ManpowerGroup Inc. (MAN) Q2 2012 Earnings Report, Transcript and Summary

Welcome and thank you for standing by. (Operator Instructions) Now I'd like to turn the call over to Mr. Jeff Joerres. Sir, you may begin.

Good morning and welcome to the second quarter 2012 conference call. With me, as usual, is Mike Van Handel, our Chief Financial Officer. I'll go through the high level results for the quarter. Mike will then spend some time with the segment detail as well as the balance sheet and an outlook for the third quarter. I'll then do a wrap up on some comments and then we'll open up for questions. Mike, could you read the Safe Harbor language?

Good morning. 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 on the company's annual report on Form 10-K and in the other Securities and Exchange Commission filing for the company, which information is incorporated here and by reference.

Thanks, Mike. The second quarter, given the economic volume, was a hard-fought quarter that yielded profits within our guidance. We did see declining trends throughout the quarter but for the most part, excluding the non-recurring items and the change in currency, which only affects us really on a translation basis, our operations came in where we anticipated. We were anticipating constant currency revenue of flat to minus two. We came in down 1% for the second quarter. The revenue performances across the board were pretty much in line with what we had anticipated from a segment perspective with no segment being down more than 2.7% (inaudible). Americas, slightly up at 1.4% as well as Asia up by 1.8%. And Right Management finished the second quarter up by 2.9%. We expected to have an earnings per share between $0.68 and $0.76 and, in fact, we earned $0.76 excluding the effect of the non-recurring items. As we talked about in our conference calls, we see this current downturn as quite different than what we experienced in 2008. There really is no major fall off but rather a slow, decline of business that is holding true across all geographies at this time. In total, our operating profit increased 11% in constant currency and our earnings per share dropped 5% in constant, (including) the non-recurring items. While we were able to do a fair amount of work on our gross profit margin, we – there still is a lot more to do. In fact, we saw some drop in our permanent recruitment, which is what we've been seeing across the board for a little bit of time right now and we are still seeing some challenges in the staffing part of our business. That is an overview. I'd like to turn it over to Mike to discuss the details.

Okay, thanks, Jeff. I'll begin today with some overall comments on the quarter followed by a discussion of each of our operating segments and then a review of our cash flow and balance sheet. Lastly, I'll comment on our outlook of the third quarter. As Jeff mentioned, our operational performance in the quarter was in line with expectations and the midpoint of our guidance. However, there are a number of unique items included in the reported results which I will try and unpack to give you a clear view of our underlying performance. Revenue in the quarter was down 1% in constant currency, right at the midpoint of our guidance range of flat to minus 2%. Our operating profit margin, excluding non-recurring items, came in at 2.4% also in line with expectations at the midpoint of our guidance range. While we delivered on our operating profit margin, our gross margin fell short of expectations but we're able to compensate for that with productivity improvements and expense reductions. I'll comment on both of these elements in just a bit. Our reported earnings per share were $0.51 which includes reorganization cost of $0.17 and legal cost of $0.08, which gets you to an adjusted earnings per share of $0.76, which is at the higher end of our guidance range. Of the $18.7 million reorganization charge, $10.4 million relates to the final phase of the reorganization plan announced in the fourth quarter for Right Management. This plan included realigning our management structure to more effectively deliver service to our clients and reducing our office cost by combing our office footprint for the professional business in certain markets. Under this reorganization plan, Right was able to continue to deliver their market leading services in a more efficient and effective way while maintaining a strong…

Thanks, Mike. The second quarter presented clearly more challenges than we experienced in the first quarter. However, overall, we held up well given the drop – the back drop of all of the challenges that are in the marketplace. Throughout the quarter we were able to continue and expand many of our new offerings which include Experis and the solutions programs. At the same time, Right Management, through lots of work as Mike talked about, was able to produce good profitability and Manpower improved efficiency and productivity, all of which, as you heard from Mike said, allowed us to achieve our anticipated profit in the second quarter. Our strategic driver of differentiation continues to gain traction as we are experiencing more pull through our network as more prospects and clients will see us as a solutions provider. We are being invited and asked by many companies to participate in bids and come in and have conversations about their workforces as they are challenged with the chaos of today's world and the effects on its own workforce. We continue to lead in thought leadership and we are turning this thought leadership into sales opportunities and business. Diversification, another strategic driver for us, is going very well. Our Solutions business is growing faster than market. In the first quarter we grew our GP at 18% in constant currency and we were able to hold that strong growth in the second quarter. At the same time, we were able to add to our book of business with 34 additional RPO wins, up from our previous run rate from the last few quarters of that in the mid 20s. And we see great uptick also in our Talent Based Outsourcing, which is the outcome-based pricing that involves service-level agreements. This is done in all…

