ManpowerGroup 2001 Annual Report Download - page 19

Total Capitalization
In Millions of U.S. Dollars
Capital Resources
In August 2001, the Company received $240.0 million in gross proceeds
related to the issuance of $435.4 million in aggregate principal amount at
maturity of unsecured zero-coupon convertible debentures, due August
17, 2021 (the “Debentures”). These Debentures were issued at a discount
to yield an effective interest rate of 3% per year and rank equally with all
existing and future senior unsecured indebtedness of the Company. Gross
proceeds were used to repay borrowings under the Company’s unsecured
revolving credit agreement and advances under the Receivables Facility. There
are no scheduled cash interest payments associated with the Debentures.
The Debentures are convertible into shares of the Company’s common
stock at an initial price of $39.50 per share if the closing price of the
Company’s common stock on the New York Stock Exchange exceeds
specified levels or in certain other circumstances.
The Company may call the Debentures beginning August 17, 2004
for cash at the issue price, plus accreted original issue discount. Holders
of the Debentures may require the Company to purchase the Debentures
at the issue price, plus accreted original issue discount, on the first, third,
fifth, tenth and fifteenth anniversary dates. The Company may purchase
these Debentures for either cash, the Company’s common stock, or
combinations thereof.
The Company has K150.0 million in unsecured notes due March 2005
and K200.0 million in unsecured notes due July 2006.
During November 2001, the Company entered into new revolving credit
agreements with a syndicate of commercial banks. The new agreements
consist of a $450.0 million five-year revolving credit facility (the “Five-year
Facility”) and a $300.0 million 364-day revolving credit facility (the
“364-day Facility”).
The revolving credit agreements allow for borrowings in various currencies
and up to $100.0 million of the Five-year Facility may be used for the
issuance of standby letters of credit. Outstanding letters of credit totaled
$65.5 million and $62.1 million as of December 31, 2001 and 2000,
respectively. Additional borrowings of $449.9 million were available to
the Company under these agreements at December 31, 2001.
The interest rate and facility fee on both agreements, and the issuance fee
paid for the issuance of letters of credit on the Five-year Facility, vary
based on the Company’s debt rating and borrowing level. Currently, on the
Five-year Facility, the interest rate is LIBOR plus .725% and the facility
and issuance fees are .15% and .725%, respectively. On the 364-day
Facility, the interest rate is LIBOR plus .75% and the facility fee is
.125%. The Five-year Facility expires in November 2006. The 364-day
Facility expires in November 2002.
The agreements require, among other things, that the Company comply
with a Debt-to-EBITDA ratio of less than 3.75 to 1 in 2002 (less than 3.25
to 1 beginning in March 2003) and a fixed charge ratio of greater than 2.00
to 1. As defined in the agreement, the Company had a Debt-to-EBITDA ratio
of 2.69 to 1 and a fixed charge ratio of 2.52 to 1 as of December 31, 2001.
Borrowings of $57.1 million were outstanding under the Company’s
$125.0 million U.S. commercial paper program. Commercial paper
borrowings, which are backed by the Five-year Facility, have been
classified as long-term debt due to the availability to refinance them on a
long-term basis under this facility.
In addition to the above, the Company and some of its foreign subsidiaries
maintain separate lines of credit with local financial institutions to meet
working capital needs. As of December 31, 2001, such lines totaled
$163.0 million, of which $152.8 million was unused.
A wholly-owned U.S. subsidiary of the Company has an agreement to
sell, on an ongoing basis, up to $200.0 million of an undivided interest in
its accounts receivable. There were no receivables sold under this
agreement at December 31, 2001. Unless extended by amendment, the
agreement expires in December 2002. (See Note 4 to the Consolidated
Financial Statements for further information.)
The Company’s principal ongoing cash needs are to finance working
capital, capital expenditures, acquisitions and the share repurchase
program. Working capital is primarily in the form of trade receivables,
which increase as revenues increase. The amount of financing necessary to
support revenue growth depends on receivable turnover, which differs in
each market in which the Company operates.
The Company believes that its internally generated funds and its existing
credit facilities are sufficient to cover its near-term projected cash needs.
With revenue increases or additional acquisitions or share repurchases,
additional borrowings under the existing facilities would be necessary to
finance the Company’s cash needs.
