ManpowerGroup 2008 Annual Report Download

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Manpower Inc. 2008 Annual Report
The world
of work has
changed.

Table of contents

  • Page 1
    The world of work has changed. Manpower Inc. 2008 Annual Report

  • Page 2

  • Page 3
    But our mission hasn't. From the day Manpower was founded in 1948, we have been helping individuals find work and new opportunities while helping businesses find skilled, talented workers. Manpower Annual Report 2008 Shareholder's Letter 1

  • Page 4
    ... of our expense base in the second half of the year. Cash ï¬,ow more than doubled and our cash position improved nicely to $874 million. During the course of the year, we were able to purchase 2.2 million shares and maintain our dividend. 2 Shareholder's Letter Manpower Annual Report 2008

  • Page 5
    ...changing world of work for six decades, successfully navigating through good economic times and bad. Despite the ups and downs of economic cycles, Manpower has always been able to manage through and position ourselves for future growth, consistently providing innovative services that our clients and...

  • Page 6
    ... revenue grew 44% in 2008. Key expansion markets grew: India (+40%), China (+15%) and Eastern Europe (+38%). the pulse of the world of work. Whether it be helping women enter or re-enter the workforce, adapting to young people looking at work in new and different ways, or working with our clients...

  • Page 7
    ... the power from the employer to the individual and, as a result, retaining talent will be much more elusive. This will create Strong Record of Long-Term Revenue Growth in billions ($) 24 18 12 06 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 Manpower Annual Report 2008 Shareholder's Letter...

  • Page 8
    ...what our clients around the world are asking for, directly or indirectly, and applying solutions locally and then refining and implementing them globally. In response to these trends: ™ We've launched MyPath, our community-driven online career management experience that will establish Manpower as...

  • Page 9
    .... So as we move into 2009, we will address these trends with solutions that will unlock value and profitability for our clients and us. What we have presented to the market is only the beginning of our services pipeline. At our company, we develop solutions thoughtfully - not simply replicating and...

  • Page 10
    ... world, we have put We have a solid balance sheet and strong cash ï¬,ows. Free cash ï¬,ow more than doubled, to $698.9 million, in 2008. Doing well by doing good...our workforce development programs provide an important, sustainable revenue stream. 8 Shareholder's Letter Manpower Annual Report...

  • Page 11
    ... - 76), Mitchell Fromstein (left, 1976 - 99) and Jeff Joerres (center), who has been President and CEO since 1999 and Chairman since 2001. They have guided Manpower to its current position as a $22 billion global leader in employment services. Manpower Annual Report 2008 Shareholder's Letter 9

  • Page 12
    ...In Good Times and Bad. Periods of Recession 1948 1952 1956 1967 Founded in Milwaukee, Wisconsin, as a provider of temporary workers. Forges ahead with growth strategy and now has offices in every major U.S. city. Launches first Canadian branches in Montreal and Toronto. The first European...

  • Page 13
    ... workers. Operating 2,000 offices, surpasses $5 billion in systemwide sales. Proven assessment methodology to ensure our people are productive for clients from day one. * Systemwide sales represents revenues from our branch offices plus the sales activity of locations operating under a franchise...

  • Page 14
    ...In Good Times and Bad. 1995 1996 1998 1999 2000 outsourcing $10+ BILLION IN SYSTEMWIDE SALES 3,000 offices Begins offering outsourcing solutions to clients. Manpower launches TechTrack™ computer-based training to help IT contractors gain new skills in the rapidly changing world of work...

  • Page 15
    ... markets in Asia and Eastern Europe. Achieves $22 billion in revenues in 2008. Expands operations in the Middle East with offices in Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates. First foreign corporation to receive a license to provide temporary staffing services across...

  • Page 16
    ... the needs of clients in all industry segments. Systemwide Offices represents our branch offices plus the offices operating under a franchise agreement with us. 04 05 06 07 08 * Temporary and contract only 14 Manpower at a Glance 2.0 Million* Manpower Annual Report 2008 4.0 Million 4,407

  • Page 17
    ...428.8 532.1 04 05 06 07 08 2008 was a record year with the highest revenues in Manpower's history. Revenues from Services rose 5.1% on the continued strength of our European operations. 04 05 06 07 08 2.71% 3.03% 04 05 06 07 08 08 Operating Profit decreased 38% from 2007. Excluding the...

  • Page 18
    ... 44 45 46 72 72 73 74 MANAGEMENT'S DISCUSSION & ANALYSIS FINANCIAL MEASURES MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONSOLIDATED STATEMENTS OF OPERATIONS CONSOLIDATED BALANCE SHEETS CONSOLIDATED STATEMENTS OF CASH FLOWS...

