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ManpowerGroupTM 2012 Annual Report

Table of contents

  • Page 1
    ManpowerGroup 2012 Annual Report TM

  • Page 2
    Forces Driving the Era of Certain Uncertainty Require New Approaches to the World of Work ManpowerGroup, the world leader in Innovative Workforce Solutions, creates and delivers high-impact solutions that enable our clients to achieve their business goals and enhance their competitiveness. With ...

  • Page 3
    Expertise to harness the winds of change

  • Page 4
    ... In the Human Age, understanding the forces impacting talent, business, governments, and economies is required to create workforce solutions that are both innovative and achievable. Through our extensive experience, proprietary research, and our partnerships with experts from business, academia and...

  • Page 5
    to reshape the World of Work

  • Page 6
    ...staffing, professional resourcing and talent management to the outsourcing and consulting solutions that address the complexities of today's World of Work. Our innovative solutions ensure the results you need, providing greater predictability of cost, a more efficient recruiting process, an improved...

  • Page 7
    to match human potential and the ambition of business

  • Page 8
    ... the World of Work better than ManpowerGroup. For more than 60 years, we have been helping our clients solve business challenges by connecting the potential of people to the ambition of business. Our talent expertise makes us the worldwide leader in delivering Innovative Workforce Solutions.

  • Page 9
    to create innovative and agile work models

  • Page 10
    ... the World of Work, ManpowerGroup partners with clients to develop and deliver innovative solutions that drive success-increasing the quality, productivity and effectiveness of their entire workforce. Manpower ® is a global leader in contingent and permanent recruitment workforce solutions. We...

  • Page 11
    ... and career management workforce solutions. Through our innovative and proprietary process, we leverage our expertise to successfully increase productivity and optimize business performance. ManpowerGroupâ„¢ Solutions provides clients with talent-based outsourcing and consulting services primarily...

  • Page 12
    It's been two years since we announced that the world had entered a new age-the Human Age-in which we stated that unleashing talent in new ways will be the single most important determinant of success. 10 ManpowerGroup 2012 Annual Report Letter to Shareholders

  • Page 13
    ...contrasting criteria. One small change is occurring at a time, but each element of the system is dramatically transforming how work gets done. The conclusion we can draw from this is clear-companies must prepare for one certainty: uncertainty. Letter to Shareholders ManpowerGroup 2012 Annual Report...

  • Page 14
    This uncertainty is so powerful that it can be thought of as a force in and of itself, driving new systems and structures and requiring a whole new level of workforce flexibility and agility to succeed. This is where we come in. Forces driving certain uncertainty mean every company is faced with the...

  • Page 15
    ... assignment each day-a great vote of confidence for the vitality of Manpower throughout the world. Our business in China and ASEAN continues to grow rapidly. Our U.S. business has made strategic moves to better position Manpower in key markets, reversing some of the declines in gross margin percent...

  • Page 16
    .... Within ManpowerGroup Solutions, we won 120 new Recruitment Process Outsourcing (RPO) contracts in 2012. We will continue to build on our global leadership position by establishing our global RPO practice and pursuing more multi-country and long-term contracts. TAPFIN, our Managed Service Provider...

  • Page 17
    ... pivot in 2012. We significantly reduced our cost base, and dramatically improved our operating unit profit margin. We did this while strengthening our offering. Our combination of "at home" and in-person is leading edge and positively affecting our clients that are seeking Human Age agility, and...

  • Page 18
    ... one in professional resourcing. We anticipate significant growth opportunities from increasing penetration and economic development to further cement our leadership position in these markets. ManpowerGroup Solutions Experis Right Management $3.4 Manpower $2.3 $0.2 $0.3 $0.6 Our Focus...I am...

  • Page 19
    ... into run mode, strategic initiatives and pilot programs that have demonstrated return, and have dramatically reduced the need for support personnel. The efficiency and effectiveness of our delivery model and technology is critical to our Letter to Shareholders ManpowerGroup 2012 Annual Report 17

  • Page 20
    ...-profit markets into larger offices to create efficiency, flexibility and reduce costs. Simplifying is about our focus on the client. It's about freeing up our time and resources, so we can spend as much time as possible out in front of prospects and clients. Our use of centralized recruiting hubs...

  • Page 21
    Letter to Shareholders ManpowerGroup 2012 Annual Report 19

  • Page 22
    ... approach to governance and compensation, which we believe serves you, our shareholders, well. For more information, please refer to the Corporate Governance Guidelines and our other governance documents, available on our website, and to our 2013 Proxy Statement. 20 ManpowerGroup 2012 Annual Report...

