ManpowerGroup 2007 Annual Report Download

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Balance
Manpower Inc.
2007 Annual Report

Table of contents

  • Page 1
    Balance Manpower Inc. 2007 Annual Report

  • Page 2
    ... meet the needs of clients in all industry segments. Systemwide Offices represents our branch offices plus the offices operating under a franchise agreement with us. *Temporary and contract only Return on Manpower Stock $250 $200 $150 $100 $50 $0 2002 2003 2004 2005 2006 2007 The graph assumes...

  • Page 3
    ...growth in the business, coupled with effective cost management. Net Earnings Per Share from Continuing Operations - Diluted increased 65%, 34% excluding the French payroll tax modification. Operating Profit Margin Emerging Market Revenue in millions ($) 2007 2006 2005 2004 2003 3.03% 2.71% 2.71...

  • Page 4
    ...world of work is constantly changing, constantly shifting. Changing demand for products and services means a shift in the talent required to deliver them. New technologies, new competitors and new ways of working emerge every day. To keep a business... the job. For Manpower, 2007 was about leveraging the...

  • Page 5
    ... was centered on diversifying our services, our network and our client mix. This diversification, which is driven by anticipating the market and client needs, has improved our profit margins, reduced our sensitivity to economic cycles and increased our strategic value to clients. And in 2007, we...

  • Page 6
    .... Right Management also launched a new, contemporary outplacement product called RightChoice in 2007, which has been extraordinarily effective in increasing our market share, due to its appeal to both client companies and individuals. TM Over the past decade, we have added specialty services to...

  • Page 7
    Net Earnings Per Share from Continuing Operations - Diluted ($) $5.73 Net Earnings Per Share from Continuing Operations - Diluted increased 65%, 34% excluding the French payroll tax modification. $ 5.73 $ 3.48 $2.81 $2.61 $1.70 2003 2004 2005 2006 2007

  • Page 8
    ... people in permanent jobs in 2007. And we expect to add more recruiters in 2008 to meet the continuing demand for these services in virtually every market across our network. Another service that is gaining momentum is Manpower Business Solutions (MBS), where we take on the management of customized...

  • Page 9
    ...of adopting temporary staffing to create workforce ï¬,exibility, including countries like India, China, the Middle East, Vietnam and much of Eastern Europe, where we have secured market leadership positions and have established our brand presence based on the quality of our service and integrity of...

  • Page 10
    Emerging Market Revenue in millions ($) 222.6 Emerging market revenue growth in 2007 exceeded expectations in our three key expansion markets: India (+119%), China (+49%) and Eastern Europe (+52%). 222.6 138.1 70.1 33.9 15.0 2003 2004 2005 2006 2007

  • Page 11
    ...our business, as well as in our brand and our people. We built a new world headquarters in 2007, which combined employees from four different locations into one, and the efficiencies we gained by bringing everyone together enabled us to develop the building without increasing our costs. As an added...

  • Page 12
    ... those efforts paying dividends. The Manpower team around the world is better than ever, and we have focused our core competencies of talent attraction, retention and training internally to ensure that we have the best talent in the industry because we know that building and growing our business at...

  • Page 13
    ...who comprise the Manpower team in every corner of the world work passionately and vigorously to help our clients win. They do it with a sense of integrity and a sense of mission, which brings uniqueness to the Manpower group of companies and superior returns to our shareholders. Thanks team. We are...

  • Page 14
    ...opportunity to invest in key areas of the business and expand our market share, while improving the value of our services. If the clouds clear and sunny days lie ahead, we're off to the races. The strength of our service portfolio, geographic network and client mix provide us with the strong, sturdy...

  • Page 15
    ... 13 Management's Discussion & Analysis 21 Financial Measures 31 Management Report on Internal Control Over Financial Reporting 32 Report of Independent Registered Public Accounting Firm... Statements 64 Selected Financial Data 64 Performance Graph 65 Principle Operating Units 66 Corporate Information

  • Page 16
    ... people with strategy. • Professional Services - Our Jefferson Wells brand is a high-value alternative to public accounting firms and other consulting groups, delivering professional services in the areas of internal controls, tax, technology risk management, and finance and accounting. This...

  • Page 17
    ... other human resource services, including permanent employee recruitment, temporary and permanent employee testing, selection, and training and development. Jefferson Wells' revenues are derived from services related to internal controls, tax, technology risk management, and finance and accounting...

  • Page 18
    ... points (0.10%) is due primarily to the favorable impact of our cost control efforts and productivity gains, as we have been able to increase the billable hours from our temporary recruitment business as well as the number of our permanent placements without a similar increase in branch headcount...

