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MarketScreener Homepage  >  Equities  >  Nyse  >  ManpowerGroup Inc.    MAN

MANPOWERGROUP INC.

(MAN)
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MANPOWERGROUP : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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05/10/2019 | 06:04am EDT

See the financial measures section on page 25 for further information on the Non-GAAP financial measures of constant currency and organic constant currency.

Business Overview


Client demand for workforce solutions and services is dependent on the overall
strength of the labor market and secular trends toward greater workforce
flexibility within each of the segments where we operate. Improving economic
growth typically results in increasing demand for labor, resulting in greater
demand for our staffing services while demand for our outplacement services
typically declines. During periods of increasing demand, we are generally able
to improve our profitability and operating leverage as our cost base can support
some increase in business without a similar increase in selling and
administrative expenses. Whereas, during periods of decreased demand, as we
experienced in the first quarter of 2019, our operating profit is generally
impacted unfavorably as we experience a deleveraging of selling and
administrative expenses which may not decline at the same pace as revenues.

During the first quarter of 2019, the United States dollar was stronger, on
average, relative to the currencies in all of our markets, particularly those
markets within Europe, having an unfavorable impact on our reported results.
While our reported revenues from services decreased 8.6% in the first quarter of
2019 compared to the first quarter of 2018 and our reported operating profit
decreased 31.4%, these results were partly impacted by the relative weakness of
other currencies against the United States dollar compared to the same period in
2018, and generally may understate the performance of our underlying business.
The changes in the foreign currency exchange rates had a 6.4% unfavorable impact
on revenues from services, a 5.4% unfavorable impact on operating profit, and an
approximately $0.12 per share unfavorable impact on net earnings per share -
diluted in the quarter. Substantially all of our subsidiaries derive revenues
from services and incur expenses within the same currency and generally do not
have cross-currency transactions, and therefore, changes in foreign currency
exchange rates primarily impact reported earnings and not our actual cash flow
unless earnings are repatriated. To understand the performance of our underlying
business, we utilize constant currency or organic constant currency variances
for our consolidated and segment results.

In the three months ended March 31, 2019, we experienced constant currency
revenue declines in most of our markets. Our consolidated revenues were down
2.2% in constant currency in the quarter, a deterioration from the 0.7% constant
currency decline in the fourth quarter of 2018 due primarily to the differences
in the number of billing days. After adjusting for billing days, our organic
constant currency revenue decrease was 1.1% compared to a 2.5% decrease in the
fourth quarter of 2018. Our first quarter results reflect a stabilization of the
economic slowdown experienced in the second half of 2018 in certain markets
within Southern and Northern Europe, which when combined represents
approximately 65% of our total consolidated revenues. The revenue decrease in
Northern Europe was primarily due to the decrease in Germany resulting from the
continued challenges posed by new regulations, the implementation of new systems
and actions taken to optimize our delivery channels that caused some client
disruption during the third quarter of 2018, as well as softer demand from the
manufacturing sector in that market. We experienced a revenue decline in
Southern Europe due to the constant currency revenue decline in France, flat
after adjusting for billing days, and constant currency revenue growth in
certain markets within Other Southern Europe. In the Americas, revenues
increased 3.0% in constant currency due to increased demand for our
staffing/interim services in certain markets within Other Americas, a 5.3%
constant currency increase in our permanent recruitment business, and an
increase in our ManpowerGroup Solutions business. These increases were partially
offset by 2.1% decrease in the United States primarily driven by a decline in
demand for our staffing/interim services and the unfavorable impact of
approximately one fewer billing day. In APME, revenues increased 1.9% in
constant currency primarily due to an increase in our Manpower staffing
revenues.

Our gross profit margin in the first quarter of 2019 was flat compared to 2018
as the increase in our permanent recruitment business contribution was offset by
the decline in our staffing/interim gross profit margin due to business mix
changes in various countries.

We recorded $39.8 million of restructuring costs in the first quarter of 2019,
comprised of $5.1 million in the Americas, $5.4 million in Southern Europe,
$18.7 million in Northern Europe, $4.4 million in APME, $4.7 million in Right
Management, and $1.5 million in corporate expenses. The restructuring costs were
primarily related to our delivery channel and other front-office centralization
and back-office optimization activities, as well as adjusting our cost-base for
the slower market environment in many of our European operations.

Our operating profit decreased in the first quarter of 2019 by 31.4% (-26.0% in
constant currency) while our operating profit margin was down 70 basis points
compared to the first quarter of 2018. Excluding the restructuring costs
incurred in the first quarter of both 2019 and 2018, our operating profit was
down 11.5% in constant currency while operating profit margin was down 30 basis
points compared to the first quarter of 2018. We continue to monitor expenses
closely to ensure we maintain the benefit of our efforts to optimize our
organizational and cost structures, while investing appropriately to support the
growth in the business and enhance our productivity and technology and digital
capabilities.




