Avon 2015 Annual Report Download - page 24

PART I
Failure to comply with the terms of the DPA could result in criminal prosecution by the DOJ, including for the charged violations of the
books and records and internal controls provisions of the FCPA that were included in the information that was filed in connection with the
DPA. Under such circumstance, the DOJ would be permitted to rely upon the admissions we made in the DPA and would benefit from our
waiver of certain procedural and evidentiary defenses. Such a criminal prosecution could subject us to penalties that could have a material
adverse effect on our business, financial condition, results of operations or cash flows.
A general economic downturn, a recession globally or in one or more of our geographic
regions or markets or sudden disruption in business conditions or other challenges may
adversely affect our business, our access to liquidity and capital, and our credit ratings.
Current global macro-economic instability or a further downturn in the economies in which we sell our products, including any recession in
one or more of our geographic regions or markets could adversely affect our business, our access to liquidity and capital, and our credit
ratings. Global economic events over the past few years, including high unemployment levels, the tightening of credit markets and failures
of financial institutions and other entities, have resulted in challenges to our business and a heightened concern regarding further
deterioration globally. In addition, as mentioned above, our business is conducted primarily in the direct-selling channel. We could
experience declines in revenues, profitability and cash flow due to reduced orders, payment delays, supply chain disruptions or other factors
caused by such economic, operational or business challenges. Any or all of these factors could potentially have a material adverse effect on
our liquidity and capital resources and credit ratings, including our ability to access short-term financing, raise additional capital, reduce
flexibility with respect to working capital, and maintain credit lines and offshore cash balances.
Consumer spending is also generally affected by a number of factors, including general economic conditions, inflation, interest rates, energy
costs, gasoline prices and consumer confidence generally, all of which are beyond our control. Consumer purchases of discretionary items,
such as beauty and related products, tend to decline during recessionary periods, when disposable income is lower, and may impact sales of
our products. We may face continued economic challenges in fiscal 2016 because customers may continue to have less money for
discretionary purchases as a result of job losses, bankruptcies, and reduced access to credit, among other things.
In addition, sudden disruptions in business conditions and consumer spending may result from acts of terror, natural disasters, adverse
weather conditions, such as the significant typhoon which impacted the Philippines in 2013, and pandemic situations or large scale power
outages, none of which are under our control.
Our credit ratings were downgraded in 2015, which could limit our access to financing, affect
the market price of our financing, and increase financing costs. A further downgrade in our
credit ratings may adversely affect our access to liquidity.
Nationally recognized credit rating organizations have issued credit ratings relating to our long-term debt. In 2015, our credit ratings were
downgraded. Our long-term credit ratings are Ba2 (Negative Outlook) for corporate family debt, and Ba3 (Negative Outlook) for senior
unsecured debt, with Moody’s; B+ (Stable Outlook) with S&P; and B+ (Negative Outlook) with Fitch, which are below investment grade.
Additional rating agency reviews could result in a further change in outlook or downgrade. Our credit ratings could limit our access to new
financing, particularly short-term financing; reduce our flexibility with respect to working capital needs; adversely affect the market price of
some or all of our outstanding debt securities; result in an increase in financing costs, including interest expense under certain of our debt
instruments; and result in less favorable covenants and financial terms of our financing arrangements. For example, as of December 31,
2015, we have approximately $50 million outstanding in short-term borrowings of our international subsidiaries. A further change in
outlook or downgrade of our credit ratings may increase some of these risks and limit our access to such short-term financing in the future
on favorable terms, if at all. See Note 5, Debt and Other Financing, on pages F-19 through F-21 of our 2015 Annual Report for details about
the terms of our existing debt and other financing arrangements.
Our ability to conduct business in our international markets, may be affected by political,
legal, tax and regulatory risks.
Our ability to achieve growth in our international markets, and to improve operations in our existing international markets, is exposed to
various risks, including:
• the possibility that a foreign government might ban, halt or severely restrict our business, including our primary method of direct-selling;
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