ManpowerGroup Inc (MAN) 2013 Q1 法說會逐字稿

Welcome and thank you for standing by.

This is the first-quarter results conference call for ManpowerGroup.

At this time, participants' lines are in a listen-only mode.

(Operator Instructions)

I will now turn the meeting over to Mr. Jeff Joerres.

Sir, you may begin.

Good morning and welcome to the first-quarter 2013 conference call.

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

I'll go through the high level results for the quarter, then Mike will spend some time going through the details of the segment as well as the forward-looking items for the second quarter and any balance sheet and cash flow as well as restructuring that occurred in the first quarter.

Then I'll discuss the first quarter from a macro perspective.

Before moving into the call, I'd like to have Mike read the Safe Harbor language.

Thanks, Jeff, good morning, everyone.

This conference call includes forward-looking statements which are subject to known and unknown 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.

During our call today, we will reference certain non-GAAP financial measures which we believe provide useful information for investors.

They include reconciliation of those measures where appropriate to GAAP on the investor relations section of our website at manpowergroup.com.

Thanks, Mike.

We continue to make progress in our initiatives throughout the country.

Initiatives in revenue, our solutions, and recalibration of cost, and the results are coming through.

We continue to maintain our focus on price discipline which is resulting in some stabilization of our gross profit in key markets, while still having more work to do, particularly in Northern Europe.

We've doubled our effort in selling which is needed in these difficult economic conditions.

Our revenue of $4.8 billion is a decline of 6.4% in US dollars and minus 5.8% in constant currency, which is at the higher end of our expectation.

Revenue in Europe was also slightly ahead of our expectations.

As I mentioned earlier, we continued to focus on stabilization in our gross profit, particularly in our two largest staffing geographies, the US and France.

And in fact, staffing GP in the US is on a -- is up on a year-over-year basis.

In Italy, which had tremendously difficult economic headwinds, we are experiencing additional pricing pressures.

However, we have been able to fight that off by continued diversification of our business and strong expense management.

Our operating profit of $89 million before restructuring charge was down 5% in the US and 3% in constant currency.

We also had the benefit of some tax credits which Mike will touch upon in his remarks.

In Europe, great progress was made in the first quarter despite the continued headwinds and we expect further progress in the second quarter.

Our anticipated earnings per share for the second quarter is $0.84 to $0.92 per share before restructuring charges.

And now, for additional information regarding the segments, I'd like to turn it over to Mike.

Thanks, Jeff.

There are a number of unique items impacting the quarter, so I'll start my discussion with a review of those items, followed by a discussion of segment performance, review of the balance sheet, and finally a review of our outlook for the second quarter.

Earnings per share before restructuring charge was $0.63 in the quarter, compared to a forecasted range of $0.40 to $0.48 per share.

In comparing the midpoint of our forecast to reported results, our operational performance was $0.17 better than expected.

This better than expected performance was a result of greater expense reduction than anticipated across many of our businesses, slightly better revenue than expected in Southern Europe, and tax credits earned in France for employing eligible workers making less than 2.5 times the minimum wage.

The currency impact in the quarter was a negative $0.01, compared to a flat forecast, as currencies in a few markets such as Japan were weaker than anticipated.

Our income tax rate came in at 44.3%.

As I mentioned last quarter, this first-quarter tax provision includes a benefit of $6.8 million related to the 2012 US Workers Opportunity Tax Credit.

This 2012 credit was recognized in January of this year, as the related tax bill was not signed until January of 2013.

Congress also signed into law this tax credit for 2013, and therefore we are recognizing the 2013 tax credit on a current basis as we make our way through the year.

Our tax rate before restructuring charges came in lower than expected at 36.6%, compared to our forecast of 41%.

This added an additional $0.03 of earnings above our forecast.

This results in earnings before restructuring charges of $0.63 per share and $0.31 per share after deducting the $0.32 of restructuring charges.

These restructuring charges are important to keep in mind as you review the results of the quarter as they impact all operating segments as well as corporate expense.

These charges were $5.9 million in the Americas, $1.2 million in Southern Europe, $17.1 million in Northern Europe, $2.4 million in Asia Pacific Middle East, $3.8 million in Right Management, and $4.4 million in corporate expense.

The $34.8 million charge exceeds our estimate which ranged from $20 million to $25 million as we are able to accelerate some of our cost saving measures into the first quarter.

Let me take a moment to summarize the financial aspects of our simplification plan that we discussed on last quarter's conference call and laid out in greater detail in the materials at our investor briefing on February 25.

Our overall plan called for an SG&A run rate reduction of $125 million by December of 2013.

This would result in current year P&L expense savings of $80 million.

Our plan called for restructuring charges of $50 million to $60 million to achieve these savings.

Now that we have made our way through the first quarter and into the second quarter, we are very confident at achieving our run rate reduction goal of $125 million.

We believe that we will exceed the projected P&L savings of $80 million, as we were able to accelerate some of our action items earlier in the year.

We believe the restructuring charge to achieve these savings were approximately $60 million, which is at the higher end of our initial projection.

Our total gross profit margin was stable in the quarter at 16.6%.

During the quarter, our ManpowerGroup Solutions business added 10 basis points to the gross margin, as that higher gross margin business had a relatively higher growth rate in the quarter.

This improvement was offset by an unfavorable impact from the Permanent Recruitment -- from Permanent Recruitment, as Permanent Recruitment declined 10% during the quarter.

Our Permanent Recruitment business contracted further many of the European markets, but this was partially offset by growth in the Americas.

Permanent Recruitment fees as a percent of total gross profit was about 13% in the quarter.

We believe there is significant opportunity to grow this business further when the economies improve as our clients are increasingly looking to us to provide this service.

Our staffing gross profit margin was favorable during the quarter, as gains in the Americas and Southern Europe, which was aided by tax credits, were offset by lower gross margin in Northern Europe, which is partially due to lower utilization of full-time workers in Sweden and Germany as a result of higher bench time and the Easter holiday impacting the end of the quarter.

Next I'd like to review our gross profit by business line.

Our Manpower business, which represents traditional staffing and recruitment services in the office and industrial verticals represents about two-thirds of the Company's gross profit.

Manpower's gross profit was down 7% in constant currency in the quarter, which is a slight improvement from the last two quarters on an average daily basis.

Our Experis business comprised about 18% of gross profit in the quarter.

Approximately 70% of Experis businesses is IT services, 10% accounting and finance, 10% engineering, and 10% other professional services.

Our Experis business declined 11% in the quarter in constant currency, and was down 9% in interim staffing and 20% in Permanent Recruitment.

Within interim staffing, IT gross profit was down 4%.

On an average daily basis, the gross profit decline improved from the last quarter.

