ManpowerGroup 2009 Annual Report Download - page 33

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Management’s Discussion & Analysis Manpower 2009 Annual Report
Our Euro-denominated notes 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 (Loss). (See Signifi cant Matters Affecting Results of Operations and Notes 8 and 13 to the
Consolidated Financial Statements for further information.)
REVOLVING CREDIT AGREEMENT
We have a $400.0 million revolving credit agreement (the “credit agreement”) with a syndicate of commercial banks that
expires November 2012. 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.
On October 16, 2009, we amended our revolving credit agreement to revise certain terms and fi nancial covenants. The
amended revolving credit agreement (“Amended Revolving Credit Agreement”) reduced the size of the facility from $625.0
million to $400.0 million. In addition, the Amended Revolving Credit Agreement requires that we comply with maximum Debt-
to-EBITDA ratios, ranging from 3.25 to 1 to 6.00 to 1 beginning with the quarter ended September 30, 2009 through the
quarter ending June 30, 2011, returning to a ratio of 3.25 to 1 for the quarter ending September 30, 2011 and each quarter
thereafter. The Amended Revolving Credit Agreement also requires that we comply with minimum Fixed Charge Coverage
ratios, ranging from 1.25 to 1 to 2.00 to 1 beginning with the quarter ended September 30, 2009 through the quarter ending
December 31, 2011, returning to a ratio of 2.0 to 1 for the quarter ending March 31, 2012 and each quarter thereafter.
As defi ned in the Amended Revolving Credit Agreement, we had a Debt-to-EBITDA ratio of 3.64 to 1 (compared to a
maximum allowable ratio of 5.25 to 1) as of December 31, 2009 and a Fixed Charge Coverage ratio of 1.55 to 1 (compared to
a minimum required ratio of 1.25 to 1) as of December 31, 2009. Based on our current forecast, we expect to be in compliance
with our fi nancial covenants for the next 12 months.
Under our Amended Revolving Credit Agreement, we have a ratings-based pricing grid which determines the facility fee and
the credit spread that we add to the applicable interbank borrowing rate on all borrowings. At our current credit ratings, the
facility fee is 45 bps, and the credit spread is 255 bps. Any further downgrades from the credit agencies would unfavorably
impact our facility fees and result in additional costs ranging from approximately $0.6 million to $1.3 million annually. As of
December 31, 2009, the interest rate under the agreement was Libor plus 2.55% (for U.S. Dollar borrowings, or alternative
base rate for foreign currency borrowings).
On October 16, 2009, we repaid the €100.0 million ($146.4 million) borrowings outstanding under our Amended Revolving
Credit Agreement, and terminated the related interest rate swap agreements. As a result, we incurred approximately $7.5
million in fees classifi ed as interest expense, which was recorded in the third quarter ended September 30, 2009. We have no
borrowings under this credit agreement as of December 31, 2009. (See Signifi cant Matters Affecting Results of Operations
for further information.)
Outstanding letters of credit issued under the credit agreement totaled $8.6 million and $3.8 million as of December 31, 2009
and 2008, respectively. Additional borrowings of $391.4 million were available to us under the credit agreement as of
December 31, 2009, however total additional borrowings under all facilities would be limited to $334.3 million at December
31, 2009 by the fi nancial covenants.
ACCOUNTS RECEIVABLE SECURITIZATION
One of our wholly-owned U.S. subsidiaries had an agreement to transfer to a third party, on an ongoing basis, an interest in
up to $100.0 million of its accounts receivable. In June 2009, we terminated this program, which would have expired in July
2009, as we did not anticipate a need for this liquidity and anticipated a signifi cant increase in associated fees and borrowing
costs. The terms of this agreement were such that transfers did not qualify as a sale of accounts receivable. Accordingly, any
advances under this agreement were refl ected as debt on the consolidated balance sheets.
The interest rate for the facility was variable and tied to A1+/P1 rated commercial paper. In 2009 and 2008, the average interest rate
was 1.8% and 3.1%, respectively, and we made total interest payments of $0.1 million and $0.9 million, respectively. As of
December 31, 2008, there were borrowings of $64.0 million outstanding under this program at an interest rate of 2.4%, which were
recorded as current maturities of long-term debt. These borrowings were repaid in March 2009.