ManpowerGroup Inc (MAN) 2010 Q4 法說會逐字稿

Welcome to the Manpower fourth-quarter and full-year earnings results conference call.

All lines have been placed in a listen-only mode until the question-and-answer session.

Today's call is being recorded, if anyone has any objections, you may disconnect at this time.

I would now like to turn the call over to Mr.

Jeff Joerres, Chairman and CEO.

Sir, you may begin.

Good morning, and welcome to the fourth-quarter 2010 conference call.

With me as usual is our Chief Financial Officer, Mike Van Handel.

I'll go through some of the high level results for the fourth quarter and full year.

Mike will then spend some time going through the detail of the segments, as well as forward-looking items for the quarter and any implications at all to the balance sheet, cash and cash flow, as well as the reorganization that we've done in the fourth quarter.

Before we move into the call, I would like to have Mike read the Safe Harbor language.

Good morning, everyone.

This conference call includes forward-looking statements, which are subject to risks and uncertainties.

Actual results might differ materially from those projected in the forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements can be found in the Company's annual report on Form 10-K and in the other Securities and Exchange Commission filings of the Company, which information is incorporated herein by reference.

Thanks, Mike.

The fourth quarter was a very strong quarter for us.

We continued to experience strong trends in all geographies throughout the quarter, and we exceeded our expectations in revenue, as well as profitability.

We knew based on our third quarter results that in the fourth quarter, we were going to see strong revenue trends, and we did.

Revenue was up 22%, increase in constant currency, an 18% increase in US dollars, bringing our overall revenue for the fourth quarter to $5.2 billion.

We experienced strong revenue performance across the board, with the US up 18% organically, France and EMEA up 19% in constant currency, and Asia-Pacific up 16% in constant currency.

For the year, revenue was $18.9 billion, up 19% in constant currency, and about 18% in US dollars.

Very strong performance, and one that was supported by nearly every segment in the business.

We continue to feel the positive trends from all of the geographies, as we are in the first month into this first quarter.

In the fourth quarter, we executed, as we talked about in our last conference call, a restructuring of Jefferson Wells and Right Management, totalling $30.5 million, with a realized pay back of under 12 months.

We are also, during the quarter, took a look at the good will and intangible assets on the books, and have decided to take an impairment charge of $429 million, primarily related to Right Management.

Profitability, with those included in the fourth quarter, came in at a net loss per share of a minus $4.29, and a net loss of $350 million.

Excluding those, operationally, we exceeded our expectations with net income of $55 million, and earnings per share of $0.66, a solid performance by the entire organization.

Now, for some additional information, I'll return it to Mike for some segments.

Okay, thanks, Jeff.

I would like to begin our discussion today by analyzing some of the elements impacting our earnings statement, followed by a discussion of our segment's operating results, our balance sheet and cash flow, and finally, our outlook for the first quarter of 2011.

As Jeff mentioned, earnings in the quarter were impacted by nonrecurring reorganization charges and an impairment charge.

As flagged in our third quarter conference call, we took a $30.5 million reorganization charge, equaling $0.25 on a per-share basis.

Of this total charge, $16.8 million relates to Right Management,$7.6 million to Manpower France, and $6.1 million to Jefferson Wells.

This charge primarily relates to the streamlining of our office infrastructure and severance payments.

With these charges, we have reduced our annual SG&A cost run rate by over $35 million, so we are paying for the reorganization in less than a year.

Property and profit without these charges was $117 million, almost double that of the prior year, resulting in an operating profit margin of 2.2%.

We continue to see good operating profit margin expansion, as operating profit margin was up 100 basis points before nonrecurring items in the quarter, and 90 basis points on a full-year basis.

I should mention that both of these amounts were helped by 35 basis points, by the reclassification of the French business tax below operating profit in 2010.

Earnings per share before nonrecurring items of $0.66 was $0.08 above the midpoint of our guidance and is entirely due to above-forecast operational performance.

Our constant currency revenue growth of 22% exceeded the upper end of our forecast, and the out performance was broad-based, with each of the staffing segments exceeding our constant currency revenue forecast, or at the high end of our forecasted range.

We are able to leverage this incremental revenue nicely to the bottom line, which drove the $0.08 out performance.

Our income tax rate without nonrecurrings was 48.9%, which includes $17.7 million of French business tax.

The best way to think about our effective tax rate is to back out the impact of the business tax, since it is not determined based upon pre tax earnings.

This resulted in an effective tax rate of 38.8%, right in line with our 39% projection.

Currency negatively impacted earnings per share in the quarter by $0.02, also right in line with forecast.

With the Euro weakened in the quarter, other currency strengthened, resulting in the forecasted impact of a negative $0.02.

Our gross profit margin came in at 17.4%, 30 basis points ahead of our forecast and prior year.

Gross margin was negatively impacted 80 basis points, with the decline of the higher margin out placement business.

This was offset a number of other favorable elements.

Our temporary recruitment gross margin positively impacted margin by 20 basis points over the prior year.

Acquisition of comps accounts for the majority of this gain, however, we are making progress on pricing improvement initiatives in a number of markets.

Our permanent recruitment business continues to grow in the fourth quarter, and was up 55% in constant currency over the prior year, or almost 30% if we exclude the impact of acquisitions in the Australian defense force and pull and pluck contracts, which were new in 2010.

Permanent recruitment gross profit is currently 10% of total Company gross profit, and we expect this percentage to expand as we take advantage of good growth opportunities we are seeing in both RPO and direct hire across a number of markets.

Finally, as discussed earlier, our French business tax is classified within our tax provision, resulting in a lower direct cost or favorable impact on our overall gross margin of 35 basis points.

Our SG&A expense for the quarter was $1.2 billion compared to $756.5 million in the third quarter, after adjusting for changes in currency.

This includes the current year reorganization charges of $30.5 million, and the impairment charge of $428.8 million.

Excluding these amounts, SG&A was up $32.5 million, or 4% on a same-currency sequential basis.

This increase was primarily the result of additional incentive costs and staff added in the third and fourth quarters, to support further sales growth.

While we continue to utilize excess capacity and drive productivity, there are some markets where we need to add people to capture new revenue.

You'll note from our earnings release that corporate expenses were $30.8 million in the quarter, an increase of about $7 million from the third quarter.

This increase relates to centrally-developed IT investments as part of our digital strategy to drive productivity and marketing and branding costs.

In summary, we had a very solid quarter.