ManpowerGroup Solutions represents 11% of gross profit and consists of Recruitment Process Outsourcing, MSP, Talent Based Outsourcing, Borderless Talent Solutions, and Strategic Workforce Consulting.

Our client offerings within ManpowerGroup Solutions continue to be well received and are well-positioned for future growth.

Our reported growth in the quarter was 3% or about 6% on an average daily basis, similar to the fourth quarter.

Our Right Management business represents 6% of gross profit and declined 3% in the quarter.

I will discuss Right Management later in my segment review.

Our SG&A expense in the quarter was $736 million including restructuring charges, or $701 million excluding restructuring charges.

This compares to $754 million in the prior year first quarter.

Of this $53 million reduction, $3 million relates to a change in currency rates and $50 million relates to our cost reduction efforts.

This represents a 6.6% constant currency reduction in operational costs compared to the prior year, and a 6% constant currency sequential reduction from the fourth quarter.

You can see from this that our restructuring efforts are successfully taking hold.

Next I'd like to discuss the financial performance of our operating segments.

Revenues in the Americas was $1.1 billion, down 3% in constant currency, or flat with the prior year in constant currency on an average daily basis.

Operating unit profit, excluding restructuring charges, was $22 million and OUP margin was 2%, which is consistent with the prior year.

Gross profit margin improved nicely in the quarter.

This was the result of a strong performance in both Manpower and Experis staffing gross profit as well as continued growth in the high margin Solutions and Permanent Recruitment business.

The US business represents 65% of the Americas segment and had revenue of $706 million in the quarter, down 4% from the prior year on a reported basis, or 3% on an average daily basis, similar to the fourth quarter of last year.

Our gross profit margin improved 100 basis points compared to the prior year, primarily as a result of strong gains in the Manpower and Experis staffing gross margins as a result of lower employment tax cost and improved pricing.

Permanent Recruitment also added to the gross margin expansion with growth of 7%.

OUP for the quarter came in at $10 million before restructuring charges, an improvement of 46% over the prior year.

In the US, Manpower represents 50% of revenue, which declined 5% on a reported basis or 3% on an average daily basis.

During the quarter, we saw a decline in the growth of SMB business, which was down 1% on an average daily basis.

Our key account business was down 4% on an average daily basis, an improvement from the prior quarter as we continue to anniversary revenue losses from pricing actions taken last year.

Our US Manpower gross profit margin was up 60 basis points as we continue to maintain strong price discipline across the country.

Experis represented almost 40% of US revenue in the quarter.

Experis revenue was down 6% on a reported basis or 3% on an average daily basis.

This represents an improvement from the fourth quarter where revenue was down 5% on an average daily basis.

While our growth rate is still impacted by declines of volume within our very large Experis accounts, you can see that we are starting to anniversary some of the declines in key accounts that we discussed last year.

While Experis continues to find growth opportunities in the market, our primary focus has been margin expansion and widening the pay bill gap, which was very successful in the first quarter as gross profit margin was up 110 basis points over the prior year.

Approximately 70% of our US revenue in Experis comes from IT services, which was down 5% in the quarter or 1% on an average daily basis.

This decline continues to be driven by lower demand from our larger strategic clients.

IT revenue from our SMB business was up 7% on an average daily basis.

Our US ManpowerGroup Solutions business had a strong quarter with revenue up 13% from the prior year.

Growth in the quarter from our MSP offering was very strong and we continue to see good RPO opportunities in the market.

Revenue in Mexico was down 2% in constant currency on a reported basis, but up 6% on an average daily basis.

Mexico staffing gross margin improved in the quarter on strong price discipline, resulting in a good OUP performance.

Revenue in Argentina was down 9% on a reported basis as demand remains soft in a challenging economic environment.

Revenue in Southern Europe was stronger than expected coming in at $1.6 billion, a decline of 10% in constant currency.

On an average daily basis, constant currency revenue was down 8% in the first quarter, compared to 10% in the fourth quarter of last year.

Our OUP before restructuring charges came in at $30 million, an increase of 26% in US dollars and constant currency.

This reflects an OUP margin improvement of 60 basis points.

This performance was favorably impacted by the CICE payroll tax credits in France, which I will discuss in a moment.

Our French operation represented 72% of Southern Europe revenue in the quarter.

Revenue in France was $1.1 billion, a decline of 12% in constant currency on a reported basis, or a decline of 11% in constant currency on an average daily basis.

Importantly, revenue declines in France stabilized during the quarter, as this average daily revenue decline was similar to the fourth quarter of last year.

Acquisitions added 1% to our French growth rate, as we made an acquisition in April of 2012, which will be fully anniversaried in April of this year.

Our gross profit margin was strong in the quarter aided by the CICE tax credit.

You may recall from our last quarter call that the CICE tax credit is part of the stimulus plan introduced by the French government to improve competitiveness in France and reduce employment cost.

The tax credit for 2013 is 4% of wages paid to employees receiving less than 2.5 times the French minimum wage.

The credit increases to 6% in 2014.

The tax credit can be used to offset income tax payable on current year earnings.

In our case, the amount of tax credit earned significantly exceeds our income taxes payable, in which case the tax credit can be carried forward for a period of three years and any unused credit is paid out at that time.

The intent of the credit is to enable employers such as ourselves to invest in innovation, training, hiring, and developing new business.

While the specific rules are still being clarified, we see many opportunities for investment, including the development of a trained permanent workforce that we would place out on assignment.

We do not intend to pass this credit on to clients through price concessions, as we believe this is not the intent of the law.

This also would not be practical, as a majority of the cash receipts from the credit will not be received until the end of the three year carry-forward period.

As with any credits of this nature, we will monitor market conditions and make adjustments as necessary.

From an accounting standpoint, the credit is recognized as a reduction of direct cost in the current year as earned.

This higher gross profit combined with significant expense reductions resulted in OUP of $14.3 million, forward margin of 1.3%.

Revenue in Italy was $258 million, a decline of 4% in constant currency or 3% in constant currency on an average daily basis.

We have seen the revenue declines in Italy moderate as the economy begins to stabilize and the prior year comparative numbers become easier.

Additionally, more companies are seeking enhanced flexibility in their workforce, given these uncertain times.

Our gross profit margin continued under pressure in the quarter, as we continue to defend our pricing in the marketplace.

We were able to offset much of this pressure with enhanced productivity and efficiency and a lower cost base.

This resulted in a solid OUP contribution of $12 million.

The market in Spain remains difficult, with constant currency revenue down 18% or 16% on an average daily basis.

We continue to maintain profitability in the Spanish market through rigorous expense management.

Revenue in Northern Europe came in at $1.4 billion, a decline of 6% in constant currency or 2% on an average daily basis.

