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Manpower฀2006฀Annual฀Report
44
NOT ES฀TO฀CONSOLID AT ED฀FINA NCIAL ฀S TATEMENT S฀
in฀million s,฀except฀per฀sha re฀data
Notes฀to฀Consolidated฀Financial฀Statements฀
03.
STO CK฀COMP ENSATION฀PLANS
Effective฀January฀1,฀2006,฀we฀adopted฀Statement฀of฀Financial฀Accounting฀Standards฀SFAS฀No.฀123(R),฀“Share-Based฀
Payments”฀(“SFAS฀123R”),฀using฀the฀modified฀prospective฀application฀transition฀method.฀The฀modified฀prospective฀application฀
transition฀method฀requires฀compensation฀cost฀to฀be฀recognized฀beginning฀on฀the฀effective฀date฀(a)฀based฀on฀the฀requirements฀
of฀SFAS฀123R฀for฀all฀share-based฀payments฀granted฀after฀the฀effective฀date฀and฀(b)฀based฀on฀the฀requirements฀of฀SFAS฀123฀for฀
all฀awards฀granted฀to฀employees฀prior฀to฀the฀effective฀date฀of฀SFAS฀123R฀that฀remain฀unvested฀on฀the฀effective฀date.฀As฀such,฀
prior฀periods฀do฀not฀reflect฀restated฀amounts.฀Prior฀to฀January฀1,฀2006,฀we฀accounted฀for฀all฀of฀our฀fixed฀stock฀option฀plans฀and฀
our฀1990฀Employee฀Stock฀Purchase฀Plan฀in฀accordance฀with฀APB฀Opinion฀No.฀25,฀“Accounting฀for฀Stock฀Issued฀to฀Employees,”฀
and฀related฀Interpretations.฀No฀stock-based฀employee฀compensation฀expense฀related฀to฀stock฀options฀or฀our฀stock฀purchase฀
plans฀was฀reflected฀in฀Net฀Earnings฀prior฀to฀January฀1,฀2006.฀SFAS฀123R฀requires฀us฀to฀report฀the฀tax฀benefit฀from฀the฀tax฀฀
deduction฀that฀is฀in฀excess฀of฀the฀recognized฀compensation฀costs฀(excess฀tax฀benefits)฀as฀a฀financing฀cash฀flow.฀Prior฀to฀
January฀1,฀2006,฀we฀reported฀the฀entire฀tax฀benefit฀related฀to฀the฀exercise฀of฀stock฀options฀as฀an฀operating฀cash฀flow.
During฀2006,฀we฀recognized฀approximately฀$22.5฀in฀share-based฀compensation฀expense฀related฀to฀stock฀options,฀deferred฀
stock,฀restricted฀stock,฀and฀the฀stock฀purchase฀plan,฀all฀of฀which฀is฀recorded฀in฀Selling฀and฀Administrative฀Expenses.฀The฀total฀
income฀tax฀benefit฀recognized฀related฀to฀share-based฀compensation฀during฀2006฀was฀$3.0.฀Cash฀received฀from฀stock฀option฀
exercises฀for฀the฀same฀period฀was฀$54.0.฀The฀excess฀income฀tax฀benefit฀recognized฀related฀to฀share-based฀compensation฀
awards,฀which฀is฀recorded฀in฀Capital฀in฀Excess฀of฀Par฀Value,฀was฀approximately฀$8.2.฀We฀recognize฀compensation฀expense฀on฀
grants฀of฀share-based฀compensation฀awards฀on฀a฀straight-line฀basis฀over฀the฀service฀period฀of฀each฀award฀recipient.
As฀a฀result฀of฀adopting฀SFAS฀123R,฀Operating฀Profit฀and฀Earnings฀Before฀Income฀Taxes฀and฀Discontinued฀Operations฀฀
decreased฀by฀$15.8฀for฀the฀year฀ended฀December฀31,฀2006฀($0.12฀and฀$0.11,฀per฀basic฀and฀diluted฀share)฀as฀a฀result฀of฀the฀฀
expense฀recorded฀related฀to฀our฀stock฀option฀grants฀and฀our฀stock฀purchase฀plan.฀The฀following฀table฀illustrates฀the฀effect฀on฀
Net฀Earnings฀and฀Net฀Earnings฀Per฀Share฀had฀we฀applied฀the฀fair฀value฀recognition฀provisions฀of฀SFAS฀123R฀to฀share-based฀
employee฀compensation฀for฀periods฀prior฀to฀its฀adoption:
Year฀Ended฀December฀31 2005 2004
Net฀Earnings฀from฀Continuing฀Operations
Net฀earnings฀from฀Continuing฀Operations,฀as฀reported $฀ 255.1 $฀ 247.3
Add:฀Total฀share-based฀employee฀compensation฀expense฀under฀APB฀25,฀฀
฀ net฀of฀related฀tax฀effects(1) 1.1 0.5
Less:฀Total฀share-based฀employee฀compensation฀expense฀determined฀under฀฀
฀ the฀fair฀value฀method฀for฀all฀awards,฀net฀of฀related฀tax฀effects 11.5 10.0
Net฀earnings฀from฀continuing฀operations,฀pro฀forma $฀ 244.7 $฀ 237.8
Net฀Earnings฀Per฀Share฀–฀Continuing฀Operations
Basic฀–฀as฀reported $฀ 2.89 $฀ 2.78
Basic฀–฀pro฀forma 2.78 2.68
Diluted฀–฀as฀reported 2.81 2.61
Diluted฀–฀pro฀forma 2.70 2.51
(1)฀ The฀share-based฀employee฀compensation฀is฀related฀to฀restricted฀stock฀and฀deferred฀stock.
Stock฀Options
All฀share-based฀compensation฀is฀currently฀granted฀under฀our฀2003฀Equity฀Incentive฀Plan฀of฀Manpower฀Inc.฀(“2003฀Plan”).฀
Options฀and฀stock฀appreciation฀rights฀are฀granted฀at฀a฀price฀not฀less฀than฀100%฀of฀the฀fair฀market฀value฀of฀the฀common฀stock฀at฀
the฀date฀of฀grant.฀Generally,฀options฀are฀granted฀with฀a฀vesting฀period฀of฀up฀to฀four฀years฀and฀expire฀ten฀years฀from฀date฀of฀grant.฀
As฀of฀December฀31,฀2006,฀no฀stock฀appreciation฀rights฀had฀been฀granted฀or฀were฀outstanding.
We฀also฀maintain฀the฀Savings฀Related฀Share฀Option฀Scheme฀for฀United฀Kingdom฀employees฀with฀at฀least฀one฀year฀of฀service.฀
The฀employees฀are฀offered฀the฀opportunity฀to฀obtain฀an฀option฀for฀a฀specified฀number฀of฀shares฀of฀common฀stock฀at฀not฀less฀
than฀85%฀of฀its฀market฀value฀on฀the฀day฀prior฀to฀the฀offer฀to฀participate฀in฀the฀plan.฀Options฀vest฀after฀either฀three,฀five฀or฀seven฀
years,฀but฀may฀lapse฀earlier.฀Funds฀used฀to฀purchase฀the฀shares฀are฀accumulated฀through฀specified฀payroll฀deductions฀over฀a฀
60-month฀period.