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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)

11/06/2020 | 05:04pm EST

See the financial measures section on pages 37-38 for further information on the Non-GAAP financial measures of constant currency and organic constant currency.

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, 2019 and in Part II, Item 1A. Risk Factors in our quarterly report
on Form 10-Q for the quarter ended March 31, 2020, which information is
incorporated herein by reference, provide 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 other similar expressions. Some or all of the factors identified in our
annual report on Form 10-K and in Part II, Item 1A. - Risk Factors in our
quarterly report on Form 10-Q for the quarter ended March 31, 2020, may be
beyond our control. Other risks and uncertainties include, but are not limited
to, the following: the financial and operational impacts of the COVID-19
pandemic and related economic conditions and the Company's efforts to respond to
such impacts, including the possibility that lockdown restrictions that were
eased during the second quarter of 2020 in many countries may be reinstated if
the spread of the coronavirus accelerates; changes in tax legislation in places
we do business; challenges in operating 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.

Business Overview


Our business is cyclical in nature and is sensitive to macroeconomic conditions
generally. 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 increased 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. By contrast, during periods of decreased demand, as
we experienced in the third quarter of 2020 when compared to the prior year, 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.

Our third quarter results were negatively impacted by the COVID-19 crisis, with
revenues declining 12.7% during the quarter. The pandemic reduced demand for our
services across almost all of our operations. We believe we have seen some signs
of a global recovery as the third quarter progressed with our results reflecting
a stronger market environment. At the beginning of the quarter, it appeared the
impact of the COVID-19 crisis was stabilizing in many parts of the world, and
economies slowly reopened. However, as the quarter came to a close a number of
countries started to see increased cases of COVID-19 that are leading to the
implementation of new restrictions in an effort to mitigate the spread. Unlike
the lockdowns and restrictions experienced earlier in the year, we do not
anticipate the same country-wide lockdowns, but more targeted and localized
restrictions. Continued uncertainty remains as to the future impact of the
pandemic on global and local economies. The ultimate impact may depend on
multiple factors which cannot be predicted, including public health conditions
and the possibility of local and national governments enforcing new restrictions
on commerce, which could have an adverse impact on our business, or, conversely
the prospect of additional fiscal stimulus packages, which could be beneficial.
What started as a sudden and swift slowdown of the global economies and labor
markets is expected to take longer to recover around the world than we had
initially contemplated. We currently anticipate a two-tiered recovery with
certain industries recovering quicker in the near term and other industries
continuing to be impacted in the medium- to long-term.

In addition to the impact from COVID-19 discussed above, results for the quarter
were impacted by currency. During the third quarter of 2020, the United States
dollar was weaker, on average, relative to the currencies in all of our markets,
except in Other Americas, which therefore had a favorable impact on our reported
results and generally may overstate the performance of our underlying

                                       25

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business. The changes in the foreign currency exchange rates had a 1.8%
favorable impact on revenues from services and no 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.

During the three months ended September 30, 2020, our businesses experienced
improvement in year-over-year revenue trends from the second quarter reflecting
a stronger market environment and early signs of a global recovery. Our
consolidated revenues were down 14.5% year-over-year in constant currency in the
quarter, an improvement from the 28.0% year-over-year constant currency decrease
in the second quarter of 2020. After adjusting for billing days, our organic
constant currency revenue year-over-year decrease was 14.9% in the third quarter
of 2020 compared to a 26.6% decrease in the second quarter of 2020. Although the
most dramatic revenue declines occurred in the second quarter, as European
governments imposed states of emergency and related lockdowns, we continued to
experience revenue declines during the third quarter on a year-over-year basis
as regional economies remained at reduced activity levels as a result of
COVID-19. We experienced a gradual improvement in the rates of decline
throughout the third quarter of 2020 with monthly year-over-year revenue
declines of 18% in July, 16% in August, and 9% in September. The progressive
improvement in the rate of year-over-year revenue decline during the quarter
reflects the continued increase in activity levels since the reopening of
economies largely in May as governments in some of our largest countries lifted
lock-down requirements.

We experienced a 25.1% decrease (-26.9% in constant currency and -27.0% in
organic constant currency) in our permanent recruitment business in the third
quarter of 2020 compared to 2019 as a result of the COVID-19 crisis. On an
overall basis, our Talent Solutions business, which includes Recruitment Process
Outsourcing (RPO), TAPFIN - Managed Service Provider (MSP) and our Right
Management offerings, experienced a decline in the quarter, which was driven by
RPO activity. We experienced a sharp reduction in RPO activity as many client
programs continued their hiring freezes initiated in the second quarter due to
the COVID-19 crisis, although we did see improvement in the rate of
year-over-year revenue decline from the second quarter. Our MSP business has
been resilient during the crisis and experienced growth during the quarter as we
assisted more clients to develop customized workforce solutions during the
economic downturn. Our Right Management business experienced growth during the
quarter driven by the increase demand for our career transition services.

During the third quarter of 2020 compared to 2019, most of our markets
experienced revenue declines due to the COVID-19 crisis. We experienced a
revenue decrease in Southern Europe, mainly driven by revenue declines in France
and Italy due to the continued impact from the crisis. We experienced a revenue
decrease in Northern Europe due to the declines in all of our key markets as a
result of the COVID-19 crisis. After adjusting for billing days, our organic
constant currency decrease in the Americas was 13.0% driven by a decrease in the
United States related to the COVID-19 crisis. After adjusting for billing days,
revenues in constant currency decreased 5.4% in APME due to the COVID-19 crisis,
partially offset by an increase in Japan due to an increase in demand for our
staffing/interim revenues.

Our gross profit margin in the third quarter of 2020 compared to 2019 decreased
due to the decrease in our permanent recruitment business as a result of the
COVID-19 crisis and the margin decrease in our Proservia managed services
business. The decrease was also due the decline in our staffing/interim margins
in the Americas and Northern Europe due to the higher mix of our lower-margin
enterprise client business. The overall gross margin decrease was partially
offset by the growth in our higher-margin career transition services within our
Right Management business and increases in staffing/interim margins in Southern
Europe due to the favorable impact of a direct cost accrual adjustment in France
related to a payroll tax audit recorded in the third quarter of 2020 and in APME
primarily due to the improvement in Japan.

We recorded $49.9 million of restructuring costs in the third quarter of 2020,
comprised of $16.7 million in the Americas, $7.6 million in Southern Europe,
$24.1 million in Northern Europe, and $1.5 million in APME. The restructuring
costs were primarily related to real estate optimization and streamlining our
operations. We expect to recover the restructuring costs through cost savings
over the next 12 months with full run-rate savings beginning in the first
quarter of 2021. 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 ability of the business to grow in
the future and enhance our productivity, technology and digital capabilities.

                                       26

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Our operating profit decreased 71.6% in the third quarter of 2020 (-71.6% in
constant currency; -71.9% in organic constant currency) while our operating
profit margin decreased 280 basis points compared to the third quarter of 2019.
Excluding the restructuring costs, the loss of $5.8 million from the disposition
of our Serbia, Slovenia, Bulgaria, and Croatia businesses incurred in the third
quarter of 2020 and the $30.4 million gain related to the deconsolidation of
ManpowerGroup Greater China Limited ("Deconsolidation") in the third quarter of
2019, our operating profit was down 38.4% in constant currency while operating
profit margin was down 100 basis points compared to the third quarter of 2019.
The decrease in operating profit margin reflects the material deleveraging that
accompanied the decrease in revenues from the sustained impact of the COVID-19
crisis.

We took significant actions in late March and early April, which allowed us to
reduce selling and administrative expenses in our business. These reductions
remained in place during the third quarter of 2020, which partially offset the
revenue and gross profit declines during the third quarter. This included
leveraging government unemployment related benefits, which allowed us to move
unutilized staff and associates quickly onto these programs, with most of the
benefits from these actions occurring in the second quarter. There were a few
programs still in place, mostly in Germany and the Netherlands, in the third
quarter from which we were still benefitting. This also included the short-term
action of cutting discretionary costs and scaling operations back. In addition
to these implemented initiatives, we are prepared to take further cost actions
to optimize our business structure through this economic downturn with the
intention of simultaneously preserving our ability to rebound when market
conditions improve. We are focused on managing costs as efficiently as possible
in the short-term while continuing to progress transformational actions aligned
with our strategic priorities.