Our gross profit margin declined in the quarter as pricing remains under pressure in several markets.

Additionally, we continue to be impacted by lower bench utilization in the German and Swedish markets due to contracting revenue.

Permanent Recruitment also unfavorably impacted gross profit margin as it was down 16% over the prior year.

We were able to offset some of the gross margin decline through expense reductions, resulting in an OUP of $28 million before restructuring charges or 2%.

Within Northern Europe, Manpower comprises 75% of revenue and Experis comprises 21% of revenue.

During the quarter, Manpower's revenue was down 2% in constant currency and Experis was down 17% in constant currency.

This decline in Experis is slightly better than what we saw in the fourth quarter of last year, but we continue to see soft demand for IT services, particularly from our large clients.

Within Northern Europe, the UK is our largest operation, representing 25% of revenue.

Revenue in the UK was down 5% in constant currency or 2% on an average daily basis.

Our UK year-over-year growth rate has been declining over the last few quarters as we anniversary strong growth from a few large accounts in the early part of 2012.

Additionally, 2012 revenue growth benefited about 3% as we passed on incremental direct cost related to the Agency Workers Regulation.

Our Nordics operation represents 23% of Northern Europe revenue, and saw revenue decline 9% in constant currency or 4% on an average daily basis.

Revenue growth in Norway remained stable on an average daily basis.

However, revenue growth in Sweden weakened slightly further.

German revenue represents 12% of Northern Europe revenue, and was down 10% in constant currency or 6% on an average daily basis.

This was a slight improvement from the 9% decline we saw in the fourth quarter.

Revenue declines in the Netherlands stabilized, down 7% on an average daily basis, similar to the fourth quarter, and down 11% in constant currency on a reported basis.

Revenue in Belgium was down 4% in constant currency or 2% on an average daily basis, which is a slight improvement from what we saw in the fourth quarter.

Revenue in Asia Pacific Middle East came in about as expected at $633 million.

This represents a decline of 1% in constant currency or an increase of 1% on an average daily basis.

The gross profit margin was down slightly, partially due to a 7% constant currency decline in Permanent Recruitment fees.

This decline in gross profit was somewhat offset by reduction in SG&A costs resulting in OUP of $17 million in the quarter before restructuring charges.

This represents a slight decline of the OUP margin to 2.7%.

Japan represents the largest country in the Asia Pacific Middle East segment, representing 38% of revenue.

Japan's revenue was down 5% in constant currency or 3% on an average daily basis.

This is a slight improvement from the 4% average daily decline we experienced in the fourth quarter.

Revenue in Australia remains weak, down 9% in constant currency or 12% on an average daily basis.

Revenue in the emerging markets in Asia remains strong, improving 10% in constant currency.

China, India, and Thailand made strong contributions to the quarter, with revenue up in excess of 20% in constant currency.

Revenue at Right Management came in at $77 million, a decline of 3% in constant currency.

Revenue growth in our outplacement business moderated significantly, up 1% over the prior year.

This compares to 16% growth in the fourth quarter.

This lower growth comes primarily out of the Americas as we are seeing a lower number of large outplacement projects.

Additionally, we are seeing a tendency by clients to offer programs of a shorter duration, which is also impacting revenue levels.

The talent management portion of the Right's business, which represents 28% of revenues, also declined compared to the prior year, as we find our clients continue to push off discretionary spend.

Despite the drop in revenue, Right was able to produce $6 million of OUP before restructuring charges for a margin of 7.6%.

This is a direct result of the expense realignment program we put in place last year.

Next let's review the cash flow and balance sheet.

Particularly the first quarter is a weaker cash flow quarter due to lower seasonal earnings and timing of bonus and incentive payments.

This was impacted further this year as a result of cash payments relating to restructuring activities and the timing of quarter end falling on a weekend.

Cash used in the quarter was $75 million, compared to $40 million the prior year.

Our days sales outstanding during the quarter was stable at 56 days, similar to the prior year.

The impact of the quarter end falling on a weekend was over $100 million of less cash in the first quarter, which came in at the start of the second quarter.

Capital expenditures were down compared to the prior year in the quarter, coming in at $13 million, compared to $19 million the prior year.

The balance sheet is solid at quarter end with total cash of $583 million and total debt of $751 million, bringing our net debt position to $168 million.

Our total debt to total capitalization remains below 25%, and our net debt to trailing 12 month EBITDA is only one time.

Our total debt of $751 million is comprised of a [EUR200 million] note maturing in June of this year and a [EUR350 million] note which matures in June of 2018.

We continue to maintain strong liquidity as our $800 million revolving credit agreement is fully available and we have another $272 million of other available borrowing facilities.

At this stage, we intend to retire the [EUR200 million] note in June with available cash and borrowings under the revolver.

Finally, let's take a look at our outlook for the second quarter.

At this point, we do not see a dramatic shift in revenue trends across any of our segments.

In the second quarter, some of our markets have one more billing day than they did a year ago, which will favorably impact revenue growth, about 1% on a consolidated basis.

We expect revenue growth in the second quarter to contract between 3% and 5% in constant currency.

This should be the same amount reported on a US dollar basis, as the net currency impact across all of our businesses should not be significant based upon current exchange rates.

We expect revenue in the Americas to be flattish with the prior year, and we expect contracting revenue trends in Europe to be similar to the first quarter, with Southern Europe down between 8% and 10% and Northern Europe down between 1% and 3%.

Asia Pacific and Right Management are expected to contract in the low single digits.

We expect our gross profit margin to be slightly up on the prior year, which assumes a higher gross margin in the Americas and Southern Europe, and a slightly weaker gross margin in Northern Europe.

The gross margin in Southern Europe will benefit from the CICE tax credits I spoke of earlier.

Our operating profit margin will be up on prior year before restructuring charges, and is expected to range from 2.5% to 2.7%.

We estimate our tax rate at 42% inclusive of French business tax, or 32% if we exclude the business tax.

This should result in earnings per share ranging from $0.84 to $0.92 before restructuring with a negligible impact from currency.

In connection with our announced simplification plan, we're expecting additional restructuring charges in the quarter ranging from $15 million to $20 million.

With that, I'd like to turn things back to Jeff.

Thanks, Mike.

The first quarter was a quarter that was not unexpectedly difficult.

It challenged us in many ways.

However, the plans that we put in place, the way we have started our cost recalibration, and our efforts on pricing and gross margin helped us considerably to achieve a better than anticipated operating profit and earnings per share, excluding restructuring charges.

Clearly, we had economic challenges throughout the euro area and tepid trends in other parts of the world.

Despite this, we achieved hard fought revenue of $4.8 billion for the first quarter, down 6% in constant currency.

