ManpowerGroup 2013 Annual Report Download - page 33

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Management’s Discussion & Analysis ManpowerGroup 2013 Annual Report
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
• restructuring costs of $48.8 million;
• 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 restructuring costs of $48.8 million in 2012 compared to $23.1 million in
2011; an d
• 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 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 restructuring costs described further in Note 1 to the
Consolidated Financial Statements, and the French business tax.
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.
SEGMENT RESULTS
We evaluate performance based on operating unit profit (“OUP”), 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.
On a consolidated basis, the French business tax is reported in provision for income taxes, in accordance with the current
accounting guidance on income taxes. Prior to the second quarter of 2013, we internally reviewed the financial results of
our French operations including the French business tax within OUP given the operational nature of these taxes. While we
continue to view this tax as operational, during the second quarter of 2013 we changed our internal reporting to exclude the
French business tax from the OUP of our France reportable segment. Therefore, we are no longer required to show the
business tax amount separately to reconcile to the consolidated results. All previously reported segment results have been
restated to conform to the current year presentation. This change in segment reporting has no impact on our reporting of
consolidated results.