As we manage through this crisis and prepare our business for future opportunities we would also like to emphasize the following points:

• Many of our leaders have experience managing through economic downturns, and

      many of our senior operational leaders previously managed parts of our
      business during the economic downturn in 2008-2009. We believe this is

valuable experience for the current economic environment. Additionally, we

have enhanced our enterprise risk management framework in recent years, and

we have business continuity plans which have been executed at a global,

regional and country level.

• The technology investments we have been making for the last few years as

part of our transformational activities have facilitated a rapid response to

the COVID-19 crisis. As of September 30, 2020, we had approximately [90%] of

our full-time equivalent employees working remotely while mitigating

potential productivity losses. We have also extended our cyber and

information security capability to accelerate the ability for some of our

      associates and consultants to work for our clients at home mitigating
      potential operational or financial losses. Expectations of when our
      full-time equivalent employees return to the workplace will depend on a

number of factors including the impact such a return would have on the

safety, health and well-being of our employees as well as the impact from

any government mandates or restrictions.

• Our business has benefitted from our diversification across geographies,

industries, and offerings, that we believe position us well to endure the

COVID-19 crisis. We believe this diversification may likewise position us to

take advantage of market opportunities that present themselves. For example,

during both the third quarter and first nine months of 2020 compared to

2019, we have seen smaller declines within our Experis business compared to

the Manpower business, and we are positioned with a large portion of our

business focused on providing professional services and Talent Solutions. We

believe our strategy to improve the diversification of our business through

the growth of Experis will facilitate growth following the crisis as

companies accelerate technology investments. Additionally, portions of our

Talent Solutions business are assisting our clients through this downturn

with customized solutions. Right Management has experienced increased demand

for career transition services and has historically been a counter-cyclical

      business that helps offset the impact of an economic downturn.





                                       27
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Operating Results - Three Months Ended September 30, 2020 and 2019

The following table presents selected consolidated financial data for the three months ended September 30, 2020 as compared to 2019.


                                                                                        Constant
                                                                                        Currency
(in millions, except per share data)         2020          2019         Variance        Variance
Revenues from services                     $ 4,584.8$ 5,248.9          (12.7 )%        (14.5 )%
Cost of services                             3,859.7       4,408.6          (12.5 )%        (14.3 )%
Gross profit                                   725.1         840.3          (13.7 )%        (15.4 )%
Gross profit margin                             15.8 %        16.0 %
Selling and administrative expenses            663.5         623.3            6.5 %           4.1 %
Operating profit                                61.6         217.0          (71.6 )%        (71.6 )%
Operating profit margin                          1.3 %         4.1 %
Interest and other expenses, net                 6.0          12.2          (51.4 )%
Earnings before income taxes                    55.6         204.8          (72.8 )%        (72.7 )%
Provision for income taxes                      45.3          58.7          (22.8 )%
Effective income tax rate                       81.5 %        28.6 %
Net earnings                               $    10.3$   146.1          (93.0 )%        (92.9 )%
Net earnings per share - diluted           $    0.18$    2.42          (92.6 )%        (92.6 )%
Weighted average shares - diluted               58.5          60.3           (3.0 )%



The year-over-year decrease in revenues from services of 12.7% (-14.5% in constant currency and -14.7% in organic constant currency) was attributed to:

• a revenue decrease in Southern Europe of 10.4% (-14.7% in constant

currency). This included a revenue decrease in France of 13.1% (-17.3% in

constant currency), which was primarily due to a decrease in demand for our

Manpower staffing services and a 17.5% decrease (-21.6% in constant

currency) in the permanent recruitment business, both due to the impact of

the COVID-19 crisis. The decrease also includes a decrease in Italy of 6.8%

(-11.3% in constant currency), which was primarily due to the decreased

demand for our Manpower staffing services and a 26.1% decrease (-29.7% in

constant currency) in the permanent recruitment business, both due to the

impact of the COVID-19 crisis, partially offset by the favorable impact of

approximately one more billing day;

• decreased demand for services in most of our markets within Northern Europe,

where revenues decreased 18.8% (-21.6% in constant currency), primarily due

to reduced demand for our Manpower staffing services and a 32.9% decrease

(-35.9% in constant currency) in the permanent recruitment business, both

primarily due to the impact of the COVID-19 crisis. We experienced revenue

declines in the United Kingdom, Germany, the Nordics, the Netherlands and

Belgium of 18.3%, 28.0%, 13.2%, 18.6% and 25.3%, respectively (-22.0%,

-31.5%, -15.1%, -22.6%, and -29.1%, respectively, in constant currency);

• a revenue decrease in the United States of 13.1% (-15.2% on an organic

basis) primarily driven by decreased demand for our staffing/interim

services and a decrease in our permanent recruitment business of 14.8%

(-15.2% on an organic basis), both due to the impacts of the COVID-19

crisis, partially offset by increased demand for our MSP offering and career

transition services; and

• a revenue decrease in APME of 5.4% (-6.0% in constant currency) due to the

decline in demand for our staffing/interim services and a decrease in our

permanent recruitment business of 15.8% (-18.2% in constant currency),

      partially offset by an increase in revenues in Japan and an increase in
      demand for our Talent-Based Outsourcing services within the Manpower
      business; partially offset by

• a 1.8% increase due to the impact of changes in currency exchange rates.

The year-over-year 20 basis point decrease in gross profit margin was primarily attributed to:

• a 30 basis point unfavorable impact due to the decrease in our permanent

      recruitment business of 25.1% (-26.9% in constant currency and -27.0% in
      organic constant currency);


                                       28
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• a 20 basis point unfavorable impact from declines in the staffing/interim

      margins in the Americas and Northern Europe due to the higher mix of our
      lower-margin enterprise client business; and

• a 10 basis point unfavorable impact from the decrease in margin in our

Proservia business primarily related to the lower utilization of consultants

in Germany; partially offset by

• a 20 basis point favorable impact from the growth in our higher-margin

career transition services within our Right Management business; and

• a 20 basis point favorable impact from staffing/interim margin increases in

the Southern Europe due to the favorable impact of a direct cost accrual

adjustment in France related to a payroll tax audit recorded in the third

      quarter of 2020 and APME primarily due to the improvement in Japan.

The 6.5% increase in selling and administrative expenses in the third quarter of 2020 (4.1% in constant currency; 3.9% in organic constant currency) was primarily attributed to:

• restructuring costs of $49.9 million incurred in the third quarter of 2020;

• the $30.4 million gain related to the Deconsolidation in the third quarter

of 2019;

• the $5.8 million loss on the disposition of subsidiaries in the third

quarter of 2020;

• the additional recurring selling and administrative costs of $1.5 million

incurred as a result of the franchise acquisitions in the United States in

August and October 2019; and

• a 2.4% increase due to the impact of changes in currency exchange rates;

partially offset by

• a 6.4% decrease (-8.3% in constant currency and -8.6% in organic constant

currency) in personnel costs due to a reduction of salary-related costs as a

result of lower headcount and a decrease in variable incentive costs due to

a decline in profitability in most markets; and

• an 8.2% decrease (-10.2% in constant currency and -10.3% in organic constant

currency) in non-personnel related costs, excluding restructuring costs,

loss from the disposition of subsidiaries and gain related to the

Deconsolidation, due to cost management actions taken across all segments as

a result of revenue declines.



Selling and administrative expenses as a percent of revenues increased 260 basis
points in the third quarter of 2020 compared to the third quarter of 2019 due
primarily to:

• a 110 basis point unfavorable impact from restructuring costs in the third

quarter of 2020;

• a 70 basis point unfavorable impact from expense deleveraging, excluding

restructuring costs, the loss on the disposition of subsidiaries and the

gain related to the Deconsolidation, as we were unable to decrease selling

      and administrative expenses at the same rate as our revenue decline;


   •  a 60 basis point unfavorable impact from the gain related to the
      Deconsolidation in the third quarter of 2019;


   •  a 10 basis point unfavorable impact from the loss on disposition of
      subsidiaries in the third quarter of 2020; and

• a 10 basis point unfavorable impact from changes in currency exchange rates.



