ManpowerGroup 2007 Annual Report Download - page 32

29Management’s Discussion & Analysis Manpower 2007 Annual Report
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 fi xed-and variable-rate borrowings
and interest rate swap agreements. As of December 31, 2007, we had the following fi xed-and variable-rate borrowings:
Fixed Variable Total
Amount
Weighted –
Average
Interest Rate Amount
Weighted –
Average
Interest Rate Amount
Weighted –
Average
Interest Rate
Excluding interest rate swap agreements $ 729.6 4.4 $ 184.9 6.0 $ 914.5 4.7
Including impact of swap agreements 875.5 4.6 39.0 12.7 914.5 5.0
We have various interest rate swap agreements in order to fi x 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 ($145.9 million), fi x the interest
rate, on a weighted-average basis, at 5.71% and expire in 2010.
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,
2007. The exchange rate computations assume a 10% appreciation or 10% depreciation of the Euro and British Pound to the
U.S. Dollar.
The hypothetical impact on 2007 earnings and Accumulated Other Comprehensive Income of the stated change in rates is as follows:
Movements In
Exchange Rates
Movements In
Interest Rates
Market Sensitive Instrument
10%
Depreciation
10%
Appreciation 10% Decrease 10% Increase
€200 million, 4.86% Notes due June 2013 $ 29.2(1) $ (29.2)(1) ——
€300 million, 4.58% Notes due June 2012 43.8(1) (43.8)(1) ——
Revolving credit agreement:
€100 million Euro Borrowings 14.6(1) (14.6)(1) $ 0.6 $ (0.6)
€100 million Interest Rate Swaps — — (0.6) 0.6
Forward contracts:
$2.9 million to 2.0 million (0.3) 0.3 — —
$10.9 million to £5.5 million (1.1) 1.1 — —
$ 86.2 $ (86.2 $ — $ —
(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.
The hypothetical changes in the fair value of our market sensitive instruments due to changes in interest rates, and changes in
foreign currency exchange rates for the foreign contracts, are as follows:
Market Sensitive Instrument 10% Decrease 10% Increase
Fixed Rate Debt:
200 million, 4.86% Notes due June 2013 $ 29.0(1) $ (29.0)(1)
300 million, 4.58% Notes due June 2012 43.2(1) (43.2)(1)
Derivative Instruments:
100 million Interest Rate Swaps (1.1)(1) 1.1(1)
Forward contacts:
$2.9 million to 2.0 million (0.3) 0.3
$10.9 million to £5.5 million (1.1) 1.1
(1) This change in fair value is not recorded in the fi nancial statements, however disclosure of the fair value is included in Note 8 to the consolidated fi nancial statements.
Impact of Economic Conditions
One of the principal attractions of using employment services providers is to maintain a fl exible supply of labor to meet changing
economic conditions. Therefore, the industry has been, and remains sensitive to, economic cycles. To help minimize the effects
of these economic cycles, we offer clients a continuum of services to meet their needs throughout the employment and
business cycle. We believe that the breadth of our operations and the diversity of our service mix cushion us against the impact
of an adverse economic cycle in any single country or industry. However, adverse economic conditions in any of our largest
markets, or in several markets simultaneously, would have a material impact on our consolidated fi nancial statements.