-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, W0lCDUHwUiPEQ9R7m/V/kao2FTvP1kkIIpWXG3t+r6fg2VvPjxAWq0ugkh3Jb68/ 0c/ksDeRwBBbgfTVLQN7jg== 0000892712-98-000109.txt : 19981113 0000892712-98-000109.hdr.sgml : 19981113 ACCESSION NUMBER: 0000892712-98-000109 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MANPOWER INC /WI/ CENTRAL INDEX KEY: 0000871763 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 391672779 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10686 FILM NUMBER: 98745527 BUSINESS ADDRESS: STREET 1: 5301 N IRONWOOD RD CITY: MILWAUKEE STATE: WI ZIP: 53217 BUSINESS PHONE: 4149611000 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended: September 30, 1998 or [ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from: ______to______ Commission file number: 1-10686 MANPOWER INC. (Exact name of registrant as specified in its charter) Wisconsin 39-1672779 (State or other jurisdiction (IRS Employer of incorporation) Identification No.) 5301 N. Ironwood Road Milwaukee, Wisconsin 53217 (Address of principal executive offices) (Zip Code) Registrant's telephone number, Including area code: (414) 961-1000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Shares Outstanding Class at September 30, 1998 Common Stock, 79,185,248 $.01 par value MANPOWER INC. AND SUBSIDIARIES INDEX Page Number PART I - FINANCIAL INFORMATION Item 1 - Financial Statements (unaudited) - Consolidated Balance Sheets 3 - 4 - Consolidated Statements of Operations 5 - Consolidated Statements of Cash Flows 6 - Notes to Consolidated Financial Statements 7 - 10 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 10 - 14 Item 3 - Quantitative and Qualitative Disclosures About Market Risk 14 PART II - OTHER INFORMATION AND SIGNATURES Item 5 - Other Information 15 Item 6 - Exhibits and Reports on Form 8-K 15 Signatures 16 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements MANPOWER INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) (in thousands) ASSETS September December 30, 31, 1998 1997 CURRENT ASSETS: Cash and cash equivalents $ 108,427 $ 142,246 Accounts receivable, less allowance for doubtful accounts of $41,998 and $38,019, respectively 1,914,286 1,437,378 Prepaid expenses and other assets 58,342 60,164 Future income tax benefits 42,239 47,113 Total current assets 2,123,294 1,686,901 OTHER ASSETS: Investments in licensees 32,424 32,763 Other assets 254,269 190,990 Total other assets 286,693 223,753 PROPERTY AND EQUIPMENT: Land, buildings, leasehold 385,576 324,770 improvements and equipment Less: accumulated depreciation and 213,575 188,394 amortization Net property and equipment 172,001 136,376 Total assets $2,581,988 $2,047,030 The accompanying notes to consolidated financial statements are an integral part of these balance sheets. MANPOWER INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) (in thousands, except share data) LIABILITIES AND STOCKHOLDERS' EQUITY September December 30, 31, 1998 1997 CURRENT LIABILITIES: Payable to banks $ 142,284 $ 69,848 Accounts payable 361,331 271,064 Employee compensation payable 80,097 68,416 Accrued liabilities 160,337 108,615 Accrued payroll taxes and insurance 276,380 248,605 Value added taxes payable 320,381 223,538 Income taxes payable 11,392 13,303 Current maturities of long-term debt 3,210 1,288 Total current liabilities 1,355,412 1,004,677 OTHER LIABILITIES: Long-term debt 284,004 189,786 Other long-term liabilities 243,186 235,004 Total other liabilities 527,190 424,790 STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value, -- -- authorized 25,000,000 shares, none issued Common stock, $.01 par value, 832 828 authorized 125,000,000 shares, issued 83,187,148 and 82,778,873 shares, respectively Capital in excess of par value 1,600,290 1,590,704 Accumulated deficit (764,674) (848,195) Cumulative translation adjustments (15,404) (40,688) Treasury stock at cost, 4,001,900 and (121,658) (85,086) 2,432,400 shares, respectively Total stockholders' equity 699,386 617,563 Total liabilities and stockholders' $2,581,988 $2,047,030 equity The accompanying notes to consolidated financial statements are an integral part of these balance sheets. MANPOWER INC. AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited) (in thousands, except per share data) 3 Months Ended 9 Months Ended September 30, September 30, 1998 1997 1998 1997 Revenues from services $2,377,750 $1,973,020 $6,386,719 5,286,238 Cost of services 1,979,648 1,622,090 5,300,874 4,339,503 Gross profit 398,102 350,930 1,085,845 946,735 Selling and administrative 327,393 267,018 933,438 760,347 expenses Operating profit 70,709 83,912 152,407 186,388 Interest and other income (4,162) (1,119) (11,658) (2,875) (expense) Earnings before income 66,547 82,793 140,749 183,513 taxes Provision for income taxes 23,625 30,102 49,965 63,331 Net earnings $ 42,922 $ 52,691 $ 90,784 $ 120,182 Net earnings per share $ .54 $ .64 $ 1.13 $ 1.47 Net earnings per share - $ .53 $ .63 $ 1.11 $ 1.44 assuming dilution Weighted average common 80,173 81,819 80,472 81,824 shares Weighted average common 80,897 83,591 81,643 83,717 shares-assuming dilution The accompanying notes to consolidated financial statements are an integral part of these statements. MANPOWER INC. AND SUBSIDIARIES