  • Page 23
    ... comes from being principle-based and empowering our people to be great brand ambassadors, committed to the company's long-term profitability and sustainability within a wellgoverned framework." JEFFREY A. JOERRES Chairman and CEO ManpowerGroup Sustainability ManpowerGroup 2012 Annual Report 21

  • Page 24
    ... 3.5 million 3.0 million 4.0 million Strong Record of Long-Term Revenue Growth In Billions ($) 25 20 15 Systemwide Offices '12 '11 '10 '09 '08 3,453 3,764 3,877 3,950 4,407 10 5 0 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 22 ManpowerGroup 2012 Annual Report At a Glance

  • Page 25
    ... investment in Right Management, French business tax refund, French payroll tax modification, French competition investigation and global reorganization charges. (See Note 1 to the Consolidated Financial Statements for further information.) Financial Highlights ManpowerGroup 2012 Annual Report 23

  • Page 26
    ... 52 Consolidated Statements of Cash Flows 53 Consolidated Statements of Shareholders' Equity 54 Notes to Consolidated Financial Statements 83 Selected Financial Data 83 Performance Graph 84 Principal Operating Units 85 Corporate Information 24 ManpowerGroup 2012 Annual Report Table of Contents

  • Page 27
    ... personal success and builds more sustainable communities. We power the world of work. By offering a complete range of workforce solutions and services, we can help any company - no matter where they are in their business evolution - raise productivity, improve strategy, quality, efficiency and cost...

  • Page 28
    ... and consistency of delivery locally. We develop and implement global workforce solutions for our clients that deliver the outcomes that help them achieve their business strategy. Each operation reports directly or indirectly 26 ManpowerGroup 2012 Annual Report Management's Discussion & Analysis

  • Page 29
    ...our staffing services. This slowdown typically impacts our operating profit unfavorably as we may experience a deleveraging of our selling and administrative expense base as expenses may not change at the same pace as revenues. Management's Discussion & Analysis ManpowerGroup 2012 Annual Report 27

  • Page 30
    ... revenue decline in the United States of 4.0% primarily due to a decrease of our key account client revenues because of softening demand as well as stronger pricing discipline on new business opportunities; • decreased demand for talent management services at Right Management, where these revenues...

  • Page 31
    ... entity structure. The United States Federal Work Opportunity Tax Credit ("WOTC") was retroactively reinstated to January 1, 2012 as part of the American Taxpayer Relief Act, which was enacted on January 2, 2013. The $7.0 million tax benefit related to 2012 will be recognized by the Company during...

  • Page 32
    ... to no impairment charge recorded in 2011; partially offset by • an increase in our organic salary-related costs due to salary increases, and an increase in headcount in certain markets in response to the increased demand; 30 ManpowerGroup 2012 Annual Report Management's Discussion & Analysis

  • Page 33
    ... currency basis) in 2012 compared to 2011, led by revenue growth in Canada, Mexico and Argentina of 19.2%, 10.0% and 8.2%, respectively, in constant currency (16.2% growth in Canada on an organic constant currency basis). Management's Discussion & Analysis ManpowerGroup 2012 Annual Report 31

  • Page 34
    ...reduced FICA taxes from the one-time Hire Act credits in the United States in 2011 that did not occur in 2012. In 2011, gross profit margin increased due to the impact on the first quarter from the annualization of the COMSYS acquisition, an improvement in our United States' staffing/interim margins...

  • Page 35
    ... meet the higher demand for our services in certain markets and business lines, and $10.0 million of severances and office closure costs as we streamlined our single brand Experis strategy to drive productivity and efficiency. Management's Discussion & Analysis ManpowerGroup 2012 Annual Report 33

  • Page 36
    ... 3.5 Gross profit margin increased in 2012 compared to 2011 due to the margin improvement in each business line and the business mix changes in our revenues, as we saw an increase in the higher-margin outplacement services and a decrease 34 ManpowerGroup 2012 Annual Report Management's Discussion...

  • Page 37
    ... margin outplacement services. In 2012, selling and administrative expenses decreased 1.7% (0.4% increase in constant currency) compared to 2011 as the cost savings from the reorganization plan to streamline the office infrastructure and management organization favorably impacted expense levels...

  • Page 38
    .... Working capital is primarily in the form of trade receivables, which generally increase as revenues increase. The amount of financing necessary to support revenue growth depends on receivables turnover, which differs in each market where we operate. 36 ManpowerGroup 2012 Annual Report Management...

