SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended:
September 30, 1999
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from: ______to______
Commission file number: 1-10686
MANPOWER INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1672779
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
5301 N. Ironwood Road
Milwaukee, Wisconsin 53217
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 961-1000
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Shares Outstanding
Class at September 30, 1999
Common Stock, $.01 par value 75,856,058
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MANPOWER INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (unaudited)
- Consolidated Balance Sheets 3 - 4
- Consolidated Statements of Operations 5
- Consolidated Statements of Cash Flows 6
- Notes to Consolidated Financial Statements 7 - 10
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 11 - 15
Item 3 - Quantitative and Qualitative Disclosures
About Market Risk 15
PART II - OTHER INFORMATION AND SIGNATURES
Item 6 - Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
MANPOWER INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
ASSETS
September 30, December 31,
1999 1998
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $138,532 $180,456
Accounts receivable, less allowance
for doubtful accounts of $44,289
and $39,504, respectively 1,942,961 1,674,729
Prepaid expenses and other assets 66,301 53,565
Future income tax benefits 50,408 52,812
Total current assets 2,198,202 1,961,562
OTHER ASSETS:
Investments in licensees 34,855 33,055
Other assets 228,590 195,223
Total other assets 263,445 228,278
PROPERTY AND EQUIPMENT:
Land, buildings, leasehold
improvements and equipment 410,975 411,391
Less: accumulated depreciation
and amortization 231,173 220,131
Net property and equipment 179,802 191,260
Total assets $2,641,449 $2,381,100
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
<PAGE>
MANPOWER INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
1999 1998
(unaudited)
CURRENT LIABILITIES:
Payable to banks $ 106,033 $ 99,268
Accounts payable 429,688 347,864
Employee compensation payable 71,349 77,084
Accrued liabilities 189,398 154,428
Accrued payroll taxes and insurance 294,463 319,053
Value added and income taxes payable 329,777 309,283
Current maturities of long-term debt 4,052 4,076
Total current liabilities 1,424,760 1,311,056
OTHER LIABILITIES:
Long-term debt 320,885 154,594
Other long-term liabilities 259,201 246,512
Total other liabilities 580,086 401,106
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, authorized
25,000,000 shares, none issued - -
Common stock, $.01 par value, authorized
125,000,000 shares, issued 83,599,458
and 83,279,149 shares, respectively 836 833
Capital in excess of par value 1,608,720 1,602,721
Accumulated deficit (694,118) (787,699)
Accumulated other comprehensive loss (69,477) (17,895)
Treasury stock at cost, 7,743,400 and
4,349,400 shares, respectively (209,358) (129,022)
Total stockholders' equity 636,603 668,938
Total liabilities and stockholders'
equity $2,641,449 $2,381,100
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
<PAGE>
MANPOWER INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
3 Months Ended 9 Months Ended
September 30, September 30,
1999 1998 1999 1998
Revenues from services $2,606,768 $2,377,750 $7,109,601 $6,386,719
Cost of services 2,155,006 1,979,648 5,872,887 5,300,874
Gross profit 451,762 398,102 1,236,714 1,085,845
Selling and
administrative expenses 368,922 327,393 1,089,670 933,438
Operating profit 82,840 70,709 147,044 152,407
Interest and other expense 7,106 4,162 16,993 11,658
Earnings before income taxes 75,734 66,547 130,051 140,749
Provision for income taxes 26,870 23,625 28,794 49,965
Net earnings $ 48,864 $ 42,922 $ 101,257 $ 90,784
Net earnings per share $ .64 $ .54 $ 1.30 $ 1.13
Net earnings per share -
diluted $ .63 $ .53 $ 1.29 $ 1.11
Weighted average
common shares 76,241 80,173 77,711 80,472
Weighted average common
shares - diluted 77,093 80,897 78,504 81,643
The accompanying notes to consolidated financial statements
are an integral part of these statements.
MANPOWER INC. AND SUBSIDIARIES
Supplemental Systemwide Information (Unaudited)
(in thousands)
3 Months Ended 9 Months Ended
September 30, September 30,
1999 1998 1999 1998
Systemwide Sales $3,071,440 $2,834,201 $8,389,977 $7,672,460
Systemwide information represents the total of Company-owned
branches and franchises.
