Avon 2007 Annual Report Download - page 64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 $.9 and $1.0 at December 31, 2007 and 2006,
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, 2007 and
2006, 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 $13.0 and $14.9, 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, 2007, 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, 2007, are
as follows:
2008 2009 2010 2011 2012
After
2012 Total
Maturities $22.8 $303.8 $2.0 $501.3 $1.1 $375.0 $1,206.0
Other Financing
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 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. At December 31, 2007,
there were no amounts outstanding under the credit facility.
We maintain a $1,000.0 commercial paper program. Under the
program, 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 out-
standing 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 program 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 commercial paper outstanding of
$701.6 at an average annual interest rate of 5.05%.
In April 2007, we entered into a one-year, Euro 50 million ($72.9
at the exchange rate on December 31, 2007) uncommitted
credit facility (“Euro credit facility”) with the Bank of Tokyo-
Mitsubishi UFJ, Ltd. Borrowings under the Euro credit facility
bear interest at the Euro LIBOR rate plus an applicable margin.
The Euro credit facility is available for general corporate pur-
poses. The Euro credit facility is designated as a hedge of our
investments in our Euro-denominated functional currency sub-
sidiaries. At December 31, 2007, there was $32.8 (Euro 22.5
million) outstanding under the Euro credit facility.
In August 2006, we entered into a one-year, Japanese yen 11.0
billion ($96.3 at the exchange rate on December 31, 2007)
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 which came due in September
2006, as well as for other general corporate purposes. The yen