Supplemental Systemwide Information (Unaudited) (in thousands) 3 Months Ended 9 Months Ended September 30, September 30, 1998 1997 1998 1997 Systemwide Sales $2,834,201 $2,429,096 $7,672,460 $6,485,692 Systemwide information represents the total of Company- owned branches and franchises. MANPOWER INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) (in thousands) 9 Months Ended September 30, 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings 90,784 120,182 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and 39,740 30,144 amortization Deferred income taxes 4,874 (7,083) Provision for doubtful 10,510 10,661 accounts Changes in operating assets and liabilities: Accounts receivable (408,437) (427,108) Other assets (1,549) (10,276) Other liabilities 238,483 253,417 Cash used by operating (25,595) (30,063) activities CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (103,072) (62,378) Proceeds from the sale of property 1,282 1,156 and equipment Acquisitions of businesses, net of (30,011) -- cash acquired Cash used by investing activities (131,801) (61,222) CASH FLOWS FROM FINANCING ACTIVITIES: Net change in payable to banks 63,095 65,307 Proceeds from long-term debt 98,721 71,903 Repayment of long-term debt (1,337) (2,085) Dividends paid (7,263) (6,549) Repurchase of common stock (36,572) (53,998) Cash provided by financing activities 116,644 74,578 Effect of exchange rate changes on 6,933 (6,811) cash Net change in cash and cash (33,819) (23,518) equivalents Cash and cash equivalents, beginning 142,246 180,553 of period Cash and cash equivalents, end of $ 108,427 $ 157,035 period SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $ 5,493 $ 7,389 Income taxes paid $ 26,181 $ 60,082 The accompanying notes to consolidated financial statements are an integral part of these statements. MANPOWER INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) For the Nine Months Ended September 30, 1998 and 1997 (in thousands, except per share data) (1) Basis of Presentation Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company's latest annual report on Form 10-K for the year ended December 31, 1997. (2) Accounting Policies During the first quarter of 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." This statement establishes standards for the reporting and display of comprehensive income and its components. Comprehensive income is the total of net earnings and all other nonowner changes in stockholders' equity. Total comprehensive income is as follows: 3 Months Ended 9 Months Ended September 30, September 30, 1998 1997 1998 1997 Net earnings $ 42,922 $ 52,691 $ 90,784 $ 120,182 Change in cumulative 31,213 (4,235) 25,284 (52,163) translation adjustments Total comprehensive $ 74,135 $ 48,456 $116,068 $ 68,019 income In March of 1998 the American Institute of Certified Public Accountants issued Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This statement is effective for the Company beginning in 1999 and is not expected to have a material impact on the Consolidated Financial Statements. In June of 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards requiring that every derivative instrument be recorded on the balance sheet as either an asset or liability measured at its fair value. The statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met, in which case, the gains or losses would offset the related results of the hedged item. This statement is effective for the Company beginning in 2000, but may be adopted earlier. The Company has not yet determined the timing or method of adoption or quantified the impact of adopting this statement. While the statement could increase volatility in earnings and other comprehensive income, it is not expected to have a material impact on the Consolidated Financial Statements due to the Company's limited use of derivative instruments. (3) Interest Rate Swap In January of 1998, the Company entered into an interest rate swap agreement, expiring in 2001, to fix the interest rate at 6.0% on $50,000 of the Company's borrowings under the revolving credit agreement. This swap agreement had an immaterial impact on the recorded interest expense during the first nine months of 1998. As of September 30, 1998, the variable interest rate under the revolving credit agreement was 5.8%. (4) Operational Results The information furnished reflects all adjustments that, in the opinion of management, are necessary for a fair statement of the results of operations for the periods presented. Such adjustments are of a normal recurring nature. (5) Earnings Per Share During 1997 the Company adopted SFAS No. 128, "Earnings per Share." As a result, the Company's reported earnings per share for 1997 have been restated. The calculation of net earnings per share and net earnings per share - assuming dilution are as follows: 3 Months Ended 9 Months Ended September 30, September 30, 1998 1997 1998 1997 Net earnings per share: Net earnings available to $ 42,922 $ 52,691 $ 90,784 $120,182 common shareholders Weighted average common 80,173 81,819 80,472 81,824 shares outstanding $ .54 $ .64 $ 1.13 $ 1.47 Net earnings per share - assuming dilution: Net earnings available to $ 42,922 $ 52,691 $ 90,784 $120,182 commmon shareholders Weighted average