Our organic constant currency revenue growth was 17%, only slightly down from the 19% in the third quarter, as tougher prior-year comparable revenues did not have a huge impact.

We were able to utilize capacity and drive productivity, leveraging this revenue growth to the bottom line.

Our organic incremental operating profit margin on our staffing business was just under 10%.

Now let's turn to the segment operating results.

As a reminder, our Jefferson Wells business is now included as part of our US professional business, and is therefore included in the Americas segment.

I will discuss the specific performance of Jefferson Wells in a few minutes.

Revenues in the Americas came in at $1.1 billion, an increase of 46% in constant currency, or 47% in US dollars.

The Americas revenue growth was aided by the COMSYS acquisition.

So on an organic basis, revenues grew 18% in constant currency.

Operating unit profit was $24 million, which includes the $6.1 million Jefferson Wells reorganization charge.

Excluding this charge, operating unit profit was $30 million, or 2.7%, an increase of 280 basis points over the prior year.

The US reported revenues of $777 million, representing an increase over the prior year of 62%.

Included in this amount is Jefferson Wells revenue of $44 million and $214 million of revenue related to acquisitions, which is primarily COMSYS.

On an organic basis, the US revenue was up 18%, and if you exclude the impact of Jefferson Wells, it was up 19%.

Our year-over-year organic growth in the US peaked in July at 38%, and has been moderating since then, as prior year comparable numbers become more difficult.

The greatest moderation has occurred with our industrial business, where growth peaked near 50% in June, and was up 24% in the fourth quarter.

Growth in the office business has improved in the second half of the year, and is currently growing in the upper teens.

Our US professional business remains strong, with very good demand in the IT sector, growing 21% organically, and excluding Jefferson Wells.

Similarly, COMSYS also delivered strong revenue growth in the quarter, up 17% over the prior year.

The US gross profit margin was up 380 basis points for the quarter, partly due to the COMSYS acquisition, but also due to the HIRE Act payroll tax credits of $3 million, and strong growth in permanent recruitment business, up 56% on an organic basis.

On a full-year basis, the HIRE Act contributed $7 million to our US gross profit margin in 2010.

These payroll tax credits were not renewed for 2011.

The integration of the COMSYS business continues to go extraordinarily well, and provides us with a broader suite of services in the ITT area and enables us to delight our clients with a broad range of capabilities.

Financially, it has also exceeded expectations, with revenues in excess of $580 million, with an operating unit profit margin before transaction costs of 6%.

On a fully loaded basis, including integration costs and amortization, COMSYS was only $0.04 diluted for the year, much less than the $0.10 originally anticipated.

We expect the acquisition to be accretive in 2011 on a fully-loaded basis.

While we no longer report Jefferson Wells separately, I thought I would break out the pieces for the last quarter of the year.

Revenue in the quarter was $44 million, up 3% year-over-year.

We've seen greater sales activity and are landing new business.

This is the first time in the last several years that we have seen year-on-year positive growth, and we are encouraged that the market opportunities are improving.

Jefferson Wells operating profit for the quarter was a loss of $8.8 million, which includes a reorganization charge of $6.1 million.

This charge relates the integration with our US professional staffing business, which will result in further operational efficiencies.

Based on current market trends and the realignment of our cost base, I expect this business to be profitable in the first quarter of 2011, and for the entire year.

Our Mexico and Argentina business also had strong growth in the quarter, with Mexico growing 20% in constant currency and Argentina growing 30% in constant currency.

Both operations delivered nice profitability in the quarter, with operating unit profit margins close to 4%.

French revenue came in at $1.4 billion, an increase of 10%, or 19% in constant currency.

We are expecting the French growth rate to moderate from the third quarter levels, as the prior year comparable numbers got more difficult.

However, the fourth-quarter growth rate ended up slightly stronger than the third-quarter growth rate.

Operating unit profit for the quarter came in at $12 million, which includes a reorganization charge of $7.6 million, adjusting for this, operating unit profit was $19.6 million, or 1.4%, a year-on-year improvement of 70 basis points.

The reorganization charge primarily relates to the closure of offices and the decision by [Pulla & Pulla] not to renew their contract with us on July 1.

While the Pulla & Pulla contract will end earlier than we hoped, the contract was beneficial, as it allowed us to showcase our workforce solutions capabilities, while absorbing some of our fixed costs during the recession.

The pricing environment in France has shown some signs of improvement, but still remains a very difficult market.

We continue to focus on expanding our higher margin SMB business and tertiary skill offerings.

As discussed last quarter, the French government has in fact reduced the amount of payroll tax subsidies for eligible low-wage workers.

This has, in effect, increased our direct costs by approximately 90 basis points on French revenue, which then needs to be recovered from our clients through higher billing rates.

Our French team has worked hard on recovering this amount and the initial conversations with clients have been favorable.

It is difficult to determine at this stage the impact this change will have on the first quarter or the year, for that matter.

While our position is that these costs should be fully absorbed by our clients, we would expect some leakage, especially in the first half of the year, similar to our experience with state unemployment tax increases in the US.

Our EMEA segment had a tremendous quarter, with revenues growing 19% in constant currency, reaching the $2 billion mark.

Operating unit profit for the quarter was $82 million, almost double that of the prior year.

WP margin was 4.1%, up 160 basis points, excluding the impact of nonrecurring charges in the prior year.

EMEA's total gross margin and staffing gross margin improved year-over-year, and expenses were tightly controlled, resulting in significant operational leverage to the bottom line.

Primary recruitment business was also strong, up 33% over the prior year, representing 11% of their total gross profit.

EMEA market realized strong growth across the board, led by Germany, up 26%.

Elan up 22%, the Nordics up 21%, and Italy up 19%.

We also gained market share in the Netherlands and the UK.

The Netherlands was up 12%, and the UK up 9% in constant currency.

Of these operations, we're able to tightly control costs and leverage our network capacity.

That combined with progress on our pricing initiatives has resulted in outstanding profit growth across the region.

Revenue growth in the Asia-Pacific segment was slightly above expectations at 16% in constant currency, or 26% in US dollars.

Overall revenue totaled $588 million and OUP came in at $10 million for a margin of 1.7%.

Our total gross margin was up year-over-year, primarily as a result of the strong growth in the permanent recruitment business.

Permanent recruitment revenue doubled from the prior year as a result of the strong direct hire demand and as a result of the RPO contract we won in January of this year related to the Australian defense force.

Japan is the third largest--Japan is the largest country within the Asia-Pac segment, representing almost 50% of the segment's revenues.