                                       20
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Operating Results - Three Months Ended March 31, 2019 and 2018

The following table presents selected consolidated financial data for the three months ended March 31, 2019 as compared to 2018.


                                                                                       Constant
                                                                                       Currency
(in millions, except per share data)         2019          2018        Variance        Variance
Revenues from services                    $ 5,044.9$ 5,522.4         -8.6  %       -2.2 %
Cost of services                            4,240.1       4,637.0         -8.6          -2.0
  Gross profit                                804.8         885.4         -9.1          -3.0
  Gross profit margin                          16.0 %        16.0 %
Selling and administrative expenses           699.3         731.6         -4.4           1.9
  Operating profit                            105.5         153.8        -31.4         -26.0
  Operating profit margin                       2.1 %         2.8 %
Interest and other expenses                    11.9          16.1        -26.6
  Earnings before income taxes                 93.6         137.7        -32.0         -26.5
Provision for income taxes                     40.1          40.7         -1.4
Effective income tax rate                      42.8 %        29.6 %
  Net earnings                            $    53.5$    97.0        -44.8         -40.4
Net earnings per share - diluted          $    0.88$    1.45        -39.3         -34.5
Weighted average shares - diluted              61.0          66.9         

-8.9 %

The year-over-year decrease in revenues from services of 8.6% (-2.2% in constant currency and -1.5% in organic constant currency) was attributed to:

•      a revenue decrease in Southern Europe of 9.1% (-1.6% in constant
       currency). This included a revenue decrease in France of 8.6% (-1.1% in
       constant currency) primarily due to the unfavorable impact of
       approximately one fewer billing day. The Southern Europe decrease also

included a decrease in Italy of 14.0% (-6.9% in constant currency) due to

decreased demand for our Manpower staffing services as a result of a

challenging economic environment and the unfavorable impact of

approximately one fewer billing day, partially offset by a 7.4% increase

       (16.3% in constant currency) in the permanent recruitment business;


• decreased demand for services in several of our markets within Northern

       Europe, where revenues decreased 16.1% (-8.8% in constant currency and
       -8.2% in organic constant currency), primarily due to reduced demand for
       our Manpower staffing services. We experienced revenue declines in

Germany, the Netherlands, Belgium, the United Kingdom, and the Nordics of

29.1%, 27.6%, 12.1%, 10.7%, and 6.1% (-23.2%, -21.7%, -4.9%, -4.7%, and an

increase of 4.0%, respectively, in constant currency; -18.0% in organic

       constant currency in the Netherlands);



•      a revenue decrease in the United States of 2.1% primarily driven by a

decline in demand for our staffing/interim services and the unfavorable

       impact of approximately one fewer billing day;


• a revenue decrease in APME of 2.8% (increase of 1.9% in constant currency)

due to the impact of changes in currency exchange rates, partially offset

       by an increase in our Manpower staffing revenues;



•      decreased demand for services at Right Management, where revenues

decreased 8.4% (-4.5% in constant currency), including a 7.2% decrease

       (-3.5% in constant currency) in our outplacement services, as well as a
       12.3% decrease (-7.9% in constant currency) in our talent management
       business;


• our dispositions in Northern Europe and APME at the end of December 2018,

       which contributed approximately 0.7% of revenue decline to our
       consolidated results on a constant currency basis; and


• a 6.4% decrease due to the impact of changes in currency exchange rates.




The gross profit margin remained flat year-over-year as a 10 basis point
favorable impact due to a larger mix of services coming from our permanent
recruitment business was offset by a 10 basis point unfavorable impact from the
decline in our staffing/interim margin due to business mix changes in various
countries as well as lower associate utilization and higher vacation and
sickness rates in Germany.


                                       21
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The 4.4% decrease in selling and administrative expenses in the first quarter of 2019 (increase of 1.9% in constant currency and 2.2% in organic constant currency) was primarily attributed to:

• a 9.8% decrease (-3.8% in constant currency; -3.5% in organic constant

       currency) in office-related costs primarily due to a decrease in the
       number of offices as a result of our delivery channel and other
       front-office centralization and back-office optimization activities, as
       well as adjusting our cost-base for the slower market environment in many
       of our European operations;


• a $2.8 million decrease in the first quarter of 2019 compared to 2018 as a

       result of dispositions in December 2018 in Northern Europe and APME; and



•      a 6.3% decrease due to the impact of changes in currency exchange rates;
       partially offset by


• restructuring costs of $39.8 million incurred in the first quarter of 2019

compared to $24.0 million incurred in the first quarter of 2018.




