-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FAcQAbPXG1nC7M6jjMxFT0R5HooXcS8w2ovEQH/uIm3sIE7l+MSXXVL2qIIRrvrX DUFFJ2hJ0ezJuwD5Gztexg== 0000912057-00-010385.txt : 20000309 0000912057-00-010385.hdr.sgml : 20000309 ACCESSION NUMBER: 0000912057-00-010385 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000308 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HALF ROBERT INTERNATIONAL INC /DE/ CENTRAL INDEX KEY: 0000315213 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 941648752 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-10427 FILM NUMBER: 563428 BUSINESS ADDRESS: STREET 1: 2884 SAND HILL RD STREET 2: STE 200 CITY: MENLO PARK STATE: CA ZIP: 94025 BUSINESS PHONE: 6502346000 MAIL ADDRESS: STREET 1: 2884 SAND HILL ROAD STREET 2: STE 200 CITY: MENLO PARK STATE: CA ZIP: 94025 FORMER COMPANY: FORMER CONFORMED NAME: BOOTHE FINANCIAL CORP /DE/ DATE OF NAME CHANGE: 19870721 FORMER COMPANY: FORMER CONFORMED NAME: BOOTHE INTERIM CORP DATE OF NAME CHANGE: 19600201 10-K405 1 10-K405 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ COMMISSION FILE NUMBER 1-10427 ROBERT HALF INTERNATIONAL INC. (Exact name of registrant as specified in its charter) DELAWARE 94-1648752 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2884 SAND HILL ROAD, SUITE 200, MENLO PARK, CALIFORNIA 94025 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (650) 234-6000 ------------------------ Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED Common Stock, Par Value $.001 per Share New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None ------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ As of February 29, 2000, the aggregate market value of the Common Stock held by non-affiliates of the registrant was approximately $3,431,682,000 based on the closing sale price on that date. This amount excludes the market value of 7,339,279 shares of Common Stock directly or indirectly held by registrant's directors and officers and their affiliates. As of February 29, 2000, there were outstanding 88,562,533 shares of the registrant's Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement to be mailed to stockholders in connection with the registrant's annual meeting of stockholders, scheduled to be held in May 2000, are incorporated by reference in Part III of this report. Except as expressly incorporated by reference, the registrant's Proxy Statement shall not be deemed to be part of this report. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS Robert Half International Inc. is the world's largest specialized provider of temporary and permanent personnel in the fields of accounting and finance. Its divisions include ACCOUNTEMPS-Registered Trademark- and ROBERT HALF-Registered Trademark-, providers of temporary and permanent personnel, respectively, in the fields of accounting and finance. The Company, utilizing its experience as a specialized provider of temporary and permanent personnel, has expanded into additional specialty fields. In 1991, the Company formed OFFICETEAM-Registered Trademark- to provide skilled temporary administrative and office personnel. In 1994, the Company established RHI CONSULTING-Registered Trademark- to concentrate on providing temporary and contract information technology professionals in positions ranging from PC support technician to chief information officer. In 1992, the Company acquired THE AFFILIATES-Registered Trademark-, which focuses on placing temporary and regular employees in paralegal, legal administrative and other legal support positions. In 1997, the Company established RHI MANAGEMENT RESOURCES-REGISTERED TRADEMARK- to provide senior level project professionals specializing in the accounting and finance fields. THE CREATIVE GROUP(SM) provides project staffing in the advertising, marketing and web design fields. The Company's business was originally founded in 1948. Prior to 1986, the Company was primarily a franchisor of ACCOUNTEMPS and ROBERT HALF offices. Beginning in 1986, the Company and its current management embarked on a strategy of acquiring franchised locations and other local or regional independent providers of specialized temporary service personnel. The Company has acquired all but three of the ACCOUNTEMPS and ROBERT HALF franchises and has also acquired other local or regional providers of specialized temporary service personnel. Since 1986, the Company has significantly expanded operations at many of the acquired locations and has opened many new locations. The Company believes that direct ownership of offices allows it to better monitor and protect the image of its tradenames, promotes a more consistent and higher level of quality and service throughout its network of offices and improves profitability by centralizing many of its administrative functions. The Company currently has more than 270 offices in 40 states and seven foreign countries and placed approximately 200,000 employees on temporary assignment with clients in 1999. ACCOUNTEMPS The ACCOUNTEMPS temporary services division offers customers a reliable and economical means of dealing with uneven or peak work loads for accounting, tax and finance personnel caused by such predictable events as vacations, taking inventories, tax work, month-end activities and special projects and such unpredictable events as illness and emergencies. Businesses increasingly view the use of temporary employees as a means of controlling personnel costs and converting such costs from fixed to variable. The cost and inconvenience to clients of hiring and firing permanent employees are eliminated by the use of ACCOUNTEMPS temporaries. The temporary workers are employees of ACCOUNTEMPS and are paid by ACCOUNTEMPS only when working on customer assignments. The customer pays a fixed rate only for hours worked. ACCOUNTEMPS clients may fill their permanent employment needs by using an ACCOUNTEMPS employee on a trial basis and, if so desired, "converting" the temporary position to a permanent position. The client typically pays a one-time fee for such conversions. OFFICETEAM The Company's OFFICETEAM division, which commenced operations in 1991, places temporary and permanent office and administrative personnel, ranging from word processors to office managers. OFFICETEAM operates in much the same fashion as the ACCOUNTEMPS and ROBERT HALF divisions. 1 ROBERT HALF The Company offers permanent placement services through its office network under the name ROBERT HALF. The Company's ROBERT HALF division specializes in placing accounting, financial, tax and banking personnel. Fees for successful permanent placements are paid only by the employer and are generally a percentage of the new employee's annual compensation. No fee for permanent placement services is charged to employment candidates. RHI CONSULTING The Company's RHI CONSULTING division, which commenced operations in 1994, specializes in providing information technology contract consultants and placing regular employees in areas ranging from multiple platform systems integration to end-user support, including specialists in programming, networking, systems integration, database design and help desk support. THE AFFILIATES Since 1992, the Company has been placing temporary and permanent employees in attorney, paralegal, legal administrative and legal secretarial positions through its THE AFFILIATES division. The legal profession's requirements (the need for confidentiality, accuracy and reliability, a strong drive toward cost- effectiveness, and frequent peak workload periods) are similar to the demands of the clients of the ACCOUNTEMPS division. RHI MANAGEMENT RESOURCES The Company's RHI MANAGEMENT RESOURCES division, which commenced operations in 1997, specializes in providing senior level project professionals in the accounting and finance fields, including chief financial officers, controllers, and senior financial analysts, for such tasks as financial systems conversions, expansion into new markets, business process reengineering and post-merger financial consolidation. THE CREATIVE GROUP THE CREATIVE GROUP division, the Company's newest division, commenced operations in 1999 and serves clients in the areas of advertising, marketing and web design and places project consultants in a variety of positions such as creative directors, graphics designers, web content developers, web designers, media buyers, and public relations specialists. MARKETING AND RECRUITING The Company markets its services to clients as well as employment candidates. Local marketing and recruiting are generally conducted by each office or related group of offices. Local advertising directed to clients and employment candidates consists primarily of yellow pages advertisements, classified advertisements, websites and advertising on the internet. Direct marketing through mail and telephone solicitation also constitutes a significant portion of the Company's total advertising. National advertising conducted by the Company consists primarily of radio, print advertisements in national newspapers, magazines and certain trade journals. The Company has initiated programs to take advantage of the Internet as a resource for recruiting candidates and filling client orders. Recent Internet initiatives include forging traffic building alliances with leading Internet career search sites. The Company plans to expand its use of the Internet in all aspects of sales and recruitment. Joint marketing arrangements have been entered into with Microsoft, Lotus Development Corporation, Corel Corporation (publisher of WordPerfect), Peachtree Software, Inc., Intuit and Computer Associates International, Inc. and typically provide for cooperative advertising, joint mailings and similar promotional activities. The Company also actively seeks endorsements and affiliations with professional organizations in the business management, office administration and professional secretarial fields. The Company also conducts public relations activities designed to enhance public 2 recognition of the Company and its services. Local employees are encouraged to be active in civic organizations and industry trade groups. The Company owns many trademarks, service marks and tradenames, including the ROBERT HALF-Registered Trademark-, ACCOUNTEMPS-Registered Trademark-, OFFICETEAM-Registered Trademark-, THE AFFILIATES-Registered Trademark-, RHI CONSULTING-Registered Trademark-, RHI MANAGEMENT RESOURCES-REGISTERED TRADEMARK- and THE CREATIVE GROUP-SM- marks, which are registered in the United States and in a number of foreign countries. ORGANIZATION Management of the Company's operations is coordinated from its headquarters in Menlo Park, California. The Company's headquarters provides support and centralized services to its offices in the administrative, marketing, accounting, training and legal areas, particularly as it relates to the standardization of the operating procedures of its offices. The Company has more than 270 offices in 40 states and seven foreign countries. Office managers are responsible for most activities of their offices, including sales, local advertising and marketing and recruitment. COMPETITION The Company faces competition in its efforts to attract clients as well as high-quality specialized employment candidates. The temporary and permanent placement businesses are highly competitive, with a number of firms offering services similar to those provided by the Company on a national, regional or local basis. In many areas the local companies are the strongest competitors. The most significant competitive factors in the temporary and permanent placement businesses are price and the reliability of service, both of which are often a function of the availability and quality of personnel. The Company believes it derives a competitive advantage from its long experience with and commitment to the specialized employment market, its national presence, and its various marketing activities. EMPLOYEES The Company has approximately 6,300 full-time staff employees. The Company's offices placed approximately 200,000 employees on temporary assignments with clients during 1999. Temporary employees placed by the Company are the Company's employees for all purposes while they are working on assignments. The Company pays the related costs of employment, such as workers' compensation insurance, state and federal unemployment taxes, social security and certain fringe benefits. The Company provides voluntary health insurance coverage to interested temporary employees. OTHER INFORMATION The Company's current business constitutes two business segments. (See Note M of Notes to Consolidated Financial Statement in Item 8. Financial Statements and Supplementary Data for financial information about the Company's segments.) The Company is not dependent upon a single customer or a limited number of customers. The Company's operations are generally more active in the first and fourth quarters of a calendar year. Order backlog is not a material aspect of the Company's business and no material portion of the Company's business is subject to government contracts. Information about foreign operations is contained in Note M of Notes to Consolidated Financial Statements in Item 8. The Company does not have export sales. ITEM 2. PROPERTIES The Company's headquarters is located in Menlo Park, California. Placement activities are conducted through more than 270 offices located in the United States, Canada, the United Kingdom, Belgium, France, the Netherlands, Germany and Australia. All of the offices are leased. 