Avon 2006 Annual Report Download - page 61

Adjustments for debt with fair value hedges includes adjust-
ments to reflect net unrealized losses of $21.8 and $15.3 on
debt with fair value hedges at December 31, 2006 and 2005,
respectively, and unamortized gains on terminated swap agree-
ments and swap agreements no longer designated as fair value
hedges of $12.8 and $17.2 at December 31, 2006 and 2005,
respectively (see Note 7, Financial Instruments and Risk
Management).
At December 31, 2006, we held interest rate swap contracts that
swap approximately 30% of our long-term debt to variable rates
(see Note 7, Financial Instruments and Risk Management).
In January 2006, we issued in a public offering $500.0 principal
amount of notes payable (“5.125% Notes”) that mature on
January 15, 2011, and bear interest, payable semi-annually, at a
per annum rate equal to 5.125%. The net proceeds from the
offering were used for general corporate purposes, including the
repayment of short-term domestic debt. The carrying value of
the 5.125% Notes represents the $500.0 principal amount, net
of the unamortized discount to face value of $.5 at
December 31, 2006.
In June 2003, we issued to the public $250.0 principal amount
of registered senior notes (the “4.20% Notes”) under our
$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 convertible notes, which matured in July
2003. The carrying value of the 4.20% Notes represents the
$250.0 principal amount, net of the unamortized discount to
face value of $1.0 and $1.1 at December 31, 2006 and 2005,
respectively.
In April 2003, the call holder of $100.0, 6.25% Notes due May
2018 (the “Notes”), embedded with put and call option fea-
tures, exercised the call option associated with these Notes, and
thus became the sole note holder of the Notes. Pursuant to an
agreement with the sole note holder, we modified these Notes
into $125.0 aggregate principal amount of 4.625% notes due
May 15, 2013. The modified principal amount represented the
original value of the putable/callable notes, plus the market
value of the related call option and approximately $4.0 principal
amount of additional notes issued for cash. In May 2003, $125.0
principal amount of registered senior notes were issued in
exchange for the modified notes held by the sole note holder.
No cash proceeds were received by us. The registered senior
notes mature on May 15, 2013, and bear interest at a per
annum rate of 4.625%, payable semi-annually (the “4.625%
Notes”). The 4.625% Notes were issued under our $1,000.0
debt shelf registration statement. The transaction was accounted
for as an exchange of debt instruments and, accordingly, the
premium related to the original notes is being amortized over
the life of the new 4.625% Notes. At December 31, 2006 and
2005, the carrying value of the 4.625% Notes represents the
$125.0 principal amount, net of the unamortized discount to
face value and the premium related to the call option associated
with the original notes totaling $14.9 and $16.7, respectively.
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 sub-
stantially all of our assets. At December 31, 2006, we were in
compliance with all covenants in our indentures.
Annual maturities of long-term debt (including unamortized
discounts and premiums and excluding the adjustments for debt
with fair value hedges) outstanding at December 31, 2006, are
as follows:
2007 2008 2009 2010 2011
After
2011 Total
Maturities $4.9 $17.9 $303.1 $.1 $500.0 $375.0 $1,201.0
Other Financing
In August 2006, we entered into a one-year Japanese yen 11.0
billion ($92.9 at the exchange rate on December 31, 2006)
uncommitted credit facility (“yen credit facility”) with the Bank
of Tokyo-Mitsubishi UFJ, Ltd. Borrowings under the yen credit
facility bear interest at the yen LIBOR rate plus an applicable
margin. The yen credit facility is available for general corporate
purposes, including working capital and the repayment of out-
standing indebtedness. The yen credit facility was used to repay
the Japanese yen 9.0 billion note that came due in September
2006, as well as for other general corporate purposes. The yen
credit facility is designated as a hedge of our net investment in
our Japanese subsidiary. At December 31, 2006, $92.9 (Japanese
yen 11.0 billion) was outstanding under the yen credit facility.
We have a five-year, $1,000.0 revolving credit and competitive
advance facility (the “credit facility”), which expires in January
2011. The credit facility may be used for general corporate
purposes. The interest rate on borrowings under the new 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 fee of
$.675, payable quarterly, based on our current credit ratings.
A V O N 2006 F-11