Avon 2003 Annual Report Download - page 50

At December 31, 2003 and 2002, international lines of credit totaled $446.5 and
$411.4, respectively, of which $39.7 and $63.9, respectively, were outstanding
and included in Notes payable and Long-term debt. The maximum borrowings
under these facilities during 2003 and 2002 were $73.1 and $89.8, respectively,
and the annual average borrowings during each year were $60.1 and $75.4,
respectively, at average annual interest rates of approximately 6.0% and 7.7%,
respectively. Such lines have no compensating balances or fees.
At December 31, 2003 and 2002, Avon also had letters of credit outstanding
totaling $25.3 and $27.7, respectively, which guarantee various insurance activi-
ties. In addition, Avon had outstanding letters of credit for various trade activi-
ties and commercial commitments executed in the ordinary course of business,
such as purchase orders for normal replenishment of inventory levels.
The indentures under which the above Notes were issued contain certain
covenants, including limits on the incurrence of liens and restrictions on the
incurrence of sale/leaseback transactions and transactions involving a merger,
consolidation or sale of substantially all of Avon’s assets. At December 31,
2003, Avon was in compliance with all covenants in its indentures.
5. Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss at December 31 consisted of
the following:
2003 2002
Foreign currency translation adjustments $(433.5) $(487.2)
Unrealized losses from available-for-sale
securities, net of taxes (8.5) (13.0)
Minimum pension liability
adjustment, net of taxes (285.8) (288.6)
Net derivative losses from cash flow hedges,
net of taxes (1.6) (2.6)
Total $(729.4) $(791.4)
6. Income Taxes
Deferred tax assets (liabilities) resulting from temporary differences in the
recognition of income and expense for tax and financial reporting purposes at
December 31 consisted of the following:
2003 2002
Deferred tax assets:
Postretirement benefits $ 74.4 $ 74.8
Accrued expenses and reserves 74.0 54.2
Special and non-recurring charges 6.0 22.9
Employee benefit plans 105.0 88.2
Foreign operating loss carryforwards 51.3 38.9
Postemployment benefits 11.8 10.3
Revenue recognition 2.8 3.0
All other 31.3 38.9
Valuation allowance (52.1) (37.7)
Total deferred tax assets 304.5 293.5
Deferred tax liabilities:
Depreciation (44.1) (37.2)
Prepaid retirement plan costs (38.7) (13.2)
Capitalized interest (5.5) (6.5)
Capitalized software (6.5) (11.0)
Unremitted foreign earnings (16.9) (7.8)
All other (24.8) (21.5)
Total deferred tax liabilities (136.5) (97.2)
Net deferred tax assets $ 168.0 $196.3
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