common 80,173 81,819 80,472 81,824 shares outstanding Effect of dilutive stock 724 1,772 1,171 1,893 options 80,897 83,591 81,643 83,717 $ .53 $ .63 $ 1.11 $ 1.44 (6) Income Taxes The Company has provided income taxes for the nine month period ended September 30, 1998 at a rate of 35.5%, which is equal to the estimated annual effective tax rate based on the currently available information. This rate is higher than the effective tax rate for 1997 of 34.2% due to the increase in the corporate income tax rate in France in 1997, from 36.6% to 41.6%, and the reduced benefit from the utilization of net operating loss carryforwards. (7) Business Segment Data by Geographical Segment Geographical segment information is as follows: 3 Months Ended 9 Months Ended September 30, September 30, 1998 1997 1998 1997 Revenues from services: United States (a) $ 558,466 $ 523,023 $1,596,038 $1,470,829 France 1,030,525 773,947 2,652,598 1,951,744 United Kingdom 286,319 254,149 789,026 728,137 Other Europe 309,648 221,447 802,693 607,630 Other Countries 192,792 200,454 546,364 527,898 $2,377,750 $1,973,020 $6,386,719 $5,286,238 Earnings before income taxes: United States $ 20,839 $ 26,064 $ 56,383 $ 67,846 France 24,164 32,611 54,380 63,629 United Kingdom 14,149 13,088 27,133 27,844 Other Europe 18,462 11,082 31,889 27,611 Other Countries 3,735 10,699 16,353 25,476 Other Corporate (10,640) (9,632) (33,731) (26,018) Expenses Operating Profit 70,709 83,912 152,407 186,388 Interest & Other (4,162) (1,119) (11,658) (2,875) Income (Expense) $ 66,547 $ 82,793 $ 140,749 $ 183,513 (a) Total systemwide sales in the United States, which includes sales of Company-owned branches and franchises, was $931,741 and $875,061 for the three months ended September 30, 1998 and 1997, and $2,657,941 and $2,458,325 for the nine months ended September 30, 1998 and 1997, respectively. During 1997, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosure About Segments of an Enterprise and Related Information." This Statement will be adopted by the Company as of December 31, 1998 and is not expected to significantly change the current segment reporting. (8) Acquisition of Businesses During 1998, the Company acquired certain franchises and unrelated companies. The Company also made a final payment related to the 1996 acquisition of A Teamwork Sverige AB in Sweden. The total consideration paid during 1998 for these acquisitions was approximately $31,000, the majority of which was recorded as intangible assets and is included in Other assets in the Consolidated Balance Sheets. (9) Subsequent Events On October 22, 1998, the Company's Board of Directors authorized an additional ten million shares for repurchase under the Company's share repurchase program. Stock repurchases may be made from time to time and may be implemented through a variety of methods, including open market purchases, block transactions, privately negotiated transactions, accelerated share repurchase programs, forward repurchase agreements or similar facilities. This additional authorization increases the total shares that may be repurchased to fifteen million shares. As of September 30, 1998, the Company had repurchased approximately four million shares under the previous authorization. The Company's Board of Directors also declared a cash dividend of $.10 per share which is payable on December 14, 1998 to shareholders of record on December 3, 1998. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Operating Results - Three Months Ended September 30, 1998 and 1997 Revenues increased 20.5% to $2,377.8 million for the third quarter of 1998. Volume, as measured by billable hours of branch operations, increased 16.3% in the quarter. All of the Company's major markets experienced revenue increases, including the United States (6.8%), France (29.3% in French Francs) and Manpower-United Kingdom (10.9% in Pounds Sterling). Cost of services, which consists of payroll and related expenses of temporary workers, increased as a percentage of revenues to 83.3% in the third quarter of 1998 from 82.2% in the third quarter of 1997. In certain of the Company's European markets, government employment incentive programs are in place to encourage employment by providing a credit against payroll taxes otherwise payable. In France, legislation was enacted in late 1997 that reduced the amount of such payroll tax credits beginning in January of 1998. This reduction is the primary reason for the increased cost of services in 1998. Selling and administrative expenses increased to 13.8% of revenues, from 13.5% of revenues in the third quarter of 1997. This increase is due to significant investment in new markets, primarily in Europe, and infrastructure enhancements in many of the Company's major markets. Interest and other expense was $4.2 million in the third quarter of 1998 compared to $1.1 million in the third quarter of 1997. This increase is due to a $2.7 million increase in net interest expense and a $.5 million increase in translation losses. Net interest expense increased in the quarter as a result of higher borrowing levels to finance the share repurchase program, acquisitions and the Company's investment in new markets. The increase in translation losses is due primarily to