3 ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any material pending legal proceedings other than routine litigation incidental to its business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of the Company's security holders during the fourth quarter of the fiscal year covered by this report. 4 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is listed for trading on the New York Stock Exchange under the symbol "RHI". On December 31, 1999, there were approximately 2,400 holders of record of the Common Stock. Following is a list by fiscal quarters of the sales prices of the stock:
SALES PRICES ------------------- 1999 HIGH LOW - ---- -------- -------- 4th Quarter......................................... $30.00 $20.44 3rd Quarter......................................... $27.18 $21.63 2nd Quarter......................................... $37.50 $21.88 1st Quarter......................................... $48.38 $30.00 SALES PRICES ------------------- 1998 HIGH LOW - ---- -------- -------- 4th Quarter......................................... $49.19 $29.00 3rd Quarter......................................... $58.69 $41.00 2nd Quarter......................................... $60.25 $47.13 1st Quarter......................................... $49.25 $32.25
No cash dividends were paid in 1999 or 1998. The Company, as it deems appropriate, may continue to retain all earnings for use in its business or may consider paying a dividend in the future. 5 ITEM 6. SELECTED FINANCIAL DATA Following is a table of selected financial data of the Company for the last five years:
YEARS ENDED DECEMBER 31, ---------------------------------------------------------- 1999 1998 1997 1996 1995 ---------- ---------- ---------- -------- -------- (IN THOUSANDS) INCOME STATEMENT DATA: Net service revenues.................. $2,081,321 $1,793,041 $1,302,876 $898,635 $628,526 Direct costs of services, consisting of payroll, payroll taxes and insurance costs for temporary employees............................ 1,219,270 1,070,834 785,546 545,343 384,449 ---------- ---------- ---------- -------- -------- Gross margin.......................... 862,051 722,207 517,330 353,292 244,077 Selling, general and administrative expenses............................. 628,405 501,626 357,766 246,485 170,684 Amortization of intangible assets..... 4,990 4,993 4,926 5,405 4,767 Interest income, net.................. (6,041) (5,588) (4,190) (2,243) (463) ---------- ---------- ---------- -------- -------- Income before income taxes............ 234,697 221,176 158,828 103,645 69,089 Provision for income taxes............ 93,256 89,596 65,131 42,543 28,791 ---------- ---------- ---------- -------- -------- Net income............................ $ 141,441 $ 131,580 $ 93,697 $ 61,102 $ 40,298 ========== ========== ========== ======== ========
YEARS ENDED DECEMBER 31, ---------------------------------------------------- 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) NET INCOME PER SHARE: BASIC................................... $ 1.57 $ 1.44 $ 1.03 $ .69 $ .47 DILUTED................................. $ 1.53 $ 1.39 $ 1.00 $ .67 $ .46 SHARES: BASIC................................... 90,223 91,650 90,668 88,267 85,479 DILUTED................................. 92,294 94,822 93,999 91,522 88,488
DECEMBER 31, ---------------------------------------------------- 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- (IN THOUSANDS) BALANCE SHEET DATA: Intangible assets, net.................... $175,747 $178,363 $177,425 $174,663 $155,441 Total assets.............................. $777,188 $703,719 $561,367 $416,012 $301,140 Debt financing............................ $ 3,495 $ 4,712 $ 8,157 $ 6,611 $ 5,725 Stockholders' equity...................... $576,103 $522,470 $418,800 $308,445 $227,930
All shares and per share amounts have been restated to retroactively reflect the three-for-two stock split effected in the form of a stock dividend in September 1997 and the two-for-one stock split effected in the form of a stock dividend in June 1996. 6 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain information contained in Management's Discussion and Analysis and in other parts of this report may be deemed forward-looking statements regarding events and financial trends that may affect the Company's future operating results or financial positions. Such statements may be identified by words such as "estimate", "project", "plan", "intend", "believe", "expect", "anticipate", or variations or negatives thereof or by similar or comparable words or phrases. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements. Such risks and uncertainties include, but are not limited to, the following: changes in general or local economic conditions or in the economic condition of any industry, the availability of qualified staff employees and temporary candidates, government regulation of the personnel services industry, general regulations relating to employers and employees, liability risks associated with the operation of a personnel services business, competitive conditions in the personnel services industry, and Year 2000 issues. In addition, it should be noted that, because long-term contracts are not a significant portion of the Company's business, future results cannot be reliably predicted by considering past trends or extrapolating past results. RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1999 Temporary services revenues were $1.92 billion, $1.66 billion and $1.20 billion for the years ended December 31, 1999, 1998 and 1997, respectively, increasing by 16% during 1999 and 38% during 1998. The increase in revenues during these periods reflected in part revenues generated from the Company's OFFICETEAM, RHI CONSULTING, and RHI MANAGEMENT RESOURCES divisions, which were started in 1991, 1994 and 1997, respectively. Permanent placement revenues were $159 million, $136 million and $101 million for the years ended December 31, 1999, 1998 and 1997, respectively, increasing by 17% during 1999 and 35% during 1998. Overall revenue increases reflect continued demand for the Company's services, which the Company believes is a result of increased acceptance in the use of professional staffing services. Revenue growth rates in 1999 were impacted by tight labor supply conditions resulting from record low unemployment levels. The Company currently has more than 270 offices in 40 states and seven foreign countries. Domestic operations represented 88% of revenues for the year ended December 31, 1999, 89% of revenues for the year ended December 31, 1998, and 90% of the revenues for the year ended December 31, 1997. Foreign operations represented 12% of revenues for the year ended December 31, 1999, 11% of revenues for the year ended December 31, 1998 and 10% of revenues for the year ended December 31, 1997. Gross margin dollars from the Company's temporary services represent revenues less direct costs of services, which consist of payroll, payroll taxes and insurance costs for temporary employees. Gross margin dollars from permanent placement services are equal to revenues, as there are no direct costs associated with such revenues. Gross margin dollars for the Company's temporary services were $703 million, $586 million and $417 million for the years ended December 31, 1999, 1998 and 1997, respectively, increasing by 20% in 1999 and 41% in 1998. Gross margin amounts equaled 37% of revenues for temporary services for the year ended December 31, 1999 and 35% of revenues for temporary services for both the years ended December 31, 1998 and 1997, which the Company believes reflects its ability to adjust billing rates and wage rates to underlying market conditions. Gross margin dollars for the Company's permanent placement division were $159 million, $136 million and $101 million for each of the years ended December 31, 1999, 1998 and 1997, respectively, increasing by 17% and 35% in 1999 and 1998, respectively. Selling, general and administrative expenses were $628 million during 1999, compared to $502 million in 1998 and $358 million in 1997. Selling, general and administrative expenses as a percentage of revenues were 30% for the year ended December 31, 1999, and 28% for both the years ended December 31, 1998 and 1997. Selling, general and administrative expenses consist primarily of staff compensation, advertising, 7 depreciation and occupancy costs. The increase in 1999 relates primarily to various candidate recruitment initiatives, including those related to the internet. The Company allocates the excess of cost over the fair market value of the net tangible assets first to identifiable intangible assets, if any, and then to goodwill. Although management believes that goodwill has an unlimited life, the Company amortizes these costs over 40 years. Management believes that its strategy of making acquisitions of established companies in established markets and maintaining its presence in these markets preserves the goodwill for an indeterminate period. The carrying value of intangible assets is periodically reviewed by the Company and impairments are recognized when the expected future operating cash flows derived from such intangible assets is less than their carrying value. Based upon its most recent analysis, the Company believes that no material impairment of intangible assets existed at December 31, 1999. Intangible assets represented 23% of total assets and 31% of total stockholders' equity at December 31, 1999. Interest income for the years ended December 31, 1999, 1998 and 1997 was $6,782,000, $6,947,000 and $5,139,000, respectively. Interest expense for the years ended December 31, 1999, 1998 and 1997 was $741,000, $1,359,000 and $949,000, respectively. The provision for income taxes was 40% for the year ended December 31, 1999, and 41% for the years ended December 31, 1998 and 1997. LIQUIDITY AND CAPITAL RESOURCES The change in the Company's liquidity during the past three years is the net effect of funds generated by operations and the funds used for the staffing services acquisitions, capital expenditures, repurchases of common stock, and principal payments on outstanding