ManpowerGroup 2013 Annual Report Download - page 42

40 ManpowerGroup 2013 Annual Report Management’s Discussion & Analysis
MANAGEMENT’S DISCUSSION & ANALYSIS
of financial condition and results of operations
When the €350.0 million Notes mature, we plan to repay the amount with available cash, borrowings under our $600.0
million revolving credit facility or a new borrowing. 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 decide to replace the €350.0 million Notes.
The €350.0 million Notes have been designated as a hedge of our net investment in subsidiaries with a 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. (See Significant Matters Affecting Results of Operations and Notes 7 and 12 to the Consolidated Financial
Statements for further information.)
REVOLVING CREDIT AGREEMENT
On October 15, 2013, we amended and restated our Five-Year Credit Agreement (“the Amended Agreement”) with a
syndicate of commercial banks to, among other things: decrease the revolving commitments from $800.0 million to $600.0
million, revise the termination date of the facility from October 5, 2016 to October 15, 2018, and permit the termination date
of the facility to be extended by an additional year twice during the term of the Amended Agreement. The remaining
material terms and conditions of the Amended Agreement are substantially similar to the material terms and conditions of
our Five-Year Credit Agreement dated October 5, 2011.
The Amended Agreement allows for borrowing in various currencies and up to $150.0 million may be used for the issuance
of stand-by letters of credit. We had no borrowings under this facility as of December 31, 2013 or 2012. Outstanding letters
of credit issued under the Amended Agreement totaled $0.9 million as of both December 31, 2013 and 2012. Additional
borrowings of $599.1 million and $799.1 million were available to us under the facility as of December 31, 2013 and
2012, respectively.
Under the Amended Agreement, a credit ratings-based pricing grid determines the facility fee and the credit spread that we
add to the applicable interbank borrowing rate on all borrowings. At our current credit rating, the annual facility fee is 22.5
bps paid on the entire $600.0 million facility and the credit spread is 127.5 bps on any borrowings. Any downgrades from
the credit rating agencies would unfavorably impact our facility fees and result in additional costs ranging from approximately
$0.2 million to $0.3 million annually.
The Amended Agreement contains customary restrictive covenants pertaining to our management and operations,
including limitations on the amount of subsidiary debt that we may incur and limitations on our ability to pledge assets, as
well as financial covenants requiring, among other things, that we comply with a leverage ratio (net Debt-to-EBITDA) of not
greater than 3.5 to 1 and a fixed charge coverage ratio of not less than 1.5 to 1. The Amended Agreement also contains
customary events of default, including, among others, payment defaults, material inaccuracy of representations and
warranties, covenant defaults, bankruptcy or involuntary proceedings, certain monetary and non-monetary judgments,
change of control and customary ERISA defaults.
As defined in the Amended Agreement, we had a net Debt-to-EBITDA ratio of 0.28 to 1 (compared to the maximum
allowable ratio of 3.5 to 1) and a Fixed Charge Coverage ratio of 3.29 to 1 (compared to the minimum required ratio of 1.5
to 1) as of December 31, 2013. Based on our current forecast, we expect to be in compliance with our financial covenants
for the next 12 months.
OTHER
In addition to the previously mentioned facilities, we maintain separate bank credit lines with financial institutions to meet
working capital needs of our subsidiary operations. As of December 31, 2013, such uncommitted credit lines totaled
$376.9 million, of which $339.9 million was unused. Under the Amended Agreement, total subsidiary borrowings cannot
exceed $300.0 million in the first, second and fourth quarters, and $600.0 million in the third quarter of each year. Due to
these limitations, additional borrowings of $263.0 million could have been made under these lines as of December 31, 2013.
In January 2013, Moody’s Investors Services lowered our credit outlook from positive to stable, while maintaining the Baa3
credit rating. Our credit rating from Standard and Poor’s is BBB- with a stable outlook. The rating agencies use a proprietary
methodology in determining their ratings and outlook which includes, among other things, financial ratios based upon debt
levels and earnings performance. Both of the current credit ratings are investment grade.