ManpowerGroup Inc. (MAN) FY 2021 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Financial Measures — Constant Currency And Organic Constant Currency

Changes in our financial results include the impact of changes in foreign currency exchange rates, acquisitions and dispositions. We provide “constant currency” and “organic constant currency” calculations in this report to remove the impact of these items. We express year-over-year variances that are calculated in constant currency and organic constant currency as a percentage.

When we use the term “constant currency,” it means that we have translated financial data for a period into United States dollars using the same foreign currency exchange rates that we used to translate financial data for the previous period. We believe that this calculation is a useful measure, indicating the actual growth of our operations. We use constant currency results in our analysis of subsidiary or segment performance. We also use constant currency when analyzing our performance against that of our competitors. Substantially all of our subsidiaries derive revenues and incur expenses within a single country and, consequently, do not generally incur currency risks in connection with the conduct of their normal business operations. Changes in foreign currency exchange rates primarily impact reported earnings and not our actual cash flow unless earnings are repatriated.

When we use the term “organic constant currency,” it means that we have further removed the impact of acquisitions in the current period and dispositions from the prior period from our constant currency calculation. We believe that this calculation is useful because it allows us to show the actual growth of our ongoing business.

The constant currency and organic constant currency financial measures are used to supplement those measures that are in accordance with United States Generally Accepted Accounting Principles (“GAAP”). These Non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies may calculate such financial results differently. These Non-GAAP financial measures are not measurements of financial performance under GAAP, and should not be considered as alternatives to measures presented in accordance with GAAP.

Constant currency and organic constant currency percent variances, along with a reconciliation of these amounts to certain of our reported results, see the Financial Measures section found in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Results of Operations - For Years of Operation Ending December 31, 2021 and 2020

The financial discussion that follows focuses on 2021 results compared to 2020. For a discussion of 2020 results compared to 2019, see the company’s Annual Report on Form 10-K for the year ended December 31, 2020.

During 2021, we experienced recovery in the majority of our markets as we anniversaried the COVID-19 related declines in our results that occurred in 2020. Revenues increased 15.1% in 2021 compared to 2020. Our 2021 results reflected the global economic recovery with strong hiring demand from our clients due to vaccine rollouts throughout the year and the easing of pandemic-related restrictions in many countries resulting in increased demand for our services in most of our key markets. However, this recovery we experienced was not uniform, with some markets, particularly in Europe, continuing to experience COVID-19 related challenges. These challenges included the imposition of additional or extended lockdowns or other restrictions, mostly occurring during the first and second quarters, which impaired the rate of recovery. During the second half of 2021, we experienced a slowing rate of recovery, particularly in Europe, that was not only impacted by COVID-19 related challenges but also included additional challenges that impacted client demand for our services. These additional challenges included supply chain issues as well as labor shortages. We believe certain parts of the workforce did not return to the labor market in many industries and markets over concerns about the COVID-19 Delta and Omicron variants. Although we experienced strengthening demand across most geographies and industries during 2021 compared to 2020, uncertainty remains as to the future impact of the pandemic on global and local economies. See Part 1, Item 1A, of this Annual Report on Form 10-K for an additional discussion of risks related to COVID-19.

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In addition to the impact from COVID-19 discussed above, results for the year were impacted by currency. During 2021, the United States dollar was weaker, on average, relative to the currencies in our European markets, which therefore had a favorable impact on our reported results. The changes in the foreign currency exchange rates had a 3.0% favorable impact on revenues from services and an approximately $0.17 per share favorable impact on net earnings per share – diluted in 2021. Substantially all of our subsidiaries derive revenues from services and incur expenses within the same currency and generally do not have cross-currency transactions, and therefore, changes in foreign currency exchange rates primarily impact reported earnings and not our actual cash flow unless earnings are repatriated. To understand the performance of our underlying business, we utilize constant currency or organic constant currency variances for our consolidated and segment results.

During 2021, we experienced the following quarterly changes to our consolidated revenues compared to 2020: first quarter revenue increase of 6.6% reflecting recovery in the majority of our markets as we began to anniversary the significant COVID-19 related declines in our results that occurred during the last two weeks of the first quarter of 2020; a significant revenue increase of 41.0% in the second quarter as COVID-19 had a significant impact on the entire second quarter of 2020, especially in April and May; 12.1% increase in revenues in the third quarter reflecting a slowing in the rate of recovery in a number of key markets compared to the second quarter; and ending the year with a 6.5% revenue increase in the fourth quarter of 2021 reflecting the further slowing of our recovery rate primarily due to the anniversary of significant revenue recovery in the prior year quarter and ongoing COVID-19 uncertainty.

During 2021 compared to 2020, most of our markets experienced revenue increases as the global recovery continued and as we anniversaried the revenue declines due to the COVID-19 crisis. We experienced a 19.0% revenue increase in Southern Europe, mainly driven by the increased demand in France and Italy. We experienced a 17.4% revenue increase in Northern Europe primarily due to the increased demand for our staffing/interim services, mostly in the United Kingdom and the Nordics. Revenues increased 12.4% in the Americas driven primarily by the increase in demand for our staffing/interim services, increased demand for our RPO and MSP offerings in the United States and the additional revenues as result of the acquisition of ettain group in October 2021. We experienced a 4.4% revenue increase in APME primarily due to the increase in our Experis business.

From a brand perspective, we experienced revenue increases in all of our brands during 2021 compared to 2020. The revenue increase in our Manpower brand was primarily due to improved demand for our staffing services and an increase in our permanent recruitment business. In our Experis brand, the revenue increase was primarily due to the improved demand for our interim services, an increase in our permanent recruitment business and increased demand for our managed services, primarily in Southern Europe, and the additional revenues as a result of the acquisition of ettain group. On an overall basis, the revenue increase in our Talent Solutions brand, which includes Recruitment Process Outsourcing (RPO), TAPFIN - Managed Service Provider (MSP) and our Right Management offerings, was driven mostly by increased demand for our RPO and MSP services, partially offset by the decline in our Right Management career transition business. As workplaces reopened across our geographies and workers returned in phased approaches, we saw increased client demand for our HR skills within our RPO business due to significant hiring activity. Our MSP business has remained resilient during the pandemic and we experienced growth during 2021 as we assisted more clients to develop customized workforce solutions.

