Avon 2004 Annual Report Download - page 38

Global Beauty 59
Notes to Consolidated
Financial Statements
3Inventories
Inventories at December 31 consisted of the following:
2004 2003
Raw materials $183.2 $152.0
Finished goods 557.3 501.4
Total $740.5 $653.4
4Debt and Other Financing
Debt
Debt at December 31 consisted of the following:
2004 2003
Debt maturing within one year:
Notes payable $ 19.1 $ 39.7
Commercial paper 26.9 —
6.90% Notes, due November 2004 — 200.0
Current portion of long-term debt 5.7 4.4
Total $ 51.7 $244.1
Long-term debt:
1.06% Yen Notes, due
September 2006 $ 86.6 $ 84.2
6.55% Notes, due August 2007 100.0 100.0
7.15% Notes, due November 2009 300.0 300.0
4.625% Notes, due May 2013 106.6 105.0
4.20% Notes, due July 2018 248.9 248.8
Other, payable through 2018
with interest from 1% to 22% 12.7 11.8
Total long-term debt 854.8 849.8
Adjustments for debt with
fair value hedges 17.2 32.3
Less current portion (5.7) (4.4)
Total $866.3 $877.7
Other long-term debt, payable through 2018, consists
of obligations under capital leases, which primarily
relate to leases of automobiles.
Adjustments for debt with fair value hedges includes
adjustments to reflect net unrealized gains of $6.9 and
$23.0 on debt with fair value hedges at December 31,
2004 and 2003, respectively, and unamortized gains on
terminated swap agreements and swap agreements
no longer designated as fair value hedges of $10.3 and
$9.3 at December 31, 2004 and 2003, respectively, (see
Note 7, Financial Instruments and Risk Management).
At December 31, 2004, Avon held interest rate swap
contracts, that swap approximately 70% of the Com-
pany’s debt to variable rates (see Note 7, Financial
Instruments and Risk Management).
In July 2003, the holders of $48.3 of zero coupon
convertible senior notes due 2020 (the “Convertible
Notes”), which were originally issued in 2000, converted
their notes into approximately 1,502,000 shares of Avon
Common Stock in accordance with the conversion fea-
ture of the Convertible Notes. The conversion reduced
Treasury Stock by $13.7 and increased additional paid-
in capital by $34.6. In July 2003, Avon redeemed the
remaining Convertible Notes by paying $398.9, which
represented the redemption price of $531.74 for each
$1,000 principal amount at maturity of Convertible Notes
that were then outstanding. As a result of the redemp-
tion, deferred issuance costs related to the Convertible
Notes of approximately $6.4 were expensed to Other
expense (income), net and $.7 were reclassified to
additional paid-in capital in 2003.
In June 2003, Avon issued to the public $250.0 principal
amount of registered senior notes (the “4.20% Notes”)
under the Company’s $1,000.0 debt shelf registration
statement. The 4.20% Notes mature on July 15, 2018,
and bear interest at a per annum rate of 4.20%, payable
semi-annually. The net proceeds were used to repay a
portion of Avon’s Convertible Notes, discussed above.
The carrying value of the 4.20% Notes represents the
$250.0 principal amount, net of the unamortized dis-
count to face value of $1.1 and $1.2 at December 31,
2004 and 2003, respectively.