| In addition, from time to time, we and our representatives may make statements that are forward-looking |
| All forward-looking statements involve risks and uncertainties |
| This section provides you with cautionary statements identifying, for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, important factors that could cause our actual results to differ materially from those contained in forward-looking statements made in this report or otherwise made by us or on our behalf |
| You can identify these forward-looking statements by forward-looking words such as “expect”, “anticipate”, “intend”, “plan”, “may”, “will”, “believe”, “seek”, “estimate”, and similar expressions |
| You are cautioned not to place undue reliance on these forward-looking statements |
| The following are some of the factors that could cause actual results to differ materially from estimates contained in our forward-looking statements: • cost structure of subsidiaries; • management turnover; • reorganizations; • material changes in the demand from larger customers, including customers with which we have national, multi-national, or sole-supplier arrangements; • availability of workers with the skills required by customers; • increases in the wages paid to our associates; • competitive market pressures, including pricing pressures; • inability to pass along direct cost increases to customers; • changes in demand for our specialized services, including assisting companies in complying with the Sarbanes-Oxley Act legislation, and outplacement services; 10 ______________________________________________________________________ • our ability to successfully expand into new markets or offer new service lines; • our ability to successfully invest in and implement information systems; • unanticipated technological changes, including obsolescence or impairment of information systems; • changes in customer attitudes toward the use of staffing services; • government, tax or regulatory policies adverse to the employment services industry; • general economic conditions in domestic and international markets; • interest rate and exchange rate fluctuations; • difficulties related to acquisitions, including integrating the acquired companies and achieving the expected benefits; • impairments to the carrying value of acquisitions and other investments resulting from poor financial performance; • the risk factors disclosed below; and • other factors that may be disclosed from time to time in our SEC filings or otherwise |
| We caution you that any forward-looking statement reflects only our belief at the time the statement is made |
| We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made |
| RISK FACTORS Any significant economic downturn could result in our customers using fewer temporary and contract workers, which would materially adversely affect our business |
| Because demand for recruitment services is sensitive to changes in the level of economic activity, our business may suffer during economic downturns |
| As economic activity begins to slow down, companies tend to reduce their use of temporary and contract workers before undertaking layoffs of their regular employees, resulting in decreased demand for temporary and contract workers |
| Significant declines in demand, and thus in revenues, can result in expense de-leveraging, which would result in lower profit levels |
| The worldwide employment services industry is highly competitive with limited barriers to entry, which could limit our ability to maintain or increase our market share or profitability |
| The worldwide employment services market is highly competitive with limited barriers to entry, and in recent years has been undergoing significant consolidation |
| We compete in markets throughout North America, South America, Europe, Australia and Asia with full-service and specialized employment services agencies |
| Several of our competitors, including Adecco SA, Vedior NV, Randstad Holding NV and Kelly Services, Inc, have very substantial marketing and financial resources |
| Price competition in the staffing industry is intense and pricing pressures from competitors and customers are increasing |
| We expect that the level of competition will remain high in the future, which could limit our ability to maintain or increase our market share or profitability |
| Government regulations may result in prohibition or restriction of certain types of employment services or the imposition of additional licensing or tax requirements that may reduce our future earnings |
| In many jurisdictions in which we operate, such as France and Germany, the employment services industry is heavily regulated |
| For example, governmental regulations in Germany restrict the length of contracts and the industries in which our associates may be used |
| In some countries, special taxes, fees or costs are imposed in connection with the use of our associates |
| For example, our associates in France are entitled to a 10prca allowance for the uncertain duration of employment, which is eliminated if a full-time position is offered to them within three days |
| The countries in which we operate may, among other things: • create additional regulations that prohibit or restrict the types of employment services that we currently provide; • require new or additional benefits be paid to our associates; 11 ______________________________________________________________________ • require us to obtain additional licensing to provide staffing services; or • increase taxes, such as sales or value-added taxes, payable by the providers of temporary and contract recruitment services |
| Any future regulations may have a material adverse effect on our financial condition, results of operations and liquidity because they may make it more difficult or expensive for us to continue to provide staffing services |
| Our acquisition strategy may have a material adverse effect on our business due to unexpected or underestimated costs |
| We have completed a number of acquisitions |
| For example, we acquired Elan in 2000 for a total purchase price of dlra146dtta2 million and we acquired Jefferson Wells in 2001 for a purchase price of dlra174dtta0 million |
| We acquired and invested in other companies during 2002 for a total consideration of dlra55dtta4 million, dlra33dtta5 million of which was paid in cash |
| In 2003, we acquired and invested in other companies for a total consideration of dlra6dtta7 million |
| In January 2004, we acquired Right Management by means of an exchange offer for all of Right Management’s outstanding common stock |
| The purchase price for this acquisition was dlra630dtta6 million, the majority of which represents the fair value of shares exchanged and stock options |