notes payable. As of December 31, 1999, the Company has authorized the repurchase, from time to time, of up to nine million shares of the Company's common stock on the open market or in privately negotiated transactions, depending on market conditions. During the year ended December 31, 1999, the Company repurchased approximately 4,183,000 shares of common stock on the open market for a total cost of $108.5 million. Since 1997, the Company has repurchased approximately 5,907,000 shares on the open market pursuant this program. Repurchases of the securities have been funded with cash generated from operations. For the year ended December 31, 1999, the Company generated $147 million from operations, used $53 million in investing activities and used $110 million in financing activities. The Company's working capital at December 31, 1999, included $151 million in cash and cash equivalents. In addition, at December 31, 1999, the Company had available $75 million of its $80 million bank revolving line of credit. The Company's working capital requirements consist primarily of the financing of accounts receivable. While there can be no assurances in this regard, the Company expects that internally generated cash plus the bank revolving line of credit will be sufficient to support the working capital needs of the Company, the Company's fixed payments, and other obligations on both a short and long-term basis. As of December 31, 1999, the Company had no material capital commitments. The Company's primary exposures related to the Year 2000 were in its key internal information systems. The Company addressed the Year 2000 exposures as part of its strategic plan for upgrading core systems. The Company was successful in upgrading its core systems on a timely basis. The Company encountered no material issues related to the Year 2000. The Company spent $44 million on these systems, which was in line with its estimate. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's market risk sensitive instruments do not subject the Company to material market risk exposures. 8 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
DECEMBER 31, ------------------- 1999 1998 -------- -------- ASSETS: Cash and cash equivalents................................... $151,074 $166,060 Accounts receivable, less allowances of $13,424 and $10,176................................................... 309,278 240,690 Other current assets........................................ 30,187 23,656 -------- -------- Total current assets...................................... 490,539 430,406 Intangible assets, less accumulated amortization of $60,889 and $53,236............................................... 175,747 178,363 Property and equipment, less accumulated depreciation of $82,413 and $48,900....................................... 110,902 94,950 -------- -------- Total assets.............................................. $777,188 $703,719 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY: Accounts payable and accrued expenses....................... $ 29,835 $ 29,438 Accrued payroll costs....................................... 145,410 118,289 Income taxes payable........................................ 64 3,810 Current portion of notes payable and other indebtedness..... 898 1,308 -------- -------- Total current liabilities................................. 176,207 152,845 Notes payable and other indebtedness, less current portion................................................... 2,597 3,404 Deferred income taxes....................................... 22,281 25,000 -------- -------- Total liabilities......................................... 201,085 181,249 -------- -------- Commitments and Contingencies STOCKHOLDERS' EQUITY: Common stock, $.001 par value authorized 260,000,000 shares; issued and outstanding 88,073,937 and 91,225,353 shares... 88 91 Capital surplus............................................. 303,093 270,609 Deferred compensation....................................... (54,127) (56,790) Accumulated other comprehensive income...................... (2,420) (1,244) Retained earnings........................................... 329,469 309,804 -------- -------- Total stockholders' equity................................ 576,103 522,470 -------- -------- Total liabilities and stockholders' equity................ $777,188 $703,719 ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 9 ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, ------------------------------------ 1999 1998 1997 ---------- ---------- ---------- Net service revenues..................................... $2,081,321 $1,793,041 $1,302,876 Direct costs of services, consisting of payroll, payroll taxes and insurance costs for temporary employees...... 1,219,270 1,070,834 785,546 ---------- ---------- ---------- Gross margin............................................. 862,051 722,207 517,330 Selling, general and administrative expenses............. 628,405 501,626 357,766 Amortization of intangible assets........................ 4,990 4,993 4,926 Interest income, net..................................... (6,041) (5,588) (4,190) ---------- ---------- ---------- Income before income taxes............................... 234,697 221,176 158,828 Provision for income taxes............................... 93,256 89,596 65,131 ---------- ---------- ---------- Net income............................................... $ 141,441 $ 131,580 $ 93,697 ========== ========== ========== Basic net income per share............................... $ 1.57 $ 1.44 $ 1.03 Diluted net income per share............................. $ 1.53 $ 1.39 $ 1.00
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 10 ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
YEARS ENDED DECEMBER 31, ------------------------------ 1999 1998 1997 -------- -------- -------- COMMON STOCK--SHARES: Balance at beginning of period............................ 91,225 91,208 89,622 Issuances of restricted stock............................. 1,018 735 802 Repurchases of common stock............................... (4,530) (2,118) (676) Exercises of stock options................................ 361 1,400 1,446 Issuance of common stock for acquisitions................. -- -- 14 -------- -------- -------- Balance at end of period................................ 88,074 91,225 91,208 ======== ======== ======== COMMON STOCK--PAR VALUE: Balance at beginning of period............................ $ 91 $ 91 $ 90 Issuances of restricted stock............................. 1 1 1 Repurchases of common stock............................... (4) (2) (1) Exercises of stock options................................ -- 1 1 -------- -------- -------- Balance at end of period................................ $ 88 $ 91 $ 91 ======== ======== ======== CAPITAL SURPLUS: Balance at beginning of period............................ $270,609 $196,888 $140,443 Issuances of restricted stock--excess over par value...... 20,663 31,514 29,189 Exercises of stock options--excess over par value......... 1,968 8,452 5,755 Issuance of common stock for acquisition.................. -- -- 400 Capital impact of equity incentive plans.................. 9,853 33,755 21,101 -------- -------- -------- Balance at end of period................................ $303,093 $270,609 $196,888 ======== ======== ======== DEFERRED COMPENSATION: Balance at beginning of period............................ $(56,790) $(44,276) $(26,802) Issuances of restricted stock............................. (20,664) (31,515) (29,190) Amortization of deferred compensation..................... 23,327 19,001 11,716 -------- -------- -------- Balance at end of period................................ $(54,127) $(56,790) $(44,276) ======== ======== ======== ACCUMULATED OTHER COMPREHENSIVE INCOME: Balance at beginning of period............................ $ (1,244) $ (1,347) $ 23 Translation adjustments................................... (1,176) 103 (1,370) -------- -------- -------- Balance at end of period................................ $ (2,420) $ (1,244) $ (1,347) ======== ======== ======== RETAINED EARNINGS: Balance at beginning of period............................ $309,804 $267,444 $194,691 Repurchases of common stock--excess over par value........ (121,776) (89,220) (20,944) Net income................................................ 141,441 131,580 93,697 -------- -------- -------- Balance at end of period................................ $329,469 $309,804 $267,444 ======== ======== ======== COMPREHENSIVE INCOME: Net income................................................ $141,441 $131,580 $ 93,697 Translation adjustments................................... (1,176) 103 (1,370) -------- -------- -------- Total comprehensive income.............................. $140,265 $131,683 $ 92,327 ======== ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 11 ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEARS ENDED DECEMBER 31, ------------------------------ 1999 1998 1997 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income................................................ $141,441 $131,580 $ 93,697 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of intangible assets..................... 4,990 4,993 4,926 Depreciation expense.................................. 34,124 19,643 12,726 Provision for deferred income taxes................... (6,894) 1,902 (5,135) Changes in assets and liabilities, net of effects of acquisitions: Increase in accounts receivable....................... (68,588) (53,205) (61,027) Increase in accounts payable, accrued expenses and accrued payroll costs............................... 23,297 27,761 27,878 Increase (decrease) in income taxes payable........... (3,746) 1,552 (1,625) Change in other assets, net of change in other liabilities......................................... 22,866 21,101 10,517 -------- -------- -------- Total adjustments....................................... 6,049 23,747 (11,740) -------- -------- -------- Net cash and cash equivalents provided by operating activities.............................................. 147,490 155,327 81,957 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions, net of cash acquired........................ -- (4,187) (3,338) Capital expenditures...................................... (52,558) (67,229) (31,958) -------- -------- -------- Net cash and cash equivalents used in investing activities.............................................. (52,558) (71,416) (35,296) CASH FLOWS FROM FINANCING ACTIVITIES: Repurchases of common stock and common stock equivalents............................................. (121,780) (89,222) (20,945) Principal payments on notes payable and other indebtedness............................................ 41 (2,186) (1,405) Proceeds and capital impact of equity incentive plans..... 11,821 42,208 26,857 -------- -------- -------- Net cash and cash equivalents (used in) provided by financing activities.................................... (109,918) (49,200) 4,507 -------- -------- -------- Net increase (decrease) in cash and cash equivalents........ (14,986) 34,711 51,168 Cash and cash equivalents at beginning of period............ 166,060 131,349 80,181 -------- -------- -------- Cash and cash equivalents at end of period.................. $151,074 $166,060 $131,349 ======== ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest................................................ $ 387 $ 379 $ 476 Income taxes............................................ $ 95,002 $ 54,538 $ 50,340 Acquisitions: Assets acquired-- Intangible assets..................................... -- $ 3,967 $ 4,079 Other................................................. -- 622 499 Liabilities incurred-- Notes payable and contracts........................... -- -- (536) Other................................................. -- (402) (304) Common stock issued..................................... -- -- (400) -------- -------- -------- Cash paid, net of cash acquired......................... -- $ 4,187 $ 3,338 ======== ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS. Robert Half International Inc. (the "Company") provides specialized staffing services through such divisions as ACCOUNTEMPS, ROBERT HALF, OFFICETEAM, RHI CONSULTING, RHI MANAGEMENT RESOURCES, THE AFFILIATES and THE CREATIVE GROUP. The Company, through its ACCOUNTEMPS, ROBERT HALF, and RHI MANAGEMENT RESOURCES divisions, is the world's largest specialized provider of temporary, full-time, and project professionals in the fields of accounting and finance. OFFICETEAM specializes in highly skilled temporary administrative support personnel. RHI CONSULTING provides contract information technology professionals. THE AFFILIATES provides temporary, project, and full-time staffing of attorneys and specialized support personnel within law firms and corporate legal departments. THE CREATIVE GROUP provides project staffing in the advertising, marketing, and Web design fields. Revenues are predominantly from temporary services. The Company operates in the United States, Canada, Europe, and Australia. The Company is a Delaware corporation. PRINCIPLES OF CONSOLIDATION. The Consolidated Financial Statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany balances have been eliminated. Certain reclassifications have been made to the 1998 and 1997 financial statements to conform to the 1999 presentation. REVENUE RECOGNITION. Temporary services revenues are recognized when the services are rendered by the Company's temporary employees. Permanent placement revenues are recognized when employment candidates accept offers of permanent employment. Allowances are established to estimate losses due to placed candidates not remaining employed for the Company's guarantee period, typically 90 days. CASH AND CASH EQUIVALENTS. The Company considers all highly liquid investments with a maturity of three months or less as cash equivalents. INTANGIBLE ASSETS. Intangible assets primarily consist of the cost of acquired companies in excess of the fair market value of their net tangible assets at acquisition date, which are being amortized on a straight-line basis over a period of 40 years. The carrying value of intangible assets is periodically reviewed by the Company and impairments are recognized when the expected future operating cash flows derived from such intangible assets are less than their carrying value. Based upon its most recent analysis, the Company believes that no material impairment of intangible assets existed at December 31, 1999. INCOME TAXES. Deferred taxes are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rates. FOREIGN CURRENCY TRANSLATION. The results of operations of the Company's foreign subsidiaries are translated at the monthly average exchange rates prevailing during the period. The financial position of the Company's foreign subsidiaries is translated at the current exchange rates at the end of the period, and the related translation adjustments are recorded as a component of comprehensive income within Stockholders' Equity. Gains and losses resulting from foreign currency transactions are included in the Consolidated Statements of Income. USE OF ESTIMATES. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the life of the related asset or the life of the lease. NOTE B--ACQUISITIONS In July 1986, the Company acquired all of the outstanding stock of Robert Half Incorporated, the franchisor of the ACCOUNTEMPS and ROBERT HALF operations. Subsequently, in 66 separate transactions the Company acquired all of the outstanding stock of certain corporations operating ACCOUNTEMPS and ROBERT HALF franchised offices in the United States, the United Kingdom and Canada as well as other staffing services businesses. The Company has paid approximately $215 million in cash, stock, notes and other indebtedness in these acquisitions, excluding transaction costs and cash acquired. These acquisitions were primarily accounted for as purchases, and the excess of cost of the acquired companies in excess of the fair market value of the net tangible assets acquired is being amortized over 40 years using the straight-line method. Results of operations of the acquired companies are included in the Consolidated Statements of Income from the dates of acquisition. There were no acquisitions made in 1999. The acquisitions made during 1998 and 1997 had no material pro forma impact on the results of operations. NOTE C--NOTES PAYABLE AND OTHER INDEBTEDNESS The Company issued promissory notes as well as other forms of indebtedness in connection with certain acquisitions and other payment obligations. These are due in varying installments, carry varying interest rates and, in aggregate, amounted to $3,495,000 at December 31, 1999 and $4,712,000 at December 31, 1998. At December 31, 1999, $2,408,000 of the notes were secured by a standby letter of credit (see Note D). The following table shows the schedule of maturities for notes payable and other indebtedness at December 31, 1999 (in thousands): 2000........................................................ $ 898 2001........................................................ 56 2002........................................................ 61 2003........................................................ 66 2004........................................................ 71 Thereafter.................................................. 2,343 ------ $3,495 ======
At December 31, 1999, the notes carried fixed rates and the weighted average interest rate for the above was approximately 8.1%, 8.2% and 7.0% for the years ended December 31, 1999, 1998 and 1997, respectively. NOTE D--BANK LOAN (REVOLVING CREDIT) The Company has an unsecured credit facility which provides a line of credit of up to $80,000,000, which is available to fund the Company's general business and working capital needs, including acquisitions and the purchase of the Company's common stock, and to cover the issuance of debt support standby letters of credit up to $15,000,000. 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE D--BANK LOAN (REVOLVING CREDIT) (CONTINUED) As of December 31, 1999 and 1998, the Company had no borrowings on the line of credit outstanding and had used $5,208,000 and $6,799,000 in debt support standby letters of credit, respectively. There is a commitment fee on the unused portion of the entire credit facility of .09%. The loan is subject to certain financial covenants which also affect the interest rates charged. The final maturity date for the credit facility is August 31, 2002. NOTE E--ACCRUED PAYROLL COSTS Accrued payroll costs consisted of the following (in thousands):
DECEMBER 31, ------------------- 1999 1998 -------- -------- Payroll and bonuses..................................... $ 76,026 $ 56,943 Employee benefits and workers' compensation............. 60,359 49,926 Payroll taxes........................................... 9,025 11,420 -------- -------- $145,410 $118,289 ======== ========
NOTE F--STOCKHOLDERS' EQUITY STOCK REPURCHASE PROGRAM--As of December 31, 1999, the Company's Board of Directors has authorized the repurchase, from time to time, of up to nine million shares of the Company's common stock on the open market or in privately negotiated transactions, depending on market conditions. During the year ended December 31, 1999, the Company repurchased approximately 4,183,000 shares on the open market for a total cost of $108.5 million. Since 1997, the Company repurchased approximately 5,907,000 shares of common stock on the open market pursuant to this program. NOTE G--INCOME TAXES The provision for income taxes for the years ended December 31, 1999, 1998 and 1997 consisted of the following (in thousands):
YEARS ENDED DECEMBER 31, ------------------------------ 1999 1998 1997 -------- -------- -------- Current: Federal........................................ $79,061 $66,127 $53,973 State.......................................... 13,292 15,243 12,261 Foreign........................................ 7,797 6,324 4,032 Deferred--principally domestic................... (6,894) 1,902 (5,135) ------- ------- ------- $93,256 $89,596 $65,131 ======= ======= =======
15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE G--INCOME TAXES (CONTINUED) The income taxes shown above varied from the statutory federal income tax rates for these periods as follows:
YEARS ENDED DECEMBER 31, -------------------------------------- 1999 1998 1997 -------- -------- -------- Federal U.S. income tax rate......................... 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit....... 4.3 4.6 4.6 Amortization of intangible assets.................... .5 .6 .8 Tax-free interest income............................. (.4) (.4) -- Other, net........................................... .3 .7 .6 ---- ---- ---- Effective tax rate................................... 39.7% 40.5% 41.0% ==== ==== ====
The deferred portion of the tax provisions consisted of the following (in thousands):
YEARS ENDED DECEMBER 31, ------------------------------ 1999 1998 1997 -------- -------- -------- Amortization of franchise rights............... $ (74) $ (74) $ 66 Accrued expenses, deducted for tax when paid... (7,515) (7,317) (7,612) Capitalized costs for books, deducted for tax.......................................... 212 9,660 2,101 Other, net..................................... 483 (367) 310 -------- -------- -------- $ (6,894) $ 1,902 $ (5,135) ======== ======== ========
The deferred income tax amounts included on the balance sheet are comprised of the following (in thousands):
DECEMBER 31, ------------------- 1999 1998 -------- -------- Current deferred income tax assets, net................. $(16,717) $(12,542) Long-term deferred income tax liabilities, net.......... 22,281 25,000 -------- -------- $ 5,564 $ 12,458 ======== ========
No valuation allowances against deferred tax assets were required for the years ended December 31, 1999 and 1998. The components of the deferred income tax amounts at December 31, 1999 and 1998, were as follows (in thousands):
DECEMBER 31, ------------------- 1999 1998 -------- -------- Amortization of intangible assets....................... $ 16,859 $ 16,662 Accrued expenses, deducted for tax when paid............ (9,010) (5,603) Other, net.............................................. (2,285) 1,399 -------- -------- $ 5,564 $ 12,458 ======== ========
16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE H--COMMITMENTS Rental expense, primarily for office premises, amounted to $37,384,000, $30,146,000 and $19,594,000 for the years ended December 31, 1999, 1998 and 1997, respectively. The approximate minimum rental commitments for 2000 and thereafter under non-cancelable leases in effect at December 31, 1999, were as follows (in thousands): 2000........................................................ $40,983 2001........................................................ $40,260 2002........................................................ $35,456 2003........................................................ $28,662 2004........................................................ $23,710 Thereafter.................................................. $65,323
