ManpowerGroup 2009 Annual Report Download - page 23

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Management’s Discussion & Analysis Manpower 2009 Annual Report
The 22.7% decrease in Selling and Administrative Expenses in 2009, or 18.2% decrease in constant currency, is due to:
our focus on reducing expenses and rebalancing our cost structure in response to the lower business volumes;
a $61.0 million goodwill impairment charge recorded in the third quarter of 2009 related to Jefferson Wells as compared to
a $163.1 million goodwill and intangible asset impairment charge recorded in the third quarter of 2008 related to Right
Management (see Note 1 to the Consolidated Financial Statements for further information);
a decline of $58.0 million of costs related to the French competition investigation ($54.1 million was recorded in the second
quarter of 2008, of which $3.9 million was reversed in the fi rst quarter of 2009; see Note 14 to the Consolidated Financial
Statements for further information);
a $4.3 million gain in Japan related to the termination of a defi ned benefi t plan and a $4.9 million reversal of a reserve that
we determined was no longer necessary, both of which were recorded in the fi rst quarter of 2009; and
$33.5 million of reorganization charges for severances and other offi ce closure costs recorded in 2009 as compared to
$37.2 million recorded in the fourth quarter of 2008.
Selling and Administrative Expenses as a percent of revenue increased by 0.6% (+60 basis points) in 2009 compared to
2008. The change in Selling and Administrative Expenses as a percent of revenue consists of:
a 122 basis point (+1.22%) increase due primarily to the deleveraging of expenses given the decline in revenues, as we can only
decrease expenses to a certain level without negatively impacting the long-term potential of our branch network and brands;
offset by a 38 basis point (-0.38%) decrease due to the decrease in the goodwill impairment charge recorded in the third
quarter of 2009 compared to the goodwill and intangible asset impairment charge recorded in the third quarter of 2008;
a 25 basis point (-0.25%) decrease due to the costs related to the French competition investigation recorded in 2008; and
a 4 basis point (-0.04%) decrease due to the lower global reorganization charges recorded in 2009.
Interest and Other Expenses is comprised of interest, foreign exchange gains and losses and other miscellaneous non-
operating income and expenses. Interest and Other Expenses were $64.6 million in 2009 compared to $50.9 million in 2008.
Net Interest Expense increased $8.2 million in 2009 to $50.0 million due primarily to the recording of $7.5 million of interest
expense related to the early extinguishment of our interest rate swap agreements and amended revolving credit facility in the
third quarter of 2009. Translation losses in 2009 were $0.8 million compared to gains of $2.9 million in 2008. Miscellaneous
Expenses, net, which consist of other non-operating income and expenses, were $3.5 million in 2009 compared to $12.0
million in 2008. In 2009, we also incurred a $10.3 million loss related to a sale of an equity investment in Japan.
We recorded an income tax benefi t of 59.9% for 2009 compared to an income tax expense at an effective rate of 53.6% for
2008. The change in rate was due to the non-deductibility of the goodwill impairment charges related to Jefferson Wells in
2009 and Right Management in 2008, the impact in each year due to the non-deductibility of the French competition case
reserve, as well as a signifi cant change in the amount and mix of non-U.S. earnings and related cash repatriations and other
permanent items. This rate is different than the U.S. Federal statutory rate of 35% due primarily to the non-deductible goodwill
impairment charges related to Jefferson Wells, the impact of valuation allowances recorded for non-U.S. net operating
losses, the sale of an equity investment in Japan, and the amount and mix of non-U.S. earnings and related cash repatriations
and other permanent items.
Net (Loss) Earnings Per Share – Diluted was a loss of $0.12 compared to earnings of $2.58 in 2008. This decrease includes:
the lesser impact from the goodwill impairment charge: $61.0 million net of tax, or $0.78 per diluted share in 2009 compared
to $154.6 million net of tax, or $1.94 per diluted share in 2008;
the 2008 costs for the French competition investigation: $50.0 million net of tax, or $0.63 per diluted share in 2008;
the 2008 impact from a modifi cation to the calculation of payroll taxes in France: a $43.8 million net of tax benefi t, or $0.55
per diluted share in 2008;
the 2008 impact from the business tax refund in France: a $28.3 million net of tax benefi t, or $0.36 per diluted share in 2008;
the lesser impact from global reorganization costs: $24.3 million net of tax, or $0.31 per diluted share in 2009, compared to
$27.2 million net of tax, or $0.34 per diluted share in 2008;
the interest expense for the extinguishment of our interest rate swap agreements and amended revolving credit facility of
$4.6 million net of tax, or $0.06 per diluted share in 2009; and
the loss from the sale of an equity investment in Japan of $5.3 million net of tax , or $0.06 per diluted share in 2009.