Avon 2001 Annual Report Download - page 29

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† The Bonds are embedded with option features and at the holder’s option
can be sold back to Avon at par or can be called at par by the under-
writer and resold to investors as 15-year debt in May 2003. The coupon
rate on the Bonds is 6.25% for the first five years, but will be refinanced
at 5.69% plus the then corporate spread if the Bonds are reissued. At
December 31, 2002, the Company reclassified $100.0 from Long-term
debt to Debt maturing within one year since the holders, at their option,
can sell the Bonds back to Avon at par in May 2003.
‡ Adjustments to reflect net unrealized gains on debt with fair value
hedges of $80.0 and $33.2 at December 31, 2002 and 2001, respec-
tively, and unamortized gains on terminated swap agreements of $5.4
and $7.5 at December 31, 2002 and 2001, respectively, (see Note 7,
Financial Instruments and Risk Management).
The indentures under which the above Notes and
Bonds were issued contain certain covenants, including
limits on the incurrence of liens and restrict the incurrence
of sales and leaseback transactions and transactions involv-
ing a merger, consolidation or a sale of substantially all of
Avon’s assets. At December 31, 2002, Avon was in com-
pliance with all covenants in its indentures.
At December 31, 2002, Avon held interest rate con-
tracts with notional amounts totaling $600.0 which swap
fixed interest rates for variable rates (see Note 7, Financial
Instruments and Risk Management).
Annual maturities of long-term debt (excluding the
adjustments for debt with fair value hedges) outstanding
at December 31, 2002, are as follows:
After
2003 2004 2005 2006 2006 Total
Maturities $3.1 $204.4 $1.9 $75.1 $400.2 $684.7
Other Financing >Avon has a five-year $600.0 revolving
credit and competitive advance facility (the “credit facil-
ity”), which expires in 2006. The credit facility may be
used for general corporate purposes, including financing
working capital and capital expenditures and supporting
the stock repurchase program. The interest rate on bor-
rowings under the credit facility is based on LIBOR or on
the higher of prime or 1/2% plus the federal funds rate.
The credit facility has an annual facility fee, payable quar-
terly, of $0.5, based on Avon’s current credit ratings. The
credit facility contains customary covenants, including one
which requires Avon’s interest coverage ratio (determined
in relation to Avon’s consolidated pretax income and inter-
est expense) to equal or exceed 4:1. At December 31,
2002, Avon was in compliance with all covenants in the
credit facility. At December 31, 2002 and December 31,
2001, there were no borrowings under the credit facility.
Avon maintains a $600.0 commercial paper program,
which is supported by the credit facility. Outstanding
commercial paper effectively reduces the amount available
for borrowing under the credit facility. At December 31,
2002 and December 31, 2001, Avon had no commercial
paper outstanding.
Avon had uncommitted domestic lines of credit
available of $37.9 in 2002 and 2001 with various banks
which have no compensating balances or fees.
The maximum borrowings under these combined
domestic facilities during 2002 and 2001 were $406.4
and $409.0, respectively, and the annual average borrow-
ings during each year were approximately $215.3 and
$202.0, respectively, at average annual interest rates of
approximately 1.7% and 3.4%, respectively.
At December 31, 2002 and 2001, international
lines of credit totaled $411.4 and $457.4, respectively, of
which $63.9 and $87.9, respectively, were outstanding
and included in Notes payable and Long-term debt. The
maximum borrowings under these facilities during 2002
and 2001 were $89.8 and $89.0, respectively, and the
annual average borrowings during each year were $75.4
and $77.4, respectively, at average annual interest rates of
approximately 7.7% and 7.3%, respectively. Such lines
have no compensating balances or fees.
At December 31, 2002 and 2001, Avon also had
letters of credit outstanding totaling $27.7 and $25.9,
respectively, which guarantee various insurance activities.
In addition, Avon had outstanding letters of credit for var-
ious trade activities and commercial commitments exe-
cuted in the ordinary course of business, such as purchase
orders for normal replenishment of inventory levels.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss at December 31
consisted of the following:
2002 2001
Foreign currency translation adjustments $(487.2) $(429.1)
Unrealized losses from available-for-sale
securities, net of taxes (13.0) (8.6)
Minimum pension liability adjustment,
net of taxes (288.6) (49.6)
Net derivative losses from cash flow
hedges, net of taxes (2.6) (2.2)
Total $(791.4) $(489.5)
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