As Mike spoke about, our recalibration of expenses contributed nicely to the first-quarter results, which is a seasonally small quarter, therefore difficult for us to get any type of leverage.

In total, Northern Europe and Southern Europe combined, our revenue with $3 billion, down 7%.

One of the biggest declines came from France, with revenues down in constant currency 12%.

Italy did very well in the market, down 4%, which is a tremendous accomplishment given the environment.

Even more impressive is the expense management in Italy, which is needed as we are seeing some classical pricing challenges given that the economy is in such a difficult position.

The US, which came in at $706 million, was down 4% with improving trends in gross profit.

This includes both Manpower and Experis, as both are being disciplined not only in pricing but also in being in selective and taking on new accounts.

Our Solutions business, which is an important part of our diversification strategy and driver of value to our clients, moved nicely along with RPO wins in the quarter of 23, which stacks up nicely over last year.

And our MSP business continues to move forward, with over $7 billion of annualized spend under management.

Within the RPO space, we are seeing a solid business deal flow and a good win ratio.

However, we are experiencing lower hiring volumes, which is key to our existing book of business.

Clearly, companies are hesitant based on uncertainty of the economy, primarily in Europe.

We have yet to experience any real positive upward trends in revenue in Japan.

With some of the new policies taken by the Japanese government, we are hearing about the potential of a more buoyant market, but it will take some time for that to work its way through into our industry.

Right Management executed well, given the softer career transition business.

Our restructuring plans that have been put in place for several quarters are paying off, with our operating new profit up substantially, and a margin on the rise at 7.6% before restructuring.

We continue to move down the path of simplification within the organization.

This theme has been highlighted in our last two earnings reports, as well as the investor conference materials we prepared at the end of February.

The key to all of the simplification is to drive the processes and costs in a way that allow us to speed up our decision making and have a laser focus on responding to the field and to our clients.

Very simple, but immensely critical for us.

This is being driven through those four key areas -- organization, programs, delivery, and technology.

All four areas are making progress, with the global headquarters taking the lead in reconstituting how we do business to make sure that there is not duplication within what's happening at the headquarters, the regions, and the field.

This has clearly allowed us to spend as much time as possible focusing on how to help our field sell and win.

We are ahead of schedule from what we had written in our February 25 investor meeting materials regarding the cost recalibration.

Under organization, we have quickly realigned and increased the spans of control to eliminate many of the functions and senior levels that were put in place to launch many of the programs, very successful programs, and initiatives that you've seen over the last several years.

We are also continually evaluating and working on consolidating back office functions and roles across brands as well as regions.

And then we are making sure that the sales functions are driven into the field closest to the client, yet absolutely adhering to all the global standards and connectedness that we have within the organization.

All three of those, from a corporate and regional perspective, are being worked on.

We transitioned also many of our program management offices which are put in place to initiate and rollout those key initiatives.

And now those key initiatives and programs are in run mode.

And with that accountability and operating models being pushed into the countries.

From a technology perspective, we are refocusing our technology function to improve the speed and delivery into a better balance between global and local.

We had several redundancies between what was in global and the regions and the countries.

We are now driving that accountability into the field.

Much of that work is still in process, though a lot of progress has been made in this area.

We will continue to review all of the scope and pricing with all of our vendors in the technology space.

As much of the technology has moved rapidly, we want to ensure that we are leveraging any new technology to drive down our cost base, particularly on the maintenance side as well as ongoing operations.

In addition to those areas, we have piloted and used several technologies to allow us to consolidate branches and move lower margin business into more centralized operations.

The US has done a very good job of increasing the quality and speed of delivery, working hand-in-hand with the field offices, and we will continue to work on our delivery model to ensure that it matches as effectively as possible with what the clients are asking for and what the technology will allow us to do.

We will continue to pursue flexible delivery models as this is an important part of gaining efficiency and pleasing our clients.

The team, across the world, has done an incredible job of looking at the parts of the business in a very detailed way to ensure we are putting plans in place to not to react to what's happening in the environment, but get out ahead of what's happening in the economies.

Meanwhile, the economies continued to hold their own.

Clearly at a lower level in Europe, but we still have not seen any massive falloff as we've experienced in past recessions.

We remain cautiously optimistic that we will see some slight improvements as we go through the year, but at this time, we have not really experienced that.

On a legislative front, legislation has been positive.

Legislation within Italy and France both give a nod to the contribution that our industry is making to society, individuals, and to governments.

We believe this will add to the already positive secular trends that we see in the marketplace.

As Mike spoke about, we did have a positive impact in this quarter from CICE in France, and it is our intention to retain the CICE credits within ManpowerGroup for the purposes of continued investment in our training centers, as well as other opportunities that we are pursuing to assist improving the skills and environment for the population in which the CICE is targeted.

We continue to lean forward as we are now into the second quarter, and are working through the next phases of simplification.

Our team's approach to the markets is buoyant and confident, as our suite of offerings are strong and our sales teams are focused.

I would like to open it up for questions.

(Operator Instructions)

Andrew Steinerman, JPMorgan.

Hi, Jeff and Mike.

Really loved the increased details on the simplification plan and I realize simplification at ManpowerGroup is many things.

I wanted to know how much of the cost and the core of simplification plan is around just larger but fewer offices?

And in which geography do these kind of larger but fewer offices with all the efficiencies that you're talking about make the most sense?

It's a good question.

And clearly, as we broke up simplification into four areas, one of the areas is delivery.

And particularly in Europe, in major cities, we've been able to do some consolidation.

These consolidations are not something new, though we accelerated after kind of testing about what happens to revenue on how we make coverage.

So we are seeing some of that.

The delivery part of simplification and trying to get to what we call the larger metro offices really is staged a little bit further out as we move through this year.

The majority of the simplification has really been just making sure that global, regional, and national home offices are all in sync so that we're not having duplication.

So, Mike, I don't know if you have the exact count on the office side, but it's really not dramatic at this point.

Yes, we're certainly consolidating some and some into bigger markets.

I think the important point is we're not exiting markets overall, but if you look at since the end of last quarter to the end of this quarter, it's in the ballpark of 100 offices or so.

Alright.

But when you take it to year end is office consolidation a big theme until year end?

As you figure out -- as you go through the entire year, you would not be seeing this happening every quarter, this kind of environment.

Though you will be seeing it continue to happen.

But as we roll out through the year, we're going to take each metro large city at a time and figure out how we can consolidate.

Some European cities have a little bit more.

There's some US cities that have a little bit more.

And we'll continue to work on that.

And last clarification, when you talk about the $125 million target SG&A by year end, you feel like these are efficiency initiatives where that SG&A is not going to come roaring back when revenues rise, right?

