Avon 2007 Annual Report Download - page 63

consolidated financial statements. At December 31, 2007 and
2006, other liabilities included minority interests of $38.2 and
$37.0, respectively.
In February 2007, the FASB issued Statement of Financial
Accounting Standards (“SFAS”) No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities – including an
amendment to FASB Statement No. 115, (“SFAS 159”), which
permits entities to choose to measure many financial instruments
and certain other items at fair value that are not currently
required to be measured at fair value. SFAS 159 is effective
January 1, 2008 for Avon. In February 2008, the FASB issued
Staff Position 157-b, Effective Date of FASB Statement No. 157,
which delays the effective date of SFAS No. 157 for nonfinancial
assets and nonfinancial liabilities until January 1, 2009, for Avon.
We believe the adoption of SFAS 159 will have no impact on our
consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements (“SFAS 157”), which defines fair value, estab-
lishes a framework for measuring fair value in accordance with
generally accepted accounting principles, and expands dis-
closures about fair value measurements. SFAS 157 is effective
January 1, 2008 for Avon. We believe the adoption of SFAS 157
will not have a material impact on our consolidated financial
statements.
NOTE 3. Inventories
Inventories at December 31 consisted of the following:
2007 2006
Raw materials $ 337.8 $260.6
Finished goods 704.0 639.7
Total $1,041.8 $900.3
NOTE 4. Debt and Other Financing
Debt
Debt at December 31 consisted of the following:
2007 2006
Debt maturing within one year:
Notes payable $ 76.0 $ 81.9
Commercial paper 701.6 335.9
6.55% Notes, due August 2007 – 100.0
Yen credit facility 96.3 92.9
Euro credit facility 32.8 –
Current portion of long-term debt 22.8 4.9
Total $ 929.5 $ 615.6
2007 2006
Long-term debt:
5.125% Notes, due January 2011 $ 499.6 $ 499.5
7.15% Notes, due November 2009 300.0 300.0
4.625% Notes, due May 2013 112.0 110.1
4.20% Notes, due July 2018 249.1 249.0
Other, payable through 2013 with
interest from 1% to 16% 31.0 26.0
Total long-term debt 1,191.7 1,184.6
Adjustments for debt with fair value
hedges (1.0) (9.0)
Less current portion (22.8) (4.9)
Total $1,167.9 $1,170.7
At December 31, 2007 and 2006, notes payable included short-
term borrowings of international subsidiaries at average annual
interest rates of approximately 4.6% and 6.3%, respectively.
Other long-term debt, payable through 2013, includes obliga-
tions under capital leases of $13.6, which primarily relate to
leases of automobiles.
Adjustments for debt with fair value hedges includes adjust-
ments to reflect net unrealized losses of $9.4 and $21.8 on debt
with fair value hedges at December 31, 2007 and 2006,
respectively, and unamortized gains on terminated swap agree-
ments and swap agreements no longer designated as fair value
hedges of $8.4 and $12.8 at December 31, 2007 and 2006,
respectively (see Note 7, Financial Instruments and Risk
Management).
At December 31, 2007 and 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 $.4 and $.5 at
December 31, 2007 and 2006, respectively.
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
A V O N 2007 F-11