NOTE I--STOCK PLANS Under various stock plans, officers, employees and outside directors may receive grants of restricted stock or options to purchase common stock. Grants are made at the discretion of the Stock Plan Committee of the Board of Directors. Grants generally vest between two and seven years. Options granted under the plans have exercise prices ranging from 85% to 100% of the fair market value of the Company's common stock at the date of grant, consist of both incentive stock options and nonstatutory stock options under the Internal Revenue Code. The terms range from 27 months to 10 years. Recipients of restricted stock do not pay any cash consideration to the Company for the shares, have the right to vote all shares subject to such grant, and receive all dividends with respect to such shares, whether or not the shares have vested. Compensation expense is recognized on a straight-line basis over the vesting period. Vesting is accelerated upon the death or disability of the recipients. The Company accounts for these plans under APB Opinion 25. Therefore, no compensation cost has been recognized for its stock option plans. Had compensation cost for the stock options granted subsequent to January 1, 1995, been based on the estimated fair value at the award dates, as prescribed by Statement of Financial Accounting Standards No. 123, the Company's pro forma net income and net income per share would have been as follows (in thousands, except per share amounts):
YEARS ENDED DECEMBER 31, ------------------------------ 1999 1998 1997 -------- -------- -------- Net Income As Reported.................................. $141,441 $131,580 $93,697 Pro forma.................................... $127,924 $124,622 $90,212 Net Income Per Share Basic As Reported................................ $ 1.57 $ 1.44 $ 1.03 Pro forma.................................. $ 1.42 $ 1.36 $ .99 Diluted As Reported................................ $ 1.53 $ 1.39 $ 1.00 Pro forma.................................. $ 1.41 $ 1.33 $ .97
17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE I--STOCK PLANS (CONTINUED) The pro forma amounts do not include amounts for stock options granted before January 1, 1995. Therefore, the pro forma amounts may not be representative of the disclosed effects on pro forma net income and net income per share for future years. The fair value of each option is estimated, as of the grant date, using the Black-Scholes option pricing model with the following assumptions used for grants in 1999, 1998 and 1997, respectively: no dividend yield for any year; expected volatility of 43% to 52%; risk-free interest rates of 4.6% to 6.4%, 4.6% to 5.7% and 5.7% to 6.9%, respectively, and expected lives of 1.5 to 5.5 years for 1999 and 4.5 to 7.3 years for both 1998 and 1997. The following table reflects activity under all stock plans from December 31, 1996 through December 31, 1999, and the weighted average exercise prices:
STOCK OPTION PLANS ---------------------------- WEIGHTED RESTRICTED NUMBER OF AVERAGE PRICE STOCK PLANS SHARES PER SHARE ----------- ------------ ------------- Outstanding, December 31, 1996.......... 2,473,555 8,661,531 $ 9.53 Granted............................... 847,469 1,944,656 $29.68 Exercised............................. -- (1,446,404) $ 3.98 Restrictions lapsed................... (859,399) -- -- Forfeited............................. (45,578) (515,537) $15.29 --------- ------------ ------ Outstanding, December 31, 1997.......... 2,416,047 8,644,246 $14.52 Granted............................... 759,377 3,523,816 $40.11 Exercised............................. -- (1,400,023) $ 6.04 Restrictions lapsed................... (737,938) -- -- Forfeited............................. (25,066) (412,977) $26.05 --------- ------------ ------ Outstanding, December 31, 1998.......... 2,412,420 10,355,062 $23.93 Granted............................... 1,146,390 3,401,420 $24.77 Exercised............................. -- (360,322) $ 5.46 Restrictions lapsed................... (783,683) -- -- Forfeited............................. (47,949) (609,442) $31.76 --------- ------------ ------ Outstanding, December 31, 1999.......... 2,727,178 12,786,718 $24.25 ========= ============ ======
The following table summarizes information about options outstanding as of December 31, 1999:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------------------ ----------------------------------- NUMBER WEIGHTED AVERAGE WEIGHTED NUMBER WEIGHTED OUTSTANDING AS OF REMAINING AVERAGE EXERCISABLE AS OF AVERAGE RANGE OF EXERCISE PRICES DECEMBER 31, 1999 CONTRACTUAL LIFE EXERCISE PRICE DECEMBER 31, 1999 EXERCISE PRICE - ------------------------ ------------------ ---------------- -------------- ------------------ -------------- $ 1.44 to $12.13............... 2,934,188 4.53 $ 7.19 2,934,188 $ 7.19 $13.04 to $20.81............... 2,796,398 8.02 $19.18 639,306 $18.27 $21.25 to $27.63............... 2,726,785 6.61 $23.38 692,473 $22.69 $27.88 to $38.63............... 2,718,647 8.55 $37.28 869,030 $37.49 $38.69 to $59.00............... 1,610,700 8.53 $43.60 310,435 $44.64 ---------- ---- ------ --------- ------ 12,786,718 7.10 $24.25 5,445,432 $17.43 ========== ==== ====== ========= ======
18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE I--STOCK PLANS (CONTINUED) At December 31, 1999, the total number of available shares to grant under the plans (consisting of either restricted stock or options) was 1,144,872. NOTE J--PREFERRED SHARE PURCHASE RIGHTS Pursuant to the Company's stockholder rights agreement, each share of common stock carries one right to purchase .0067 shares of preferred stock. The rights become exercisable in certain limited circumstances involving a potential business combination transaction or an acquisition of shares of the Company and are exercisable at a price of $66.67 per right, subject to adjustment. Following certain other events after the rights become exercisable, each right entitles its holder to purchase for $66.67 an amount of common stock of the Company, or, in certain circumstances, securities of the acquiror, having a then-current market value of twice the exercise price of the right. The rights are redeemable and may be amended at the Company's option before they become exercisable. Until a right is exercised, the holder of a right has no rights as a stockholder of the Company. The rights expire on July 23, 2000. NOTE K--NET INCOME PER SHARE The calculation of net income per share for the three years ended December 31, 1999 is reflected in the following table (in thousands, except per share amounts):
YEARS ENDED DECEMBER 31, ------------------------------ 1999 1998 1997 -------- -------- -------- Net Income........................................ $141,441 $131,580 $93,697 Basic: Weighted average shares......................... 90,223 91,650 90,668 ======== ======== ======= Diluted: Weighted average shares......................... 90,223 91,650 90,668 Common stock equivalents--stock options......... 2,071 3,172 3,331 -------- -------- ------- Diluted shares.................................. 92,294 94,822 93,999 ======== ======== ======= Net Income Per Share: Basic........................................... $ 1.57 $ 1.44 $ 1.03 Diluted......................................... $ 1.53 $ 1.39 $ 1.00
NOTE L--QUARTERLY FINANCIAL DATA (UNAUDITED) The following tabulation shows certain quarterly financial data for 1999 and 1998 (in thousands, except per share amounts):
QUARTER ------------------------------------------------- YEAR ENDED 1999 1 2 3 4 DECEMBER 31, - ---- ---------- ---------- ---------- ---------- ------------- Net service revenues................ $ 484,988 $ 497,060 $ 529,462 $ 569,811 $ 2,081,321 Gross margin........................ $ 197,895 $ 204,390 $ 221,404 $ 238,362 $ 862,051 Income before income taxes.......... $ 58,983 $ 55,943 $ 57,243 $ 62,528 $ 234,697 Net income.......................... $ 35,310 $ 33,939 $ 34,549 $ 37,643 $ 141,441 Basic net income per share.......... $ 0.39 $ 0.37 $ 0.38 $ 0.43 $ 1.57 Diluted net income per share........ $ 0.38 $ 0.37 $ 0.38 $ 0.41 $ 1.53
19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE L--QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)
QUARTER ------------------------------------------------- YEAR ENDED 1998 1 2 3 4 DECEMBER 31, - ---- ---------- ---------- ---------- ---------- ------------- Net service revenues................ $ 401,296 $ 442,153 $ 470,650 $ 478,942 $ 1,793,041 Gross margin........................ $ 160,971 $ 177,693 $ 190,033 $ 193,510 $ 722,207 Income before income taxes.......... $ 48,942 $ 54,426 $ 58,530 $ 59,278 $ 221,176 Net income.......................... $ 29,050 $ 32,280 $ 34,974 $ 35,276 $ 131,580 Basic net income per share.......... $ .32 $ .35 $ .38 $ .39 $ 1.44 Diluted net income per share........ $ .31 $ .34 $ .37 $ .38 $ 1.39
NOTE M--BUSINESS SEGMENTS The Company has two reportable segments: temporary and consultant staffing; and permanent placement staffing. The temporary and consultant staffing segment provides specialized personnel in the accounting and finance, administrative and office, information technology, legal, advertising, marketing, and Web design fields. The permanent placement staffing segment provides full-time personnel in the accounting, finance, and information technology fields. The accounting policies of the segments are the same as those described in Note A: Summary of Significant Accounting Policies. The Company evaluates performance based on profit or loss from operations before interest expense, intangible amortization expense, and income taxes. The following table provides a reconciliation of revenue and operating profit by reportable segment to consolidated results (in thousands):
YEARS ENDED DECEMBER 31, ------------------------------------ 1999 1998 1997 ---------- ---------- ---------- Net service revenues Temporary and consultant staffing...... $1,922,111 $1,657,314 $1,201,562 Permanent placement staffing........... 159,210 135,727 101,314 ---------- ---------- ---------- $2,081,321 $1,793,041 $1,302,876 ========== ========== ========== Operating income Temporary and consultant staffing...... $ 194,333 $ 186,565 $ 133,855 Permanent placement staffing........... 39,313 34,016 25,709 ---------- ---------- ---------- 233,646 220,581 159,564 Amortization of intangible assets........ 4,990 4,993 4,926 Interest income, net..................... (6,041) (5,588) (4,190) ---------- ---------- ---------- Income before income taxes............... $ 234,697 $ 221,176 $ 158,828 ========== ========== ==========
20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE M--BUSINESS SEGMENTS (CONTINUED) The Company does not report total assets by segment. The following table represents identifiable assets by business segment (in thousands):
DECEMBER 31, ------------------------------ 1999 1998 1997 -------- -------- -------- Accounts receivable Temporary and consultant staffing........... $294,878 $231,754 $179,656 Permanent placement staffing................ 27,824 19,112 14,407 -------- -------- -------- $322,702 $250,866 $194,063 ======== ======== ========
The Company operates internationally, with operations in the United States, Canada, Europe, and Australia. The following tables represent revenues and long-lived assets by geographic location (in thousands):
YEARS ENDED DECEMBER 31, ------------------------------------ 1999 1998 1997 ---------- ---------- ---------- Revenues Domestic............................... $1,829,275 $1,595,029 $1,176,888 Foreign................................ 252,046 198,012 125,988 ---------- ---------- ---------- $2,081,321 $1,793,041 $1,302,876 ========== ========== ==========
DECEMBER 31, ------------------------------------ 1999 1998 1997 ---------- ---------- ---------- Assets, long-lived Domestic............................... $ 264,048 $ 253,514 $ 209,457 Foreign................................ 22,601 19,799 17,905 ---------- ---------- ---------- $ 286,649 $ 273,313 $ 227,362 ========== ========== ==========