Thank you very much. (Operator Instructions) Our first question comes from the line of Kevin McVeigh – Macquarie. Kevin McVeigh – Macquarie: Mike, I apologize. Could you just go through the $0.10 kind of non-recurring impact as we think about that into Q4? You explained it but I just – I didn't pick up it conceptually.

You're talking about the loss of one billing day that …

Yes, the $0.10 that kind of flew through to the bottom line, the loss of the one billing day, yes.

Right, right, so, so as we look at the third quarter, this year we have one less billing day than we did last year, so if you think about one less billing day, that's about 1.5% impact on our revenue, so say 1.5% less revenue. And so the GPR for that revenue basically drops down to the bottom line. If you look at it on a comparative to prior year, it drops down to bottom line because one less billing day really doesn't impact our SG&A costs in a month. A lot of those are monthly-type costs. So effectively, less revenue as a result of one less billing day, less GP. That GP will – makes its way down to the bottom line and as a result it impacts the year-on-year comparative as a result. I did make the comment as we look to the fourth quarter, we don't have that issue. We have a few markets that have a few or that have one more billing day, have an extra billing day in the fourth quarter but with the holidays, I'm not sure how to handicap that. Perhaps there might be a little bit of an uptick in the fourth quarter from that but I'm not sure that I would count on that just given the timing of the rest of the holidays.

Then just I know it's tough kind of given the visibility but any thoughts on kind of how Q4 trends more just kind of around Right Management in particular? Are we going to expect a nice pick up in that just given kind of the environment we're in right now?

The answer is on the margin. We've actually done our research. We're seeing that most companies are looking at trying to hold on to their staff. You are seeing some things particularly in the financial industry where they're announcing some layoffs and some downsizing. So what we've done from a restructuring perspective in Right Management gives us some good hope and confidence when it comes into the profitability. When you look at that top line popping up in any kind of dramatic way, we're not actually forecasting that. Now, in today's world, things happen pretty quickly but I would say other than the finance industry right now, which we have a pretty good presence in, we're not hearing from our clients that they're really getting their list together and are looking for any large downsizings coming up in the fourth quarter.

Your next question comes from the line of Paul Ginocchio – Deutsche Bank. Paul Ginocchio – Deutsche Bank: Just a couple of minor housekeeping things, one bigger picture, just on Experis top five clients, how many of those are financial services? And then I think you won a (wealthy) large contract in France. When do you cycle that contract win? And we were minus what percent in France is auto? And then finally, Jeff for you, can you just talk about the impact of the equal pay in the Netherlands and the recent supplemental wager payment in Germany where it's going to compress the cost of a temp in (inaudible)?

I was copying so feverishly. I missed the first one, Paul. Say again, I'm sorry. Paul Ginocchio – Deutsche Bank: Experis, the top five customers, what percent are – how many are financial services?

Yes, our larger – we do have some larger clients in the financial services on the Experis side and we have been doing a lot of work with a lot of the integration as they've been through their acquisitions and migrating. And some of that business is now falling off. So we're not – the business – we're not losing it to competitors per se but it's just business that's winding down and that's what we're seeing. In terms of overall mix, if you look at the US business, it's maybe a quarter of the mix, something like that overall right, something in that neighborhood. I don't have the exact number right in front of me from a mix perspective but it would be in that neighborhood. I think the second question you had was around France and France Auto. We don't have a big contract, per se, that we're anniversarying there but we do do business with the major French auto makers overall. Our overall mix of business there would be less than 3% of the overall business in France and it has been declining. I’m sure you've read the headlines on PSA and the French automotives altogether have been declining. So I would expect – so it's about 3% of the mix. I would expect the second half of the year we will do less business as they cut back on staff. Could it be half of what we did in the first half? I suppose it could be something to that magnitude but certainly less for sure in terms of the overall mix from that perspective. I think the next had to do with the Netherlands and …