losses recognized on the translation of the net monetary assets of operations in highly inflationary economies. The Company provided income taxes at a rate of 35.5% during the third quarter of 1998, equal to the estimated annual effective tax rate for 1998. This rate is slightly higher than the annual effective tax rate for 1997 due to the increase in the French corporate income tax rate (see Note 6 to Consolidated Financial Statements) and the reduced benefit from the utilization of net operating loss carryforwards. On a diluted basis, net earnings per share was $.53 in the third quarter of 1998, compared to $.63 per share in the third quarter of 1997. The weighted average shares, assuming dilution, decreased by 2.7 million shares for the quarter due to the shares that were repurchased under the Company's share repurchase program and a smaller effect of dilutive stock options (see Note 5 to the Consolidated Financial Statements) because of the lower average share price during the quarter. Operating Results - Nine Months Ended September 30, 1998 and 1997 Revenues increased 20.8% to $6,386.7 million for the first nine months of 1998. Revenues were unfavorably impacted by changes in currency exchange rates during the nine months due to the strengthening of the U.S. Dollar relative to the currencies in most of the Company's non-U.S. markets. At constant exchange rates, the increase in revenues would have been 23.8%. Volume, as measured by billable hours of branch operations, increased 17.2% in the nine month period. All of the Company's major markets experienced revenue increases, including the United States (8.5%), France (39.2% in French Francs) and Manpower-United Kingdom (7.2% in Pounds Sterling). Cost of services increased as a percentage of revenues to 83.0% in the first nine months of 1998 from 82.1% in the first nine months of 1997. As mentioned above, the primary reason for the increased cost of services in 1998 is the reduction of payroll tax credits in France. Selling and administrative expenses increased to 14.6% of revenues during the first nine months of 1998 from 14.4% of revenues during the first nine months of 1997. This increase is primarily due to significant investment in new markets, primarily in Europe, and headquarters costs and infrastructure enhancements in many of the Company's major markets. Interest and other expense was $11.7 million in the first nine months of 1998 compared to $2.9 million in the first nine months of 1997. This increase is due to a $5.4 million increase in net interest expense and a $2.8 million increase in translation losses. Net interest expense increased in the period as a result of higher borrowing levels to finance the share repurchase program, acquisitions and the Company's investment in new markets. The increase in translation losses is due primarily to losses recognized on the translation of the net monetary assets of operations in highly inflationary economies. The Company provided income taxes at a rate of 35.5% during the first nine months of 1998, equal to the estimated annual effective tax rate for 1998. This rate is slightly higher than the annual effective tax rate for 1997 due to the increase in the French corporate income tax rate (see Note 6 to Consolidated Financial Statements) and the reduced benefit from the utilization of net operating loss carryforwards. On a diluted basis, net earnings per share was $1.11 in the first nine months of 1998, compared to $1.44 per share in the first nine months of 1997. The 1998 earnings were unfavorably impacted $.08 per share due to the lower currency exchange rates in the first nine months of 1998 compared to the first nine months of 1997 and $.02 per share due to the increase in the effective tax rate discussed above. The weighted average shares, assuming dilution, decreased 2.1 million for the nine month period due to the shares repurchased under the Company's share repurchase program and a smaller effect of dilutive stock options (see Note 5 to the Consolidated Financial Statements) because of the lower average share price during the period. Liquidity and Capital Resources Cash used by operating activities was $25.6 million in the first nine months of 1998 compared to $30.1 million in the first nine months of 1997. This decrease in cash used reflects the decrease in working capital requirements between periods, due to the lower revenue growth rates in many of the Company's major markets. Working capital requirements were $171.5 million in the first nine months of 1998 compared to $184.0 million in the first nine months of 1997. Cash provided by operating activities before the changes in working capital requirements was $145.9 million in the first nine months of 1998 compared to $153.9 million in the first nine months of 1997, reflecting the lower earnings levels. Capital expenditures were $103.1 million in the first nine months of 1998 compared to $62.4 million during the first nine months of 1997. These expenditures include capitalized software of $32.7 million and $27.1 million in the first nine months of 1998 and 1997, respectively. The balance is comprised of purchases of computer equipment, office furniture and other costs related to office openings and refurbishments. During