Avon 2008 Annual Report Download - page 63

In December 2007, the FASB issued SFAS No. 160, Noncontrol-
ling Interests in Consolidated Financial Statements, (“SFAS
160”), which changes the accounting and reporting standards
for the noncontrolling interests in a subsidiary in consolidated
financial statements. SFAS 160 recharacterizes minority interests
as noncontrolling interests and requires noncontrolling interests
to be classified as a component of shareholders’ equity. SFAS
160 is effective January 1, 2009, for Avon and requires retro-
active adoption of the presentation and disclosure requirements
for existing minority interests. We do not believe the adoption of
SFAS 160 will have a material impact on our consolidated finan-
cial statements. At December 31, 2008 and 2007, other liabilities
included minority interest liabilities of $37.4 and $38.2,
respectively.
NOTE 3. Inventories
Inventories at December 31 consisted of the following:
2008 2007
Raw materials $ 292.7 $ 337.8
Finished goods 715.2 704.0
Total $1,007.9 $1,041.8
NOTE 4. Debt and Other Financing
Debt
Debt at December 31 consisted of the following:
2008 2007
Debt maturing within one year:
Notes payable $ 125.4 $ 76.0
Commercial paper 499.7 701.6
Yen credit facility 102.0 96.3
Euro credit facility – 32.8
7.15% Notes, due November 2009 300.0 –
Current portion of long-term debt 4.3 22.8
Total $1,031.4 $ 929.5
Long-term debt:
7.15% Notes, due November 2009 $ – $ 300.0
5.125% Notes, due January 2011 499.7 499.6
4.80% Notes, due March 2013 249.2 –
4.625% Notes, due May 2013 114.1 112.0
5.75% Notes, due March 2018 249.2 –
4.20% Notes, due July 2018 249.7 249.1
Other, payable through 2013 with
interest from 1.4% to 25.3% 14.7 31.0
Total long-term debt 1,376.6 1,191.7
Adjustments for debt with fair value
hedges 83.9 (1.0)
Less current portion (4.3) (22.8)
Total $1,456.2 $1,167.9
At December 31, 2008 and 2007, notes payable included
short-term borrowings of international subsidiaries at average
annual interest rates of approximately 7.6% and 4.6%,
respectively.
At December 31, 2008 and 2007, other long-term debt, payable
through 2013, included obligations under capital leases of $11.4
and $13.6, respectively, which primarily relate to leases of auto-
mobiles and equipment.
Adjustments for debt with fair value hedges includes adjust-
ments to reflect net unrealized gains of $80.0 and losses of $9.4
on debt with fair value hedges at December 31, 2008 and 2007,
respectively, and unamortized gains on terminated swap
agreements and swap agreements no longer designated as fair
value hedges of $3.9 and $8.4 at December 31, 2008 and 2007,
respectively (see Note 7, Financial Instruments and Risk
Management).
At December 31, 2008 and 2007, we held interest rate swap
contracts that swap approximately 50% and 30%, respectively,
of our long-term debt to variable rates (see Note 7, Financial
Instruments and Risk Management).
In March 2008, we issued $500.0 principal amount of notes
payable in a public offering. $250.0 of the notes bear interest at
a per annum coupon rate equal to 4.80%, payable semi-
annually, and mature on March 1, 2013, unless previously
redeemed (the “2013 Notes”). $250.0 of the notes bear interest
at a per annum coupon rate of 5.75%, payable semi-annually,
and mature on March 1, 2018, unless previously redeemed (the
“2018 Notes”). The net proceeds from the offering of $496.3
were used to repay outstanding indebtedness under our
commercial paper program and for general corporate purposes.
The carrying value of the 2013 Notes represents the $250.0
principal amount, net of the unamortized discount to face value
of $.8 at December 31, 2008. The carrying value of the 2018
Notes represents the $250.0 principal amount, net of the unam-
ortized discount to face value of $.8 at December 31, 2008.
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 $.3 and $.4 at
December 31, 2008 and 2007, respectively.
In June 2003, we issued to the public $250.0 principal amount
of registered senior notes (the “4.20% Notes”) under our
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