What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-07 compared with 2020-05-08 · 348 added, 229 removed, 109 unchanged (84% of the section changed)

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

See the financial measures section on page 29 for further information on the Non-GAAP financial measures of constant currency and organic constant currency.

See the financial measures section on pages 35-36 for further information on the Non-GAAP financial measures of constant currency and organic constant currency.

Forward-Looking Statements

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- Risk Factors in our annual report on Form 10-K for the year ended December 31, 2019, which information is incorporated herein by reference as well as those discussed in Part II, Item 1A.

Risk Factors, in this document, provides cautionary statements identifying, for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, important factors that could cause our actual results to differ materially from those contained in the forward-looking statements.

Risk Factors in our quarterly report on Form 10-Q for the quarter ended March 31, 2020, provides cautionary statements identifying, for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, important factors that could cause our actual results to differ materially from those contained in the forward-looking statements.

Forward-looking statements can be identified by words such as “expect,” “anticipate,” “intend,” “plan,” “may,” “believe,” “seek,” “estimate,” and 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 this document, may be beyond our control.

- 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 the Company’s efforts to respond to such impacts;

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;

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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.

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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 first quarter of 2020, 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 first quarter results were significantly negatively impacted by the COVID-19 crisis, especially in the last few weeks of March as market conditions rapidly deteriorated.

By the end of March, significant lockdown measures had been implemented in our main markets in Europe and North America, as well as in certain other countries.

There is considerable uncertainty as to when governmental restrictions in different countries may be lifted, and to what degree individuals and businesses will be permitted to resume economic activity, including the re-opening of workplaces that are restricted.

We expect our short-term results will be heavily impacted by the timing of such activities, which are impossible to predict.

As of the date of this filing, governments in some of our key markets such as France, the United States, Italy, the United Kingdom and Germany still had work-related restrictions in place.

During the first quarter of 2020, the United States dollar was stronger, on average, relative to the currencies in all of our markets having an unfavorable impact on our reported results.

This strengthening was particularly pronounced against the Euro.

Our reported revenues from services decreased 8.4% in the first quarter of 2020 compared to the first quarter of 2019 and our reported operating profit decreased 64.2%.

These results were partly impacted by the relative weakness of other currencies against the United States dollar compared to the same period in 2019, and generally may understate the performance of our underlying business.

The changes in the foreign currency exchange rates had a 2.5% unfavorable impact on revenues from services, a 1.5% unfavorable impact on operating profit, and an approximately $0.03 per share unfavorable impact on net earnings per share – diluted in the quarter.

By contrast, during periods of decreased demand, as we experienced in the second quarter of 2020, 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 second quarter results were significantly negatively impacted by the COVID-19 crisis, which sharply reduced demand for our services across almost all of our operations.

By the end of March, significant lockdown measures had been implemented in our main markets in Europe and North America, as well as in certain other countries with the majority of lockdown measures being eased in May.

During the quarter, we experienced turbulent and uncertain market conditions, reflecting the unprecedented speed and magnitude of the shutdowns.

Effects were felt across the world in March and April and quickly impacted the labor markets, resulting in rapidly rising unemployment as well as high levels of government supported furloughs.

As the quarter drew to a close, indications are that the impact of the COVID-19 crisis had been contained in many parts of the world, and economies had begun to slowly reopen.

However, some countries in Latin America and parts of the United States continue to deal with the COVID-19 crisis at elevated levels.

Continued uncertainty remains as to the future impact of the pandemic on global and local economies.

This may depend on multiple factors which cannot be predicted, including public health conditions and the willingness of local and national governments to re-open commerce and to continue with fiscal stimulus packages.

What started as a sudden and swift slowdown of the global economies and labor markets is expected to take much longer to recover around the world, and consequently we expect any improvement in labor market conditions will be slow and gradual.

During the second quarter of 2020, the United States dollar was stronger, on average, relative to the currencies in all of our markets, which therefore had an unfavorable impact on our reported results.

Our reported revenues from services decreased 30.4% in the second quarter of 2020 compared to the second quarter of 2019.

As noted above, most of the decline is due to the impact of COVID-19.

Additionally, the results were further impacted by the relative weakness of other currencies against the United States dollar

compared to the same period in 2019, which generally may understate the performance of our underlying business.

The changes in the foreign currency exchange rates had a 2.4% unfavorable impact on revenues from services and an approximately $0.02 per share unfavorable impact on net earnings per share – diluted in the quarter.

Substantially all of our subsidiaries derive revenues from services and incur expenses within the same currency and generally do not have cross-currency transactions, and therefore, changes in foreign currency exchange rates primarily impact reported earnings and not our actual cash flow unless earnings are repatriated.

To understand the performance of our underlying business, we utilize constant currency or organic constant currency variances for our consolidated and segment results.

During the three months ended March 31, 2020, our businesses experienced significant changes in revenue trends from the previous quarter reflecting the sudden drop of activity during March as our largest markets experienced COVID-19 related work restrictions.

Our consolidated revenues were down 5.9% year-over-year in constant currency in the quarter, a decline from the 1.8% year-over-year

constant currency decrease in the fourth quarter of 20 19.

After adjusting for billing days, our organic constant currency revenue year-over-year decrease was 7.1% in the first quarter of 2020 compared to a 1.5% decrease in the fourth quarter of 2019.

A majority of the year-over-year revenue decline in the first quarter of 2020 was driven by our Europe an markets during the last two weeks of March as governments issued states of emergency and related lockdown requirements .

We experienced a 13.2% decrease (-10.7% in constant currency and -6.2% in organic constant currency) in our permanent recruitment business in the quarter as a result of the COVID-19 disruption in March.

Our Talent Solutions business, which includes Recruitment Process Outsourcing (RPO), TAPFIN - Managed Service Provider (MSP) and our Right Management offerings, experienced growth in the quarter, which was driven by MSP and RPO activity in the first two months of the quarter.

We experienced a sharp reduction in RPO activity during March as many client programs initiated hiring freezes due to the COVID 19 crisis.

Our Right Management business also experienced a decline in organic constant currency during the quarter.

Although Right Management has historically experienced an increase in outplacement activity during economic downturns, we are not seeing an increase in outplacement activity at this time as we believe clients are uncertain as to the duration of the downturn.

During the first quarter of 2020, several key markets within Southern and Northern Europe continued to experience revenue declines worsened by the COVID-19 crisis in March, partially offset by continued constant currency revenue increases in certain markets within the Americas and APME despite the volatile and uncertain global economic environment.

We experienced a revenue decrease in organic constant currency in Southern Europe, mainly due to revenue declines in France and Italy.

After adjusting for billing days, 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 and reduced demand from the manufacturing sector in Germany, the Netherlands and Sweden.

After adjusting for billing days, our organic constant currency decrease in the Americas was 1.8% due to a decrease in the United States related to the COVID-19 crisis in March, partially offset by increased demand for our staffing/interim services in certain markets within Other Americas.

After adjusting for billing days, revenues in organic constant currency were flat in APME as the increase in Japan due to an increase in Manpower staffing revenues was offset by the revenue decrease in Australia due to our decision to exit certain businesses with low-margins to improve profitability and the COVID-19 crisis in March.

Our gross profit margin in the first quarter of 2020 compared to 2019 decreased due to the decrease in our permanent recruitment business as a result of the COVID-19 disruption in March and the margin decrease in our Talent Based Outsourcing business.

These decreases were partially offset by an improvement in our staffing/interim margin due to increases in a few countries within Southern Europe and APME, which were partially offset by higher sickness and absenteeism in certain countries as well as increased direct costs associated with early termination of client contracts during the COVID-19 crisis in March.

We anticipate an ongoing material decline in our higher-margin permanent recruitment business during the duration of government-guided lockdowns in most of our markets as the COVID-19 crisis continues into the second quarter of 2020.

We recorded $48.2 million of restructuring costs in the first quarter of 2020, comprised of $12.8 million in the Americas, $13.1 million in Southern Europe, $19.5 million in Northern Europe, $2.6 million in APME, and $0.2 million in corporate expenses.

The restructuring costs were primarily related to our delivery channel and other front-office centralization and back-office optimization activities.

We expect to recover the restructuring costs through cost savings over the next 12 months with full run-rate savings beginning in the third quarter of 2020.

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.

Our operating profit decreased 64.2% in the first quarter of 2020 (62.7% in constant currency;

62.8% in organic constant currency) while our operating profit margin decreased 130 basis points compared to the first quarter of 2019.

Excluding the restructuring costs incurred in the first quarter of both 2020 and 2019, our operating profit was down 38.6% in constant currency while operating profit margin was down 100 basis points compared to the first quarter of 2019.

The decrease in operating profit margin reflects the significant deleveraging that accompanied the sudden decrease in revenues during March.

We have taken significant actions in late March and early April, which we believe will allow us to reduce selling and administrative expenses to further offset the significant gross profit declines that we anticipate in the second quarter of 2020.