Our gross profit margin improved in 2021 compared to 2020 primarily due to a favorable change in business mix as our higher-margin permanent recruitment business, which experienced a 45.5% increase (41.7% in constant currency and 41.4% in organic constant currency) during 2021 as a result of stronger hiring activity, represented a higher percentage of the revenue mix in our largest markets during 2021 compared to 2020. The increase was also due to the improvement in our staffing/interim margins in the Americas, Southern Europe and APME, margin improvement in our Experis managed services business in Europe, and a higher percentage of revenue mix coming from our higher-margin consulting and MSP services. These increases were partially offset a lower mix of revenues coming from our higher-margin Right Management career transition business.

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We recorded transaction and integration costs of $18.8 million in 2021 relating to our acquisition of ettain group in the fourth quarter of 2021. We recorded restructuring costs of $15.2 million in 2021 related to the Americas and Northern Europe. We also recognized a one-time gain of $10.0 million related to a long-term obligation in Northern Europe.

Our operating profit margin increased 212.0% in 2021 while our operating profit margin increased 180 basis points compared to 2020. Excluding acquisition transaction and integration costs incurred in 2021, the one-time gain related to a Northern Europe long-term obligation, restructuring costs incurred in 2021 of $15.2 million and $110.7 million in 2020, $72.8 million of goodwill and other impairment charges incurred in 2020,

and a loss of $5.8 million from the disposition of subsidiaries incurred in 2020, our operating profit was up 61.7% while operating profit margin was up 80 basis points compared to 2020. The operating profit margin increased mostly due to the improvement in our gross profit margin and our ability to support an increase in revenues without a similar increase in selling and administrative expenses.

We continue to monitor expenses closely to ensure we maintain the benefit of our efforts to optimize our organizational and cost structures, while investing appropriately to support the ability of the business to grow in the future and enhance our productivity, technology and digital capabilities. We are focused on managing costs as efficiently as possible in the short-term while continuing to progress transformational actions aligned with our strategic priorities.

Consolidated Results - 2021 compared to 2020

The following table presents selected consolidated financial data for 2021 as compared to 2020.

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The year-over-year increase in revenues from services of 15.1% (12.1% in constant currency and 11.3% in organic constant currency) was attributed to:

•
a revenue increase in Southern Europe of 19.0% (15.0% in constant currency). France, the largest market in Southern Europe, experienced a revenue increase of 19.2% (15.3% in constant currency), which was primarily due to the increased demand for our Manpower staffing services, a 34.2% increase (29.2% in constant currency) in the permanent recruitment business and the favorable impact of changes in currency exchange rates. Italy, also part of Southern Europe, experienced a revenue increase of 31.0% (26.7% in constant currency), which was primarily due to the increased demand for our Manpower staffing services, a 69.2% increase (63.9% in constant currency) in the permanent recruitment business and the favorable impact of changes in currency exchange rates;

•
a revenue increase in Northern Europe of 17.4% (11.4% in constant currency), primarily due to the increased demand for our Manpower staffing services, the 45.5% increase (38.7% in constant currency) in the permanent recruitment business and the favorable impact of changes in currency exchange rates. We experienced revenue increases in the United Kingdom, the Nordics, Germany, the Netherlands and Belgium of 23.5%, 20.9%, 6.1%, 4.5% and 9.6%, respectively (15.2%, 12.4%, 2.4%, 0.9% and 6.2%, respectively, in constant currency);

•
a revenue increase in the United States of 17.9% (9.3% on an organic basis) primarily driven by increased demand for our Manpower staffing services, an increase in our permanent recruitment business of 67.6% (63.5% on an organic basis), including our RPO offering, increased demand for our MSP offering and the ettain group acquisition;

•
a revenue increase in APME of 4.4% (4.2% in constant currency) primarily due to the increase in our Experis business, the 19.3% increase (14.1% in constant currency) in the permanent recruitment business and the favorable impact of changes in currency exchange rates; and

•
a 3.0% increase due to the impact of changes in currency exchange rates in markets within Europe and APME.

The year-over-year 70 basis point increase in gross profit margin was primarily attributed to:

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a 50 basis point favorable change in business mix as the higher-margin permanent recruitment business represented a higher percentage of the revenue mix;

•
a 30 basis point favorable impact from the improvement in the staffing/interim margins in the Americas, Southern Europe and APME;

•
a 10 basis point favorable impact from the margin improvement in our Experis managed services business in Europe; and

•
a 10 basis point favorable change in business mix as our higher-margin consulting and MSP services represented a higher percentage of the revenue mix; partially offset by

•
a 20 basis point unfavorable change in business mix as the higher-margin Right Management career transition business represented a lower percentage of the revenue mix; and

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

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The 7.0% increase in selling and administrative expenses in the year ended December 31, 2021 (4.5% in constant currency; 3.7% in organic constant currency) was primarily attributed to:

•
a 17.7% increase (15.0% in constant currency and 13.9% in organic constant currency) in personnel costs due to the increase in salary costs related to additional headcount as we invested in incremental recruiters and sales talent based on increased market activity. The increase in salary costs was also due to an increase in variable incentive costs as a result of increased profitability in most markets and the decrease in benefits related to the transition of employees onto government temporary unemployment programs that occurred in the year ended December 31, 2020;

•
a 3.9% increase (6.2% in constant currency and 6.0% in organic constant currency) in non-personnel related costs, excluding acquisition transaction and integration costs, restructuring costs, goodwill and other impairment charges, loss on disposition of subsidiaries and gain related to a long-term obligation in Northern Europe, primarily to support the increase in revenues;

•
the $18.8 million of acquisition transaction and integration costs incurred in the year ended December 31, 2021; and

•
a 2.5% increase due to the impact of changes in currency exchange rates in markets within Europe and APME; partially offset by

•
a decrease in restructuring costs to $15.2 million incurred in the year ended December 31, 2021 from $110.7 million in the year ended December 31, 2020;

•
the goodwill and other impairment charges of $72.8 million incurred in the year ended December 31, 2020;

•
the gain of $10.0 million related to a long-term obligation in Northern Europe; and

•
the $5.8 million loss on the disposition of subsidiaries incurred in the year ended December 31, 2020.