Selling and administrative expenses as a percent of revenues increased 70 basis
points in the first quarter of 2019 compared to the first quarter of 2018 due to
a 40 basis point unfavorable impact from the increase in restructuring costs, a
20 basis point unfavorable impact from expense deleveraging as we were unable to
decrease expenses at the same rate as our revenue decline, and a 10 basis point
unfavorable impact from changes in currency exchange rates.

Interest and other expenses are comprised of interest, foreign exchange gains
and losses and other miscellaneous non-operating income and expenses, including
noncontrolling interests. Interest and other expenses were $11.9 million in the
first quarter of 2019 compared to $16.1 million in the first quarter of 2018.
Net interest expense decreased $3.7 million in the first quarter of 2019 to $8.7
million from $12.4 million in the first quarter of 2018 due to the lower
interest rate on our €500.0 million notes offered and sold in June 2018 compared
to the interest rate on the €350.0 million notes due June 22, 2018 that were
repaid in June 2018. Foreign exchange losses in the first quarter of 2019 were
$2.9 million compared to income of $0.1 million in the first quarter of 2018.
The increase in foreign exchange losses was primarily due to the $2.3 million
translation loss in Argentina as a result of the highly-inflationary designation
of its economy as of July 1, 2018. Miscellaneous expenses were $0.3 million in
the first quarter of 2019 compared to $3.8 million in the first quarter of 2018.
The decrease is primarily due to a decrease in expenses related to net earnings
attributable to noncontrolling interests.

We recorded income tax expense at an effective rate of 42.8% for the three
months ended March 31, 2019, as compared to an effective rate of 29.6% for the
three months ended March 31, 2018. The 2019 rate was unfavorably impacted by the
transition of the French CICE subsidy, which was non-taxable, to new French
subsidies in January 2019 that are taxable, and the recognition of valuation
allowances against certain tax losses. The 42.8% effective tax rate in the
quarter was higher than the United States Federal statutory rate of 21%
primarily due to the French business tax, restructuring costs recorded in the
quarter, our overall mix of earnings and the recognition of valuation allowances
against certain tax losses.

Net earnings per share - diluted was $0.88 and $1.45 in the first quarter of
2019 and 2018, respectively. Foreign currency exchange rates unfavorably
impacted net earnings per share - diluted by approximately $0.12 per share in
the first quarter of 2019. Restructuring costs recorded in the first quarter of
2019 and 2018 negatively impacted net earnings per share - diluted by
approximately $0.51 and $0.27 per share, net of tax, in the first quarter of
2019 and 2018, respectively.

Weighted average shares - diluted decreased 8.9% to 61.0 million in the first
quarter of 2019 from 66.9 million in the first quarter of 2018. This decrease
was due to the impact of share repurchases completed since the first quarter of
2018, partially offset by shares issued as a result of exercises and vesting of
share-based awards since the first quarter of 2018.

Segment Operating Results

Americas


In the Americas, revenues from services decreased 1.5% (increase of 3.0% in
constant currency) in the first quarter of 2019 compared to 2018. In the United
States, revenues from services decreased 2.1% in the first quarter of 2019
compared to 2018, primarily driven by a decline in demand for our
staffing/interim services and the unfavorable impact of approximately one fewer
billing day, partially offset by a 4.9% increase in our permanent recruitment
business and an increase in our ManpowerGroup Solutions business, primarily
within our MSP offering. In Other Americas, revenues from services decreased
0.6% (increase of 10.7% in constant currency) in the first quarter of 2019
compared to 2018. We experienced revenue growth in Mexico, Canada, Colombia, and
Peru of 4.4%, 7.7%, 1.6%, and 10.5%, respectively (7.0%, 13.2%, 11.4%, and
13.4%, respectively, in constant currency). These increases were partially
offset by decreases in Argentina and Brazil of 41.7% and 1.0%, respectively
(increases of 15.5% and 14.8%, respectively, in constant currency). The constant
currency increase in Argentina was primarily due to inflation. There has been a
steady devaluation of the Argentine peso relative to the United States dollar in
the last few years. As of July 1, 2018, the Argentina economy was designated as
highly-inflationary and was treated as such for accounting purposes starting in
the third quarter of 2018.

                                       22
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Gross profit margin decreased in the first quarter of 2019 compared to 2018 due
to business mix changes within our staffing/interim business, as a larger
percentage of our revenues came from our lower-margin entities within Other
Americas. This decrease was partially offset by an improved staffing/interim
margin in the United States, due to pricing discipline and lower payroll tax and
insurance costs, as well as an increase of 3.1% (5.3% in constant currency) in
the permanent recruitment business.