This includes leveraging government unemployment related benefits, which allowed us to move unutilized staff and associates quickly onto these programs.

This also includes 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 continu ing to progress transformational actions aligned with our strategic priorities.

During the three months ended June 30, 2020, our businesses experienced significant changes in revenue trends from the previous quarter reflecting the sudden drop of activity that started in March.

Our consolidated revenues were down 28.0% year-over-year in constant currency in the quarter, a decline from the 5.9% year-over-year constant currency decrease in the first quarter of 2020.

After adjusting for billing days, our organic constant currency revenue year-over-year decrease was 26.6% in the second quarter of 2020 compared to a 7.1% decrease in the first quarter of 2020.

While revenue declines persisted throughout the second quarter, the most significant portion of the year-over-year revenue decline occurred in our European markets during April and the first few weeks of May as governments put states of emergency and related lockdown requirements into place.

After adjusting for billing days, we experienced a gradual improvement in the rates of decline throughout the second quarter of 2020 with monthly year-over-year revenue declines of 31% in April, 26% in May, and 24% in June.

The improvement in the rate of decline during the quarter reflects the reopening of economies largely in May as governments in some of our largest countries lifted lock-down requirements.

We experienced a 45.0% decrease (-43.4% in constant currency and -38.4% in organic constant currency) in our permanent recruitment business in the quarter as a result of the COVID-19 crisis.

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 mostly by RPO activity.

We experienced a sharp reduction in RPO activity as many client programs initiated hiring freezes due to the COVID-19 crisis.

Our MSP business has been resilient during the crisis and experienced growth during the quarter.

Our Right Management business also experienced a decline during the quarter.

Although Right Management has historically experienced an increase in outplacement activity during economic downturns, we believe client uncertainty as to the duration of the downturn has chilled outplacement spending.

As a result, we did not see an increase in outplacement activity during the second quarter, although we experienced gradual improvement in the rate of revenue decline as the quarter progressed.

During the second quarter of 2020, most of our markets experienced revenue declines due to the COVID-19 crisis.

We experienced a revenue decrease in Southern Europe, mainly due to revenue declines in France and Italy due to the severe 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 and reduced demand from very challenging conditions in the manufacturing sector, particularly the automotive sector, in Germany, which has not experienced the improvement in the rate of revenue decline as the second quarter progressed that many of our other European markets have experienced.

After adjusting for billing days, our organic constant currency decrease in the Americas was 18.1% due mostly to a decrease in the United States related to the COVID-19 crisis.

After adjusting for billing days, revenues in organic constant currency decreased 4.6% in APME due to the COVID-19 crisis, partially offset by an increase in Japan due to an increase in Manpower staffing revenues.

Our gross profit margin in the second 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 decrease in our staffing/interim margin in the Americas, Southern Europe and Northern Europe.

The decrease in the staffing/interim margin was due to the higher mix of our lower-margin enterprise client business and higher rates of sickness and absenteeism in certain countries at the beginning of the quarter, partially offset by reduced direct costs in certain countries due to government crisis response programs and our execution of various bill/pay yield initiatives due to the COVID-19 crisis.

We recorded $72.8 million of goodwill and other impairment charges related to our investment in Germany and capitalized software in the United States ($66.8 million and $6.0 million, respectively) in the second quarter of 2020.

We experienced an operating loss of $50.0 million in the second quarter of 2020 compared to an operating profit of $130.8 million in the second quarter of 2019, with our operating profit margin decreasing 370 basis points compared to the second quarter of 2019.

Excluding the goodwill and other impairment charges of $72.8 million and $65.6 million incurred in the second quarter of both 2020 and 2019, respectively, our operating profit was down 87.5% in constant currency while operating profit margin was down 310 basis

points compared to the second quarter of 2019.

The decrease in operating profit margin reflects the material deleveraging that accompanied the sudden decrease in revenues during the quarter as government lockdowns and restrictions were in effect.

We took significant actions in late March and early April, which allowed us to reduce selling and administrative expenses to partially offset the revenue and gross profit declines in the second quarter of 2020.

This included leveraging government unemployment related benefits, which allowed us to move unutilized staff and associates quickly onto these programs.

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:

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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.

We did this while preserving our operating profit margin as much as possible in the first quarter while creating plans for a very challenging second quarter.

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.

In a matter of 10 days in March we were able to shift more than 80% of our people to remote working while mitigating potential productivity losses.

As of June 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.

Our business is benefitted by our diversification across geographies, industries, and offerings, as some businesses have not been impacted materially by the crisis at this stage.

We have a large portion of our business dedicated to professional services and Talent Solutions.

We have seen much smaller declines within our Experis business compared to the Manpower business in March.

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 the second quarter, we have seen much 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.

Although we have seen a decline in hiring activity from some of our major RPO clients as expected in the current environment, we are finding select opportunities elsewhere.

Right Management has not yet seen a significant increase in outplacement activity, which we take as an indication that our clients are uncertain as to the duration of this downturn.

Operating Results - Three Months Ended March 31, 2020 and 2019

The following table presents selected consolidated financial data for the three months ended March 31, 2020 as compared to 2019.

Right Management has not yet seen an increase in overall outplacement activity during the second quarter, which we believe is due to client uncertainty as to the duration of the downturn, although we did experience gradual improvement in the rate of revenue decline as the quarter progressed.

Operating Results - Three Months Ended June 30, 2020 and 2019

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

(in millions, except per share data)

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Gross profit margin

Selling and administrative expenses, excluding goodwill impairment charges

Goodwill impairment charges

Selling and administrative expenses

Operating profit

Operating profit margin

Interest and other expenses, net

Earnings before income taxes

Operating (loss) profit

Operating (loss) profit margin

Interest and other expenses (income), net

(Loss) earnings before income taxes

Provision for income taxes

Effective income tax rate

Net earnings per share – diluted

Net (loss) earnings

Net (loss) earnings per share – diluted

Weighted average shares – diluted

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a revenue decrease in Southern Europe of 38.6% (-37.7% in constant currency).

-9.8% in organic constant currency).

This included a revenue decrease in France of 16.2% (-13.7% in constant currency), which was primarily due to a decrease in our Manpower staffing services and a 13.2% decrease (-10.5% in constant currency) in the permanent recruitment business, both due to the impact of the COVID-19 crisis in March.

The decrease also includes a decrease in Italy of 8.0% (-5.3% in constant

currency), which was primarily due to the decreased demand for our Manpower staffing services and a 16.9% decrease (-14.2% in constant currency) in the permanent recruitment business, both due to the impact of the COVID-19 crisis in March.

The se de crease s w ere partially offset by the additional revenues as a result of the acquisition of the remaining controlling interest in Manpower Switzerland in April 2019 ;

decreased demand for services in most of our markets within Northern Europe, where revenues decreased 11.0% (-7.9% in constant currency and -7.5% in organic constant currency), primarily due to a decrease in our Manpower business and a 16.1% decrease (-13.4% in constant currency) in the permanent recruitment business as a result of the impact of the COVID-19 crisis in March.

We experienced revenue declines in the United Kingdom, Germany, the Netherlands, the Nordics, and Belgium of 2.1%, 17.2%, 19.3%, 16.7% and 18.6% (-0.3%, -14.7%, -16.9%, -10.4%, and -16.2%, respectively, in constant currency;

-8.6% in organic constant currency in the Nordics);

a revenue decrease in the United States of 2.0% (-4.8% on an organic basis) primarily driven by a decline in demand for our Manpower staffing services due mostly do the impact of the COVID-19 crisis, partially offset by an increase in our Talent Solutions business, primarily within our MSP and RPO offerings;

a revenue decrease in APME of 15.7% (-14.0% in constant currency;

increase of 1.2% in organic constant currency) due to the deconsolidation of ManpowerGroup Greater China Limited in July 2019 (the “Deconsolidation”), partially offset by an increase in demand for our Talent-Based Outsourcing services within the Manpower business;

This included a revenue decrease in France of 48.4% (-47.5% in constant currency), which was primarily due to a decrease in our Manpower staffing services and a 45.6% decrease (-44.6% 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 31.9% (-30.7% in constant currency), which was primarily due to the decreased demand for our Manpower staffing services and a 56.2% decrease (-55.4% in constant currency) in the permanent recruitment business, both due to the impact of the COVID-19 crisis;

decreased demand for services in most of our markets within Northern Europe, where revenues decreased 27.5% (-24.2% in constant currency), primarily due to a decrease in our Manpower business and a 47.2% decrease (-45.0% 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 Netherlands, the Nordics, and Belgium of 24.2%, 33.5%, 27.9%, 26.8% and 39.2%, respectively (-21.6%, -32.2%, -26.4%, -20.3%, and -38.0%, respectively, in constant currency);

a revenue decrease in the United States of 21.0% (-23.0% on an organic basis) primarily driven by a decline in demand for our Manpower staffing services and a 34.6% decrease in the permanent recruitment business, both due to the impact of the COVID-19 crisis, partially offset by an increase in demand for our MSP offering and outplacement services;

a revenue decrease in APME of 20.6% (-19.1% in constant currency and -3.4% in organic constant currency) due to the deconsolidation of ManpowerGroup Greater China Limited in July 2019 (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;

a 2.4% decrease due to the impact of changes in currency exchange rates.

partially offset by

the 1.1% favorable impact of approximately one more billing day.