Selling and administrative expenses as a percent of revenues decreased 100 basis points in the year ended December 31, 2021 compared to the year ended December 31, 2020 due primarily to:

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a 40 basis point favorable impact as a result of the decrease in goodwill and other impairment charges;

•
a 60 basis point favorable impact as a result of the decrease in restructuring costs in the year ended December 31, 2021 compared to the year ended December 31, 2020; and

•
a 20 basis point favorable impact as we were able to support an increase in revenues without a similar increase in non-personnel related costs, excluding acquisition transaction and integration costs, restructuring costs and goodwill and other impairment charges; partially offset by

•
a 10 basis point unfavorable impact from the acquisition transaction and integration costs incurred in the year ended December 31, 2021; and

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

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Interest and other expenses, net is comprised of interest, foreign exchange gains and losses and other miscellaneous non-operating income and expenses, including noncontrolling interests. Interest and other expenses, net was $17.3 million in 2021 compared to $39.9 million in 2020. Miscellaneous income was $14.7 million in 2021 compared to miscellaneous expense of $4.8 million in 2020. The change is primarily due to the pension settlement expenses of $10.2 million recorded in 2020 related to the settlement of our United States qualified retirement plan liability and the increase in income from our equity investment in ManpowerGroup Greater China Limited.

We recorded income tax expense at an effective rate of 32.7% for 2021, as compared to an effective rate of 83.9% for 2020. The 2021 rate was favorably impacted by the scheduled reduction in the French corporate tax rate to 27.5%, the enacted 50% reduction in the French business tax rate, and a higher level of pre-tax earnings. The 32.7% effective tax rate for 2021 was higher than the United States Federal statutory rate of 21% primarily due to the French business tax, tax losses in certain countries for which we did not recognize a corresponding tax benefit due to valuation allowances, and the overall mix of earnings. The 2020 rate was unfavorably impacted by the relatively low level and mix of pre-tax earnings, the recognition of discrete valuation allowances in Germany and the Netherlands, the non-deductible goodwill impairment charge in Germany and the French business tax. The French business tax had a more significant unfavorable impact in 2020 due to French pre-tax earnings decreasing at a greater rate than revenues, which is the primary basis for the tax calculation.

Net earnings per share - diluted was earnings of $6.91 in 2021 compared to $0.41 in 2020. Foreign currency exchange rates favorably impacted net earnings per share - diluted by approximately $0.17 per share in 2021. Restructuring costs recorded in 2021 and 2020 negatively impacted net earnings per share - diluted by approximately $0.07 and $1.56 per share, net of tax, in 2021 and 2020, respectively. The acquisition transaction and integration costs in 2021 negatively impacted net earnings per share - diluted by approximately $0.27, net of tax, in 2021. Goodwill and other impairment charges recorded in 2020 negatively impacted net loss per share - diluted by approximately $1.14 in 2020. The pension settlement expense recorded in 2020 negatively impacted net loss per share - diluted by approximately $0.11, net of tax, in 2020. The loss from the disposition of subsidiaries in 2020 negatively impacted net loss per share - diluted by approximately $0.09, net of tax, in 2020.

Weighted average shares - diluted decreased to 55.4 million in 2021 from 58.3 million in 2020. This decrease was due to the impact of share repurchases completed since 2020 and the full weighting of the repurchases completed in 2020, partially offset by shares issued as a result of exercises and vesting of share-based awards since 2020.

Segment Results

We evaluate performance based on operating unit profit (“OUP”), which is equal to segment revenues less direct costs and branch and national headquarters operating costs. This profit measure does not include goodwill and intangible asset impairment charges or amortization of intangible assets related to acquisitions, corporate expenses, interest and other income and expense amounts or income taxes.

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Americas

In the Americas, revenues from services increased 12.4% (13.0% in constant currency and 7.8% in organic constant currency) in 2021 compared to 2020. In the United States, revenues from services increased 17.9% (9.3% on an organic basis) in 2021 compared to 2020, primarily driven by increased demand for our Manpower staffing services, an increase in our permanent recruitment business of 67.6% (63.5% on an organic basis), including our RPO offering, and increased demand for our MSP offering, partially offset by the unfavorable impact of one fewer billing day. In Other Americas, revenues from services increased 3.8% (5.3% in constant currency) in 2021 compared to 2020 primarily due to increased demand for our staffing/interim services, an increase in our permanent recruitment business of 95.9% (103.2% in constant currency), partially offset by the unfavorable impact of four fewer billing days. This improvement was driven by increases in Canada, Argentina, Colombia, Peru and Brazil of 22.0%, 31.1%, 16.9%, 6.6% and 6.6%, respectively (14.1%, 76.7%, 19.0%, 18.4% and 13.1%, respectively, in constant currency), with the increase in Argentina being primarily due to inflation. The increases were partially offset by a decrease in Mexico of 22.2% (26.5% in constant currency) primarily due to the new labor legislation, implemented in July 2021, that prohibits the provision of traditional temporary staffing services, only allowing outsourced worker assignments for specialized services outside of the client’s core business activity. Although we believe the new labor legislation will result in significant revenue reductions in Mexico over the next few quarters, we believe the mix shift towards more specialized staffing will improve the margins of our Mexico business over time. Our Mexico operations generated approximately 1.9% and 2.8% of our consolidated global revenues for the years ended December 31, 2021 and 2020, respectively.

Gross profit margin increased in 2021 compared to 2020 primarily due to the improvements in the staffing/interim margins, which were partly due to favorable direct cost adjustments incurred in 2021 in a market within Other Americas. The improvements were also due to the increases in our permanent recruitment business, and increases in revenues from our higher-margin MSP and RPO offerings in the United States. These improvements were partially offset by the unfavorable changes in business mix as the higher-margin Right Management career transition business represented a lower percentage of the revenue mix.

In 2021, selling and administrative expenses increased 11.3% (11.7% in constant currency and 7.9% in organic constant currency), primarily due to the increase in salary-related costs due to higher headcount to support an increase in revenues in 2021 and an increase in variable incentive costs as a result of an increase in profitability in certain markets. The increase was also due to acquisition transaction and integration costs of $18.8 million incurred in 2021 and an increase in consulting costs related to certain technology initiatives. The increases were partially offset by the decrease in restructuring costs to $5.2 million in 2021 compared to $29.5 million in 2020, the decrease in software impairment charges and a decline in office-related expenses driven by a decrease in the number of offices.

Operating Unit Profit (“OUP”) margin in the Americas was 4.6% and 3.1% for 2021 and 2020, respectively. In the United States, OUP margin increased to 5.0% in 2021 from 2.6% in 2020 primarily due to decrease in restructuring costs, the decrease in software impairment charges, our ability to increase revenues without a similar increase in expenses, and an increase in the gross profit margin. The increase was partially offset by the acquisition transaction and integration costs incurred in 2021. Other Americas OUP margin increased to 3.9% in 2021 from 3.8% in 2020 primarily due to the gross profit margin improvement, partially offset by an increase in restructuring costs.