Yes, so I'll take a little. So you're right, Paul, there's been some movement on CLAs primarily in Germany and then most recently announced in the Netherlands where the Netherlands have had some those agreements in the CLAs. When you get into the kind of detail that we're talking about here, there's kind of what I would call puts and calls. Overall, to be very transparent, we think that this isn't better for us but it could be somewhat neutral. So in Germany, too, the largest unions which now make up about 35% of the workforce, the IT metal and the (IGBCE), came out with some parody pay when, in fact, as we know, the (Convention 181) and some other things that have been done with the Agency Worker Directive have already talked about parody pay. This basically moves you into from a Group 1 salary all the way into a nine-month – and you get these raises throughout to increase the minimum wage. Having said that, many of our people are already at or above that minimum wage, so that change the calculation or at least lessens the effect of the calculation. We've seen parody pay in a fair amount of spots and there has been little blips, the biggest one, of course, was in the UK. But we don't see a major impact. What could happen out of this – we do expect in Germany that many of the other unions will follow suit. But exactly what happens out of this is our revenue possibly goes up and our gross margin percent goes down but the dollars being yielded is actually slightly higher. So then when you get into usage, in the case of Germany, when you get past nine months – you can go all the way up to 24 – when you get past nine months, you could say that there is a little bit of a disincent to possibly use a temporary contract within Germany but we're not quite sure. Our clients are still a little bit confused and a little bit concerned about which way they'll go on that. Netherlands changes a little bit more rapidly. They already had this in place. And again, we would see the level as really being something that will affect us but will be more on the margin. Anything to add to that, Mike?

Yes, I think just in terms of the Netherlands, I think what they're talking about there is that they're parody paid effective week one versus now it's week 26. So I think it's a little bit further and that would be effective in 2015. I think the important thing to remember is why we're used. It's not really for the pay arbitrage. It's really for flexibility. That's what clients are looking for. That’s what they're using us for, so might there be some clients as pay rates go up on temporaries that don't use us? I think that is certainly possible. But it really is the flexibility is the primary reason that we find our clients are using us just given the uncertainty and the changing workforce dynamic out there. So I think it's those elements that are driving a lot of this. So we'll see how it plays out. As Jeff said, our view would be gross profit margin percent may go down but as we pass it through the gross profit dollars, it should be the same and but some risk on the revenue line and some clients drop off as a result of the pay rate increase.

And in Germany most recently – I think it was yesterday or the day before, Labor Minister (inaudible) had stated that we're going to just calm down here for a second. She didn't use those words. But we suspect back in November some of the other unions will probably pick up and mimic some of the things that have been occurred in the other two unions that have already struck their CLA agreements.

Your next question comes from the line of Sara Gubins – Bank of America Merrill Lynch. Sara Gubins – Bank of America Merrill Lynch: In France, you're continuing to outperform the market and I'm wondering if you think that can continue. And I’m also wondering if you're seeing any pricing pressure in France.

So we' have been and if you look at the (prison) data, which I'm sure you're referring to, Sara, and, yes, we are outperforming. And it really is the same reasons we had talked about in the first quarter conference call. We put a tremendous amount of emphasis in sales activity to be able to do that. In addition to that, while our costs are higher there still than we want – and the team has just done a great job in efficiency and moving it down, so I think for them to hear me say that it's higher than what we want would be a little bit of distress for them. But the fact is we've made sure that we didn't impact the quality. And many of our competitors are being some challenged with the quality and that's allowing us to pick up some additional business. We've seen – and I would like to say but I don't believe it – I'd like to say, yes, we're just going to keep this spread of beating the market. That market is a tough market and typically what we find – we were leading that market for three or four quarters and then you start to anniversary it and all of a sudden it goes a little way the other way on the margin. So I think we've got a little bit of some good things in there but my sense is competition is tough and for us to be on market, if we're doing on market with the appropriate amount of margin discipline, I'm fairly happy with that, which leads to the second question on pricing pressure. It exists in France but no more than what we saw in the first quarter. So I would say that we are seeing, which is typical, very typical of what we're seeing in Italy and maybe, Mike, you'll talk about pricing pressures in Italy because I think that's almost more important when you look at some of the GP. It's some of the mid-sized players in the mid-sized accounts that are now giving us some of the challenge because the market has gotten soft and the margin left is really in what would be called the (SMB)s and therefore, they're getting a little bit under attack. So overall, we're still outperforming the market with some good execution. Pricing seems to be fair, tough. It is a tough market but not a major concern for us at this time. Mike, do you want to just (parlait) into maybe Italy? And, Sara, does that answer your question? Sara Gubins – Bank of America Merrill Lynch: Yes, it does.