The year-over-year 80 basis point decrease in gross profit margin was primarily attributed to:

a 40 basis point unfavorable impact due to the decrease in our permanent recruitment business of 45.0% (-43.4% in constant currency and -38.4% in organic constant currency);

a 20 basis point unfavorable impact due to the margin decrease in our Talent Based Outsourcing business;

partially offset by

a 10 basis point favorable impact from an improvement in our staffing/interim margin due to increases in a few markets within Southern Europe and APME, partially offset by higher sickness and absenteeism in certain countries as well as increased direct costs associated with early termination of client contracts during the COVID-19 crisis in March.

The 1.9% decrease in selling and administrative expenses in the first quarter of 2020 (increases of 0.6% in constant currency and 1.1% in organic constant currency) was primarily attributed to:

a 2.5% decrease due to the impact of changes in currency exchange rates;

a 40 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 at the beginning of the quarter, partially offset by reduced direct costs in certain countries due to government crisis response programs and our execution of various bill/pay yield initiatives due to the COVID-19 crisis.

The 15.3% decrease in selling and administrative expenses in the second quarter of 2020 (-13.2% in constant currency;

-11.2% in organic constant currency) was primarily attributed to:

a 20.4% decrease (-18.2% in constant currency and -15.9% in organic constant currency) in personnel costs due to a reduction of salary-related costs as a result of lower 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;

a 12.5% decrease (-10.3% in constant currency and -8.2% in organic constant currency) in non-personnel related costs, excluding goodwill and other impairment charges, due to cost management actions taken across all segments as a result of revenue declines;

the reduction in recurring selling and administrative costs of $19.5 million as a result of the Deconsolidation in July 2019;

a 9.3% decrease (-7.1% in constant currency and -5.7% in organic constant currency) in variable incentive costs due to a decline in profitability in most markets;

a 2.1% decrease due to the impact of changes in currency exchange rates;

partially offset by

restructuring costs of $48.2 million incurred in the first quarter of 2020 compared to $39.8 million incurred in the first quarter of 2019;

the additional recurring selling and administrative costs of $12.8 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;

a bad debt expense and a state sales tax related charge of $4 million incurred in the first quarter of 2020 in the United States.

Selling and administrative expenses as a percent of revenues increased 100 basis points in the first quarter of 2020 compared to the first quarter of 2019 due primarily to:

a 70 basis point un favorable impact from expense deleveraging, excluding restructuring costs, as we were unable to decrease selling and administrative expenses at the same rate as our revenue decline ;

a 30 basis point unfavorable impact from the increase in restructuring costs in the first quarter of 2020 compared to 2019;

the increase in goodwill and other impairment charges to $72.8 million in the second quarter of 2020 from $65.6 million in the second quarter of 2019;

the additional recurring selling and administrative costs of $1.8 million incurred as a result of the franchise acquisitions in the United States in August and October 2019.

Selling and administrative expenses as a percent of revenues increased 290 basis points in the second quarter of 2020 compared to the second quarter of 2019 due primarily to:

a 220 basis point unfavorable impact from expense deleveraging, excluding goodwill and other impairment charges, as we were unable to decrease selling and administrative expenses at the same rate as our revenue decline;

a 70 basis point unfavorable impact from the increase in goodwill and other impairment charges;

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

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a 10 basis point favorable impact from acquisitions and dispositions.

Interest and other expenses is comprised of interest, foreign exchange gains and losses and other miscellaneous non-operating income and expenses, including noncontrolling interests.

Interest and other expenses was $20.5 million in the first quarter of 2020 compared to $11.9 million in the first quarter of 2019.

Net interest expense decreased $1.3 million in the first quarter of 2020 to $7.4 million from $8.7 million in the first quarter of 2019 primarily due to the net interest income incurred as a result of cross-currency swaps related to investment hedges and intercompany lending activities.

Miscellaneous expense increased to $10.0 million in the first quarter of 2020 from $0.3 million in the first quarter of 2019 primarily due to the pension settlement expense of $10.2 million recorded in the first quarter of 2020.

We recorded income tax expense at an effective rate of 90.2% for three months ended March 31, 2020, as compared to an effective rate of 42.8% for the three months ended March 31, 2019.

The 2020 rate was unfavorably impacted by low pre-tax earnings due partly to restructuring costs recorded in the first quarter of 2020.

In certain countries in which we recorded restructuring costs, we did not recognize a corresponding tax benefit due to the recognition of valuation allowances against anticipated tax losses.

In addition, 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.

These unfavorable impacts were partially offset by a discrete favorable benefit in the quarter resulting from the successful appeal of a non-United States tax ruling.

The 90.2% effective tax rate in the first quarter of 2020 was higher than the United States Federal statutory rate of 21% primarily due to the restructuring costs recorded in the first quarter of 2020, the French business tax and overall mix of earnings.

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 $5.8 million in the second quarter of 2020 compared to income of $70.2 million in the second quarter of 2019.

Net interest expense decreased $2.8 million in the second quarter of 2020 to $7.3 million from $10.1 million in the second quarter of 2019 primarily due to an increase interest income as a result of higher cash balances.

Miscellaneous income decreased to $2.0 million in the second quarter of 2020 from $79.8 million in the second quarter of 2019 primarily due to the $80.4 million gain that was recorded in the second quarter of 2019 from the acquisition of Manpower Switzerland and decrease in noncontrolling interest expense as a result of a decrease in earnings in a joint venture in Germany.

We recorded income tax expense on a pre-tax loss resulting in a negative effective rate of 15.4% for the three months ended June 30, 2020, as compared to an income tax expense on pre-tax earnings resulting in an effective rate of 36.7% for the three months ended June 30, 2019.

The 2020 rate was negative due to a pre-tax loss that primarily resulted from the impact from the goodwill impairment charge, related to our Germany reporting unit, which was non-deductible.

The 2020 rate was also unfavorably impacted by the relatively low level and mix of pre-tax (losses) earnings, tax losses in certain countries for which we did not recognize a corresponding

tax benefit due to valuation allowances, 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 negative effective tax rate of 15.4% for the three months ended June 30, 2020 was significantly different than the United States Federal statutory rate of 21% primarily due to the factors noted above .

We compute our quarterly effective tax rate in part based upon an estimate of projected annual earnings before income taxes.

Given the uncertainty in predicting future earnings before income taxes due to the impact of the COVID-19 crisis, the impact to the first quarter of 2020 along with future quarters quarterly effective tax rates may be material.

Net earnings per share - diluted was $0.03 and $0.88 in the first quarter of 2020 and 2019, respectively.

Foreign currency exchange rates unfavorably impacted net earnings per share - diluted by approximately $0.03 per share in the first quarter of 2020.

Restructuring costs recorded in the first quarter of 2020 and 2019 negatively impacted net earnings per share - diluted by approximately $0.68 and $0.51 per share, net of tax, in the first quarter of 2020 and 2019, respectively.

The pension settlement expense recorded in the first quarter of 2020 negatively impacted net earnings per share – diluted by approximately $0.11, net of tax, in the first quarter of 2020.

Weighted average shares - diluted decreased to 59.0 million in the first quarter of 2020 from 61.0 million in the first quarter of 2019.

This decrease was due to the impact of share repurchases completed since the first quarter of 2019 and the full weighting of the repurchases completed in the first quarter of 2019, partially offset by shares issued as a result of exercises and vesting of share-based awards since the first quarter of 2019.

The COVID-19 crisis has created uncertainty in predicting future earnings before income taxes and its impact to the second quarter of 2020 along with future quarters quarterly effective tax rates may be material.

Net (loss) earnings per share - diluted was a loss of $1.11 in the second quarter of 2020 compared to earnings of $2.11 in the second quarter of 2019.

Foreign currency exchange rates unfavorably impacted net (loss) earnings per share - diluted by approximately $0.02 per share in the second quarter of 2020.

Goodwill and other impairment charges recorded in the second quarter of 2020 and 2019 negatively impacted net earnings per share - diluted by approximately $1.23 and $1.26 per share in the second quarter of 2020 and 2019, respectively.

The gain from the acquisition of Manpower Switzerland recorded in the second quarter of 2019 positively impacted net earnings per share – diluted by approximately $1.32 per share in the second quarter of 2019.

Weighted average shares - diluted decreased to 58.2 million in the second quarter of 2020 from 60.4 million in the second quarter of 2019.

This decrease was due to the impact of share repurchases completed since the second quarter of 2019 and the full weighting of the repurchases completed in the second quarter of 2019, partially offset by shares issued as a result of exercises and vesting of share-based awards since the second quarter of 2019.