Southern Europe

In Southern Europe, which includes operations in France and Italy, revenues from services increased 19.0% (15.0% in constant currency and 15.6% in organic constant currency) in 2021 compared to 2020. In 2021, revenues from services increased 19.2% (15.3% in constant currency) in France and increased 31.0% (26.7% in constant currency) in Italy. The increase in France is primarily due to the increased demand for our Manpower staffing services, a 34.2% increase (29.2% in constant currency) in the permanent recruitment business and the favorable impact of changes in currency exchange rates. The increase in Italy was primarily due to the increased demand for our Manpower staffing services, a 69.2% increase (63.9% in constant currency) in the permanent recruitment business and the favorable impact of changes in currency exchange rates. In Other Southern Europe, revenues from services increased 10.9% (7.1% in constant currency and 9.2% in organic constant currency) during 2021 compared to 2020, due to increased demand for our Manpower staffing services and an increase in our permanent recruitment business of 33.0% (28.7% in constant currency and 34.4% in organic constant currency), partially offset by the disposition of subsidiaries in Other Southern Europe in 2020.

Gross profit margin increased in 2021 compared to 2020. The increases were primarily due to the increases of 42.7% (37.8% in constant currency) in the permanent recruitment business. The increase in 2021 compared to 2020 was partially offset by the decrease in the Manpower staffing margin as lower margin enterprise clients represented a larger percentage of revenues during 2021 compared to 2020.

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Selling and administrative expenses increased 8.4% (4.6% in constant currency) during 2021 compared to 2020 primarily due to the increase in salary-related costs due to higher headcount to support an increase in revenues in the quarter, an increase in variable incentive costs as a result of increased profitability in certain markets, and the

decrease in benefits related to the transition of full-time equivalent employees onto government temporary unemployment programs that occurred in 2020. The increase was also due to the unfavorable impact of changes in currency exchange rates. These increases were partially offset by the decrease in restructuring costs to zero in 2021 from $24.5 million in 2020.

OUP margin in Southern Europe was 4.5% for 2021 compared to 3.0% for 2020. In France, the OUP margin increased to 4.5% for 2021 from 3.4% in 2020 primarily due to our ability to increase revenues without a similar increase in expenses and the increase in the gross profit margin. In Italy, the OUP margin increased to 6.4% for 2021 from 4.7% for 2020 primarily due to the decrease in restructuring costs to zero in 2021 from $3.4 million in 2020, our ability to increase revenues without a similar increase in expenses and the increase in the gross profit margin. Other Southern Europe’s OUP margin increased to 2.8% in 2021 from 1.1% in 2020, primarily due to the decrease in restructuring costs to zero in 2021 from $17.3 million in 2020, our ability to increase revenues without a similar increase in expenses, the increase in the gross profit margin and the loss on disposition of subsidiaries incurred in 2020.

Northern Europe

In Northern Europe, which includes operations in the United Kingdom, the Nordics, Germany, the Netherlands and Belgium (comprising 37%, 22%, 14%, 10%, and 7%, respectively, of Northern Europe’s revenues), revenues from services increased 17.4% (11.4% in constant currency) in 2021 compared to 2020. We experienced revenue increases in the United Kingdom, the Nordics, Germany, the Netherlands and Belgium of 23.5%, 20.9%, 6.1%, 4.5% and 9.6%, respectively (15.2%, 12.4%, 2.4%, 0.9% and 6.2%, respectively, in constant currency). The revenue increase in Northern Europe was primarily due to the increased demand for our Manpower staffing services, the 45.5% increase (38.7% in constant currency) in the permanent recruitment business and the favorable impact of changes in currency exchange rates, partially offset by the unfavorable impact of approximately one fewer billing day.

Gross profit margin increased in 2021 compared to 2020 due to the increases in our permanent recruitment business, partially offset by the declines in the Manpower staffing margin due to client mix changes, as a higher percentage of revenues consisted of revenues from our lower-margin enterprise clients.

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Selling and administrative expenses increased 5.6% (0.5% in constant currency) in 2021 compared to 2020. The increases are primarily due to the increases in salary-related costs due to higher headcount to support increases in revenues and increases in variable incentive costs as a result of increases in profitability in certain markets. The increases were also due to the increases in non-personnel related costs to support the increases in revenues, and the decrease in benefits related to the transition of full-time equivalent employees onto government temporary unemployment programs that occurred in 2020. The increases were partially offset by the decrease in restructuring costs to $10.0 million in 2021 from $52.4 million in 2020 and a one-time gain of $10.0 million incurred in 2021 related to a long-term obligation.

OUP margin for Northern Europe was 1.5% in 2021 compared to an operating unit loss margin of (0.7%) in 2020. The increases were primarily due to our ability to increase revenues without a similar increase in expenses, increases in the gross profit margin and the decreases in restructuring costs.

APME

Revenues from services increased 4.4% (4.2% in constant currency) in 2021 compared to 2020. In Japan (which represents 47% of APME's revenues), revenues from services increased 8.7% (12.0% in constant currency) due to the increase in our Experis business, increased demand for our Manpower staffing services, the 19.3% increase (14.1% in constant currency) in our permanent recruitment business and the favorable impact of approximately one additional billing day. In Australia (which represents 14% of APME's revenues), revenues from services decreased 11.4% (19.6% in constant currency) due to the decreased demand for our Manpower staffing services and the unfavorable impact of approximately seven fewer billing days, partially offset by the 13.2% increase (3.9% in constant currency) in our permanent recruitment business and the favorable impact of changes in currency exchange rates. The revenue increase in the remaining markets in APME is due to the increase in demand for our Talent-Based Outsourcing services within our Manpower business, the 51.9% increase (50.5% in constant currency) in our permanent recruitment business and the favorable impact of changes in currency exchange rates, partially offset by the unfavorable impact of one fewer billing day.

Gross profit margin increased in 2021 compared to 2020 primarily due to the increases in our staffing/interim margins and the increases of 8.4% and 19.3%, respectively, (9.6% and 14.1% in constant currency, respectively) in our permanent recruitment business.

Selling and administrative expenses increased 11.2% (9.7% in constant currency) in 2021 compared to 2020. The increases are primarily due to the increases in salary-related costs due to higher headcount to support an increase in revenues and increases in variable incentive costs as a result of increases in profitability in certain markets, and the increases in non-personnel related costs to support the increases in revenues. The increase for 2021 compared to 2020 was also due to the unfavorable impact of changes in currency exchange rates. The increases were partially offset by the decreases in restructuring costs to zero in 2021 from $4.1 million in 2020.