We saw a slight contraction in revenues of 1%, as the new legislation, restricting the allowed skills within the temporary services sector took hold.

While this new legislation negatively impacted a number of our accounts in Japan, our management team did an exceptional job of replacing lost business with new business in the Japanese market.

Other markets within the Asia-Pac segment continued to show very good growth.

Our China revenues more than doubled, as we continued to expand our presence within China, while revenues in the Australian market were up in excess of 50% and in India, in excess of 40%, all in constant currency.

Operating results for Right Management came in as expected, with revenue of $87 million and a breakeven operating result before the restructuring costs of $16.8 million.

As we discussed last quarter, with the economy improving, the demand for out placement services has fallen dramatically.

As a result, we have taken action to reduce our infrastructure costs, consolidating 35 offices, and reducing personnel expenses.

This expense realignment will enable us to be profitable in 2011 on a much lower revenue base.

With the decline in revenues, we also reevaluated the carrying value of intangible assets related to Right Management.

Based on current market trends, we reduced our future cash flow forecasts, resulting in a write down of good will and intangibles of $396 million.

This is a non cash charge, and has no impact on the future cash flows of the Company.

Turning to our cash flow, we realized very strong cash flow in the fourth quarter.

Free cash flow defined as cash from operations, less capital expenditures, was $222 million in the fourth quarter, bringing our full year free cash flow to $124 million.

Our capital expenditures for the year came in at $58 million, an increase over the prior year, yet only 0.3% of revenues, as we prudently invested in our new branch experience design.

Accounts receivable came in at $3.8 billion at year end, slightly below the third quarter, primarily due to currency rate changes.

Our cash collections were very strong throughout the quarter and we improved our day sales outstanding by one day compared to the prior year.

On a full-year basis, we used $270 million of cash for acquisitions, of which $238 million related to COMSYS in the second quarter.

With the strong cash flow in the quarter, we moved from a net debt position of $108 million in the third quarter to a net cash position of $75 million in the fourth quarter.

Total cash was $773 million at year-end, and total debt was $698 million.

While total debt was stable, our total debt to total capitalization increased modestly to 23%, as a result of the lower shareholders' equity, due to the impairment charge-offs.

Our borrowings at year-end primarily relate to a EUR300 million note due June of 2012 and a EUR200 million note due June of 2013.

There were no borrowings under our revolving credit agreement during the quarter, and $398 million remains available for borrowing as of year-end.

We are in compliance with all debt covenant ratios and expect to be so throughout the course of this year.

Finally, let's take a look at the first quarter outlook.

We expect secular demand for our services and the cyclical recovery to continue into the first quarter.

This should result in constant currency growth of between 18% and 20%.

Constant currency growth on an organic basis should range between 13% and 15%.

Remember that the COMSYS acquisition was completed in early April, and therefore, our second quarter reported revenue growth rate will decline as we anniversary this acquisition.

Based upon where exchange rates are today, we do not expect a significant impact on revenue or earnings per share from foreign currency exchange rates.

Our consolidated growth rate does moderate slightly from the 22% constant currency growth we saw in the fourth quarter.

However, this is primarily due to strengthening comparable revenue numbers in the prior period.

Looking at the segments, I expect the Americas revenue growth to range between 39% and 41% in constant currency, and European growth in the mid to upper teens in constant currency.

Our growth in the Asia-Pacific segment is expected to be from 8% to 10% in constant currency, moderating from the 16% we saw in the fourth quarter, as we anniversary a few large contracts in Australia that began in January 2010.

We believe we will see positive growth in Japan in the first quarter, as our management team has done a superb job finding new business to replace business lost under the more restrictive market regulations.

Our Right Management business is expected to show further revenue declines, ranging from 21% to 23%, as the counter-cyclical out placement business continues to fall off.

Despite this loss in revenue, I do expect Right to be profitable in the first quarter, given the restructuring measures that we have taken in the fourth quarter.

Our gross profit margin is expected to be in line with the prior year, ranging from 17% to 17.2%.

We expect to offset the declines in gross margin from state unemployment tax increases, and, from subsidy decreases with better pricing and improving growth in the primary recruitment market.

This should result in an operating profit margin in the range of 1.3% to 1.5%, a prior year-on-year improvement of 50 to 70 basis points.

This is similar to the fourth quarter improvement of 65 basis points, after adjusting for the nonrecurring items and the business tax reclass.

From an incremental margin standpoint, our organic operating margin guidance, excluding Right Management, suggests a 7% incremental margin.

This is slightly below our targeted incremental margin range, as a result of the impact in the first quarter from state unemployment tax, and the French subsidy reduction.

As we get to the second quarter and beyond, I expect that we will recover more of the state unemployment tax and loss of French subsidy to improve pricing, which should favorably impact our incremental operating profit margin.

Our tax rate for the quarter is estimated to be 56%, which includes the French business tax.

Excluding the business tax, I expect the rate to approximate 39%.

This results in earnings per share ranging from $0.26 to $0.34.

As you're likely aware, we have announced a new organizational structure in Europe, beginning in January of this year.

We have created a Northern Europe region and a Southern Europe region.

Southern Europe will include France, Italy, Spain, and a few other smaller countries.

We will report on these new segments, beginning in the first quarter of 2011.

And at that time, we will issue restated historical quarters to conform to the current segment classification.

So with that, I will turn things back to Jeff.

Thanks, Mike.

As you can hear, the fourth quarter was a very successful quarter for us.

We are hitting on all cylinders, and we're able to continue to do well on the top line, while leveraging our infrastructure and driving profit to the bottom line.

Not only was it a successful fourth quarter, it was a successful year.

We leveraged our footprint well, adding $3 billion of annual revenue, while at the same time, adding only $225 million of costs.

We will continue, as you can see, to have this as a major emphasis for us in 2011.

This is a tribute to an outstanding team worldwide, where each person is aligned with our global strategy, and understanding what it takes to help our clients win in what we do and how to do that in a very profitable way.

We continue to see strong secular and cyclical trends.

We pointed out, in fact, in October of 2009, that we felt as though we were in line for a recovery, but the recovery would be slow, that there would be changes across the world in how companies, both large and small, would be using our services, and in fact, we are seeing that unfold.

Our largest clients continue to talk about the desire to have between 15% and 25% flexible staffing, and in some cases, above 25%.

In the past, midsize companies did not use our services at the same level, and we are now starting to see that change.

