ManpowerGroup 2008 Annual Report Download - page 32

30 Management’s Discussion & Analysis Manpower Annual Report 2008
Management’s Discussion & Analysis
of financial condition and results of operations
We also have €300.0 million aggregate principal amount of 4.50% notes due June 1, 2012 (the “€300.0 million Notes”). 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) is being amortized to interest expense over the term of the €300.0 million Notes. Interest is payable
annually on June 1.
Both the €200.0 million Notes and 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 these notes, in whole but not in part, at our
option at any time for a redemption price determined in accordance with the term of the notes. These notes also contain
certain customary non-financial restrictive covenants and events of default.
Our Euro-denominated borrowings, including the euro notes and borrowings under the revolving credit agreement, 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 (Loss) Income. (See Significant
Matters Affecting Results of Operations and Notes 8 and 13 to the consolidated financial statements for further information.)
REVOLVING CREDIT AGREEMENT
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. The credit agreement was amended in November 2007 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 credit 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, 2008, the
interest rate under the 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. As of December 31, 2008 we
have borrowed €100.0 million ($139.7 million) under this credit agreement. (See Significant Matters Affecting Results of
Operations for further information.)
Outstanding letters of credit issued under the credit agreement totaled $3.8 million and $3.7 million as of December 31, 2008
and 2007, respectively. Additional borrowings of $481.5 million were available to us under the credit agreement as of
December 31, 2008. In February 2009, we borrowed an additional $56.0 million under the credit agreement which has
reduced our availability.
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 agreement, we had a Debt-to-EBITDA ratio of 1.22 to 1 and a
fixed charge ratio of 3.28 to 1 as of December 31, 2008. Based on our current forecast, we expect to be in compliance with
these covenants for the next 12 months.
ACCOUNTS RECEIVABLE SECURITIZATION
One of our wholly-owned U.S. subsidiaries has an agreement to transfer to a third party, on an ongoing basis, an interest in up
to $100.0 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 reflected as debt on the consolidated balance sheets.
In July 2008, we amended the facility and elected to reduce the program’s amount from $200.0 million to $100.0 million. With
this amendment, the liquidity fee increased to 70 basis points (0.70%) on the total program amount, with an additional
increase to 95 basis points (0.95%) if the average program usage falls below a minimum level, the program fee increased to
30 basis points (0.30%), and the maturity was extended to July 2009. The interest rate for borrowings under the agreement is
variable and tied to A1+/P1 rated commercial paper. This program has covenants that are similar to those under the credit
agreement. Based on our current forecast, we expect to be in compliance with these covenants throughout the coming year.
We currently plan to renew this program in July 2009, assuming borrowing costs program fees do not increase significantly.
As of December 31, 2008, there were borrowings of $64.0 million outstanding under this program, which are recorded as
current maturities of long-term debt, at an interest rate of 2.4%. For the year ended December 31, 2008, the average interest
rate on all borrowings was 3.1%, and we made total interest payments of $0.9 million. There were no borrowings outstanding
as of December 31, 2007. In February 2009 we repaid all borrowings under this program.