OUP margin increased to 3.4% in 2021 from 2.9% in 2020 due to the improvements in the gross profit margins and decreases in restructuring costs.

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Financial Measures

Constant Currency And Organic Constant Currency Reconciliation

Certain constant currency and organic constant currency percent variances are discussed throughout this report. A reconciliation of these Non-GAAP percent variances to the percent variances calculated based on our annual GAAP financial results is provided below. (See Constant Currency and Organic Constant Currency on page 31 for information.)

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Cash Sources and Uses

Cash used to fund our operations is primarily generated through operating activities and provided by our existing credit facilities. We believe our available cash and existing credit facilities are sufficient to cover our cash needs for the foreseeable future. We assess and monitor our liquidity and capital resources globally. We use a global cash pooling arrangement, intercompany lending, and some local credit lines to meet funding needs and allocate our capital resources among our various entities. As of December 31, 2021, we had $769.4 million of cash held by foreign subsidiaries. We have historically made and anticipate future cash repatriations to the United States from certain foreign subsidiaries to fund corporate activities. As of December 31, 2021, deferred taxes related to non-United States withholding and other taxes were provided on $1,473.3 million of unremitted earnings of non-United States subsidiaries that may be remitted to the United States. As of December 31, 2021 and 2020, we have recorded a deferred tax liability of $16.1 million and $10.0 million, respectively, related to these non-United States earnings that may be remitted. As of December 31, 2021, we had an additional $343.8 million of unremitted earnings of non-United States subsidiaries for which we have not currently provided deferred taxes as amounts are deemed indefinitely reinvested. We have not estimated the deferred tax liability on these earnings as such estimation is not practicable to determine or immaterial to the financial statements.

Our principal ongoing cash needs are to finance working capital, capital expenditures, debt payments, interest expense, dividends, share repurchases and acquisitions. Working capital is primarily in the form of trade receivables, which generally increase as revenues increase. The amount of financing necessary to support revenue growth depends on receivables turnover, which differs in each market where we operate.

Cash provided by operating activities was $644.8 million, $936.4 million and $814.4 million for 2021, 2020 and 2019, respectively. Changes in operating assets and liabilities generated $135.6 million, $703.6 million and $313.2 million of cash in 2021, 2020 and 2019, respectively. The change in 2021 from 2020 was primarily attributable to an increase in accounts receivable due to the stronger market environment as the impact of the COVID-19 crisis has stabilized in many parts of the world, offset by an increase in accounts payable due to timing. The change in 2020 from 2019 was primarily attributable to a decrease in accounts receivable, due to collections and the receivables not being replaced at the same level as a result of a decrease in demand for our services, and the benefit of certain government payment deferral measures introduced as part of the COVID-19 crisis. These improvements in our cash flows were partially offset by the decrease in our payroll-related liabilities due to lower activity.

The CICE payroll tax credits are creditable against our current French income tax payable, with any remaining amount being paid after three years. In April 2019, we sold a portion of our CICE earned in 2018 for net proceeds of $103.5 million (€92.0 million) with the remaining amount to be used against future tax payments. We derecognized these receivables upon the sale as the terms of the agreement are such that the transaction qualifies for sale treatment according to the accounting guidance on the transfer and servicing of assets. The discount on the sale of these receivables was recorded as a reduction of the payroll tax credits earned in the respective years in cost of services.

Accounts receivable increased to $5,448.2 million as of December 31, 2021 from $4,912.4 million as of December 31, 2020. This increase was partially offset by the impact of changes in currency exchange rates. Days Sales Outstanding ("DSO") increased by one day from December 31, 2020 to 55 days as of December 31, 2021 due to unfavorable mix changes, with higher growth in countries with a higher average DSO.

Capital expenditures were $64.2 million, $50.7 million and $52.9 million during 2021, 2020 and 2019, respectively. These expenditures were primarily comprised of purchases of computer equipment, office furniture and other costs related to office openings and refurbishments, as well as capitalized software costs of $26.9 million in 2021, $14.0 million in 2020 and $2.0 million in 2019. The higher expenditures in 2021 compared to 2020 was primarily due to additional technology investment and the timing of capital expenditures. The lower expenditures in 2020 compared to 2019 are primarily due to overall scale-back of activities in 2020 due to the COVID-19 crisis, completion of a software development project in 2019, and the timing of capital expenditures, partially offset by additional technology investments.

Net debt borrowings were $70.3 million in 2021 as compared to net debt payments of $38.5 million in 2020 and net debt borrowings of $19.5 million in 2019. We drew $150.0 million as of October 1, 2021 in conjunction with the funding of the ettain group acquisition and $75.0 million remains outstanding as of December 31, 2021. We intend to repay the outstanding balance during 2022.

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The Board of Directors authorized the repurchase of 4.0 million, 6.0 million and 6.0 million shares of our common stock in August 2021, August 2019 and August 2018. Share repurchases may be made from time to time through a variety of methods, including open market purchases, block transactions, privately negotiated transactions or similar facilities. In 2021, we repurchased a total of 2.1 million shares under the 2019 authorization at a total cost of $210.0 million. In 2020, we repurchased a total of 3.4 million shares comprised of 0.8 million shares under the 2018 authorization and 2.6 million shares under the 2019 authorization, at a total cost of $264.7 million. In 2019, we repurchased a total of 2.4 million shares at a total cost of $203.0 million under the 2018 authorization. As of December 31, 2021, there were 4.0 million and 1.2 million shares remaining authorized for repurchase under the 2021 authorization and 2019 authorization, respectively, and no shares remaining authorized for repurchase under the 2018 authorization.

During 2021, 2020 and 2019, the Board of Directors declared total cash dividends of $2.52, $2.26 and $2.18 per share, respectively, resulting in total dividend payments of $136.6 million, $129.1 million and $129.3 million, respectively.

We have aggregate commitments of $2,100.0 million related to debt, operating leases, severances and office closure costs, transition tax resulting from the Tax Act and certain other commitments, as follows:

Our liability for unrecognized tax benefits, including related interest and penalties, of $56.6 million is excluded from the commitments above as we cannot determine the years in which these positions might ultimately be settled.

We recorded net restructuring costs of $15.2 million, $110.7 million and $42.0 million during 2021, 2020 and 2019, respectively, in selling and administrative expenses, primarily related to severances and office closures and consolidations in multiple countries and territories. As a result of the adoption of the new accounting guidance on leases as of January 1, 2019, the office closure costs of $27.3 million during 2020 were recorded as an impairment to the operating lease right-of-use asset and, thus, are not included in the restructuring reserve balance as of December 31, 2020. The costs paid or utilized out of our restructuring reserve were $38.0 million during 2021.