  • Page 19
    ... of services for the entire employment and business cycle including: Permanent, temporary and contract recruitment - We find the best people for all types of jobs and industries at both the staff and professional levels under the Manpower, Manpower Professional and Elan brands. Employee assessment...

  • Page 20
    ... our business, our strategy is focused on providing both the skilled employees our clients need and high-value workforce management, outsourcing and consulting solutions. Client demand for employment services is dependent on the overall strength of the labor market and secular trends toward greater...

  • Page 21
    ... an increase in Gross Profit of $68.2 million in 2008 related to the modification of payroll taxes for 2005, and $157.1 million in 2007, related to the modification of payroll taxes for 2006 and the first nine months of 2007. Manpower Annual Report 2008 Management's Discussion & Analysis 19

  • Page 22
    ... of 35% due primarily to the impact of valuation allowances recorded for non-U.S. net operating losses, U.S. state income taxes and the income tax cost associated with additional cash repatriations from our non-U.S. subsidiaries. 20 Management's Discussion & Analysis Manpower Annual Report 2008

  • Page 23
    ... of payroll taxes in France, which reduced the amount of payroll taxes, retroactive to January 1, 2006, through September 30, 2007 by $157.1 million. (See Note 1 to the consolidated financial statements for further information.) Manpower Annual Report 2008 Management's Discussion & Analysis 21

  • Page 24
    ...to the payroll tax calculation in France. Included in Selling and Administrative Expenses for 2006 were $15.9 million of reorganization charges and $9.2 million of global cost reduction project costs. Selling and Administrative Expenses as a percent of revenue decreased by 0.2% (-20 basis points) in...

  • Page 25
    ... franchise offices. Revenues in the U.S. consist of sales of services by our Company-owned branch offices and fees from our franchise operations. Revenues for the year were $1.9 billion, a decrease of 0.9%. Excluding acquisitions, revenues decreased 11.3%. Franchise fees were $17.7 million in 2008...

  • Page 26
    ... employment services delivered under the Manpower and Manpower Professional brands, this region also includes Elan, which is a leading IT recruitment and managed services firm operating across 16 countries in the region, and Brook Street, which provides recruitment services in the U.K. The largest...

  • Page 27
    ... audit, technology risk management, tax, and finance and accounting. Our services are provided through 36 offices, which include major U.S. metropolitan markets, Toronto, three European cities, South Africa and Hong Kong. A portion of employees assigned by Jefferson Wells are full-time company...

  • Page 28
    ... security costs for their associates in the current market environment. Selling and Administrative Expenses increased 21.6%, or 15.0% in constant currency, to support the increased revenue levels, investments in office openings and the permanent recruitment business in certain markets. Included...

  • Page 29
    ... - Manpower Inc. Operating Unit Profit United States France Other EMEA Italy Jefferson Wells Right Management Other Operations Operating Profit - Manpower Inc. Amounts represent 2007 Percentages represent 2007 compared to 2006 Reported Variance Impact of Currency Revenues from Services United...

  • Page 30
    ...we sold a non-core payroll processing business in Sweden. In December 2006, we also sold a non-core facilities management services business in the Nordics. Pre-tax gains of $123.5 million ($89.5 million after tax, or $1.02 per diluted share) related to these sales were recorded in 2006. Net proceeds...

  • Page 31
    ... of 99.349% to yield an effective interest rate of 4.862%. The discount of â,¬1.3 million ($1.6 million) is being amortized to interest expense over the term of the â,¬200.0 million Notes. Interest is payable annually on June 14. Manpower Annual Report 2008 Management's Discussion & Analysis 29

  • Page 32
    ... coming year. We currently plan to renew this program in July 2009, assuming borrowing costs program fees do not increase significantly. As of December 31, 2008, there were borrowings of $64.0 million outstanding under this program, which are recorded as current maturities of long-term debt, at an...

  • Page 33
    ...We review peer data and historical rates, on a country-by-country basis, to check for reasonableness in setting both the discount rate and the expected return on plan assets. We estimate compensation increases and employee turnover rates for each Manpower Annual Report 2008 Management's Discussion...

  • Page 34
    ... and changes to the payroll tax regulations. To the extent that our actual experience differs from our estimates, we will need to make adjustments to our reserve balance, which will impact the results of the related operation and 32 Management's Discussion & Analysis Manpower Annual Report 2008

  • Page 35
    ... reviews, at least annually, using a fair-value-based approach. The majority of our goodwill and indefinite-lived intangible assets result from our acquisitions of Right Management, Elan and Jefferson Wells, U.S. franchises and Vitae. Manpower Annual Report 2008 Management's Discussion & Analysis...

  • Page 36
    ...the market approach derived from comparable public companies. 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. The fair value of the reporting unit...

