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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:
September 30, 1997
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.
Class Shares Outstanding
Common Stock at September 30, 1997
$.01 par value 81,143,932
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 9 - 11
PART II - OTHER INFORMATION AND SIGNATURES
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 12
Signatures 13
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
MANPOWER INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
(in thousands)
ASSETS
Sept. 30, Dec. 31,
1997 1996
CURRENT ASSETS:
Cash and cash equivalents $ 157,035 $ 180,553
Accounts receivable, less allowance 1,484,207 1,167,468
for doubtful accounts of $38,120
and $33,526, respectively
Prepaid expenses and other assets 62,950 42,913
Future income tax benefits 55,234 48,151
Total current assets 1,759,426 1,439,085
OTHER ASSETS:
Investments in licensees 31,408 29,409
Other assets 165,754 162,390
Total other assets 197,162 191,799
PROPERTY AND EQUIPMENT:
Land, buildings, leasehold improvements 311,291 302,547
and equipment
Less: accumulated depreciation and 190,795 181,168
amortization
Net property and equipment 120,496 121,379
Total assets $2,077,084 $1,752,263
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
Sept. 30, Dec. 31,
1997 1996
CURRENT LIABILITIES:
Payable to banks $ 85,555 $ 24,375
Accounts payable 280,652 235,466
Employee compensation payable 64,934 60,222
Accrued liabilities 126,742 87,444
Accrued payroll taxes and insurance 230,424 195,194
Value added taxes payable 241,964 174,624
Income taxes payable 15,748 30,945
Current maturities of long-term debt 1,597 2,986
Total current liabilities 1,047,616 811,256
OTHER LIABILITIES:
Long-term debt 171,399 100,848
Other long-term liabilities 239,251 239,453
Total other liabilities 410,650 340,301
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, -- --
authorized 25,000,000 shares,
none issued
Common stock, $.01 par value, authorized 828 822
125,000,000 shares,
issued 82,759,932 and 82,206,446
shares, respectively
Capital in excess of par value 1,590,502 1,579,868
Accumulated deficit (884,597) (998,230)
Cumulative translation adjustments (30,687) 21,476
Treasury stock at cost, 1,616,000 and (57,228) (3,230)
101,700 shares, respectively
Total stockholders' equity 618,818 600,706
Total liabilities and stockholders' $2,077,084 $1,752,263
equity
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 9 Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenues from services $1,973,020 $1,694,523 $5,286,238 $4,464,314
Cost of services 1,622,090 1,379,199 4,339,503 3,635,091
Gross profit 350,930 315,324 946,735 829,223
Selling and administrative 267,018 238,218 760,347 665,991
expenses
Operating profit 83,912 77,106 186,388 163,232
Interest and other (income) 1,119 603 2,875 (8,381)
expenses
Earnings before income taxes 82,793 76,503 183,513 171,613
Provision for income taxes 30,102 24,087 63,331 57,400
Net earnings $ 52,691 $ 52,416 $ 120,182 $ 114,213
Net earnings per share $ .63 $ .63 $ 1.44 $ 1.37
Dividends declared per share -- -- $ .08 $ .07
Weighted average common shares 83,173 83,356 83,178 83,084
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,
1997 1996 1997 1996
Systemwide Sales $2,420,387 $2,060,113 $6,461,083 $5,481,353
Systemwide information represents the total of Company-
owned branches and franchises.
MANPOWER INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
9 Months Ended
September 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings 120,182 114,213
Adjustments to reconcile net
earnings to net cash
by operating activities:
Depreciation 27,787 23,848
Amortization of intangible 2,357 2,695
assets
Deferred income taxes (7,083) 1,159
Provision for doubtful 10,661 9,777
accounts
Gain on sale of securities -- (8,452)
Changes in operating
assets and liabilities:
Accounts receivable (427,108) (233,054)
Other assets (10,276) 12,431
Other liabilities 253,417 119,967
Cash (used) provided (30,063) 42,584
by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (62,573) (49,773)
Purchases of businesses -- (32,200)
Proceeds from the sale of property 1,351 977
and equipment
Proceeds from sale of securities -- 8,452
Cash used in investing activities (61,222) (72,544)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in payable to banks 65,307 (8,087)
Proceeds from long-term debt 71,903 13,663
Repayment of long-term debt (2,085) (1,501)
Dividends paid (6,549) (5,739)
Repurchase of common stock (53,998) --
Cash provided (used) by financing 74,578 (1,664)
activities
Effect of exchange rate changes on (6,811) (4,558)
cash
Net change in cash and cash (23,518) (36,182)
equivalents
Cash and cash equivalents, beginning 180,553 142,773
of period
Cash and cash equivalents, end of $ 157,035 $ 106,591
period
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 7,389 $ 5,437
Income taxes paid $ 60,082 $ 57,700
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 Nine Months Ended September 30, 1997 and 1996
(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 latest
annual report on Form 10-K for the year ended December
31, 1996.