We have entered into guarantee contracts and stand-by letters of credit that total $769.3 million as of December 31, 2021 ($717.7 million for guarantees and $51.6 million for stand-by letters of credit). The guarantees primarily relate to staffing license requirements, operating leases and indebtedness. The stand-by letters of credit mainly relate to workers’ compensation in the United States. If certain conditions were met under these arrangements, we would be required to satisfy our obligation in cash. Due to the nature of these arrangements and our historical experience, we do not expect to make any significant payments under these arrangements. Therefore, they have been excluded from our aggregate commitments identified above. The cost of these guarantees and letters of credit was $1.8 million for 2021.

Total capitalization as of December 31, 2021 was $3,650.0 million, comprised of $1,118.3 million in debt and $2,531.7 million in equity. Debt as a percentage of total capitalization was 31%, 31% and 28% as of December 31, 2021, 2020 and 2019, respectively.

Acquisitions

On October 1, 2021, we acquired ettain group, one of the largest privately held IT resourcing and services providers in North America. Effective that date, ettain group became part of our Experis business in the Americas segment. The acquisition is intended to accelerate our strategy of diversifying our business mix into higher growth and higher value services. The aggregate cash consideration paid was $930.9 million. Of the total consideration paid, $925.0 million was for the acquired interests and the remaining $5.9 million was for excess working capital and cash. The transaction was funded through cash on hand and a $150.0 million draw on our revolving debt facility on October 1, 2021. We expect to finalize the net working capital adjustments in 2022.

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The acquisition of ettain group was accounted for as a business combination, and the assets and liabilities of ettain group were included in the Consolidated Balance Sheets as of the acquisition date and the results of its operations

have been included in the Consolidated Statements of Operations subsequent to the acquisition date. The customer relationship intangible asset will be amortized over a 15 year useful life. The customer relationship intangible asset and goodwill from the acquisition are partially deductible for income tax purposes. As of December 31, 2021, the carrying value of intangible assets and goodwill was $354.0 million and $519.6 million, respectively.

On April 3, 2019, we acquired the remaining 51% controlling interest in our Swiss franchise (“Manpower Switzerland”) to obtain full ownership of the entity. Additionally, as part of the purchase agreement we acquired the remaining 20% interest in Experis AG. Manpower Switzerland provides contingent staffing services under our Manpower brand in the four main language regions in Switzerland. Both Manpower Switzerland and Experis AG are reported in our Southern Europe segment. The aggregate cash consideration paid was $219.5 million and was funded through cash on hand. Of the total consideration paid, $58.3 million was for the acquired interests and the remaining $161.2 million was for cash and cash equivalents. The aggregate cash consideration paid reflects a post-closing settlement of net debt and net working capital adjustments of $6.8 million, which we paid out during the third quarter of 2019. The acquisition of the remaining interest of Experis AG was accounted for as an equity transaction as we previously consolidated the entity.

Our investment in Manpower Switzerland prior to the acquisition was accounted for under the equity method of accounting and we recorded our share of equity income or loss in interest and other expenses (income), net on the Consolidated Statements of Operations. The acquisition of the remaining controlling interest in Manpower Switzerland was accounted for as a business combination, and the assets and liabilities of Manpower Switzerland were included in the Consolidated Balance Sheets as of the acquisition date and the results of its operations have been included in the Consolidated Statements of Operations subsequent to the acquisition date.

The aggregate of the consideration paid and the fair value of previously held equity interest totaled $415.1 million, or $97.6 million net of cash acquired. In connection with the business combination, we recognized a one-time, non-cash gain on the disposition of our previously held equity interest in Manpower Switzerland of $80.4 million, which is included within interest and other expenses (income), net on the Consolidated Statements of Operations. Of the $80.4 million, $32.5 million represented the reclassification of foreign currency translation adjustments related to the previously held equity interest, from accumulated other comprehensive loss. As of December 31, 2019, the carrying value of intangible assets and goodwill resulting from the Manpower Switzerland acquisition was $44.5 million and $34.2 million, respectively.

From time to time, we acquire and invest in companies throughout the world, including franchises. The total cash consideration paid for acquisitions excluding ettain group, Manpower Switzerland and Experis AG, net of cash acquired, for the years ended December 31, 2021, 2020 and 2019 was $8.1 million, $2.6 million and $47.7 million, respectively. The 2021, 2020 and 2019 balances include consideration payments for franchises in the United States and contingent consideration payments related to previous acquisitions, of which $6.3 million, $1.9 million and $13.0 million, respectively, had been recognized as a liability at the acquisition date.

As of December 31, 2021, goodwill and intangible assets resulting from the 2021 acquisitions, excluding ettain group, were $3.1 million and $0.6 million, respectively. No goodwill and intangible assets resulted from acquisitions in 2020. As of December 31, 2019, goodwill and intangible assets resulting from the 2019 acquisitions, excluding Manpower Switzerland, were $14.2 million and $9.0 million, respectively.

Dispositions

Occasionally, we dispose of parts of our operations to optimize our global strategic and geographic footprint and synergies. On January 17, 2022, we disposed of our Russia business in our Northern Europe segment for $4.0 million, consisting of upfront cash proceeds received of $3.2 million and $0.8 million of deferred consideration. We simultaneously entered into a franchise agreement with the new ownership of the Russia business. In connection with the disposition, we anticipate recognizing a one-time loss on disposition of approximately $8.0 million during the first quarter of 2022. We will finalize our accounting for the disposition during the first quarter of 2022.

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In November 2021, we disposed of our Tunisia business in our Southern Europe segment and recognized a one-time loss on disposition of $1.2 million, which was included in selling and administrative expenses in the Consolidated Statements of Operations in the year ended December 31, 2021.

On September 30, 2020, we disposed of four businesses (Serbia, Croatia, Slovenia, Bulgaria) in our Southern Europe segment for $5.8 million, subject to normal post close working capital adjustments, and simultaneously entered into franchise agreements with the new ownership of these businesses. In connection with the disposition, we recognized a one-time loss on disposition of $5.8 million, which was included in the selling and administrative expenses in the Consolidated Statements of Operations for the year ended December 31, 2020.