Interest and other expenses, net is comprised of interest, foreign exchange
gains and losses and other miscellaneous non-operating income and expenses,
including noncontrolling interests. Interest and other expenses, net was $6.0
million in the third quarter of 2020 compared to $12.2 million in the third
quarter of 2019. Net interest expense decreased $3.6 million in the third
quarter of 2020 to $7.7 million from $11.3 million in the third quarter of 2019
primarily due to an increase interest income as a result of higher cash
balances. Miscellaneous income was $2.3 million in the third quarter of 2020
compared to $3.2 million in the third quarter of 2019.

                                       29

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We recorded income tax expense at an effective rate of 81.5% for the three
months ended September 30, 2020, as compared to an effective rate of 28.6% for
the three months ended September 30, 2019. The 2020 rate was unfavorably
impacted by the relatively low level and mix of pre-tax earnings, tax losses in
certain countries for which we did not recognize a corresponding tax benefit due
to valuation allowances, including the recognition of a discrete valuation
allowance in Germany, and the French business tax. The French business tax had a
more significant unfavorable impact in the quarter due to French pre-tax
earnings decreasing at a greater rate than revenues, which is the primary basis
for the tax calculation. The effective tax rate of 81.5% for the three months
ended September 30, 2020 was significantly higher than the United States Federal
statutory rate of 21% primarily due to the factors noted above. The COVID-19
crisis has created uncertainty in predicting future earnings before income taxes
and its impact to the third quarter of 2020 along with quarterly effective tax
rates for future quarters may be material.

Net earnings per share - diluted was $0.18 in the third quarter of 2020 compared
to $2.42 in the third quarter of 2019. Restructuring costs recorded in the third
quarter of 2020 negatively impacted net earnings per share - diluted by
approximately $0.72 in the third quarter of 2020. The loss from the disposition
of subsidiaries in the third quarter of 2020 negatively impacted net earnings
per share - diluted by approximately $0.09 in the third quarter of 2020. The
gain from the ManpowerGroup Greater China Limited IPO recorded in the third
quarter of 2019 positively impacted net earnings per share - diluted by
approximately $0.50 per share in the third quarter of 2019.

Weighted average shares - diluted decreased to 58.5 million in the third quarter
of 2020 from 60.3 million in the third quarter of 2019. This decrease was due to
the impact of share repurchases completed since the third quarter of 2019 and
the full weighting of the repurchases completed in the third quarter of 2019,
partially offset by shares issued as a result of exercises and vesting of
share-based awards since the third quarter of 2019.



Operating Results - Nine months ended September 30, 2020 and 2019


                                                                                           Constant
                                                                                           Currency
(in millions, except per share data)           2020           2019         Variance        Variance
Revenues from services                      $ 12,946.1$ 15,666.9          (17.4 )%        (16.4 )%
Cost of services                              10,920.3       13,151.4          (17.0 )%        (15.9 )%
Gross profit                                   2,025.8        2,515.5          (19.5 )%        (18.6 )%
Gross profit margin                               15.6 %         16.1 %
Selling and administrative expenses,
excluding goodwill impairment charges          1,909.7        1,998.2           (4.4 )%         (3.6 )%
Goodwill impairment charges                       66.8           64.0            4.2 %           4.6 %
Selling and administrative expenses            1,976.5        2,062.2           (4.2 )%         (3.3 )%
Operating profit                                  49.3          453.3          (89.1 )%        (88.4 )%
Operating profit margin                            0.4 %          2.9 %

Interest and other expenses (income), net 32.3 (46.1 )

N/A

Earnings before income taxes                      17.0          499.4          (96.6 )%        (96.0 )%
Provision for income taxes                        69.4          172.5          (59.8 )%
Effective income tax rate                        407.4 %         34.5 %
Net (loss) earnings                         $    (52.4 )$    326.9            N/A             N/A

Net (loss) earnings per share - diluted $ (0.90 )$ 5.40

      N/A             N/A
Weighted average shares - diluted                 58.4           60.6           (3.6 )%



The year-over-year decrease in revenues from services of 17.4% (-16.4% in constant currency and -16.0% in organic constant currency) was attributed to:

• a revenue decrease in Southern Europe of 19.4% (-19.9% in constant currency;

-21.2% in organic constant currency). This included a revenue decrease in

France of 26.3% (-26.6% in constant currency), which was primarily due to a

decrease in our Manpower staffing services and a 25.5% decrease (-25.4% in

      constant currency) in the permanent recruitment business, both due to the
      impact of the COVID-19 crisis. The decrease also includes a decrease in

Italy of 16.0% (-16.2% in constant currency), which was primarily due to the

decreased demand for our Manpower staffing services and a 34.2% decrease

      (-34.0% in constant currency) in the permanent recruitment business, both
      due to the impact of the COVID-19 crisis;


                                       30
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• decreased demand for services in most of our markets within Northern Europe,

where revenues decreased 19.1% (-17.9% in constant currency; -17.7% in

organic constant currency), primarily due to reduced demand for our Manpower

staffing services and a 32.1% decrease (-31.3% in constant currency) in the

permanent recruitment business as a result of the impact of the COVID-19

crisis. We experienced revenue declines in the United Kingdom, Germany, the

      Nordics, the Netherlands and Belgium of 14.9%, 26.1%, 19.1%, 21.9% and
      27.7%, respectively (-14.7%, -26.0%, -15.3%, -21.9%, and -27.8%,
      respectively, in constant currency);

• a revenue decrease in the United States of 12.2% (-14.5% on an organic

basis) primarily driven by a decline in demand for our Manpower staffing

services and a 13.8% (-14.3% on an organic basis) decrease in the permanent

recruitment business, both due to the impact of the COVID-19 crisis,

partially offset by an increase in our Talent Solutions business, primarily

within our MSP offering and career transition services;

• a revenue decrease in APME of 14.2% (-13.3% in constant currency; -2.8% in

organic constant currency) due to the Deconsolidation, partially offset by

      an increase in revenues in Japan and an increase in demand for our
      Talent-Based Outsourcing services within the Manpower business; and

• a 1.0% decrease due to the impact of changes in currency exchange rates.

The year-over-year 50 basis point decrease in gross profit margin was primarily attributed to:

• a 30 basis point unfavorable impact due to the decrease in our permanent

      recruitment business of 28.1% (-27.2% in constant currency and -23.9% in
      organic constant currency);

• a 20 basis point unfavorable impact due to the margin decrease in our

Proservia business primarily related to the lower utilization of consultants

      in Germany; and


   •  a 10 basis point unfavorable impact from a deterioration in our

staffing/interim margin in the Americas, Southern Europe, and Northern

Europe due to the higher mix of our lower-margin enterprise client business

and higher rates of sickness and absenteeism in certain countries and

increased direct costs associated with early termination of client contracts

during the COVID-19 crisis. These unfavorable impacts were partially offset

by reduced direct costs in certain countries due to government crisis

response programs, a direct cost accrual adjustment in France related to a

payroll tax audit recorded in the first nine months of 2020, our execution

of various bill/pay yield initiatives due to the COVID-19 crisis; partially

offset by

• a 10 basis point favorable impact by growth in our higher-margin MSP

offering and career transition services.

The 4.2% decrease in selling and administrative expenses in the nine months ended September 30, 2020 (-3.3% in constant currency; -2.4% in organic constant currency) was primarily attributed to:

• a 10.7% decrease (-9.8% in constant currency and -8.8% in organic constant

currency) in personnel costs due to a reduction of salary-related costs as a

result of lower headcount and a decrease in variable incentive costs due to

a decline in profitability in most markets, and the benefits related to the

transition of full-time equivalent employees onto government temporary

unemployment programs that mostly occurred in the second quarter of 2020;

• a 6.7% decrease (-5.8% in constant currency and -5.0% in organic constant

currency) in non-personnel related costs, excluding goodwill and other

impairment charges, restructuring costs, loss on disposition of

subsidiaries, and gain related to Deconsolidation, due to cost management

actions taken across all segments as a result of revenue declines;

• the reduction in recurring selling and administrative costs of $36.5 million

as a result of the Deconsolidation in July 2019; and

• a 0.9% decrease due to the impact of changes in currency exchange rates;

partially offset by



   •  an increase in restructuring costs to $98.1 million incurred in the nine
      months ended September 30, 2020 from $39.8 million incurred in the nine
      months ended September 30, 2019;

• the $30.4 million gain related to the Deconsolidation in the nine months

      ended September 30, 2019;


                                       31
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• the additional recurring selling and administrative costs of $17.9 million

incurred as a result of the acquisition of Manpower Switzerland in Southern

Europe and franchise acquisitions in the United States in August and October

2019;

• the increase in goodwill and other impairment charges to $72.8 million in

      the nine months ended September 30, 2020 from $65.6 million in the nine
      months ended September 30, 2019; and

• the $5.8 million loss on the disposition of subsidiaries in the nine months

ended September 30, 2020.



