ManpowerGroup 2006 Annual Report Download - page 27

฀ 23Management’s฀Discussion฀&฀Analysis Manpower฀2006฀Annual฀Report
Our฀1999฀200฀million฀Notes฀($254.3฀million),฀were฀retired฀on฀July฀26,฀2006฀with฀the฀net฀proceeds฀from฀the฀200฀million฀Notes฀
and฀other฀available฀cash.
On฀February฀28,฀2005,฀we฀elected฀to฀call฀our฀Zero฀Coupon฀Convertible฀Debentures฀due฀August฀17,฀2021฀(the฀“Debentures”)฀at฀
a฀redemption฀price฀of฀$613.99฀per฀$1,000฀of฀principal฀amount฀at฀maturity฀of฀the฀Debentures.฀Under฀the฀Indenture฀relating฀to฀the฀
Debentures,฀the฀Debentures฀could฀be฀converted฀at฀a฀conversion฀rate฀of฀13.9559฀shares฀of฀Manpower฀common฀stock฀per฀
$1,000฀of฀principal฀amount฀at฀maturity฀of฀Debentures,฀at฀the฀option฀of฀the฀debenture฀holders.
On฀March฀30,฀2005,฀the฀Debentures฀were฀redeemed,฀and฀of฀the฀$435.2฀million฀principal฀amount฀at฀maturity฀of฀Debentures,฀
$336.4฀million฀principal฀amount฀at฀maturity฀was฀redeemed฀for฀an฀aggregate฀cash฀payment฀of฀$206.6฀million฀and฀$98.8฀million฀
principal฀amount฀at฀maturity฀($60.6฀million฀in฀accreted฀value)฀was฀converted฀into฀1,378,670฀shares฀of฀Manpower฀common฀
stock.฀These฀shares฀were฀issued฀from฀Treasury฀Stock฀at฀the฀average฀price฀per฀treasury฀share,฀which฀totaled฀$41.4฀million.฀The฀
remaining฀$19.2฀million฀was฀recorded฀as฀Capital฀in฀Excess฀of฀Par฀Value.฀The฀cash฀payment฀was฀financed฀through฀borrowings฀
under฀our฀U.S.฀Receivables฀Facility฀($187.0฀million)฀and฀our฀revolving฀credit฀agreement฀($20.0฀million),฀both฀of฀which฀were฀฀
repaid฀during฀2005.
Our฀150.0฀million฀notes฀($198.4฀million),฀due฀March฀2005,฀were฀retired฀on฀March฀7,฀2005,฀with฀available฀cash,฀along฀with฀฀
derivative฀financial฀instruments฀to฀swap฀these฀notes฀to฀floating฀U.S.฀LIBOR,฀which฀expired฀concurrently฀with฀the฀notes.฀Cash฀฀
received฀from฀settlement฀of฀the฀foreign฀currency฀component฀of฀these฀derivative฀financial฀instruments฀was฀approximately฀$50.7฀
million,฀resulting฀in฀a฀net฀repayment฀of฀$147.7฀million฀related฀to฀the฀150.0฀million฀notes฀and฀is฀reflected฀in฀cash฀flows฀from฀฀
financing฀activities฀on฀the฀consolidated฀statements฀of฀cash฀flows.
On฀June฀1,฀2005,฀we฀offered฀and฀sold฀300.0฀million฀aggregate฀principal฀amount฀of฀4.50%฀notes฀due฀June฀1,฀2012฀(the฀
“300.0฀million฀Notes”).฀Net฀proceeds฀of฀approximately฀297.7฀million฀($372.3฀million)฀were฀used฀to฀repay฀a฀portion฀of฀the฀฀
outstanding฀indebtedness฀under฀our฀revolving฀credit฀facility฀and฀U.S.฀Receivables฀Facility,฀to฀fund฀our฀share฀repurchase฀฀
program,฀and฀for฀general฀corporate฀purposes.฀The฀300.0฀million฀Notes฀were฀issued฀at฀a฀price฀of฀99.518%฀to฀yield฀an฀effective฀
interest฀rate฀of฀4.58%.฀The฀discount฀of฀1.4฀million฀($1.8฀million)฀will฀be฀amortized฀to฀interest฀expense฀over฀the฀term฀of฀the฀notes.฀
Interest฀is฀payable฀annually฀on฀June฀1.฀The฀300.0฀million฀Notes฀are฀unsecured฀senior฀obligations฀and฀rank฀equally฀with฀all฀of฀
our฀existing฀and฀future฀senior฀unsecured฀debt฀and฀other฀liabilities.฀We฀may฀redeem฀the฀300.0฀million฀Notes,฀in฀whole฀but฀not฀in฀
part,฀at฀our฀option฀at฀any฀time฀for฀a฀redemption฀price฀as฀defined฀in฀the฀agreement.฀These฀notes฀also฀contain฀certain฀customary฀
restrictive฀covenants฀and฀events฀of฀default.