<PAGE>
MANPOWER INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
9 Months Ended
September 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $101,257 $90,784
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 51,323 39,740
Deferred income taxes 1,286 4,874
Provision for doubtful accounts 12,752 10,510
Changes in operating assets
and liabilities:
Accounts receivable (362,226) (408,437)
Other assets (41,335) (1,549)
Other liabilities 161,527 228,893
Cash used by operating
activities (75,416) (35,185)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (53,421) (103,072)
Proceeds from the sale of property
and equipment 13,321 1,282
Acquisitions of businesses,
net of cash acquired (9,443) (30,011)
Cash used by investing activities (49,543) (131,801)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in payable to banks 14,574 63,095
Proceeds from long-term debt 304,728 98,721
Repayment of long-term debt (149,398) (1,337)
Proceeds from stock option and
purchase plans 6,002 9,590
Repurchase of common stock (80,336) (36,572)
Dividends paid (7,675) (7,263)
Cash provided by financing activities 87,895 126,234
Effect of exchange rate changes on cash (4,860) 6,933
Net change in cash and cash equivalents (41,924) (33,819)
Cash and cash equivalents,
beginning of period 180,456 142,246
Cash and cash equivalents,
end of period $138,532 $108,427
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $10,762 $5,493
Income taxes paid $48,562 $26,181
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE>
MANPOWER INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
For the Nine Months Ended September 30, 1999 and 1998
(in thousands, except per share data)
(1) Basis of Presentation
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and
Exchange Commission, although the Company believes that the
disclosures are adequate to make the information presented not
misleading. These consolidated financial statements should be
read in conjunction with the consolidated financial statements
included in the Company's 1998 Annual Report to Shareholders.
The information furnished reflects all adjustments that, in the
opinion of management, are necessary for a fair statement of the
results of operations for the periods presented. Such
adjustments are of a normal recurring nature.
(2) Accounting Policies
New Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging
Activities" in June 1998. This statement establishes accounting
and reporting standards requiring that every derivative
instrument be recorded on the balance sheet as either an asset or
liability measured at its fair value. The statement requires
that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria
are met, in which case the gains or losses would offset the
related results of the hedged item. In June 1999, the FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No.
133" which defers the required adoption date of SFAS No. 133
until 2001 for the Company, however early adoption is allowed.
The Company has not yet determined the timing or method of
adoption or quantified the impact of adopting this statement.
While the statement could increase volatility in earnings and
other comprehensive income, it is not expected to have a material
impact on the Consolidated Financial Statements.
Accounts Receivable Securitization
The Company accounts for the securitization of accounts
receivable in accordance with SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities." At the time the receivables are sold, the balances
are removed from the Consolidated Balance Sheets. Costs
associated with the sale of receivables, primarily related to the
discount and loss on sale, are included in other expense in the
Consolidated Statements of Operations.
Foreign Currency Translation
The financial statements of the Company's non-U.S. subsidiaries
have been translated in accordance with SFAS No. 52. Under SFAS
No. 52, asset and liability accounts are translated at the
current exchange rate and income statement items are translated
at the weighted average exchange rate for the year. The
resulting translation adjustments are recorded as Accumulated
other comprehensive loss, which is a component of Stockholders'
equity. In accordance with SFAS No.109, no deferred taxes have
been recorded related to the cumulative translation adjustments.
Translation adjustments for those operations in highly
inflationary economies and certain other adjustments are included
in earnings.
<PAGE>
(3) Earnings Per Share
The calculations of net earnings per share and net earnings per
share - diluted are as follows:
3 Months Ended 9 Months Ended
September 30, September 30,
1999 1998 1999 1998
Net earnings per share:
Net earnings available to
common shareholders $48,864 $42,922 $101,257 $90,784
Weighted average common
shares outstanding 76,241 80,173 77,711 80,472
$ .64 $ .54 $ 1.30 $ 1.13
Net earnings per share - diluted:
Net earnings available to
common shareholders $48,864 $42,922 $101,257 $90,784
Weighted average common
shares outstanding 76,241 80,173 77,711 80,472
Effect of dilutive
stock options 852 724 793 1,171
77,093 80,897 78,504 81,643
$ .63 $ .53 $ 1.29 $ 1.11
(4) Income Taxes
During the second quarter of 1999, the Company had a one-time tax
benefit of $15.7 million in connection with the Company's
dissolution of a non-operating subsidiary. Exclusive of this
benefit, the Company provided for income taxes at approximately
35.5%, which is equal to the estimated annual effective tax rate
based on the currently available information. This rate is
higher than the U.S. Federal statutory rate due to foreign tax
rate differences and U.S. state income taxes.