It's a really good question.

And we've been very careful to talk about it as a recalibration.

This is not a -- there's no travel freeze.

There's no mandates for splitting sandwiches at lunch time.

None of those things.

This is about how can we do business differently.

We put a lot of thought into the organization.

That doesn't mean things won't come back, because we may need more sales people in our global sales function.

We may need a free more people are different areas.

But this was meant to be permanent.

And while we can't say 100% of it is permanent, the intent is this was operating differently, creating that collaborative model which we talked about three quarters ago, and really making sure that we're forcing a much better use of our resources.

The whole idea, Andrew, is that there are going to be growth opportunities and we're going to take advantage of those.

But the whole idea is to drive efficiency into the organization and use that efficiency to take costs out and reinvest where we need to and grow.

But I feel very good about the $125 million that that's costs that are coming out because we're doing things differently.

And we may get more costs out over and above that, that's costs that may come in, but this -- come back a little bit quicker.

But this is costs where we are -- it's a true recalibration.

And to add to that, there was no mandate that said everybody needs to take out 8%, 10%, 12%.

That is not how we did it.

We did it from a bottoms up environment that said alright, how do we look at benchmarks, how do we get more efficient, where is there overlap, and then we targeted each of the areas with a dollar amount based on that analysis and that's what we're running after.

And that's why we have much more confidence in it being able to -- (technical difficulties).

All clear Mr. Steinerman's line.

Please stand by for just a moment.

Hello?

Go ahead.

Go, sir.

Your line is open, sir, go ahead.

Alright, so can we go to the next question please?

Gary Bisbee, Barclays.

Gary, we gave you plenty of time to think about this next question.

(Laughter).

Yes, hopefully I've got a good one for you.

I thought it was interesting to hear you guys say that you don't plan to pass on the savings from the French tax situation to clients.

I guess given the competitive nature of the business, and I think a history of much more good and bad changes being passed on, how do you think -- how are the competitors handling this?

Do think that's going to be a competitive disadvantage?

Or do you have a sense that a lot of the cash comes later, it's not really going to change the dynamic there?

It's a great question and it's one that, of course, we don't have an exact answer.

We do know that our view is we're not going to give the CICE as a pass-through to the clients, and that really was not the intent of the CICE.

So when we look at it, we say, you know what, that's just not what it's for and therefore we shouldn't be doing that.

At the same time, when you look at market pressures and what might be happening in small, medium-sized businesses, and is that price pressure that we're fighting out in the marketplace because there is a slight difference in maybe the margin if you put the CICE in and then starts to erode.

Clearly, that could happen.

But when we're looking at it and saying, wait, we've got a request to return CICE which technically you really can't do.

We're saying, wait, that's not what the intent of it was.

So do we see this kind of drifting over time because the market has pricing pressures and very competitive?

I would say yes, we see that.

But as we're going into this right now, we're looking at it and saying, wait, that's not the intent of it.

We don't intend to do that.

And we'll stay very close to the market.

We'll monitor the market.

We'll monitor pricing pressures.

But when we look at this from an industry perspective, the intent of the industry is no, that isn't what we're supposed be doing with this.

We're looking at what we can do with the additional training centers, how we can get people more work ready.

We don't have the cash yet for this, so it's a very complicated, so we're giving at our best attempt and we'll continue to monitor.

But our view is, no, the intent is not, but we might see some drifting over time.

Okay, great.

And then the follow-up question, I understand all the reasons that the US business has declined, and I guess that gross profit is doing well as a result of that discipline is certainly a good sign.

But how should we think about what's now been 18 months of moderate revenue declines in a market that's had mid single digits or better growth?

And at what point -- at what point does this business get back on track, despite the discipline that's probably causing a lot of that?

I think your view is -- definitely has some accuracy in it.

You got to create the right kind of balance between how do you get those price discipline, and at the same time, make sure that you're not slipping out from a market competitiveness perspective.

There were a few large accounts that have kind of done that, but that made a difference.

Also, if you look at what was achieved in '10 and '11, we far exceeded the market.

So it sometimes has kind of a wave effect.

But no doubt, we're looking for this year to start picking that up and becoming more close to market.

But what I don't want to do is to unleash the discipline that we created within the organization.

That's one of the bigger challenges.

I think, as you look at that, you obviously have two components within the US, we've got the Manpower piece and the Experis piece.

And both of them have different things underneath the covers.

But I think with Experis, we've talked about it.

We are seeing a little bit weaker demand from some of our key accounts and we've had some significant declines within some of the key account usage within there.

That really is what's happening in the marketplace.

Meanwhile, our SMB business is still growing quite nicely, still growing at a rate of about 7% on the IT side within Experis in the US.

So we're seeing growth there.

It is a little bit about the [booked] core business.

Understand, we don't use that as an excuse.

But, we clearly are -- we've been focused on the pricing side, but clearly are also looking for revenue opportunities.

And though we've seen some improvements in this quarter, but I think we still have a ways to go on that and keep the growth engine going.

Kevin McVeigh, Macquarie.

Nice job.

Mike or Jeff, how much did the price actions impact revenue in the quarter?

In terms of just being disciplined, how much revenue would you have rationalized or how much more would you have had, if not for the discipline on the top line?

That's a really hard one because what we have done is, given the environment, we have not been as aggressive in jettisoning clients, while we will still do a little of that.

We've just been much more disciplined on what we would be taking on.

So when you look at a $50 million or a $10 million or a $25 million opportunity and we decided to walk away for a GP point, that does have an effect.

It's pretty hard to keep track of that in exact terms.

I could say, if I kind of unleashed the team out there, we could pick up several hundreds of millions of dollars in business in the next two, three months because we just wouldn't pass on those accounts.

And we're going to be selective on that.

And we worked really hard for price discipline.

Clearly, it would be easy to think about 2% to 3%, maybe 4% that we could pick up if we really loosened up on our discipline.

That's helpful.

And then Mike, on the $80 million in targeted P&L savings coming in, given the success you had in quarter one, how should we think about that kind of coming in over the course of the year?

Is it still Q1 versus Q2 or Q3?

Any sense whether it will be more than $80 million, just given how nice the Q1 outcome was?

Yes, I think we are in front of our plan in terms of some of the simplification actions that we've been taking.

And some of what we had seen in Q2, we were able to move into Q1, and some what's in Q3 we moved up into Q2.

So when I look at it from a run rate basis, that $125 million, I think looks very solid.

And I do think with that $125 million, we're talking about $80 million of savings within the year in terms of P&L savings.

I do think that it's going to be in excess of that.

I'm not prepared to give you a specific number, but I do think it's going to be well in excess of that.