In the first quarter of 2019, selling and administrative expenses increased 5.3%
(9.6% in constant currency), due primarily to an increase in salary-related
expenses, as a result of higher headcount related to growth initiatives,
increased costs as a result of investment in certain technology and back-office
and delivery channel optimization activities in the United States, and an
increase in restructuring costs to $5.1 million in the first quarter of 2019
from $0.3 million in the first quarter of 2018.

Operating Unit Profit ("OUP") margin in the Americas was 3.1% and 4.2% for the
first quarter of 2019 and 2018, respectively. In the United States, OUP margin
decreased to 2.7% in the first quarter of 2019 from 4.3% in 2018. The margin
decrease in 2019 in the United States was primarily due to the restructuring
costs incurred in the first quarter of 2019 and increased costs as a result of
headcount increases for growth initiatives, investment in certain technology and
back-office and delivery channel optimization activities. Other Americas OUP
margin decreased to 3.7% in the first quarter of 2019 compared to 4.0% in 2018
due to the increase in restructuring costs.

Southern Europe


In Southern Europe, which includes operations in France and Italy, revenues from
services decreased 9.1% (-1.6% in constant currency) in the first quarter of
2019 compared to 2018. In the first quarter of 2019, revenues from services
decreased 8.6% (-1.1% in constant currency) in France (which represents 62% of
Southern Europe's revenues) and decreased 14.0% (-6.9% in constant currency) in
Italy (which represents 17% of Southern Europe's revenues). The decrease in
France is primarily due to the unfavorable impact of changes in currency
exchange rates and the unfavorable impact of approximately one fewer billing
day, partially offset by a constant currency increase in our permanent
recruitment business of 5.8% (-2.3% as reported). The decrease in Italy was due
to decreased demand for our Manpower staffing services as a result of a
challenging economic environment, partially offset by a 7.4% increase (16.3% in
constant currency) in the permanent recruitment business. In Other Southern
Europe, revenues from services decreased 6.2% (increase of 1.5% in constant
currency) during the first quarter of 2019 compared to 2018, due to the
unfavorable impact of changes in currency exchange rates, partially offset by an
increase in our ManpowerGroup Solutions business and the constant currency
increase in our permanent recruitment business of 4.8% (-3.7% as reported).

Gross profit margin increased in the first quarter of 2019 compared to 2018
primarily due to the increase in France's staffing/interim margin as a result of
favorable pricing actions, favorable direct costs adjustments and various
initiatives to offset the unfavorable impact from transition of the CICE program
to a new subsidy program. These increases were partially offset by the
unfavorable impact of transition of the CICE program to a new subsidy program.
The Southern Europe gross profit margin also increased due to growth in our
higher-margin ManpowerGroup Solutions business and a 7.9% constant currency
increase (-0.5% as reported) in the permanent recruitment business. These
increases were partially offset by a decrease in Italy's Manpower staffing
margin primarily due to the loss of certain subsidies.

Selling and administrative expenses decreased 5.7% (increase of 2.1% in constant
currency) during the first quarter of 2019 compared to 2018 due to the favorable
impact of changes in currency exchange rates, partially offset by an increase in
salary-related expenses, as a result of higher headcount, and an increase of
restructuring costs to $5.4 million in the first quarter of 2019 from $3.1
million in the first quarter of 2018.

OUP margin in Southern Europe was 4.1% for the first quarter of 2019 compared to
4.2% for 2018. In France, the OUP margin increased to 4.3% for the first quarter
of 2019 from 4.1% in 2018, primarily due to the improvement in the gross profit
margin, partially offset by an increase in salary-related expenses. In Italy,
the OUP margin decreased to 5.7% for the first quarter of 2019 from 6.1% for
2018, primarily due to the increase in restructuring costs, partially offset by
an increase in the gross profit margin. Other Southern Europe's OUP margin
decreased to 2.5% for the first quarter of 2019 from 3.1% in 2018, due to a
decline in the gross profit margin and the increase in restructuring costs.

