Avon 2000 Annual Report Download - page 27

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cap ra In May 1998, Avon issued $100.0 of bonds embed-
ded with option features (the “Bonds”) to pay down com-
mercial paper borrowings. The Bonds have a twenty-year
maturity; however, after five years, the Bonds, at the
holder’s option, can be sold back to the Company at par
or can be called at par by the underwriter and resold to
investors as fifteen-year debt. The coupon rate on the
Bonds is 6.25% for the first five years, but will be refi-
nanced at 5.69% plus the then corporate spread if the
Bonds are reissued.
In connection with the May 1998 Bond issuance,
Avon entered into a five-year interest rate swap contract
with a notional amount of $50.0 to effectively convert
fixed interest on a portion of the Bonds to a variable
interest rate, based on libor.
During 1997, the Company issued $100.0 of
6.55% notes, due August 1, 2007, to pay down commer-
cial paper borrowings.
Under the terms of a revolving credit and competi-
tive advance facility agreement amended in 1996 and
expiring in 2001 (the “credit facility”), the Company
may borrow up to $600.0. The Company is currently
negotiating with various banks to renew this credit facil-
ity and expects to have a final agreement by the end of
the second quarter of 2001. Within this facility, the
Company is able to borrow, on an uncommitted basis,
various foreign currencies.
The credit facility is primarily to be used to finance
working capital, provide support for the issuance of com-
mercial paper and support the stock repurchase program.
At the Company’s option, the interest rate on borrowings
under the credit facility is based on libor or the higher of
prime or federal fund rates. The credit facility has an
annual facility fee of $.4. The credit facility contains a
covenant for interest coverage, as defined. The Company
is in compliance with this covenant. At December 31,
2000 and 1999, the Company has $29.9 and $226.4,
respectively, outstanding under a $600.0 commercial
paper program supported by the credit facility.
The Company has uncommitted lines of credit
available of $49.0 in 2000 and 1999 with various banks
which have no compensating balances or fees. As of
December 31, 2000 and 1999, $11.1 of these lines are
being used for letters of credit.
The maximum borrowings under these combined
facilities during 2000 and 1999 were $515.4 and $840.7,
respectively, and the annual average borrowings during
each year were approximately $313.7 and $304.0, respec-
tively, at average annual interest rates of approximately
6.5% and 5.3%, respectively.
At December 31, 2000 and 1999, international
lines of credit totaled $449.5 and $399.5, respectively, of
which $74.8 and $81.6 were outstanding, respectively.
The maximum borrowings under these facilities during
2000 and 1999 were $86.4 and $121.0, respectively, and
the annual average borrowings during each year were
$77.8 and $73.0, respectively, at average annual interest
rates of approximately 6.4% and 6.2%, respectively. Such
lines have no compensating balances or fees.
At December 31, 2000 and 1999, Avon also had
letters of credit outstanding totaling $15.5, which guar-
antee various insurance activities. In addition, Avon had
outstanding letters of credit for various trade activities.
During 1998 and 1997, the Company entered into
securities lending transactions resulting in the borrowing
of securities which were subsequently sold for net pro-
ceeds approximating $58.1 and $58.6, respectively, used
to repay commercial paper borrowings. The borrowed
securities were paid during 2000. The obligations are
included in other accrued liabilities on the balance sheet
at December 31, 1999. The effective rates on the transac-
tions were 5.5% and 6.5%, respectively.
5Comprehensive Income
The following table reflects comprehensive income as of
December 31:
2000 1999 1998
Net income $478.4 $302.4 $270.0
Other comprehensive loss:
Foreign currency
translation adjustments (42.9) (49.7) (15.6)
Available-for-sale securities
Unrealized loss (9.3) ——
Income taxes 3.3 ——
Minimum pension liability
adjustment (.8) 2.0 (24.6)
Income taxes .3 (.7) 9.2
Comprehensive income $429.0 $254.0 $239.0
Accumulated other comprehensive loss at
December 31 consisted of the following:
2000 1999
Foreign currency translation adjustments $(378.5) $(335.6)
Unrealized loss from available-for-sale
securities, net of tax (6.0) —
Minimum pension liability
adjustment, net of tax (14.6) (14.1)
Total $(399.1) $(349.7)