ManpowerGroup 2012 Annual Report Download - page 29

through a regional manager, to a member of executive management. Given this reporting structure, all of our operations
have been segregated into the following reporting segments: Americas, which includes United States and Other Americas;
Southern Europe, which includes France, Italy and Other Southern Europe; Northern Europe; APME (Asia Pacific Middle
East); and Right Management.
The Americas, Southern Europe, Northern Europe and APME segments derive a significant majority of their revenues from
the placement of contingent workers. The remaining revenues within these segments are derived from other workforce
solutions and services, including recruitment and assessment, training and development, and ManpowerGroup Solutions.
ManpowerGroup Solutions includes TBO, MSP, RPO, BTS and SWC. Right Management’s revenues are derived from
career management and workforce consulting services. Segment revenues represent sales to external clients. Due to the
nature of our business, we generally do not have export sales. We provide services to a wide variety of clients, none of
which individually comprises a significant portion of revenues for us as a whole or for any segment.
Financial Measures — Constant Currency and Organic Constant Currency
Changes in our financial results include the impact of changes in foreign currency exchange rates and acquisitions.
We provide “constant currency” and “organic constant currency” calculations in this report to remove the impact of
these items. We express year-over-year variances that are calculated in constant currency and organic constant currency
as a percentage.
When we use the term “constant currency,” it means that we have translated financial data for a period into United States
dollars using the same foreign currency exchange rates that we used to translate financial data for the previous period. We
believe that this calculation is a useful measure, indicating the actual growth of our operations. We use constant currency
results in our analysis of subsidiary or segment performance. We also use constant currency when analyzing our
performance against that of our competitors. Substantially all of our subsidiaries derive revenues and incur expenses within
a single country and, consequently, do not generally incur currency risks in connection with the conduct of their normal
business operations. Changes in foreign currency exchange rates primarily impact reported earnings and not our actual
cash flow unless earnings are repatriated.
When we use the term “organic constant currency,” it means that we have further removed the impact of acquisitions in the
current period from our constant currency calculation. We believe that this calculation is useful because it allows us to show
the actual growth of our pre-existing business.
Constant currency and organic constant currency percent variances, along with a reconciliation of these amounts to
certain of our reported results, are included on pages 35 and 36.
Results of Operations — Years Ended December 31, 2012, 2011 and 2010
In 2012, we saw revenue slow in several of our markets, which unfavorably impacted our operating leverage and profitability.
The decline in revenues in 2012 from 2011 was due to the economic uncertainty primarily in Europe and the United States.
We saw slowing in our staffing/interim and our permanent recruitment businesses, as both declined from the prior year.
Our ManpowerGroup Solutions business showed solid growth over 2011. At Right Management, we saw a decrease in
demand for the talent management services, as clients have delayed their discretionary spending, but an increase in
demand for our countercyclical outplacement services.
We saw a decrease in our gross profit margin in 2012 compared to 2011 mostly due to the decline in our staffing/interim
and permanent recruitment businesses, offset by the growth in our higher-margin ManpowerGroup Solutions business and
Right Management’s outplacement services. We saw a deleveraging of our expenses as we did not decrease expenses as
quickly as revenues declined during 2012. We incurred $48.8 million of reorganization charges in 2012, $26.6 million of
which occurred in the fourth quarter, as we further streamline and simplify our organization.
Client demand for workforce solutions and services is dependent on the overall strength of the labor market and secular
trends toward greater workforce flexibility within each of the countries and territories in which we operate. Slowing economic
growth or economic contraction typically results in decreasing demand for labor, resulting in less demand for 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