| We acquired and invested in other companies in 2005 for a total consideration of dlra12dtta9 million |
| We may make additional acquisitions in the future |
| Our acquisition strategy involves significant risks, including: • difficulties in the assimilation of the operations, services and corporate culture of acquired companies; • over-valuation by us of acquired companies; • insufficient indemnification from the selling parties for legal liabilities incurred by the acquired companies prior to the acquisitions; and • diversion of management’s attention from other business concerns |
| These risks could have a material adverse effect on our business because they may result in substantial costs to us and disrupt our business |
| In addition, future acquisitions could materially adversely effect our business, financial condition, results of operations and liquidity because they would likely result in the incurrence of additional debt or dilution, contingent liabilities, an increase in interest expense and amortization expenses related to separately identified intangible assets |
| Possible impairment losses on goodwill and intangible assets with an indefinite life, or restructuring charges could also occur |
| Intense competition may limit our ability to attract, train and retain the qualified personnel necessary for us to meet our clients’ staffing needs |
| We depend on our ability to attract and retain qualified associates who possess the skills and experience necessary to meet the requirements of our clients |
| We must continually evaluate and upgrade our base of available qualified personnel through recruiting and training programs to keep pace with changing customer needs and emerging technologies |
| Competition for individuals with proven professional skills, particularly employees with accounting and technological skills, is intense, and we expect demand for such individuals to remain very strong for the foreseeable future |
| Qualified personnel may not be available to us in sufficient numbers and on terms of employment acceptable to us |
| Developing and implementing training programs requires significant expenditures and may not result in the trainees developing effective or adequate skills |
| We may not be able to develop training programs to respond to our clients’ changing needs or retain associates who we have trained |
| The failure to recruit, train and retain qualified associates could materially adversely affect our business because it may result in an inability to meet our clients’ needs |
| We may be exposed to employment-related claims and costs and other litigation that could materially adversely affect our business, financial condition and results of operations |
| We are in the business of employing people and placing them in the workplaces of other businesses |
| Risks relating to these activities include: • claims of misconduct or negligence on the part of our associates; • claims by our associates of discrimination or harassment directed at them, including claims relating to actions of our clients; 12 ______________________________________________________________________ • claims related to the employment of illegal aliens or unlicensed personnel; • payment of workers’ compensation claims and other similar claims; • violations of wage and hour requirements; • retroactive entitlement to employee benefits; • errors and omissions of our associates, particularly in the case of professionals, such as accountants; and • claims by our clients relating to our assoicates’ misuse of clients proprietary information, misappropriation of funds, other criminal activity or torts or other similar claims |
| We may incur fines and other losses or negative publicity with respect to these problems |
| In addition, some or all of these claims may give rise to litigation, which could be time-consuming to our management team and costly and could have a negative impact on our business |
| We cannot assure you that we will not experience these problems in the future or that our insurance will be sufficient in amount or scope to cover any of these types of liabilities |
| We cannot assure you that our insurance will cover all claims that may be asserted against us |
| Should the ultimate judgments or settlements exceed our insurance coverage, they could have a material effect on our results of operations, financial position and cash flows |
| We also cannot assure you that we will be able to obtain appropriate types or levels of insurance in the future or that adequate replacement policies will be available on acceptable terms, if at all |
| If we lose our key personnel, then our business may suffer |
| Our operations are dependent on the continued efforts of our officers and executive management |
| In addition, we are dependent on the performance and productivity of our local managers and field personnel |
| Our ability to attract and retain business is significantly affected by local relationships and the quality of service rendered |
| The loss of those key officers and members of executive management who have acquired significant experience in operating an employment services company on an international level may cause a significant disruption to our business |
| Moreover, the loss of our key managers and field personnel may jeopardize existing client relationships with businesses that continue to use our services based upon past relationships with these local managers and field personnel |
| The loss of such key personnel could materially adversely affect our operations, because it may result in an inability to establish and maintain client relationships and otherwise operate our business |
| Some of our subsidiaries might have significant clients, which if lost, could have a material adverse impact on their earnings |
| Jefferson Wells is a global professional services provider of internal controls, tax operations and finance operations services, with operations in the United States, Canada and Europe |
| Approximately 13prca and 19prca of Jefferson Wells’ revenues for 2005 and 2004, respectively, were generated from providing services to one client |
| Should this client’s demand for our services decrease, this would negatively impact our Jefferson Wells segment and overall profitability for us as a whole |
| Foreign currency fluctuations may have a material adverse effect on our operating results |
| We conduct our operations in 72 countries and territories and the results of our local operations are reported in the applicable foreign currencies and then translated into US Dollars at the applicable foreign currency exchange rates for inclusion in our consolidated financial statements |
| During 2005, approximately 80prca of our revenues were generated outside of the United States, the majority of which were generated in Europe |