  • Page 37
    ... Euro-denominated variable rate borrowings. The Euro interest rate swap agreements, with a notional value of â,¬100.0 million ($139.7 million), fix the interest rate, on a weighted-average basis, at 5.71% and expire in July 2010. Manpower Annual Report 2008 Management's Discussion & Analysis 35

  • Page 38
    ... 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 results. 36 Management's Discussion & Analysis Manpower Annual Report 2008

  • Page 39
    ... 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...

  • Page 40
    ... about derivative instruments and hedging activities to enable investors to better understand their effects on an entity's financial position, financial performance, and cash ï¬,ows. SFAS 161 is effective for us in 2009. 38 Management's Discussion & Analysis Manpower Annual Report 2008

  • Page 41
    ... 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, 2008. February 18, 2009 Manpower Annual Report 2008 Management's Discussion & Analysis 39

  • Page 42
    ... LLP Milwaukee, Wisconsin February 18, 2009 Report Of Independent Registered Public Accounting Firm To The Board Of Directors And Shareholders Of Manpower Inc.: We have audited the internal control over financial reporting of Manpower Inc. and subsidiaries (the "Company") as of December 31, 2008...

  • Page 43
    ... 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. Manpower Annual Report 2008 Report of Independent Registered...

  • Page 44
    ..., except per share data Year Ended December 31 2008 2007 2006 Revenues from services Cost of services Gross profit Selling and administrative expenses, excluding impairment charge Goodwill and intangible asset impairment charge Selling and administrative expenses Operating profit Interest...

  • Page 45
    ... Treasury stock at cost, 25,791,941 and 23,541,579 shares, respectively Total shareholders' equity Total liabilities and shareholders' equity The accompanying notes to consolidated financial statements are an integral part of these statements. $ 6,618.2 $ 7,224.4 Manpower Annual Report 2008...

  • Page 46
    ...provided by operating activities: Gain on sale of businesses Depreciation and amortization Non-cash goodwill and intangible impairment charge Deferred income taxes Provision for doubtful accounts Share-based compensation Excess tax benefit on exercise of stock options Change in operating assets and...

  • Page 47
    ...pension plans and retiree health care plan, net of tax Total comprehensive income Adjustment to initially apply FIN 48 Issuances under equity plans, including tax benefits 807,829 Share-based compensation expense Dividends ($0.69 per share) Repurchases of common stock... Manpower Annual Report 2008 ...

  • Page 48
    .... Our largest operations, 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...

  • Page 49
    ... are evaluated for sale accounting treatment and, if such a transfer qualifies as a sale under SFAS 140, the related receivable balance is removed from our consolidated balance sheets and the loss related to the transfer is recorded as other Manpower Annual Report 2008 Notes to Consolidated...

  • Page 50
    ..., except per share data expense. If the transfer of receivables does not qualify for sale accounting, the related receivable balance remains on our consolidated balance sheet, the corresponding advance is recorded as debt and the related cost of the transaction is recorded as interest expense...

  • Page 51
    ...the market approach derived from comparable public companies. 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. The fair value of the reporting unit...

  • Page 52
    ...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 53
    ...funded status of our defined benefit and retiree medical plans as of the balance sheet date in 2008, rather than as of an earlier measurement date. We adopted the measurement date provisions as of December 31, 2008. The net impact of the measurement date change was a $1.7 decrease in pension asset...

  • Page 54
    ...December 31 2006 Revenues from services Cost of services and Selling and administrative expenses Earnings before income taxes Provision for income taxes Net gain on sale of businesses, net of income taxes of $34.0 Income from discontinued operations, net of income taxes $ 224.0 217.0 7.0 (2.5) 87...

  • Page 55
    ...straight-line basis over the vesting period of each award. 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...

  • Page 56
    ...-employee directors may elect to receive deferred stock in lieu of part or all of their annual cash retainer otherwise payable to them. The number of shares of deferred stock is determined pursuant to a formula set forth in the terms and conditions adopted under the 2003 Plan and the deferred stock...

  • Page 57
    ... Our 2003 Plan allows us to grant performance share units. Vesting of units occurs at the end of the performance period, generally three years, except in the case of death, disability or termination of employment, and the units are settled in shares of our common stock. A payout multiple is applied...

  • Page 58
    ... Savings Related Share Option Scheme for U.K. 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...

  • Page 59
    ... - Diluted for the years ended December 31, 2008 and 2007 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 number, exercise prices and weighted-average remaining life of these...

  • Page 60
    ... when the temporary differences reverse. Temporary differences, which gave rise to the deferred taxes are as follows: Year Ended December 31 2008 2007 Current Future Income Tax Benefits (Expense) Accrued payroll taxes and insurance Employee compensation payable Pension and postretirement bene...

