ManpowerGroup 2009 Annual Report Download - page 34

32 Manpower 2009 Annual Report Management’s Discussion & Analysis
OTHER
In addition to the previously mentioned facilities, we maintain separate bank credit lines with fi nancial institutions to meet
working capital needs of our subsidiary operations. As of December 31, 2009, such uncommitted credit lines totaled $408.4
million, of which $367.1 million was unused. Under the credit agreement, total subsidiary borrowings cannot exceed $300.0
million in the fi rst, second and fourth quarters, and $600.0 million in the third quarter of each year. Due to these limitations,
additional borrowings of $257.7 million could have been made under these lines as of December 31, 2009.
In August 2009, our credit rating from Moody’s Investors Services was downgraded from Baa2 with a negative outlook to
Baa3 with a stable outlook. Our credit rating from Standard and Poor’s is BBB- with a negative outlook. The rating agencies
use a proprietary methodology in determining their ratings and outlook which includes, among other things, fi nancial ratios
based upon debt levels and earnings performance. Both of the current credit ratings are investment grade.
Application Of Critical Accounting Policies
The preparation of our fi nancial statements in conformity with accounting principles generally accepted in the United States
requires us to make estimates and assumptions that affect the reported amounts. A discussion of the more signifi cant
estimates follows. Management has discussed the development, selection and disclosure of these estimates and
assumptions with the Audit Committee of our Board of Directors.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
We have an Allowance for Doubtful Accounts recorded as an estimate of the Accounts Receivable balance that may not be
collected. This allowance is calculated on an entity-by-entity basis with consideration for historical write-off experience, the
current aging of receivables and a specifi c review for potential bad debts. Items that affect this balance mainly include bad
debt expense and write-offs of Accounts Receivable balances.
Bad Debt Expense, which increases our Allowance for Doubtful Accounts, is recorded as a Selling and Administrative
Expense and was $27.8 million, $23.4 million and $21.8 million for 2009, 2008 and 2007, respectively. Factors that would
cause this provision to increase primarily relate to increased bankruptcies by our clients and other diffi culties collecting
amounts billed. On the other hand, an improved write-off experience and aging of receivables would result in a decrease to
the provision.
Write-offs, which decrease our Allowance for Doubtful Accounts, are recorded as a reduction to our Accounts Receivable
balance and were $39.0 million, $21.5 million and $20.8 million for 2009, 2008 and 2007, respectively.
EMPLOYMENT-RELATED ITEMS
The employment of contingent workers and permanent staff throughout the world results in the recognition of liabilities
related to defi ned benefi t pension plans, self-insured workers’ compensation, social program remittances and payroll tax
audit exposures that require us to make estimates and assumptions in determining the proper reserve levels. These reserves
involve signifi cant estimates or judgments that are material to our fi nancial statements.
Defined Benefit Pension Plans
We sponsor several qualifi ed and nonqualifi ed pension plans covering permanent employees. The most signifi cant plans are
located in the U.S., France, the United Kingdom and other European countries. Annual expense relating to these plans is
recorded as Selling and Administrative Expense and is estimated to be approximately $9.9 million in 2010, compared to $6.7
million, $15.5 million and $19.2 million in 2009, 2008 and 2007, respectively. A relatively lower expense is recognized
subsequent to 2008 as we terminated our Japanese plan in January 2009 and replaced it with a defi ned contribution plan.
The termination resulted in a curtailment and settlement gain of $4.3 million in 2009, which decreased the 2009 expense.
The calculations of annual pension expense and the pension liability required at year-end include various actuarial assumptions
such as discount rates, expected rate of return on plan assets, compensation increases and employee turnover rates. We
determine our assumption for the discount rate to be used for purposes of computing annual service and interest costs
based on an index of high-quality corporate bond yields and matched-funding yield curve analysis as of the measurement
date. We review the actuarial assumptions on an annual basis and make modifi cations to the assumptions as necessary. We
review peer data and historical rates, on a country-by-country basis, to check for reasonableness in setting both the discount
rate and the expected return on plan assets. We estimate compensation increases and employee turnover rates for each
plan based on the historical rates and the expected future rates for each respective country. Changes to any of these
assumptions will impact the level of annual expense recorded related to the plans.
Management’s Discussion & Analysis
of fi nancial condition and results of operations