Many more clients are becoming attuned to the advantage of using temporary to permanent conversion for their work force, leaving their recruiting and matching and selecting to us, while still maintaining agility and cost effectiveness in their own organizations.

This is not just a US phenomenon, or European phenomenon.

We are seeing this in all emerging markets, as the emerging markets grow in such a rapid fashion that talent is the new it, becomes much more of a topic of efficiency and productivity than ever before.

No longer can the emerging markets trade off the simple fact of the labor arbitrage.

It's becoming a thinner arbitrage and a much more complex world.

These secular trends, as well as improving cyclical trends, give us wind at our back as we go into 2011 and for that matter, beyond 2011.

We are aligned globally to our strategy,all 82 countries and 30,000-plus employees.

We are an established great staffing company, with the best footprint in the mature markets, and the emerging markets.

Additionally, we are using that large scale, fast-growing staffing business, as a calling card to provide our clients innovative work force solutions.

We have been successful in 2010, and are confident that the solutions piece of our business will grow in 2011.

Our four strategic priorities in 2011 are to enhance the Manpower experience, develop and improve our presence in new sectors and services, increase our capability, bandwidth, and profitability in professional resourcing, and enhance our digital platform, both internally and candidate and client-facing.

I have spoken in the past about the Manpower experience in previous conference calls.

We have institutionalized the Manpower experience.

A large part of our difference in the industry is how our candidates and associates view us versus our competitors.

We do extensive mystery shopping and have indicators that prove that we are driving higher quality candidates to our doors, and having them have a better experience, which is creating not only a better match, but a better flow of candidates.

In 2011, we will codify and implement our Manpower experience for our clients and for the professional resourcing area.

All touchpoints, both digital and traditional, will have structured behaviors and metrics associated with enhancing the experience of the client, and therefore, giving us great confidence that we will continue to exceed in this area.

To further strengthen our client relationships in 2010, we implemented salesforce.com globally in all of our strategic clients.

Therefore, we are fully connected in all territories for all clients, which is giving us not only much better visibility and pipeline to our business, but more importantly, we are serving our clients at a much higher level than anyone in the industry.

We have solid traction in developing new sectors and services, particularly in RPO and MSP, but also in 2010, we implemented our border-less talent solution, allowing us to recruit and move talent across borders within our network.

We have done this with an automated system, compensation plan, and methodologies.

We will see this already benefiting us in our emerging markets, as talent becomes shorter in supply.

Additionally, recruitment process outsourcing, which is a high growth area for us, ended 2010 in a very solid place.

We established a global center of excellence in the beginning of the year.

As a result of that, we have been able to secure over 75 new RPO accounts, and we are currently the largest RPO provider on a global basis.

In addition to our size, we also have some of the most complex RPO assignments, including the Australian defense force.

Managed service provider business, through our Captain and Manpower offerings is now the largest vendor-neutral supplier in the world.

In total, our MSP offering has $3.7 billion under management.

Additionally, we were named at the top overall MSP performer for customer satisfaction from staffing industry analysts.

Our government business is also improving.

While many of the European governments are looking at austerity programs, they are at the same time also looking at outsourcing, and using flexible labor in a more strategic manner.

As a result, we remain cautiously optimistic for our government business across the world in 2011.

Our professional resourcing strategy is developed and we are in deployment.

We made a great acquisition with COMSYS and the integration was superb.

The US team did a fantastic job, and as a result, we beat all expectations in revenue and profitability.

As we look to 2011, our new go-to-market strategy, which is globally based, will enhance this even further.

COMSYS not only has given the US organization, but also globally, our clients much more confidence in our IT resourcing capabilities.

We continue to look for acquisitions in this area across the world, and we will move on them if they have the right cultural fit and valuation.

Also, we will be, as I mentioned in our last conference call, rolling out new branding in the professional resourcing offering.

This will further enhance our ability to take market share nationally and globally, as well as leverage our profitability.

Our digital strategy in 2010 made great progress and we anticipate even more in 2011.

Direct talent, our own job board, for example, is implemented in 31 countries, and currently contains over 6 million CVs.

This has aloud us to enhance our employer brand to the candidate, but it also is reducing our dependency and costs for outside job boards.

We've also implemented iPhone and iPad applications for the candidate and thought leadership pieces.

Most importantly in our digital strategy, is we implemented a new front office system in North America and in a short period of time, we were able to gain 15% efficiency gains.

As a result of this and the strong platform on which it is built, we will be rolling this out to other countries in 2011.

Great strides in our organization have been made, not only in the staffing area, but in the innovative work force solutions.

This, of course, has not been done at the expense of staffing growth.

We see great growth in this area.

The emerging markets and the mature markets are all in a secular and cyclical upswing, and we have every intention of taking advantage of this.

You may have heard last week we announced at the annual meeting of the world economic forum in Davos, that the world is entering a new era.

Our leading research over the past several years, which has culminated into Manpower's four world work trends, the work that we've done with our clients, and that constant pressure to do more with less, particularly in the human resource area, has led us to conclude that we are entering the Human Age.

Our announcement of this has been well-received and understood by clients, prospects and the media.

I invite you to visit www.Manpower.com/HumanAge, as so many others already have.

What is most exciting about entering this Human Age is that we are uniquely qualified to provide high impact solutions to help our clients win in this new era.

We look forward to 2011 with great expectations.

We have strong platforms, strong strategy, strong infrastructure, and the strongest team we've ever had.

And we've just enhanced it with the instruction of our Northern and Southern European organization.

This allows us to be much more agile and nimble, and in a short period of time, we've already seen the benefits of approaching clients in a much more cohesive way.

Additionally, the parent brand and working brands of Manpower throughout our thought leadership and our marketing and communications efforts will be enhanced in 2011, all leading to maximizing the opportunity that is in front of us.

With that, I would like to open it up for questions.

Thank you.

We will now begin the question-and-answer session.

(Operator Instructions).

One moment, please.

Our first question comes from Jeff Silber with BMO Capital Markets.

Thank you so much.

In your prepared remarks, you talk a little bit about adding staff in, I think it was in one region.

I don't remember specifically which one it was.

Can you tell us generally around the world, how are you doing on that?

Are you hitting capacity constraints in any areas?

And will we see more investments like that going forward this year?

Yes, Jeff, it's Mike.

When you look at where we're adding, it's in selective markets.

Certainly some markets we still do have capacity.

It's always an issue.

You never get the demand exactly in that market, in that city that you have all the capacity.

