ManpowerGroup 2011 Annual Report Download - page 36

34 ManpowerGroup 2011 Annual Report Management’s Discussion & Analysis
MANAGEMENT’S DISCUSSION & ANALYSIS
of financial condition and results of oper ations
We have aggregate commitments of $1,636.0 million related to debt, operating leases, severances and office closure
costs, and certain other commitments, as follows:
(in millions) Total 2012 2013–2014 2015–2016 Thereafter
Long-term debt including interest $ 686.0 $ 411.7 $ 271.3 $ 3.0 $ –
Short-term borrowings 42.4 42.4 – – –
Operating leases 744.3 201.3 258.1 143.4 141.5
Severances and other office closure costs 29.4 22.4 5.5 1.5 –
Other 133.9 55.0 43.0 10.7 25.2
$ 1,636.0 $ 732.8 $ 577.9 $ 158.6 $ 166.7
Our liability for unrecognized tax benefits, including related interest and penalties, of $23.4 million is excluded from the
commitments above as we cannot determine the years in which these positions might ultimately be settled.
We recorded net reorganization costs of $23.1 million, $36.1 million and $33.5 million in 2011, 2010 and 2009, respectively,
in Selling and administrative expenses, primarily related to severances and office closures and consolidations in multiple
countries. These expenses are net of reversals of previous accruals resulting mainly from larger-than-estimated cost
savings from subleasing and lease buyouts as well as lower-than expected severance costs. During 2011, we made
payments of $27.9 million out of our reorganization reserve. We expect a majority of the remaining $29.4 million reserve will
be paid in 2012. (See Note 1 to the Consolidated Financial Statements for further information.)
We also have entered into guarantee contracts and stand-by letters of credit that total approximately $174.0 million and
$168.1 million as of December 31, 2011 and 2010, respectively ($135.4 million and $131.4 million for guarantees,
respectively, and $38.6 million and $36.7 million for stand-by letters of credit, respectively). Guarantees primarily relate to
bank accounts, operating leases and indebtedness. The stand-by letters of credit relate to workers’ compensation,
operating leases and indebtedness. If certain conditions were met under these arrangements, we would be required to
satisfy our obligation in cash. Due to the nature of these arrangements and our historical experience, we do not expect
to make any significant payments under these arrangements. Therefore, they have been excluded from our aggregate
commitments identified above. The cost of these guarantees and letters of credit was $1.5 million and $1.8 million in 2011
and 2010, respectively.
Capital Resources
Total capitalization as of December 31, 2011 was $3,183.6 million, comprised
of $700.2 million in debt and $2,483.4 million in equity. Debt as a percentage of
total capitalization was 22% as of December 31, 2011 and 23% as of both
December 31, 2010 and 2009.
EURO NOTES
We 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.
We also have €200.0 million aggregate principal amount of 4.75% notes due June 14, 2013 (the “€200.0 million Notes”).
The €200.0 million Notes were issued at a price of 99.349% to yield an effective interest rate of 4.862%. The discount of
€1.3 million ($1.6 million) is being amortized to interest expense over the term of the €200.0 million Notes. Interest is payable
annually on June 14.
Both the €300.0 million Notes and the €200.0 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.
When these facilities mature, we plan to repay these amounts with available cash, borrowings under our new $800.0
million Five-Year Credit Agreement (the “Agreement”) or refinance them with new long-term facilities. In the event that the
economy declines again for an extended period of time, we may be unable to repay these amounts with available cash and,
as such, we may need to replace these borrowings with borrowings under our Agreement, or with new long-term facilities.
The credit terms, including interest rate and facility fees, of any replacement borrowings will be dependent upon the
condition of the credit markets at that time. We currently do not anticipate any problems accessing the credit markets
should we need to replace our facilities.
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TOTAL CAPITALIZATION
in mi lli ons ($)
2,483.4 700.2
2,397.2 698.0
2,536.5 757.3