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: March 31, 1997 or [ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from: ______to______ Commission file number: 1-10686 MANPOWER INC. (Exact name of registrant as specified in its charter) Wisconsin 39-1672779 (State or other jurisdiction (IRS Employer of incorporation) Identification No.) 5301 N. Ironwood Road Milwaukee, Wisconsin 53217 (Address of principal executive offices) (Zip Code) Registrant's telephone number, Including area code: (414) 961-1000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Shares Outstanding Class at March 31, 1997 Common Stock, 81,790,895 $.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 - Supplemental Systemwide Information 5 - Consolidated Statements of Cash Flows 6 - Notes to Consolidated Financial Statements 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 9 PART II - OTHER INFORMATION AND SIGNATURES Item 5 - Other Information 10 Item 6 - Exhibits and Reports on Form 8-K 10 Signatures 11
PART I - FINANCIAL INFORMATION Item 1 - Financial Statements MANPOWER INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) (in thousands) ASSETS March 31, Dec. 31, 1997 1996 CURRENT ASSETS: Cash and cash equivalents $ 180,274 $ 180,553 Accounts receivable, less allowance for doubtful accounts of $34,643 and $33,526, respectively 1,141,339 1,167,468 Prepaid expenses and other assets 47,236 42,913 Future income tax benefits 48,495 48,151 Total current assets 1,417,344 1,439,085 OTHER ASSETS: Investments in licensees 30,414 29,409 Other assets 168,070 162,390 Total other assets 198,484 191,799 PROPERTY AND EQUIPMENT: Land, buildings, leasehold improvements and equipment 297,731 302,547 Less: accumulated depreciation and amortization 180,903 181,168 Net property and equipment 116,828 121,379 Total assets $1,732,656 $1,752,263 The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
MANPOWER INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) (in thousands, except share data) LIABILITIES AND STOCKHOLDERS' EQUITY March 31, Dec. 31, 1997 1996 CURRENT LIABILITIES: Payable to banks $ 17,775 $ 24,375 Accounts payable 239,348 235,466 Employee compensation payable 57,010 60,222 Accrued liabilities 90,552 87,444 Accrued payroll taxes and insurance 183,919 195,194 Value added taxes payable 165,127 174,624 Income taxes payable 31,180 30,945 Current maturities of long-term debt 2,347 2,986 Total current liabilities 787,258 811,256 OTHER LIABILITIES: Long-term debt 124,170 100,848 Other long-term liabilities 239,460 239,453 Total other liabilities 363,630 340,301 STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value, authorized 25,000,000 shares, none issued -- -- Common stock, $.01 par value, authorized 125,000,000 shares, issued 82,558,195 and 82,206,446 shares, respectively 826 822 Capital in excess of par value 1,587,053 1,579,868 Accumulated deficit (971,631) (998,230) Cumulative translation adjustments (10,086) 21,476 Treasury stock at cost, 767,300 and 101,700 shares, respectively (24,394) (3,230) Total stockholders' equity 581,768 600,706 Total liabilities and stockholders' equity $ 1,732,656 $ 1,752,263 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 March 31, 1997 1996 Revenues from services $1,521,002$ 1,309,167 Cost of services 1,244,347 1,064,528 Gross profit 276,655 244,639 Selling and administrative expenses 236,301 209,161 Operating profit 40,354 35,478 Interest and other (income) expenses, net 666 (211) Earnings before income taxes 39,688 35,689 Provision for income taxes 13,089 12,494 Net earnings $ 26,599 $ 23,195 Net earnings per share $ .32 $ .28 Weighted average common shares 83,119 82,778 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 March 31, 1997 1996 Systemwide Sales $1,850,584 $1,627,101 Systemwide information represents the total of Company-owned branches and franchises.