21 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and the Board of Directors of Robert Half International Inc.: We have audited the accompanying consolidated statements of financial position of Robert Half International Inc. (a Delaware corporation) and subsidiaries, as of December 31, 1999 and 1998, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Robert Half International Inc. and subsidiaries, as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP San Francisco, California January 21, 2000 22 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III The information required by Items 10 through 13 of Part III is incorporated by reference from the registrant's Proxy Statement, under the captions "NOMINATION AND ELECTION OF DIRECTORS," "BENEFICIAL STOCK OWNERSHIP," "COMPENSATION OF DIRECTORS," "COMPENSATION OF EXECUTIVE OFFICERS" AND "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION AND CERTAIN TRANSACTIONS," which Proxy Statement will be mailed to stockholders in connection with the registrant's annual meeting of stockholders which is scheduled to be held in May 2000. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS The following consolidated financial statements of the Company and its subsidiaries are included in Item 8 of this report: Consolidated statements of financial position at December 31, 1999 and 1998. Consolidated statements of income for the years ended December 31, 1999, 1998 and 1997. Consolidated statements of stockholders' equity for the years ended December 31, 1999, 1998 and 1997. Consolidated statements of cash flows for the years ended December 31, 1999, 1998 and 1997. Notes to consolidated financial statements. Report of independent public accountants. Selected quarterly financial data for the years ended December 31, 1999 and 1998 are set forth in Note L--Quarterly Financial Data (Unaudited) included in Item 8 of this report. 2. FINANCIAL STATEMENT SCHEDULES Schedules I through V have been omitted as they are not applicable. 3. EXHIBITS
EXHIBIT NO. EXHIBIT ------- ------------------------------------------------------------ 3.1 Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1998. 3.2 By-Laws, incorporated by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999. 4.1 Indenture dated as of October 1, 1972, as amended, between IDS Realty Trust and First National Bank of Minneapolis, incorporated by reference to Exhibits 6(t) and 6(v) to the Form S-14 Registration Statement of the Registrant (formerly known as Boothe Interim Corporation) filed with the Securities and Exchange Commission on December 31, 1979. 4.2 Restated Certificate of Incorporation of Registrant (filed as Exhibit 3.1).
23
EXHIBIT NO. EXHIBIT ------- ------------------------------------------------------------ 4.3 Rights Agreement, dated as of July 23, 1990, between the Registrant and The Chase Manhattan Bank (formerly Manufacturers Hanover Trust Company of California), as amended and restated effective May 17, 1999, incorporated by reference to Exhibit 1 to Registrant's Form 8-A/A Amendment No. 5 filed on May 21, 1999. 10.1 Credit Agreement dated as of November 1, 1993, among the Registrant, NationsBank of North Carolina, N.A. and Bank of America National Trust and Savings Association, as amended, incorporated by reference to (i) Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1993, (ii) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1995, (iii) Exhibit 10.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, and (iv) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997. *10.2 Employment Agreement dated as of October 2, 1985, between the Registrant and Harold M. Messmer, Jr. The Fourteenth Amendment to the Employment Agreement is filed with this Annual Report on Form 10-K for the fiscal year ended December 31, 1999. The original Employment Agreement and the first thirteen amendments thereto are incorporated by reference to (i) Exhibit 10.(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1985, (ii) Exhibit 10.2(b) to Registrant's Registration Statement on Form S-1 (No. 33-15171), (iii) Exhibit 10.2(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, (iv) Exhibit 10.2(d) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, (v) Exhibit 28.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1990, (vi) Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, (vii) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1993, (viii) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, (ix) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1995, (x) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, (xi) Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, (xii) Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and (xiii) Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. *10.3 Key Executive Retirement Plan--Level II, as amended, incorporated by reference to Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.4 Restated Retirement Agreement between the Registrant and Harold M. Messmer, Jr., incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.5 1985 Stock Option Plan, as amended, incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997. *10.6 Excise Tax Restoration Agreement dated November 5, 1996, incorporated by reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.7 Outside Directors' Option Plan, as amended, incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999. *10.8 1989 Restricted Stock Plan, as amended, incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997. *10.9 StockPlus Plan, as amended, incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999. *10.10 1993 Incentive Plan, as amended, incorporated by reference to Exhibit 10.10 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997.
24
EXHIBIT NO. EXHIBIT ------- ------------------------------------------------------------ *10.11 Deferred Compensation Plan, incorporated by reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. *10.12 Annual Performance Bonus Plan, incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996. *10.13 Form of Amended and Restated Severance Agreement. *10.14 Form of Change in Control Severance Agreement. *10.15 Form of Indemnification Agreement for Directors of the Registrant, incorporated by reference to (i) Exhibit 10.27 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989 and (ii) Exhibit 10.19 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. *10.16 Form of Indemnification Agreement for Executive Officers of Registrant, incorporated by reference to Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. *10.17 Senior Executive Retirement Plan, as amended, incorporated by reference to Exhibit 10.16 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.18 Collateral Assignment of Split Dollar Insurance Agreement, incorporated by reference to Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.19 Form of Consulting Agreement, incorporated by reference to Exhibit 10.18 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. 21 Subsidiaries of the Registrant. 23 Accountants' Consent 27 Financial Data Schedule.
- ------------------------ * Management contract or compensatory plan required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K. (b) Reports on Form 8-K The Registrant filed no reports on Form 8-K during the fiscal quarter ending December 31, 1999. 25 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ROBERT HALF INTERNATIONAL INC. (Registrant) Date: March 8, 2000 By: /S/ M. KEITH WADDELL ------------------------------------ M. Keith Waddell Vice Chairman, Chief Financial Officer and Treasurer (Principal Financial Officer) 26 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: March 8, 2000 By: /S/ HAROLD M. MESSMER, JR. ------------------------------------------ Harold M. Messmer, Jr. Chairman of the Board, President, Chief Executive Officer, and a Director (Principal Executive Officer) Date: March 8, 2000 By: /S/ ANDREW S. BERWICK, JR. ------------------------------------------ Andrew S. Berwick, Jr., Director Date: March 8, 2000 By: /S/ FREDERICK P. FURTH ------------------------------------------ Frederick P. Furth, Director Date: March 8, 2000 By: /S/ EDWARD W. GIBBONS ------------------------------------------ Edward W. Gibbons, Director Date: March 8, 2000 By: /S/ FREDERICK A. RICHMAN ------------------------------------------ Frederick A. Richman, Director Date: March 8, 2000 By: /S/ THOMAS J. RYAN ------------------------------------------ Thomas J. Ryan, Director Date: March 8, 2000 By: /S/ J. STEPHEN SCHAUB ------------------------------------------ J. Stephen Schaub, Director Date: March 8, 2000 By: /S/ M. KEITH WADDELL ------------------------------------------ M. Keith Waddell Vice Chairman, Chief Financial Officer, Treasurer and a Director (Principal Financial Officer) Date: March 8, 2000 By: /S/ BARBARA J. FORSBERG ------------------------------------------ Barbara J. Forsberg Senior Vice President, Corporate Services (Principal Accounting Officer)
27 EXHIBIT INDEX
EXHIBIT NO. EXHIBIT ------- ------------------------------------------------------------ 3.1 Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1998. 3.2 By-Laws, incorporated by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999. 4.1 Indenture dated as of October 1, 1972, as amended, between IDS Realty Trust and First National Bank of Minneapolis, incorporated by reference to Exhibits 6(t) and 6(v) to the Form S-14 Registration Statement of the Registrant (formerly known as Boothe Interim Corporation) filed with the Securities and Exchange Commission on December 31, 1979. 4.2 Restated Certificate of Incorporation of Registrant (filed as Exhibit 3.1). 4.3 Rights Agreement, dated as of July 23, 1990, between the Registrant and The Chase Manhattan Bank (formerly Manufacturers Hanover Trust Company of California), as amended and restated effective May 17, 1999, incorporated by reference to Exhibit 1 to Registrant's Form 8-A/A Amendment No. 5 filed on May 21, 1999. 10.1 Credit Agreement dated as of November 1, 1993, among the Registrant, NationsBank of North Carolina, N.A. and Bank of America National Trust and Savings Association, as amended, incorporated by reference to (i) Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1993, (ii) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1995, (iii) Exhibit 10.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, and (iv) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997. *10.2 Employment Agreement dated as of October 2, 1985, between the Registrant and Harold M. Messmer, Jr. The Fourteenth Amendment to the Employment Agreement is filed with this Annual Report on Form 10-K for the fiscal year ended December 31, 1999. The original Employment Agreement and the first thirteen amendments thereto are incorporated by reference to (i) Exhibit 10.(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1985, (ii) Exhibit 10.2(b) to Registrant's Registration Statement on Form S-1 (No. 33-15171), (iii) Exhibit 10.2(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, (iv) Exhibit 10.2(d) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, (v) Exhibit 28.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1990, (vi) Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, (vii) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1993, (viii) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, (ix) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1995, (x) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, (xi) Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, (xii) Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and (xiii) Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. *10.3 Key Executive Retirement Plan--Level II, as amended, incorporated by reference to Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.4 Restated Retirement Agreement between the Registrant and Harold M. Messmer, Jr., incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.5 1985 Stock Option Plan, as amended, incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997. *10.6 Excise Tax Restoration Agreement dated November 5, 1996, incorporated by reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.