Selling and administrative expenses as a percent of revenues increased 210 basis
points in the nine months ended September 30, 2020 compared to the first nine
months of 2019 due primarily to:

• a 120 basis point unfavorable impact from expense deleveraging, excluding

goodwill and other impairment charges, restructuring costs, loss on

disposition of subsidiaries, and gain related to Deconsolidation, as we were

unable to decrease selling and administrative expenses at the same rate as

our revenue decline;

• a 50 basis point unfavorable impact from the increase in restructuring costs

      in the nine months ended September 30, 2020 compared to 2019;


   •  a 20 basis point unfavorable impact from the gain related to the
      Deconsolidation in the nine months ended September 30, 2019;

• a 10 basis point unfavorable impact from the increase in goodwill and other

impairment charges; and

• a 10 basis point unfavorable impact from changes in currency exchange rates.



Interest and other expenses (income), net is comprised of interest, foreign
exchange gains and losses and other miscellaneous non-operating income and
expenses, including noncontrolling interests. Interest and other expenses
(income), net was expense of $32.3 million in the nine months ended September
30, 2020 compared to income of $46.1 million in the nine months ended September
30, 2019. Net interest expense decreased $7.7 million in the nine months ended
September 30, 2020 to $22.4 million from $30.1 million in the nine months ended
September 30, 2019 primarily due to an increase in interest income as a result
of higher cash balances. Miscellaneous expense (income), net was an expense $5.7
million in the nine months ended September 30, 2020 compared to income of $82.7
million in the nine months ended September 30, 2019. The change is primarily due
to the $80.4 million from the acquisition of Manpower Switzerland in the nine
months ended September 30, 2019, the pension settlement expense of $10.2 million
recorded in the nine months ended September 30, 2020 and the decrease in
noncontrolling interest expense as a result of a decrease in earnings in a joint
venture in Germany.

We recorded income tax expense at an effective rate of 407.4% for the nine
months ended September 30, 2020, as compared to an effective rate of 34.5% for
the nine months ended September 30, 2019. The 2020 rate was unfavorably impacted
by the relatively low level and mix of pre-tax earnings, tax losses in certain
countries for which we did not recognize a corresponding tax benefit due to
valuation allowances, including the recognition of a discrete valuation
allowance in Germany, the non-deductible goodwill impairment charge in Germany,
and the French business tax. The effective tax rate of 407.4% for the nine
months ended September 30, 2020 was significantly higher than the United States
Federal statutory rate of 21% primarily due to the factors noted above.

Net (loss) earnings per share - diluted was a loss of $0.90 in the nine months
ended September 30, 2020 compared to earnings of $5.40 in the nine months ended
September 30, 2019. Foreign currency exchange rates unfavorably impacted net
(loss) earnings per share - diluted by approximately $0.01 per share in the nine
months ended September 30, 2020. Restructuring costs recorded in the nine months
ended September 30, 2020 and 2019 negatively impacted net (loss) earnings per
share - diluted by approximately $1.40 and $0.52 per share, net of tax, in the
nine months ended September 30, 2020 and 2019, respectively. Goodwill and other
impairment charges recorded in the nine months ended September 30, 2020 and 2019
negatively impacted net earnings per share - diluted by approximately $1.14 and
$1.08 per share in the nine months ended September 30, 2020 and 2019,
respectively. The pension settlement expense recorded in the nine months ended
September 30, 2020 negatively impacted net loss per share - diluted by
approximately $0.11, net of tax, in the nine months ended September 30, 2020.
The loss from the disposition of subsidiaries in the nine months ended September
30, 2020 negatively impacted net earnings per share - diluted by approximately
$0.09, net of tax, in the nine months ended September 30, 2020. The gain from
the acquisition of Manpower Switzerland recorded in the nine months ended
September 30, 2019 positively impacted net earnings per share - diluted by
approximately $1.33 per share in the nine months ended

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September 30, 2019. The gain from the Deconsolidation recorded in the nine
months ended September 30, 2019 positively impacted net earnings per share -
diluted by approximately $0.50 per share in the nine months ended September 30,
2019.

Weighted average shares - diluted decreased to 58.4 million in the nine months
ended September 30, 2020 from 60.6 million in the nine months ended September
30, 2019. This decrease was due to the impact of share repurchases completed
since September 30, 2019 and the full weighting of the repurchases completed in
the nine months ended September 30, 2019, partially offset by shares issued as a
result of exercises and vesting of share-based awards since September 30, 2019.

Segment Operating Results

Americas

In the Americas, revenues from services decreased 15.1% (-11.2% in constant
currency; -12.5% in organic constant currency) in the third quarter of 2020
compared to 2019. In the United States, revenues from services decreased 13.1%
(-15.2% on an organic basis) in the third quarter of 2020 compared to 2019,
primarily driven by decreased demand for our staffing/interim services and a
decrease in our permanent recruitment business of 14.8% (-15.2% on an organic
basis), both due to the impacts of the COVID-19 crisis. These decreases in the
United States were partially offset by increased demand for our MSP offering as
well as increased demand for career transition services, within our Right
Management business. In Other Americas, revenues from services decreased 18.2%
(-8.2% in constant currency) in the third quarter of 2020 compared to 2019
primarily due to the impacts of the COVID-19 crisis. This decline was driven by
decreases in Mexico, Canada, Peru, Colombia and Brazil of 20.0%, 11.2%, 25.1%,
42.8%, and 12.2%, respectively (-9.1%, -10.4%, -20.6%, -36.1% and increase of
18.9%, respectively, in constant currency). These decreases were offset by an
increase in Argentina of 7.9% (58.1% in constant currency) primarily due to
inflation.

In the Americas, revenues from services decreased 13.0% (-9.0% in constant
currency, -10.4% in organic constant currency) in the nine months ended
September 30, 2020 compared to 2019. In the United States, revenues from
services decreased 12.2% (-14.5% on an organic basis) in the nine months ended
September 30, 2020 compared to 2019, primarily driven by decreased demand for
our Manpower staffing services and a decrease in our permanent recruitment
business of 13.8% (-14.3% on an organic basis), both due to the impacts of the
COVID-19 crisis. These decreases in the United States were partially offset by
increased demand for our MSP offering and career transition services. In Other
Americas, revenues from services decreased 14.4% (-4.2% in constant currency) in
the nine months ended September 30, 2020 compared to 2019 primarily due to the
impacts of the COVID-19 crisis. This decline was driven by decreases in Mexico,
Canada, Argentina, Peru, Colombia and Brazil of 16.6%, 4.4%, 2.9%, 16.3%, 34.0%
and 21.5%, respectively (-6.6%, -2.7%, increase of 48.5%, -13.2%, -24.9% and
increase of 1.9%, respectively, in constant currency). The constant currency
increase in Argentina was primarily due to inflation.

Gross profit margin increased in both the third quarter and the nine months
ended September 30, 2020 compared to 2019 primarily due to gross profit margin
increases in the United States from the increase in revenues from our
higher-margin career transition services and MSP offering. This increase was
partially offset by the decreases in our permanent recruitment business of 20.0%
and 17.6%, respectively (-18.6% and -16.2%, respectively, in constant currency)
and declines in the staffing/interim margin due to client mix changes, as a
higher percentage of revenues came from our lower margin enterprise clients.