MANPOWER INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) (in thousands) Months Ended March 31, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 26,599 $ 23,195 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 8,840 7,612 Amortization of intangible assets 1,032 636 Deferred income taxes (344) 5,200 Provision for doubtful accounts 2,844 2,839 Changes in operating assets and liabilities: Accounts receivable (35,986) 66,584 Other assets (20,638) (11,604) Other liabilities 29,745 (47,483) Cash provided by operating activities 12,092 46,979 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (9,408) (9,197) Proceeds from the sale of property and equipment 690 347 Cash used in investing activities (8,718) (8,850) CASH FLOWS FROM FINANCING ACTIVITIES: Net change in payable to banks (4,862) (20,450) Proceeds from long-term debt 23,664 2,361 Repayment of long-term debt (312) (3,517) Repurchase of common stock (21,164) -- Cash used in financing activities (2,674) (21,606) Effect of exchange rate changes on cash (979) (2,989) Net change in cash and cash equivalents (279) 13,534 Cash and cash equivalents, beginning of period 180,553 142,773 Cash and cash equivalents, end of period $ 180,274 $ 156,307 SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $ 1,741 $ 3,972 Income taxes paid $ 14,785 $ 5,773 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 Three Months Ended March 31, 1997 and 1996 (1)Basis of Presentation Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company's latest annual report on Form 10-K for the year ended December 31, 1996. (2)Accounting Policies In February of 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings per Share." This Statement revises the computation and presentation of earnings per share and will be adopted by the Company in the fourth quarter of 1997. The Company does not expect this Statement to have a significant impact on reported earnings per share. Had the Company adopted this Statement for the three months ended March 31, 1997 and 1996, both basic and diluted earnings per share would have been equal to those currently reported on the Statements of Operations. (3)Operational Results The information furnished reflects all adjustments which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods presented. Such adjustments are of a normal recurring nature. (4)Income Taxes The provision for income taxes has been computed using the estimated annual effective tax rate, based on currently available information. (5)Subsequent Events On April 28, 1997, the Company's Board of Directors declared a cash dividend of $.08 per share payable June 16, 1997 to shareholders of record on May 28, 1997.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Operating Results - Three Months Ended March 31, 1997 and 1996 First quarter 1997 revenues increased 16.2% to $1,521.0 million. Revenues were unfavorably impacted 5.1% in the first quarter by currency exchange rates. Volume, as measured by billable hours of branch operations, increased 22.1% in the quarter. All of the Company's major markets experienced revenue increases, including the United States (12.2%), France (25.5% in French Francs) and the United Kingdom (9.2% in Pound Sterling). Cost of services, which consists of payroll and related expenses of temporary workers, increased as a percentage of revenues to 81.8% in the first quarter of 1997 from 81.3% in the first quarter of 1996. During 1996, government employment incentive programs in certain of the Company's European markets reduced payroll taxes, resulting in the lower cost of services. Without the impact of these programs, cost of services as a percentage of revenues in 1996 is comparable to the 1997 amount. Selling and administrative expenses increased 13.0%, but decreased as a percentage of revenue to 15.5% in 1997 from 16.0% in 1996. This decrease reflects the improved leveraging of overhead costs with volume growth, primarily in France. Net interest and other was $666,000 of expense in the first quarter of 1997 compared to income of $211,000 in the first quarter of 1996. This change is primarily due to the changes in net interest and translation losses. Net interest was income of $144,000 in the first quarter of 1997 compared to income of $622,000 in the first quarter of 1996. This change in net interest income is primarily the result of an increase in interest expense caused by higher worldwide borrowing levels. The Company had a translation loss of $504,000 during the first quarter of 1997 due to the fluctuation in foreign currency exchange rates, compared to a loss of $161,000 in the first quarter of 1996. The Company provided income taxes at an estimated rate of 33.0% which is equal to the expected annual effective rate for 1997. The Company's effective income tax rate for 1996 was 33.0%. Liquidity and Capital Resources Cash provided by operating activities was $12.1 million in the first quarter of 1997 compared to $47.0 million in the first quarter of 1996. This change reflects the increase in working capital requirements in the first quarter of 1997 compared to a decrease in the first quarter of 1996. Cash provided by operating activities before the change in working capital requirements was $39.0 million in the first quarter of 1997 compared to $39.5 million in 1996. Capital expenditures increased to $9.4 million in the first quarter of 1997 from $9.2 million in the first quarter of 1996. These expenditures primarily consist of computer equipment and office furniture used in the Company's worldwide branch office network. Net cash from additional borrowings was $18.5 million in the first quarter of 1997 compared to net cash used to retire borrowings of $21.6 million in the first quarter of 1996. The Company repurchased 665,600 shares of stock during the first quarter of 1997, at a cost of $21.2 million. These shares were purchased under the 1996 Board of Directors' authorization.
Accounts receivable decreased to $1,141.3 million at March 31, 1997 from $1,167.5 million at December 31, 1996. This change is due to the impact of foreign exchange rates during the quarter, which reduced receivables by $59.2 million, offset by the increased sales level in all of the Company's major markets. As of March 31, 1997, the Company had borrowings of $61.4 million outstanding under its $275 million U.S. revolving credit facility, and borrowings of $58.9 million outstanding under its U.S. commercial paper program. The commercial paper borrowings have been classified as long-term debt due to the availability to refinance them on a long-term basis under the revolving credit facility. In addition, the Company and some of its foreign subsidiaries maintain separate lines of credit with foreign financial institutions to meet short-term working capital needs. As of March 31, 1997, such lines totaled $154.7 million, of which $136.9 million was unused. On April 28, 1997, the Company's Board of Directors declared a cash dividend of $.08 per share which will be paid on June 16, 1997 to shareholders of record on May 28, 1997.
PART II - OTHER INFORMATION Item 5 - Other Information None 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: May 13, 1997 /s/ Michael J. Van Handel ------------------------- Michael J. Van Handel Vice President Chief Accounting Officer & Treasurer (Signing on behalf of the Registrant and as Principal Accounting Officer)