Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Annual Report -- [x] Reg. S-K Item 405 28 160K
2: EX-3.2 Articles of Incorporation/Organization or By-Laws 11 60K
9: EX-10.10 Material Contract 10 58K
10: EX-10.16 Material Contract 5 31K
11: EX-10.17 Material Contract 4 17K
3: EX-10.2 Material Contract 1 9K
4: EX-10.3 Material Contract 5 33K
5: EX-10.4 Material Contract 7 46K
6: EX-10.6 Material Contract 3 15K
7: EX-10.7 Material Contract 6 38K
8: EX-10.8 Material Contract 7 45K
12: EX-11 Statement re: Computation of Earnings Per Share 1 9K
13: EX-21 Subsidiaries of the Registrant 1 9K
14: EX-23 Consent of Experts or Counsel 1 8K
15: EX-27 Financial Data Schedule (Pre-XBRL) 2 10K
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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, 1996
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: (415) 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 28, 1997, the aggregate market value of the Common Stock held
by non-affiliates of the registrant was approximately $2,262,309,000 based on
the closing sale price on that date. This amount excludes the market value of
5,673,627 shares of Common Stock held by registrant's directors and officers and
their affiliates.
As of February 28, 1997, there were outstanding 60,023,397 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 1997, 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.
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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
permanent employees in paralegal, legal administrative and other legal support
positions.
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 in 47 separate
transactions, and has acquired 17 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 the ACCOUNTEMPS and ROBERT
HALF names, 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 200
offices in 37 states and 5 foreign countries and placed approximately 129,000
employees on temporary assignment with clients in 1996.
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, from over 150 locations in the United States
and Canada. 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 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. RHI Consulting conducts its activities from over
60 locations in the United States, Canada and Europe.
THE AFFILIATES
In 1992, the Company acquired THE AFFILIATES, a small operation involving
only a limited number of offices, which places temporary and permanent employees
in paralegal, legal administrative and legal secretarial positions. 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.
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. Advertising directed to clients and
employment candidates consists primarily of yellow pages advertisements,
classified advertisements and radio. 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
print advertisements in national newspapers, magazines and certain trade
journals. Joint marketing arrangements have been entered into with Microsoft,
Lotus Development Corporation, WordPerfect Corporation, Peachtree Software,
Inc., 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 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- and RHI
CONSULTING-Registered Trademark- 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 200 offices in 37 states and five foreign countries. Office managers are
responsible for most activities of their offices, including sales, local
advertising and marketing and recruitment.
2
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 2,900 full-time staff employees. The Company's
offices placed approximately 129,000 employees on temporary assignments with
clients during 1996. 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 a single business segment. (See
Item 8. Financial Statements and Supplementary Data for financial information
about the Company.)
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. The Company does not have any material
expenditures for research and development. Compliance with federal, state or
local environmental protection laws has no material effect on the capital
expenditures, earnings or competitive position of the Company.
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 200 offices located in the United
States, Canada, the United Kingdom, Belgium, France and the Netherlands. All of
the offices are leased.
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.
3
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, 1996, there were approximately
1,600 holders of record of the Common Stock.
Following is a list by fiscal quarters of the sales prices of the stock as
quoted on the New York Stock Exchange, adjusted, as appropriate, to reflect the
two-for-one stock split effected in the form of a stock dividend in June 1996:
[Download Table]
SALES PRICES
--------------------
1996 HIGH LOW
-------------------------------- -------- ---------
4th Quarter..................... $41 1/2 $32 5/8
3rd Quarter..................... $40 1/4 $24 1/8
2nd Quarter..................... $30 7/16 $24 3/8
1st Quarter..................... $24 7/8 $19 1/2
SALES PRICES
--------------------
1995 HIGH LOW
-------------------------------- -------- ---------
4th Quarter..................... $22 5/16 $15 15/16
3rd Quarter..................... $17 15/16 $12 5/8
2nd Quarter..................... $14 5/16 $ 9 13/16
1st Quarter..................... $13 5/16 $10 1/2
No cash dividends were paid in 1996 or 1995. 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.