  • Page 61
    ...the facility, then the total fee for this program increases to Libor plus 500 basis points (Libor + 5.0%). Under the previous agreement, we had a liquidity fee of 12.5 basis points (0.125%) and a program fee of 15 basis points (0.15%). 59 Manpower Annual Report 2008 Notes to Consolidated Financial...

  • Page 62
    ... share data Fees associated with the amounts advanced were $0.9, $0.3 and $0.4 in 2008, 2007 and 2006, respectively, and were recorded as Other Expense in the consolidated statements of operations. 07. Goodwill Changes in the carrying value of goodwill by reportable segment are as follows: United...

  • Page 63
    ...The carrying value of Long-Term Debt approximates fair value, except for the Euro-denominated notes which had a fair value, as determined by quoted market prices, as of December 31, as follows: 2008 2007 Euro-denominated notes $ 654.7 $ 722.5 Manpower Annual Report 2008 Notes to Consolidated...

  • Page 64
    ...the fair value of plan assets and the funded status of the plans are as follows: U.S. Plans Year Ended December 31 2008 2007 2008 Non-U.S. Plans 2007 Change in Benefit Obligation Benefit obligation, beginning of year Service cost Interest cost Plan amendments Curtailments Transfers Actuarial loss...

  • Page 65
    ... 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 as of the end of each fiscal year. Manpower Annual Report 2008 Notes to Consolidated...

  • Page 66
    ... of our plans, a building block approach has been employed to establish this return. Historical markets are studied and long-term historical relationships between equity securities and fixed income instruments are preserved consistent with the widely accepted capital market principle that assets...

  • Page 67
    ... 2009 is $0.7. The health care cost trend rate was assumed to be 8.0% for 2008, 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...

  • Page 68
    ...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, 2008: Year 2009 2010...

  • Page 69
    ... of operations, financial position or cash ï¬,ows. In November 2004, French authorities 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...

  • Page 70
    ... internal controls, tax, technology risk management, and finance and accounting. The Right Management segment revenues are derived from outplacement and consulting services. Segment revenues represent sales to external clients primarily within a single segment. Due to the nature of our business, we...

  • Page 71
    ... revenues above represent revenues from our Company-owned branches and franchise fees received from our franchise operations. These fees are primarily based on revenues generated by our franchise operations, which are discussed further on the financial highlights page Manpower Annual Report 2008...

  • Page 72
    ...To Consolidated Financial Statements in millions, except per share data As Of And For The Year Ended December 31 2008 2007 2006 Total Assets United States France Other EMEA Italy Jefferson Wells Right Management Other Operations Corporate (a) $ 622.4 2,314.7 1,656.3 291.2 42.5 210.0 634.5 846...

  • Page 73
    ...2008 Revenues from services Gross profit Operating profit Net earnings (loss) Net earnings (loss) per share - basic Net earnings (loss) per share - diluted Dividends per share Market...,500.3 3,848.6 825.4 484.7 5.83 5.73 0.69 78.86 $ 71.56 94.10 $ 73.00 95.05 $ 61.43 Manpower Annual Report 2008...

  • Page 74
    ... 31 2008 2007 2006 2005 2004 2003 Manpower S&P 400 Midcap Stock Index S&P Supercomposite Human Resources and Employment Services Index $ 72 93 $ 121 $ 149 159 $ 140 99 $ 128 103 $ 115 100 100 111 123 163 136 119 100 72 Selected Financial Data Manpower Annual Report 2008

  • Page 75
    ... world of work. The $22 billion company offers employers a range of services for the entire employment and business cycle including permanent, temporary and contract recruitment; employee assessment and selection; training; outplacement; outsourcing and consulting. Manpower's worldwide network...

  • Page 76
    ... CEO Wm Morrison Supermarkets PLC GINA BOSWELL 1 President of Global Brands The Alberto-Culver Company J . T H O M A S B O U C H A R D 2 *, 3 Executive Vice President President - Europe, Middle East and Africa (Excluding France) D A R RY L G R E E N Retired Senior Vice President, Human Resources...

  • Page 77
    ... Place Milwaukee, WI 53212 USA SHAREHOLDERS As of February 17, 2009, Manpower Inc. common stock was held by approximately 5,200 record holders. ANNUAL MEETING OF SHAREHOLDERS April 28, 2009 at 10 a.m. Manpower World Headquarters 100 Manpower Place Milwaukee, WI 53212 USA Manpower's business is...

  • Page 78
    Manpower Inc. World Headquarters 100 Manpower Place Milwaukee, WI 53212 USA www.manpower.com GC-24 © 2009 Manpower Inc.