ManpowerGroup 2007 Annual Report Download - page 27

Management’s Discussion & Analysis24 Manpower 2007 Annual Report
Management’s Discussion & Analysis
of financial condition and results of operations
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 fi nanced 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 fi nancial instruments to swap these notes to fl oating U.S. LIBOR, which expired concurrently with the notes. Cash
received from settlement of the foreign currency component of these derivative fi nancial instruments was approximately $50.7
million, resulting in a net repayment of $147.7 million related to the €150.0 million notes and is refl ected in cash fl ows from
fi nancing activities on the consolidated statements of cash fl ows.
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 defi ned 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 Signifi cant Matters Affecting Results of Operations and Notes 8 and 13 to the consolidated
fi nancial 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 $3.7 million and $4.0 million as of December
31, 2007 and 2006, respectively. Additional borrowings of $475.4 million were available to us under the credit agreement as of
December 31, 2007.
In November 2007, the revolving credit agreement was amended (the “amended agreement”) to extend the expiration date to
November 2012 from October 2010, to revise certain covenant calculations, and increase the amount of subsidiary borrowings
allowed under the agreement.
The borrowing margin and facility fee on the amended agreement, as well as the fee paid for the issuance of letters of credit
under the facility, vary based on our public debt ratings and borrowing level. As of December 31, 2007, the interest rate under
the amended agreement was LIBOR plus 0.40% (for U.S. Dollar borrowings, or alternative base rate for foreign currency
borrowings), and the facility and issuance fees were 0.10% and 0.40%, respectively.
The amended agreement requires, among other things, that we comply with a Debt-to-EBITDA ratio of less than 3.25 to 1 and
a fi xed charge ratio of greater than 2.00 to 1. As defi ned in the credit agreement, we had a Debt-to-EBITDA ratio of 0.99 to 1 and
a fi xed charge ratio of 4.31 to 1 as of December 31, 2007. Based upon current forecasts, we expect to be in compliance with
these covenants throughout the coming year.
There were no borrowings outstanding under our $125.0 million U.S. commercial paper program as of December 31, 2007
and 2006.
One of our wholly-owned U.S. subsidiaries has an agreement to transfer, on an ongoing basis, an interest in up to $200.0 million
of its accounts receivable. The terms of this agreement are such that transfers do not qualify as a sale of accounts receivable.
Accordingly, any advances under this agreement are refl ected as debt on the consolidated balance sheets. In July 2007, we
amended the agreement to extend it to July 2008. All other terms remain substantially unchanged. No amounts were advanced
under this facility as of December 31, 2007 and 2006.