Northern Europe


In Northern Europe, which includes operations in the United Kingdom, Germany,
the Nordics, the Netherlands and Belgium (comprising 32%, 18%, 21%, 12%, and 8%,
respectively, of Northern Europe's revenues), revenues from services decreased
16.1% (-8.8% in constant currency) in the first quarter of 2019 compared to
2018. We experienced revenue declines in the United Kingdom, Germany, the
Nordics, the Netherlands and Belgium of 10.7%, 29.1%, 6.1%, 27.6% and 12.1%
(-4.7%, -23.2%, increase of 4.0%, -21.7% and -4.9%, respectively, in constant
currency). The Northern Europe revenue decrease is primarily due to reduced
demand for our Manpower staffing services, primarily because of the decrease in
Germany resulting from lower production activity in the manufacturing sector in
that market, decrease in the UK due to reduced production from one of our
automotive clients, and reduced demand in the Netherlands. This decrease was
also due to a decrease in our ManpowerGroup Solutions business from the
disposition of our language translation business in the Netherlands at the end
of December 2018 and the 14.5% decrease (-7.0% in constant currency) in the
permanent recruitment business. These decreases were partially offset an

                                       23
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increased demand for our staffing/interim services in Norway as well as a constant currency increase in our Experis interim business primarily within the IT sector in the United Kingdom.


Gross profit margin decreased in the first quarter of 2019 compared to 2018 due
to the decline in our staffing/interim margin, primarily as a result of business
mix changes, lower associate utilization and higher vacation and sickness rates
in Germany, and the decrease in our permanent recruitment business.

Selling and administrative expenses decreased 14.3% (-6.8% in constant currency;
-6.2% in organic constant currency) in the first quarter of 2019 compared to
2018 due primarily to a decrease in organic salary-related expenses as a result
of a reduction in headcount, a decrease in office-related expenses driven by a
decrease in the number of offices, and a decrease in consulting costs related to
certain technology projects, front-office centralization and back-office
optimization activities incurred in the first quarter of 2018. The decrease is
also due to the decrease of restructuring costs to $18.7 million in the first
quarter of 2019 from $20.1 million in the first quarter of 2018. The 2019
restructuring costs related to delivery model and other front-office
centralization activities as well as back-office optimization activities
primarily in Germany, the Netherlands, Sweden, and Belgium.

OUP margin for Northern Europe for the first quarter of 2019 decreased to 0.1%
compared to 1.2% in 2018. The decrease in the OUP margin was primarily due to a
decrease in the gross profit margin, as well as deleveraging, as we were unable
to reduce costs at the same rate as the revenue decline.

APME


Revenues from services decreased 2.8% (increase of 1.9% in constant currency and
5.9% in organic constant currency) in the first quarter of 2019 compared to
2018. In Japan (which represents 33% of APME's revenues), revenues from services
increased 0.9% (2.8% in constant currency) due to the increased demand for our
staffing/interim services and a 11.5% increase (13.7% in constant currency) in
our permanent recruitment business, partially offset by the unfavorable impact
of one fewer billing day in the quarter. In Australia (which represents 18% of
APME's revenues), revenues from services decreased 13.3% (-4.4% in constant
currency) as we chose to exit out of certain low-margin business to improve
profitability, and due to the 13.0% decrease (-4.0% in constant currency) in our
permanent recruitment business. The slight revenue decrease in the remaining
markets in APME is due to the disposition of a low-margin business in Greater
China at the end of December 2018, partially offset by increased demand for our
Manpower staffing services, mostly in India, Greater China, Thailand, and
Singapore.

Gross profit margin remained flat in the first quarter of 2019 compared to 2018
as the increase in our staffing/interim margin due to the Greater China business
disposition in 2018 was offset by the decrease in our permanent recruitment
business of 9.5% (-2.9% in constant currency).

Selling and administrative expenses increased 2.9% (8.4% in constant currency)
in the first quarter of 2019 compared to 2018 due primarily to an increase in
restructuring costs to $4.4 million, incurred in Australia and New Zealand, in
first quarter of 2019 compared to no restructuring costs incurred in the first
quarter of 2018, and the increase in organic salary-related costs due to higher
headcount, which supported the constant currency increase in revenues. These
increases were offset by a decrease in selling and administrative expenses as a
result of the Greater China business disposition in 2018.

OUP margin for APME decreased to 2.9% in the first quarter of 2019 from 3.6% in 2018 due to the restructuring costs incurred in the first quarter of 2019.

Right Management


Revenues from services decreased 8.4% (-4.5% in constant currency) in the first
quarter of 2019 compared to 2018. The decrease is primarily due to the 7.2%
decrease (-3.5% in constant currency) in our outplacement services as we
experienced softer demand in our Americas and European markets. Our talent
management business decreased 12.3% (-7.9% in constant currency) in the first
quarter of 2019 compared to 2018 due mostly to softening demand across all
markets.

Gross profit margin decreased in the first quarter of 2019 compared to 2018 due
to the decrease in both our outplacement and talent management businesses gross
profit margins, partially offset by the change in business mix as the
higher-margin outplacement business represented a higher percentage of the
revenues mix.