Sara Gubins, Bank of America Merrill Lynch.

Just a follow-up on that last question about the $88 million plus in cost savings.

To be simplistic, is it reasonable to think that we should see your SG&A, excluding various charges, down $80 million in 2013 versus 2012?

Or are there enough other areas where you're growing that we wouldn't see it down that much?

No, I think you'll see a down that much.

In the first quarter itself, we're down 6.6% in constant currency, which is about $50 million.

So I think as we look at the year, we would expect it's going to be down at least that.

And there are other cost reduction efforts that may not deal specifically with restructuring actions per se.

So I think you can pretty much count on that, unless we get some big tailwind that comes through at the end of the year that pushes things.

But I don't see that happening from a revenue standpoint.

And even then, I don't see us adding costs back in that quickly on all.

As we said earlier, there's a recalibration, these cost the coming out, and so you can expect to see at least that for the year.

Okay, great.

And then on the corporate tax rates, the 32% excluding the adjustments around France, you mentioned the tax credit in your prepared remarks.

Is that what drives the down?

That's a really nice boost versus your parent tax rate.

And so I'm wondering, should we consider the underlying 32% to be the new normal for the rest of 2013 and beyond?

As you look at 2013, I would expect a little bit lower tax -- underlying tax rate.

You've got the complication in tax rate is you have this French business tax at now under US GAAP classified as income tax provision, even though it has nothing to do with pretax earnings.

So, that usually adds about 10% to our overall rate.

So as you look at the rate on a full year basis, I'd be thinking somewhere in the range of maybe 42% to 44% with the underlying rate without the business tax in the low 30%s, maybe 32% to 34%.

So the business tax adds about 10% at the given -- overall given tax levels.

In the quarter, just to be sure that I'm clear on that, part of what was beneficial in the quarter was $6.8 million of Worker Opportunity Tax Credit in the US that related to 2012.

So it is a one-time help in the quarter of that amount.

That was anticipated in my guidance and in the forecast that we talked about.

So that was in there, but that does bring the rate down.

But there was -- even then, the rate was a little bit lower than we expected and that added in incremental $0.03 to our earnings this quarter that was not in the guidance.

So hopefully that all pieces together for you.

Great, thank you.

And then just last quick question.

In France, the tax credit that you're getting, I know it's retroactive for the beginning of 2013.

Is the law now a done deal passed by parliament and signed in?

Or are we still waiting for that to be finalized?

The law has been passed.

It is a matter of often times, once the laws passed, there our rules around the law and some clarifications.

And so there is still work being done associated with the law and clarifications around specifics related to the law, but the law is passed and so that is set.

Paul Ginocchio, Deutsche Bank.

Just a quick question on France.

You've been sort of running ahead of the market now.

It looks like you're much closer to the market.

Should we assume the market share gains we've seen over the last year are over?

And then second, as we look somewhat early, as we look into the second quarter, it looks like on an average daily basis your constant currency rev declines will be 4% to 6%.

And I think if you adjust the first quarter for a an average daily basis, it's more like minus 4%.

So it looks like somewhat of a deceleration.

Could you point out what markets you think may decelerate?

Or is that some kind of impact from the cost cutting program?

Thanks.

Sure.

In terms of overall market share, I think as we looked at the quarter, the gap probably did close a little bit.

I think overall, the market has been fairly stable through -- if you look at the last several months, it's been bouncing around from our perspective down 11%, 12%, something like that, overall.

But it's been pretty stable.

From a market share standpoint, there are different mixes of business in terms of where were located and where others are located.

Is that gap between us and market closing a little bit?

It could be.

It appears to be tightening a little bit.

It's one of those things where we've been ahead of the market for the last two years or so.

Can we sustain it on long-term basis?

I'm not sure that that's practical.

But we still see good opportunities even in a tough market there, and we'll continue to drive for good growth within the market.

And I would add, we have not, at this point and sometimes it's hard to really ascertain, but we've not seen a reduction in revenue or revenue growth based on what we are doing with recalibration.

We continue to monitor that.

That clearly is one of the risks that we've highlighted to ourselves to make sure that as we go through this, we really keep our faces and bodies and minds and hearts out in front of the clients and prospects.

But we do not feel as though that's any part of what's happening in the French organization.

I guess that question was overall -- are my calcs right on an average daily basis?

More like minus 4% in the first quarter going to --?

When you get an average daily basis, if you just look at where we came in the first quarter, we're down about 4%, that's correct.

And the midpoint of our guidance in Q2 was down about 5%.

And a little bit of that is just rounding.

I don't think we're looking for a full percentage point down.

And when I actually go market by market, the major markets, the US, we're expecting similar average daily revenue in Q2 versus Q1.

France, we're expecting similar.

A few of the smaller markets may be just a touch weaker.

But we're not really -- as I think about the second quarter, were not really expecting things to soften further.

I think you've got a little bit of rounding in the numbers.

But it's pretty much looking at it as kind of running the same and maybe just a touch down in a couple markets.

But the key markets, we're pretty much calling for the same.

Thanks very much.

But your math is very precise, Paul, so thanks for that.

Tim McHugh, William Blair and Company.

Can you give us a sense for the CICE roughly from at least an accounting perspective, how much that is impacting the profitability of France at least as of right now?

I think one of the things with the CICE, Tim, is that it is a very competitive information, very market sensitive information.

So, as you know, we like to be transparent and break out all of the components, that's one component we're not going to break out just for competitive reasons.

So clearly, as you look at France and Southern Europe, you certainly can see that there is some positive impact coming through there and some positive impact overall.

What I would say is without CICE, we still would've exceeded the high end of the range of our guidance.

And so there were a number of other positive things in the quarter.

But certainly that did add to as well.

Okay.

And then can you also give a little more color on revenue?

Given the tough environment from an economic perspective and then you also mentioned pricing pressure, the fact that the revenue growth rate there has shown some signs of -- or the pace of decline has moderated pretty significantly in the last two quarters, how are you -- what are you diversifying into and how are you kind of overcoming those things?

There's a couple of things and I assume you're speaking specifically about Southern Europe and some of the European entities.

Yes.

What's really interesting is there's a few things that are occurring.

One is this is not a drop off the cliff which we've been talking about for some time.

So it's not a complete shutdown.

This is just a very slow, painful workout that's happening there.

In addition to that, in both Italy and France, there have been, which we had talked about, some legislation beyond CICE that has been helpful where you added fixed-term contracts, short-term contracts which are not temporary help contracts, that are taxed differently.

So we're also seeing that there might be a little bit of movement more towards temporary help because of the way the law works and the taxation works.

It doesn't give us an advantage.

It gives us less of a disadvantage, is the way that it has worked.

