ManpowerGroup 2001 Annual Report Download - page 26

– 49 –– 48 –
03 Income Taxes
The provision for income taxes consists of:
2001 2000 1999
Current
United States:
Federal $ 11.3 $ 24.0 $ 6.0
State (.3) 1.8 5.6
Foreign 75.2 86.4 28.9
Total current 86.2 112.2 40.5
Deferred
United States:
Federal (10.4) (9.5) (15.1)
State .4 –(.6)
Foreign (2.8) (8.7) 31.0
Total deferred (12.8) (18.2) 15.3
Total provision $ 73.4 $ 94.0 $ 55.8
A reconciliation between taxes computed at the United States Federal statutory tax rate of 35% and the consolidated effective tax rate is as follows:
2001 2000 1999
Income tax based on statutory rate $ 69.3 $ 92.8 $ 72.0
Increase (decrease) resulting from:
Foreign tax rate differences 3.6 5.0 3.9
State income taxes –1.2 2.6
Benefit on dissolution (a) ––(15.7)
Tax effect of foreign repatriations (2.3) (1.6) (11.3)
Change in valuation reserve .6 (4.0) 5.0
Other, net 2.2 .6 (.7)
Total provision $ 73.4 $ 94.0 $ 55.8
(a) The Benefit on dissolution of $15.7 represents the one-time tax benefit realized during 1999 related to the dissolution of a non-operating subsidiary.
Deferred income taxes are recorded on temporary differences at the tax rate expected to be in effect when the temporary differences reverse. Temporary
differences, which gave rise to the deferred tax assets at December 31, are as follows:
2001 2000
Current Future Income Tax Benefits
Accrued payroll taxes and insurance $19.8$22.4
Employee compensation payable 16.6 13.7
Pension and postretirement benefits 8.5 4.5
Other 30.4 30.0
Valuation allowance (1.5) (1.8)
73.8 68.8
Noncurrent Future Income Tax Benefits
Accrued payroll taxes and insurance 27.4 24.3
Pension and postretirement benefits 27.1 23.0
Net operating losses and other 22.9 23.7
Valuation allowance (26.2) (25.3)
51.2 45.7
Total future tax benefits $ 125.0 $ 114.5
The noncurrent future income tax benefits have been classified as Other assets in the Consolidated Balance Sheets.
The Company has U.S. Federal and foreign net operating loss carryforwards totaling $95.1 that expire as follows: 2002 – $.1, 2003 – $.5, 2004 – $2.6,
2005 – $14.5, 2006 – $12.0, 2007 and thereafter – $25.2 and $40.2 with no expiration. The Company has U.S. State net operating loss carryforwards
totaling $180.2 that expire as follows: 2004 – $71.2, 2005 – $68.2, 2006 – $11.0, 2007 and thereafter – $29.8. The Company has recorded a deferred
tax asset of $43.2 at December 31, 2001, for the benefit of these net operating losses. Realization of this asset is dependent on generating sufficient
taxable income prior to the expiration of the loss carryforwards. A valuation allowance of $24.4 has been recorded at December 31, 2001, as
management believes that realization of certain loss carryforwards is unlikely.
Pretax income of foreign operations was $163.6, $174.8 and $118.8 in 2001, 2000 and 1999, respectively. United States income taxes have not been
provided on unremitted earnings of foreign subsidiaries that are considered to be permanently invested. If such earnings were remitted, foreign tax
credits would substantially offset any resulting United States income tax. At December 31, 2001, the estimated amount of unremitted earnings of the
foreign subsidiaries totaled $722.4.
04 Accounts Receivable Securitization
The Company and certain of its U.S. subsidiaries entered into an agreement (the “Receivables Facility”) in December 1998 with a financial institution
whereby it sells on a continuous basis an undivided interest in all eligible trade accounts receivable. In December 2001, the Company extended the
agreement to expire in December 2002 and the agreement may be extended further with the financial institution’s consent. Pursuant to the
Receivables Facility, the Company formed Ironwood Capital Corporation, a wholly owned, special purpose, bankruptcy-remote subsidiary (“ICC”)
that is fully consolidated in the Company’s financial statements. ICC was formed for the sole purpose of buying and selling receivables generated by
the Company and certain subsidiaries of the Company. Under the Receivables Facility, the Company and certain subsidiaries, irrevocably and without
recourse, transfer all of their accounts receivable to ICC. ICC, in turn, has sold and, subject to certain conditions, may from time to time sell an undi-
vided interest in these receivables and is permitted to receive advances of up to $200.0 for the sale of such undivided interest.
Notes to Consolidated Financial Statements (continued)
— in millions, except per share data —