ManpowerGroup 2008 Annual Report Download - page 24

22 Management’s Discussion & Analysis Manpower Annual Report 2008
Management’s Discussion & Analysis
of financial condition and results of operations
The overall 90 basis point (+0.90%) change in Gross Profit Margin is made up of the following components:
a 77 basis point (+0.77%) increase due to the modification to the calculation of payroll taxes in France;
a 10 basis point (+0.10%) increase in temporary recruitment business margin as a result of improved pricing in some
markets, including France, and improved margins in other markets as a result of lower direct costs;
a 30 basis point (+0.30%) increase in our permanent recruitment business; and
a 27 basis point (-0.27%) decline due to a change in mix of services provided, primarily due to a relatively lesser amount of
revenues coming from Jefferson Wells and Right Management where the gross profit margin is generally higher than the
company average.
Included in the increase in Selling and Administrative Expenses is a 6.8% increase due to currency and $7.5 million related to
the modification 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 2007. The change in
Selling and Administrative Expenses as a percent of revenue is made up of the following components:
a 4 basis point (+0.04%) increase due to the modification to the calculation of payroll taxes in France;
a 14 basis point (-0.14%) decline due to reorganization charges and global cost reduction project costs recognized in 2006; and
a 10 basis point (-0.10%) decline 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. This favorable impact was offset by continued
investments in certain markets.
Interest and Other Expense is comprised of interest, foreign exchange gains and losses, and other miscellaneous non-
operating income and expenses. Interest and Other Expense was expense of $34.2 million in 2007 compared to $50.2
million in 2006. Net Interest Expense decreased $6.8 million to $29.0 million in 2007 from $35.8 million in 2006, as increases
in interest expense were offset by higher interest income as a result of our higher cash levels. Foreign exchange gains and
losses primarily result from intercompany transactions between our foreign subsidiaries and the U.S. Foreign exchange gains
were $0.6 million in 2007 compared to losses of $3.2 million in 2006. Other expense consists of bank fees and other non-
operating expenses and, in 2007, was $5.8 million compared to $11.2 million in 2006.
We provided for income taxes from continuing operations at a rate of 38.7% in 2007 and 36.6% in 2006. The 2007 rate is
higher than the 2006 rate primarily due to the income tax cost associated with additional anticipated cash repatriations from
our foreign subsidiaries, additional valuation allowances recorded for non-U.S. net operating losses, and the lower tax cost in
2006 of the reorganization charges and the costs related to our global cost reduction initiative. Our 2007 annual effective tax
rate is higher than the U.S. Federal statutory rate of 35% due primarily to the impact of valuation allowances recorded for non-
U.S. net operating losses, U.S. state income taxes and other permanent items.
Net Earnings Per Share From Continuing Operations – Diluted increased 64.7% to $5.73 in 2007 compared to $3.48 in 2006.
This increase includes:
the retroactive modification to the payroll tax calculation in France, a $88.6 million, net of tax increase, or $1.05 per diluted
share; and
higher foreign currency exchange rates, a $0.35 per diluted share increase.
Weighted Average Shares – Diluted decreased 3.6% to 84.6 million in 2007 from 87.7 million in 2006. This decline is primarily
a result of our repurchase of 6.1 million shares of our common stock during 2007.