So it kind of comes a little bit in different parts around the world, but when you look at where we added head count, and part of it was added in the third quarter towards the second half or later in the third quarter, as revenues were ramping up, and then some in the fourth quarter to have a full fourth quarter impact, part of it was on the IT side, where we're seeing some very good growth.

Some of it was on the solutions side, the MSP and the RPO side, where we're seeing some good growth, and then some of the faster growing markets across Europe as well, when you look at where we're seeing some very good growth in Germany, Sweden, some of the emerging markets, as well as Europe, as well as Asia, China and India.

It's more those markets that we're adding a little bit more staff.

As I look forward, I think we'll -- if we continue to see the type of growth we're seeing, we'll be adding staff,again, in a very disciplined way.

We do run metrics office-by-office to determine exactly when are they at the productivity level that then would allow them to add staff to make sure that we're hitting the metrics office by office.

That's how we control it on an overall basis and that's how we make sure that the expenses aren't getting out in front of us and in front of the revenue growth.

Okay, great.

And Jeff, in your prepared remarks, you mentioned the temp-to-perm conversion business.

Are you seeing a pickup along those lines?

I'm just curious how big that is, maybe as a percentage of your overall gross profit and where you think that will go over the next year or so.

Yes, so what we're seeing is, and the way I positioned that, was there are some secular growth as well.

So we would typically see temp-to-perms conversions happening about this time in the cycle.

It has been delayed, and we talked about that for two quarters, but we are starting to see that get a little bit better.

At the same time, we're just having different conversations with our clients.

Our clients are now asking for it as a service, as opposed to incidentally saying, wow, that person out on assignment really turned out well.

I would like to hire that person.

So it's in a much more planned way.

We have been across the world in a more disciplined approach to making sure that the pricing gets right, and the selection process is a little different.

Mike, you may want to talk about some of the numbers associated with that.

Yes conversions, I would say are stepping up a little bit.

Q4 was a little bit higher than what we saw in Q3.

Conversions as a part of the overall mix on permanent recruitment is roughly about 20% or so.

So there clearly is other significant amount of business that we're doing in direct hire and RPO that would also fall in that category.

But as Jeff said, it clearly is an important part and really something our clients are looking for.

All right, if I can sneak up on a quick numbers question.

What organic growth are you looking for in Americas in the current quarter?

Yes, in the current quarter, the first quarter we have been looking for, in the call it low teens, 12% to 14%, something in that range is what I'd be thinking about, so as you look to where we were in the fourth quarter, where the US organically without Jefferson Wells was up about 19%, we're clearly expecting that growth rate to moderate.

It was moderating through the balance of the fourth quarter, and we expect it to moderate a little bit further in the first quarter, as the year on year comparable numbers start getting a little bit tougher overall.

But we'll see how things go.

I mean, overall, from a client perspective, we're still seeing very good, very good demand and there clearly isn't a slowdown from an overall perspective in terms of what our clients are looking for.

I think what you're seeing is just a matter of the running up against some tougher prior year comparable numbers.

Great.

Thanks so much.

Our next question comes from Vance Edelson with Morgan Stanley.

Good morning.

Thanks for taking the questions.

Given those positive trends that you're seeing, what could bring about the low end of the EPS guidance range for the first quarter?

Would that be a rather extraordinary combination of events, or is $0.26 more likely than that in your mind?

Well, I think where it really relates to is what happens on the revenue line.

As you well know, Vance, in our business, while there's some backlog and we can look at recent trends to give us a feel, we are certainly projecting on that revenue line and so while we feel like the overall range for the quarter of 18% to 20% constant currency growth is sensible, if we get to the lower end of that, we would end up at the lower end of our EPS guidance.

And the first quarter is always a little bit trickier because it is a smaller quarter.

So any movement in revenue does have a little bit more disproportional impact on our overall earnings per share, just given their fixed cost base.

Okay, that's helpful.

Following up on the question, regarding excess capacity and the hiring that's going on, how easy is it to add staff when you need to around the world?

Would you say you're in a position of strength right now, so that you can pretty much add at-will, or is it increasingly taking more effort?

I would say in general, we have a little bit of a syndrome, if you will, of the rest of the world, which is there's some talent mismatch out there.

Finding the right person is a little bit more difficult.

I did mention in my prepared comments about what we are doing with the Manpower experience, and how that is helping us attract candidates into our offices, but in addition to the candidates into the offices, it's creating a different way of attracting our own full-time staff.

So I've not heard from the field.

In fact, this has been a major challenge, that we feel as though over the last six months we've been able to upgrade the talent and capabilities within the team.

So where we are right now, we're feeling pretty confident that's not going to be any kind of governor for us for growth for at least the next two or three quarters.

Okay, great.

And one more, if I may.

As we get slammed by another storm this week in parts of the US at least, has there been any impact from the inclement weather in the fourth quarter, now that we're a month into the first quarter, is that having any impact on business?

Well, I mean, clearly it has an impact on business.

When people can't go to work, they don't get paid.

That hurts our revenue, and hurts our profitability.

But what we've seen so far in some of what we call the flash, the weekly numbers that come in, it really has been on the margin.

Also, I don't want anyone out there to forget we have a huge chunk now of professional with IT staffing and engineering, and that's a little different.

While they may not come in, they have an opportunity to work from home, and in addition to that, they have the opportunity to work additional hours after to make up on the project.

So I would say that there could be -- I mean Milwaukee is literally shut down.

It's a state of emergency.

There are a few brave people listening to us on the conference call at our headquarters.

Other than that, my sense is, yes, a little on the margin, probably won't feel it unless we get hit a lot more over the next two months.

Okay.

Well, good luck with the weather in Milwaukee.

Thanks for taking the questions.

Our next question comes from Andrew Steinerman with JPMorgan.

Hi, Mike and Jeff.

I definitely agree that this big secular and cyclical growth drivers here, and the volume growth, and the step rate recovery in the US and France, and elsewhere has been really kind of record strength.

The oddity to me, is if the management is so strong, why hasn't pricing kicked in?

In my memory, pricing usually follows volume, and I definitely heard you speak about kind of better prospects for pricing and pass-throughs, but I'm just asking, do you feel like it's odd as we sit here today, that the demand is so strong for temporary help, but that pricing hasn't kicked in yet?

It's about pricing power?

Yes, it's a good question and I would say that you have been around not making you sound old, but you've been around for about the longest out there, and pricing power is kind of the third phase of the recovery.

You first get the light industrial.

