Avon 2007 Annual Report Download - page 42

PART II
Debt and Contractual Financial Obligations and Commitments
At December 31, 2007, our debt and contractual financial obligations and commitments by due dates were as follows:
2008 2009 2010 2011 2012
2013 and
Beyond Total
Short-term debt $ 906.7 $ – $ – $ – $ – $ – $ 906.7
Long-term debt 16.9 300.2 – 500.0 – 375.0 1,192.1
Capital lease obligations 5.9 3.6 2.0 1.3 1.1 – 13.9
Total debt 929.5 303.8 2.0 501.3 1.1 375.0 2,112.7
Debt-related interest 63.4 63.4 41.9 41.9 16.3 68.8 295.7
Total debt-related 992.9 367.2 43.9 543.2 17.4 443.8 2,408.4
Operating leases 86.7 66.5 48.4 31.6 23.0 42.4 298.6
Purchase obligations 155.8 70.4 47.1 25.3 17.7 64.2 380.5
Benefit obligations (2) 33.3 12.5 12.9 13.6 14.0 81.2 167.5
Total debt and contractual
financial obligations and
commitments (1) $1,268.7 $516.6 $152.3 $613.7 $72.1 $631.6 $3,255.0
(1) The amount of debt and contractual financial obligations and commitments excludes amounts due pursuant to derivative transactions. The table also excludes
information on recurring purchases of inventory as these purchase orders are non-binding, are generally consistent from year to year, and are short-term in
nature. The table does not include any reserves for income taxes under FIN 48 because we are unable to reasonably predict the ultimate amount or timing of
settlement of our reserves for income taxes. At December 31, 2007, our reserves for income taxes, including interest and penalties, totaled $155.4.
(2) Amounts represent expected future benefit payments for our unfunded pension and postretirement benefit plans, as well as expected contributions for 2008
to our funded pension benefit plans.
See Note 4, Debt and Other Financing, and Note 12, Leases and Commitments, for further information on our debt and contractual financial
obligations and commitments. Additionally, as disclosed in Note 13, Restructuring Initiatives, we have a remaining liability of $143.9 at
December 31, 2007, associated with the restructuring charges recorded to date, and we also expect to record additional restructuring
charges of $49.6 in future periods to implement the actions approved to date. The significant majority of these liabilities will require cash
payments during 2008.
Off Balance Sheet Arrangements
At December 31, 2007, we had no material off-balance-sheet
arrangements.
Capital Resources
Total debt at December 31, 2007 increased $311.1 to $2,097.4
from $1,786.3 at December 31, 2006, primarily due to higher
commercial paper borrowings.
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 this 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.
The credit facility contains various covenants, including a finan-
cial covenant which requires Avon’s interest coverage ratio
(determined in relation to our consolidated pretax income and
interest expense) to equal or exceed 4:1. The credit facility also
provides for a possible extension of the term by up to two years
and possible increases by up to an aggregate incremental princi-
pal amount of $250.0, subject to the consent of the affected
lenders under the credit facility. At December 31, 2007, there
were no amounts outstanding under the credit facility.
We have a $1,000.0 commercial paper program. Under this pro-
gram, we may issue from time to time unsecured promissory
notes in the commercial paper market in private placements
exempt from registration under federal and state securities laws,
for a cumulative face amount not to exceed $1,000.0 outstanding
at any one time and with maturities not exceeding 270 days from
the date of issue. The commercial paper short-term notes issued
under the program are not redeemable prior to maturity and are
not subject to voluntary prepayment. The commercial paper pro-
gram is supported by our credit facility. Outstanding commercial
paper effectively reduces the amount available for borrowing
under the credit facility. At December 31, 2007, we had commer-
cial paper outstanding of $701.6.
In April 2007, we entered into a one-year Euro 50 million ($72.9
at the exchange rate on December 31, 2007) uncommitted