EXHIBIT NO. EXHIBIT ------- ------------------------------------------------------------ *10.7 Outside Directors' Option Plan, as amended, incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999. *10.8 1989 Restricted Stock Plan, as amended, incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997. *10.9 StockPlus Plan, as amended, incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999. *10.10 1993 Incentive Plan, as amended, incorporated by reference to Exhibit 10.10 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. *10.11 Deferred Compensation Plan, incorporated by reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. *10.12 Annual Performance Bonus Plan, incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996. *10.13 Form of Amended and Restated Severance Agreement. *10.14 Form of Change in Control Severance Agreement. *10.15 Form of Indemnification Agreement for Directors of the Registrant, incorporated by reference to (i) Exhibit 10.27 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989 and (ii) Exhibit 10.19 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. *10.16 Form of Indemnification Agreement for Executive Officers of Registrant, incorporated by reference to Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. *10.17 Senior Executive Retirement Plan, as amended, incorporated by reference to Exhibit 10.16 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.18 Collateral Assignment of Split Dollar Insurance Agreement, incorporated by reference to Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.19 Form of Consulting Agreement, incorporated by reference to Exhibit 10.18 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. 21 Subsidiaries of the Registrant. 23 Accountants' Consent 27 Financial Data Schedule.
- ------------------------ * Management contract or compensatory plan required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K. EX-10.2 2 EXHIBIT 10.2 EXHIBIT 10.2 FOURTEENTH AMENDMENT TO EMPLOYMENT AGREEMENT This Fourteenth Amendment to Employment Agreement is made and entered into as of January 1, 2000, by and between Robert Half International Inc. (formerly Boothe Financial Corporation), a Delaware corporation, ("Corporation") and Harold M. Messmer, Jr. ("Officer"). 1. The Employment Agreement dated as of October 2, 1985, as amended, between Corporation and Officer (the "Employment Agreement") is hereby amended as follows: a. Section 2.1(d) is amended to delete "30 days following a Change in Control" and insert, in lieu thereof, "one year following a Change in Control". b. Section 4.1 is amended to delete "plus an equal amount in lieu of bonus" and insert, in lieu thereof, "plus an amount equal to the annual cash bonus paid (or to be paid) to Officer with respect to the last full calendar year completed prior to the Termination". c. Section 4.6 is amended to delete "the later to occur of (a) Officer's 55th birthday or (b) the 20th anniversary of Officer's first day of service with the Corporation as a director or full-time employee" and insert, in lieu thereof, "January 1, 2000". 2. In all other respects, the Employment Agreement is hereby ratified and confirmed. IN WITNESS WHEREOF, the parties hereto have executed this agreement effective as of the day and year first written above. ROBERT HALF INTERNATIONAL INC. By /s/ M. Keith Waddell ---------------------------- M. Keith Waddell Vice Chairman /s/ Harold M. Messmer, Jr. ------------------------------ Harold M. Messmer, Jr. EX-10.13 3 EXHIBIT 10.13 EXHIBIT 10.13 FORM OF AMENDED AND RESTATED SEVERANCE AGREEMENT Effective January 1, 2000, the Registrant entered into an Amended and Restated Severance Agreement in the form attached hereto with Harold M. Messmer, Jr., M. Keith Waddell, Robert W. Glass and Steven Karel. Pursuant to Instruction 2 to Item 601 of Regulation S-K, the individual agreements are not being filed. AMENDED AND RESTATED SEVERANCE AGREEMENT This Agreement is entered as of January 1, 2000, by and between Robert Half International Inc., a Delaware corporation (the "Company") and Harold M. Messmer, Jr. (the "Employee"). WHEREAS, the Company and Employee have previously entered into a Severance Agreement dated as of January 8, 1990, amended effective as of May 15, 1990. WHEREAS, the Severance Agreement was entered into because the Company believed it to be in the best interest of the Company and its shareholders to provide for stability in the management of the Company. WHEREAS, the Compensation Committee of the Board of Directors of the Company has approved certain amendments to the Severance Agreement. WHEREAS, certain modifications to the wording of certain sections of the Severance Agreement, as amended, are deemed advisable in order to clarify the intent of the parties. NOW, THEREFORE, in consideration of the foregoing and the terms and conditions set forth herein, the Company and the Employee hereby agree that the Severance Agreement be amended and restated as follows: 1. DEFINITIONS "Change in Control" shall have the meaning specified in the Company's 1993 Incentive Plan. "Continuation Period" means (a) 36 months following the Termination Date, if Employee has served as a Director of the Company at any time prior to the Termination Date, and (b) 24 months following the Termination Date in all other cases. "Stock" means the Common Stock, $.001 par value, of the Company. "Termination Date" means the date on which Employee's employment with the Company is terminated. "Termination For Cause" means termination by the Company of Employee's employment by the Company by reason of Employee's willful dishonesty towards, fraud upon, or deliberate injury or attempted injury to the Company, or by reason of Employee's willful material breach of any employment agreement with the Company, which has resulted in material injury to the Company; provided, however, that Employee's employment shall not be deemed to have terminated in a Termination For Cause if such termination took place as a result of any act or omission believed by Employee in good faith to have been in the interest of the Company. "Termination Without Cause" means termination of Employee's employment other than pursuant to a Termination For Cause. Termination Without Cause includes a termination by Employee following (a) a reduction by more than 5% of Employee's base salary per month, exclusive of bonus, fringe benefits and other non-salary compensation, (the "Monthly Base Salary") or (b) a request by the Company that Employee relocate more than 50 miles away from the current location of the principal executive offices of the Company. "Termination Following a Change in Control" means a voluntary termination by Employee within one year following Change in Control. 2. PAYMENTS AND BENEFITS UPON TERMINATION WITHOUT CAUSE. In the event of a Termination Without Cause, the Employee shall be entitled to receive the following: 2.1. MONTHLY BASE SALARY. Commencing on the Termination Date, Employee shall receive Monthly Base Salary, at a rate equal to the highest Monthly Base Salary paid to Employee within the six (6) months preceding the Termination Date, each month during the Continuation Period. At the option of the Company, all or part of such Monthly Base Salary may be paid in a lump sum. 2.2. BONUS. (a) If the Termination Date occurs within 12 months after a Change in Control, then, commencing on the Termination Date, Employee shall receive, each month during the Continuation Period, an amount equal to 1/12 of the annual cash bonus paid (or to be paid) to Employee with respect to the last full calendar year completed prior to the Change in Control. At the option of the Company, all or part of such payments may be paid in a lump sum. (b) If the Termination Date does not occur within 12 months after a Change in Control, Employee shall be paid, when such bonus payments would otherwise typically be made to Employee, the amount determined by multiplying (i) a fraction, the numerator of which shall be the number of months that, as of the last day of the month in which the Termination Date occurs, shall have passed since the beginning of that calendar year, and the denominator of which shall be twelve and (ii) the bonus to which Employee would have been entitled had such termination not occurred. For purposes of the foregoing clause (ii), Employee shall be not be entitled to a pro rata amount of bonus that is discretionary unless such Employee is specifically awarded such discretionary amount in accordance with the terms and conditions of the applicable bonus plan or program. 2.3. BENEFITS. During the Continuation Period or until Employee is reemployed, whichever first occurs, Employee also shall be entitled to all employee benefits, including medical and life insurance, pension, retirement and other benefits to which Employee was entitled on the Termination Date. 2.4. VESTING. If, on the Termination Date, Employee holds any Stock or options or other rights to acquire Stock which are subject to restrictions or vesting based on continued employment with the Company, such restrictions shall lapse and such vesting shall occur effective as of the Termination Date. Each option held by Employee shall remain outstanding and exercisable until the earlier of its exercise or its original expiration date. In addition, if Employee is a participant in the Company's Deferred Compensation Plan or any successor plan, all amounts credited under such plan to Employee shall become fully vested and nonforfeitable. 2.5. OUTPLACEMENT SERVICES. The Company shall pay, on behalf of Employee, expenses and fees relating to outplacement services utilized by Employee, in an amount that is the usual and customary rate for such services for an individual at Employee's level. 