Selling and administrative expenses increased 6.1% (9.9% in constant currency)
in the first quarter of 2019 compared to 2018 primarily due to the increase of
restructuring costs to $4.7 million in the first quarter of 2019 compared to
$0.5 million in the first quarter of 2018, partially offset by a decrease in
salary-related expenses as a result of a reduction in headcount and a decrease
in office-related expenses related to a decrease in the number of offices.

OUP margin for Right Management decreased to 4.5% in the first quarter of 2019
from 12.9% in 2018 due to the increase in restructuring costs and the decline in
the gross profit margin.


                                       24
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Financial Measures

Constant Currency and Organic Constant Currency Reconciliation


Changes in our financial results include the impact of changes in foreign
currency exchange rates, acquisitions, and dispositions. We provide "constant
currency" and "organic constant currency" calculations in this report to remove
the impact of these items. We express year-over-year variances that are
calculated in constant currency and organic constant currency as a percentage.

When we use the term "constant currency," it means that we have translated
financial data for a period into United States dollars using the same foreign
currency exchange rates that we used to translate financial data for the
previous period. We believe that this calculation is a useful measure,
indicating the actual growth of our operations. We use constant currency results
in our analysis of subsidiary or segment performance. We also use constant
currency when analyzing our performance against that of our
competitors. Substantially all of our subsidiaries derive revenues and incur
expenses within a single country and, consequently, do not generally incur
currency risks in connection with the conduct of their normal business
operations. Changes in foreign currency exchange rates primarily impact reported
earnings and not our actual cash flow unless earnings are repatriated.

When we use the term "organic constant currency," it means that we have further
removed the impact of acquisitions in the current period and dispositions from
the prior period from our constant currency calculation. We believe that this
calculation is useful because it allows us to show the actual growth of our
ongoing business.

The constant currency and organic constant currency financial measures are used
to supplement those measures that are in accordance with United States Generally
Accepted Accounting Principles ("GAAP"). These Non-GAAP financial measures may
not provide information that is directly comparable to that provided by other
companies in our industry, as other companies may calculate such financial
results differently. These Non-GAAP financial measures are not measurements of
financial performance under GAAP, and should not be considered as alternatives
to measures presented in accordance with GAAP.

Constant currency and organic constant currency percent variances, along with a
reconciliation of these amounts to certain of our reported results, are provided
below:
                                                    3 Months Ended March 31, 2019 Compared to 2018
                                                                                               Impact of
                                                                                             Acquisitions
                                                                                                  and           Organic
                                                                               Constant      Dispositions      Constant
                                Reported        Reported       Impact of       Currency      (In Constant      Currency
                                Amount(a)       Variance        Currency       Variance        Currency)       Variance
Revenues from services:
Americas:
  United States               $     603.6       (2.1 )%            -  %          (2.1 )%          -  %           (2.1 )%
  Other Americas                    403.7       (0.6 )         (11.3 )           10.7             -              10.7
                                  1,007.3       (1.5 )          (4.5 )            3.0             -               3.0

Southern Europe:
  France                          1,301.4       (8.6 )          (7.5 )           (1.1 )           -              (1.1 )
  Italy                             355.9      (14.0 )          (7.1 )           (6.9 )           -              (6.9 )
  Other Southern Europe             444.9       (6.2 )          (7.7 )            1.5             -               1.5
                                  2,102.2       (9.1 )          (7.5 )           (1.6 )           -              (1.6 )

Northern Europe                   1,189.7      (16.1 )          (7.3 )           (8.8 )        (0.6 )            (8.2 )
APME                                699.9       (2.8 )          (4.7 )            1.9          (4.0 )             5.9
Right Management                     45.8       (8.4 )          (3.9 )           (4.5 )           -              (4.5 )
Consolidated                  $   5,044.9       (8.6 )          (6.4 )           (2.2 )        (0.7 )            (1.5 )

Gross Profit                  $     804.8       (9.1 )          (6.1 )           (3.0 )        (0.5 )            (2.5 )
Selling and
Administrative Expenses       $     699.3       (4.4 )          (6.3 )            1.9          (0.3 )             2.2
Operating Profit              $     105.5      (31.4 )          (5.4 )          (26.0 )        (0.6 )           (25.4 )


(a) In millions for the three months ended March 31, 2019.





                                       25
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Liquidity and Capital Resources


Cash used to fund our operations is primarily generated through operating
activities and provided by our existing credit facilities. We believe our
available cash and existing credit facilities are sufficient to cover our cash
needs for the foreseeable future. We assess and monitor our liquidity and
capital resources globally. We use a global cash pooling arrangement,
intercompany lending, and some local credit lines to meet funding needs and
allocate our capital resources among our various entities. As of March 31, 2019,
we had $363.5 million of cash held by foreign subsidiaries. We have historically
made and anticipate future cash repatriations to the United States from certain
foreign subsidiaries to fund domestic operations. With the enactment of the
United States Tax Cuts and Jobs Act in December 2017, we no longer recorded
United States federal income taxes on unremitted earnings of non-United States
subsidiaries. However, we do record deferred tax liabilities related to
non-United States withholding and other taxes on unremitted earnings that are
not considered permanently invested.