  • Page 19
    ...impact of a 2005 French payroll tax audit settlement (-0.12%). Temporary recruitment margins have increased as a result of improved pricing in some markets, including France, and improved margins in other markets as a result of lower direct costs (such as workers' compensation and state unemployment...

  • Page 20
    ... workers. The professional temporary recruitment business continued to show improving revenue growth rates throughout 2007 with yearover-year growth of 5.3%. Our permanent recruitment business showed good growth throughout the year, with $38.1 million of revenues, a 27.0% increase over 2006. United...

  • Page 21
    ...calculation of payroll taxes. The impact of this modification was an increase in Gross Profit Margin of 226 basis points (2.26%) for 2007. Excluding that impact, Gross Profit Margin increased during the year as a result of the 71.8% increase in our permanent recruitment business. France Revenues...

  • Page 22
    ... four primary business lines - internal controls, tax, technology risk management, and finance and accounting. Our services are provided through 56 offices, which include major U.S. metropolitan markets, Toronto, five European cities, South Africa and Hong Kong. The majority of employees assigned...

  • Page 23
    Management's Discussion & Analysis of financial condition and results of operations Right M anagement - Right Management is the world's largest outplacement and consulting services firm operating through 285 offices in 52 countries. Right Management Revenues in millions ($) 2007 409.9 387.3 401...

  • Page 24
    ...2007 compared to 2006 Reported Amount (in millions) Reported Variance Impact of Currency Variance in Constant Currency Organic Constant Currency Revenues from Services United States France Other EMEA Italy Jefferson Wells Right Management Other Operations Manpower Inc. Gross Profit - Manpower...

  • Page 25
    ...computer equipment, office furniture and other costs related to office openings and refurbishments, as well as capitalized software costs of $7.5 million, $12.0 million and $6.5 million in 2007, 2006 and 2005, respectively. From time to time, we acquire and invest in companies throughout the world...

  • Page 26
    ... principal amount at maturity was redeemed for an aggregate cash payment of $206.6 million and $98.8 million principal amount at maturity ($60.6 million in accreted value) was converted into 1,378,670 shares of Manpower common Management's Discussion & Analysis Manpower 2007 Annual Report 23

  • Page 27
    ... on the consolidated balance sheets. In July 2007, we amended the agreement to extend it to July 2008. All other terms remain substantially unchanged. No amounts were advanced under this facility as of December 31, 2007 and 2006. 24 Manpower 2007 Annual Report Management's Discussion & Analysis

  • Page 28
    ...rate of return on plan assets, compensation increases and employee turnover rates. We determine our assumption for the discount rate to be used for purposes of computing annual service and interest costs based on an index of high-quality corporate bond yields and matched-funding yield curve analysis...

  • Page 29
    ... Cost of Services. There are two main factors that impact workers' compensation expense: the number of claims and the cost per claim. The number of claims is driven by the volume of hours worked, the business mix which reï¬,ects the type of work performed (for example, office and professional work...

  • Page 30
    .... Significant assumptions used in this analysis include: expected future revenue growth rates, operating unit profit margins, and working capital levels; a discount rate; and a terminal value multiple. We have completed our annual impairment review for 2007 and determined there to be no impairment...

  • Page 31
    Management's Discussion & Analysis of financial condition and results of operations We may be required to perform an impairment review prior to our scheduled annual review if certain events occur, including lower-than-forecasted earnings levels for certain reporting units. In addition, changes to ...

  • Page 32
    ... 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. Management's Discussion & Analysis Manpower 2007 Annual Report 29

  • Page 33
    ... of recruitment services 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...

  • Page 34
    ... of the operating effectiveness of controls and a conclusion on this evaluation. Based on our evaluation we have concluded that our internal control over financial reporting was effective as of December 31, 2007. February 21, 2008 Management's Discussion & Analysis Manpower 2007 Annual Report 31

  • Page 35
    ... Share-Based Payment. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control-Integrated Framework...

  • Page 36
    ...Stock Exchange in accordance with Section 303A.12 of the NYSE Listed Company Manual stating that, as of the date of the certification, he was not aware of any violation by Manpower of the NYSE's corporate governance listing standards. Management's Discussion & Analysis Manpower 2007 Annual Report...

  • Page 37
    ...share data Year Ended December 31 2007 2006 2005 Revenues from services Cost of services Gross profit Selling and administrative expenses Operating profit Interest and other expense Earnings before income taxes... 88.1 91.1 34 Manpower 2006 Annual Report Consolidated Statements of Operations

  • Page 38
    ...630.0 693.2 491.1 202.1 6,514.1 $ $ Current Liabilities Accounts payable Employee compensation payable Accrued liabilities Accrued payroll taxes and insurance Value added taxes payable Short-term borrowings and current maturities of long-term debt Total current liabilities Other Liabilities Long...