2.6. MULTIPLE BENEFITS. To the extent that any other agreement ("Other Agreement") between the Employee and the Company would provide for salary continuation (or a lump sum payment in lieu of salary continuation) and bonus payments under the same circumstances as such benefits would be provided pursuant to Sections 2.1 and 2.2 hereof, then Employee shall not receive such benefits under both the Other Agreement and Sections 2.1 and 2.2, but shall instead receive the greater of the salary continuation benefit payable under either Section 2.1 or the Other Agreement and the greater of the bonus benefit payable under either Section 2.2 and the Other Agreement. Except as provided by the foregoing sentence, the benefits payable under this Agreement shall be in addition to, and not in lieu of, any other benefits that may be provided under any plan, program or agreement. 3. TERMINATION FOLLOWING A CHANGE IN CONTROL. If Employee has served as a Director of the Company at any time prior to the Termination Date, Employee shall be entitled to the benefits described in Section 2 hereof in the event of a Termination Following a Change in Control. 4. ADDITIONAL MEDICAL BENEFITS. If Employee has served as a Director of the Company at any time prior to the Termination Date, then, in the event of any termination of Employee's employment on or after the first January 1 occurring after the Employee's 53rd birthday, other than a Termination For Cause, Employee and his then current wife shall each continue to participate until his or her death, at the Company's expense, in whatever healthcare plan may be maintained by the Company from time to time for its then current employees as if Employee were still a full time employee of the Company. 5. EMPLOYMENT. The sole purpose of this Agreement is to provide Employee with severance benefits in the event Employee is Terminated Without Cause. This Agreement is not an employment agreement. This Agreement shall not affect any right of the Company to terminate Employee's employment at any time. 6. HEADINGS. The headings used in this Agreement are for convenience only, and shall not be used to construe the terms and conditions of the Agreement. 7. GOVERNING LAW. This Agreement shall be governed by and construed according to the laws of the State of California. The terms of this Agreement shall bind and shall inure to the benefit of the successors and assigns of the parties hereto. IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the date first set forth above. ROBERT HALF INTERNATIONAL INC. ------------------------- ------------------------- Employee EX-10.14 4 EXHIBIT 10.14 EXHIBIT 10.14 FORM OF CHANGE IN CONTROL SEVERANCE AGREEMENT Effective January 1, 2000, the Registrant entered into a Change in Control Severance Agreement in the form attached hereto with Barbara J. Forsberg, Lynn Taylor, Paul F. Gentzkow and James M. Taylor. Pursuant to Instruction 2 to Item 601 of Regulation S-K, the individual agreements are not being filed. CHANGE IN CONTROL SEVERANCE AGREEMENT This Agreement is entered as of January 1, 2000, by and between Robert Half International Inc., a Delaware corporation (the "Company") and ______________ (the "Employee"). WHEREAS, the Employee currently is employed by the Company. WHEREAS, the Company believes that it is in the best interest of the Company and its shareholders to enter into this Agreement in order to provide for stability in the management of the Company. NOW, THEREFORE, in consideration of the foregoing and the terms and conditions set forth herein, the Company and the Employee hereby agree as follows: 1. DEFINITIONS "Board" means the Board of Directors of the Company. "Change in Control" shall have the meaning specified in the Company's 1993 Incentive Plan "Continuation Period" means (a) 36 months following the Termination Date, if Employee has served as a Director of the Company at any time prior to the Termination Date, and (b) 24 months following the Termination Date in all other cases. "Termination Date" means the date on which Employee's employment with the Company is terminated. "Termination For Cause" means termination by the Company of Employee's employment by the Company by reason of Employee's willful dishonesty towards, fraud upon, or deliberate injury or attempted injury to the Company, or by reason of Employee's willful material breach of any employment agreement with the Company, which has resulted in material injury to the Company; provided, however, that Employee's employment shall not be deemed to have terminated in a Termination For Cause if such termination took place as a result of any act or omission believed by Employee in good faith to have been in the interest of the Company. "Termination Following a Change in Control" means termination of Employee's employment, within twelve months following a Change in Control, other than pursuant to a Termination For Cause. Termination Following a Change in Control includes a termination by Employee during such twelve month period following (a) a reduction by more than 5% of Employee's base salary per month, exclusive of bonus, fringe benefits and other non-salary compensation, (the "Monthly Base Salary") or (b) a request by the Company that Employee relocate more than 50 miles away from the current location of the principal executive offices of the Company. 2. BENEFITS IN THE EVENT OF A TERMINATION FOLLOWING A CHANGE IN CONTROL. In the event of a Termination Following a Change in Control, the Employee shall be entitled to receive the following: 2.1. MONTHLY BASE SALARY. Commencing on the Termination Date, Employee shall receive Monthly Base Salary, at a rate equal to the highest Monthly Base Salary paid to Employee within the six (6) months preceding the Termination Date, each month during the Continuation Period. At the option of the Company, all or part of such Monthly Base Salary may be paid in a lump sum. 2.2. BONUS. Commencing on the Termination Date, Employee shall receive, each month during the Continuation Period, an amount equal to 1/12 of the annual cash bonus paid (or to be paid) to Employee with respect to the last full calendar year completed prior to the Change in Control. At the option of the Company, all or part of such payments may be made in a lump sum. 3. MULTIPLE BENEFITS. To the extent that any other agreement ("Other Agreement") between the Employee and the Company would provide for salary continuation (or a lump sum payment in lieu of salary continuation) and bonus payments under the same circumstances as such benefits would be provided pursuant to Sections 2.1 and 2.2 hereof, then Employee shall not receive such benefits under both the Other Agreement and Sections 2.1 and 2.2, but shall instead receive the greater of the salary continuation benefit payable under either Section 2.1 or the Other Agreement and the greater of the bonus benefit payable under either Section 2.2 and the Other Agreement. Except as provided by the foregoing sentence, the benefits payable under this Agreement shall be in addition to, and not in lieu of, any other benefits that may be provided under any plan, program or agreement. 4. EMPLOYMENT. The sole purpose of this Agreement is to provide Employee with severance benefits in the event of a Termination Following a Change in Control. This Agreement is not an employment agreement. This Agreement shall not affect any right of the Company to terminate Employee's employment at any time. 5. HEADINGS. The headings used in this Agreement are for convenience only, and shall not be used to construe the terms and conditions of the Agreement. 6. GOVERNING LAW. This Agreement shall be governed by and construed according to the laws of the State of California. The terms of this Agreement shall bind and shall inure to the benefit of the successors and assigns of the parties hereto. IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the date first set forth above. ROBERT HALF INTERNATIONAL INC. ------------------------- ------------------------- Employee EX-21 5 EXHIBIT 21 EXHIBIT 21 LIST OF SUBSIDIARIES
JURISDICTION OF NAME OF SUBSIDIARY INCORPORATION - ------------------------------------------------------------------------ -------------------- RH Holding Company, Inc. California LegalTeam, Inc. California Benchmark Staffing, Inc. California Benchmark Resources, Inc. California Robert Half Licensing, Inc. California Robert Half of California, Inc. California Cooperative Resources, Inc. California Golden State Temporaries, Inc. California Merlin Freelancers, Inc. California TM Holdings, Inc. California Robert Half of Texas G.P. Ltd. Delaware XYZ-II, Inc. Delaware Atlantic Temporaries, Inc. Delaware Texas Temp Gen, Inc. Delaware Texas Temp Lim, Inc. Delaware Jersey Temporaries, Inc. Delaware TM Digital, Inc. Delaware Robert Half Incorporated Florida R-H International Advertising Fund, Inc. Florida OfficeTeam Inc. Louisiana Robert Half Corporation Nevada Robert Half Nevada Staff, Inc. Nevada Tripoli Associates Corporation New York Robert Half of Pennsylvania, Inc. Pennsylvania Texas Temp Limited Partnership Texas RHT, L.P. (a limited partnership) Texas Robert Half Australia Pty. Ltd. Australia RHI Belgium S.A./N.V. Belgium Robert Half Belgium S.A./N.V. Belgium Robert Half Canada Inc. Canada Robert Half France S.A. France Accountemps S.A.R.L. France Robert Half S.A. France Robert Half Limited United Kingdom Robert Half Personnel (Midlands) Limited United Kingdom Envaward Limited United Kingdom Hatlon Limited United Kingdom Smiths Recruitment Limited United Kingdom Robert Half Deutschland Germany
EX-23 6 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants we hereby consent to the incorporation by reference of our report dated January 21, 2000 into the Company's Registration Statements on Form S-8 (nos. 33-14706, 33-32622, 33-32623, 33-39187, 33-39204, 33-40795, 33-52617, 33-56639, 33-56641, 33-57763, 33-62138, 33-62140, 33-65401, 33-65403, 333-05743, 333-05745, 333-18283, 333-18339, 333-42471, 333-42573, 333-42343, 333-42269, 333-68193, 333-68135, 333-68273, 333-79793, 333-79829, 333-88001, 333-91173, 333-91151 and 333-91167). /s/ ARTHUR ANDERSEN LLP San Francisco, California January 21, 2000 EX-27 7 EXHIBIT 27
5 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 151,074 0 322,702 13,424 0 490,539 193,315 82,413 777,188 176,207 3,495 0 0 88 576,015 777,188 0 2,081,321 0 1,219,270 4,990 0 (6,041) 234,697 93,256 141,441 0 0 0 141,441 1.57 1.53
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