  • Page 39
    ... and other costs related to office openings and refurbishments, as well as capitalized software costs of $3.3 million, $0.4 million and $1.4 million in 2012, 2011 and 2010, respectively. On April 16, 2012, we acquired Damilo Group ("Damilo"), a French firm specializing in IT design solutions, for...

  • Page 40
    ..., respectively). Guarantees primarily relate to bank accounts, operating leases and indebtedness. The stand-by letters of credit relate to workers' compensation, operating leases and indebtedness. If certain conditions were met under these arrangements, we Total Capitalization would be required to...

  • Page 41
    ... use a proprietary methodology in determining their ratings and outlook which includes, among other things, financial ratios based upon debt levels and earnings performance. Both of the current credit ratings are investment grade. Management's Discussion & Analysis ManpowerGroup 2012 Annual Report...

  • Page 42
    ... in the recognition of liabilities related to defined benefit pension plans, self-insured workers' compensation, social program remittances and payroll tax audit exposures that require us to make estimates and assumptions in determining the proper reserve levels. These reserves involve significant...

  • Page 43
    ... of 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 reflects the type of work performed (for example, office and professional work...

  • Page 44
    ... and operating unit profit margins were determined after taking into consideration our historical revenue growth rates and operating unit profit margins, our assessment of future market potential, and our expectations of future business performance. 42 ManpowerGroup 2012 Annual Report Management...

  • Page 45
    ...United States dollar had strengthened an additional 10% as of December 31, 2011, resulting translation adjustments recorded in shareholders' equity would have increased by approximately $145.4 million from the amounts reported. Management's Discussion & Analysis ManpowerGroup 2012 Annual Report 43

  • Page 46
    ... below are based on the United States dollar spot rate as of December 31, 2012 and 2011. The exchange rate computations assume a 10% appreciation or 10% depreciation of the euro and British pound to the United States dollar. 44 ManpowerGroup 2012 Annual Report Management's Discussion & Analysis

  • Page 47
    ... 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. Management's Discussion & Analysis ManpowerGroup 2012 Annual Report 45

  • Page 48
    ... 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 workforce solutions and services firms may operate. These changes could impose additional costs, taxes, record keeping or reporting requirements...

  • Page 49
    ... over financial reporting as of December 31, 2012, which is included herein. Based on our evaluation we have concluded that our internal control over financial reporting was effective as of December 31, 2012. February 22, 2013 Management's Discussion & Analysis ManpowerGroup 2012 Annual Report 47

  • Page 50
    ... of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2013 expressed an unqualified opinion on the Company's internal control over financial reporting. Milwaukee, Wisconsin February 22, 2013 48 ManpowerGroup 2012 Annual Report Report of Independent Registered...

  • Page 51
    ... of ManpowerGroup Inc. We have audited the internal control over financial reporting of ManpowerGroup Inc. and subsidiaries (the "Company") as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of...

  • Page 52
    CONSOLIDATED STATEMENTS OF OPERATIONS in millions, except per share data Year Ended December 31 2012 2011 2010 Revenues from services Cost of services Gross profit Selling and administrative expenses, excluding impairment charges Goodwill and intangible asset impairment charges Selling and ...

  • Page 53
    ....6 511.1 174.5 $ 7,012.6 $ 6,899.7 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 54
    ... and intangible asset impairment charges Deferred income taxes Provision for doubtful accounts Share-based compensation Excess tax benefit on exercise of share-based awards Change in operating assets and liabilities, excluding the impact of acquisitions: Accounts receivable Other assets Other...

  • Page 55
    ... plans, including tax benefits Issuance for business acquisition Share-based compensation expense Dividends ($0.74 per share) Repurchases of common stock Other... Statements are an integral part of these statements. Consolidated Statements of Shareholders' Equity ManpowerGroup 2012 Annual Report 53

  • Page 56
    ... clients in all industry segments. Our largest operations, based on revenues, are located in the United States, France, Italy and the United Kingdom. We specialize in permanent, temporary and contract recruitment and assessment; training and development; outsourcing; career management and workforce...

  • Page 57
    ... or utilized in 2013. Changes in the reorganization liability balances for each reportable segment and Corporate are as follows: Americas(1) Southern Europe(2) Northern Europe APME Right Management Corporate Total Balance, January 1, 2011 Severance costs, net Office closure costs, net Costs paid...

  • Page 58
    ... $0.3 $- $- We determine the fair value of our available-for-sale securities and deferred compensation plan assets, comprised of publicly traded securities, by using market quotes as of the last day of the period. The fair value of the foreign currency forward contracts are measured at the value...