Operating Results – Six Months Ended June 30, 2020 and 2019

(in millions, except per share data)

Revenues from services

Cost of services

Gross profit margin

Selling and administrative expenses, excluding goodwill impairment charges

Goodwill impairment charges

Selling and administrative expenses

Operating (loss) profit

Operating (loss) profit margin

Interest and other expenses (income), net

(Loss) earnings before income taxes

Provision for income taxes

Effective income tax rate

Net (loss) earnings

Net (loss) earnings per share – diluted

Weighted average shares – diluted

The year-over-year decrease in revenues from services of 19.7% (-17.3% in constant currency and -16.6% in organic constant currency) was attributed to:

a revenue decrease in Southern Europe of 24.2% (-22.6% in constant currency;

-24.6% in organic constant currency).

This included a revenue decrease in France of 33.0% (-31.3% in constant currency), which was primarily due to a decrease in our Manpower staffing services and a 28.9% decrease (-27.1% 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 20.6% (-18.6% in constant currency), which was primarily due to the decreased demand for our Manpower staffing services and a 37.4% decrease (-35.7% in constant currency) in the permanent recruitment business, both due to the impact of the COVID-19 crisis;

decreased demand for services in most of our markets within Northern Europe, where revenues decreased 19.2% (-16.0% in constant currency;

-15.8% in organic constant currency), primarily due to a decrease in our Manpower business and a 31.7% decrease (-29.3% 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 Netherlands, the Nordics, and Belgium of 13.2%, 25.2%, 23.5%, 21.7% and 28.9% , respectively (-11.0%, -23.3%, -21.5%, -15.4%, and -27.1%, respectively, in constant currency);

a revenue decrease in the United States of 11.7% (-14.1% on an organic basis) primarily driven by a decline in demand for our Manpower staffing services and a 13.2% 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 outplacement services;

a revenue decrease in APME of 18.1% (-16.6% in constant currency;

-1.1% in organic constant currency) due to the deconsolidation of ManpowerGroup Greater China Limited in July 2019 (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;

a 2.4% 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 29.5% (-27.4% in constant currency and -22.5% in organic constant currency);

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, partially offset by reduced direct costs in certain countries due to government crisis response programs and our execution of various bill/pay yield initiatives due to the COVID-19 crisis;

a 10 basis point unfavorable impact due to the margin decrease in our Talent Based Outsourcing business primarily related to the lower utilization of consultants in Germany.

The 8.8% decrease in selling and administrative expenses in the first half of 2020 (-6.5% in constant currency;

-5.2% in organic constant currency) was primarily attributed to:

a 12.8% decrease (-10.5% in constant currency and -9.0% 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;

a 6.0% decrease (-3.6% in constant currency and -2.4% in organic constant currency) in non-personnel related costs, excluding goodwill and other impairment charges and restructuring costs, due to cost management actions taken across all segments as a result of revenue declines;

restructuring costs of $48.2 million incurred in the first half of 2020 compared to $39.8 million incurred in the first half of 2019;

the increase in goodwill and other impairment charges to $72.8 million in the first half of 2020 from $65.6 million in the first half of 2019;

the additional recurring selling and administrative costs of $16.3 million incurred as a result of the franchise acquisitions in the United States in August and October 2019;

partially offset by

a 2.3% decrease due to the impact of changes in currency exchange rates;

the reduction in recurring selling and administrative costs of $36.5 million as a result of the Deconsolidation in July 2019.

Selling and administrative expenses as a percent of revenues increased 190 basis points in the first half of 2020 compared to the first half of 2019 due primarily to:

a 130 basis point unfavorable impact from expense deleveraging, excluding goodwill and other impairment charges, as we were unable to decrease selling and administrative expenses at the same rate as our revenue decline;

a 30 basis point unfavorable impact from the increase in goodwill and other impairment charges;

a 20 basis point unfavorable impact from the increase in restructuring costs in the first half of 2020 compared to 2019;

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 $26.3 million in the first half of 2020 compared to income of $58.3 million in the first half of 2019.

Net interest expense decreased $4.1 million in the first half of 2020 to $14.7 million from $18.8 million in the first half of 2019 primarily due to an increase interest income as a result of higher cash balances.

Miscellaneous expense was $8 million in the first half of 2020 compared to miscellaneous income of $79.5 million in the first half of 2019.

The change is primarily due to the $80.4 million from the acquisition of Manpower Switzerland in the first half of 2019, the pension settlement expense of $10.2 million recorded in the first half of 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 on a pre-tax loss resulting in a negative effective rate of 62.4% for the six months ended June 30, 2020, as compared to an income tax expense on pre-tax earnings resulting in an effective rate of 38.6% for the six months ended June 30, 2019.

The 2020 rate was negative due to a pre-tax loss that primarily resulted from the impact from the goodwill impairment charge, related to our Germany reporting unit, which was non-deductible.

The 2020 rate was also unfavorably impacted by the relatively low level and mix of pre-tax earnings, restructuring costs and tax losses in certain countries for which we did not recognize a corresponding tax benefit due to valuation allowances, and the French business tax.

The negative effective tax rate of 62.4% in the first half of 2020 was significantly different than the United States Federal statutory rate of 21% primarily due to the factors noted above, partially offset by a discrete favorable benefit for the successful appeal of a non-United States tax ruling.

Net (loss) earnings per share - diluted was a loss of $1.07 in the six months ended June 30, 2020 compared to earnings of $2.98 in the six months ended June 30, 2019.

Foreign currency exchange rates unfavorably impacted net (loss) earnings per share - diluted by approximately $0.05 per share in the first half of 2020.

Restructuring costs recorded in the six months ended June 30, 2020 and 2019 negatively impacted net (loss) earnings per share – diluted by approximately $0.68 and $0.52 per share, net of tax, in the six months ended June 30, 2020 and 2019, respectively.

Goodwill and other impairment charges recorded in the first half of 2020 and 2019 negatively impacted net earnings per share - diluted by approximately $1.22 and $1.26 per share in the first half of 2020 and 2019, respectively.

The pension settlement expense recorded in the six months ended June 30, 2020 negatively impacted net loss per share – diluted by approximately $0.11, net of tax, in the six months ended June 30, 2020.

The gain from the acquisition of Manpower Switzerland recorded in the first half of 2019 positively impacted net earnings per share – diluted by approximately $1.32 per share in the first half of 2019.

Weighted average shares - diluted decreased to 58.5 million in the first half of 2020 from 60.7 million in the first half of 2019.

This decrease was due to the impact of share repurchases completed since the first half of 2019 and the full weighting of the repurchases completed in the first half of 2019, partially offset by shares issued as a result of exercises and vesting of share-based awards since the first half of 2019.

Segment Operating Results

In the Americas, revenues from services decreased 1.9% (increase of 1.2% in constant currency;

-0.5% in organic constant currency) in the first quarter of 2020 compared to 2019.

In the United States, revenues from services decreased 2.0% (-4.8% on an organic basis) in the first quarter of 2020 compared to 2019, primarily driven by decreased demand for our Manpower staffing services due to the impacts of the COVID-19 crisis in March, with the impacts becoming more significant as we ended the quarter.

This decrease in the United States was partially offset by an increase in our Talent Solutions business, primarily within our RPO and MSP offerings in January and February, increased demand for our Experis interim services, mostly in January and February, and the favorable impact of approximately one additional billing day.

Our RPO business in the United States has experienced significant client hiring freezes in late March as a result of the COVID-19 crisis.

In Other Americas, revenues from services decreased 1.7% (increase of 6.1% in constant currency) in the first quarter of 2020 compared to 2019.

We experienced revenue growth in Canada and Peru of 7.5% and

10.5%, respectively (8.5%, and 13.0%, respectively, in constant currency).

These increases were partially offset by decreases in Mexico, Argentina, Colombia and Brazil of 3.4%, 5.2%, 11.7% and 24.0%, respectively (-0.3%, increase of 49.5%, -0.9% and -10.5%, respectively, in constant currency).

In the Americas, revenues from services decreased 21.7% (-16.7% in constant currency;

-17.9% in organic constant currency) in the second quarter of 2020 compared to 2019.

In the United States, revenues from services decreased 21.0% (-23.0% on an organic basis) in the second quarter of 2020 compared to 2019, primarily driven by decreased demand for our Manpower staffing services and a decrease in our permanent recruitment business of 34.6%, all 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 outplacement services.

Our RPO business in the United States has experienced significant client hiring freezes in the quarter as a result of the COVID-19 crisis.

In Other Americas, revenues from services decreased 22.8% (-10.0% in constant currency) in the second quarter of 2020 compared to 2019.

This decline was driven by decreases in Mexico, Canada, Argentina, Peru, Colombia and Brazil of 26.4%, 7.6%, 10.1%, 31.3%, 47.0% and 27.4%, respectively (-10.3%, -4.3%, increase of 38.7%, -29.1%, -37.1% and -0.5%, respectively, in constant currency).

