ManpowerGroup 2004 Annual Report Download - page 70

2004 Annual Report MANPOWER INC.68
Year Ended December 31 2004 2003 2002
Net Earnings
Net earnings, as reported $ 245.7 $ 137.7 $ 113.2
Less: Total stock-based employee compensation expense determined
under the fair value method for all awards, net of related tax effects 9.5 6.4 4.5
Net earnings, pro forma $ 236.2 $ 131.3 $ 108.7
Net Earnings Per Share
Basic – as reported $2.76$ 1.77 $ 1.48
Basic – pro forma $2.67$ 1.70 $ 1.43
Diluted – as reported(1) $2.59$ 1.69 $ 1.42
Diluted – pro forma(1) $2.50$ 1.62 $ 1.37
(1) 2003 and 2002 amounts have been restated to include the convertible debentures using the “if-converted” method. See Recently Issued Accounting Standards below.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions used for grants in 2004, 2003 and 2002, respectively: risk-free interest
rates of 3.2%, 3.3%, and 4.6%; expected volatility of 39.8%, 40.1%, and 40.9%; dividend yield of .5% in all years; and
expected lives of 6.0 years, 7.4 years, and 6.4 years. The weighted-average fair value of options granted was $17.76,
$10.32, and $10.86 per share in 2004, 2003 and 2002, respectively.
Recently Issued Accounting Standards
During May 2004, the FASB issued FASB Staff Position (“FSP”) No. 106-2, “Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (“FSP 106-2”), which provides
guidance on accounting for the effects of the new Medicare prescription drug legislation (“the Act”). The Act, which
was signed into law on December 8, 2003, introduces a prescription drug benefit under Medicare (Medicare Part D) as
well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially
equivalent to Medicare Part D. FSP 106-2 was adopted by us in the third quarter of 2004 and did not have a material
impact on our consolidated financial statements.
During September 2004, the Emerging Issues Task Force (“EITF”) issued Issue No. 04-8, “The Effect of Contingently
Convertible Debt on Diluted Earnings Per Share” (“EITF 04-8”), which requires the effect of contingently convertible debt
securities with a market price trigger to be included in the calculation of diluted earnings per share, using the “if-converted”
method, regardless of whether the market price trigger has been met. EITF 04-8 also requires that previously reported
diluted earnings per share be restated. We adopted EITF 04-8 in the fourth quarter of 2004. (See note 3 for the impact
of the adoption of EITF 04-8.)
During December 2004, the FASB issued SFAS No. 123(R) “Share-Based Payment” (“SFAS 123R”), which revises
SFAS 123 and supercedes APB 25. SFAS 123R requires all share-based payments to employees, including grants of
employee stock options, to be recognized as expense based on their fair values beginning with the first interim or
annual period after June 15, 2005, with early adoption encouraged. The pro forma disclosures previously permitted
under SFAS 123 will no longer be an alternative to expense recognition. We will adopt SFAS 123R using the modified-
prospective method in the third quarter of 2005.
During December 2004, the FASB issued FSP No. 109-2, “Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (“FSP 109-2”), which provides guidance
on the accounting for the potential impact of the repatriation provisions of the American Jobs Creation Act of 2004 (the
“Jobs Act”) on enterprises’ income tax expense and deferred tax liability. The Jobs Act, which was signed into law on
October 22, 2004, introduces relief on the potential income tax impact of repatriating foreign earnings and certain other
provisions. FSP 109-2 states that an enterprise is allowed time beyond the financial reporting period of enactment to
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
in millions, except share and per share data