You then get kind of the office and the professional.

You start during that period to soak up some of the talent, and now you get a little bit more pricing power.

Now, because of the secular change, and the increase of it, we do believe we are going to be doing that.

And I would say with a very high level of confidence, we will be capturing a larger percent of [SUDA] in the US this year than we did last year.

Part of it is the ability to have some pricing power.

The other thing is we have put out price increase letters that says this will be going up January 1, or January 15.

We'll lose some clients on that, but I think we won't lose as many as we had lost last year.

So I would say you're right on.

Secular trends, as well as the talent mismatch across the world, will give us the ability to have some pricing power, but to put in context, it will be pricing power on the margin, but in our business, that's still a big deal.

20 basis points in pricing across the board, which would be a little aggressive, 20 basis points of pricing across the board drops to the bottom line.

So we're after it, I think it's just slightly early to feel the effects of that.

Right, right.

But again, to say a different way, it's like when you talk to your customers about price, and they are saying, oh, you guys are so strategic, did they say, oh, not -- we don't want to talk about price, or do the conversations at this stage feel like a normal stage of development in price evolution?

Yes, thanks for the clarification on that, because that is the case.

While price is part of the discussion, it takes much less percent of the discussion and because we're offering particularly our larger, a fuller suite of work force solutions, they see it more in a total value proposition than just knocking off one price, billable hour, in Costa Rica for a light industrial plant.

So we are starting to see that, not just so much the secular trends that are allowing us to have better pricing, but actually our overall corporate strategy, and how we're driving some solutions in a more holistic view to the client, that's driving some better pricing.

That makes total sense.

Thanks so much.

All right.

Our next question is from Tim McHugh with William Blair.

Yes, thanks.

Mike, first one, I have to apologize if I missed this, but can you be a little more specific on how much of the French payroll tax issue you were hoping to pass through, say, in the first six months, and specifically maybe in your guidance here in the first quarter versus how much you're not counting on at this point?

Sure, sure, Tim.

I think just to repeat my earlier comments, overall, the impact of the payroll tax subsidy reduction, I should say this is something that's across the labor market overall in France.

This isn't just directed at our industry, but this is a reduction in payroll tax subsidy across for all employ ears, which actually is helpful, because it keeps us on the same playing field.

When you look at the impact to our business for the year, it's about 90 basis points on French revenue, so in terms of dollar numbers, that probably is going to end up being somewhere in the neighborhood of $50 million, before we get any recovery from our clients.

And clearly our view is that we will pass this on to our clients.

It is a cost of business and we are looking to do that.

We're having the conversations today.

Those conversations have gone well, so I think as we get through the year, I would expect we'll recover more and more of it, and I would expect somewhere by the time we exit the year, somewhere north of 70%, 75%, hopefully even higher than that, but it's too early right now to make any precise predictions on that.

In terms of the first quarter, given the stage of our conversations, it is difficult to make an estimate, but for purposes of the guidance, I'm assuming about we recover about half of that.

Of the 90 basis points on French revenue, I assume we're going to recover about 45 basis points on French revenue.

So it will have a negative impact of call it about $0.05 or so, $0.04 to $0.05 in the first quarter in terms of impact, if things play out as we expect.

Okay, thank you.

And then sticking with the French market, my other question would be there are signs of a reacceleration in demand as we got towards the year end, which you're not seeing in many markets, could you talk a little bit more about what you're seeing and are you seeing signs of that reacceleration in your numbers, and then I trust that I don't understand markets as well as you guys, what might be driving that on the ground level?

Well, I think you are seeing a little bit better industrial production numbers than you would see in the past.

I described it in a couple ways.

One of them is that what we are hearing about, some of the depth in the Euro bailout is all true, but that's actually at a fairly high level within the Euro zone and also within France.

What's happening on the ground is unemployment is actually kind of in check compared to where it's been in the last five to six years, and people are -- and their confidence is getting slightly better.

We are starting to see the market just have a little bit of that kind of second phase of energy.

I don't think in our view, you're not going to see any big burst coming out, but a second phase of energy.

And part of that is that the, and you could say the same in the US, the IFM numbers that came out, is there must be some pull-through of inventory in order to be providing some of this now assembly, manufacturing, and packaging.

So we look at the French market and anticipated a little bit less than the first quarter, and we actually came out a little bit above, I'm sorry, in the fourth quarter.

And part of that is that, on the street there's still some demand out there, and we would expect that to continue for some time.

If maybe I just add a little bit more color, too, in terms of numbers and how things are starting out the year, so we closed -- December was up in terms of average daily sales and France was up about 19% revenue-wise.

So really pretty much on our overall growth for the quarter, which in constant currency is 19.5%.

So as we started the year out, the first few weeks that we've been able to see so far, it's come back -- started off the year quite nicely.

Looking at increases in head count out on assignment between that 18% and 19% range, so in that range, so we're seeing a bit of a continuation.

The one thing I will add is that as we get further into the quarter, the comparable numbers do get much tougher in France.

The first four weeks of the year, we're about flat on prior year, whereas you get to the last four weeks of the quarter, we're up year on year, about 15% or so.

So clearly, we've got some tougher comparables going forward, which is why the guidance for the first quarter is in the range of 16 to 18%.

A little bit of a moderation from the 19.5% growth that we saw in the fourth quarter.

Okay, thank you.

Our next question comes from Mark Marcon with RW Baird.

Good morning.

Congratulations on the strong results.

Wanted to ask a couple of questions.

One relates to pricing, and there's two facets to it.

Going back to Andrew's question, in terms of pricing, it seems to me that part of the reason why it's taken a little bit longer to pass along price increases relative to prior cycles is just simply because if you take a look at unemployment rates across most of the developed world, not Germany or Bavaria, but most of the industrialized world, we're at generational highs.

That makes it a little bit more difficult.

Is that not true?

Related to the US, if you think about SUDA, you gave us good color in terms of the French tax subsidy, how much are your SUDA rates going to go up and what do you expect the pace of pass-through to be?

Thanks, Mark.

On the first one, no doubt there is a true element of what you're talking about there.

But I would say that in a very interesting way, what we're seeing is that while the unemployment rate is still high, to put it into economic terms, you would think, okay, you've got a fair amount of supply, and therefore, supply versus demand, therefore, your pricing isn't going to be able to be improved.

Actually what we're finding, and this is in more of the mid-level skills, and it is across all geographies, including China and India, is that in the mid-level skills, we may be getting a lot of CVs and a lot of interviews.