  • Page 39
    ...provided by operating activities: Gain on sale of businesses Depreciation and amortization Amortization of discount on convertible debentures Deferred income taxes Provision for doubtful accounts Share-based compensation Excess tax benefit on exercise of stock options Change in operating assets and...

  • Page 40
    ... Defined benefit pension plans and retiree health care plan, net of tax Total comprehensive income Adjustment to adopt FIN 48 Issuances under equity plans, including tax benefits 807,829 Share-based compensation expense Dividends ($0.69 per share) Repurchases of common stock Balance, December 31...

  • Page 41
    ..., based on revenues, are located in the U.S., France, Italy and the U.K. We specialize in permanent, temporary and contract recruitment; employee assessment and selection; training; outsourcing; and outplacement and consulting services. We provide services to a wide variety of clients, none of...

  • Page 42
    .... Employment-Related Items In April 2007, we received a letter from the Central Agency for Social Security Organizations in France regarding a modification to the calculation of payroll taxes under certain French social programs aimed at encouraging the employment of low-wage workers. This...

  • Page 43
    ...Significant assumptions used in our discounted cash ï¬,ow analysis include: expected future revenue growth rates, operating unit profit margins, and working capital levels; a discount rate; and a terminal value multiple. We completed our annual impairment review for 2007 and determined there to be...

  • Page 44
    ...lives: buildings - up to 40 years; leasehold improvements - lesser of life of asset or expected lease term; furniture and equipment - 3 to 15 years. Expenditures for renewals and betterments are capitalized whereas expenditures for repairs and maintenance are charged to income as incurred. Upon sale...

  • Page 45
    ... variety of methods, including open market purchases, block transactions, privately negotiated transactions, accelerated share repurchase programs, forward repurchase agreements or similar facilities. As of December 31, 2007, we have repurchased 1.7 million shares at a total cost of $105.7 under the...

  • Page 46
    ... 2006, we sold a non-core payroll processing business in Sweden. In addition, in December 2006, we sold a non-core facilities management services business in the Nordics. Pre-tax gains of $123.5 ($89.5 after tax, or $1.02 per share - diluted) related to these sales were recorded in Income from...

  • Page 47
    ... 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 reï¬,ected in Net Earnings prior to January 1, 2006. SFAS 123R requires us to report the tax benefit from the...

  • Page 48
    ... volatility using a weighted average of daily historical volatility (weighted 40 percent) of our stock price over the past five years and implied volatility (weighted 60 percent) based upon exchange traded options for Notes to Consolidated Financial Statements Manpower 2007 Annual Report 45

  • Page 49
    ...the terms and conditions under the 2003 Plan. As of December 31, 2007 and 2006, there were 9,743 and 7,446, respectively, shares of deferred stock awarded under this arrangement, all of which are vested. Effective January 1, 2006, non-employee directors also receive an annual grant of deferred stock...

  • Page 50
    ...used in calculating the fair value of our stock options. We recognized expense of $3.0 and $2.6 for shares purchased under the plan in 2007 and 2006, respectively. We also maintain the Savings Related Share Option Scheme for U.K. employees with at least one year of service. The employees are offered...

  • Page 51
    ....1 2.81 0.06 2.87 $ $ $ $ The calculations of Net Earnings Per Share - Diluted for the years ended December 31, 2007 and 2005 do not include certain stock option grants because the exercise price for these options is greater than the average market price of the common shares during that year. The...

  • Page 52
    ...at the tax rate expected to be in effect when the temporary differences reverse. Temporary differences, which gave rise to the deferred taxes are as follows: Year Ended December 31 2007 2006 2005 Current Future Income Tax Benefits (Expense) Accrued payroll taxes and insurance Employee compensation...

  • Page 53
    ... in current year tax positions Expiration of statute of limitations for the assessment of taxes Gross unrecognized tax benefits, December 31, 2007 Potential interest and penalties Balance, December 31, 2007 $ 60.9 5.7 (10.0) 8.4 (4.5) 60.5 6.7 67.2 $ $ 50 Manpower 2007 Annual Report Notes to...

  • Page 54
    ..., Italy and Japan. As of December 31, 2007, we are subject to tax audits in France, the U.K. and the U.S., and we believe that resolution of such audits would not have a material impact on earnings. 06. Accounts Receivable Securitization We and certain of our U.S. subsidiaries have an agreement...

  • Page 55
    ..., except per share data 08. Debt Information concerning Short-Term Borrowings is as follows: December 31 2007 2006 Short-term borrowings Weighted-average interest rates $ 39.0 12.7% $ 30.2 10.8% We maintain separate bank credit lines with financial institutions to meet working capital needs...