Okay, so Italy just for a second.

Maybe even just a little color on France before I go to Italy, in terms of when you look at what we've been trying to do, we've been trying to push pricing and push pricing up in that market, which is, of course, challenging in a contracting market. So we've been able to get a little bit of pricing and a little bit of market share at the same time but that is difficult given the contraction we're seeing. So overall, our gross margin in France is down a little bit this quarter but the core underlying gross margin is actually up a little bit. What did impact us, which brought our gross margin down this quarter, was the timing of holidays. We had two holidays last year were on a Sunday that happened to be on Tuesday this year which is a bit of a double whammy because you get the fact that now the holiday's in the middle of the week so you end up paying the temporaries and then also because they're on a Tuesday it ends up being what we call a bridge holiday where there is one work day in between which then has more of a dramatic impact because many then take the Monday off if it's on a Tuesday. So that has impacted us. We also had a little bit of an increase in our profit sharing cost to temporaries as well, which has impacted the margin as well. But I just think it's important to underline that despite the overall, France's gross profit margin being down a bit, the core gross margin has actually bumped up a little bit as the team there continues to push as much as they can in a very difficult environment on price overall.

And we're seeing some of the business that we had descoped or taken out affect that as well which is helping that some of that lift in the GP.

That's right. That's right. And in the case of Italy, there we are seeing a little bit more pressure, particularly on the (SMB) margin, which is a greater percentage of the book of our business there. So we are seeing more pressure amongst the smaller players in that market which is fairly typical in a contracting market. That usually happens – those happen first. And we also have a mix issue in Italy where the (SMB) side of the market is actually contracting more quickly than the key accounts as well. So we've got a couple things going on that's impacting the overall margin on Italy overall. So that's where that's having some impact. Sara Gubins – Bank of America Merrill Lynch: And then just one other separate question. In the US it looks like professional is slowing more with large accounts in the core Manpower business with its large accounts. If that's right, can you talk about what's driving that? Is that simply the decline in financial services business or is it something else?

No, you hit it on the head. We had talked about that for two quarters and unfortunately the banks still haven't found their feet. So Mike, what percent on the top line of our business is financial for Experis US?

Experis US is about 25%.

So we're running about 25% and what's happening in there is that they are shedding off some of the projects, some of the integration projects that we had hundreds and hundreds of contractors in have rolled off. Additionally, to add to the GP story, which I'm not happy about at all, but is correctable is our pay bill gap has narrowed primarily in Experis US. We are getting some pressure from the market as some of the higher skills are asking for more pay. But in the financial industry particularly, we have not been able to pass through some of that additional pay that's required to secure the candidate and, therefore, we're lessening a little of the gross margin in Experis. I've got confidence in the Experis team. They're working on that not only in the fiancial services but also in the (SMB) where we have got to get back to that pay bill gap that we were at before. So there is some execution issues that we're working on there but that also contributed somewhere around, what, 20 bips in there, Mike, on some of the GP decline.

Your next question comes from the line of Tim McHugh – William Blair & Company. Tim McHugh – William Blair & Company: Can you just talk a little bit about the differential, why you continue to see good, permanent growth in the US versus the trends in the temporary? Is it simply the lack of exposure to financial services or is there any more – anything else going on that kind of underlies?