| Furthermore, approximately dlra733dtta8 million of our outstanding indebtedness as of December 31, 2005 was denominated in foreign currencies |
| Because of devaluations and fluctuations in currency exchange rates or the imposition of limitations on conversion of foreign currencies into US Dollars, we are subject to currency translation exposure on the profits of our operations, in addition to economic exposure |
| This exposure could have a material adverse effect on our business, financial condition, cash flow and results of operations in the future because, among other things, it could cause our reported revenues and profitability to decline or debt levels and interest expense to increase |
| 13 ______________________________________________________________________ As of December 31, 2005, we had dlra735dtta0 million of total debt |
| This level of debt could adversely affect our operating flexibility and put us at a competitive disadvantage |
| Our level of debt and the limitations imposed on us by our credit agreements could have important consequences for investors, including the following: • we will have to use a portion of our cash flow from operations for debt service rather than for our operations; • we may not be able to obtain additional debt financing for future working capital, capital expenditures or other corporate purposes or may have to pay more for such financing; • some or all of the debt under our current or future revolving credit facilities may be at a variable interest rate, making us more vulnerable to increases in interest rates; • we could be less able to take advantage of significant business opportunities, such as acquisition opportunities, and to react to changes in market or industry conditions; • we will be more vulnerable to general adverse economic and industry conditions; and • we may be disadvantaged compared to competitors with less leverage |
| The terms of our revolving credit facility permit additional borrowings, subject to certain conditions |
| If new debt is added to our current debt levels, the related risks we now face could intensify |
| We expect to obtain the money to pay our expenses, to repay borrowings under our credit facility and to repay our other debt primarily from our operations |
| Our ability to meet our expenses thus depends on our future performance, which will be affected by financial, business, economic and other factors |
| We are not able to control many of these factors, such as economic conditions in the markets where we operate and pressure from competitors |
| The money we earn may not be sufficient to allow us to pay principal and interest on our debt and to meet our other debt obligations |
| If we do not have enough money, we may be required to refinance all or part of our existing debt, sell assets or borrow additional funds |
| We may not be able to take such actions on terms that are acceptable to us, if at all |
| In addition, the terms of our existing or future debt agreements, including the revolving credit facilities and our indentures, may restrict us from adopting any of these alternatives |
| Our failure to comply with restrictive covenants under our revolving credit facilities and other debt instruments could trigger prepayment obligations |
| Our failure to comply with the restrictive covenants under our revolving credit facilities and other debt instruments could result in an event of default, which, if not cured or waived, could result in us being required to repay these borrowings before their due date |
| If we are forced to refinance these borrowings on less favorable terms, our results of operations and financial condition could be adversely affected by increased costs and rates |
| The performance of our subsidiaries may vary, negatively affecting our ability to service our debt |
| Since we conduct a significant portion of our operations through our subsidiaries, our cash flow and our consequent ability to service our debt depends in part upon the earnings of our subsidiaries and the distribution of those earnings, or upon loans or other payments of funds by those subsidiaries, to us |
| The payment of dividends and the making of loans and advances to us by our subsidiaries may be subject to statutory or contractual restrictions, depend upon the earnings of those subsidiaries and be subject to various business considerations |
| 14 ______________________________________________________________________ The price of our common stock may fluctuate significantly, which may result in losses for investors |
| The market price for our common stock has been and may continue to be volatile |
| For example, during the fiscal year ended December 31, 2005, the prices of our common stock as reported on the New York Stock Exchange ranged from a high of dlra48dtta65 to a low of dlra38dtta55 |
| Our stock price can fluctuate as a result of a variety of factors, including factors listed in these “Risk Factors” and others, many of which are beyond our control |
| These factors include: • actual or anticipated variations in our quarterly operating results; • announcement of new services by us or our competitors; • announcements relating to strategic relationships or acquisitions; • changes in financial estimates or other statements by securities analysts; and • changes in general economic conditions |
| Because of this volatility, we may fail to meet the expectations of our shareholders or of securities analysts, and our stock price could decline as a result |
| Wisconsin law and our articles of incorporation and bylaws contain provisions that could make the takeover of us more difficult |
| Certain provisions of Wisconsin law and our articles of incorporation and bylaws could have the effect of delaying or preventing a third party from acquiring us, even if a change in control would be beneficial to our shareholders |
| These provisions of our articles of incorporation and bylaws include: • providing for a classified board of directors with staggered, three-year terms; • permitting removal of directors only for cause; • providing that vacancies on the board of directors will be filled by the remaining directors then in office; and • requiring advance notice for shareholder proposals and director nominees |
| In addition, the Wisconsin control share acquisition statute and Wisconsin’s “fair price” and “business combination” provisions limit the ability of an acquiring person to engage in certain transactions or to exercise the full voting power of acquired shares under certain circumstances |
| These provisions and other provisions of Wisconsin law could make it more difficult for a third party to acquire us, even if doing so would benefit our shareholders |
| The provisions described above could cause our stock price to decline |