On July 10, 2019, our joint venture in Greater China, ManpowerGroup Greater China Limited, became listed on the Main Board of the Stock Exchange of Hong Kong Limited through an initial public offering. Prior to the initial public offering, we owned a 51% controlling interest in the joint venture and consolidated the financial position and results of its operations into our Consolidated Financial Statements as part of our APME segment. As a result of the offering, in which ManpowerGroup Greater China Limited issued new shares representing 25% of the equity of the company, our ownership interest was diluted to 38.25%, and then further diluted to 36.87% as the underwriters exercised their overallotment option in full on August 7, 2019. As a result, we deconsolidated the joint venture as of the listing date and account for our remaining interest under the equity method of accounting and record our share of equity income or loss in interest and other expenses (income), net in the Consolidated Statements of Operations. In connection with the deconsolidation of the joint venture, we recognized a one-time non-cash gain of $30.4 million, which was included in selling and administrative expenses in the Consolidated Statements of Operations in the year ended December 31, 2019. Included in the $30.4 million was foreign currency translation adjustment losses of $6.2 million related to the joint venture from accumulated other comprehensive loss.

Euro Notes

On June 22, 2018, we offered and sold €500.0 million aggregate principal amount of the Company’s 1.750% notes due June 22, 2026 (the “€500.0 million notes”). The net proceeds from the €500.0 million notes of €495.7 million were used to repay our €350.0 million notes due June 22, 2018, with the remaining balance used for general corporate purposes, which included share repurchases. The €500.0 million notes were issued at a price of 99.564% to yield an effective interest rate of 1.809%. Interest on the €500.0 million notes is payable in arrears on June 22 of each year. The €500.0 million notes are unsecured senior obligations and rank equally with all of the Company’s existing and future senior unsecured debt and other liabilities.

Our €400.0 million aggregate principal amount 1.875% notes (the "€400.0 million notes") are due September 2022. When the notes mature, we plan to repay the amounts with available cash, borrowings under our $600.0 million revolving credit facility or a new borrowing. The credit terms, including interest rate and facility fees, of any replacement borrowings will be dependent upon the condition of the credit markets at that time. We currently do not anticipate any problems accessing the credit markets upon replacement of either the €500.0 million notes or the €400.0 million notes.

Both the €500.0 million notes and €400.0 million notes contain certain customary non-financial restrictive covenants and events of default and are unsecured senior obligations and rank equally with all of our existing and future senior unsecured debt and other liabilities. A portion of these notes has been designated as a hedge of our net investment in our foreign subsidiaries with Euro-functional currency as of December 31, 2021. For this portion of the Euro-denominated notes, since our net investment in these subsidiaries exceeds the respective amount of the designated borrowings, both net of taxes, the related translation gains or losses are included as a component of accumulated other comprehensive loss. (See the Significant Matters Affecting Results of Operations section and Notes 8 and 12 to the Consolidated Financial Statements found in Item 8. "Financial Statements and Supplementary Data" for further information.)

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Revolving Credit Agreement

We have a Five-Year Credit Agreement with a syndicate of commercial banks through June 18, 2023. The Credit Agreement allows for borrowing of $600.0 million in various currencies, and up to $150.0 million may be used for the issuance of stand-by letters of credit, with an option to request an increase to the total availability by an additional $200.0 million and each lender may participate in the requested increase at their discretion. We had $75.0 million borrowed under this facility as of December 31, 2021, and no borrowings as of December 31, 2020. Outstanding letters of credit issued under the Credit Agreement totaled $0.5 million as of both December 31, 2021 and 2020. Additional borrowings of $524.5 million and $599.5 million were available to us under the facility as of December 31, 2021 and 2020, respectively.

Under the Credit Agreement, a credit ratings-based pricing grid determines the facility fee and the credit spread that we add to the applicable interbank borrowing rate on all borrowings. At our current credit rating, the annual facility fee is 12.5 basis points paid on the entire facility and the credit spread is 100.0 basis points on any borrowings. A downgrade from both credit agencies would unfavorably impact our interest and facility fees and result in additional costs ranging from approximately $0.3 million to $1.2 million annually.

The Credit Agreement contains customary restrictive covenants pertaining to our management and operations, including limitations on the amount of subsidiary debt that we may incur and limitations on our ability to pledge assets, as well as financial covenants requiring, among other things, that we comply with a leverage ratio (Net Debt-to-Net Earnings before interest and other expenses, provision for income taxes, intangible asset amortization expense, depreciation and amortization expense ("EBITDA")) of not greater than 3.5 to 1 and a fixed charge coverage ratio of not less than 1.5 to 1. In the Credit Agreement, Net Debt is defined as total debt less cash in excess of $400.0 million. The Credit Agreement also contains customary events of default, including, among others, payment defaults, material inaccuracy of representations and warranties, covenant defaults, bankruptcy or involuntary proceedings, certain monetary and non-monetary judgments, change of control and customary ERISA defaults.

As defined in the Credit Agreement, we had a net Debt-to-EBITDA ratio of 0.97 to 1 (compared to the maximum allowable ratio of 3.5 to 1) and a Fixed Charge Coverage ratio of 5.12 to 1 (compared to the minimum required ratio of 1.5 to 1) as of December 31, 2021.

Other

In addition to the previously mentioned facilities, we maintain separate bank credit lines with financial institutions to meet working capital needs of our subsidiary operations. As of December 31, 2021, such uncommitted credit lines totaled $338.6 million, of which $314.9 million was unused. Under the Credit Agreement, total subsidiary borrowings cannot exceed $300.0 million in the first, second and fourth quarters, and $600.0 million in the third quarter of each year. Due to these limitations, additional borrowings of $276.3 million could have been made under these lines as of December 31, 2021.

Our long-term debt has a rating of Baa1 from Moody's Investor Services and BBB from Standard and Poor's, both with a stable outlook. Both of the credit ratings are investment grade. Rating agencies use proprietary methodology in determining their ratings and outlook which includes, among other things, financial ratios based upon debt levels and earnings performance.

COVID-19

We have assessed what impact the COVID-19 crisis has had or may have on our liquidity position as of December 31, 2021 and for the near future. As of December 31, 2021, our cash and cash equivalents balance was $847.8 million. We also have access to the previously mentioned revolving credit facility that could immediately provide us with up to $600.0 million of additional cash, of which just $75.0 million was used as of December 31, 2021, and we have an option to request an increase to the total availability under the revolving credit facility by an additional $200.0 million and each lender may participate in the requested increase at their discretion. In addition, we have access to the previously mentioned credit lines of up to $300.0 million ($600.0 million in the third quarter) to meet the working capital needs of our subsidiaries, of which $276.3 million was available to use as of December 31, 2021. Our €500.0 million notes and €400.0 million notes that total $1,019.6 million as of December 31, 2021 mature in June 2026 and September 2022, and we plan to refinance the €400.0 million note in 2022; thus, there will be no payments due in the very near term except for annual interest payments. Based on the above, notwithstanding the cash used to fund the ettain group acquisition on October 1, 2021, we believe we have sufficient liquidity and capital resources to satisfy future requirements and meet our obligations currently and in the near future should the COVID-19 crisis cause any additional cash flow needs.