  • Page 59
    ... rights result from our franchise acquisitions in the United States completed prior to 2009. In accordance with the accounting guidance on goodwill and other intangible assets, we perform an annual impairment test of goodwill at our reporting unit level and indefinite-lived intangible assets at our...

  • Page 60
    ... FINANCIAL STATEMENTS in millions, except share and per share data Significant assumptions used in our goodwill impairment tests during 2012, 2011 and 2010 included: expected revenue growth rates, operating unit profit margins, working capital levels, discount rates ranging from 10.6% to 16...

  • Page 61
    ... equipment are stated at cost and are depreciated using primarily the straight-line method over the following estimated useful lives: buildings - up to 40 years; furniture, fixtures, autos and computer equipment - 2 to 16 years; leasehold improvements - lesser of life of asset or expected lease term...

  • Page 62
    ... required. We adopted this guidance effective January 1, 2012. We did not adopt the option of performing a qualitative assessment and the application of the guidance to our annual impairment test had no impact on our Consolidated Financial Statements. In December 2011, the FASB issued new accounting...

  • Page 63
    ..., we utilized the multiperiod excess-earnings method, a form of the income approach. Some of the significant assumptions used in this valuation included: expected revenue growth rates, operating unit profit margins, capital charges representing 1.3% of revenues, and a 13% discount rate. The...

  • Page 64
    ..., in share-based compensation expense related to stock options, deferred stock, restricted stock and performance share units, all of which is recorded in selling and administrative expenses. The total income tax benefit recognized related to share-based compensation during 2012, 2011 and 2010...

  • Page 65
    ...2011 and 2010, respectively. DEFERRED STOCK Our non-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...

  • Page 66
    ... on the performance criteria determined by the Executive Compensation and Human Resources Committee of the Board of Directors at the time of grant. In the event the performance criteria exceed the target performance level, an additional number of shares, up to the Outstanding Award level, may be...

  • Page 67
    ...in 2012, 2011 and 2010, respectively, related to the performance share units. OTHER STOCK PLANS Under the 1990 Employee Stock Purchase Plan, designated employees meeting certain service requirements may purchase shares of our common stock through payroll deductions. These shares may be purchased at...

  • Page 68
    ... non-United States earnings Change in valuation reserve Non-deductible goodwill impairment charge Other, net Tax provision $128.9 6.7 40.8 (16.9) 4.7 - 6.6 $170.8 $168.0 5.2 40.6 11.1 (3.3) - 6.7 $228.3 $ (57.8) (0.6) 38.7 (4.8) 11.7 109.1 2.1 $ 98.4 66 ManpowerGroup 2012 Annual Report Notes to...

  • Page 69
    ... that may be remitted to the United States. As of December 31, 2012 and 2011, we have recorded a deferred tax liability of $15.7 and $22.0, respectively, related to these non-United States earnings that may be remitted. Notes to Consolidated Financial Statements ManpowerGroup 2012 Annual Report 67

  • Page 70
    ... and $5.5 as of January 1, 2011, December 31, 2011 and December 31, 2012, respectively. (3) The majority of the Corporate balance as of December 31, 2012 relates to goodwill attributable to our acquisition of Jefferson Wells ($55.5) which is part of the United States reporting unit. For purposes of...

  • Page 71
    ... not in part, at our option at any time for a redemption price determined in accordance with the term of the notes. These notes also contain certain customary non-financial restrictive covenants and events of default. Notes to Consolidated Financial Statements ManpowerGroup 2012 Annual Report 69

  • Page 72
    ... States Plans Year Ended December 31 2012 2011 Non-United States Plans 2012 2011 Change in Benefit Obligation Benefit obligation, beginning of year Service cost Interest cost Curtailments Transfers Actuarial loss Plan participant contributions Benefits paid Currency exchange rate changes Benefit...

  • Page 73
    ...United States Plans 2012 2011 Change in Plan Assets Fair value of plan assets, beginning of year Actual return on plan assets Curtailments Transfers Plan participant contributions Company contributions Benefits paid Currency exchange rate changes Fair value of plan assets, end of year Funded Status...

  • Page 74
    ... of our expected rate of return. Projected salary levels utilized in the determination of the projected benefit obligation for the pension plans are based upon historical experience and the future expectations for each respective country. 72 ManpowerGroup 2012 Annual Report Notes to Consolidated...

  • Page 75
    ... Inputs (Level 3) December 31, 2011 Significant Unobser vable Inputs (Level 3) Asset Category Cash and cash equivalents (1) Equity securities: United States companies International companies Fixed income securities: Government bonds (2) Corporate bonds Guaranteed insurance contracts Other types...

