Avon 2008 Annual Report Download - page 65

2008. In August 2008, we entered into another amendment of
our yen credit facility that provides for the extension of the yen
credit facility until August 2009. At December 31, 2008 and
2007, $102.0 (Japanese yen 9.2 billion) and $96.3 (Japanese yen
11.0 billion), respectively, was outstanding under the yen credit
facility.
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, 2008, we were in
compliance with all covenants in our indentures. Such indentures
do not contain any rating downgrade triggers that would
accelerate the maturity of our debt. However, we would be
required to make an offer to repurchase the 2013 Notes and
2018 Notes at a price equal to 101% of their aggregate principal
amount plus accrued and unpaid interest in the event of a
change in control involving Avon and a corresponding ratings
downgrade to below investment grade.
At December 31, 2008, we also had letters of credit outstanding
totaling $19.6, which primarily guarantee various insurance
activities. In addition, we had outstanding letters of credit for
various trade activities and commercial commitments executed in
the ordinary course of business, such as purchase orders for
normal replenishment of inventory levels.
NOTE 5. Accumulated Other
Comprehensive Loss
Accumulated other comprehensive loss at December 31 con-
sisted of the following:
2008 2007
Foreign currency translation adjustments $(406.2) $ (62.5)
Unrealized (losses) gains from
available-for-sale securities, net of taxes of
$.2 and $.1 (.3) .4
Unrecognized actuarial losses, prior service
credit, and transition obligation, net of
taxes of $266.8 and $167.5 (532.2) (337.2)
Net derivative losses from cash flow hedges,
net of taxes of $14.8 and $9.7 (27.2) (17.7)
Total $(965.9) $(417.0)
Foreign exchange gains (losses) of $25.4 and ($8.1) resulting
from the translation of unrealized actuarial losses, prior service
credit and translation obligation recorded in AOCI are included
in foreign currency translation adjustments in the rollforward of
AOCI on the Consolidated Statements of Changes in Share-
holders Equity for 2008 and 2007, respectively.
NOTE 6. Income Taxes
Deferred tax assets (liabilities) resulting from temporary differ-
ences in the recognition of income and expense for tax and
financial reporting purposes at December 31 consisted of the
following:
2008 2007
Deferred tax assets:
Postretirement benefits $ 46.9 $ 43.0
Accrued expenses and reserves 155.0 176.7
Asset revaluations 52.7 42.6
Restructuring initiatives 12.9 48.8
Employee benefit plans 261.1 197.3
Foreign operating loss carryforwards 300.9 295.8
Postemployment benefits 17.0 16.1
Capitalized expenses 46.0 18.8
Minimum tax credit carryforwards 32.5 24.9
Foreign tax credit carryforwards 93.9 28.6
All other 35.5 22.6
Valuation allowance (284.1) (278.3)
Total deferred tax assets 770.3 636.9
Deferred tax liabilities:
Depreciation and amortization (45.3) (53.9)
Prepaid retirement plan costs (6.0) (37.4)
Capitalized interest (6.1) (2.1)
Capitalized software (5.4) (6.8)
Unremitted foreign earnings (19.1) (20.1)
All other (34.6) (21.9)
Total deferred tax liabilities (116.5) (142.2)
Net deferred tax assets $ 653.8 $ 494.7
Deferred tax assets (liabilities) at December 31 were classified as
follows:
2008 2007
Deferred tax assets:
Prepaid expenses and other $194.6 $261.4
Other assets 502.5 272.9
Total deferred tax assets 697.1 534.3
Deferred tax liabilities:
Income taxes (7.0) (7.7)
Long-term income taxes (36.3) (31.9)
Total deferred tax liabilities (43.3) (39.6)
Net deferred tax assets $653.8 $494.7
The valuation allowance primarily represents amounts for foreign
operating loss carryforwards. The basis used for recognition of
deferred tax assets included the profitability of the operations,
related deferred tax liabilities and the likelihood of utilizing tax
credit carryforwards during the carryover periods. The net
A V O N 2008 F-13