4
ITEM 6. SELECTED FINANCIAL DATA
Following is a table of selected financial data of the Company for the last
five years:
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
INCOME STATEMENT DATA:
Net service revenues................................. $ 898,635 $ 628,526 $ 446,328 $ 306,166 $ 220,179
Direct costs of services, consisting of payroll,
payroll taxes and insurance costs for temporary
employees........................................... 545,343 384,449 273,327 188,292 131,875
---------- ---------- ---------- ---------- ----------
Gross margin......................................... 353,292 244,077 173,001 117,874 88,304
Selling, general and administrative expenses......... 246,485 170,684 121,640 88,074 72,136
Amortization of intangible assets.................... 5,405 4,767 4,584 4,251 3,961
Interest (income) expense............................ (2,243) (463) 1,570 3,992 4,301
---------- ---------- ---------- ---------- ----------
Income before income taxes........................... 103,645 69,089 45,207 21,557 7,906
Provision for income taxes........................... 42,543 28,791 19,090 9,834 3,524
---------- ---------- ---------- ---------- ----------
Net income........................................... $ 61,102 $ 40,298 $ 26,117 $ 11,723 $ 4,382
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME PER SHARE:.................................... $ 1.00 $ .68 $ .46 $ .23 $ .09
WEIGHTED AVERAGE NUMBER OF SHARES:................... 61,178 59,417 56,969 50,520 48,014
[Enlarge/Download Table]
DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
BALANCE SHEET DATA:
Intangible assets, net............................... $ 174,663 $ 155,441 $ 152,824 $ 152,156 $ 143,757
Total assets......................................... 416,012 301,140 227,761 204,598 181,999
Debt financing....................................... 6,611 5,725 4,214 32,740 61,855
Stockholders' equity................................. 308,445 227,930 176,995 133,602 90,972
All shares and per share amounts have been restated to retroactively reflect
the two-for-one stock splits effected in the form of a stock dividend in both
June 1996 and August 1994.
5
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1996
Temporary services revenues were $829 million, $577 million and $406 million
for the years ended December 31, 1996, 1995 and 1994, respectively, increasing
by 44% during 1996 and 42% during 1995. The increase in revenues during these
periods reflected in part revenues generated from the Company's
OFFICETEAM-REGISTERED TRADEMARK- and RHI CONSULTING-REGISTERED TRADEMARK-
divisions, which were started in 1991 and 1994, respectively. Permanent
placement revenues were $70 million, $52 million and $40 million for the years
ended December 31, 1996, 1995 and 1994, respectively, increasing by 35% during
1996 and 30% during 1995. Overall revenue increases reflect continued
improvement in demand for the Company's services, which the Company believes is
a result of increased acceptance in the use of professional staffing services.
Revenues from companies acquired during 1996, 1995 and 1994 were not material.
The Company currently has more than 200 offices in 37 states and five
foreign countries. Domestic operations represented 90% of revenues for both the
years ended December 31, 1996 and 1995 and 91% of revenues for the year ended
December 31, 1994. Foreign operations represented 10% of revenues for both the
years ended December 31, 1996 and 1995 and 9% of revenues for the year ended
December 31, 1994.
Gross margin dollars from the Company's temporary services represent
revenues less direct costs of services, which consists 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 $283 million, $192 million and $133 million for the years ended
December 31, 1996, 1995 and 1994, respectively, increasing by 47% in 1996 and
44% in 1995. Gross margin amounts equaled 34% of revenues for temporary services
for the year ended December 31, 1996, and 33% for both the years ended December
31, 1995 and 1994, 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 $70 million, $52
million and $40 million for each of the years ended December 31, 1996, 1995 and
1994, respectively, increasing by 35% and 30% in 1996 and 1995, respectively.
Selling, general and administrative expenses were $246 million during 1996
compared to $171 million in 1995 and $122 million in 1994. Selling, general and
administrative expenses as a percentage of revenues were 27% in all three of the
years ended December 31, 1996, 1995 and 1994. Selling, general and
administrative expenses consist primarily of staff compensation, advertising and
occupancy costs, most of which generally follow changes in revenues.
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, 1996.
Intangible assets represented 42% of total assets and 57% of total stockholders'
equity at December 31, 1996.
Interest income for the years ended December 31, 1996, 1995 and 1994 was
$2,948,000, $1,237,000 and $144,000, respectively. Interest expense for the
years ended December 31, 1996, 1995 and 1994 was $705,000, $774,000 and
$1,714,000, respectively. These changes reflect an increase in cash and cash
equivalents.
6
The provision for income taxes was 41% for the year ended December 31, 1996
and 42% for both the years ended December 31, 1995 and 1994. The decrease in
1996 is the result of a smaller percentage of non-deductible intangible
expenses.
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 personnel
services acquisitions, capital expenditures and principal payments on
outstanding notes payable. No open market purchases of the Company's stock were
made during the year ended December 31, 1996 and in November 1996 the Company
formally terminated its previously approved 2 million share repurchase program.
For the year ended December 31, 1996, the Company generated $54 million from
operations, used $23 million in investing activities and provided $7 million
from financing activities.