Additionally, all companies are running as thin as they possibly can because they're concerned about the uncertainty.

So anytime there is a bump in demand, their first place is to go to us.

And that's why we're seeing this kind of moderation, particularly, if you look at the revenue declines in Italy which are really going through some very difficult economic times as well as political times.

But companies are still doing business, and when they do it and if there's any demand, they're using us.

And I really believe that's where we're seeing our ability to kind of get this almost stabilization, I'm not sure if I'd call that, but not as dramatic drop as we've seen in the past.

Okay, great.

One last one.

Mike, you talked about the middle of this year, you might just repay the existing or the EUR250 million note.

Is that a change in the balance sheet structure?

Are you bringing down the absolute amount of debt and should we model it that way?

Or will you probably just use the credit facility and we should assume it's just where the debt falls on the -- out there in the capital structure?

Yes, I think it will be a refinance with available cash and euro -- and revolver, excuse me.

So when we look at that, we'll see where we are from an overall cash standpoint.

At quarter end, we had cash on the balance sheet of $583 million.

Not all of that is what I would call available cash.

Some of it is structural in nature as we just close out the accounts at quarter end.

But there probably is something, at least $150 million of available cash there.

And to the extent that we don't have enough available cash, we will supplement that with revolver borrowings at this point.

But you'd be looking to bring the debt down?

And given the cost of debt, would you -- why not acquisitions or repurchases or something like that?

I think the balance sheet is strong.

I think we do have capacity for that, and that's something we'll continue to look at.

But obviously, we're not going to chase an acquisition just because we have availability either.

But if there's the right opportunity that comes up, I think that's one of the advantages of how we're structured here.

We do have the capacity to take advantage of those opportunities when they present themselves.

So we're extremely well positioned.

A little bit of leverage on the balance sheet, but we certainly have more capacity for debt if we need to.

And one of the things we do think about as well, is we do like to maintain an overall investment grade rating.

So we always leave our -- look at our capital structure in the context of that.

And in that context, we would have some capacity as well, particularly as we pay down some of this available -- or this outstanding debt coming up in June.

Jeff Silber, BMO Capital Markets.

I wanted to look out a little bit beyond the next quarter.

And I know this may depend on region and major city, but when you start to get top line growth back, is there a certain level of growth that would cause you to maybe open up some offices or add to your footprint again?

We are opening offices throughout the world.

We're opening offices in some places in South America.

We're opening some offices in Southeast Asia.

So this isn't about closing offices to save money.

This is our ability of what we've done with some technology, how we can do some recruiting on a centralized basis, not leave that market.

Where we are looking at, we are not abandoning any markets in our office consolidation because of our ability to use some of the technology.

So there are some opportunities in a few countries where some offices may be the answer.

We've looked at more offices in China and we've looked at some in South America, and we're opening those.

So clearly, where we're looking at some of the mature markets where technology, transportation, and others would allow us not to have 10 offices in one city in Europe where you could do that with three larger offices, that's not abandoning, that's just getting quite efficient and actually serving the client in a much more effective way.

And getting much more efficient from a cost perspective on how to do acquisition of temporaries.

I think to that point, Jeff, in those more developed markets, as growth comes there, we probably don't need to add offices in those markets for the most part.

So yes, some of the newer markets, new opportunities, we will and as growth comes in.

But I think as we -- we can go to a more efficient structure in some of these more developed markets.

And as growth comes in those markets, we likely will not need to add incremental offices there.

Okay, great.

That's helpful.

And then shifting gears a bit, I know this was an issue a bit last quarter.

But in terms of the impact of Obamacare in the US, now you've got another quarter of experience, are you seeing any of your smaller clients reaching out to you to use your services as a way of complying with the laws or maybe avoiding the laws?

Mostly what we are seeing is ways in which they can comply with the law.

There's lots of confusion, lots of unanswered questions in their mind.

And we're doing a lot of time and spending a lot of time working with them about what the law really means and how they can use maybe the seasonality of seasonal workers that might be under 30 hours.

We are not interested in at all trying to maintain or have a company stay under 50 by using us.

That's not the intent.

The IRS is not interested in that and they are looking for those where that's happening.

So we see it as a slight positive incremental to the business, but right now the conversations are quite interesting where they're in many cases, not even the very small ones, but the mediums are saying, why don't you just take my summer programs.

Why don't you just take my seasonal programs that I may have managed in the past because I just don't want to -- I want to make sure I'm not making a mistake and I don't know how to do all of the paperwork and the logistics.

In other cases, that may end up being just a pass-through to them because we're going to be paying for the insurance of that person.

And we really do believe this is a pass-through.

So conversations are good.

Opportunity is marginally on the upside, but we still have a ways to see how this will shake out.

Tobey Sommer, SunTrust.

Could you comment on what you think the incremental costs to the firm are related to the ACA?

And then regarding IT, among the large clients, do you think your experience is reflective of the market?

Or will you just kind of overweight those large clients in IT, and therefore kind of getting the brunt of change in demand there?

We were overweighted in financials in IT.

And we were doing an awful lot of back office consolidation as consolidation was happening.

And that has run off, not entirely, but it has run off.

We've also had one large pharma company we were doing some work with and that's run off.

So I think our book of business, which is where we gained a tremendous amount of opportunity in '10 and '11, outperformed the market dramatically.

We had a little bit of setback in '12 as a result.

So I would say that -- I'm not sure if I would put it up to a generalized overall trend, though as Mike had said, we are seeing just a slight left demand overall for IT as companies are being, again, hesitant and very prudent in how they're looking at their business.

Switching over to affordable health healthcare, we've got multiple scenarios of if this, this how much it would cost.

How do we pass it through?

What's happening to our own employee base?

How do we do it penalty versus the offering?

So our view right now is, is we're going to do it the most efficient way that we can while still delivering that great experience that we want from our client.

That then also means that we're going to work very hard like we do for SUTA and pass this through.

This is a pass-through cost.

And I'm very hopeful that others in the industry are taking the same view, though sometimes the smaller players may not have the same vigor to make sure that the margin erosion doesn't go down too much, especially since we've worked so hard to get it back up and have an upward trend.

So we've got multiple scenarios, but until triggers are pulled and companies are making decisions and we're seeing how this works, we can't quite get the true effect.

But clearly, it's in the tens of millions of dollars of what the cost would be.

And our view is, again, is that's going to be passed through.

John Healy, Northcoast Research.

Mike, had a question about the progress you're making on the cost for your calibration.

I was wondering if you could just update us in terms of how much progress you've made towards the $125 million goal, maybe quarter to date and how much of that actually flow through to the P&L in terms of cost savings this quarter?

Sure.

So if you take last quarter, our restructuring charge, about $26 million.

