ManpowerGroup 2006 Annual Report Download - page 33

฀ 29Management’s฀Discussion฀&฀Analysis Manpower฀2006฀Annual฀Report
Impact฀of฀Economic฀Conditions
One฀of฀the฀principal฀attractions฀of฀using฀temporary฀staffing฀solutions฀is฀to฀maintain฀a฀flexible฀supply฀of฀labor฀to฀meet฀changing฀
economic฀conditions.฀Therefore,฀the฀industry฀has฀been฀and฀remains฀sensitive฀to฀economic฀cycles.฀To฀help฀minimize฀the฀effects฀
of฀these฀economic฀cycles,฀we฀offer฀customers฀a฀continuum฀of฀services฀to฀meet฀their฀needs฀throughout฀the฀employment฀and฀
business฀cycle.฀We฀believe฀that฀the฀breadth฀of฀our฀operations฀and฀the฀diversity฀of฀our฀service฀mix฀cushion฀us฀against฀the฀impact฀
of฀an฀adverse฀economic฀cycle฀in฀any฀single฀country฀or฀industry.฀However,฀adverse฀economic฀conditions฀in฀any฀of฀our฀largest฀
markets,฀or฀in฀several฀markets฀simultaneously,฀would฀have฀a฀material฀impact฀on฀our฀consolidated฀financial฀statements.
Legal฀Regulations
The฀employment฀services฀industry฀is฀closely฀regulated฀in฀all฀of฀the฀major฀markets฀in฀which฀we฀operate฀except฀the฀U.S.฀and฀
Canada.฀Many฀countries฀impose฀licensing฀or฀registration฀requirements฀and฀substantive฀restrictions฀on฀temporary฀employment฀
services,฀either฀on฀the฀provider฀of฀temporary฀staffing฀or฀the฀ultimate฀client฀company,฀or฀minimum฀benefits฀to฀be฀paid฀to฀the฀฀
temporary฀employee฀either฀during฀or฀following฀the฀temporary฀assignment.฀Regulations฀also฀may฀restrict฀the฀length฀of฀assignments,฀
the฀type฀of฀work฀permitted฀or฀the฀occasions฀on฀which฀contingent฀workers฀may฀be฀used.฀Changes฀in฀applicable฀laws฀or฀regulations฀
have฀occurred฀in฀the฀past฀and฀are฀expected฀in฀the฀future฀to฀affect฀the฀extent฀to฀which฀employment฀services฀firms฀may฀operate.฀
These฀changes฀could฀impose฀additional฀costs,฀taxes,฀record฀keeping฀or฀reporting฀requirements;฀restrict฀the฀tasks฀to฀which฀฀
contingent฀workers฀may฀be฀assigned;฀limit฀the฀duration฀of฀or฀otherwise฀impose฀restrictions฀on฀the฀nature฀of฀the฀relationship฀(with฀
us฀or฀the฀customer);฀or฀otherwise฀adversely฀affect฀the฀industry.฀All฀of฀our฀other฀service฀lines฀are฀currently฀not฀regulated.
In฀many฀markets,฀the฀existence฀or฀absence฀of฀collective฀bargaining฀agreements฀with฀labor฀organizations฀has฀a฀significant฀฀
impact฀on฀our฀operations฀and฀the฀ability฀of฀customers฀to฀utilize฀our฀services.฀In฀some฀markets,฀labor฀agreements฀are฀structured฀
on฀a฀national฀or฀industry-wide฀(rather฀than฀a฀company-by-company)฀basis.฀Changes฀in฀these฀collective฀bargaining฀agreements฀
have฀occurred฀in฀the฀past,฀are฀expected฀to฀occur฀in฀the฀future,฀and฀may฀have฀a฀material฀impact฀on฀the฀operations฀of฀employment฀
services฀firms,฀including฀us.