Yes, it's a good question and it's one that we've analyzed and looked at and it really is following a secular trend that is positive for the industry and even more positive for us because of the infrastructure we've put in place. What we are seeing is the tie, if you will, where that correlation between permanent recruitment and temporary and where you are in the cycle and how one leads to another, I think has broken down somewhat. I mean, there are still some directional trends that can help out but they're broken down. In fact, if you recall, about three quarters ago, when they said you must be in the later innings of the recovery because perm is already so strong and we said, no, that's not the case. What the case is, is companies want more agility and when they need more agility, one of the things they've noticed is why should I have a staff of recruiters when I'm going to stop or slow down hiring I still have those recruiters? So they have basically advocated that recruitment to us, whether it be through RPO, large perm recruitment deals or just one-off perm. We've done extremely well in addressing that marketplace and, therefore, we are seeing our number percent of GP of perm is still relatively high in this quarter. It's as high as what we've seen in some of the peaks back in 2007, 2008. So that will and does have a chance of coming down as you see the market come down but it's a bit more resilient than it's been in the past. It's a little different than in Europe because in Europe they haven't quite gone that extreme of outsourcing but they still have done some of that. So that's why you're seeing the perm hold up primarily in the US, good execution and really some secular trends that we're taking advantage of. Tim McHugh – William Blair & Company: Then, Mike, just two kind of numbers ones – one, for Right Management, the margin excluding the restructuring charge up in the single digits. Is that sustainable? And then also the tax rate you're guiding for Q3 of 34%, is that something that can continue for a couple quarters?

Sure, so in the case of Right Management, I would expect that with the reorganization plan we've taken it really was to get those – our costs better in line with now the lower revenue levels. So our expectation would be that we're going to be a looking at upper single digit type operating margins given these revenue levels. If revenue picks up a little bit more, if revenue goes the other way, which I don't see that happening at this stage. We may have to trim cost back a little bit but there's always some seasonality in Right. Usually the fourth quarter is a bit of a softer quarter, so I would expect third quarter to dip down just a little bit but overall I think you can reset your thoughts around Right Management. I think we now are more in an even steady playing field there. In terms of the overall tax rate, I do expect that we're going to have this lower tax rate throughout this year. As we look to next year, I would then bring it back up next year. I would say back into what's been more normalized rate of about 37% before the business tax. I think that's for planning purposes, 37% to 38% is maybe where I would think about for next year and we'll see how things move forward. But you can expect the lower rate for the balance of this year anyway.

Our next question comes from the line of Andres Steinerman – JPMorgan. Andrew Steinerman – JPMorgan: Mike, I was surprised when you unpacked gross margin that you didn't pull out idle time just given the declines in Germany and Holland. I would think that idle time is having an impact here. And Jeff, I know we've sort of been through this intellectual discussion before but let's just try at this stage. If real GDP in France inflects fourth quarter, first quarter but to modest levels, do you think that will drive overall French temporary help or do you think that will narrow the declines?

Andrew, a couple things – one, Mike, you can discuss some of the idle time but one of the components of the downturn or the pricing is the Netherlands and the Netherlands does have particular (inaudible) and they have a bench model, which is down time. So Mike, do you maybe want to take it from there a put a little bit more color on it?

Yes, yes, so I think – I didn't mention idle time. I did mention a little bit of pressure in Holland and part of the pressure in Holland does come from exactly that. We do have within our Experis business a bench model in Holland, so that did put some pressure on margin. And then also the other market, of course, when we think about idle time is Germany and I somewhat bundled that, if you will, with the impact from the overall holidays because to some extent, whether it's holidays or just downtime or it's unutilized time, if you will. So within Germany that was actually the biggest piece of that and I kind of characterized that as the overall impact of the holidays but it has had some of that idle time inherent in there as well. So you're right in thinking that. That's a good clarification.

And then regarding the French scenario in GDP, while you're right, there is a little bit of a philosophical but mostly intellectual conversation on it, you can turn it to it is one of the markets where you had more higher correlation between growth in GDP and growth in temporary staffing. And we believe that is still true. Now, when you get growth in GDP in Europe in the past it had been what I would call just a regular growth due to demand. With the new administration in Europe, which is looking at some stimulus, stimulus will create GDP growth, we then have to look at can we participate in that stimulus. You've heard me talk about in the past that some stimulus programs in the US and other parts of the world really are GDP growth that we cannot participate in, therefore, it doesn't have an effect on us. In the case of France, where we are large in the construction industry and construction tends to be a good stimulus area, we would see increased GDP growth in France having an effect on us. Now, the question is, is when you get to 1% versus 1.5%, that will make a big difference to us. When you get into a 1% GDP growth in France, I think you will see a nominal effect. When you get to 1.5%, closer to 2%, now you start to see some of the momentum build. So going from 0.2 down or whatever the post in number will be up to 0.2 to 0.3 up I think you're not going to feel it. Around 1% you start to feel relief, 1.5% you start to actually get a little leverage on it.