(5) Accounts Receivable Securitization
In December 1998, the Company and certain of its U.S.
subsidiaries entered into an agreement (the "Receivables
Facility") with a financial institution whereby it sells on a
continuous basis an undivided interest in all eligible trade
accounts receivable. Pursuant to the Receivables Facility, the
Company formed Ironwood Capital Corporation, a wholly-owned,
special purpose, bankruptcy-remote subsidiary ("ICC"). 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
receivables to ICC. ICC, in turn, has sold and, subject to
certain conditions, may from time to time sell an undivided
interest in these receivables and is permitted to receive
advances of up to $200 million for the sale of such undivided
interest. Unless extended by agreement, the agreement expires in
December 1999.
This two-step transaction is accounted for as a sale of
receivables under the provisions of SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities." At September 30, 1999 and December 31, 1998, $175
million has been advanced under the Receivables Facility and,
accordingly, that amount of accounts receivable has been removed
from the Consolidated Balance Sheets. Costs associated with the
sale of receivables, primarily related to the discount and loss
on sale, were $2.5 million and $7.1 million for the three-month
period and nine-month period ended September 30, 1999,
respectively, and are included in other expenses in the
Consolidated Statements of Operations.
<PAGE>
(6) Euro Notes
On July 26, 1999, the Company issued euro200,000 in unsecured
notes with an effective interest rate of 5.69%, due in July 2006.
Net proceeds of $200,861 from the issuance were used to repay
amounts under the Company's unsecured revolving credit agreement
and the commercial paper program.
These notes will be accounted for as a hedge of the Company's net
investment in its European subsidiaries with Euro functional
currencies. Since the Company's net investment in these
subsidiaries exceeds the amount of the notes, all translation
gains or losses related to these notes will be recorded as a
component of Other comprehensive income (loss).
(7) Stockholders' Equity
Total comprehensive income consists of net earnings and foreign
currency translation adjustments as follows:
3 Months Ended 9 Months Ended
September 30, September 30,
1999 1998 1999 1998
Net earnings $48,864 $42,922 $101,257 $90,784
Foreign currency
translation adjustments 10,606 31,213 (51,582) 25,284
Total comprehensive income $59,470 $74,135 $49,675 $116,068
(8) Interest and Other Expense
Interest and other expense consists of the following:
3 Months Ended 9 Months Ended
September 30, September 30,
1999 1998 1999 1998
Interest expense $4,921 $5,731 $12,693 $13,171
Interest income (1,665) (2,094) (5,729) (6,197)
Foreign exchange losses 72 617 985 3,024
Loss on sale of accounts receivable 2,470 - 7,088 -
Miscellaneous, net 1,308 (92) 1,956 1,660
Total $7,106 $4,162 $16,993 $11,658
<PAGE>
(9) Business Segment Data by Geographical Area
Geographical segment information is as follows:
3 Months Ended 9 Months Ended
September 30, September 30,
1999 1998 1999 1998
Revenues from services:
United States (a) $ 583,546 $ 558,466 $1,659,467 $1,596,038
France 1,045,172 1,030,525 2,766,531 2,652,598
United Kingdom 306,097 286,319 843,604 789,026
Other Europe 400,859 309,648 1,084,994 802,693
Other Countries 271,094 192,792 755,005 546,364
$2,606,768 $2,377,750 $7,109,601 $6,386,719
Operating Unit Profit:
United States $ 22,493 $ 20,839 $ 56,834 $ 56,383
France 33,633 24,164 68,299 54,380
United Kingdom 13,103 14,149 27,441 27,133
Other Europe 19,872 18,462 41,813 31,889
Other Countries 4,455 3,735 12,115 16,353
93,556 81,349 206,502 186,138
Corporate expenses (8,945) (9,264) (26,434) (29,931)
Amortization of
intangible assets (1,771) (1,376) (5,024) (3,800)
Non-recurring expenses (b) - - (28,000) -
Operating profit 82,840 70,709 147,044 152,407
Interest and other expense 7,106 4,162 16,993 11,658
Earnings before
income taxes $ 75,734 $ 66,547 $ 130,051 $ 140,749
(a) Total systemwide sales in the United States, which
includes sales of Company-owned branches and franchises, was
$985,563 and $931,741 for the three months ended September
30, 1999 and 1998, respectively, and $2,766,480 and
$2,657,941 for the nine months ended September 30, 1999 and
1998, respectively.
