ManpowerGroup 2009 Annual Report Download - page 38

36 Manpower 2009 Annual Report Management’s Discussion & Analysis
Under the current accounting guidance, we are also required to test our indefi nite-lived intangible assets for impairment by
comparing the fair value of the intangible asset with its carrying value. If the intangible asset’s fair value is less than its carrying
value, an impairment loss is recognized for the difference. There was no signifi cant impairment of our indefi nite-lived intangible
assets recorded in 2009.
We did not perform an interim impairment test of our goodwill and indefi nite-lived intangible assets in the fourth quarter of
2009 as we noted no signifi cant indicators of impairment as of December 31, 2009.
The goodwill and intangible asset impairment charge is non-cash in nature and does not impact our liquidity, cash fl ows
provided by operating activities or future operations. (See Note 1 to the Consolidated Financial Statements for further information.)
Signifi cant Matters Affecting Results Of Operations
MARKET RISKS
We are exposed to the impact of foreign currency exchange rate fl uctuations and interest rate changes.
Exchange Rates – Our exposure to foreign currency exchange rates relates primarily to our foreign subsidiaries and our Euro-
denominated borrowings. For our foreign subsidiaries, exchange rates impact the U.S. Dollar value of our reported earnings,
our investments in the subsidiaries and the intercompany transactions with the subsidiaries.
Approximately 87% of our revenues and profi ts are generated outside of the U.S., with approximately 49% generated from
our European operations that use the Euro as their functional currency. As a result, fl uctuations in the value of foreign
currencies against the U.S. Dollar, particularly the Euro, may have a signifi cant impact on our reported results. Revenues and
expenses denominated in foreign currencies are translated into U.S. Dollars at the monthly weighted-average exchange
rates for the year. Consequently, as the value of the U.S. Dollar changes relative to the currencies of our major markets, our
reported results vary.
Throughout 2009, the U.S. Dollar was volatile against many of the currencies of our major markets. Revenues from Services
and Operating Profi t in constant currency were approximately 4.6% and 0.2% higher than reported. If the U.S. Dollar had
strengthened an additional 10% during 2009, Revenues from Services would have decreased by approximately 8.7% and
Operating Profi t would have decreased by approximately 17.0% from the amounts reported.
Fluctuations in currency exchange rates also impact the U.S. Dollar amount of our Shareholders’ Equity. The assets and
liabilities of our non-U.S. subsidiaries are translated into U.S. Dollars at the exchange rates in effect at year-end. The resulting
translation adjustments are recorded in Shareholders’ Equity as a component of Accumulated Other Comprehensive Income
(Loss). The U.S. Dollar weakened relative to many foreign currencies as of December 31, 2009 compared to December 31,
2008. Consequently, Shareholders’ Equity increased by $107.0 million as a result of the foreign currency translation during
the year. If the U.S. Dollar had weakened an additional 10% as of December 31, 2009, resulting translation adjustments
recorded in Shareholders’ Equity would have increased by approximately $288.7 million from the amounts reported.
Although currency fl uctuations impact our reported results and Shareholders’ Equity, such fl uctuations generally do not
affect our cash fl ow or result in actual economic gains or losses. Substantially all of our subsidiaries derive revenues and incur
expenses within a single country and, consequently, do not generally incur currency risks in connection with the conduct of
their normal business operations. We generally have few cross-border transfers of funds, except for transfers to the U.S. for
payment of license fees and interest expense on intercompany loans, working capital loans made between the U.S. and our
foreign subsidiaries, dividends from our foreign subsidiaries, and payments between certain countries for services provided.
To reduce the currency risk related to these transactions, we may borrow funds in the relevant foreign currency under our
revolving credit agreement or we may enter into a forward contract to hedge the transfer.
As of December 31, 2009, there were £7.4 million ($12.0 million) of net forward contracts that relate to cash fl ows owed to
our foreign subsidiaries in 2010. In addition, there were €6.9 million ($9.9 million) of net forward contracts outstanding relating
to the interest due on our €200.0 million Notes and €300.0 million Notes in June 2010. Our forward contracts are not
designated as hedges. Consequently, any gain or loss resulting from the change in fair value is recognized in the current
period earnings.
As of December 31, 2009, we had $714.6 million of long-term borrowings denominated in Euros (€500.0 million) which have
been designated as a hedge of our net investment in subsidiaries with the Euro-functional currency. Since our net investment
in these subsidiaries exceeds the respective amount of the designated borrowings, all translation gains or losses related to
these borrowings are included as a component of Accumulated Other Comprehensive Income (Loss) . Shareholders’ Equity
increased by $15.1 million, net of tax, due to changes in Accumulated Other Comprehensive Income (Loss) during the year
due to the currency impact on these borrowings.
Management’s Discussion & Analysis
of fi nancial condition and results of operations