  • Page 76
    ... point change in the assumed health care cost trend rate would have the following effects: 1% Increase 1% Decrease Effect on total of service and interest cost components Effect on benefit obligation $0.2 4.1 $(0.2) (3.5) 74 ManpowerGroup 2012 Annual Report Notes to Consolidated Financial...

  • Page 77
    ... health care payments as incurred. Projected benefit payments from the plans as of December 31, 2012 were estimated as follows: Year Pension Plans Retiree Health Care Plan 2013 2014 2015 2016 2017 2018-2022 Total projected benefit payments DEFINED CONTRIBUTION PLANS AND DEFERRED COMPENSATION PLANS...

  • Page 78
    ... to our ongoing business operations. The primary risks, which are managed through the use of derivative instruments, are foreign currency exchange rate risk and interest rate risk. In certain circumstances, we enter into foreign currency forward exchange contracts ("forward contracts") to reduce the...

  • Page 79
    ... Process Outsourcing (RPO), Borderless Talent Solutions (BTS) and Strategic Workforce Consulting (SWC). The Right Management segment revenues are derived from career management and workforce consulting services. Segment revenues represent sales to external clients. Due to the nature of our business...

  • Page 80
    ... revenues from our company-owned branches and franchise fees received from our franchise operations, which are discussed further on the financial highlights page. (c) Intangible asset amortization related to acquisitions is excluded from operating costs within the reportable segments and corporate...

  • Page 81
    ... Europe APME Right Management $ 2.5 - - 2.5 $ 3.9 $ 4.6 (a) Intangible asset amortization related to acquisitions is excluded from operating costs within the reportable segments and corporate expenses, and shown separately. Notes to Consolidated Financial Statements ManpowerGroup 2012 Annual...

  • Page 82
    ... Southern Europe 0.1 - - 0.1 Northern Europe APME Right Management $ 81.5 0.7 - 85.3 $ 75.9 $ 71.6 (a) Corporate assets include assets that were not used in the operations of any segment, the most significant of which were purchased intangibles and cash. 80 ManpowerGroup 2012 Annual Report...

  • Page 83
    ... by geographical region was as follows: Long-Lived Assets 2012 2011 2010 United States France Italy United Kingdom Total Foreign $ 39.7 61.0 7.1 11.0 155.7 $ 41.1 48.1 8.1 12.9 147.8 $ 48.2 45.8 8.1 15.3 144.0 Notes to Consolidated Financial Statements ManpowerGroup 2012 Annual Report 81

  • Page 84
    ... $0.5 and $21.0 recorded in the first, second, third and fourth quarters, respectively. (d) Included in the results are reorganization costs of ($0.02) per diluted share in the second quarter and ($0.20) per diluted share in the fourth quarter. **** 82 ManpowerGroup 2012 Annual Report Notes to...

  • Page 85
    ...of the Sarbanes-Oxley Act of 2002 as exhibits to its Annual Report on Form 10-K. In 2012, Jeffrey A. Joerres, ManpowerGroup's Chief Executive Officer, submitted a certification to the New York Stock Exchange in accordance with Section 303A.12 of the NYSE Listed Company Manual stating that, as of the...

  • Page 86
    ... the Human Age. These solutions cover an entire range of talent-driven needs from recruitment and assessment, training and development, and career management, to outsourcing and workforce consulting. ManpowerGroup maintains the world's largest and industry-leading network of nearly 3,500 offices in...

  • Page 87
    ...CEO Health Care Service Corporation TERRY A. HUENEKE1 Senior Vice President Operational Excellence and Technology Retired Executive Vice President ManpowerGroup ROBERTO MENDOZA1 Senior Managing Director Atlas Advisors ULICE PAYNE JR.1,3 BOARD COMMITTEES 1 Audit Committee 2 Executive Compensation...

  • Page 88
    ....com/investors STOCK EXCHANGE LISTING April 30, 2013 at 10 a.m. ManpowerGroup World Headquarters 100 Manpower Place Milwaukee, WI 53212 USA INVESTOR RELATIONS WEBSITE The most current corporate and investor information can be found on the ManpowerGroup corporate Web site at www.manpowergroup.com...

  • Page 89
    ... Social Responsibility Report, which is accessible via our corporate Web site at www.manpowergroup.com/socialresponsibility. In addition, Chuck was focused on improving the exchange and sharing of our collective expertise and knowledge across the global organization. He evamped our company's Code...

  • Page 90
    www.manpowergroup.com ManpowerGroup 100 Manpower Place Milwaukee, Wisconsin 53212