In the third quarter of 2020, selling and administrative expenses increased 0.8%
(3.4% in constant currency and 2.5% in organic constant currency), primarily due
to the increase in restructuring costs to $16.7 million in the third quarter of
2020 compared to zero in the third quarter of 2019 and the additional recurring
selling and administrative costs incurred as a result of the franchise
acquisitions in the United States in August and October 2019. These increases
were partially offset by the decrease in salary-related costs, because of lower
headcount, and discretionary expenses. Selling and administrative expenses
increased 0.3% (3.0% in constant currency and 1.9% in organic constant currency)
in the nine months ended September 30, 2020 compared to 2019, primarily due to
the increase in restructuring costs to $29.5 million in the first nine months of
2020 compared to $9.8 million in the first nine months of 2019, the impairment
charge of $6.0 million recorded in the United States related to capitalized
software in the first nine months of 2020, a bad debt expense and a state sales
tax related charge incurred in the first nine months of 2020, and the additional
recurring selling and administrative costs incurred as a result of the franchise
acquisitions in the United States. These increases were partially offset by
decreases in salary-related costs, due to lower headcount, and discretionary
expenses.

Operating Unit Profit ("OUP") margin in the Americas was 3.4% and 5.4% for the
third quarter of 2020 and 2019, respectively. In the United States, OUP margin
decreased to 3.3% in the third quarter of 2020 from 6.0% in 2019 primarily due
to the increase in

                                       33
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restructuring costs and expense deleveraging, as we were unable to decrease
expenses at the same rate as the accelerated revenue decline due to the COVID-19
crisis, partially offset by the increase in the gross profit margin. Other
Americas OUP margin decreased to 3.5% in the third quarter of 2020 from 4.6% in
the third quarter of 2019 due primarily to the decrease in the gross profit
margin, increase in restructuring costs and expense deleveraging.

OUP margin in the Americas was 2.4% and 4.6% for the nine months ended September
30, 2020 and 2019, respectively. In the United States, OUP margin decreased to
1.8% for the nine months ended September 30, 2020 from 4.8% in 2019 primarily
due to the increase in restructuring costs, the software impairment charge and
expense deleveraging. These decreases were partially offset by the increase in
the gross profit margin. Other Americas OUP margin decreased to 3.5% for the
nine months ended September 30, 2020 from 4.2% in 2019 primarily due to a
decline in the gross profit margin and expense deleveraging.

Southern Europe


In Southern Europe, which includes operations in France and Italy, revenues from
services decreased 10.4% (-14.7% in constant currency) in the third quarter of
2020 compared to 2019. In the third quarter of 2020, revenues from services
decreased 13.1% (-17.3% in constant currency) in France (which represents 57% of
Southern Europe's revenues) and decreased 6.8% (-11.3% in constant currency) in
Italy (which represents 17% of Southern Europe's revenues), with both
experiencing improvement in the rate of revenue decline as the third quarter
progressed. The decrease in France is primarily due to decreased demand for our
Manpower staffing services and a 17.5% decrease (-21.6% in constant currency) in
the permanent recruitment business, both due to the impact of the COVID-19
crisis. The decrease in Italy was primarily due to the decreased demand for our
Manpower staffing services and a 26.1% decrease (-29.7% in constant currency) in
the permanent recruitment business, both due to the impact of the COVID-19
crisis, partially offset by the favorable impact of approximately one more
billing day. In Other Southern Europe, revenues from services decreased 6.5%
(-10.7% in constant currency) during the third quarter of 2020 compared to 2019,
due to decreased demand for our Manpower staffing services and a decrease in our
permanent recruitment business of 43.2% (-45.0% in constant currency), both due
to the impact of the COVID-19 crisis.

Revenues from services decreased 19.4% (-19.9% in constant currency) in the nine
months ended September 30, 2020 compared to 2019. In the nine months ended
September 30, 2020, revenues from services decreased 26.3% (-26.6% in constant
currency) in France and decreased 16.0% (-16.2% in constant currency) in Italy.
The decrease in France is due to decreased demand for our Manpower staffing
services and a 25.5% (-25.4% in constant currency) decrease in our permanent
recruitment business, both due to the impact of the COVID-19 crisis. The
decrease in Italy was primarily due to decreased demand for our Manpower
staffing services and a 34.2% (-34.0% in constant currency) decrease in our
permanent recruitment business, both due to the impact of the COVID-19 crisis.
In Other Southern Europe, revenues from services decreased 4.3% (-5.3% in
constant currency) during the nine months ended September 30, 2020 compared to
2019, due to decreased demand for our Manpower staffing services and a decrease
in our permanent recruitment business of 33.7% (-33.7% in constant currency),
both due to the impact of the COVID-19 crisis.

Gross profit margin decreased in both the third quarter and the first nine
months of 2020 compared to 2019 primarily due to the decrease of 30.5% (-33.4%
in constant currency) in the permanent recruitment business, partially offset by
the increase in the staffing/interim gross profit margin due to a direct cost
accrual adjustment in France related to a payroll tax audit recorded in the
third quarter of 2020. Gross profit margin decreased in the first nine months of
2020 compared to 2019 primarily due to the decrease of 30.9% (-30.8% in constant
currency) in the permanent recruitment business and a decrease in the
staffing/interim gross profit margin in France, Italy and certain countries
within Other Southern Europe, partially offset by a direct cost accrual
adjustment in France recorded in the first nine months of 2020.

Selling and administrative expenses increased 2.0% (decrease -2.9% in constant
currency) during the third quarter of 2020 compared to 2019 primarily due to an
increase in restructuring costs to $7.6 million in the third quarter of 2020
compared to zero in the third quarter of 2019, the loss of $5.8 million from the
disposition of our Serbia, Slovenia, Bulgaria, and Croatia businesses, and the
unfavorable impact of changes in currency exchange rates. These increases were
partially offset by the reduction of our discretionary expenses, a decrease in
personnel costs, as a result of a reduction in headcount, and a decrease in
variable incentive costs due to a decline in profitability in most markets.

Selling and administrative expenses decreased 5.7% (-6.2% in constant currency)
in the nine months ended September 30, 2020 compared to 2019. We took
significant actions in France and Italy in March and April to reduce our costs
to help offset the materially reduced revenues in the first nine months of 2020.
In both France and Italy, we transitioned full-time equivalent employees onto

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government temporary unemployment programs and other initiatives and eliminated
a significant amount of discretionary spend to manage through the COVID-19
crisis. The decrease in selling and administrative expenses in the first nine
months of 2020 was primarily due to the decreases in personnel costs, as a
result of a reduction in headcount, a decrease in variable incentive costs due
to a decline in profitability in most markets, and the benefits related to the
transition of full-time equivalent employees onto government temporary
unemployment programs in certain markets that mostly occurred in the second
quarter of 2020. The decreases are also due to the reduction of our
discretionary expenses. These decreases were offset by the increase in
restructuring costs to $20.7 million in the first nine months of 2020 compared
to $5.4 million in the first nine months of 2019, the loss on the disposition of
subsidiaries and the additional recurring selling and administrative costs from
our acquisition of the remaining interest in Manpower Switzerland.

OUP margin in Southern Europe was 3.4% for the third quarter of 2020 compared to
4.9% for 2019. In France, the OUP margin decreased to 4.3% for the third quarter
of 2020 from 5.1% in 2019 primarily due to expense deleveraging partially offset
by the increase in the gross profit margin. In Italy, the OUP margin decreased
to 4.4% for the third quarter of 2020 from 6.2% for 2019 primarily due to the
decline in the gross profit margin, the increase in restructuring costs to $1.8
million in the third quarter of 2020 compared to zero in the third quarter of
2019 and expense deleveraging. Other Southern Europe's OUP margin decreased to
0.9% for the third quarter of 2020 from 3.9% in 2019, due to the increase in
restructuring costs to $5.8 million in the third quarter of 2020 compared to
zero in the third quarter of 2019, the loss from the disposition of subsidiaries
in the third quarter of 2020, decrease in the gross profit margin and expense
deleveraging.

OUP margin in Southern Europe was 2.5% for the nine months ended September 30,
2020 compared to 4.8% in 2019. In France, the OUP margin decreased to 2.9% in
the nine months ended September 30, 2020 compared to 4.9% in 2019. In Italy, the
OUP margin decreased to 4.3% in the nine months ended September 30, 2020
compared to 6.5% in 2019. The decreases in France and Italy were primarily due
to the decline in the gross profit margin and expense deleveraging. Other
Southern Europe's OUP margin decreased to 0.6% in the nine months ended
September 30, 2020 compared to 3.2% in 2019, due to the decrease in the gross
profit margin, the increase in restructuring costs to $17.3 million in the first
nine months of 2020 from $3.1 million in the first nine months of 2019, the loss
from the disposition of subsidiaries in the first nine months of 2020 and
expense deleveraging.