The constant currency increase in Argentina was primarily due to inflation.

In April 2020, the United States has experienced a year-over-year revenue decline of approximately 20%.

It is uncertain when COVID-19 related restrictions will be lifted in different parts of the United States, and how those developments will impact our revenue trends.

Gross profit margin decreased in the first quarter of 2020 compared to 2019.

Gross profit margin decreased due to a decline in the staffing/interim gross profit margins within certain markets within Other Americas as a result of business mix changes, with higher growth coming from clients with low margins.

This decrease was partially offset by the increases in our higher margin RPO and MSP offerings and slight increase in the staffing/interim margin in the United States.

In the first quarter of 2020, selling and administrative expenses increased 6.0% (8.3% in constant currency and 6.9% in organic constant currency) due primarily to the increase in restructuring costs to $12.8 million from $5.1 million in the first quarter of 2019, the additional recurring selling and administrative costs incurred as a result of the franchise acquisitions in the United States in August and October 2019, the bad debt expense and a state sales tax related charge incurred in the first quarter of 2020, and increase in salary-related expenses, as a result of higher headcount to support increases in revenues in certain markets within Other Americas.

The majority of our restructuring costs related to the United States where we consolidated branches and other facilities and optimized front and back office processes, and the remaining amount related to Canada and other countries in Other Americas where we continue to simplify our operations.

Operating Unit Profit (“OUP”) margin in the Americas was 1.6% and 3.1% for the first quarter of 2020 and 2019, respectively.

In the United States, OUP margin decreased to 0.4% in the first quarter of 2020 from 2.7% in 2019.

The margin decrease in the first quarter of 2020 in the United States was primarily due to the increase in restructuring costs, the bad debt expense and a state sales tax related charge incurred in the first quarter of 2020, and the increase in selling and administrative expenses while our revenues decreased, which reflected the significant expense deleveraging due to the sudden impact of the COVID-19 crisis in March.

These decreases were partially offset by the improvement in the gross profit margin.

Other Americas OUP margin decreased to 3.6% in the first quarter of 2020 from 3.7% in the first quarter of 2019 due primarily to the decrease in the gross profit margin, partially offset by our ability to decrease selling and administrative expenses more than the revenue decline.

In the Americas, revenues from services decreased 12.0% (-7.9% in constant currency, -9.4% in organic constant currency) in the six months ended June 30, 2020 compared to 2019.

In the United States, revenues from services decreased 11.7% (-14.1% on an organic basis) in the six months ended June 30, 2020 compared to 2019, primarily driven by decreased demand for our Manpower staffing services and a decrease in our permanent recruitment business of 13.2%, 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, mostly in the first quarter of 2020, and outplacement services.

In Other Americas, revenues from services decreased 12.4% (-2.0% in constant currency) in the six months ended June 30, 2020 compared to 2019.

This decline was driven by decreases in Mexico, Canada, Argentina, Peru, Colombia and Brazil of 14.9%, 0.3%, 7.6%, 11.3%, 29.6% and 25.6%, respectively (-5.3%, increase of 1.9%, increase of 44.2%, -8.9%, -19.2% and -5.6%, respectively, in constant currency).

The constant currency increase in Argentina was primarily due to inflation.

After adjusting for billing days, the United States experienced monthly organic year-over-year revenue declines of 24% in April, 22% in May, and 23% in June.

In July 2020, the United States experienced an organic year-over-year revenue decline of approximately 14%.

It is uncertain if additional COVID-19 related restrictions will be introduced in different parts of the United States, and how those developments will impact our revenue trends.

Gross profit margin increased in the second quarter of 2020 compared to 2019 primarily due to gross profit margin increase in the United States from our higher margin MSP offering and outplacement services.

This increase was partially offset by the decrease in our permanent recruitment business of 37.9% (-36.5% in constant currency) and a decline in the staffing/interim margin due to client mix changes, as a higher percentage of revenues came from our lower margin enterprise clients.

Gross profit margin was flat for the six months ended June 30, 2020 compared to 2019 as the increases in our higher margin MSP offering and outplacement services were offset by the decrease in our permanent recruitment business of 16.3% (-15.0% in constant currency) and a decline in the staffing/interim margin due to client mix changes, as a higher percentage of our revenues came from our lower margin enterprise clients.

In the second quarter of 2020, selling and administrative expenses decreased 6.2% (-2.9% in constant currency and -4.0% in organic constant currency) primarily due to the decrease in salary-related costs, because of lower headcount, and discretionary expenses.

These decreases were partially offset by the impairment charge of $6.0 million recorded in the United States related to capitalized software 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.

Selling and administrative expenses increased 0.1% (2.9% in constant currency and 1.6% in organic constant currency) in the six months ended June 30, 2020 compared to 2019, primarily due to the software impairment charge in the United States, the increase in restructuring costs to $12.8 million in the first half of 2020 compared to $9.8 million in the first half of 2019, a bad debt expense and a state sales tax related charge incurred in the first half 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 2.4% and 5.2% for the second quarter of 2020 and 2019, respectively.

In the United States, OUP margin decreased to 1.8% in the second quarter of 2020 from 5.8% in 2019.

The margin decrease in 2020 in the United States was primarily due to the software impairment charge and expense deleveraging, as we were unable to decrease expenses at the same rate as our revenue decline.

These decreases were partially offset by the increase in the gross profit margin.

Americas OUP margin decreased to 3.3% in the second quarter of 2020 from 4.3% in the second quarter of 2019 due primarily to the decrease in the gross profit margin and expense deleveraging.

OUP margin in the Americas was 2.0% and 4.2% for the six months ended June 30, 2020 and 2019, respectively.

In the United States, OUP margin decreased to 1.0% for the six months ended June 30, 2020 from 4.3% in 2019.

The margin decrease in 2020 in the United States was primarily due to the software impairment charge, increase in restructuring costs and expense deleveraging.

These decreases were partially offset by the increase in the gross profit margin.

Other Americas OUP margin decreased to 3.4% for the six months ended June 30, 2020 from 4.0% in 2019 primarily due to a decline in the gross profit margin.

Southern Europe

In Southern Europe, which includes operations in France and Italy, revenues from services decreased 7.8% (-5.5% in constant currency and -9.8% in organic constant currency) in the first quarter of 2020 compared to 2019.

In the first quarter of 2020, revenues from services decreased 16.2% (-13.7% in constant currency) in France (which represents 56% of Southern Europe’s revenues) and decreased 8.0% (-5.3% in constant currency) in Italy (which represents 17% of Southern Europe’s revenues).

The decrease in France is primarily due to decreased demand for our Manpower staffing services and a 13.2% decrease (-10.5% in constant currency) in the permanent recruitment busines s, both due to the impact of the COVID-19 crisis in March.

These decreases were partially offset by the favorable impact of approximately one additional billing day .

The decrease in Italy was primarily due to the decreased demand for our Manpower staffing services and a 16.9% decrease (-14.2% in constant currency) in the permanent recruitment business, both due to the impact of the COVID-19 crisis in March.

In Other Southern Europe, revenues from services increased 17.2% (18.3% in constant currency;

decrease of -2.0% in organic constant currency) during the first quarter of 2020 compared to 2019, due to the additional revenue from our acquisition in April 2019 of the remaining interest in Manpower Switzerland (which represents approximately 5% of Southern Europe’s revenues) and the favorable impact of approximately one additional billing day, partially offset by the decreased demand for our Manpower staffing services due to the impact of the COVID-19 crisis in March and a decrease in our permanent recruitment business of 1.0% (increase of 0.2% in constant currency;

-11.9% in organic constant currency).

In April 2020, France has experienced a year-over-year revenue decline of approximately 60%.

In mid-April, the French government announced that their COVID-19 restrictions are extended through May 11th.

We believe that any improvement in the rate of revenue decline would be dependent on the timing and the nature of the government’s actions to ease the lockdown requirements.

In April 2020, Italy has experienced a year-over-year revenue decline of approximately 40%.

The Italian government imposed additional significant restrictions in late March with broader restrictions that were extended to and ended May 3 rd , with a majority of businesses opening on May 4 th .

Gross profit margin decreased in the first quarter of 2020 compared to 2019 primarily due to the 9.7% decrease (-7.6% in constant currency and -12.0% in organic constant currency) in the permanent recruitment business and a decrease in the staffing/interim gross profit margin in Italy, partially offset by improvements in staffing/interim margins in France and certain countries within Other Southern Europe.

Selling and administrative expenses increased 2.1% (4.5% in constant currency;

decrease of -0.8% in organic constant currency) during the first quarter of 2020 compared to 2019, due to the additional recurring costs from our acquisition of the remaining interest in Manpower Switzerland and an increase in restructuring costs to $13.1 million in the first quarter of 2020 from $5.4 million in the first quarter of 2019, partially offset by the decrease in variable incentive costs due to a decline in profitability in certain markets.