Your next question comes from the line of Jim Janesky – Avondale Partners. Jim Janesky – Avondale Partners: Yes, I wanted to ask a question around perm first. Mike, what percent of GP did you say that was?

12.9% of overall company GP.

So CEO would round that to 13%. Jim Janesky – Avondale Partners: And Jeff, it sounds like the increase in perm in the US is more secular than growth driven right now unless I didn't catch that right. So I’m just wondering, do you think that there is some pent up demand or deferred hiring that can happen in the back half of 2012 and then take that into Europe as well? Do you think that the perm slowdown is those jobs are gone for good or could come back in a better economy?

Jim, it's really a question and frankly it's where our heads are. If you talk to some of the labor economists, which I guess you can pick whichever one you're in favor of because they have answers all over the place. But the majority of them would talk about this inflection point of productivity, where companies are and the growth of GDP is maxed out. I believe there is a little left in there but the reason I bring that up is if you get some slight demand, you actually have to start adding. Companies are right on the cups of there's not much left juice – not much juice left in the orange, if you will, to get some productivity or work done. So if demand starts to pick up, I think our perm number has a nice jump to it. I do think that we are getting into a little bit of a soft patch and then we also have some uncertainty in the US, all the things everybody's aware of, that is holding back. Well, this holding back is actually creating a little bit of that catapult-latent demand to it. We're – they still may need the hiring. They're asking for more with less but they know they can't do that a whole lot longer. So our perm business is secular but it's also – I don't want to take anything away from our team. What we've built on our perm recruiters, how we drive our perm recruiters, what we're doing in conversion rates from temp to perm, which is still almost 40%, is really showing that we have an offer that the clients want and we have an economy that when it springs back, there is not a lot of slack in that labor market in order for us not to achieve some really good perm numbers out of it. Jim Janesky – Avondale Partners: And what about within the – globally, especially Europe?

Well, you see some of that in Europe, no doubt. You'd see some of that in France, which actually in 2011 in the beginning of 2012 had some very good perm numbers. We started to see that tail off a little bit more. That's very economically driven. I would suspect they have a bit more slack in their system than we would. So as the economy comes back, you would see a little bit more of a lag effect because it is social plans are much harder to implement, so you have a little bit more excess capacity than you wold in the US. But across Europe and Sweden, the UK market, Netherlands, I think that – more than think – I’m confident perm has a very good future for the industry and because of our infrastructure and how we've built nearly close to some $500 million in GP dollars in there that it's a good second wave for us. The question is, is do we see any of that in the fourth quarter or do we see more of that in 2013? And I'm not prepared to really put a number out because there is too much uncertainty in the market right now. Jim Janesky – Avondale Partners: And then as it relates to – we understand that a better perm mix would be very positive for gross margins. But in terms of temp gross margins, when you look at that, should we be looking for gross margins to go up over time more because of a geographic or a business mix shift and maybe some of the pricing that has come under pressure might be more permanent in nature? Or how should we look at …

It's temp gross margins. The reality is that for us to flatten it out, in other words to get it to go sideways instead of down, we believe will be very good. Meaning, yes, can we see a slight turn up? You see a little of that in the US. We saw slight of that in France. But we're talking little bips here. We're not talking big, big numbers. The point of it is that the mix of business, the S&B, yes, that will help, pricing will help. Descoping or taking some – purging some accounts out will help. But as we see that, as that becomes more stabilized – in the quarter it was little anomalies had some little odd things in there. But as that stabilized, then we get into our $1 billion plus solutions business which is GP is growing at 18% in that area. Then you get the business mix overturnings. So what we're really looking at is stabilizing the staffing GP, hopefully bending that curve just slightly but not, you know, setting any wild expectations that we can make a big bend in that curve and then filling it in with a mix of business and get our overall GP going up as an organization.

Your next question comes from the line of Jeff Silber – BMO Capital Markets. Jeff Silber – BMO Capital Markets: Just wanted to circle back to Experis. Mike, if you can remind us within Experis what the breakdown is maybe on a gross profit basis between perm and temp and also between US and non-US.

Yes, between perm and temp it's not too different from the overall mix, Jeff. I can look up the exact number but it's pretty similar to the overall company as a whole.

It's a little less in the US maybe than where we might be going.

A little bit less in the US in terms of where we are. So that's how that would lay out. And then your second question again was …

(Tax) versus non-US within Experis.