– 35 –– 34 –
much of 2001 and 2000. In addition, the change from 2000 to 2001 was
also partially due to the decrease in working capital needs because of the
declining revenue levels. Cash provided by operating activities before
working capital changes was $221.2 million, $243.9 million and
$249.7 million during 2001, 2000 and 1999, respectively.
Accounts receivable decreased to $1,917.8 million at December 31, 2001
from $2,094.4 million at December 31, 2000. This decrease is primarily
due to the declining revenue levels in many of our countries and a two-day
reduction in DSO on a consolidated basis. These declines were offset
somewhat by a $145.0 million reduction in the amount of accounts receivable
sold under the Receivables Facility. The accounts receivable balance is also
impacted by currency exchange rates. At constant exchange rates, the
receivables balance would have been $102.8 million higher than reported.
The Company records an Allowance for doubtful accounts as a reserve
against the outstanding Accounts receivable balance. This allowance is
calculated on a country-by-country basis with consideration for historical
write-off experience, the current aging of receivables and a specific review
for potential bad debts. The Allowance for doubtful accounts was $61.8
million and $55.3 million at December 31, 2001 and 2000, respectively.
Net cash provided by borrowings was $313.0 million and $71.8 million
in 2001 and 2000, respectively. Borrowings in 2001 and 2000 were used
for acquisitions, investments in new and expanding markets, capital
expenditures and repurchases of the Company’s common stock.
Cash Uses
Capital expenditures were $87.3 million, $82.6 million and $74.7 million
during 2001, 2000 and 1999, respectively. These expenditures are
primarily comprised of purchases of computer equipment, office
furniture and other costs related to office openings and refurbishments,
as well as capitalized software costs of $19.1 million, $6.9 million and
$3.0 million in 2001, 2000 and 1999, respectively.
In July 2001, the Company acquired Jefferson Wells for total consideration
of approximately $174.0 million, including assumed debt. The acquisition
of Jefferson Wells was originally financed through the Company’s existing
credit facilities.
In January 2000, the Company acquired Elan Group Ltd. for total
consideration of approximately $146.2 million, the remaining $30.0
million of which was paid during 2001.
The Company has also acquired or invested in other companies throughout
the world. The total consideration paid for such transactions, excluding
the acquisitions of Jefferson Wells and Elan, was $95.8 million, $56.2
million and $18.8 million in 2001, 2000 and 1999, respectively.
The Board of Directors has authorized the repurchase of 15 million shares
under the Company’s share repurchase program. Share repurchases may
be made from time to time and may be implemented through a variety of
methods, including open market purchases, block transactions, privately
negotiated transactions, accelerated share repurchase programs, forward
repurchase agreements or similar facilities. At December 31, 2001, 9.0
million shares at a cost of $253.1 million have been repurchased under
the program, $3.3 million of which were repurchased during 2001.
During September 2000, the Company entered into a forward repurchase
agreement to purchase shares of its common stock under its share
repurchase program. Under the agreement, over a two-year period, the
Company is required to repurchase a total of one million shares at a current
price of approximately $34 per share, which approximates the market
price at the inception of the agreement, plus a financing charge. The
Company may choose the method by which it settles the agreement (i.e.,
cash or shares). As of December 31, 2001, 100,000 shares have been
purchased under this agreement, leaving 900,000 shares to be purchased
by September 2002.
The Company paid dividends of $15.2 million, $15.1 million and $15.3
million in 2001, 2000 and 1999, respectively.
Cash and cash equivalents increased by $64.1million in 2001 compared to a
decrease of $60.0 million in 2000 and an increase of $61.2 million in 1999.
The Company has aggregate commitments related to debt, the forward
repurchase agreement and operating leases as follows:
there-
In Millions of U.S. Dollars 2002 2003 2004 2005 2006 after
Long-term debt 13.5 6.5 8.6 135.1 413.5 247.4
Short-term borrowings 10.2 –––––
Forward repurchase agreement 30.5 –––––
Operating leases 67.5 55.2 40.2 31.1 22.9 48.0
121.7 61.7 48.8 166.2 436.4 295.4
Capitalization
Total capitalization at December 31, 2001 was $1,649.1 million,
comprised of $834.8 million of debt and $814.3 million of equity. Debt
as a percentage of total capitalization was 51% at December 31, 2001
compared to 43% in 2000.
97
1,800
1,500
1,200
900
600
300
98 99 00 01
equity
debt
Management’s Discussion and Analysis (continued)
— of Financial Condition and Results of Operations —