The restructuring costs in the first quarter of 2020 related to a reduction of our less profitable call center operations in Portugal, front office centralization and organizational simplification in Spain, front office delivery changes and back office optimization in Italy and Switzerland, and simplification of our Israel and eastern European operations.

We have taken significant actions in France in March and April to reduce our costs during this period of materially reduced revenues.

In France, we have transitioned approximately 30% of our full-time equivalents to government temporary unemployment programs and other initiatives and have eliminated a significant amount of discretionary spend.

We expect these actions to significantly reduce France’s selling and administrative expenses in April as we manage through the COVID-19 crisis.

In Italy, we have taken significant actions to reduce costs during this crisis, which also involves transitioning full-time employees onto temporary unemployment programs.

These actions along with the benefits of the restructuring actions should allow our Italian business to significantly reduce selling and administrative expenses in April.

OUP margin in Southern Europe was 2.7% for the first quarter of 2020 compared to 4.1% for 2019.

In France, the OUP margin decreased to 3.5% for the first quarter of 2020 from 4.2% in 2019, primarily due to expense deleveraging, as we were unable to decrease selling and administrative expenses at the same rate as our revenue decline due to the sudden impact of the COVID-19 crisis in March, partially offset by the increase in the gross profit margin.

In Italy, the OUP margin decreased to 4.3% for the first quarter of 2020 from 5.7% for 2019, primarily due to the decrease in the gross profit margin and expense deleveraging, as we were unable to decrease selling and administrative expenses, excluding restructuring costs, at the same rate as our revenue decline due to the sudden impact of the COVID-19 crisis in March.

Other Southern Europe’s OUP margin decreased to 0.2% for the first quarter of 2020 from 2.5% in 2019, due to the increase in restructuring costs to $11.5 million in the first quarter of 2020 from $3.1 million in the first quarter of 2019 and a decrease in the gross profit margin.

In Southern Europe, which includes operations in France and Italy, revenues from services decreased 38.6% (-37.7% in constant currency) in the second quarter of 2020 compared to 2019.

In the second quarter of 2020, revenues from services decreased 48.4% (-47.5% in constant currency) in France (which represents 50% of Southern Europe’s revenues) and decreased 31.9% (-30.7% in constant currency) in Italy (which represents 18% of Southern Europe’s revenues).

The decrease in France is primarily due to decreased demand for our Manpower staffing services and a 45.6% decrease (-44.6% in constant currency) in the permanent recruitment busines s, 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 56.2% decrease (-55.4% in constant currency) in the permanent recruitment business, both due to the impact of the COVID-19 crisis.

In Other Southern Europe, revenues from services decreased 18.9% (-18.2% in constant currency) during the second quarter of 2020 compared to 2019, due to decreased demand for our Manpower staffing services and a decrease in our permanent recruitment business of 53.4% (-52.6% in constant currency), both due to the impact of the COVID-19 crisis.

Revenues from services decreased 24.2% (-22.6% in constant currency) in the six months ended June 30, 2020 compared to 2019.

In the six months ended June 30, 2020, revenues from services decreased 33.0% (-31.3% in constant currency) in France and decreased 20.6% (-18.6% in constant currency) in Italy.

The decrease in France is due to decreased demand for our Manpower staffing services and a 28.9% (-27.1% 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 37.4% (-35.7% in constant currency) decrease in our permanent recruitment business.

In Other Southern Europe, revenues from services decreased 3.1% (-2.3% in constant currency) during the six months ended June 30, 2020 compared to 2019, due to decreased demand for our Manpower staffing services and a decrease in our permanent recruitment business of 28.8% (-27.8% in constant currency), both due to the impact of the COVID-19 crisis.

After adjusting for billing days, France experienced monthly year-over-year revenue declines of 62% in April, 49% in May, and 33% in June.

In July 2020, France has experienced a year-over-year revenue decline of approximately 25%.

Although improvement in revenue trends throughout the quarter were steady in France, the rate of improvement in the revenue trend slowed somewhat in July.

After adjusting for billing days, Italy experienced monthly year-over-year revenue declines of 41% in April, 31% in May, and 20% in June.

In July 2020, Italy has experienced a year-over-year revenue decline of approximately 15%.

Gross profit margin decreased in both the second quarter and first half of 2020 compared to 2019 primarily due to the decreases of 51.5% and 31.1%, respectively (-50.6% and -29.6% in constant currency, respectively) in the permanent recruitment business and a decrease in the staffing/interim gross profit margins in France and certain countries within Other Southern Europe.

Selling and administrative expenses decreased 20.9% (-19.6% in constant currency) during the second quarter of 2020 compared to 2019.

Selling and administrative expenses decreased 9.6% (-7.7% in constant currency) in the six months ended June 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 second quarter of 2020.

In both France and Italy, we transitioned full-time equivalent employees onto 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 second quarter and first half of 2020 was primarily due to the decreases in personnel costs, as a result of a reduction in headcount, 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.

The decreases are also due to the reduction of our discretionary expenses.

The decreases in the first half of 2020 were offset by the increase in restructuring costs to $13.1 million in the first half of

2020 compared to $ 5.4 million in the first half of 2019 and the additional recurring selling and administrative costs from our acquisition of the remaining interest in Manpower Switzerland.

OUP margin in Southern Europe was 0.8% for the second quarter of 2020 compared to 5.2% for 2019.

France experienced a decrease to an operating unit loss of 0.3% for the second quarter of 2020 from an OUP of 5.3% in 2019.

In Italy, the OUP margin decreased to 4.1% for the second quarter of 2020 from 7.5% for 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 0.7% for the second quarter of 2020 from 3.1% in 2019, due to the decrease in the gross profit margin and expense deleveraging.

OUP margin in Southern Europe was 1.9% for the six months ended June 30, 2020 compared to 4.7% in 2019.

In France, the OUP margin decreased to 1.9% in the six months ended June 30, 2020 compared to 4.8% in 2019.

In Italy, the OUP margin decreased to 4.2% in the six months ended June 30, 2020 compared to 6.7% 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 0.4% in the six months ended June 30, 2020 compared to 2.8% in 2019, due to the decrease in the gross profit margin, the increase in restructuring costs to $11.5 million in the first half of 2020 from $3.1 million in the first half of 2019, and expense deleveraging.

Northern Europe

In Northern Europe, which includes operations in the United Kingdom, Germany, the Nordics, the Netherlands and Belgium (comprising 36%, 17%, 20%, 11%, and 8%, respectively, of Northern Europe’s revenues), revenues from services decreased 11.0% (-7.9% in constant currency and -7.5% in organic constant currency) in the first quarter of 2020 compared to 2019.

In Northern Europe, which includes operations in the United Kingdom, Germany, the Nordics, the Netherlands and Belgium (comprising 35%, 16%, 22%, 11%, and 7%, respectively, of Northern Europe’s revenues), revenues from services decreased 27.5% (-24.2% in constant currency) in the second quarter of 2020 compared to 2019.

We experienced revenue declines in the United Kingdom, Germany, the Nordics, the Netherlands and Belgium of 24.2%, 33.5%, 26.8%, 27.9% and 39.2% (-21.6%, -32.2%, -20.3%, -26.4% and -38.0%, respectively, in constant currency).

-8.6% in organic constant currency in the Nordics).

The Northern Europe revenue decrease is primarily due to reduced demand for our Manpower staffing services, primarily because of the impact of the COVID-19 crisis in March and reduced demand from the manufacturing sector in Germany, the Netherlands and Sweden.

The decrease was also due to a 16.1% decrease (-13.4% in constant currency) in the permanent recruitment business primarily due to the impact of the COVID-19 crisis in March.

These decreases were partially offset by an increased demand for our Experis interim services in the United Kingdom, mostly in January and February.

In April 2020, our United Kingdom business experienced a year-over-year revenue decline of approximately 20% with the United Kingdom government imposing COVID-19 restrictions that are still in place as of the date of this filing, with the government set to make an announcement on the possible easing of the restrictions on May 10 th .

In Germany, we experienced a year-over-year revenue decline of approximately 35% in April 2020 with the German government gradually lifting certain provisions of their lockdown starting on May 4 th .

Gross profit margin decreased in the first quarter 2020 compared to 2019 due to the decline in our staffing/interim margin, primarily as a result of higher sickness and absenteeism as well as increased direct costs associated with early termination of client contracts during the COVID-19 crisis in March in certain countries, and the decrease in our permanent recruitment business.

Selling and administrative expenses decreased 7.6% (-4.3% in constant currency and -3.6% in organic constant currency) in the first quarter of 2020 compared to 2019, primarily due to the decrease in salary-related expenses as a result of a reduction in headcount in certain countries and a decrease in office-related expenses driven by a decrease in the number of offices.

These decreases were partially offset by the increase in restructuring costs to $19.5 million in the first quarter of 2020 from $18.7 million in the first quarter of 2019.

The restructuring costs in the first quarter of 2020 related to a reduction of finance and shared services back office costs in Germany, and simplifying operations in the Nordics, the Netherlands, and Belgium.