(b) Represents non-recurring items ($16,400 after tax) recorded
during the second quarter of 1999 related to employee severances,
retirement costs and other associated realignment costs.
(10) 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 impact on the
Company's results of operations, financial position or cash
flows.
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Operating Results - Three Months Ended September 30, 1999 and 1998
Revenues increased 9.6% to $2,606.8 million for the third quarter
of 1999. Revenues were unfavorably impacted by changes in
currency exchange rates during the third quarter of 1999 due to
the strengthening of the U.S. Dollar, as compared to the third
quarter of 1998, relative to the currencies in most of the
Company's non-U.S. markets. At constant exchange rates, the
increase in revenues would have been 12.7%. Volume, as measured
by billable hours of branch operations, increased 7.7% in the
quarter. All of the Company's major markets experienced revenue
increases, as measured in their local currencies, including the
United States (4.5%), France (7.4%) and the United Kingdom
(10.4%). The Company's Other Europe and Other Countries segments
reported revenue increases, as measured in their local
currencies, of 36.1% and 30.4%, respectively.
Cost of services, which consists of payroll and related expenses
of temporary workers, decreased as a percentage of revenues to
82.7% in the third quarter of 1999 from 83.3% in the third
quarter of 1998. Gross margins increased in France during the
quarter due to enhanced pricing. In addition, there was a
proportional increase in business in countries with higher gross
margins.
Selling and administrative expenses increased 12.7% to $368.9
million in the third quarter of 1999 compared to the third
quarter of 1998. As a percent of revenues, selling and
administrative expenses increased to 14.2% from 13.8% in the
third quarter of 1998 due to the continued investment in new or
expanding markets and an increase in France's business tax (taxe
professionnelle).
Interest and other expense was $7.1 million in the third quarter
of 1999 compared to $4.2 million in the third quarter of 1998
(see Note 8 to the Consolidated Financial Statements). This
increase is primarily due to higher borrowing levels to finance
the Company's share repurchase program and investments in new
markets.
The Company provided for income taxes at 35.5% for the third
quarter of 1999. This rate is equal to the estimated annual
effective tax rate, based on the currently available information,
excluding the one-time tax benefit related to the Company's
dissolution of a non-operating subsidiary in the second quarter
of 1999. This rate is higher than the U.S. Federal statutory
rate due to foreign tax rate differences and U.S. state income
taxes.
On a diluted basis, net earnings per share was $.63 in the third
quarter of 1999 compared to $.53 in the third quarter of 1998
(see Note 3 to the Consolidated Financial Statements). The
diluted weighted average shares decreased by 4.7% for the quarter
due primarily to the Company's treasury stock purchases.
Operating Results - Nine Months Ended September 30, 1999 and 1998
Revenues increased 11.3% to $7,109.6 million for the first nine
months of 1999. Revenues were unfavorably impacted by changes in
currency exchange rates during the first nine months of 1999 due
to the strengthening of the U.S. Dollar, as compared to the first
nine months of 1998, relative to the currencies in most of the
Company's non-U.S. markets. At constant exchange rates, the
increase in revenues would have been 11.9%. Volume, as measured
by billable hours of branch operations, increased 8.7% in the
nine month period. All of the Company's major markets
experienced revenue increases, as measured in their local
currencies, including the United States (4.0%), France (6.4%) and
the United Kingdom (9.5%). The Company's Other Europe and Other
Countries segments reported revenue increases, as measured in
their local currencies, of 38.6% and 26.2%, respectively.
Cost of services, which consists of payroll and related expenses
of temporary workers, was 82.6% of revenues for the first nine
months of 1999 compared to 83.0% during the same period in 1998.
This margin improvement is primarily due to an increase in gross
margins in France because of enhanced pricing.
<PAGE>
Selling and administrative expenses increased 16.7% to $1,089.7
million during the first nine months of 1999. This increase is
primarily due to the non-recurring items recorded in the second
quarter of 1999 totaling $28.0 million ($16.4 million after tax)
related to employee severances, retirement costs and other
associated realignment costs. Excluding the impact of these
items, selling and administrative expenses as a percent of
revenue were 14.9% in the first nine months of 1999 compared to
14.6% in the first nine months of 1998. This increase is due to
the Company's continued investment in new or expanding markets
and an increase in France's business tax (taxe professionnelle).
Interest and other expense was $17.0 million in the first nine
months of 1999 compared to $11.7 million in the first nine months
of 1998 (see Note 8 to the Consolidated Financial Statements).
This increase is primarily due to higher borrowing levels to
finance the Company's share repurchase program and investments in
new markets, offset by a decrease in translation losses.
The Company had a one-time tax benefit of $15.7 million during
the second quarter of 1999 in connection with the Company's
dissolution of a non-operating subsidiary. Exclusive of this
benefit, the Company provided for income taxes at approximately
35.5%, which is equal to the estimated annual effective tax rate
based on the currently available information. This rate is
higher than the U.S. Federal statutory rate due to foreign tax
rate differences and U.S. state income taxes.
On a diluted basis, net earnings per share was $1.29 in the first
nine months of 1999 compared to $1.11 in the first nine months of
1998. Excluding the non-recurring items and one-time income tax
gain, net earnings per share on a diluted basis would have been
$1.30 during the first nine months of 1999. The diluted weighted
average shares decreased by 3.8% for the first nine months due to
the Company's treasury stock purchases and a smaller effect of
dilutive stock options (see Note 3 to the Consolidated Financial
Statements) because of the lower average share price during the
first nine months of 1999.
Liquidity and Capital Resources
Cash used by operating activities was $75.4 million in the first
nine months of 1999 compared to $35.2 million in the first nine
months of 1998. This change reflects the increased working
capital requirements between periods, which were $242.0 million
and $181.1 million in the first nine months of 1999 and 1998,
respectively. Cash provided by operating activities before the
changes in working capital requirements was $166.6 million in the
first nine months of 1999 compared to $145.9 million in the first
nine months of 1998.
Capital expenditures were $53.4 million in the first nine months
of 1999 compared to $103.1 million during the first nine months
of 1998. These expenditures included capitalized software of
$1.6 million and $32.7 million in the first nine months of 1999
and 1998, respectively. The balance is comprised of purchases of
computer equipment, office furniture and other costs related to
office openings and refurbishments.
From time to time, the Company acquires certain franchises and
unrelated companies. In addition, in 1998, the Company made a
final payment related to the 1996 acquisition of A Teamwork
Sverige AB in Sweden. The total consideration paid for
acquisitions in the first nine months of 1999 and 1998 was $9.4
million and $30.0 million, respectively, the majority of which
was recorded as intangible assets.
Net cash provided from additional borrowings was $169.9 million
and $160.5 million in the first nine months of 1999 and 1998,
respectively. The additional borrowings in 1999 were primarily
used to support the working capital growth, investments in new
markets and repurchase the Company's common stock. The additional
borrowings in 1998 were primarily used to support the working
capital growth, investment in new markets, capital expenditures,
acquisitions and repurchase of the Company's common stock.
<PAGE>
The Company repurchased 3.4 million common shares at a cost of
$80.3 million during the first nine months of 1999. During the
first nine months of 1998, the Company repurchased 1.6 million
common shares at a cost of $36.6 million.
On July 26, 1999, the Company issued euro200 million in unsecured
notes with an effective interest rate of 5.69%, due in July 2006.
Net proceeds of $200.9 million from the issuance were used to
repay amounts outstanding under the Company's unsecured revolving
credit agreement and the commercial paper program.
Accounts receivable increased to $1,943.0 million at September
30, 1999 from $1,674.7 million at December 31, 1998. This
increase is primarily due to the growth in many of the Company's
major markets offset by the effect of the change in currency
exchange rates during the first nine months of 1999. The change
in exchange rates negatively impacted the receivable balance by
$104.0 million.
As of September 30, 1999, the Company had borrowings of $62.5
million and letters of credit of $62.0 million outstanding under
its $415 million U.S. revolving credit facility, borrowings of
$40.5 million outstanding under its U.S. commercial paper program
and euro200 million outstanding in unsecured notes. The
commercial paper borrowings have been classified as long-term
debt due to the availability to refinance them on a long-term
basis under the revolving credit facility.
The Company and some of its foreign subsidiaries maintain
separate lines of credit with foreign financial institutions to
meet short-term working capital needs. As of September 30, 1999,
such lines totaled
$167.0 million, of which $61.0 million was unused.
Year 2000
State of Readiness - In order to address Year 2000 compliance,
the Company has undertaken a comprehensive project designed to
eliminate or minimize any business disruption associated with its
information technology ("IT") and non-IT systems. In connection
with this project, all significant Company subsidiaries did
systems assessments to determine what modifications were required
and developed detailed plans and timetables to complete and test
the necessary remediation.
Due primarily to changing customer requirements, the Company has
been converting and upgrading many of its IT systems, and these
new IT systems are Year 2000 compliant. All other critical IT
systems at our significant subsidiaries have been fully tested
for Year 2000 compliance and all implementation has been
completed. The Company believes that with these conversions,
upgrades and remediation efforts, all significant Year 2000
issues related to the Company's critical IT systems have been
addressed.
For our non-critical IT and non-IT systems, the majority of our
significant subsidiaries have completed all remediation, testing
and implementation. The remaining subsidiaries have completed
the initial remediation of non-critical IT and non-IT systems and
will complete the testing and implementation during the fourth
quarter of 1999.
In addition, the Company has contacted significant franchisees,
vendors and customers to determine the extent to which the
Company is vulnerable to those third parties' potential failure
to remediate their own systems to address Year 2000 Issues. The
Company has sent information to all significant franchisees
regarding the business risks associated with the Year 2000. In
addition, the Company contacted all significant franchisees
requesting information regarding their Year 2000 status. The
results are being used to assess the Year 2000 operational risks
of these franchisees. The responses received to date have shown
that our franchisees do not expect any significant Year 2000
problems. Despite the Company's
<PAGE>
diligence, there can be no
guarantee that companies that the Company relies upon to conduct
its day-to-day business will be compliant.
Costs - To date, the Company has used both external and internal
resources for the assessment, remediation and testing of its
systems. As of September 30, 1999, approximately $10.4 million
has been expensed for external resources. The total expense for
external resources is currently estimated to be $11 million to
$12 million. Hardware purchases directly related to the project,
which are expensed as incurred, have been minimal as of September
30, 1999, and the Company does not expect any remaining hardware
purchases to be significant. The cost of internal resources is
aggregated with the Company's information technology cost
centers. The total cost of the project is not expected to have a
material impact on the Company's financial position, results of
operations or cash flows.
Risks - With respect to the risks associated with its systems,
the Company believes that the most reasonably likely worst case
scenario is that the Company will experience a number of minor
system malfunctions and errors in the early days and weeks of the
Year 2000. The Company does not expect these problems to have a
material impact on the Company's ability to place and pay workers
or invoice customers.
The Company has limited the scope of its risk assessment to
factors which it can reasonably be expected to have an influence
upon. With respect to the risks associated with third parties,
the Company believes that the most reasonably likely worst case
scenario is that some of the Company's franchisees, vendors and
customers will not be compliant. Failure by these companies, or
any governmental entities, utility companies or telecommunication
providers, to remediate their systems on a timely basis could
have a material adverse effect on the Company.
Contingency Plans - The Company has developed contingency plans
at each of its significant subsidiaries to handle the most
reasonably likely worst case scenarios described above related to
its internal systems. Testing and implementation of these plans
is completed or will be completed during the fourth quarter of
1999. The Company believes that these contingency plans will
adequately protect the Company and allow it to pay its workers
and invoice its customers in the event of the most reasonably
likely worst case scenario discussed above.
Year 2000 Readiness Statements - Statements made or contained in
this quarterly report of Form 10-Q or any past statements
regarding our state of readiness for Year 2000 are deemed Year
2000 Readiness Statements and are subject to the Year 2000
Information and Readiness Disclosure Act (P.L. 105-271), to the
fullest extent permitted by law.
The Euro
On January 1, 1999, eleven of the fifteen member countries of the
European Union (the "participating countries") established fixed
conversion rates between their existing sovereign currencies (the
"legacy currencies") and the Euro and have agreed to adopt the
Euro as their common legal currency. The legacy currencies will
remain legal tender in the participating countries as
denominations of the Euro between January 1, 1999 and January 1,
2002 (the "transition period"). During the transition period,
public and private parties may pay for goods and services using
either the Euro or the participating country's legacy currency.
The Company is in the process of assessing the impact of the Euro
in its business operations in all participating countries. In
some countries, the Company has made system modifications to
generate dual currency invoices, allowing customers to pay in
either the legacy currency or in Euro. To date, the Company has
not had significant customer requests for specific invoicing or
reporting formats that are not handled by the current systems.
However, modifications will be necessary to convert database
information to report information in either Euro or in both
currencies. Such modifications will occur throughout the
transition period and will be coordinated with other system-
related upgrades and
<PAGE>
enhancements. The Company expenses all such
system modification costs as incurred. The total costs are not
expected too have a material impact on the Company's financial
position, results of operations or cash flows.
Forward-Looking Statements
Certain information included or incorporated by reference in this
filing and identified by use of the words `expects,' `believes,'
`plans' or the like constitutes forward-looking statements, as
such term is defined in Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. In
addition, any information included or incorporated by reference
in future filings by the Company with the Securities and Exchange
Commission, as well as information contained in written material,
releases and oral statements issued by or on behalf of the
Company may include forward-looking statements. All statements
which address operating performance, events or developments that
the Company expects or anticipates will occur or future financial
performance are forward-looking statements.
These forward-looking statements speak only as of the date on
which they are made. They rely on a number of assumptions
concerning future events and are subject to a number of risks and
uncertainties, many of which are outside of the Company's
control, that could cause actual results to differ materially
from such statements. These risks and uncertainties include, but
are not limited to:
* material changes in the demand from larger customers,
including customers with which the Company has national or global
arrangements
* availability of temporary workers or increases in the wages
paid to these workers
* competitive market pressures, including pricing pressures
* ability to successfully identify strategic acquisitions and
integrate them into the Company
* ability to successfully invest in and implement information systems
* unanticipated technological changes, including obsolescence
or impairment of information systems and other situations arising
from the Year 2000
* changes in customer attitudes toward the use of staffing services
* government or regulatory policies adverse to the employment
services industry
* general economic conditions in international markets
* interest rate and exchange rate fluctuations
The Company disclaims any obligation to update publicly or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
The Company's annual report on Form 10-K contains certain
disclosures about market risks affecting the Company. There have
been no material changes to the information provided which would
require additional disclosures as of the date of this filing
except for the issuance of the euro200 million unsecured notes in
July 1999 (see the Liquidity and Capital Resource section of the
Management Discussion and Analysis for additional information).
These notes will be accounted for as a hedge of the Company's net
investment in European subsidiaries with Euro functional
currencies. Since the Company's net investment in these
subsidiaries exceeds the amount of the notes, all translation
gains or losses related to the these notes will be recorded as a
component of Other comprehensive income.
<PAGE>
PART II - OTHER INFORMATION
Item 6 - Exhibit and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed one current report on Form 8-K on July
27, 1999 with respect to Item 5 - Other Events for the
period ended July 27, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MANPOWER INC.
------------------------
(Registrant)
Date: November 15, 1999 /s/ Michael J. Van Handel
----------------------------
Michael J. Van Handel
Senior Vice President
Chief Financial Officer and Secretary
(Signing on behalf of the Registrant and as
the Principal Financial Officer and Principal
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF
THE REGISTRANT AS OF AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30,
1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<MULTIPLIER> 1000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 138,532
<SECURITIES> 0
<RECEIVABLES> 1,942,961
<ALLOWANCES> 44,289
<INVENTORY> 0
<CURRENT-ASSETS> 2,198,202
<PP&E> 410,975
<DEPRECIATION> 231,173
<TOTAL-ASSETS> 2,641,449
<CURRENT-LIABILITIES> 1,424,760
<BONDS> 320,885
0
0
<COMMON> 836
<OTHER-SE> 635,767
<TOTAL-LIABILITY-AND-EQUITY> 2,641,449
<SALES> 0
<TOTAL-REVENUES> 7,109,601
<CGS> 0
<TOTAL-COSTS> 5,872,887
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12,752
<INTEREST-EXPENSE> 12,693
<INCOME-PRETAX> 130,051
<INCOME-TAX> 28,794
<INCOME-CONTINUING> 101,257
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101,257
<EPS-BASIC> 1.30
<EPS-DILUTED> 1.29
</TABLE>