We expected to get about $52 million of that, and $13 million of that was expected to hit already in the first quarter.

So that did come in and did come through in the first quarter overall.

And then we had the restructuring charge that we took this quarter as well, and there was somewhere in the ballpark of $4 million or $5 million that came through on that as well.

So I think as you look at that, the two charges -- so you have the $52 million already laid out.

We've taken a charge this quarter of about $35 million.

That charge should result in something in the neighborhood of $45 million of savings.

That's already starting to phase-through.

That will phase-through through the balance of the year.

So you can see that it's starting to come through and starting to have an impact overall.

So is it realistic to think that if you $13 million from previous actions benefit in the first quarter plus $4 million or $5 million you might have gotten from the actions that you did in the first quarter, maybe something like $20 million to $25 million in P&L benefit in Q2?

Is that how we should think about it?

Yes, I think that's the range I'd be thinking about.

Okay.

And just -- the confidence that you guys are portraying relating to the realignment efforts, what part of the strategy, I think you guys talked about the four points to it, are you finding the most upside, are you finding the most success early on with?

They're staged across.

And this is one of the things that we're trying to really focus within the Company is to stay agile.

We talk about it to our clients and we have to stay agile.

We started first at the headquarters and really tried to make sure that there were redundancies.

And that's all been taken care of.

And any time you do this, I don't want to portray it -- this is tough stuff.

But we really fought through it so that it is a recalibration and it is driving the right way.

So I would say that when we get into delivery channels and how we are managing some of those delivery channels, that's the sacred part because it's about the revenue and really making sure that our brand and what it represents, whether it be Experis or whether it be Right Management or Manpower to the client.

So I would say that the team here has done extraordinarily well.

The team in Northern Europe, extraordinarily well.

Those guys have just really done some incredible things.

And then when you look at what we're able to do in Southern Europe, particularly France and Italy, which have different laws associated with it, we're really looking at a lot of non-personnel costs and how we can get better at it.

So the team has been very focused.

I'm very proud of what they're able to do.

There's been some very difficult challenges, but it's a resilient organization.

And without sounding trite, there's people who really love this Company and they know that we want to get out in front of some of these economic challenges and get to where we should be from a return perspective.

Last question.

Mark Marcon, Robert W. Baird.

Good morning and congratulations on the strong progress.

I know it's obviously quite difficult and you partially answered this question in the prior response.

But just wanted to get a sense for how are you monitoring the engagement level within the organization with all these changes that are coming through?

Certainly, you've made some big cuts to the executive leadership.

And those are people that have been around for quite a while.

So just wondering about the morale across the board.

Clearly, any time you do this there are them real soft spots and I really appreciate that because we've asked people who are very engaged in the company to leave.

I could say at the senior levels that people who have left the organization, I have conversations with them every week where they're talking about their plans and how excited they are and how thankful they are for what we've been able to do together over decades in some cases.

And I and others are assisting them in what will be, I'm sure, phenomenal careers for them.

We were able to explain very well to many of the people in the IT functions and sales functions and how we're dropping it.

So we do spot market and spot surveys and those spot surveys are showing that there is some angst in some areas just to make sure that we're getting everything covered.

And then there's some real energy where people are saying this whole simplification is great because I didn't want to sit on a conference call listening to something really important, but it took two hours, I wanted to go make two sales calls.

So you get both sides.

I'm spending much more time in the field.

I'm meeting with many more clients, a lot more town hall meetings.

And there's very good questions, but there is a good confidence that while this is difficult, it's the right thing to do.

And I would also say, and I said it in my internal message that went out this morning to all of the team across the world is if we wouldn't have done this in the beginning in the third and fourth quarter, our results for this quarter would have put pressures on us that we would have then been forced to do things that were not as clever, not as sustainable, not as longitudinal in look.

And that's always been the hallmark of what we do is to do things that are the right things to do over a long period of time.

And I believe people are getting it and understand it.

And there are some that are disturbed because they want to be part of the team as we go forward.

Great, appreciate the color.

And then with regards to the taxes, this is a little bit of a detail question.

Could you -- I got several e-mails from clients that were trying to understand the various benefits from the changes, both from the CICE as well as the WOTC.

From two perspectives, just what was the total amount for each?

And then, what was baked into the plan relative to what exceeded estimates?

Right.

So, two pieces in there, and two very different types of tax credits.

The tax credits related to the CICE impact direct cost, and therefore flow in through the gross profit margin.

And so we had anticipated some benefit coming through in the quarter.

That was in our guidance, but the benefit ended up being larger than we expected.

As I mentioned earlier, Mark, we view that as very sensitive competitive information, so we're not going to break out the specific amounts on that.

The other piece is the WOTC tax was goes into the tax provision.

That was $6.8 million of credit, and that related to 2012.

And again, the reason it fell in the first quarter 2013 is because the bill was affectively signed in January of 2013.

That's a credit we get every year.

And so it just so happened that it took them a whole year to get it signed into place.

The good news is they signed in 2013 in January, so we're accruing currently in January.

But it did bring down our overall tax rate in the first quarter as a result.

And again, that WOTC credit was in our guidance because we were aware that, that was coming through.

So partials CICE -- some of CICE and some WOTC was in some of our forward-looking.

Without breaking out the CICE specifically, can you just say what the total benefit from the tax credits were?

I think that's kind of hard to do, Mark.

Okay.

Or it that might give you -- all you have to do is solve for X.

Yes, I know.

So we know where you're going, Mark.

(Laughter).

One more, do you have, Mark?

Yes, one more.

Just in France, did you say that you were going to put in place a kind of a bench model in France?

Actually, and Mike can add some color to this also, there's things going on in the labor reform that are in France.

And the CICE is just is really not that.

That's really more of a stimulus program.

There's other label reform in there which I had talked about which gives us some positive secular trends, and I did that in my prepared remarks.

Also, in Italy.

So fixed-term contracts and short-term contracts that are used by companies are taxed differently.

In other words, taxed higher.

So it makes it better maybe to go towards -- so that's one part of it.

The other part within that law was that the temporary help companies now have some obligation based on the right kinds of skills is to build out a bench.

And we think in our Experis business and some of our higher end labeled business within Manpower as we build out that bench with some of those key skills.

That allows us to be more valuable to our client.

We know how to do bench because we do bench in Germany, we do bench in Sweden and others.

So that was part of that labor reform that came out before.

So there's the labor reform and the CICE which are two different things.

Got it.

Thank you.

We apologize for our communication challenges.

So thanks for spending an extra 15, 20 minutes with us on the phone.

And we'll be talking to you in the next quarter or sooner.

Thanks.

This concludes today's conference.

You may disconnect at this time.

Thank you.