On฀November฀30,฀2004,฀we฀were฀informed฀that฀authorities฀had฀commenced฀an฀investigation฀at฀our฀French฀headquarters.฀
According฀to฀the฀search฀warrant,฀the฀investigation฀stems฀from฀a฀complaint฀submitted฀during฀2003฀to฀the฀European฀Commission฀
and฀subsequently฀transferred฀to฀France’s฀Direction฀Generale฀de฀la฀Concurrence,฀de฀la฀Consommation฀et฀de฀la฀Repression฀des฀
Fraudes.฀We฀understand฀that฀the฀purpose฀of฀the฀investigation฀is฀to฀search฀for฀evidence฀of฀price฀fixing฀and฀allocation฀of฀market฀
share฀within฀the฀French฀market.฀The฀investigation฀is฀continuing฀and฀we฀are฀cooperating฀fully.฀We฀are฀currently฀not฀able฀to฀predict฀
the฀outcome฀of฀the฀investigation฀and฀consequently฀no฀amounts฀have฀been฀recorded฀in฀the฀financial฀statements.
Recently฀Issued฀Accounting฀Standards
During฀July฀2006,฀the฀Financial฀Accounting฀Standards฀Board฀(“FASB”)฀issued฀FASB฀Interpretation฀No.฀48,฀“Accounting฀for฀
Uncertainty฀in฀Income฀Taxes,฀and฀Related฀Implementation฀Issues,”฀(“FIN฀48”).฀FIN฀48฀prescribes฀a฀comprehensive฀model฀for฀
how฀a฀company฀should฀recognize,฀measure,฀present,฀and฀disclose฀in฀its฀financial฀statements฀uncertain฀tax฀positions฀that฀the฀
company฀has฀taken฀or฀expects฀to฀take฀on฀a฀tax฀return.฀FIN฀48฀is฀effective฀as฀for฀fiscal฀years฀beginning฀January฀1,฀2007.฀We฀฀
expect฀the฀adoption฀of฀this฀new฀standard฀to฀be฀immaterial฀to฀the฀consolidated฀financial฀statements.
In฀September฀2006,฀the฀FASB฀issued฀Statement฀No.฀157,฀Fair฀Value฀Measurements฀(“SFAS฀157”).฀SFAS฀157฀defines฀fair฀value,฀
establishes฀a฀framework฀for฀measuring฀fair฀value฀in฀accordance฀with฀generally฀accepted฀accounting฀principles,฀and฀expands฀
disclosures฀about฀fair฀value฀measurements.฀SFAS฀157฀is฀effective฀for฀us฀in฀2008.฀We฀are฀currently฀assessing฀the฀impact฀of฀the฀
adoption฀of฀this฀statement.
During฀September฀2006,฀the฀FASB฀issued฀SFAS฀No.฀158,฀“Employers’฀Accounting฀for฀Defined฀Benefit฀Pension฀and฀Other฀
Postretirement฀Plans,฀an฀amendment฀of฀FASB฀Statements฀No.฀87,฀88,฀106,฀and฀132(R),฀(“SFAS฀158”).฀SFAS฀158฀requires฀that฀
we฀recognize฀the฀overfunded฀or฀underfunded฀status฀of฀our฀defined฀benefit฀and฀retiree฀medical฀plans฀(our฀“Plans”)฀as฀an฀asset฀or฀
liability฀in฀our฀consolidated฀balance฀sheets,฀with฀changes฀in฀the฀funded฀status฀recognized฀through฀comprehensive฀income฀in฀the฀
year฀in฀which฀they฀occur.฀We฀adopted฀SFAS฀158฀as฀of฀December฀31,฀2006.฀The฀net฀impact฀of฀the฀initial฀application฀of฀SFAS฀158฀
was฀$6.7฀million,฀which฀resulted฀in฀a฀reduction฀in฀Shareholders’฀Equity฀on฀our฀consolidated฀balance฀sheet.฀See฀Note฀9฀for฀the฀฀
incremental฀effect฀of฀adopting฀SFAS฀158฀on฀individual฀line฀items฀in฀our฀consolidated฀balance฀sheet.฀SFAS฀158฀had฀no฀impact฀on฀
our฀consolidated฀statements฀of฀operations฀or฀cash฀flows฀for฀the฀year฀ending฀December฀31,฀2006.฀SFAS฀158฀also฀requires฀us฀to฀
measure฀the฀funded฀status฀of฀our฀Plans฀as฀of฀the฀balance฀sheet฀date,฀rather฀than฀as฀of฀an฀earlier฀measurement฀date,฀by฀2008.฀
We฀do฀not฀expect฀the฀impact฀of฀the฀change฀in฀measurement฀date฀to฀have฀a฀material฀impact฀on฀our฀consolidated฀financial฀statements.