Cash provided by operating activities was $101.9 million during the three months
ended March 31, 2019 compared to cash used in operating activities of $58.4
million during the three months ended March 31, 2018. Changes in operating
assets and liabilities utilized $11.9 million of cash during the three months
ended March 31, 2019 compared to $177.8 million during the three months ended
March 31, 2018. These changes are primarily attributable to the timing of
collections and payments and the contingent consideration of $24.1 million paid
in 2018 in excess of the contingent consideration liabilities initially
recognized on the acquisition date.

Accounts receivable decreased to $5,186.3 million as of March 31, 2019 from
$5,276.1 million as of December 31, 2018. This decrease is primarily due to the
revenue decline and changes in currency exchange rates, partially offset by
higher Days Sales Outstanding ("DSO"). DSO increased by approximately two days
from December 31, 2018 due primarily to unfavorable mix changes, as countries
with a higher average DSO represented a higher percentage of our consolidated
revenues.

Capital expenditures were $10.0 million for the three months ended March 31,
2019 compared to $12.7 million for the three months ended March 31, 2018. These
expenditures were primarily comprised of purchases of computer equipment, office
furniture and other costs related to office openings and refurbishments, as well
as capitalized software costs. The higher expenditures in 2018 compared to 2019
was primarily due to additional technology investment and the timing of capital
expenditures.

From time to time, we acquire and invest in companies throughout the world,
including franchises. For the three months ended March 31, 2019, the total cash
consideration paid for acquisitions, net of cash acquired, was $0.6 million,
which represents contingent consideration payments related to previous
acquisitions. For the three months ended March 31, 2018, the total cash
consideration for acquisitions, net of cash acquired, was $41.0 million, the
majority of which took place in the Netherlands. This balance includes initial
acquisition payments of $8.2 million and contingent consideration payments of
$32.8 million ($8.7 million of which had been recognized as a liability at the
acquisition date).

Cash provided by net debt borrowings was $2.6 million in the three months ended March 31, 2019 compared to net debt repayments of $4.4 million in the three months ended March 31, 2018.


Our €500.0 million notes and €400.0 million notes are due June 2026 and
September 2022, respectively. When the notes mature, we plan to repay the
amounts with available cash, borrowings under our $600.0 million revolving
credit facility or a new borrowing. The credit terms, including interest rate
and facility fees, of any replacement borrowings will be dependent upon the
condition of the credit markets at that time. We currently do not anticipate any
problems accessing the credit markets should we decide to replace either the
€500.0 million notes or the €400.0 million notes.

As of March 31, 2019, we had letters of credit totaling $0.5 million issued under our $600.0 million revolving credit facility. Additional borrowings of $599.5 million were available to us under the facility as of March 31, 2019.


The $600.0 million revolving credit agreement requires that we comply with a
leverage ratio (Net Debt-to-Net Earnings before interest and other expenses,
provision for income taxes, intangible asset amortization expense, depreciation
and amortization expense ("EBITDA")) of not greater than 3.5 to 1 and a fixed
charge coverage ratio of not less than 1.5 to 1. As defined in the agreement, we
had a Net Debt-to-EBITDA ratio of 1.03 to 1 and a fixed charge coverage ratio of
5.32 to 1 as of March 31, 2019. Based on our current forecast, we expect to be
in compliance with our financial covenants for the next 12 months.

In addition to the previously mentioned facilities, we maintain separate bank
credit lines with financial institutions to meet working capital needs of our
subsidiary operations. As of March 31, 2019, such uncommitted credit lines
totaled $318.9 million, of which $265.5 million was unused. Under the Credit
Agreement, total subsidiary borrowings cannot exceed $300.0 million in the
first, second and fourth quarters, and $600.0 million in the third quarter of
each year. Due to these limitations, additional borrowings of $246.6 million
could have been made under these lines as of March 31, 2019.

