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, 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.
Shares Outstanding
Class at June 30, 1997
Common Stock, 81,893,933
$.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
Item 3 - Quantitative and Qualitative Disclosures
about Market Risk 10
PART II - OTHER INFORMATION AND SIGNATURES
Item 4 - Submission of Matters to a Vote of Security
Holders 11
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
June 30, Dec. 31,
1997 1996
CURRENT ASSETS:
Cash and cash equivalents $ 116,080 $ 180,553
Accounts receivable, less allowance for
doubtful accounts of $35,289 and 1,286,688 1,167,468
$33,526, respectively
Prepaid expenses and other assets 57,281 42,913
Future income tax benefits
50,841 48,151
Total current assets 1,510,890 1,439,085
OTHER ASSETS:
Investments in licensees 31,213 29,409
Other assets
171,600 162,390
Total other assets 202,813 191,799
PROPERTY AND EQUIPMENT:
Land, buildings, leasehold improvements 302,621 302,547
and equipment
Less: accumulated depreciation and
amortization 184,629 181,168
Net property and equipment
117,992 121,379
Total assets $1,831,695 $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
June 30, Dec. 31,
1997 1996
CURRENT LIABILITIES:
Payable to banks $ 49,152 $ 24,375
Accounts payable 263,651 235,466
Employee compensation payable 51,535 60,222
Accrued liabilities 95,361 87,444
Accrued payroll taxes and insurance 218,460 195,194
Value added taxes payable 173,174 174,624
Income taxes payable 13,457 30,945
Current maturities of long-term debt
1,264 2,986
Total current liabilities 866,054 811,256
OTHER LIABILITIES:
Long-term debt 129,287 100,848
Other long-term liabilities
234,647 239,453
Total other liabilities 363,934 340,301
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
authorized 25,000,000 shares, -- --
none issued
Common stock, $.01 par value, authorized
125,000,000 shares, 827 822
issued 82,661,233 and 82,206,446
shares, respectively
Capital in excess of par value 1,589,014 1,579,868
Accumulated deficit (937,288) (998,230)
Cumulative translation adjustments (26,452) 21,476
Treasury stock at cost, 767,300 and
101,700 shares, respectively (24,394) (3,230)
Total stockholders' equity 601,707 600,706
Total liabilities and stockholders' 1,831,695 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 6 Months Ended
June 30, June 30,
1997 1996 1997 1996
Revenues from services $1,792,216 $1,460,624 $3,313,218 $2,769,791
Cost of services 1,473,066 1,191,364 2,717,413 2,255,892
Gross profit 319,150 269,260 595,805 513,899
Selling and administrative 257,028 218,612 493,329 427,773
expenses
Operating profit 62,122 102,476 50,648 86,126
Interest and other (income) 1,090 (8,773) 1,756 (8,984)
expenses
Earnings before income taxes 61,032 59,421 100,720 95,110
Provision for income taxes 20,140 20,819 33,229 33,313
Net earnings $40,892 $38,602 $67,491 $61,797
Net earnings per share $ .49 $ .46 $ .81 $ .74
Dividends declared per share $ .08 $ .07 $ .08 $ .07
Weighted average common shares 83,134 83,144 83,159 82,976
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 6 Months Ended
June 30, June 30,
1997 1996 1997 1996
Systemwide Sales $2,190,112 $1,794,139 $4,040,696 $3,421,240
Systemwide information represents the total of Company-owned
branches and franchises.