Yes, oh, geographically, so we would be looking at Experis US – we would be about 40% in the US basically and the rest would be Europe and Asia. Jeff Silber – BMO Capital Markets: And in terms of the weakness that you're seeing again, is it more on the perm side or the temp side? Is it more on the US side or the non-US side?

Well, I think revenue-wise we're seeing actually pretty similar on the – both in Europe and in the US. We would see both of them being down in the mid-single digits. So we're seeing fairly similar from that perspective. I think you've got a little bit different (bags) occurring in the US. I think there still is good activity in the market. I think there's more strength in the US and the US just happens to be a little bit more of our client mix.

If you took out the financial part, we're actually growing nicely.

Yes, our (SMB) in Experis in the US is growing about 6%. So in terms of – so I think in terms of how it's acting, it's actually healthier in the US. We're seeing a little bit softer demand overall in Europe on the Experis side. Jeff Silber – BMO Capital Markets: And just one quick follow up – within financial services and even more broadly, within Experis, in terms of the weakness, on the skill set side, is it mostly in IT or are there other skill sets that you're also seeing the weakness?

I would say mostly IT.

Your next question comes from the line of Mark Marcon – Robert W Baird. Mark Marcon – Robert W Baird: I was wondering if you could talk a little bit more about just the perm discussion that we're having and specifically can you tell us what percentage of GP perm comprises in Europe relative to the US and given the declines that you're seeing in Europe, how are you thinking about managing through that from an expense perspective?

Well, so far we haven't seen – so we haven't seen perm drop off the map. So I think that's an important point and that's across geographies. We are seeing in some of the more distressed markets, like in Italy – but Italy we actually didn't have a lot of perm going on in Italy. We have more going on in the Netherlands and the Netherlands is suffering a little. So I would say the spread in pricing, the biggest difference is that the French perm is probably at a lower number because it's also at a little bit different category of individual that we would be placing. But even within the French market we've not seen it, again, fall off the cliff. So the perm, if I understood your question correctly, the perm from a margin and pricing and per mandate, if you will, it's fairly solid across the world. There are some wage differences, so we do an awful lot of perm in India and China and those are also a little soft. China is going through a little bit of a soft time, even though they're growing. So we're seeing a little of that. Mike, do you want to add any other color on there?

No, nothing further. I don't know if part of your question in terms of perm as a percentage of the overall business in Europe as well, which would … Mark Marcon – Robert W Baird: That was exactly it.

That would actually be pretty close to the overall – it's about 12.5%. Northern Europe has a little bit more, closer to 14% and Southern Europe closer to 11% of the overall GP. And then what you would see is the US slightly lower than that overall average and then coming out of Asia Pac, Middle East, we'd see a higher percentage. Mark Marcon – Robert W Baird: And I've probably maybe a missed impression in terms of listening to the commentary. I was under the impression that some of the Northern Europe and Southern European markets were falling off a little bit more in perm than what you were seeing on average.

Yes, I think if you look at what's happening overall, so if you take, you know, in the Americas perm overall was up 32% I think the number was. So we are – we're clearing seeing some difference. So yes, I guess the America perm was up 28%. Southern Europe perm down 17%. Part of that was because of the French Pole Emploi contract, so without that, we're down 3%. Northern Europe perm was down 8%. So clearly see some softening in perm on a year – that's all year-on-year. And then sequentially we felt perm fall off more so going from Q1 to Q2 which when you look at where our GP forecast was relative to where we came out, part of where we missed or I missed was I was anticipating a bit stronger perm performance particularly. I didn't see Europe falling down quite as quickly as it did. Mark Marcon – Robert W Baird: Do you – if the weakness continues, just from a macro perspective, do you have levers to adjust for that or how should we think about that?

Sure, so in – as you very well know, it's a little harder to adjust in Europe than it is in the US. However, the way we have set it up, we have some levers. But if you get down into the minus 20%, 25%, 30% range, you're in a little bit of a challenge. But if we go back, which doesn't seem that long ago, we go back into the '08, '09, we were actually deploying, redeploying some of those perm recruiters into other positions. So it is harder. You do reach a point where it almost becomes a bench model for recruiters, which is not healthy. But we don't see that happening in the near term because we still see enough business happening on the ground in Europe to really support the basis of recruiters that we have now.