the first nine months of 1998, the Company acquired certain franchises and unrelated companies. The Company also made a final payment related to the 1996 acquisition of A Teamwork Sverige AB in Sweden. The total consideration paid during 1998 for these acquisitions was approximately $31,000, the majority of which was recorded as intangible assets. Net cash provided from additional borrowings was $160.5 million and $135.1 million in the first nine months of 1998 and 1997, respectively. The additional borrowings in 1998 were primarily used to support the working capital growth, investment in new markets, capital expenditures, acquisitions and repurchase of the Company's common stock. The additional borrowings in 1997 were primarily used to support the working capital growth and the repurchase of the Company's common stock. The Company repurchased common stock during the first nine months of 1998 and 1997 at a cost of $36.6 million and $54.8 million, respectively. Accounts receivable increased to $1,914.3 million at September 30, 1998 from $1,437.4 million at December 31, 1997. Of this increase, $58.4 million is due to the change in exchange rates during the first nine months of 1998. The remaining increase is primarily due to the revenue growth in France and many of the Company's other major markets. As of September 30, 1998, the Company had borrowings of $204.1 million and letters of credit of $52.0 million outstanding under its $415 million U.S. revolving credit facility, and borrowings of $71.7 million outstanding under its U.S. commercial paper program. The commercial paper borrowings have been classified as long-term debt due to the availability to refinance them on a long-term basis under the revolving credit facility. The Company and some of its foreign subsidiaries maintain separate lines of credit with foreign financial institutions to meet short-term working capital needs. As of September 30, 1998, such lines totaled $174.4 million, of which $32.1 million was unused. In October, the Company's Board of Directors authorized an additional ten million shares for repurchase under the Company's share repurchase program. Stock repurchases may be made from time to time and may be implemented through a variety of methods, including open market purchases, block transactions, privately negotiated transactions, accelerated share repurchase programs, forward repurchase agreements or similar facilities. This additional authorization increases the total shares that may be repurchased to fifteen million shares. As of September 30, 1998, the Company had repurchased approximately four million shares under the previous authorization. The Company's Board of Directors also declared a cash dividend of $.10 per share which is payable on December 14, 1998 to shareholders of record on December 3, 1998. Information Technology Much of the software currently used by the Company will require modification to properly process data after December 31, 1999 (the `Year 2000 Issues'). In all significant locations where the Company operates, assessments have been done to determine what modifications will be required. In addition, detailed plans and timetables have been developed to complete and test the necessary remediation. The Company expects to have the majority of all remediation and testing completed prior to June 30, 1999. The Company is also in the process of converting and upgrading many of its internal information systems to meet changing customer requirements. The Company presently believes that with these conversions and upgrades, and the remediation efforts to existing systems, all significant Year 2000 Issues will be addressed. To date, the Company has used both internal and external resources for the assessment, remediation and testing of its systems. As of September 30, 1998, approximately $2.5 million has been expensed related to this assessment and remediation. The total expense is estimated to be $7 million to $12 million. These costs are not expected to have a material impact on the Company's financial position, results of operations or cash flows. The Company is also in the process of contacting significant vendors and large customers to determine the extent to which the Company is vulnerable to those third parties' potential failure to remediate their own systems to address Year 2000 Issues. While the Company does not anticipate any such problems, failure by other companies or governmental entities to remediate their systems on a timely basis could have a material adverse effect on the Company. The Company is currently evaluating the reasonably likely worst case scenario if its information technology and non-information technology systems do not function as a result of Year 2000 Issues. The Company is also in the process of evaluating and developing contingency plans for Year 2000 risks. On January 1, 1999, eleven of the fifteen member countries of the European Union (the "participating countries") are scheduled to establish fixed conversion rates between their existing sovereign currencies (the "legacy currencies") and the euro. The participating countries have agreed to adopt the euro as their common legal currency on that date. Following introduction of the euro, the legacy