ManpowerGroup 2012 Annual Report Download - page 40

We have aggregate commitments of $1,963.1 million related to debt, operating leases, severances and office closure costs,
and certain other commitments, as follows:
(in millions) Total 2013 2014–2015 2016–2017 Thereafter
Long-term debt including interest $ 845.5 $291.1 $ 41.8 $ 41.4 $471.2
Short-term borrowings 43.3 43.3 — — —
Operating leases 798.2 210.3 279.4 153.9 154.6
Severances and other office closure costs 41.4 30.8 8.2 2.4 —
Other 234.7 74.2 81.3 53.4 25.8
$ 1,963.1 $649.7 $410.7 $251.1 $651.6
Our liability for unrecognized tax benefits, including related interest and penalties, of $26.0 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 $48.8 million, $23.1 million and $36.1 million in 2012, 2011 and 2010, 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. During 2012, we made payments of $36.8 million out of our reorganization reserve. We
expect a majority of the remaining $41.4 million reserve will be paid in 2013. (See Note 1 to the Consolidated Financial
Statements for further information.)
In the fourth quarter of 2012, we implemented a simplification plan that impacts all of our segments as well as our corporate
functions. The goal of our plan is to simplify our organization by creating the right agility and speed, which allows us to
move forward regardless of the economic challenges and focuses around four different areas: organization design,
programs, delivery models, and technology structure. We estimate that the $26.6 million of reorganization costs we
recorded in the fourth quarter of 2012 in connection with this plan will result in a reduction in selling and administrative
expenses of approximately $52.0 million in 2013. We expect further reorganization costs, and estimate that we will achieve
additional savings in selling and administrative expenses, in 2013 as we continue to execute our plan.
We also have entered into guarantee contracts and stand-by letters of credit that total approximately $166.8 million and
$174.0 million as of December 31, 2012 and 2011, respectively ($128.9 million and $135.4 million for guarantees, respectively,
and $37.9 million and $38.6 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 $1.7 million and $1.5 million in 2012
and 2011, respectively.
Capital Resources
Total capitalization as of December 31, 2012 was $3,270.9 million, comprised of $770.1 million in debt and $2,500.8 million
in equity. Debt as a percentage of total capitalization was 24%, 22% and 23% as of December 31, 2012, 2011 and 2010,
respectively.
EURO NOTES
On June 22, 2012, we offered and sold €350.0 million aggregate principal amount of the Company’s 4.50% notes due June
22, 2018 (the “€350.0 million Notes”). The net proceeds from the €350.0 million Notes of €348.7 million were used to repay
borrowings under our $800.0 million revolving credit facility that were drawn in May to repay our €300.0 million notes that
matured on June 1, 2012 and for general corporate purposes. The €350.0 million Notes were issued at a price of 99.974%
to yield an effective interest rate of 4.505%. Interest on the €350.0 million Notes is payable in arrears on June 22 of each year.
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 ($1.6) million is being amortized to interest expense over the term of the €200.0 million Notes. Interest on the €200.0
million Notes is payable in arrears on June 14 of each year.
MANAGEMENT’S DISCUSSION & ANALYSIS
of financial condition and results of operations
ManpowerGroup 2012 Annual Report Management’s Discussion & Analysis
38
2,500.8
2,483.4
2,397.2
Total Capitalization
In Millions ($)
770.1
700.2
698.0
’10
’11
’12
Equity Debt