Northern Europe


In Northern Europe, which includes operations in the United Kingdom, Germany,
the Nordics, the Netherlands and Belgium (comprising 34%, 16%, 21%, 12%, and 8%,
respectively, of Northern Europe's revenues), revenues from services decreased
18.8% (-21.6% in constant currency) in the third quarter of 2020 compared to
2019. We experienced revenue declines in the United Kingdom, Germany, the
Nordics, the Netherlands and Belgium of 18.3%, 28.0%, 13.2%, 18.6% and 25.3%
(-22.0%, -31.5%, -15.1%, -22.6% and -29.1%, respectively, in constant currency).
The Northern Europe revenue decrease is primarily due to reduced demand for our
Manpower staffing services and a 32.9% decrease (-35.9% in constant currency) in
the permanent recruitment business, both primarily due to the impact of the
COVID-19 crisis.

Revenues from services decreased 19.1% (-17.9% in constant currency) in the nine
months ended September 30, 2020 compared to 2019. We experienced revenue
declines in the United Kingdom, Germany, the Nordics, the Netherlands and
Belgium of 14.9%, 26.1%, 19.1%, 21.9% and 27.7% (-14.7%, -26.0%, -15.3%, -21.9%
and -27.8%, respectively, in constant currency). The Northern Europe revenue
decrease is primarily due to reduced demand for our Manpower staffing services
and a 32.1% decrease (-31.3% in constant currency) in the permanent recruitment
business, both primarily due to the impact of the COVID-19 crisis.

Gross profit margin decreased in both the third quarter and first nine months of
2020 compared to 2019 due to the decreases in our permanent recruitment business
for the third quarter and nine months ended September 30, 2020 compared to 2019,
and the declines in the Experis interim margins due to client mix changes, as a
higher percentage of revenues consisted of revenues from our lower-margin
enterprise clients, and the margin decrease in our Proservia business primarily
related to the lower utilization of consultants in Germany.

Selling and administrative expenses increased 1.2% (decrease of -3.2% in
constant currency) in the third quarter of 2020 compared to 2019 primarily due
to the increase in restructuring costs to $24.1 million in the third quarter of
2020 from zero in the third quarter of 2019 and the unfavorable impact of
changes in currency exchange rates. These increases were partially offset by the
decrease in discretionary expenses and personnel costs, as a result of a
reduction in headcount, a decrease in variable incentive costs due to declines
in profitability in most markets, and the continued benefits related to the
transition of full-time equivalent employees onto government temporary
unemployment programs in Germany and the Netherlands.

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Selling and administrative expenses decreased 9.7% (-8.9% in constant currency)
in the nine months ended September 30, 2020 compared to 2019 primarily due to
the decrease in personnel costs, as a result of a reduction in headcount, a
decrease in variable incentive costs due to declines in profitability in most
markets, and the benefits related to the transition of full-time equivalent
employees onto government temporary unemployment programs in certain markets,
mostly in the second quarter of 2020. The decrease is also due to the decline in
office-related expenses driven by a decrease in the number of offices, and a
reduction of our discretionary expenses. These decreases were partially offset
by increase of restructuring costs to $43.5 million in the first nine months of
2020 from $18.7 million in the first nine months of 2019 and the increase in the
goodwill impairment charge in Germany of $66.8 million in the first nine months
of 2020 compared to $60.2 million in the first nine months of 2019.

Northern Europe experienced a decrease to an operating unit loss of 2.4% in the
third quarter of 2020 from an OUP margin of 2.0% in the third quarter of 2019
and a decrease to an operating unit loss of 1.3% in the nine months ended
September 30, 2020 from an OUP margin of 1.4% in the nine months ended September
30, 2019. The decreases were primarily due to the declines in the gross profit
margins, the increase in restructuring costs, and expense deleveraging. The
decrease in the nine months ended September 30, 2020 was also due increase in
the goodwill impairment charge in Germany.

APME


Revenues from services decreased 5.4% (-6.0% in constant currency) in the third
quarter of 2020 compared to 2019. In Japan (which represents 45% of APME's
revenues), revenues from services increased 5.7% (4.5% in constant currency) due
to the increased demand for our staffing/interim services, partially offset by a
13.0% decrease (-14.0% in constant currency) in our permanent recruitment
business and the unfavorable impact of approximately one fewer billing day. In
Australia (which represents 17% of APME's revenues), revenues from services
decreased 4.5% (-8.4% in constant currency) due to the decline in demand for our
staffing/interim services and the 5.0% (-8.8% in constant currency) decrease in
our permanent recruitment business, both due to the impact of the COVID-19
crisis, as well as the unfavorable impact of approximately one fewer billing
day. The revenue decrease in the remaining markets in APME is due to the decline
in demand for our staffing/interim services and the decrease in our permanent
recruitment business, both due to the COVID-19 crisis, partially offset by the
increase in demand for our Talent-Based Outsourcing services within our Manpower
business.

Revenues from services decreased 14.2% (-13.3% in constant currency and -2.8% in
organic constant currency) in the nine months ended September 30, 2020 compared
to 2019. In Japan, revenues from services increased 8.8% (7.2% in constant
currency) due to increased demand for our staffing/interim services, an increase
in our Talent Solutions business and the favorable impact of approximately one
additional billing days in the first nine months of 2020 compared to 2019. These
increases were partially offset by a 5.1% decrease (-6.5% in constant currency)
in our permanent recruitment business. In Australia, revenues from services
decreased 20.3% (-17.6% in constant currency) due to the decrease in our
staffing/interim revenues, as a result of our decision to exit certain
businesses with low-margins to improve profitability and the impact of the
COVID-19 crisis, the 8.7% (-5.6% in constant currency) decline in our permanent
recruitment business and the unfavorable impact of approximately one fewer
billing day. The revenue decrease in the remaining markets in APME is due to the
Deconsolidation, and the decline in demand for our staffing/interim services and
the decrease in our permanent recruitment business, both due to the COVID-19
crisis, partially offset by the increase in demand for our Talent-Based
Outsourcing services within our Manpower business.

Gross profit margin increased in the third quarter of 2020 compared to 2019 due
to the increase in our staffing/interim margin, mostly in Japan, partially
offset by the decrease in our permanent recruitment business of 15.8% (-18.2% in
constant currency). Gross profit margin decreased in the first nine months of
2020 compared to 2019 due to the decrease in our permanent recruitment business
of 30.3% (-28.8% in constant currency and -11.6% in organic constant currency),
partially offset by the increase in our staffing/interim margin, mostly in
Japan.

Selling and administrative expenses increased 82.3% (79.4% in constant currency)
in the third quarter of 2020 compared to 2019 primarily due to the gain of $30.4
million from the Deconsolidation in the third quarter of 2019, an increase in
costs to support the increase in revenues in certain markets, and the increase
of restructuring costs to $1.5 in the third quarter of 2020 from zero in the
third quarter of 2019.

Selling and administrative expenses increased 2.5% (3.5% in constant currency
and 22.9% in organic constant currency) in the first nine months of 2020
compared to 2019 primarily due to the gain from the Deconsolidation in the first
nine months of 2019 and an increase in costs to support the increase in revenues
in certain markets. These increases were partially offset by the reduction of

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recurring selling and administrative costs as a result of the Deconsolidation
and the decrease of restructuring costs to $4.1 million in the first nine months
of 2020 compared to $4.4 million in the first nine months of 2019.

OUP margin for APME decreased to 2.8% in the third quarter of 2020 from 8.7% in
the third quarter of 2019 due to the gain from the Deconsolidation in the third
quarter of 2019, an increase in restructuring costs and expense deleveraging,
partially offset by an increase in the gross profit margin. OUP margin decreased
to 2.9% in the first nine months of 2020 from 5.1% in the first nine months of
2019 due to the gain from the Deconsolidation in the third quarter of 2019, a
decline in the gross profit margin and expense deleveraging.



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 or decline 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 or decline
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.

