ManpowerGroup 2012 Annual Report Download - page 31

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The year-over-year 20 basis point (–0.20%) decrease in gross profit margin was primarily attributed to:
• a 40 basis point (–0.40%) decline from our staffing/interim business primarily related to pricing pressures in some of our
European markets and within the Experis business line in the United States; partially offset by
• a 10 basis point (0.10%) favorable impact from strong growth and improved margins in Right Management’s higher-
margin outplacement services; and
• a 10 basis point (0.10%) increase due to the impact of currency exchange rates.
The 4.8% decline in selling and administrative expenses in 2012 (–0.8% in constant currency and –1.5% in organic constant
currency) was attributed to:
• a decrease in our organic salary-related costs, because of lower headcount and lower variable incentive-based costs;
• a 4.0% decrease due to the impact of currency exchange rates; partially offset by
• reorganization costs of $48.8 million, comprised of $9.8 million in the Americas, $3.8 million in Southern Europe, $13.2
million in Northern Europe, $0.7 million in APME, $10.9 million at Right Management and $10.4 million in corporate
expenses;
• legal costs of $10.0 million in the United States, primarily related to a settlement agreement in connection with a lawsuit
involving allegations regarding the Company’s vacation pay practices in Illinois; and
• the additional recurring selling and administrative costs as a result of the acquisitions in Southern Europe, APME and
the Americas.
Selling and administrative expenses as a percent of revenues increased 20 basis points (0.20%) in 2012 compared to 2011.
The change in selling and administrative expense as a percent of revenues consists of:
• a 15 basis point (0.15%) increase due to the reorganization costs of $48.8 million in 2012 compared to $23.1 million in
2011; and
• a 5 basis point (0.05%) increase due to the legal costs of $10.0 million in the United States as noted above.
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 $43.3 million in 2012 compared to $44.3 million in 2011.
Net interest expense decreased $0.3 million in 2012 to $35.2 million from $35.5 million in 2011 due to lower interest rates.
Other expenses decreased $0.7 million in 2012 due primarily to a $1.9 million decrease in translation losses.
We recorded an income tax expense at an effective rate of 46.4% for 2012, as compared to an effective rate of 47.6% for
2011. The 2012 tax rate is lower than the 2011 rate due to the benefits resulting from the changes in our legal entity
structure. The 46.4% effective tax rate is higher than the United States Federal statutory rate of 35% due primarily to
valuation allowances, other permanent items, discrete items related to reorganization costs described further in Note 1 to
the Consolidated Financial Statements, and the French business tax. Excluding the impact of the discrete items and the
French business tax, our tax rate for 2012 and 2011 would have been approximately 33% and 36%, respectively. The 2012
tax rate, excluding the discrete items and French business tax, is lower than the 2011 rate due to the benefits resulting from
the changes in our legal 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 the first quarter of 2013, the period during
which the law was enacted. The American Taxpayer Relief Act also extended the WOTC through December 31, 2013.
Net earnings per share — diluted was $2.47 in 2012 compared to $3.04 in 2011. Foreign currency exchange rates
unfavorably impacted net earnings per share — diluted by approximately $0.14 per share in 2012.
Weighted average shares — diluted decreased 3.3% to 80.1 million in 2012 from 82.8 million in 2011. This decrease was
primarily a result of the repurchase of 3.6 million shares in 2012.
Management’s Discussion & Analysis ManpowerGroup 2012 Annual Report 29