ManpowerGroup 2011 Annual Report Download - page 29

Management’s Discussion & Analysis ManpowerGroup 2011 Annual Report 27
• an increase in organic salary-related costs due to an increase in headcount (to meet client demand in certain markets),
as well as an increase in our variable incentive-based costs due to improved operating results.
Selling and administrative expenses as a percent of revenues increased 0.5% (+50 basis points) in 2010 compared to 2009.
The change in Selling and administrative expenses as a percent of revenues consists of:
• a 180 basis point (+1.80%) increase due to an increase in the goodwill and intangible asset impairment charges recorded
in 2010 as compared to 2009; offset by
• a 130 basis point (-1.30%) decrease due primarily to the leveraging of expenses, as we experienced an increase in
revenues of 17.6% (or 19.2% in constant currency) without a commensurate increase in expenses during 2010 as
compared to 2009.
Interest and other expenses are comprised of interest, foreign exchange gains and losses and other miscellaneous non-
operating income and expenses. Interest and other expenses were $43.2 million in 2010 compared to $64.6 million in
2009. Net interest expense decreased $12.5 million in 2010 to $37.5 million due primarily to the $7.5 million of interest
expense we incurred in 2009 related to the early extinguishment of our interest rate swap agreements and the amendment
of our revolving credit facility. Translation losses in 2010 were $3.3 million compared to $0.8 million in 2009. This increase
was primarily related to the translation loss of $1.2 million for Venezuela, resulting from our Venezuelan reporting unit’s
currency (Bolivar Fuerte) being devalued in January 2010 and the changing of its functional currency to the U.S. dollar as its
economy was deemed hyperinflationary effective January 1, 2010. 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 expense at an effective rate of 59.5% for 2010 compared to an income tax benefit at an
effective rate of 59.9% for 2009. The change in rate was due to the non-deductibility of the goodwill impairment charges in
2010 related to Right Management and Jefferson Wells as well as a significant change in the amount and mix of non-U.S.
earnings and related cash repatriations and other permanent items. The 2010 rate was also negatively impacted by
$42.8 million, net of a U.S. Federal tax benefit of $22.5 million, related to a French Business Tax, which has been classified
as a component of income tax beginning in January 2010, in accordance with the current accounting guidance on income
taxes. Prior to January 2010, the French business tax had been presented as a component of Cost of services. The French
government changed the business tax from an asset-based tax to a profit-based tax, thereby requiring the classification of
this tax as an income tax effective January 1, 2010.
The 2010 rate is higher than the U.S. Federal statutory rate of 35% due primarily to the non-deductible goodwill impairment
charges related to Right Management and Jefferson Wells, the impact of non-U.S. income taxes, the impact of valuation
allowances recorded for non-U.S. net operating losses, and the amount and mix of non-U.S. earnings and related cash
repatriations and other permanent items.
Net loss per share — diluted was a loss of $3.26 compared to a loss of $0.12 in 2009. This decrease was primarily related to
a greater impact from the goodwill and intangible asset impairment charge ($384.3 million, net of tax, or $4.73 per diluted
share) in 2010 compared to the goodwill impairment charge ($61.0 million, net of tax, or $0.78 per diluted share) in 2009.
Weighted average shares — diluted increased 3.4% to 81.0 million in 2010 from 78.3 million in 2009. This increase was
primarily a result of the issuance of 3.2 million shares as part of the COMSYS acquisition on April 5, 2010. Due to the net
loss in both 2010 and 2009, all of the stock-based awards were antidilutive and therefore were excluded from the Weighted
average shares — diluted calculation for the years ended December 31, 2010 and 2009.
SEGMENT RESULTS
Effective January 1, 2011, we created a new organizational structure in Europe in order to elevate our service quality
throughout Europe, the Middle East and Africa. Other Southern Europe and Northern Europe, previously reported in Other
EMEA, are now separate reportable segments. France, Italy and Other Southern Europe are aggregated into our Southern
Europe reportable segment. All previously reported results have been restated to conform to the current year presentation.
Additionally, we have changed the name of our Asia Pacific reportable segment to APME; the results of this reportable
segment have not been restated as only the name has changed.
We evaluate performance based on Operating unit profit, which is equal to segment revenues less direct costs and branch
and national headquarters operating costs. This profit measure does not include goodwill and intangible asset impairment
charges or amortization of intangible assets related to acquisitions, interest and other income and expense amounts or
income taxes.