  • Page 56
    ... allowed under the agreement. The borrowing margin and facility fee on the amended agreement, as well as the fee paid for the issuance of letters of credit on the facility, vary based on our public debt ratings and borrowing level. As of December 31, 2007, the interest rate under the amended...

  • Page 57
    ...share data 09. Retirement And Deferred Compensation Plans Defined Benefit Plans We sponsor several qualified and nonqualified pension plans covering permanent employees. The reconciliation of the changes in the plans' benefit obligations and the fair value of plan assets and the funded status...

  • Page 58
    ... for the discount rate to be used for purposes of computing annual service and interest costs based on an index of high-quality corporate bond yields and matched-funding yield curve analysis as of the measurement date. Notes to Consolidated Financial Statements Manpower 2007 Annual Report 55

  • Page 59
    ..., professionally-managed equity and bond funds, government and agency securities and guaranteed insurance contracts. None of our plan assets include any of our debt or equity securities. Retiree Health Care Plan We provide medical and dental benefits to certain eligible retired employees in...

  • Page 60
    ... $0.6. The health care cost trend rate was assumed to be 8.5% for 2007, decreasing gradually to 5.0% for the years 2014 and beyond. Assumed health care cost trend rates have a significant effect on the amounts reported. A one-percentage point change in the assumed health care cost trend rate would...

  • Page 61
    ...11. Leases We lease property and equipment primarily under operating leases. Renewal options exist for substantially all leases. Future minimum payments, by year and in the aggregate, under noncancelable operating leases with any remaining terms consist of the following as of December 31, 2007: Year...

  • Page 62
    ... financial instruments are reï¬,ected in the consolidated balance sheets as follows: December 31 2007 2006 Other Long-Term Liabilities â,¬100.0 Interest Rate Swaps Forward contracts $ $ (5.1) - (5.1) $ $ (7.8) - (7.8) Notes to Consolidated Financial Statements Manpower 2007 Annual Report 59

  • Page 63
    ... from other human resource services, including permanent employee recruitment, temporary and permanent employee testing, selection, and training and recruitment process outsourcing. The Jefferson Wells segment revenues are derived from services related to internal controls, tax, technology risk...

  • Page 64
    ...Services 2007 2006 2005 United States France Italy U.K. Total Foreign (b) $ 2,466.8 7,056.3 1,401.5 1,544.7 18,033.5 $ 2,644.1 6,050.6 1,135.4 1,554.3 14,918.4 $ 2,593.1 5,506.8 899.8 1,848.0 13,252.3 The U.S. revenues above represent revenues from our Company-owned branches and franchise...

  • Page 65
    ... breakdown of Long-Lived Assets by geographical region is as follows: Long-Lived Assets 2007 2006 2005 United States France Italy U.K. Total Foreign $ 57.9 69.1 14.6 19.9 203.7 $ 60.2 66.9 14.5 20.5 186.0 $ 67.6 68.4 14.1 23.1 172.5 62 Manpower 2007 Annual Report Notes to Consolidated...

  • Page 66
    ...2007 Revenues from Services Gross profit Operating profit Net earnings from continuing operations Net earnings per share from continuing operations - basic Net earnings per share from continuing operations - diluted Dividends per share Market... Financial Statements Manpower 2007 Annual Report 63

  • Page 67
    ... 31 2007 2006 2005 2004 2003 2002 Manpower S&P 400 Midcap Stock Index S&P Supercomposite Human Resources and Employment Services Index $ 178 $ 184 $ 200 $ 235 $ 243 $ 187 $ 146 $ 204 $ 172 $ 151 $ 178 $ 154 $ 148 $ 149 $ 134 $ 100 $ 100 $ 100 64 Manpower 2007 Annual Report Selected...

  • Page 68
    ..., Peru, Philippines, Poland, Portugal, Puerto Rico, Qatar, Reunion, Romania, Russia, Saudi Arabia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Tunisia, Turkey, Ukraine, United Arab Emirates, U.K., United States, Uruguay, Venezuela and Vietnam Manpower...

  • Page 69
    ... President Global Human Resources Emma Van Rooyen President and CEO Northwestern Mutual Board Committees 1 Audit Committee 2 Executive Compensation Committee 3 Nominating and Governance Committee * Denotes Committee Chair Vice President Global Marketing 66 Manpower 2007 Annual Report Corporate...

  • Page 70
    ... a.m. Manpower World Headquarters 100 Manpower Place Milwaukee, WI 53212 USA Investor Relations Web Site Manpower's business is, in itself, socially responsible because everything we do is geared toward connecting people with jobs, which enables individuals to support themselves and their families...

  • Page 71
    Manpower Inc. World Headquarters 100 Manpower Place Milwaukee, WI 53212 www.manpower.com GC-18 (03/08) ©2008 Manpower Inc.