OUP margin for Northern Europe for the first quarter of 2020 decreased to -1.3% compared to 0.2% in 2019 due to the decrease in gross profit margin, the increase in restructuring costs, and expense deleveraging, as we were unable to decrease selling and administrative expenses, excluding restructuring costs, at the same rate as the revenue decline due to the sudden impact of the COVID-19 crisis in March.

As Germany is a bench market, which means our temporary workers are staffed as full-time employees for which we absorb the cost of unutilized time and sickness, our ability to utilize government unemployment benefits for our bench associates and full-time employees is critical to being able to preserve gross margin and minimize operating losses in the current environment.

The German program is subject to certain conditions and is providing between approximately 60% to 70% of lost after tax wages due to the COVID-19 crisis.

We anticipate that this program will allow us to avoid absorbing substantial levels of unutilized bench costs to preserve gross margin.

Sweden and Norway are also bench markets and there are government programs for unemployment benefits for our bench associates and full-time employees.

We expect these programs will allow us to minimize the impact of gross profit margin decline and significantly reduce selling and administrative expenses in Sweden and Norway with the anticipated declines in revenue.

Netherlands also has significant bench components and current government programs will also be utilized to compensate for wages pertaining to bench associates as well as our full-time employees running operations.

Revenues from services decreased 15.7% (-14.0% in constant currency and an increase of 1.2% in organic constant currency) in the first quarter of 2020 compared to 2019.

In Japan (which represents 43% of APME’s revenues), revenues from services increased 9.7% (8.4% in constant currency) due to the increased demand for our staffing/interim services, a 4.7% increase (3.6% in constant currency) in our permanent recruitment business, and an increase in our Talent Solutions business.

In Australia (which represents 16% of APME’s revenues), revenues from services decreased 28.8% (-22.8% in constant currency) due to our decision to exit certain businesses with low-margins to improve profitability, and due to the COVID-19 crisis in March.

The revenue decrease in the remaining markets in APME is due to the Deconsolidation, partially offset by increased demand for staffing and Talent-Based Outsourcing services within our Manpower business.

The government of Japan initiated more restrictive COVID-19 measures in April 2020 in Tokyo and other large districts, which will be in place through May 31.

In April 2020, Japan experienced year-over-year revenue growth of approximately 5%, which was negatively impacted as a result of the government restrictions.

Gross profit margin increased in the first quarter 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 28.9% (-25.3% in constant currency and -2.5% in organic constant currency).

The Northern Europe revenue decrease is primarily due to reduced demand for our Manpower staffing services, primarily because of the impact of the COVID-19 crisis and reduced demand from very challenging conditions in the manufacturing sector, particularly the automotive sector, in Germany, which did not experience the improvement in the rate of revenue decline as the second quarter progressed that many of our other European markets have experienced.

The decrease was also due to a 47.2% decrease (-45.0% in constant currency) in the permanent recruitment business primarily due to the impact of the COVID-19 crisis.

Revenues from services decreased 19.2% (-16.0% in constant currency) in the six months ended June 30, 2020 compared to 2019.

We experienced revenue declines in the United Kingdom, Germany, the Nordics, the Netherlands and Belgium of 13.2%, 25.2%, 21.7%, 23.5% and 28.9% (-11.0%, -23.3%, -15.4%, -21.5% and -27.1%, respectively, in constant currency).

The Northern Europe revenue decrease is primarily due to reduced demand for our Manpower staffing services and a 31.7% decrease (-29.3% in constant currency) in the permanent recruitment business, both primarily due to the impact of the COVID-19 crisis.

After adjusting for billing days, the United Kingdom experienced monthly year-over-year revenue declines of 17% in April, 26% in May, and 23% in June.

In July 2020, the United Kingdom has experienced a year-over-year revenue decline of approximately 21%.

After adjusting for billing days, Germany experienced monthly year-over-year revenue declines of 33% in April, 32% in May, and 32% in June.

In July 2020, Germany has experienced a year-over-year revenue decline of approximately 33%.

Gross profit margin decreased in both the second quarter and first half of 2020 compared to 2019 due to the decreases in our permanent recruitment business for the second quarter and six months ended June 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 Talent Based Outsourcing business primarily related to the lower utilization of consultants in Germany.

Selling and administrative expenses decreased 22.8% (-19.6% in constant currency) in the second quarter of 2020 compared to 2019.

Selling and administrative expenses decreased 14.7% (-11.4% in constant currency) in the six months ended June 30, 2020 compared to 2019.

The decreases were primarily due to the decreases in personnel costs, as a result of reductions in headcount, decreases 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.

The decreases are 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 the increase in the goodwill impairment charge in Germany of $66.8 million in the second quarter and first half of 2020 compared to $60.2 million in the second quarter and first half of 2019.

The decrease in the first half of 2020 was also

partially offset by the increase of restructuring costs to $19.5 million in the first half of 2020 from $18.7 million in the first half of 2019.

OUP margin for Northern Europe for the second quarter of 2020 decreased to 0.0% compared to 2.1% in 2019.

Northern Europe experienced a decrease to an operating unit loss of 0.7% in the six months ended June 30, 2020 from an OUP of 1.1% in the six months ended June 30, 2019.

The decreases were primarily due to the declines in the gross profit margins, increase in the goodwill impairment charge, and expense deleveraging.

The decrease in the six months ended June 20, 2020 was also due to the increase in restructuring costs.

Revenues from services decreased 20.6% (-19.1% in constant currency and -3.4% in organic constant currency) in the second quarter of 2020 compared to 2019.

In Japan (which represents 47% of APME’s revenues), revenues from services increased 11.3% (8.9% in constant currency) due to the increased demand for our staffing/interim services and an increase in our Talent Solutions business, partially offset by a 6.0% decrease (-8.2% in constant currency) in our permanent recruitment business,.

In Australia (which represents 16% of APME’s revenues), revenues from services decreased 24.9% (-20.1% in constant currency) due to the decline in demand for our staffing/interim business and the 14.3% (-9.0% in constant currency) decrease in our permanent recruitment business, both due to the impact of the COVID-19 crisis.

The revenue decrease in the remaining markets in APME is due to the Deconsolidation, and the decline in demand for our staffing and Talent-Based Outsourcing services within our Manpower business due to the COVID-19 crisis.

Revenues from services decreased 18.1% (-16.6% in constant currency and -1.1% in organic constant currency) in the six months ended June 30, 2020 compared to 2019.

In Japan, revenues from services increased 10.5% (8.7% 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 two additional billings days in the first half of 2020 compared to 2019.

These increases were partially offset by a 1.0% decrease (-2.7% in constant currency) decrease in our permanent recruitment business.

In Australia, revenues from services decreased 27.0% (-21.5% 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, and the 10.4% (-4.0% in constant currency) decline in our permanent recruitment business.

Gross profit margin decreased in both the second quarter and first half of 2020 compared to 2019 due to the decreases in our permanent recruitment business of 41.9% and 35.6%, respectively (-39.8 and -32.8%, respectively, in constant currency;

-14.3% and -8.3%, respectively, in organic constant currency), partially offset by the increases in our staffing/interim margins due to the Deconsolidation.

Selling and administrative expenses decreased 18.2% (-16.6% in constant currency;

and increase of 6.0% in organic constant currency) in the first quarter of 2020 compared to 2019.

The decrease was primarily due to the reduction of recurring selling and administrative costs as a result of the Deconsolidation and the decrease in restructuring costs to $2.6 million in the first quarter of 2020 from $4.4 in the first quarter of 2019.

These decreases were partially offset by increases in costs to support the increases in revenues in certain markets.

The restructuring costs in the first quarter of 2020 related to Australia where we continue to simplify the business after exiting certain low-margin clients.

OUP margin for APME was 2.9% in both the first quarter of 2020 and 2019 as the decrease in restructuring costs and gross profit margin improvement was offset by expense deleveraging, as we were unable to decrease selling and administrative expenses, excluding restructuring costs, at the same rate as the revenue decline due to the sudden impact of the COVID-19 crisis in March.

and increase of 6.1% in organic constant currency) in the second quarter of 2020 compared to 2019.

Selling and administrative expenses decreased 16.6% (-14.7% in constant currency;

and increase of 6.1% in organic constant currency) in the first half of 2020 compared to 2019.

These decreases were primarily due to the reduction of recurring selling and administrative costs as a result of the Deconsolidation.

The decrease in the first half of 2020 was also due to the decrease of restructuring costs to $2.6 million in the first half of 2020 compared to $4.4 million in the first half of 2019.

These decreases in the second quarter and first half of 2020 were partially offset by increases in costs to support the increases in revenues in certain markets

OUP margin for APME decreased to 3.1% in the second quarter of 2020 from 4.1%.

OUP margin decreased to 3.0% in the first half of 2020 from 3.5% in 2019.

The decreases were due to the declines in the gross profit margins and expense deleveraging.

In the first half of 2020, these decreases were partially offset by the decrease in restructuring costs.