We're not making a lot of matches based on the client asking for much more specificity and exactness in what they are asking for.

But what's happening is that the client is willing to wait a little bit more.

So in more of a mid-cycle, when things are more robust, demand is more consistent, they can't wait two months, or don't want to wait two months or three months.

In this case, they are willing to kind of stretch it out a little, so that pricing power of saying, look, this is hard out there.

If you need someone in three weeks, we're going to have to put more people on it.

We're going to have to do something special, we're going to do whatever.You'll have to do more pricing.

I would say right now, pricing power, it's stabilized.

We're not on a slide, but we haven't been able to increase at the amounts, just because it's just still a little early in the cycle and clients are willing to be able to wait longer than what they would probably, I would say, six months from now as we get into the end of the second quarter and into the beginning of the third quarter.

Then, Mark, the second part of your question in terms of state unemployment taxes, certainly we've seen an increase by a number of states this year.

We expect overall state unemployment tax in the US to be up somewhere in the neighborhood of 25% year-on-year, which will result on US revenue of about 40 basis points overall impact before any recovery of that through pricing.

As Jeff said, we have been working with our clients and talking to them.

That has gone quite well, better than last year, as I think they are accustomed to this now with this being the second year.

So I would expect well over 80% of this will be recovered this year.

There is a little, always a little bit more of an impact in the first quarter because some clients may not take it exactly January 1 and there's a little bit of a discussion.

So we do expect a little bit more of an impact in the first quarter.

You have also have the fact that you reach wage thresholds for state unemployment tax, so there's more front loaded than back end loaded as well, so you see a little bit more coming through in the first quarter.

So in terms of first quarter impact, right now I'm estimating that on US revenue of about 20 to 30 basis points, may not be recovered in the first quarter.

So that's going to get you somewhere in the range of about $2 million or so.

Great, and then could I just ask a follow-up with regards to Right and Jefferson Wells.

Are all the changes -- what percentage of the changes are complete at this point?

And given the current run rates that you're currently seeing, how should we think about the operating margins for those divisions?

I know that Jefferson isn't going to be included separately or broken out separately, but just for purposes of our models and things of that nature.

Well, I mean, Jefferson Wells really has a nice fit, particularly with what we're doing with branding overall, and the professional staffing or resourcing side of the business.

We saw 3% year-over-year growth about sequential flat growth, better profitability because of what we've done, and we're actually starting to see our pipeline get a little bit better.

So Jefferson Wells is in the right spot, and we're very excited about what and where it's going to go from here.

The Right Management, and if you look, that's where the bulk of the restructuring came in.

What we're really seeing is, which kind of makes sense if you think of it at a high level, there's not many other some pharmaceutical companies and a few still financial institutions, there's not a lot of excess people, so we're not seeing our career transition business go at the pace that we would have seen in the past, about this far, if you will, into a recovery.

Our numbers are down a little bit less than 50% in career transition.

That's made up, not proportionately, but made up with our increase in talent management at about 26%.

So Right Management, where we are with the new expense ratios, Mike can get into kind of what that looks like from a profitability perspective, but we're actually feeling the moves we made, and the speed in which we made the moves are going to have a very nice benefit for us in 2011.

Yes, to just add a little bit more color, so we did, we did do the restructuring or reorganization charge of about $17 million, and that will take over $20 million out of our overall cost run rate.

As I mentioned, we still are seeing revenue slip a little bit as we get into the first quarter on the career transition side, so we're probably looking at revenue in the $80 million range or so in Q1.

At that revenue side, we still will be profitable.

I would anticipate the overall margins will be low single to mid single digits, is what I would expect from an operating margin at that level of revenue.

I think we'll have to see where things progress to talk about where things go for the rest of the year.

The first, third quarter is always the weaker quarter as you get out there.

Not expecting significant further declines in revenue from Right Management across the year, but I would also say this is a year of a reset and things will -- I don't think we'll see any real growth coming through on balance.

Clearly the talent management will continue to grow, but given where the outplacement is, I think it's going to be more of a stable revenue run rate this year before we get back to more normalized growth in 2012.

That's all good news.

Thank you.

Our next question comes from Gary Bisbee with Barclays Capital.

Hi, guys, good morning.

I wonder if you could just give us an update on sort of the size overall and maybe profitability of the solutions businesses today.

You've talked about several of them being rapid growth, but can you give us any sense are they growing above the total company growth rate, which I would like to define as rapid recently, and how are you thinking about those, in terms of their contribution for 2011?

Well, their growth actually is much higher than the core part of the business.

Part of it is off of a much smaller base.

So we're still running on some relatively small numbers.

Our RPO business, the recruitment process outsourcing where we secured 75 new accounts, a lot of that now depends on the economy staying healthy so that we're actually turning those into hires.

We would be shooting that business, which is still a relatively small compared to the $18 billion overall.

That we look at as a low double-digit kind of profitability, and we've been able to achieve that as we get into that.

When you look at MSP business, too, we've done very well on that.

We see that business growing.

When we get to the broader solutions business, the unit-priced output kind of pricing, some of the more sophisticated, we're still we've got some big, good size contracts out there, but still not big enough to move the needle.

We think in 2011, we're going to be able to climb that up a little bit more and I would say you're going to see a more noticeable difference on the profitability in 2012.

It's not because those businesses, if those businesses were put in a $1 billion company, as they exist now, they'd be making a major impact.

It's just that they are put into a very large business and as a result, we really need to scale that, and scale that fast.

In response to an earlier question about pricing, you made a comment that the ability to do these deals across a whole organization and not just focus on one person and price per hour type of thing would help get pricing, but is that the reality today in a lot of your business, or is part of what you're talking about here being small, but something that you expect to be a lot bigger a few years in the future?

What we are seeing in our larger client side is they are very convinced that this is a global play, that they must have a global play.

So it is very unusual for us to have any of our larger RPO businesses not be asking for people in Asia, not be calling out what we need to be doing in China, and how do we hire somebody in India.

So we're able to put that at a premium, and the reason it is at a premium, is it requires more sophistication.

We put in systems like salesforce.com.

We have centers of excellence that are able to be global, agnostic, pull it across the entire Manpower network, and our level of collaboration in our Company, based on what we are hearing from all of our clients, is head and shoulders above our competitors, who are still very siloed, very much about their local sales plan, and not maximizing the profitability of bringing the bigger kind of solution, if you will.

So when you look at the solutions business and how we're pulling that off, whether it be our border-less talent solution or some of the others, it is becoming a bigger part of it.

