ManpowerGroup 2012 Annual Report Download - page 46

Although currency fluctuations impact our reported results and shareholders’ equity, such fluctuations generally do not
affect our cash flow 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 United States for payment of license fees and interest expense on intercompany loans, working capital loans made
between the United States 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, 2012, there were £4.0 ($6.4) million of forward contracts that relate to cash flows owed to
our foreign subsidiaries in 2013. 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 is the currency gain or loss on the
amounts owed.
As of December 31, 2012, we had outstanding $725.5 million in aggregate principal amount of notes denominated in euros
(€550.0 million). These notes 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,
translation gains or losses related to these borrowings are included as a component of accumulated other comprehensive
income. Shareholders’ equity decreased by $7.9 million, net of tax, due to changes in accumulated other comprehensive
income during the year due to the currency impact on these designated borrowings.
On January 7, 2010, Venezuela’s National Consumer Price Index for December 2009 was released, which noted that the
cumulative three-year inflation rates for both of Venezuela’s inflation indices were over 100%. Under the current accounting
guidance, since the country’s economy is considered highly inflationary, the functional currency of the foreign entity (Bolivar
Fuerte) must be remeasured to the functional currency of the reporting entity (United States dollar) effective January 1,
2010. As such, all currency adjustments related to the assets and liabilities of our Venezuelan subsidiary are now reported
as translation gains or losses in our Consolidated Statements of Operations.
Interest Rates — Our exposure to market risk for changes in interest rates relates primarily to our variable rate long-term
debt obligations. We have historically managed interest rates through the use of a combination of fixed- and variable-
rate borrowings and interest rate swap agreements. As of December 31, 2012, we had the following fixed- and variable-
rate borrowings:
(in millions) Amount
Weighted-
Average
Interest Rate(1)
Variable-rate borrowings $ 43.3 9.10%
Fixed-rate borrowings 726.8 4.63
Total debt $ 770.1 4.88%
(1) The rates are impacted by currency exchange rate movements.
Sensitivity analysis — The following tables summarize our debt and derivative instruments that are sensitive to foreign
currency exchange rate and interest rate movements. All computations below are based on the United States dollar spot
rate as of December 31, 2012 and 2011. The exchange rate computations assume a 10% appreciation or 10% depreciation
of the euro and British pound to the United States dollar.
MANAGEMENT’S DISCUSSION & ANALYSIS
of financial condition and results of operations
ManpowerGroup 2012 Annual Report Management’s Discussion & Analysis
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