(2)Accounting Policies
In February of 1997, the Financial Accounting Standards
Board issued SFAS No. 128, "Earnings per Share." This
Statement revises the computation and presentation of
earnings per share and will be adopted by the Company
in the fourth quarter of 1997. Had the Company adopted
this Statement for the nine months ended September 30,
1997 and 1996, basic and diluted earnings per share
would have been as follows:
3 Months Ended 9 Months Ended
September 30, September 30,
1997 1996 1997 1996
As reported on Statements of $.63 $.63 $1.44 $1.37
Operations
As calculated under SFAS No.
128 -
Basic earnings per share $.64 $.64 $1.46 $1.40
Diluted earnings per share $.63 $.63 $1.44 $1.37
(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 Company has provided income taxes for the nine
month period ended September 30, 1997 at a rate of
34.5%, which is equal to the estimated annual effective
tax rate based on the currently available information.
During the third quarter, the corporate income tax rate
in France was increased from 36.6% to 41.6%,
retroactive to January 1, 1997. The impact of this
retroactive increase is fully reflected in the third
quarter, resulting in a 36.4% tax rate for the quarter.
(5)Business Segment Data by Geographical Segment
Geographical Segment information is as follows:
3 Months Ended 9 Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenues from Services:
United States (a) $ 523,023 $ 468,397 $1,470,829 $1,303,514
France 773,947 690,073 1,951,744 1,703,031
United Kingdom 254,149 226,341 728,137 632,381
Other Europe 221,447 182,014 607,630 478,839
Other Countries 200,454 127,698 527,898 346,549
$1,973,020 $1,694,523 $5,286,238 $4,464,314
Earnings Before Income
Taxes:
United States $ 26,064 $ 25,877 $ 67,846 $ 63,855
France 32,611 29,441 63,629 54,535
United Kingdom 13,088 11,354 27,844 23,809
Other Europe 11,082 13,305 27,611 24,091
Other Countries 10,699 4,963 25,476 15,919
Other Corporate (9,632) (7,834) (26,018) (18,977)
Expenses
Operating Profit 83,912 77,106 186,388 163,232
Interest & Other (1,119) (603) (2,875) 8,381
Income (Expense)
$ 82,793 $ 76,503 $ 183,513 $ 171,613
(a) Total systemwide sales in the United States, which
include sales of Company-owned branches and franchises,
were $874,744 and $776,585 for the three months ended
September 30, 1997 and 1996, respectively, and
$2,457,301 and $2,155,583 for the nine months ended
September 30, 1997 and 1996, respectively.
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
Operating Results - Three Months Ended September 30,
1997 and 1996
Revenues increased 16.4% to $1,973.0 million for the
third quarter of 1997. Revenues were unfavorably
impacted by changes in currency exchange rates during
the quarter due to the strengthening of the U.S. Dollar
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 26.7%. Volume, as measured
by billable hours of branch operations, increased 23.7%
in the quarter. All of the Company's major markets
experienced revenue increases, including the United
States (11.7 %), France (34.1% in French Francs) and
Manpower-United Kingdom (9.7% in Pound Sterling).
Cost of services, which consists of payroll and related
expenses of temporary workers, increased as a
percentage of revenues to 82.2% in the third quarter of
1997 from 81.4% in the third quarter of 1996. During
1996, government employment incentive programs in
certain of the Company's European markets reduced
payroll taxes, resulting in the lower cost of services.
Without the impact of these programs, cost of services
as a percentage of revenues in 1996 is comparable to
the 1997 amount.
Selling and administrative expenses increased 12.1% for
the quarter, but decreased as a percentage of revenue
to 13.5% in the third quarter of 1997 from 14.1% in the
third quarter of 1996. This decrease reflects the
improved leveraging of overhead costs with volume
growth in most of the Company's markets.
Net interest and other expense was $1.1 million in the
third quarter of 1997 compared to $603,000 in the third
quarter of 1996. This increase is due to a higher net
interest expense, offset by a decrease in translation
losses. Net interest expense was $914,000 in the third
quarter of 1997 compared to $181,000 in the third
quarter of 1996, due primarily to higher worldwide
borrowing levels. Translation losses were $81,000 in
the third quarter of 1997 compared to $458,000 in the
third quarter of 1996.
The Company provided income taxes at a rate of 36.4%
during the third quarter of 1997. This rate is higher
than the estimated annual effective tax rate for 1997
because it includes the year-to-date impact of the
corporate income tax rate increase in France. This tax
increase was announced during the third quarter and is
retroactive to January 1, 1997. (See Note 4 to
Consolidated Financial Statements.)
Net earnings per share was $.63 in the third quarter of
1997, equal to the net earnings per share in the third
quarter of 1996. The 1997 earnings were negatively
impacted $.10 per share due to the lower currency
exchange rates and the increase in corporate income
taxes in France. In addition, the 1996 earnings
include $.05 per share of non-recurring income from
European employment initiative credits. Without these
items, earnings per share would have increased by more
than 25%.