MANPOWER INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
6 Months Ended
June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 67,491 $ 61,797
Adjustments to reconcile net
earnings to net cash by
operating activities:
Depreciation 18,006 15,378
Amortization of intangible 1,984 1,555
assets
Deferred income taxes (2,690) 6,150
Provision for doubtful 6,702 5,862
accounts
Gain on sale of securities -- (8,452)
Changes in operating
assets and liabilities:
Accounts receivable (213,439) (94,743)
Other assets (20,789) (1,264)
Other liabilities 97,344 21,800
Cash Provided by (45,391) 8,083
operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (39,107) (33,436)
Purchases of businesses -- (31,206)
Proceeds from the sale of property
and equipment 1,096 933
Proceeds from sale of securities
-- 8,452
Cash used in investing activities (38,011) (55,257)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in payable to banks 28,298 (7,519)
Proceeds from long-term debt 29,074 21,614
Repayment of long-term debt (1,711) (789)
Dividends paid (6,549) (5,735)
Repurchase of common stock (21,164)
--
Cash used in financing activities
27,948 7,571
Effect of exchange rate changes on
cash (9,019) (5,784)
Net change in cash and cash (64,473) (45,387)
equivalents
Cash and cash equivalents, beginning 180,553 142,773
of period
Cash and cash equivalents, end of
period $116,080 $ 97,386
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 4,230 $ 5,507
Income taxes paid $ 46,706 $ 34,715
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, 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 six months ended June 30, 1997
and 1996, basic and diluted earnings per share would
have been as follows:
3 Months Ended 6 Months Ended
June 30, June 30,
1997 1996 1997 1996
As reported on Statements of
Operations $.49 $.46 $.81 $.84
As calculated under SFAS
No. 128-
Basic earnings per share $.50 $.47 $.82 $.75
Diluted earnings per share $.49 $.46 $.81 $.74
(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 the
information available as of June 30, 1997. The
Company is currently assessing the impact of a
corporate tax increase in France announced on July 22,
1997. This increase, retroactive to January 1, 1997,
could result in a higher tax rate in the second half of
1997.
(5)Dividend
On April 28, 1997, the Company's Board of Directors
declared a cash dividend of $.08 per share which was
paid on June 16, 1997 to shareholders of record on May
28, 1997.
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
Operating Results - Three Months Ended June 30, 1997
and 1996
Second quarter 1997 revenues increased 22.7 % to
$1,792.2 million. Revenues were unfavorably impacted
5.8% in the second quarter by currency exchange rates.
Volume, as measured by billable hours of branch
operations, increased 27.7% in the quarter. All of the
Company's major markets experienced revenue increases,
including the United States (14.7 %), France (33.6% in
French Francs) and Manpower-United Kingdom (18.0% 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 second quarter
of 1997 from 81.6% in the second 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 17.6%,
but decreased as a percentage of revenue to 14.3% in
the second quarter of 1997 from 15.0% in the second
quarter of 1996. This decrease reflects the improved
leveraging of overhead costs with volume growth,
primarily in France.
Net interest and other was $1.1 million of expense in
the second quarter of 1997 compared to income of
$8.8 million in the second quarter of 1996. 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 difference between
years is primarily due to changes in net interest,
which was expense of $848,000 in the second quarter of
1997 compared to income of $534,000 in the second
quarter of 1996. This change in net interest is
primarily the result of an increase in interest expense
caused by higher worldwide borrowing levels.
The Company provided income taxes at an estimated rate
of 33.0% which is equal to the expected annual
effective rate for 1997, based on the information
available at June 30, 1997, and the Company's effective
income tax rate for 1996. The Company is currently
assessing the impact of a corporate tax increase in
France announced on July 22, l997. This increase,
retroactive to January 1, 1997, could result in a
higher tax rate in the second half of 1997.
Net earnings per share was $.49 in the second quarter
of 1997, compared to net earnings per share of $.46 in
the second quarter of 1996. 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.
Operating Results - Six Months Ended June 30, 1997 and
1996
Revenues for the first six months of 1997 increased
19.6% to $3,313.2 million. Revenues were unfavorably
impacted 5.5% during the first six months by currency
exchange rates. Volume, as measured by billable hours
of branch operations, increased 25.1% for the six month
period. All of the Company's major markets experienced
revenue increases, including the United States (13.5%),
France (30.0% in French Francs) and Manpower-United
Kingdom (13.5% in Pound Sterling).
Cost of services, which consists of payroll and related
expenses of temporary workers, increased as a
percentage of revenues to 82.0% in the first six months
of 1997 from 81.4% in the first six 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 15.3%,
but decreased as a percentage of revenues to 14.9% in
the first six months of 1997 from 15.4% in the first
six months of 1996. This decrease reflects the
improved leveraging of overhead costs with volume
growth, primarily in France.
Net interest and other totaled $1.8 million of expense
in the first six months of 1997 compared to $9.0
million of income in the first six months of 1996. As
discussed above, the Company recorded an $8.5 million
gain in the second quarter of 1996. The remaining
change is primarily due to changes in net interest,
which was $704,000 of expense in the first six months
of 1997 compared to $1.2 million of income in the first
six months of 1996. This change in net interest is
primarily the result of an increase in interest expense
caused by higher worldwide borrowing levels.