Yes, I think we're still a ways away from that but last time in the depths of the downturn we were deploying them and having them work on outplacement assignments. So there's a little bit of hedging that we can do as well there. Mark Marcon – Robert W Baird: And two longer-term questions – one would relate to Italy, just if you could comment with regards to what you're seeing on the (SMB) pricing front there relative to the last downturn. Is it something where you typically – this happens at this point in the cycle but then you're able to recoop it later on and, therefore, the profitability of the market probably is unchanged? And then secondly – and I know it's early and there's not a lot of clarity – but to the extent that you've got some commentary, what do you think about this summit that (Holland) had in France and the likely ramifications of it with regards to labor?

I'll take the first one … ((Crosstalk)

I think from an (SMB) pricing standpoint, I think one of the things you do have in Italy is it does, on the (SMB) side, enjoy some higher margins than other markets that we might have, not all markets but certainly some of the other markets. And so it is typical in a downturn that you're going to see more pressure on the (SMB) side. The smaller players are struggling to stay alive and they just want the volume. So you do see that come under more pressure typically in a recession and I think we're seeing the early signs of that. And then you do see – you also do see (SMB) come up. It is much more elastic. It can bounce back much more so. So I would expect that that should come back. Will it come back to the same level? Chances are it probably will not but we continue to drive efficiency and productivity within these markets as well. So I know implicit in your question was how are we thinking about the overall margins once Italy gets back on their feet? What do we think about that? And we still think it's a country that will deliver good margins. We've got a very efficient team there. They do good work. And even in a tough quarter like this, our overall operating margin was 4.6%. So they still are producing okay but certainly not at that 6% to 7% operating margin. I certainly wouldn't rule that out at this stage.

And then regarding the summit, it's hard to figure out what was and what will be some of the outcomes. So you heard about (inaudible) on over time taxation or lack of or no taxation on the 35 hour work week. It goes all the way back to before the elections where we talked about many of his policies, as stated and as may rule out, can and will increase some activity and stimulate the economy, which we would be a beneficiary of. The notions of taxation and some of those others, those actually have potentially longer term implications, whether you want to be on the side of negative or positive implications, those are longer term. So the summit and others, what we see coming out of there, right now there is kind of some subsidy changes a little here, tax change a little there. On the margin, Mike, I think we would – the best we can assess is let's call it a break even, a push and a take on it. But overall, we could find ourselves with a little bit of stimulus in Japan – in France and, as a result, get some business out of it. But I think it's too early to tell. Is till think we've got to make it through the fall before we can see how this stuff really falls and what would be the ramifications of it.

Your last question comes from the line of James Sanford – Citigroup. James Sanford – Citigroup: Just wanted to sort of focus on I guess visibility really quickly here. We've touched on most of the subjects here but I think you've commented that we're sort of in a chaotic world right now. How do you feel about the visibility now versus maybe it was in '08 and are your clients giving you any feedback as far as – or at least in terms of length of engagement of your pipeline as to how they're thinking about fiscal cliff and political issues in the US?

It's a really good question and it feels completely different. In '08, there felt like the world may come to an end and we would just have empty buildings. Of course, we knew that wasn't going to be true. But it really felt – and when you talked to customers, the conversations were how do we shutter our doors as fast as possible and figure out how to (inaudible). The conversations are very different now. They actually have healthy plans. They're just saying I don’t know when I can implement these plans. They're looking at expansions. They're looking at the ways to understand maybe the landscape of this new global connected world but they're not going to implement the plans. They're not going to implement the plans for two reasons. One is massive amounts of uncertainty in the US, more than ever before, and a lot of uncertainty in Europe and then China just doesn't seem to have that good, old fashioned 10% GDP that we would like to see. But it's also coupled with they look at their own demand for their products or services and it's a bit tepid if not anemic in some cases. Others it's fine. And the ones that have actually good demand are very nervous because they're trying to squeeze out as much as they can without adding anything else because they want to make sure that this uncertainty goes away. So there is a bit of latency that's occurring here. The conversations with clients large, small and medium are a very different nature than what we would have seen and heard back in the last beginning of the downturn. And then just one last comment because I actually planned on it coming up in a question and it didn't, so I’m just going…

Conference now is concluded. Thank you, everyone for your participation. All lines may, please, disconnect. Have a great day.