Annual Report 2010

Adecco Group –
Notes to consolidated financial statements
in millions, except share and per share information

Note 17 • Commitments and contingencies

The Company leases facilities under operating leases, certain of which require payment of property taxes, insurance, and maintenance costs. Operating leases for facilities are usually renewable at the Company’s option.

Total rent expense under operating leases amounted to EUR 215 in 2010 and to EUR 223 in 2009 and 2008. Future minimum annual lease payments under operating leases are as follows:

in EUR

2011

2012

2013

2014

2015

Thereafter

Total

 

 

 

 

 

 

 

 

Lease payments by year

190

130

98

72

58

79

627

As of December 31, 2010, the Company had future purchase and service contractual obligations of approximately EUR 89 primarily related to IT development and maintenance agreements, earn-out agreements related to acquisitions, marketing sponsorship agreements, equipment purchase agreements, and other vendor commitments. Future payments under these arrangements are as follows:

in EUR

2011

2012

2013

2014

2015

Thereafter

Total

 

 

 

 

 

 

 

 

Contractual obligations by year

31

49

4

3

2

 

89

Guarantees

The Company has entered into certain guarantee contracts and standby letters of credit that total EUR 746, including those letters of credit issued under the multicurrency revolving credit facility (EUR 80). The guarantees primarily relate to government requirements for operating a temporary staffing business in certain countries and are generally renewed annually. Other guarantees relate to operating leases and credit lines. The standby letters of credit mainly relate to workers’ compensation in the USA. If the Company is not able to obtain and maintain letters of credit and/or guarantees from third parties then the Company would be required to collateralise its obligations with cash. Due to the nature of these arrangements and historical experience, the Company does not expect to be required to collateralise its obligations with cash.

Contingencies

In the ordinary course of business, the Company is involved in various legal actions and claims, including those related to social security charges, other payroll related charges, and various employment related matters. Although the outcome of the legal proceedings cannot be predicted with certainty, the Company believes it has adequately reserved for such matters.