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Application of Critical Accounting Policies

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts. A discussion of the more significant estimates follows. Management has discussed the development, selection and disclosure of these estimates and assumptions with the Audit Committee of our Board of Directors.

Business Combinations

Assets acquired and liabilities assumed as part of a business acquisition are generally recorded at their fair value at the date of acquisition. The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Determining fair value of identifiable assets, particularly intangibles, requires management to make estimates, which are based on all available information and in some cases assumptions with respect to the timing and amount of future revenues and expenses associated with an asset. On October 1, 2021, we acquired ettain group (see Note 4 to the Consolidated Financial Statements for further information). As part of the accounting for the acquisition, we identified and recorded a customer relationship intangible asset of $360.0 million which will be amortized over a 15 year useful life. We utilized the discounted cash flow method to estimate the fair value of the customer relationship asset, which required management to make significant assumptions in the model, but was calculated based on the historical customer sales of the acquired company. A change in the customer attrition rate of 250 basis points would result in a decrease of $66.0 million or an increase of $87.0 million in intangible assets, respectively, but would not result in a material change to future amortization expense

Defined Benefit Pension Plans

We sponsor several qualified and nonqualified pension plans covering permanent employees. The most significant plans are located in Switzerland, the United Kingdom, the Netherlands, Germany and France. Annual expense relating to these plans was $22.2 million, $34.1 million and $17.2 million in 2021, 2020 and 2019, respectively. The decrease in 2021 pension expense is primarily due to the settlement of a U.S. pension plan in the first quarter of 2020. Pension expense is estimated to be approximately $17.0 million in 2022.

The calculations of annual pension expense and the pension liability required at year-end include various actuarial assumptions such as discount rates, expected rate of return on plan assets, compensation increases and employee turnover rates. We review the actuarial assumptions on an annual basis and make modifications to the assumptions as necessary. We review market data and historical rates, on a country-by-country basis, to check for reasonableness in setting both the discount rate and the expected return on plan assets. We determine the discount rate based on an index of high-quality corporate bond yields and matched-funding yield curve analysis as of the end of each fiscal year. The expected return on plan assets is determined based on the expected returns of the various investment asset classes held in the plans. We estimate compensation increases and employee turnover rates for each plan based on the historical rates and the expected future rates for each respective country. Changes to any of these assumptions will impact annual expense recorded related to the plans.

In determining the estimated 2022 pension expense for non-United States plans, we used a weighted-average discount rate of 1.0% compared to 0.6% for 2021, reflecting the current interest rate environment. We have selected a weighted-average expected return on plan assets of 1.7% for the non-United States plans in determining the 2022 estimated pension expense compared to 1.5% used for the calculation of the 2021 pension expense. Absent any other changes, a 25 basis point increase and decrease in the weighted-average discount rate would decrease or increase our 2022 consolidated pension expense by $0.6 million. Absent any other changes, a 25 basis point increase or decrease in the weighted-average expected return on plan assets would decrease or increase our 2022 consolidated pension expense by $1.8 million. Changes to these assumptions have historically not been significant in any jurisdiction for any reporting period, and no significant adjustments to the amounts recorded have been required in the past or are expected in the future. (See Note 9 to the Consolidated Financial Statements found in Item 8. "Financial Statements and Supplementary Data" for further information.)

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Income Taxes

The accounting guidance related to uncertain tax positions requires an evaluation process for all tax positions taken that involves a review of probability for sustaining a tax position. If the probability for sustaining a tax position is more likely than not, which is a 50% threshold, then the tax position is warranted and the largest amount, based on cumulative probability, that is greater than 50% likely of being realized upon settlement is recognized. An uncertain tax position, one which does not exceed the 50% threshold, will not be recognized in the financial statements.

We provide for income taxes on a quarterly basis based on an estimated annual tax rate. In determining this rate, we make estimates about taxable income for each of our largest locations worldwide, as well as the tax rate that will be in effect for each location. To the extent these estimates change during the year, or actual results differ from these estimates, our estimated annual tax rate may change between quarterly periods and may differ from the actual effective tax rate for the year.

Goodwill Impairment

We perform an annual impairment test of goodwill at our reporting unit level during the third quarter, or more frequently if events or circumstances change that would more likely than not reduce the fair value of our reporting units below their carrying value.

We evaluate the recoverability of goodwill utilizing an income approach that estimates the fair value of the future discounted cash flows to which the goodwill relates. This approach reflects management’s internal outlook of the reporting units, which is believed to be the best determination of value due to management’s insight and experience with the reporting units. Significant assumptions used in our goodwill impairment tests include: expected future revenue growth rates, operating unit profit margins, working capital levels, discount rates, and a terminal value multiple.

We performed our annual impairment test of our goodwill during the third quarter of 2021 and determined that there was no impairment.

The table below provides our reporting units’ estimated fair values and carrying values, determined as part of our annual goodwill impairment test performed in the third quarter, representing approximately 80% of our consolidated goodwill balance as of September 30, 2021.

As of July 1, 2021, the fair value of each reporting unit was at least 20% in excess of the respective reporting unit’s carrying value with the exception of the Netherlands reporting unit, which is part of the Northern Europe segment. The Netherlands reporting unit had a fair value that exceeded its carrying value by approximately 5.5%. Key assumptions included in the Netherlands discounted cash flow valuation performed during the third quarter of 2021 were a discount rate of 10.4%, revenue growth for the next three years ranging from 3.0%-5.0%, a terminal value revenue growth rate of 2.0%, and a terminal value OUP margin of 3.5%. If the Netherlands reporting cannot meet its operating targets and/or recover from the deteriorated macroeconomic, industry, and market conditions, it may not achieve the growth and margin assumptions noted above and some or all of the recorded goodwill for the Netherlands reporting unit, which was $112.2 million as of December 31, 2021, could be subject to impairment.

While our other reporting units' fair values exceeded 20% or more of their respective carrying values, given the uncertainty of the financial impacts from the COVID-19 pandemic, there could be significant further decreases in the operating results of our reporting units for a sustained period, which may result in a recognition of goodwill impairment that could be material to the Consolidated Financial Statements.

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