ManpowerGroup 2004 Annual Report Download - page 42

2004 Annual Report MANPOWER INC.40
During the last several years, secular trends toward greater workforce flexibility have had a favorable impact on demand
for our services in several markets. As companies attempt to increase the variability of their cost base, contemporary
work solutions help them to effectively address the fluctuating demand for their products or services. Due to our industry’s
dependence on economic factors, the inherent difficulty in forecasting the direction and strength of the economy and
the short-term nature of staffing assignments, it is difficult to forecast future demand for our services with any certainty.
As a result, we monitor a number of economic indicators, as well as recent business trends, to predict future revenue
growth trends. Based upon these anticipated trends, we determine whether additional personnel and office investments
are necessary to take full advantage of growth opportunities.
Our staffing business is organized and managed primarily on a geographic basis, and Jefferson Wells and Right are
operated as separate global business units. Each country and business unit primarily has its own distinct operations,
and is managed locally by its own management team. Each operation reports directly, or indirectly, through a regional
manager to a member of executive management. Given this reporting structure, all of our operations have been seg-
regated into the following segments: United States; France; EMEA (Europe, Middle East and Africa, excluding France);
Jefferson Wells; Right; and Other Operations.
The United States, France, EMEA, and Other Operations segments derive a significant majority of their revenues from
the placement of temporary workers. The remaining revenues within these segments are derived from other human
resource services, including permanent employee recruitment, temporary and permanent employee testing, selection,
and training and development. Jefferson Wells’ revenues are derived from internal audit and control services, technology
risk management, tax, finance and accounting services. The Right segment revenues are derived from career transition
(outplacement) services and organizational-performance consulting. Segment revenues represent sales to external
customers. Due to the nature of our business, we do not have export or intersegment sales. We provide services to a
wide variety of customers, none of which individually comprise a significant portion of revenue for us as a whole and by
segment, except for Jefferson Wells, in which approximately 19% of Jefferson Wells’ revenues for 2004 were generated
from providing services to one customer.
CONSTANT CURRENCY
Changes in our revenues and operating profits include the impact of changes in foreign currency exchange rates and
acquisitions and dispositions. We provide “constant currency” and “organic constant currency” calculations in this
annual report to remove the impact of these items. We typically 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 U.S.
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. Earnings from our
subsidiaries are not generally repatriated to the United States, and we typically do not incur significant gains or losses
on foreign currency transactions with our subsidiaries. Therefore, changes in foreign currency exchange rates primarily
impact only reported earnings and not our actual cash flow or economic condition.
When we use the term “organic constant currency,” it means that we have further removed the impact of acquisitions
in the current period and dispositions from the prior 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 page 90.
MANAGEMENT’S DISCUSSION AND ANALYSIS
of financial condition and results of operations