Operating Results - Nine Months Ended September 30,
1997 and 1996
Revenues for the first nine months of 1997 increased
18.4% to $5,286.2 million. Revenues were unfavorably
impacted by changes in currency exchange rates during
the nine month period due to the strengthening of the
U.S. Dollar 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 25.7%.
Volume, as measured by billable hours of branch
operations, increased 24.5% for the nine month period.
All of the Company's major markets experienced revenue
increases, including the United States (12.8%), France
(31.6% in French Francs) and Manpower-United Kingdom
(12.1% in Pound Sterling).
Cost of services, which consists of payroll and related
expenses of temporary workers, increased as a
percentage of revenues to 82.1% in the first nine
months of 1997 from 81.4% in the first nine months of
1996. As discussed above, government employment
incentive programs in certain of the Company's European
markets reduced payroll taxes in 1996. Without the
impact of these programs, cost of services as a
percentage of revenues in 1996 is comparable to the
1997 amount.
Selling and administrative expenses increased 14.2%,
but decreased as a percentage of revenues to 14.4% in
the first nine months of 1997 from 14.9% in the first
nine months of 1996. This decrease reflects the
improved leveraging of overhead costs with volume
growth in most of the Company's markets.
Net interest and other totaled $2.9 million of expense
in the first nine months of 1997 compared to $8.4
million of income in the first nine months of 1996.
During the second quarter of 1996, the Company recorded
a non-recurring gain of $8.5 million from the sale of
an equity interest. The remaining change is primarily
due to changes in net interest, which was $1.6 million
of expense in the first nine months of 1997 compared to
$1.0 million of income in the first nine months of
1996. This change in net interest is primarily the
result of higher worldwide borrowing levels.
The Company provided income taxes at a rate of 34.5%
which is equal to the expected annual effective rate
for 1997, based on currently available information.
This rate is higher than the annual effective rate in
1996 due to the increase in the corporate income tax
rate in France. (See Note 4 to Consolidated Financial
Statements.)
Net earnings per share was $1.44 for the first nine
months of 1997 compared to net earnings per share of
$1.37 for the first nine months of 1996. The 1997
earnings were negatively impacted $.16 per share due to
the lower currency exchange rates and the increase in
the French corporate income tax rate. In addition, the
1996 earnings included non-recurring gains, net of
taxes, of $.06 per share on the sale of the Company's
equity interest discussed above, and $.13 per share for
the European employment initiative credits. Without
these items, earnings per share for the nine month
period would have increased by more than 30%.
Liquidity and Capital Resources
Cash used by operating activities was $30.1 million in
the first nine months of 1997 compared to cash provided
by operating activities of $42.6 million in the first
nine months of 1996. The change reflects the increase
in working capital requirements of $184.0 million in
the first nine months of 1997 compared to $100.7
million in the first nine months of 1996. The
significant revenue growth in France, where DSO is in
excess of 70 days, is the primary reason for this
increase. Cash provided by operating activities before
the changes in working capital requirements was $153.9
million in the first nine months of 1997 compared to
$143.3 million in the first nine months of 1996, due
primarily to the increased earnings level in 1997.
Capital expenditures were $62.6 million in the first
nine months of 1997 compared to $49.8 million during
the first nine months of 1996. These expenditures
primarily consist of computer software and equipment
and office furniture to be used in the branch office
network.
During the first nine months of 1996, the Company
acquired A Teamwork Sverige AB (subsequently renamed
Manpower Teamwork Sverige AB), the largest employment
services organization in Sweden, and several United
States franchises. Total cash paid for these
acquisitions, net of cash acquired, was $32.2 million.
There were no significant acquisitions during the first
nine months of 1997. During 1996, the Company had cash
proceeds of $8.5 million from the sale of its equity
interests, as previously discussed.
Net cash from additional borrowings was $135.1 million
in the first nine months of 1997 compared to $4.1
million in the first nine months of 1996. The
additional borrowings were primarily used to support
the working capital growth in both years, and the
repurchase of the Company's common stock in 1997. The
Company repurchased 1.5 million shares of common stock
during the first nine months of 1997, at a cost of
$54.0 million. These shares were purchased under the
1996 Board of Directors' authorization which allows for
the repurchase of up to 5 million shares of common
stock.
The Company paid cash dividends of $6.5 million during
the first nine months of 1997 compared to cash
dividends of $5.7 million during the first nine months
of 1996.
Accounts receivable increased to $1,484.2 million at
September 30, 1997 from $1,167.5 million at December
31, 1996. This change is due to the increased sales
level in all of the Company's major markets, offset by
the impact of currency exchange rates during the first
nine months which reduced receivables by $93.3 million.
As of September 30, 1997, the Company had borrowings of
$122.8 million and letters of credit of $59.0 million
outstanding under its $275 million U.S. revolving
credit facility, and borrowings of $45.0 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.
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, 1997, such lines
totaled
$151.3 million, of which $65.7 million was unused.
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk
Not applicable
PART II - OTHER INFORMATION
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(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: November 13, 1997 /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)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.