ManpowerGroup 2004 Annual Report Download - page 49

MANPOWER INC. 2004 Annual Report47
CASH SOURCES AND USES
Cash used to fund our operations is primarily generated through operating activities and our existing credit facilities.
We believe that our internally generated funds and our existing credit facilities are sufficient to cover our near-term
projected cash needs.
Our principal ongoing cash needs are to finance working capital, capital expenditures, share repurchases, debt payments,
and acquisitions. Working capital is primarily in the form of trade receivables, which generally increase as revenues
increase. The amount of financing necessary to support revenue growth depends on receivable turnover, which differs
in each market in which we operate.
During 2004, cash provided by operating activities was $187.4 million, compared to $223.4 million for 2003 and $227.9
million for 2002. The strong results reflect the impact of our focus on working capital management over the past few
years. The change in 2004 from 2003 is due primarily to the higher working capital requirements to fund the growth in
our business, offset by the higher earnings level in 2004.
Accounts receivable increased to $3,227.8 million as of December 31, 2004 from $2,600.9 million as of December 31,
2003. This increase is primarily due to increased business volumes, the acquisition of RMC, and changes in foreign
currency exchange rates. At constant exchange rates, the 2004 Accounts Receivable balance would have been approx-
imately $190 million less than reported. Days Sales Outstanding (“DSO”) has remained relatively stable during 2004,
and has decreased one day since 2002. However, this calculation is impacted by the effect of exchange rates on our mix
of accounts receivable by country. Excluding that impact, we have reduced DSO by approximately two days compared
to 2002.
One of our wholly-owned U.S. subsidiaries has an agreement to transfer, on an ongoing basis, up to $200.0 million of
an interest in its Accounts Receivable. The terms of this agreement are such that transfers do not qualify as a sale of
accounts receivable. Accordingly, any advances under this agreement are reflected as debt on the consolidated balance
sheets. Prior to an amendment to the agreement in November 2002, transfers of accounts receivable qualified as a
sale and the related amount of accounts receivable was removed from our consolidated balance sheets. In July 2004,
we amended the agreement to extend it to July 2005. All other terms remain substantially unchanged. No amounts
were advanced under this facility as of December 31, 2004 and 2003.
Capital expenditures were $67.9 million, $55.5 million, and $58.5 million during 2004, 2003 and 2002, 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 $2.7 million, $8.2 million, and $17.7 million
in 2004, 2003,and 2002, respectively.
From time to time, we acquire and invest in companies throughout the world, including U.S. franchises. The total cash
consideration for such transactions was $117.3 million, $6.7 million, and $33.5 million in 2004, 2003 and 2002,
respectively. The 2004 amount includes the payment of acquisition-related costs and the $123.8 million repayment of
RMC’s long-term debt that we were required to make due to change of control provisions contained in the agreements.
We financed the acquisition-related costs and this repayment with excess cash and borrowings under our U.S.
Receivables Facility, which was repaid in 2004. Cash acquired of approximately $39.5 million offsets these payments.
In 2003 and 2002, in addition to the cash consideration, we acquired ownership interests in certain U.S. franchises in
exchange for approximately 13,000 and 592,000 shares of our common stock, respectively, which had an aggregate
market value of $0.7 million and $21.9 million, respectively, at the dates of acquisition.
MANAGEMENT’S DISCUSSION AND ANALYSIS
of financial condition and results of operations