currencies are scheduled to remain legal tender in the participating countries as denominations of the euro between January 1, 1999 and January 1, 2002 (the "transition period"). During the transition period, public and private parties may pay for goods and services using either the euro or the participating country's legacy currency. The Company is currently assessing the impact of the euro in its business operations in all participating countries. Since the Company's labor costs and prices are generally determined on a local basis, the near-term impact of the euro is expected to be related to meeting customer invoicing requirements and making internal information systems modifications. Such modifications relate to converting currency values and to operating in a dual currency environment during the transition period. Modifications of internal information systems will occur throughout the transition period and will be coordinated with other system-related upgrades and enhancements. The Company will expense all such system modification costs as incurred and does not expect such costs to be material to the Company's financial results. The Company has made significant investments in information technology systems (both hardware and software) in the last several years in order to keep pace with the rapid growth of the business and to service larger and more complex customer arrangements. The Company is currently engaged in the development of new proprietary information systems for branch office administration, invoicing and payroll. These systems are in the process of being developed and are in the early stages of implementation and deployment. As of September 30, 1998, the Company had capitalized approximately $77 million in software development costs which is included in Other assets in the Consolidated Balance Sheets. As with any complex system design and implementation effort, there are various risks and uncertainties, including whether such systems will meet performance expectations and whether they can be implemented on schedule. The Company regularly reviews the carrying value of all capitalized software and, under applicable accounting guidelines, is required to recognize a loss if the unamortized balance is considered unrealizable. The Company has determined that no such adjustment is currently required. Forward-Looking Statements Certain information included or incorporated by reference in this filing and identified by use of the words `expects,' `believes,' `plans' or the like constitutes forward-looking statements, as such term is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In addition, any information included or incorporated by reference in future filings by the Company with the Securities and Exchange Commission, as well as information contained in written material, releases and oral statements issued by or on behalf of the Company may include forward-looking statements. All statements which address operating performance, events or developments that the Company expects or anticipates will occur or future financial performance are forward- looking statements. These forward-looking statements speak only as of the date on which they are made. They rely on a number of assumptions concerning future events and are subject to a number of risks and uncertainties, many of which are outside of the Company's control, that could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to: material changes in the demand from larger customers, including customers with which the Company has national or global arrangements availability of temporary workers or increases in the wages paid to these workers competitive market pressures, including pricing pressures ability to successfully invest in and implement information systems unanticipated technological changes, including obsolescence or impairment of information systems changes in customer attitudes toward the use of staffing services government or regulatory policies adverse to the employment services industry general economic conditions in international markets interest rate and exchange rate fluctuations The Company disclaims any obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Item 3 - Quantitative and Qualitative Disclosures About Market Risk The Company's annual report on Form 10-K contains certain disclosures about market risks affecting the Company. There have been no material changes to the information provided which would require additional disclosures as of the date of this filing. PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K - None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MANPOWER INC. (Registrant) Date: November 12, 1998 /s/ Michael J. Van Handel -------------------------- Michael J. Van Handel Senior Vice President Chief Financial Officer, Treasurer and Secretary (Signing on behalf of the Registrant) EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF THE REGISTRANT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1998 SEP-30-1998 108,427 0 1,914,286 41,998 0 2,123,294 385,576 213,575 2,581,988 1,355,412 284,004 0 0 832 698,554 2,581,988 0 6,386,719 0 5,300,874 0 10,510 13,171 140,749 49,965 90,784 0 0 0 90,784 1.13 1.11
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