The Company provided income taxes at an estimated rate
of 33.0% which is equal to the expected annual
effective rate of 1997, based on the information
available at June 30, 1997, and the Company's effective
income tax rate for 1996. The Company is currently
assessing the impact of a corporate tax increase in
France announced on July 22, 1997. This increase,
retroactive to January 1, 1997 could result in a higher
tax rate in the second half of 1997.
Net earnings per share was $.81 for the first six
months of 1997 compared to net earnings per share of
$.74 for the first six months of 1996. 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.
Liquidity and Capital Resources
Cash used by operating activities was $45.4 million in
the first six months of 1997 compared to cash provided
by operating activities of $8.1 million in the first
six months of 1996. The change reflects the increase in
working capital requirements of $136.9 million in the
first six months of 1997 compared to $74.2 million in
the first six months of 1996. Cash provided by
operating activities before the changes in working
capital requirements was $91.5 million in the first six
months of 1997 compared to $82.3 million in the first
six months of 1996, due primarily to the increased
earnings level in 1997.
Capital expenditures were $39.1 million in the first
six months of 1997 compared to $33.4 million during the
first six months of 1996. These expenditures primarily
consist of computer software and equipment and office
furniture to be used in the branch office network.
During 1996, the Company had cash proceeds of $8.5
million from the sale of its equity interests discussed
above.
During the first six 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 $31.2 million.
There were no significant acquisitions during the first
six months of 1997.
Net cash from additional borrowings was $55.7 million
in the first six months of 1997 compared to $13.3
million in the first six months of 1996. The
additional borrowings were used primarily to support
the working capital growth in both years, and the
repurchase of the Company's common stock in 1997. The
Company repurchased 665,600 shares of stock during the
first six months of 1997, at a cost of $21.2 million.
These shares were purchased under the 1996 Board of
Directors' authorization.
Accounts receivable increased to $1,286.7 million at
June 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 foreign exchange rates during the first six
months which reduced receivables by $82.7 million.
As of June 30, 1997, the Company had borrowings of
$74.2 million and letters of credit of $57.0 million
outstanding under its $275 million U.S. revolving
credit facility, and borrowings of $51.2 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 June 30, 1997, such lines totaled
$148.7 million, of which $99.6 million was unused.
On April 28, 1997, the Company's Board of Directors
declared a cash dividend of $.08 per share which was
paid on June 16, 1997 to shareholders of record on May
28, 1997.
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk
Not applicable
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security
Holders
On April 28, 1997, 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 2000 as Class I directors, (2) increase the
number of shares authorized under the Manpower 1990
Employee Stock Purchase Plan; (3) increase the number
of shares authorized under the Manpower 1991 Directors
Stock Option Plan; (4) approve an incentive bonus
arrangement for the Company's Executive Vice President
and Managing Director-International Operations; (5)
approve an incentive bonus arrangement for the
Company's Executive Vice President; and (6) ratify the
appointment of Arthur Andersen LLP as the Company's
independent auditors for 1997. In addition, Messrs. J.
Ira Harris, Newton N. Minow, and Gilbert Palay
continued as Class II directors (term expiring 1998),
and Messrs. Jon F. Chait, Dudley J. Godfrey Jr., Marvin
B. Goodman continued as Class III directors (term
expiring 1999). The results of the proposals voted
upon at the Annual Meeting are as follows:
For Against Withheld Abstain Broker
Non-
Vote
1. a) Election of Audrey 70,789,122 - 747,478 - -
Freedman
b) Election of 70,767,219 - 769,381 - -
Mitchell S. Fromstein
c) Election of Dennis 70,783,641 - 752,959 - -
Stevenson
2. Increase the number of
shares authorized
under the Manpower 1990
Employee Stock Purchase
Plan. 70,912,816 553,320 - 70,464 -
3. Increase the number of
Shares authorized
under the Manpower
1991 Directors Stock
Option Plan. 70,404,707 1,036,143 - 95,750 -
4. Approve an incentive
bonus arrangement
for the Company's
Executive Vice
President and Managing
Director - International
Operations. 68,762,022 2,652,318 - 122,260 -
5. Approve an incentive
bonus arrangement
for the Company's
Executive Vice
President. 68,766,231 2,651,669 - 118,700 -
6. Ratification of Arthur
Andersen LLP as
independent auditors. 71,400,584 79,734 - 56,282 -
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Manpower 1991 Directors Stock Option Plan, as amended
10.2 Amended and Restated Deferred Stock Plan of Manpower Inc.
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: August 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)