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, 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 September 30, 1996
- --------------- ----------------------
Common Stock, 82,084,729
$.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
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations............8 - 10
PART II - OTHER INFORMATION AND SIGNATURES
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
Sept. 30, Dec. 31,
1996 1995
CURRENT ASSETS:
[S]
Cash and cash equivalents $ 106,591 $ 142,773
Accounts receivable, less allowance for
doubtful accounts of $34,832 and
$32,901, respectively 1,231,337 1,043,694
Prepaid expenses and other assets 36,918 39,224
Future income tax benefits 50,458 51,617
Total current assets 1,425,304 1,277,308
OTHER ASSETS:
Investments in licensees 31,702 31,591
Other assets 145,557 100,868
Total other assets 177,259 132,459
PROPERTY AND EQUIPMENT:
Land, buildings, leasehold improvements
and equipment 289,997 267,526
Less: accumulated depreciation and amortization 177,125 159,507
Net property and equipment 112,872 108,019
Total assets $1,715,435 $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
Sept. 30, Dec. 31,
1996 1995
CURRENT LIABILITIES:
Payable to banks $ 28,048 $ 37,559
Accounts payable 219,816 219,794
Employee compensation payable 59,899 56,630
Accrued liabilities 109,609 72,325
Accrued payroll taxes and insurance 229,143 195,376
Value added taxes payable 199,485 167,937
Income taxes payable 17,130 25,286
Current maturities of long-term debt 3,157 1,408
Total current liabilities 866,287 776,315
OTHER LIABILITIES:
Long-term debt 72,124 61,783
Other long-term liabilities 216,526 224,695
Total other liabilities 288,650 286,478
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 82,084,729 and 81,153,023
shares, respectively 821 812
Capital in excess of par value 1,574,753 1,564,305
Accumulated deficit (1,038,076) (1,148,223)
Cumulative translation adjustments 23,000 38,099
Total stockholders' equity 560,498 454,993
Total liabilities and stockholders' equity $1,715,435 $ 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 9 Months Ended
September 30, September 30,
1996 1995 1996 1995
REVENUES
FROM SERVICES $1,694,523 $1,520,900 $4,464,314 $4,091,631
COST AND EXPENSES
Cost of services 1,379,199 1,242,250 3,635,091 3,350,936
Selling and
administrative expenses 238,218 204,133 665,991 584,747
Interest and other
(income) expenses, net 603 2,422 (8,381) 8,446
Earnings before income taxes 76,503 72,095 171,613 147,502
PROVISION FOR INCOME TAXES 24,087 27,050 57,400 56,024
Net earnings $ 52,416 $ 45,045 $ 114,213 $ 91,478
Dividends declared per share $ -- $ -- $ .07 $ .06
Net earnings per share $ .63 $ .59 $ 1.37 $ 1.20
Weighted average common
shares 83,356 76,535 83,084 76,228
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)
9 Months Ended
Sept. 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $114,213 $ 91,478
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Amortization of intangible assets 2,695 2,725
Depreciation 23,848 18,504
Deferred income taxes 1,159 (10,066)
Provision for doubtful accounts 9,777 9,357
Changes in operating assets and liabilities:
Accounts receivable (233,054) (280,832)
Other assets (6,663) 4,907
Other liabilities 119,967 132,400
Cash provided by operating activities 31,942 (31,527)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of businesses, net of cash acquired (32,200) --
Purchases of property and equipment (30,679) (29,060)
Proceeds from the sale of property and
equipment 977 2,180
Cash used in investing activities (61,902) (26,880)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in payable to banks (8,087) 19,205
Proceeds from long-term debt 13,663 34,845
Repayment of long-term debt (1,501) (1,393)
Dividends paid (5,739) (4,507)
Cash used in financing activities (1,664) 48,150
Effect of exchange rate changes on cash (4,558) 3,856
Net change in cash and cash equivalents (36,182) (6,401)
Cash and cash equivalents, beginning
of period 142,773 82,049
Cash and cash equivalents, end of period $106,591 $ 75,648
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 5,437 $ 10,123
Income taxes paid $ 57,700 $ 58,912
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, 1996 and 1995
(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, 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. 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)Interest and Other Expenses
The Company recorded an $8.5 million gain on proceeds
received in April 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.
(7)Acquisitions of Businesses
During the first nine 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
$38.7 million.
Item 2 - Management's Discussion and Analysis of
Financial
Condition and Results of Operations
Operating Results - Three Months Ended September 30,
1996 and 1995
Third quarter 1996 revenues increased 11.4% to $1,694.5
million. Revenues were negatively impacted 2.1% due to
changes in currency exchange rates between years.
Volume, as measured by billable hours of branch
operations, increased 11.2% in the quarter. Almost all
of the Company's major markets experienced revenue
increases, including the United States (16.1%),
Manpower-United Kingdom (7.5% in Pound Sterling) and
France (9.0% in French Francs).
