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2004 Annual Report MANPOWER INC.54
As a result of certain derivative financial instruments that we entered into during September 2002, all translation gains
and losses on the short-term borrowings of 150.0 million ($203.7 million as of December 31, 2004) unsecured notes
due March 2005 are recorded in the consolidated statements of operations. These gains and losses are offset by
changes in the fair value of the related derivative instruments. (See below and note 13 to the consolidated financial
statements for further information.)
Interest Rates – Our exposure to market risk for changes in interest rates relates primarily to our variable rate long-
term debt obligations. We have historically managed interest rates through the use of a combination of fixed- and vari-
able-rate borrowings and interest rate swap agreements. As of December 31, 2004, we had the following fixed- and
variable-rate borrowings:
Fixed Variable Total
Weighted Weighted Weighted
Average Average Average
Average Interest Rate Amount Interest Rate Amount Interest Rate Amount Interest Rate
Excluding interest rate
swap agreements $ 756.2 4.9% $ 145.6 3.0% $ 901.8 4.6%
Including impact of
swap agreements 688.0 4.7% 213.8 4.6% 901.8 4.7%
We have various interest rate swap agreements in order to fix our interest costs on a portion of our Euro-denominated
variable rate borrowings. The Euro interest rate swap agreements, with a notional value of 100.0 million ($135.5 mil-
lion) fix the interest rate, on a weighted-average basis, at 5.7% and expire in 2010.
During September 2002, we entered into derivative financial instruments (“150 million Swaps”) to swap our 150.0
million ($203.7 million) unsecured notes, at 6.25%, due March 2005, to floating U.S. LIBOR, yielding an initial effective
interest rate of 4.39% (currently yielding 4.64%). These instruments expire in March 2005.
If we had not entered into the 150.0 million Swaps and our interest rate swap agreements, interest expense would
have been higher by $0.1 million in 2004 and $1.1 million in 2003.
Sensitivity Analysis – The following table summarizes our debt and derivative instruments that are sensitive to foreign
currency exchange rate and interest rate movements. All computations below are based on the U.S. Dollar spot rate
as of December 31, 2004. The exchange rate computations assume a 10% appreciation or 10% depreciation of the
Euro to the U.S. Dollar. The impact on 2004 earnings of the stated change in rates is as follows:
Movements Movements
In Exchange In Interest
Rates Rates
10% 10% 10% 10%
Market Sensitive Instrument Depreciation Appreciation Decrease Increase
200 million, 5.63% Notes due July 2006 $ 27.1(1) $ (27.1)(1) ——
150 million, 6.25% Notes due March 2005 20.4 (20.4) (0.1) 0.1
150 million Swaps (20.4) 20.4 0.1 (0.1)
Revolving credit agreement:
100 million Euro Borrowings 13.6(1) (13.6)(1) 0.4 (0.4)
100 million Interest Rate Swaps — — (0.4) 0.4
$ 40.7 $ (40.7) $ — $ —
(1) Exchange rate movements are recorded through Accumulated Other Comprehensive Income as these instruments have been designated as an economic hedge
of our net investment in subsidiaries with a Euro functional currency.
MANAGEMENT’S DISCUSSION AND ANALYSIS
of financial condition and results of operations