Avon 2013 Annual Report Download - page 91

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 credit ratings downgrade to below investment grade. In addition, the indenture governing the Notes contains interest
rate adjustment provisions depending on our credit ratings.
Commercial Paper Program
We also maintain a $1 billion commercial paper program, which is supported by the revolving credit facility. 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 billion 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. Outstanding commercial paper effectively reduces the amount available for
borrowing under the revolving credit facility. Beginning in 2012 and continuing through 2013, the demand for our commercial paper
declined, partially impacted by the rating agency actions described below. We have not had significant borrowings of commercial paper in
2013, and as of December 31, 2013, there was no outstanding commercial paper under this program.
Letters of Credit
At December 31, 2013 and December 31, 2012, we also had letters of credit outstanding totaling $19.9 and $21.4, respectively, which
primarily guarantee various insurance activities. In addition, we had outstanding letters of credit for trade activities and commercial
commitments executed in the ordinary course of business, such as purchase orders for normal replenishment of inventory levels.
Additional Information
Our long-term credit ratings are Baa3 (Stable Outlook) with Moody’s and BBB- (Negative Outlook) with S&P, which are on the low end of
investment grade, and BB (Negative Outlook) with Fitch, which is below investment grade. In February 2013, Fitch lowered their long-term
credit rating from BBB- (Negative Outlook) to BB+ (Stable Outlook) and Moody’s lowered their long-term credit rating from Baa1 (Negative
Outlook) to Baa2 (Stable Outlook). In November 2013, Fitch lowered their long-term credit rating from BB+ (Stable Outlook) to BB (Negative
Outlook) and Moody’s placed Avon’s long-term credit rating of Baa2 (Stable Outlook) on review for possible downgrade. In February 2014,
Moody’s lowered their long-term credit rating from Baa2 (Stable Outlook) to Baa3 (Stable Outlook). Additional rating agency reviews could
result in a further change in outlook or downgrade, which could limit our access to new financing, particularly short-term financing, reduce
our flexibility with respect to working capital needs, affect the market price of some or all of our outstanding debt securities, as well as most
likely result in an increase in financing costs, including interest expense under certain of our debt instruments, and less favorable covenants
and financial terms of our financing arrangements.
NOTE 6. Accumulated Other Comprehensive Loss
The tables below present the changes in AOCI by component and the reclassifications out of AOCI during 2013:
Foreign
Currency
Translation
Adjustments
Cash Flow
Hedges
Net
Investment
Hedges
Pension and
Postretirement
Benefits Total
Balance at December 31, 2012 $(317.6) $(6.8) $(4.3) $(548.0) $(876.7)
Other comprehensive loss other than reclassifications (111.7) – – – (111.7)
Reclassifications into earnings:
Derivative losses on cash flow hedges, net of tax of $.9(1) – 1.7 – – 1.7
Adjustments of and amortization of net actuarial loss
and prior service cost, net of tax of $55.7(2) – – – 116.3 116.3
Total reclassifications into earnings – 1.7 – 116.3 118.0
Balance at December 31, 2013 $(429.3) $(5.1) $(4.3) $(431.7) $(870.4)
(1) Gross amount reclassified to interest expense, and related taxes reclassified to income taxes.
(2) Gross amount reclassified to pension and postretirement expense, within selling, general & administrative expenses, and related taxes reclassified to income
taxes.
A V O N 2013 F-21