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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 September 30, 2020 Compared to 2019
                                                                                                Impact of
                                                                                              Acquisitions          Organic
                                                                            Constant        and Dispositions       Constant
                          Reported        Reported         Impact of        Currency          (In Constant         Currency
                          Amount(a)       Variance         Currency         Variance            Currency)          Variance
Revenues from
services:
Americas:
United States                  578.8           (13.1 )%             -            (13.1 )%                 2.1 %         (15.2 )%
Other Americas                 350.3           (18.2 )%         (10.0 )%          (8.2 )%                   -            (8.2 )%
                               929.1           (15.1 )%          (3.9 )%         (11.2 )%                 1.3 %         (12.5 )%
Southern Europe:
France                       1,205.3           (13.1 )%           4.2 %          (17.3 )%                   -           (17.3 )%
Italy                          351.2            (6.8 )%           4.5 %          (11.3 )%                   -           (11.3 )%
Other Southern Europe          555.9            (6.5 )%           4.2 %          (10.7 )%                   -           (10.7 )%
                             2,112.4           (10.4 )%           4.3 %          (14.7 )%                   -           (14.7 )%
Northern Europe                947.7           (18.8 )%           2.8 %          (21.6 )%                   -           (21.6 )%
APME                           595.6            (5.4 )%           0.6 %           (6.0 )%                   -            (6.0 )%
Consolidated                 4,584.8           (12.7 )%           1.8 %          (14.5 )%                 0.2 %         (14.7 )%
Gross Profit                   725.1           (13.7 )%           1.7 %          (15.4 )%                 0.3 %         (15.7 )%
Selling and
Administrative
Expenses                       663.5             6.5 %            2.4 %            4.1 %                  0.2 %           3.9 %
Operating Profit                61.6           (71.6 )%             -            (71.6 )%                 0.3 %         (71.9 )%

(a) In millions for the three months ended September 30, 2020.



                                                  9 Months Ended September 

30, 2020 Compared to 2019

                                                                                               Impact of
                                                                                              Acquisitions           Organic
                                                                           Constant         and Dispositions        Constant
                          Reported       Reported         Impact of        Currency           (In Constant          Currency
                         Amount(a)       Variance         Currency         Variance            Currency)            Variance
Revenues from
services:
Americas:
United States            $  1,705.6           (12.2 )%             -            (12.2 )%                  2.3 %          (14.5 )%
Other Americas              1,071.1           (14.4 )%         (10.2 )%          (4.2 )%                    -             (4.2 )%
                            2,776.7           (13.0 )%          (4.0 )%          (9.0 )%                  1.4 %          (10.4 )%
Southern Europe:
France                      3,035.1           (26.3 )%           0.3 %          (26.6 )%                    -            (26.6 )%
Italy                         947.4           (16.0 )%           0.2 %          (16.2 )%                    -            (16.2 )%
Other Southern Europe       1,545.4            (4.3 )%           1.0 %           (5.3 )%                  5.7 %          (11.0 )%
                            5,527.9           (19.4 )%           0.5 %          (19.9 )%                  1.3 %          (21.2 )%
Northern Europe             2,881.9           (19.1 )%          (1.2 )%         (17.9 )%                 (0.2 )%         (17.7 )%
APME                        1,759.6           (14.2 )%          (0.9 )%         (13.3 )%                (10.5 )%          (2.8 )%
Consolidated             $ 12,946.1           (17.4 )%          (1.0 )%         (16.4 )%                 (0.4 )%         (16.0 )%
Gross Profit             $  2,025.8           (19.5 )%          (0.9 )%         (18.6 )%                 (0.7 )%         (17.9 )%
Selling and
Administrative
Expenses                 $  1,976.5            (4.2 )%          (0.9 )%          (3.3 )%                 (0.9 )%          (2.4 )%
Operating Profit         $     49.3           (89.1 )%          (0.7 )%         (88.4 )%                  0.4 %          (88.8 )%

(a) In millions for the nine months ended September 30, 2020.

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 September 30,
2020, we had $1,300 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

                                       38

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December 2017, we no longer record 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 $715.7 million and $495.4 million
during the nine months ended September 30, 2020 and 2019, respectively. Changes
in operating assets and liabilities generated $599.7 million of cash during the
nine months ended September 30, 2020 compared to $114.7 million of cash
generated during the nine months ended September 30, 2019. These changes were
primarily attributable to a decrease in accounts receivable, due to collections
and the receivables not being replaced at the same level as a result of a
decrease in demand for our services, and the benefit of certain government
payment deferral measures introduced as part of the COVID-19 crisis. These
improvements in our cash flows were partially offset by the decrease in our
payroll-related liabilities due to lower activity.

Accounts receivable decreased to $4,535.7 million as of September 30, 2020 from
$5,273.1 million as of December 31, 2019. This decrease is primarily due to
successful collection efforts and the revenue decline, partially offset by the
impact of changes in currency exchange rates. Days Sales Outstanding ("DSO")
decreased by approximately 1.0 day from December 31, 2019 due to successful
collection efforts and favorable mix changes, as a higher percentage of our
consolidated revenues were generated in countries with a lower average DSO.

The nature of our operations is such that our most significant current asset is
accounts receivable, with an average days sales outstanding of between 55 and 60
days based on the markets where we do business. Our most significant current
liabilities are payroll related costs, which are generally paid either weekly or
monthly. As the demand for our services increases, we generally see an increase
in our working capital needs, as we continue to pay our associates on a weekly
or monthly basis while the related accounts receivable is outstanding for much
longer, which may result in a decline in operating cash flows.

Conversely, as the demand for our services declines, as we saw starting in late
March and continuing through the third quarter of 2020 due to the impact of the
COVID-19 crisis, we generally see a decrease in our working capital needs, as
the existing accounts receivable are collected and not replaced at the same
level, resulting in a decline of our accounts receivable balance, with less of
an effect on current liabilities due to the shorter cycle time of the payroll
related items. This may result in an increase in our operating cash flows;
however, any such increase would not be expected to be sustained in the event
that an economic downturn continued for an extended period. During the third
quarter of 2020, we were highly successful in receivable collections while
incurring lower payroll costs on lower activity. Our improved cash flow also
benefited from certain government payment deferral measures introduced as part
of the COVID-19 crisis, with some of the benefits maturing in the third quarter.
The impact of the remaining benefits is expected to mature in the last quarter
of the 2020 and first quarter of 2021 and we expect lower levels of operating
cash flow during the fourth quarter of 2020 and first quarter of 2021.

Capital expenditures were $30.5 million for the nine months ended September 30,
2020 compared to $36.2 million for the nine months ended September 30,
2019. 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 lower expenditures in
2020 compared to 2019 are primarily due to overall scale-back of activities in
2020 due to the COVID-19 crisis and the completion of a software development
project in 2019, as well as the timing of capital expenditures.

From time to time, we acquire and invest in companies throughout the world,
including franchises. For the nine months ended September 30, 2020, the total
cash consideration paid for acquisitions, net of cash acquired, was $1.7
million, which represents a deferred consideration payment related to a previous
acquisition.

On September 30, 2020 we disposed of four businesses (Serbia, Croatia, Slovenia,
Bulgaria) in our Southern Europe segment for $5.8 million, subject to normal
post close working capital adjustments, and simultaneously entered into
franchise agreements with the new ownership of these businesses. In connection
with the disposition, we recognized a one-time loss on disposition of $5.8
million, which was included in the selling and administrative expenses in the
Consolidated Statement of Operations for the three and nine months ended
September 30, 2020.

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

                                       39

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Switzerland. Both Manpower Switzerland and Experis AG are reported in our
Southern Europe segment. The aggregate cash consideration paid was $212.7
million as of September 30, 2019 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. The total cash
impact of the acquisition was an inflow of $104.8 million, net of cash acquired
of $317.5 million. The acquisition of the remaining interest of Experis AG was
accounted for as an equity transaction as we previously consolidated the entity.



In connection with the business combination, we recognized a one-time, non-cash
gain on the disposition of our previously held equity interest in Manpower
Switzerland of $80.4 million, which is included within interest and other
expenses (income), net on the Consolidated Statements of Operations. Of the
$80.4 million, $32.5 million represented the reclassification of foreign
currency translation adjustments related to the previously held equity interest,
from accumulated other comprehensive income.

Excluding Manpower Switzerland and Experis AG, the total cash consideration paid
for acquisitions, net of cash acquired, was $17.7 million for the nine months
ended September 30, 2019. This balance represents contingent consideration
payments related to previous acquisitions, of which $12.9 million had been
recognized as a liability at the acquisition date.