                                       26
--------------------------------------------------------------------------------


In August 2018, the Board of Directors authorized the repurchase of 6.0 million
shares of our common stock. This authorization is in addition to the July 2016
Board authorization to repurchase 6.0 million shares of our common stock. Share
repurchases may be made from time to time through a variety of methods,
including open market purchases, block transactions, privately negotiated
transactions or similar facilities. During the first quarter of 2019, we
repurchased a total of 1.2 million shares at a cost of $101.0 million under the
2018 authorization. During the first quarter of 2018, we repurchased 0.4 million
shares at a cost of $50.1 million under the 2016 authorization. As of March 31,
2019, there were 1.9 million shares remaining authorized for repurchase under
the 2018 authorization and no shares remaining authorized for repurchase under
the 2016 authorization.
We had aggregate commitments of $2,102.8 as of March 31, 2019 related to debt,
operating leases, severances and office closure costs, transition tax resulting
from the Tax Act and certain other commitments compared to $2,236.4 million as
of December 31, 2018.

We also have entered into guarantee contracts and stand-by letters of credit
totaling approximately $184.2 million and $190.3 million as of March 31, 2019
and December 31, 2018, respectively, which consist of $132.9 million and $139.0
million for guarantees, respectively, and $51.3 million for stand-by letters of
credit as of both March 31, 2019 and December 31, 2018. Guarantees primarily
relate to bank accounts, operating leases and indebtedness. The letters of
credit relate to workers' compensation, operating leases and indebtedness. If
certain conditions were met under these arrangements, we would be required to
satisfy our obligations in cash. Due to the nature of these arrangements and our
historical experience, we do not expect any significant payments under these
arrangements. Therefore, they have been excluded from our aggregate
commitments. The cost of these guarantees and letters of credit was $0.4 million
and $0.5 million for the three months ended March 31, 2019 and 2018,
respectively.

We recorded net restructuring costs of $39.8 million and $24.0 million during
the three months ended March 31, 2019 and 2018, respectively, in selling and
administrative expenses, primarily related to severances and office closures and
consolidations in multiple countries and territories. During the three months
ended March 31, 2019, we made payments, utilized or transferred $22.1 million
out of our restructuring reserve ($7.6 million of this amount was transferred to
current operating lease liabilities). We expect a majority of the remaining
$33.2 million reserve will be paid by the end of 2019.

Subsequent Event (Acquisition of remaining interests in Switzerland)


On April 3, 2019, we acquired the remaining 51% controlling interest in our
Swiss franchise ("Manpower Switzerland") to obtain full ownership of the entity.
Additionally, as part of the purchase agreement we acquired the remaining 20%
interest in Experis AG. Manpower Switzerland provides contingent staffing
services under our Manpower brand in the four main language regions in
Switzerland. The aggregate cash consideration paid was $212.7 million and was
funded through cash on hand. Of the total consideration paid, $58.3 million was
for the acquired interests and the remaining $154.4 million was for cash and
cash equivalents.

Our investment in Manpower Switzerland prior to the acquisition was accounted
for under the equity method of accounting and we recorded our share of equity
income or loss in interest and other expenses on the Consolidated Statements of
Operations.

The acquisition of the remaining controlling interest in Manpower Switzerland
will be accounted for as a business combination and the assets and liabilities
of Manpower Switzerland will be included in the Consolidated Balance Sheets as
of the acquisition date, and its performance will be included in the
Consolidated Statements of Operations subsequent to the acquisition date. The
major classes of assets and liabilities of Manpower Switzerland are expected to
be cash and cash equivalents, accounts receivable, current and long-term
liabilities, goodwill and other intangible assets (amortizable and
non-amortizable) and the funded status of its defined benefit pension plan.

The acquisition of the remaining interest in Experis AG will be accounted for as the purchase of a noncontrolling interest as we previously consolidated the entity.

Recently Issued Accounting Standards

See Note 2 to the Consolidated Financial Statements.

                                       27
--------------------------------------------------------------------------------

Forward-Looking Statements


Statements made in this quarterly report that are not statements of historical
fact are forward-looking statements. In addition, from time to time, we and our
representatives may make statements that are forward-looking. All
forward-looking statements involve risks and uncertainties. The information in
Item 1A. Risk Factors in our annual report on Form 10-K for the year ended
December 31, 2018, which information is incorporated herein by reference,
provides cautionary statements identifying, for purposes of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995, important
factors that could cause our actual results to differ materially from those
contained in the forward-looking statements. Forward-looking statements can be
identified by words such as "expect," "anticipate," "intend," "plan," "may,"
"believe," "seek," "estimate," and similar expressions. Some or all of the
factors identified in our annual report on Form 10-K may be beyond our
control. Other risks and uncertainties include, but are not limited to, the
following: changes in tax legislation in places we do business; challenges in
growing our business in certain European markets; failure to implement strategic
technology investments; and other factors that may be disclosed from time to
time in our SEC filings or otherwise. We caution that any forward-looking
statement reflects only our belief at the time the statement is made. We
undertake no obligation to update any forward-looking statements to reflect
subsequent events or circumstances.

© Edgar Online, source Glimpses

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