Avon 2010 Annual Report Download - page 54

PART II
See Note 5, Debt and Other Financing, and Note 14, Leases and Commitments, to our 2010 Annual Report for further information on our
debt and contractual financial obligations and commitments. Additionally, as disclosed in Note 15, Restructuring Initiatives, we have a
remaining liability of $135.9 at December 31, 2010, associated with the restructuring charges recorded to date under the 2005 and 2009
Restructuring Programs, and we also expect to record additional restructuring charges of $25.1 in future periods to implement the actions
approved to date. The significant majority of these liabilities will require cash payments during 2011.
Off Balance Sheet Arrangements
At December 31, 2010, we had no material off-balance-sheet arrangements.
Capital Resources
We maintain a three-year, $1,000.0 revolving credit and competitive advance facility, which expires in November 2013, and a $300.0, 364
day credit facility, which expires on December 13, 2011, (collectively, the “credit facilities”). Borrowings under the credit facilities bear
interest at a rate per annum, which are either based on LIBOR or a floating base rate plus an applicable margin. The credit facilities contain
various covenants, including a financial covenant that requires our interest coverage ratio (determined in relation to our consolidated pretax
income and interest expense) to equal or exceed 4:1. The credit facilities may be used for general corporate purposes. At December 31,
2010, there were no amounts outstanding under the credit facilities.
We also maintain a $1,000.0 commercial paper program. Under this 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 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 program is supported by our three-year credit facility. Outstanding commercial paper effectively reduces
the amount available for borrowing under the three-year credit facility. At December 31, 2010, there were no amounts outstanding under
this program.
In November 2010, we issued, in a private placement exempt from registration under the Securities Act of 1933, as amended, $142.0
principal amount of 2.60% Senior Notes, Series A, due November 23, 2015, $290.0 principal amount of 4.03% Senior Notes, Series B, due
November 23, 2020, and $103.0 principal amount of 4.18% Senior Notes, Series C, due November 23, 2022. The Notes are senior
unsecured obligations of the Company, rank equal in right of payment with all other senior unsecured indebtedness of the Company, and
are unconditionally guaranteed by one of the Company’s wholly-owned subsidiaries. The Notes also require the Company to comply with an
interest coverage ratio and contain customary default provisions, including cross-default provisions. The proceeds from the sale of the Notes
were used to repay existing debt and for general corporate purposes.
In March 2009, we issued, in a public offering, $500.0 principal amount of 5.625% Notes, due March 1, 2014 and $350.0 principal amount
of 6.50% Notes, due March 1, 2019. In March 2008, we issued, in a public offering, $250.0 principal amount of 4.80% Notes, due
March 1, 2013 and $250.0 principal amount of 5.75% Notes, due March 1, 2018. The proceeds from these offerings were used to repay
the outstanding indebtedness under our commercial paper program and for general corporate purposes.
At December 31, 2010, 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. We would be required to make an offer to repurchase the notes described above 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
us and a corresponding ratings downgrade to below investment grade. We also have outstanding $250.0 principal amount of 4.20% Notes,
due July 15, 2018 and $125.0 principal amount of 4.625% Notes, due May 15, 2013. Additionally, we had $500.0 principal amount of
5.125% Notes, due in January 2011, outstanding at December 31, 2010, which has subsequently been repaid primarily with the use of
commercial paper. Please refer to Note 5, Debt and Other Financing, to our 2010 Annual Report for more details.