Financial Measures

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When we use the term “constant currency,” it means that we have translated financial data for a period into United States dollars using the same foreign currency exchange rates that we used to translate financial data for the previous period.

We believe that this calculation is a useful measure, indicating the actual growth of our operations.

We 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.

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When we use the term “organic constant currency,” it means that we have further removed the impact of acquisitions in the current period and dispositions from the prior period from our constant currency calculation.

We believe that this calculation is useful because it allows us to show the actual growth of our ongoing business.

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”).

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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 March 31, 2020 Compared to 2019

3 Months Ended June 30, 2020 Compared to 2019

and Dispositions

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Selling and Administrative Expenses

Operating Profit

In millions for the three months ended March 31, 2020.

Operating Loss

In millions for the three months ended June 30, 2020.

6 Months Ended June 30, 2020 Compared to 2019

and Dispositions

Revenues from services:

United States

Other Americas

Southern Europe:

Other Southern Europe

Northern Europe

Selling and Administrative Expenses

Operating Loss

In millions for the six months ended June 30, 2020.

Liquidity and Capital Resources

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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 assess and monitor our liquidity and capital resources globally.

We use a global cash pooling arrangement, intercompany lending, and some local credit lines to meet funding needs and allocate our capital resources among our various entities.

As of March 31, 2020 , we had $990.9 million of cash held by foreign subsidiaries.

As of June 30, 2020, we had $1,295.9 million of cash held by foreign subsidiaries.

We have historically made and anticipate future cash repatriations to the United States from certain foreign subsidiaries to fund domestic operations.

With the enactment of the United States Tax Cuts and Jobs Act in December 2017, we no longer recorded United States federal income taxes on unremitted earnings of non-United States subsidiaries.

With the enactment of the United States Tax Cuts and Jobs Act in 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 $181.0 million and $101.9 million during the three months ended March 31, 2020 and 2019, respectively.

Changes in operating assets and liabilities generated $155.9 million of cash during the three months ended March 31, 2020 compared to $18.1 million of cash generated during the three months ended March 31, 2019.

These changes were primarily attributable to the timing of collections and payments.

Accounts receivable decreased to $4,748.5 million as of March 31, 2020 from $5,273.1 million as of December 31, 2019.

Cash provided by operating activities was $596.1 million and $277.1 million during the six months ended June 30, 2020 and 2019, respectively.

Changes in operating assets and liabilities generated $536.0 million of cash during the six months ended June 30, 2020 compared to $35.6 million of cash generated during the six months ended June 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 $4,224.6 million as of June 30, 2020 from $5,273.1 million as of December 31, 2019.

This decrease is primarily due to the revenue decline and changes in currency exchange rates.

Days Sales Outstanding ("DSO") increased by approximately 2.0 days from December 31, 2019 due to unfavorable mix changes, with higher growth in countries with a higher average DSO.

Days Sales Outstanding ("DSO") increased by approximately 1.0 day from December 31, 2019 due to unfavorable mix changes, as a higher percentage of our consolidated revenues consisted of countries with a higher 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.

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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 in the second half of March 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.

Conversely, as the demand for our services declines , as we saw starting in late March and continuing th r ough the second 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 sustainable in the event that an economic downturn continued for an extended period.

We do expect a similar underlying trend of increased operating cash flows through the beginning of the second quarter of 2020, if we experience consistent client payment patterns.

In April 2020, we have not experienced a significant decrease in cash collections from clients.

We will continue to monitor default risks and we intend to staff our collection teams appropriately to diligently pursue payments as per original payment terms.

Many governments in countries and territories in which we do business have announced that certain payroll, income, and other tax payments may be deferred without penalty for a certain period of time.

These governments have also provided other cash flow related relief packages.

As part of our working capital strategy to improve our cash flow needs in the short-term, especially in the next three to six months, we have been actively monitoring these relief packages to take advantage of them.

Capital expenditures were $9.1 million for the three months ended March 31, 2020 compared to $10.0 million for the three months ended March 31, 2019.

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 second 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.

The impact of these benefit s is expected to mature in the second half of the year and we expect lower levels of operating cash flow during the third and fourth quarters of 2020.

Capital expenditures were $18.9 million for the six months ended June 30, 2020 compared to $24.0 million for the six months ended June 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 is 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.

No cash consideration was paid for acquisitions for the three months ended March 31, 2020.

For the three months ended March 31, 2019, the total cash consideration paid for acquisitions, net of cash acquired, was $0.6 million, which represents contingent consideration payments related to previous acquisitions.

Net debt repayments was $9.4 million in the three months ended March 31, 2020 compared to cash provided by net borrowings of $2.6 million in the three months ended March 31, 2019.

For the six months ended June 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 April 3, 2019, we acquired the remaining 51% controlling interest in our Swiss franchise (“Manpower Switzerland”) to obtain full ownership of the entity.

Additionally, as part of the purchase agreement, we acquired the remaining 20% interest in Experis AG.

Manpower Switzerland provides contingent staffing services under our Manpower brand in the four main language regions in Switzerland.

Both Manpower Switzerland and Experis AG are reported in our Southern Europe segment.

The aggregate cash consideration paid was $212.7 million as of June 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 six months ended June 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.

Net debt repayments was $16.8 million in the six months ended June 30, 2020 compared to cash provided by net borrowings of $4.5 million in the six months ended June 30, 2019.

Our €500.0 million notes and €400.0 million notes are due June 2026 and September 2022, respectively.

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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 March 31, 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 March 31, 2020 .

As of June 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 June 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 0.48 to 1 and a fixed charge coverage ratio of 4.69 to 1 as of March 31, 2020.

As defined in the agreement, we

had a Net Debt-to-EBITDA ratio of 0.03 to 1 and a fixed charge coverage ratio of 3.

88 to 1 as of June 30, 2020 .

Based on our current forecast, we expect to be in compliance with our financial covenants for the next 12 months.

In addition to the previously mentioned facilities, we maintain separate bank credit lines with financial institutions to meet working capital needs of our subsidiary operations.

As of March 31, 2020, such uncommitted credit lines totaled $326.3 million, of which $269.8 million was unused.

Under the Credit Agreement, total subsidiary borrowings cannot exceed $300.0 million in the first, second and fourth quarters, and $600.0 million in the third quarter of each year.

Due to these limitations, additional borrowings of $243.5 million could have been made under these lines as of March 31, 2020.

We have assessed what impact the COVID-19 crisis has had or may have on our liquidity position as of March 31, 2020 and for the very near future.

As of March 31, 2020, our cash and cash equivalents balance was $1,099.5 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 March 31, 2020.

We also 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 $243.5 million was available to use as of March 31, 2020.

Our €500.0 million notes and €400.0 million notes that total $986.9 million as of March 31, 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 resources to satisfy future requirements and meet our obligations currently and in the very near future should the COVID-19 crisis cause any additional cash flow needs.

We have assessed what impact the COVID-19 crisis has had or may have on our liquidity position as of June 30, 2020 and for the near future.

As of June 30, 2020, our cash and cash equivalents balance was $1,438.6 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 June 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 $250.7 million was available to use as of June 30, 2020.

Our €500.0 million notes and €400.0 million notes that total $1,005.5 million as of June 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 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 each.

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 quarter 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.

During the first quarter of 2019, we repurchased a total of 1.2 million shares at a cost of $ 101.0 million under the 2018 authorization.

As of March 31, 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 $2,167.1 million as of March 31, 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 $823.0 million and $845.0 million as of March 31, 2020 and December 31, 2019, respectively ($771.4 million and $793.4 million for guarantees, respectively, and $51.6 million for stand-by letters of credit as of both dates).

During the first six 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 half of 2020 all occurred within the first quarter of 2020.

During the first six months of 2019, we repurchased a total of 1.2 million shares at a cost of $ 101.0 million under the 2018 authorization.

As of June 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 $2,148.5 million as of June 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 $902.6 million and $845.0 million as of June 30, 2020 and December 31, 2019, respectively ($851.0 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.

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Therefore, they have been excluded from our aggregate commitments.

The cost of these guarantees and letters of credit was $0.5 million and $0.4 million for the three months ended March 31, 2020 and 2019, respectively.

We recorded net restructuring costs of $48.2 million and $ 39.8 million during the three months ended March 31, 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 $8.2 million in the first quarter of 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 March 31, 2020.

The costs paid, utilized or transferred out of our restructuring reserve were $20.4 million during the three months ended March 31, 2020.

The cost of these guarantees and letters of credit was $0.9 million and $0.8 million for the six months ended June 30, 2020 and 2019, respectively.

We recorded net restructuring costs of $48.2 million and $ 41.4 million during the six months ended June 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 $8.2 million during the six months ended June 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 June 30, 2020.

The costs paid, utilized or transferred out of our restructuring reserve were $32.1 million during the six months ended June 30, 2020.

We expect a majority of the remaining $23.4 million reserve will be paid by the end of 2020.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis