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2004 Annual Report MANPOWER INC.84
12.
INTEREST AND OTHER EXPENSE
Interest and Other Expense consists of the following:
Year Ended December 31 2004 2003 2002
Interest expense $ 45.4 $ 41.4 $ 42.4
Interest income (9.4) (8.0) (9.0)
Foreign exchange gains (1.6) (1.3) (1.8)
Fees and loss on sale of accounts receivable 0.4 0.4 0.4
Miscellaneous (income) expense, net (8.5) 3.3 14.8
Interest and other expense $ 26.3 $ 35.8 $ 46.8
Miscellaneous (Income) Expense, Net in 2004, includes non-operating gains of $14.2, primarily related to the sale of
our equity interest in a European internet job board. In 2002, Miscellaneous Expenses included a charge of $5.1 related
to a writedown of equity security investments where the decline in market value was determined to be other-than-
temporary, as defined by SFAS 115.
13.
DERIVATIVE FINANCIAL INSTRUMENTS
Foreign Currency Exchange Rate Risk Management
In certain circumstances, we enter into foreign currency forward exchange contracts to reduce the effects of fluctuating
foreign currency exchange rates on cash flows with foreign subsidiaries. All such contracts entered into during 2004 and
2003 were designated as cash flow hedges and were considered highly effective, as defined by SFAS 133, as amended.
As of December 31, 2004, there were no forward contracts outstanding. As of December 31, 2003, there were two
forward contracts outstanding totaling $24.7 relating to cash flows to be received from our foreign subsidiaries, both
of which were designated as cash flow hedges and were considered highly effective as of December 31, 2003.
Our revolving credit agreement borrowings of 100.0 ($135.5) and the 200.0 ($271.1) unsecured notes, have
been designated and are effective as economic hedges of our net investment in our foreign subsidiaries with a Euro-
functional currency. Therefore, all translation gains or losses related to these borrowings are recorded as a component
of Accumulated Other Comprehensive Income.
During September 2002, we entered into derivative financial instruments to swap our 150.0 ($203.7) unsecured
notes, at 6.25% due March 2005, to floating U.S. LIBOR, with a current effective interest rate of 4.64%. These instruments
expire in March 2005. Gains and losses arising from foreign exchange fluctuations throughout the contract term on the
derivative instruments are recorded in the consolidated statements of operations, offsetting the foreign exchange gain
or loss recorded on the notes.
Interest Rate Risk Management
Our exposure to market risk for changes in interest rates relates primarily to our Long-Term Debt obligations. We have
historically managed interest rates through the use of a combination of fixed and variable rate borrowings and interest
rate swap agreements.
As previously mentioned, we entered into derivative instruments to swap our 150.0 ($203.7) unsecured notes, at
6.25% due March 2005, to floating U.S. LIBOR, with a current effective interest rate of 4.64%. We designated these
interest rate swaps as a fair value hedge, offsetting changes in the fair value of the notes that are due to interest rate
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
in millions, except share and per share data