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59
Manpower 2007 Annual Report
Notes to Consolidated Financial Statements
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 fl uctuating foreign
currency exchange rates on cash fl ows with foreign subsidiaries. All such contracts entered into during 2007 and 2006, whether
designated as cash fl ow hedges or fair value hedges, were considered highly effective, as defi ned by SFAS No. 133, as amended.
As of December 31, 2007, there was a £5.5 ($10.9) forward contract that relates to cash fl ows owed to our foreign subsidiaries
in March 2008. In addition, a €2.0 ($2.9) forward contract is outstanding relating to cash fl ows owed for interest due on our
€200 Notes and €300 Notes in June 2008.
Our revolving credit agreement borrowings of €100.0 ($145.9), the €200.0 ($290.5) unsecured notes and the €300.0 ($436.6)
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.
We had derivative fi nancial instruments which expired in March 2005 to swap our €150.0 ($198.4) unsecured notes, at 6.25%
due March 2005, to fl oating U.S. LIBOR. Cash received from settlement of the foreign currency component of these derivative
fi nancial instruments was approximately $50.7. Gains and losses arising from foreign exchange fl uctuations throughout the
contract term on the derivative instruments were 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 fi xed and variable rate borrowings and interest rate swap agreements.
We have various interest rate swap agreements to fi x our interest costs on a portion of our Euro-denominated variable rate
borrowings. The Euro interest rate swap agreements have a notional value of €100.0 ($145.9), which fi x the interest rate, on a
weighted-average basis, at 5.71% and expire in 2010. Such contracts have been designated as cash fl ow hedges and were
considered highly effective, as defi ned by SFAS No. 133, as amended, as of December 31, 2007. For the years ended
December 31, 2007, 2006 and 2005 these instruments increased interest expense by $2.2, $3.6, and $4.6 respectively.
Fair Value of Derivative Financial Instruments
The fair value of our derivative fi nancial instruments are refl ected in the consolidated balance sheets as follows:
December 31 2007 2006
Other Long-Term Liabilities
€100.0 Interest Rate Swaps $ (5.1) $ (7.8)
Forward contracts ——
$ (5.1) $ (7.8)