Our฀Euro-denominated฀borrowings฀have฀been฀designated฀as฀a฀hedge฀of฀our฀net฀investment฀in฀subsidiaries฀with฀a฀Euro-฀
functional฀currency.฀Since฀our฀net฀investment฀in฀these฀subsidiaries฀exceeds฀the฀respective฀amount฀of฀the฀designated฀borrowings,฀
all฀foreign฀exchange฀gains฀or฀losses฀related฀to฀these฀borrowings฀are฀included฀as฀a฀component฀of฀Accumulated฀Other฀
Comprehensive฀Income.฀(See฀Significant฀Matters฀Affecting฀Results฀of฀Operations฀and฀Notes฀8฀and฀13฀to฀the฀consolidated฀฀
financial฀statements฀for฀further฀information.)
We฀have฀a฀$625.0฀million฀revolving฀credit฀agreement฀(the฀“credit฀agreement”)฀with฀a฀syndicate฀of฀commercial฀banks.฀The฀credit฀
agreement฀allows฀for฀borrowings฀in฀various฀currencies฀and฀up฀to฀$150.0฀million฀may฀be฀used฀for฀the฀issuance฀of฀standby฀letters฀
of฀credit.฀Outstanding฀letters฀of฀credit฀issued฀under฀the฀credit฀agreement฀totaled฀$4.0฀million฀and฀$85.8฀million฀as฀of฀December฀
31,฀2006฀and฀2005,฀respectively.฀Beginning฀in฀2006,฀the฀letters฀of฀credit฀outstanding฀under฀the฀credit฀agreement฀were฀substantially฀
reduced฀as฀certain฀letters฀of฀credit฀have฀been฀issued฀directly฀by฀third฀parties฀rather฀than฀under฀the฀credit฀agreement.฀Additional฀
borrowings฀of฀$489.0฀million฀were฀available฀to฀us฀under฀the฀credit฀agreement฀as฀of฀December฀31,฀2006.
In฀January฀2006,฀the฀agreement฀was฀amended฀to฀extend฀the฀expiration฀date฀to฀October฀2010,฀from฀October฀2009,฀and฀to฀฀
revise฀the฀borrowing฀margin฀and฀reflect฀improved฀market฀pricing฀conditions.฀The฀borrowing฀margin฀and฀facility฀fee฀on฀the฀agree-
ment,฀as฀well฀as฀the฀fee฀paid฀for฀the฀issuance฀of฀letters฀of฀credit฀under฀the฀credit฀agreement,฀vary฀based฀on฀our฀public฀debt฀฀
ratings฀and฀borrowing฀level.฀As฀of฀December฀31,฀2006฀the฀interest฀rate฀under฀the฀agreement฀was฀LIBOR฀plus฀0.50%฀(for฀U.S.฀
Dollar฀borrowings,฀or฀alternative฀base฀rate฀for฀foreign฀currency฀borrowings),฀and฀the฀facility฀and฀issuance฀fees฀were฀0.125%฀and฀
0.50%,฀respectively.
The฀credit฀agreement฀requires,฀among฀other฀things,฀that฀we฀comply฀with฀a฀Debt-to-EBITDA฀ratio฀of฀less฀than฀3.25฀to฀1฀and฀a฀
fixed฀charge฀ratio฀of฀greater฀than฀2.00฀to฀1.฀As฀defined฀in฀the฀credit฀agreement,฀we฀had฀a฀Debt-to-EBITDA฀ratio฀of฀1.33฀to฀1฀and฀
a฀fixed฀charge฀ratio฀of฀3.08฀to฀1฀as฀of฀December฀31,฀2006.฀Based฀upon฀current฀forecasts,฀we฀expect฀to฀be฀in฀compliance฀with฀
these฀covenants฀throughout฀the฀coming฀year.