But again, I want to go back to, we will be talking about it, we'll actually be calling some of that out as we get further into the year, but just based on the size, and we have this wonderful thing, which is our staffing business is still growing leaps and bounds.

So, it is a smaller percent, but it's a percent that actually makes a very good difference.

And when we analyze it on a business case basis and on a P&L basis for that either account or that business, we're into the low double-digits and that's where we think we should be for that business.

Okay, great.

And then just one last one, can you give us an update on the scale overall of your business within emerging markets?

And is the perm versus temp mix there much different than the overall 10% of gross profit that you cited earlier?

Thank you.

Mike can give a little color on the numbers.

I want to make a couple clarifications that not all emerging markets are created equal.

So there's a big difference between eastern Europe, which used to be a big part of the conversation alas, but is extremely important.

That would be more classic staffing, near-shoring call centers, transaction processing centers.

Brazil, which we are making leaps and bounds on in Brazil and we see some things very positively going on in that, and then when you go to what we would consider the real big stars in there, it would be India and China.

And in both cases, we made massive investments.

We are the leader in many of the areas, and we have turned the corner to consistent profitability, so it becomes much more self-funding.

Of those businesses right now, China and India primarily are permanent recruitment markets.

We are not going to let that permanent recruitment go.

We think that is a big part of the market.

Having said that, as we have seen wage inflation and as we have seen particularly multinational say, you know what?

My work force is getting too complicated when I own these all myself.

They are now coming to us to try to come up with ways to have back to these solutions kinds of a business and more solutions in more of the staffing side of the business, and then also I would say that more state-owned enterprises within China are now looking to have a more sophisticated work force and a more flexible work force.

So we really are quite bullish because of the position our management team and some of the moves that we're going to be making in 2011 to make that to be much more relevant from a profitability perspective.

Great.

And just to add, in terms of, in terms of size and scale, so overall emerging markets, if we include Eastern Europe, Asia, South America, Mexico would also be in there as one of the emerging markets that, would represent just over 10% of our revenue in 2010.

Thank you.

Our next question comes from Paul Ginocchio with Deutsche Bank.

Thanks.

Mike, could you remind us how much of the cash is overseas, and if those comments in Washington about potentially a tax holiday or some kind of reduction, if you wanted to bring that cash back onshore, if that would happen, should we expect a little bit more share repurchases versus the last couple of years, which have been pretty low?

Thanks.

Yes, sure, Paul.

Not all the cash is overseas.

We did, we do have some of that here.

When we actually did the COMSYS transaction, we actually brought some of the cash here, so we do have some in the US as well.

But there is a little bit of a cost right now to bring that back.

It's not prohibitive, so it doesn't dramatically impact our behavior in terms of share buyback and how we think about share buyback.

Certainly the whole tax legislation is one of the things on the docket, and at least the winds in Washington seem to be going more favorably towards corporate taxes and where things are going.

So hopefully we'll see some more positive news on that.

But in terms of overall share repurchase that is something that we do have a program authorized.

We do not do any repurchasing in the fourth quarter, and it's something that we'll see as the year unfolds, how active we may be on that.

But at this point, share repurchase is not a priority for us in our overall capital structure.

We're looking at managing through this recovery, looking at opportunities from an acquisition standpoint.

As Jeff said, if there is something on the specialty side that is of interest, that may require a little bit of investment.

We just want to keep a strong balance sheet right now to make sure that we can take advantage of opportunities that may present to us.

Just a short one on the fourth quarter, you made a couple of small acquisitions in France, are those pretty nominal?

Yes, they are pretty nominal and the reason those acquisitions were made is they fit very nicely into something we already have.

They had some unique management and one of them actually had a technology we were interested in and what we're doing in some of the training areas.

Very nominal, but one of those we bought management, we bought some know-how and we would see expanding it organically from here on out.

Thank you.

Last question, please?

Our last question comes from TC Robillard with Signal Hill Capital.

Thanks for squeezing me in.

Just real quickly, Mike, I want to talk a little bit about the incremental margin targets that you had talked about.

Where do you see that getting through 2011?

Understanding that the first half's going to be more impacted by the French subsidy tax and SUDA can we be at the high single digits when we look at 2011 as a whole, or should we expect to see that start to moderate down into kind of the mid-single-digits?

Yes, clearly something that we focus on and it really has to do with managing our overall costs and our SG&A to make sure we're getting through the leverage through the business, so something that I'm working with the management team every day on, and making sure the focus is there.

As you at it of course, it's all going to depend a little bit upon what happens on the overall revenue line and where revenue goes.

So you somewhat have to make an assumption there, on the revenue line.

I think most of, most of yourself, the other analysts I believe have revenue growth in the low double digits, probably 10% to 12% I think is how most of, most of you are looking at the balance of the year.

Of course we don't give guidance out that far, but at that rate, I would expect that we would see upper-single-digit incremental margins for the balance of the year, if we're able to maintain that type of growth, because I do think the capacity is in the network overall.

You combine that with the first quarter, which is a little bit less than that, you may be looking at something on the order of 7% to 9%, probably 8% to 9%, something in that range, I would think for the year.

But it will depend a little bit where that demand comes through.

In terms of very high level, on a global basis in terms of how you may want to think about it right now, I think that seems to be a reasonable ballpark to be in.

Okay, and just aside from revenue, which obviously is the biggest lever there, what's the next biggest lever?

Is it the recovery of SUDA in the payroll taxes, or is it mix?

I'm trying to figure out what could be the driver, aside from revenues.

Yes, I think it's a combination.

It's one of those where we've talked about this internally.

We can't just focus on one thing.

It's the French subsidy to get that back to the clients.

It's the SUDA, it's the mix of business and it's actually thinning business out, as well, that has some low margin stuff on it.

Perm recruitment coming --

So when we model that, as you see in our analyst presentation, we waterfall.

We waterfall that going out for each of our operations as well, to make sure that we're pulling the right levers to drive that additional profitability based on the sales coming in.

And so is it fair to assume then that all those that you mentioned are fairly equal in terms of impact?

Well, some have a little bit more impact than others.

You mean, no doubt you can do a modeling of 50% SUDA recapture versus 90% and it has a big impact.

So my point is that if they don't have all have equal importance, but they are all important for us to be able to increase that BP down at the operating profit level, which is a real goal of ours, and the management team's.

Got it, okay.

Thank you.

All right.

Thank you, everyone.

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