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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:
June 30, 1996
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 June 30, 1996
- ------------ ----------------
Common Stock, 82,001,153
$.01 par value
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 . 7-8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations . . 8-10
PART II - OTHER INFORMATION AND SIGNATURES
Item 4 - Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . 10
Item 5 - Other Information . . . . . . . . . . . . . . . . 10
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 11
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
MANPOWER INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
(in thousands)
ASSETS
June 30, Dec. 31,
1996 1995
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . $ 97,386 $ 142,773
Accounts receivable, less allowance for
doubtful accounts of $33,537 and
$32,901, respectively . . . . . . . . . . . 1,099,714 1,043,694
Prepaid expenses and other assets . . . . . . . 45,325 39,224
Future income tax benefits . . . . . . . . . . 45,467 51,617
--------- ---------
Total current assets . . . . . . . . . . . . 1,287,892 1,277,308
OTHER ASSETS:
Investments in licensees . . . . . . . . . . 31,551 31,591
Other assets . . . . . . . . . . . . . . . . . 141,600 100,868
------- -------
Total other assets . . . . . . . . . . . . . . 173,151 132,459
PROPERTY AND EQUIPMENT:
Land, buildings, leasehold improvements
and equipment . . . . . . . . . . . . . . 281,364 267,526
Less: accumulated depreciation and amortization 169,787 159,507
Net property and equipment . . . . . . . . . . 111,577 108,019
---------- -----------
Total assets . . . . . . . . . . . . . . . . $1,572,620 $1,517,786
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
MANPOWER INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, Dec. 31,
1996 1995
CURRENT LIABILITIES:
Payable to banks . . . . . . . . . . . $ 28,417 $ 37,559
Accounts payable . . . . . . . . . . . 219,717 219,794
Employee compensation payable . . . . . 49,261 56,630
Accrued liabilities . . . . . . . . . . 85,797 72,325
Accrued payroll taxes and insurance . . 212,343 195,376
Value added taxes payable . . . . . . . 157,764 167,937
Income taxes payable . . . . . . . . . 19,452 25,286
Current maturities of long-term debt . 3,143 1,408
------- --------
Total current liabilities . . . . . . 775,894 776,315
OTHER LIABILITIES:
Long-term debt . . . . . . . . . . . . 80,814 61,783
Other long-term liabilities . . . . . . 210,151 224,695
------- -------
Total other liabilities . . . . . . . 290,965 286,478
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 82,001,153 and 81,153,023
shares, respectively . . . . . . . . . 820 812
Capital in excess of par value . . . . . 1,574,370 1,564,305
Accumulated deficit . . . . . . . . . . . (1,092,161) (1,148,223)
Cumulative translation adjustments . . . 22,732 38,099
--------- ---------
Total stockholders' equity . . . . . . . 505,761 454,993
Total liabilities and stockholders' equity $ 1,572,620 $ 1,517,786
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
MANPOWER INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
3 Months Ended 6 Months Ended
June 30, June 30,
1996 1995 1996 1995
REVENUES
FROM SERVICES . . . . . $1,460,624 $1,371,130 $2,769,791 $2,570,731
COST AND EXPENSES
Cost of services . . . . 1,191,364 1,125,409 2,255,892 2,108,686
Selling and
administrative expenses . 218,612 196,323 427,773 380,614
Interest and other (income)
expenses, net . (8,773) 3,562 (8,984) 6,024
Earnings before income
taxes . . . . . . . 59,421 45,836 95,110 75,407
PROVISION FOR INCOME TAXES 20,819 17,588 33,313 28,974
Net earnings . . . . $ 38,602 $ 28,248 $ 61,797 $ 46,433
Net earnings per share $ .46 $ .37 $ .74 $ .61
Dividends declared . . $ .07 $ .06 $ .07 $ .06
Weighted average common shares 83,144 76,340 82,976 76,121
The accompanying notes to consolidated financial statements
are an integral part of these statements.
MANPOWER INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
6 Months Ended
June 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings . . . . . . . . . . . . . . . $ 61,797 $ 46,433
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Amortization of intangible assets . . . . . 1,555 2,110
Depreciation . . . . . . . . . . . . . . . 15,378 12,662
Deferred income taxes . . . . . . . . . . . 6,150 (5,300)
Provision for doubtful accounts . . . . . . 5,862 6,513
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . (94,743) (110,487)
Other assets . . . . . . . . . . . . . . . (19,432) 1,309
Other liabilities . . . . . . . . . . . . . 28,851 32,157
Cash used in operating activities . . . . . 5,418 (14,603)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of businesses . . . . . . . . . (31,206) --
Purchases of property and equipment . . . (22,319) (15,712)
Proceeds from the sale of property and equipment 933 1,018
Cash used in investing activities . . . . (52,592) (14,694)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in payable to banks . . . . . . (7,519) 13,697
Proceeds from long-term debt . . . . . . . 21,614 --
Repayment of long-term debt . . . . . . . (789) (8,425)
Dividends paid . . . . . . . . . . . . . . (5,735) (4,507)
Cash provided by financing activities . . 7,571 765
Effect of exchange rate changes on cash . (5,784) 2,890
Net change in cash and cash equivalents . . (45,387) (25,642)
Cash and cash equivalents, beginning of period 142,773 82,049
Cash and cash equivalents, end of period . $ 97,386 $ 56,407
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid . . . . . . . . . . . . . . $ 5,507 $ 6,860
Income taxes paid . . . . . . . . . . . . $ 34,715 $ 42,294
The accompanying notes to consolidated financial statements
are an integral part of these statements.
MANPOWER INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
For the Six Months Ended June 30, 1996 and 1995
(1)Basis of Presentation
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principals
have been condensed or ommitted 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 latest annual
report on Form 10-K for the year ended December 31, 1995.
(2)Accounting Policies
Intangible assets consist primarily of trademarks and the excess of cost over
the fair value of net assets acquired. Trademarks are amortized on a straight-
line basis over their useful lives. The excess of cost over the fair value of
net assets acquired is amortized on a straight-line basis over its useful life,
estimated based on the facts and circumstances surrounding each individual
acquisition, ranging from five to twenty years.
(3)Operational Results
The information furnished reflects all adjustments which, 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.
(4)Income Taxes
The provision for income taxes has been computed using the estimated annual
effective tax rate, based on currently available information.
(5)Unsecured Revolving Credit Agreement
On April 1, 1996, the Company entered into a $275 million unsecured revolving
credit agreement which includes a $60 million commitment to be used exclusively
for standby letters of credit. As of June 30, 1996, $17.5 million of Yen
denominated borrowings is outstanding under this multicurrency facility. The
interest rate and facility fee payable on the total line vary based upon the
Company's financial performance, debt rating, and borrowing level, and are
currently at LIBOR plus .225% and .125%, respectively. The facility matures on
May 15, 1999, but may be extended for an additional two years with the lenders'
consent. The agreement requires, among other things, that the Company comply
with minimum tangible net worth levels and interest coverage and debt-to-
capitalization ratios. This agreement replaced the Company's $240 million
unsecured revolving credit agreement.
(6)Dividend
On April 29, 1996, the Company's Board of Directors declared a cash dividend of
$.07 per share which was paid on June 14, 1996 to shareholders of record on
May 24, 1996.
(7)Interest and Other Expenses
In April, the Company recorded an $8.5 million gain on proceeds received from an
equity interest and note related to the sale of Blue Arrow Personnel Services
Limited in 1991. The Company had previously deferred recognition of the equity
interest and the note due to uncertainties regarding their eventual realization.
(8)Acquisitions of Businesses
During the first six months of 1996, the Company acquired Teamwork Sverige AB,
the largest employment services organization in Sweden, and several United
States franchises. The consolidated financial statements include the operating
results of each business from the date of acquisition. Pro forma results of
operations have not been presented because the effects of these acquisitions
were not significant. The total consideration for these acquisitions was $37.7
million.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Operating Results - Three Months Ended June 30, 1996 and 1995
Second quarter 1996 revenues increased 6.5% to $1,460.6 million. Revenues were
negatively impacted 4.5% due to changes in currency exchange rates between
years. Volume, as measured by billable hours of branch operations, increased
8.0% in the quarter. All of the Company's major markets experienced revenue
increases, including the United States (14.3%), Manpower-United Kingdom (7.7% in
Pound Sterling), and France (1.7% in French Francs). The low revenue growth
rate in France was expected after the record revenue levels of 1995 and the
economic slowdown in France which started in late 1995, and represents an
improvement over the first quarter 1996 results.
Cost of services, which consists of payroll and related expenses of temporary
workers, decreased as a percentage of revenues to 81.6% in 1996 from 82.1% in
1995. This decrease is primarily attributable to a decrease in payroll tax
and insurance costs in certain of the Company's major markets.
Selling and administrative expenses increased as a percentage of revenue to
15.0% in 1996 from 14.2% in 1995. This increase is primarily due to the decrease
in revenues in France without a proportional decrease in expenses. Excluding the
impact of changes in foreign currency, selling and administrative expenses
increased 16.7% for the quarter.
Net interest and other totaled $8.8 million of income in the second quarter of
1996 compared to $3.6 million of expense in the second quarter of 1995. During
the second quarter of 1996, the Company recorded an $8.5 million gain on
proceeds received from an equity interest and note related to the sale of Blue
Arrow Personnel Services Limited in 1991. The Company had previously deferred
recognition of the equity interest and the note due to uncertainties regarding
their eventual realization. The remaining change in net interest and other
income/expenses is primarily due to an increase in interest income, $2.0 million
in the second quarter of 1996 compared to $1.3 million in the second quarter of
1995, and a reduction in interest expense, $1.5 million in the second quarter of
1996 compared to $3.5 million in 1995. The decrease in interest expense is due
to lower worldwide borrowing levels as the Company converted its subordinated
convertible debentures in October of 1995.
The Company provided income taxes at an estimated rate of 35% which is equal to
the expected annual effective rate for 1996. The Company's effective income tax
rate for 1995 was 38.5%.
Operating Results - Six Months Ended June 30, 1996 and 1995
Revenues for the first six months of 1996 increased 7.7% to $2,769.8 million.
Volume, as measured by billable hours of branch operations, increased 6.9% for
the six month period. Major markets experiencing revenue increases included the
United States (12.4%) and Manpower-United Kingdom (12.0% in Pound Sterling).
France experienced a slight decrease in revenues (0.6% in French Francs) which
was expected after the record revenue levels of 1995 and the economic slowdown
in France which started in late 1995.
Cost of services, which consists of payroll and related expenses of temporary
workers, decreased as a percentage of revenues to 81.4% in 1996 from 82.0% in
1995. This decrease is primarily attributable to a decrease in payroll tax and
insurance costs in certain of the Company's major markets.
Selling and administrative expenses increased as a percentage of revenues to
15.4% in 1996 from 14.8% in 1995. This increase is primarily due to the
decrease in revenues in France without a proportional decrease in expenses.
Excluding the impact of changes in foreign currency, selling and administrative
expenses increased 15.1% for the six month period.
Net interest and other totaled $9.0 million of income in the first six months of
1996 compared to $6.0 million of expense in the first six months of 1995. As
discussed above, the Company recorded an $8.5 million gain in the second quarter
of 1996. The remaining change is primarily due to an increase in interest
income, which was $4.1 million in the first six months of 1996 compared to
$2.6 million in the first six months of 1995, and a reduction in interest
expense, $3.2 million in the first six months of 1996 compared to $6.7
million in 1995. The decrease in interest expense is due to lower worldwide
borrowing levels as the Company converted its subordinated convertible
debentures in October of 1995.
The Company provided income taxes at an estimated rate of 35% which is equal to
the expected annual effective rate of 1996. The Company's effective income tax
rate for 1995 was 38.5%.
Liquidity and Capital Resources
Cash provided by operating activities was $5.4 million in the first six months
of 1996 compared to cash used in operating activities of $14.6 million in the
first six months of 1995. The change reflects the higher earnings level in 1996
offset by a larger increase in working capital requirements in the first six
months of 1996 compared to the first six months of 1995. Cash provided by
operating activities before working capital changes was $90.7 million in the
first six months of 1996 compared to $62.4 million in 1995.