On July 10, 2019, our joint venture in Greater China, ManpowerGroup Greater
China Limited, became listed on the Main Board of the Stock Exchange of Hong
Kong Limited through an initial public offering. Prior to the initial public
offering, we owned a 51% controlling interest in the joint venture and
consolidated the financial position and results of its operations into our
Consolidated Financial Statements as part of our APME segment. As a result of
the offering, in which ManpowerGroup Greater China Limited issued new shares
representing 25% of the equity of the company, our ownership interest was
diluted to 38.25%, and then further diluted to 36.87% as the underwriters
exercised their overallotment option in full on August 7, 2019. As a result, we
deconsolidated the joint venture as of the listing date and account for the
remaining interest under the equity method of accounting and record our share of
equity income or loss in interest and other expenses (income), net in the
Consolidated Statement of Operations. In connection with the deconsolidation of
the joint venture, we recognized a one-time cash gain of $30.4, which was
included in the selling and administrative expenses in the Consolidated
Statement of Operations in the quarter ended September 30, 2019. Included in the
$30.4 was foreign currency translation adjustment losses of $6.2 related to the
joint venture from accumulated other comprehensive income.

Net debt repayments were $28.7 million in the nine months ended September 30,
2020 compared to cash provided by net borrowings of $6.3 million in the nine
months ended September 30, 2019.

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 or €400.0 million notes.

As of September 30, 2020, 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 September 30, 2020.

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 (0.24) to 1 and a fixed charge coverage ratio
of 3.33 to 1 as of September 30, 2020. Based on our current forecast, we expect
to be in compliance with our financial covenants for the next 12 months.

We have assessed what impact the COVID-19 crisis has had or may have on our
liquidity position as of September 30, 2020 and for the near future. As of
September 30, 2020, our cash and cash equivalents balance was $1,587.7 million.
We also have access to the previously mentioned revolving credit facility that
could immediately provide us with up to $600 million of additional cash, which
remains unused as of September 30, 2020, and we have an option to request an
increase to the total availability under the revolving credit facility by an
additional $200 million and each lender may participate in the requested
increase at their discretion. In addition, we have access to the previously
mentioned credit lines of up to $300 million ($600 million in the third quarter)
to meet the working capital needs of our subsidiaries, of which $262.0 million
was available to use as of September 30, 2020. Our €500.0 million notes and
€400.0 million notes that total $1,049.6 million as of September 30, 2020 mature
in 2022 and 2026, thus, there are no payments due in the very near term except
for annual interest payments. Based on the above, we believe we have sufficient
liquidity and capital

                                       40
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resources to satisfy future requirements and meet our obligations currently and
in the near future should the COVID-19 crisis cause any additional cash flow
needs.

The Board of Directors declared a semi-annual dividend of $1.09 per share on
both May 8, 2020 and May 10, 2019. The 2020 dividends were paid on June 15, 2020
to shareholders of record as of June 1, 2020. The 2019 dividends were paid on
June 14, 2019 to shareholders of record on June 3, 2019.

In August 2019, the Board of Directors authorized the repurchase of 6.0 million
shares of our common stock, with terms consistent with the previous
authorizations. This authorization is in addition to the August 2018 Board
authorizations to purchase 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 nine months of 2020, we
repurchased a total of 0.9 million shares comprised of 0.8 million shares under
the 2018 authorization and 0.1 million shares under the 2019 authorization, at a
total cost of $63.8 million. The repurchases in the first nine months of 2020
all occurred within the first quarter of 2020. During the first nine months of
2019, we repurchased a total of 1.8 million shares at a cost of $152.0 million
under the 2018 authorization. As of September 30, 2020, there were 5.9 million
shares remaining authorized for repurchase under the 2019 authorization and no
shares remaining authorized for repurchase under the 2018 authorization.

We had aggregate commitments of $2,139.3 million as of September 30, 2020 related to debt, operating leases, severances and office closure costs, transition tax resulting from the Tax Act and certain other commitments compared to $2,202.8 million as of December 31, 2019.


We also have entered into guarantee contracts and stand-by letters of credit
totaling approximately $941.7 million and $845.0 million as of September 30,
2020 and December 31, 2019, respectively ($890.1 million and $793.4 million for
guarantees, respectively, and $51.6 million for stand-by letters of credit as of
both dates). The guarantees primarily relate to staffing license requirements,
operating leases and indebtedness. The stand-by letters of credit mainly relate
to workers' compensation in the United States. 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 $1.4 million and $1.3 million for the nine months
ended September 30, 2020 and 2019, respectively.

We recorded net restructuring costs of $98.1 million and $42.5 million during
the nine months ended September 30, 2020 and 2019, respectively, in selling and
administrative expenses, primarily related to severances and office closures and
consolidations in multiple countries and territories. As a result of the
adoption of the new accounting guidance on leases as of January 1, 2019, the
office closure costs of $22.4 million during the nine months ended September 30,
2020 were recorded as an impairment to the operating lease right-of-use asset
and, thus, are not included in the restructuring reserve balance as of September
30, 2020. The costs paid, utilized or transferred out of our restructuring
reserve were $55.5 million during the nine months ended September 30, 2020. We
expect a majority of the remaining $49.9 million reserve will be paid by the end
of 2020.

Application of Critical Accounting Policies


In accordance with the accounting guidance for goodwill, we perform an annual
impairment test of goodwill at our reporting unit level during the third
quarter, or more frequently if events or circumstances change that would more
likely than not reduce the fair value of our reporting units below carrying
value.

Estimated cash flows and goodwill are grouped at the reporting unit level, which
the company has determined to be a component of the operating segments for which
discrete financial information is available and for which segment management
regularly reviews the reporting results.

We evaluate the recoverability of goodwill utilizing an income approach that
estimates the fair value of the future discounted cash flows to which the
goodwill relates. This approach reflects management's internal outlook of the
reporting units, which is believed to be the best determination of value due to
management's insight and experience with the reporting units. Significant
assumptions used in our goodwill impairment test during the third quarter of
2020 included: expected future revenue growth rates, operating unit profit
margins, working capital levels, discount rates, and a terminal value multiple.
The expected future revenue growth rates and operating unit profit margins were
determined after taking into consideration our historical revenue growth rates
and operating unit profit margins, our assessment of future market potential,
and our expectations of future business performance.

                                       41

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We believe that the future discounted cash flow valuation model provides the
most reasonable and meaningful fair value estimate based on the reporting units'
projections of future operating results and cash flows and is consistent with
our view of how market participants would value the company's reporting units in
an orderly transaction.

In the event the fair value of a reporting unit is less than the carrying value,
including goodwill, we would record an impairment charge based on the excess of
a reporting units' carrying amount over its fair value.

For the second quarter of 2020, in connection with the preparation of our
quarterly financial statements, we assessed the changes in circumstances that
occurred during the quarter to determine if it was more likely than not that the
fair value of any reporting unit was below its carrying amount. We identified
several factors related to our Germany reporting unit that led us to conclude
that it was more likely than not that the fair value of the reporting unit was
below its carrying amount. These factors included sustained operating losses
resulted from the ongoing decline and increased uncertainty in the outlook of
the manufacturing sector, particularly the automotive sector in Germany, coupled
with the significant implications of COVID-19.

As we determined that it was more likely than not that the fair value of the
Germany reporting unit was below its carrying amount, we performed an interim
impairment test on this reporting unit as of June 30, 2020. As a result of our
interim test, we recognized a non-cash impairment loss of $66.8, which resulted
in full impairment of the remaining goodwill in the Germany reporting unit. The
Germany reporting unit is included in the Northern Europe segment. The goodwill
impairment charge resulted from reductions in the estimated fair value for our
Germany reporting unit based on lower expectations for future revenue,
profitability and cash flows as compared to the expectations of the 2019 annual
goodwill impairment test and our quarterly assessments in the intervening
periods due to the factors discussed above.

We performed our annual impairment test of our goodwill during the third quarter
of 2020 and there was no impairment of our goodwill as a result of our annual
tests. Refer to Note 1 for results of our annual goodwill impairment testing.

Recently Issued Accounting Standards

See Note 2 to the Consolidated Financial Statements.

© Edgar Online, source Glimpses

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