Cost of services, which consists of payroll and related
expenses of temporary workers, decreased as a
percentage of revenues to 81.4% in the third quarter of
1996, from 81.7% in the third quarter of 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 14.1% in the third quarter of
1996, from 13.4% in 1995. This increase is primarily
due to the decline in revenue growth in France without
a proportional decline in expense growth. Excluding
the impact of changes in foreign currency, selling and
administrative expenses increased 18.8% for the
quarter.
Net interest and other was $603,000 of expense in the
third quarter of 1996, compared to $2.4 million of
expense in the third quarter of 1995. This change is
primarily the result of a decrease in net interest
expense to $0.2 million in the third quarter of 1996,
from $3.1 million in the third quarter of 1995. This
decrease is due to lower worldwide borrowing levels as
the Company converted its subordinated convertible
debentures in October of 1995 and a slight increase in
investment income.
The Company provided income taxes at an estimated rate
of 31.5% during the third quarter of 1996. This rate
reflects an adjustment made during the quarter to
record the nine-month provision at the expected annual
effective rate for 1996. The Company's effective
income tax rate for 1995 was 38.5%.
Operating Results - Nine Months Ended September 30,
1996 and 1995
Revenues for the first nine months of 1996 increased
9.1% to $4.5 million. Revenues were negatively
impacted 2.2% for the nine-month period due to changes
in currency exchange rates between years. Volume, as
measured by billable hours of branch operations,
increased 8.5% for the nine-month period. Almost all
of the Company's major markets experienced revenue
increases, including the United States (13.7%),
Manpower-United Kingdom (10.4% in Pound Sterling), and
France (3.1% in French Francs). The low revenue growth
in France reflects the low growth rates in the first
and second quarters, which were 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 81.9% 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 14.9% in the first nine
months of 1996, from 14.3% in 1995. This increase is
primarily due to the decline in revenue growth in
France without a proportional decline in expense
growth. Excluding the impact of changes in foreign
currency, selling and administrative expenses increased
16.4% for the nine-month period.
Net interest and other was $8.4 million of income in
the first nine months of 1996, compared to $8.4 million
of expense in the first nine months 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 is primarily due to the change in
net interest, which was $1.0 million of income in the
first nine months of 1996 compared to $7.2 million of
expense in the first nine months of 1995. This change
is due to lower worldwide borrowing levels as the
Company converted its subordinated convertible
debentures in October of 1995 and an increase in
investment income.
The Company provided income taxes at an estimated rate
of 33% which is equal to the expected annual effective
rate for 1996. The Company's effective income tax rate
for 1995 was 38.5%.
Liquidity and Capital Resources
Cash provided by operating activities was $31.9 million
in the first nine months of 1996, compared to cash used
by operating activities of $31.5 million in the first
nine months of 1995. The change reflects the higher
earnings level in 1996 and a lesser increase in working
capital requirements in the first nine months of 1996
compared to the first nine months of 1995. Cash
provided by operating activities before working capital
changes was $151.7 million in the first nine months of
1996, compared to $112.0 million in 1995.
During the first nine 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, net of cash acquired, was $32.2
million.
The Company increased its capital expenditures to $30.7
million in the first nine months of 1996, from $29.1
million during the first nine months of 1995. These
expenditures primarily consist of computer equipment
and office furniture used in the branch office network.
During the first nine months of 1996, the Company had
net additional borrowings of $4.1 million compared to
$52.7 million in the first nine months of 1995. The
additional borrowings were primarily used to support
working capital growth.
Accounts receivable increased $187.6 million to
$1,231.3 million at September 30, 1996, from
$1,043.7 million at December 31, 1995. The change
represents a $34.1 million decrease due to the change
in foreign exchange rates, offset by a general increase
in receivables due to the higher sales level in the
Company's major markets during the third quarter of
1996 as compared to the fourth quarter of 1995.
During the first nine months of 1996, the Company
expended the remaining $2.7 million of reserves related
to the strategic restructuring plan started in 1989.
These reserves were used to cover general operating
costs and lease costs of properties vacated under the
restructuring plan.
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 September 30, 1996, the Company had borrowings of
$32.9 million outstanding under its $275 million U.S.
revolving credit facility, and borrowings of $34.6
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 September 30, 1996, such
lines totaled $166.5 million, of which $138.5 million
was unused.
PART II - OTHER INFORMATION
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 1991 Executive Stock Option and Restricted
Stock Plan of Manpower Inc. (Amended and Restated
effective August 6, 1996.)
10.2 1994 Executive Stock Option and Restricted
Stock Plan ofManpower Inc.(Amended and Restated
effective August 6, 1996.)
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 14, 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)