During the first six months of 1996, the Company acquired Teamwork Sverige AB,
the largest employment services organization in Sweden, and several United
States franchises. The total cash consideration paid for these acquisitions
was $31.2 million.
The Company increased its capital expenditures to $22.3 million in the first six
months of 1996 from $15.7 million during the first six months of 1995. These
expenditures primarily consist of computer equipment and office furniture used
in the branch office network.
During the first six months of 1996, the Company had net additional borrowings
of $13.3 million compared to $5.3 million in the first six months of 1995. The
additional borrowings were primarily used to support working capital growth.
Accounts receivable increased $56.0 million to $1,099.7 million at June 30, 1996
from $1,043.7 million at December 31, 1995. The change represents a $32.4
million decrease due to the change in foreign exchange rates offset by a
general increase in receivables due to the increased sales levels in the
Company's major markets.
The Company continues to carry reserves related to the strategic restructuring
plan started in 1989. No changes have been made to the reserve estimates during
the first six months of 1996.
On April 1, 1996, the Company entered into a $275 million unsecured revolving
credit agreement which includes a $60 million commitment to be used exclusively
for standby letters of credit. The interest rate and facility fee payable on
the total line vary based upon the Company's financial performance, debt rating,
and borrowing level, and are currently at LIBOR plus .225% and .125%,
respectively. The facility matures on May 15, 1999, but may be extended for
an additional two years with the lenders' consent. The agreement requires,
among other things, that the Company comply with minimum tangible net worth
levels and interest coverage and debt-to-capitalization ratios. This agreement
replaced the Company's $240 million unsecured revolving credit agreement.
As of June 30, 1996, the Company had borrowings of $17.5 million outstanding
under its $275 million
U.S. revolving credit facility, and borrowings of $58.6 million outstanding
under its U.S. commercial paper program. 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.
In addition, 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 June 30, 1996, such lines totaled $167.1 million, of which
$138.7 million was unused.
On April 29, 1996, the Company's Board of Directors declared a cash dividend of
$.07 per share which was paid on June 14, 1996 to shareholders of record on May
24, 1996.
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
On April 29, 1996, at the Company's Annual Meeting of Shareholders (the "Annual
Meeting") the shareholders of the Company voted to: (1) elect three directors to
serve until 1999 as Class III directors; (2) increase the number of shares
authorized under the Manpower 1990 Employee Stock Purchase Plan; and (3) ratify
the appointment of Arthur Andersen LLP as the Company's independent auditors for
1996. In addition, Ms. Audrey Freedman and Messrs. Mitchell S. Fromstein and
Dennis Stevenson continued as Class I directors (term expiring 1997), and
Messrs. J. Ira Harris, Newton N. Minow, and Gilbert Palay continued as Class II
directors (term expiring 1998). The results of the proposals voted upon at the
Annual Meeting are as follows:
Broker
For Against Withheld Abstain Non-Vote
1. a) Election of Jon F. Chait 66,779,698 -- 1,185,765 -- --
b) Election of Dudley J. Godfrey Jr. 66,774,326 -- 1,191,137 -- --
c) Election of Marvin B. Goodman 66,779,292 -- 1,186,171 -- --
2. Increase the number of shares
authorized under the Manpower 1990
Employee Stock Purchase Plan 67,288,819 523,130 -- 153,514 --
3. Ratification of Arthur Andersen LLP 67,235,602 28,288 -- 28,886 --
as independent auditors.
Item 5 - Other Information
On July 1, 1996, Manpower Wisconsin Inc., (formerly Manpower International
Inc.), a wholly-owned operating subsidiary of Manpower Inc., merged with and
into Manpower Inc. Accordingly, in addition to serving as a holding company
for the Company's subsidiaries, the Company now conducts certain United States
operations directly.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits - none
(b) Reports on Form 8-K - None
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: August 13, 1996
/s/ Michael J. Van Handel
-------------------------------
Michael J. Van Handel
Vice President Chief Accounting
Officer & Treasurer
(Signing on behalf of the
Registrant and as Principal
Accounting Officer)