ManpowerGroup 2001 Annual Report Download - page 31

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Foreign Currency Exchange Rate Management
In certain circumstances, the Company enters into foreign currency forward exchange contracts to reduce the effects of fluctuating foreign
currency exchange rates on cash flows with foreign subsidiaries. During 2001, all such contracts were designated as cash flow hedges and were
considered highly effective, as defined by the Statements. No such contracts existed as of December 31, 2001.
The Company’s borrowings denominated in Euro and Yen have been designated and are effective as economic hedges of the Company’s net investment
in its foreign subsidiaries with the related functional currencies. Therefore, all translation gains or losses related to these borrowings are recorded as a
component of Accumulated other comprehensive income (loss).
Interest Rate Risk Management
The Company enters into interest rate swaps to manage the effects of interest rate movements on the Company’s variable rate borrowings. The swaps
are denominated in Euro and Yen and exchange floating rate for fixed rate payments on a periodic basis over the terms of the related borrowings.
Such contracts have been designated as cash flow hedges and were considered highly effective, as defined by the Statements, as of December 31,
2001.
12 Contingencies
The Company is involved in a number of lawsuits arising in the ordinary course of business which will not, in the opinion of management, have a
material effect on the Company’s results of operations, financial position or cash flows.
13 Business Segment Data by Geographical Area
The Company is organized and managed on a geographical basis. Each country has its own distinct operations, is managed locally by its own management
team, and maintains its own financial reports. Under SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” the
Company has four reportable segments – United States, France, United Kingdom and Other Europe. All remaining countries have never met the
quantitative thresholds for determining reportable segments.
Each reportable segment derives at least 94% of its revenues from the placement of temporary help. The remaining revenues are derived from other
human resource services, including temporary and permanent employee testing, selection, training and development; and organizational-performance
consulting. Segment revenues represent sales to external customers within a single segment. Due to the nature of its business, the Company does not
have export or intersegment sales. The Company provides services to a wide variety of customers, none of which individually comprise a significant
portion of revenues within a reporting segment, geographic region or for the Company as a whole.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates
performance based on Operating Unit Profit, which is equal to segment revenues less direct costs and branch and national head office operating
costs. This profit measure does not include nonrecurring items, goodwill amortization, interest and other income and expense amounts or
income taxes. Total assets for the segments are reported after the elimination of investments in subsidiaries and intercompany accounts.
2001 2000 1999
Revenues from Services
United States (a) $ 2,003.4 $ 2,413.5 $ 2,250.5
Foreign:
France 3,766.4 3,939.2 3,775.1
United Kingdom 1,489.3 1,453.1 1,170.3
Other Europe 1,939.4 1,896.3 1,665.5
Other Countries 1,285.3 1,140.7 908.7
Total foreign 8,480.4 8,429.3 7,519.6
$ 10,483.8 $ 10,842.8 $ 9,770.1
Operating Unit Profit
United States $ 29.5 $ 84.6 $ 80.3
France 135.7 130.6 100.9
United Kingdom 44.5 46.2 40.2
Other Europe 75.9 89.1 68.0
Other Countries 8.9 13.2 10.6
294.5 363.7 300.0
Corporate expenses 39.9 39.4 34.5
Amortization of intangible assets 17.0 13.3 6.9
Interest and other expense 39.7 45.8 24.8
Nonrecurring expenses (b) ––28.0
Earnings before income taxes $ 197.9 $ 265.2 $ 205.8
Depreciation and Amortization Expense
United States $ 14.4 $ 16.0 $ 16.4
France 13.6 11.8 12.2
United Kingdom 10.4 7.4 8.2
Other Europe 16.3 16.1 13.2
Other Countries 9.3 6.5 5.2
$ 64.0 $ 57.8 $ 55.2
Earnings from Investments in Licensees
United States $ (.1) $ (.1) $ .1
United Kingdom .4 ––
Other Europe 1.1 2.0 2.0
Other Countries (.6) (.5) .9
$ .8$ 1.4$ 3.0
(a) Total Systemwide sales in the United States, which include sales of Company-owned branches and franchises, were $3,114.8, $3,814.9 and $3,758.7 for the years ended December 31, 2001,
2000 and 1999, respectively.
(b) Represents nonrecurring items ($16.4 after tax) in the second quarter of 1999 related to employee severances, retirement costs and other associated realignment costs.
Notes to Consolidated Financial Statements (continued)
— in millions, except per share data —