The Company's working capital at December 31, 1996 included $80 million in
cash and cash equivalents. In addition at December 31, 1996, the Company had
available $66 million of its $75 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, 1996, the Company had no material capital commitments.
The Company's revolving bank line has scheduled reductions in availability
through 2001 when the agreement terminates.
7
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
[Enlarge/Download Table]
DECEMBER 31,
----------------------
1996 1995
---------- ----------
ASSETS:
Cash and cash equivalents................................................................. $ 80,181 $ 41,346
Accounts receivable, less allowances of $4,016 and $3,067................................. 125,383 84,955
Other current assets...................................................................... 12,184 7,349
---------- ----------
Total current assets.................................................................... 217,748 133,650
Intangible assets, less accumulated amortization of $39,461 and $33,071................... 174,663 155,441
Other assets.............................................................................. 23,601 12,049
---------- ----------
Total assets............................................................................ $ 416,012 $ 301,140
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses..................................................... $ 15,049 $ 12,631
Accrued payroll costs..................................................................... 66,087 33,853
Income taxes payable...................................................................... 3,883 5,157
Current portion of notes payable and other indebtedness................................... 1,542 4,239
---------- ----------
Total current liabilities............................................................... 86,561 55,880
Notes payable and other indebtedness, less current portion................................ 5,069 1,486
Deferred income taxes..................................................................... 15,937 15,844
---------- ----------
Total liabilities....................................................................... 107,567 73,210
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, $.001 par value, 100,000,000 shares authorized, 59,748,171 and 57,784,622
shares issued and outstanding in 1996 and 1995, respectively.......................... 60 58
Capital surplus......................................................................... 140,473 99,768
Deferred compensation................................................................... (26,802) (9,642)
Accumulated translation adjustments..................................................... 23 51
Retained earnings....................................................................... 194,691 137,695
---------- ----------
Total stockholders' equity............................................................ 308,445 227,930
---------- ----------
Total liabilities and stockholders' equity............................................ $ 416,012 $ 301,140
---------- ----------
---------- ----------
All share amounts have been restated to retroactively reflect the
two-for-one stock split effected in the form of a stock dividend in June 1996.
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
8
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
[Enlarge/Download Table]
YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
Net service revenues......................................................... $ 898,635 $ 628,526 $ 446,328
Direct costs of services, consisting of payroll, payroll taxes and insurance
costs for temporary employees.............................................. 545,343 384,449 273,327
---------- ---------- ----------
Gross margin................................................................. 353,292 244,077 173,001
Selling, general and administrative expenses................................. 246,485 170,684 121,640
Amortization of intangible assets............................................ 5,405 4,767 4,584
Interest (income) expense.................................................... (2,243) (463) 1,570
---------- ---------- ----------
Income before income taxes................................................... 103,645 69,089 45,207
Provision for income taxes................................................... 42,543 28,791 19,090
---------- ---------- ----------
Net income................................................................... $ 61,102 $ 40,298 $ 26,117
---------- ---------- ----------
---------- ---------- ----------
Income per share............................................................. $ 1.00 $ .68 $ .46
---------- ---------- ----------
---------- ---------- ----------
All per share amounts have been restated to retroactively reflect the
two-for-one stock split effected in the form of a stock dividend in June 1996.
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
9
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
[Enlarge/Download Table]
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
COMMON STOCK--SHARES:
Balance at beginning of period................................................ 57,785 56,304 53,674
Issuance of common stock...................................................... -- -- 1,267
Issuance of restricted stock.................................................. 659 468 665
Repurchases of common stock................................................... (197) (228) (229)
Exercises of stock options.................................................... 1,139 1,241 927
Issuance of common stock for acquisitions..................................... 362 -- --
--------- --------- ---------
Balance at end of period.................................................... 59,748 57,785 56,304
--------- --------- ---------
--------- --------- ---------
COMMON STOCK--PAR VALUE:
Balance at beginning of period................................................ $ 58 $ 56 $ 53,674
Issuance of common stock...................................................... -- -- 1
Issuances of restricted stock................................................. 1 1 668
Repurchases of common stock................................................... -- -- (118)
Exercises of stock options.................................................... 1 1 427
Change in par value........................................................... -- -- (54,596)
--------- --------- ---------
Balance at end of period.................................................... $ 60 $ 58 $ 56
--------- --------- ---------
--------- --------- ---------
CAPITAL SURPLUS:
Balance at beginning of period................................................ $ 99,768 $ 82,626 $ 6,335
Issuance of common stock--excess over par value............................... -- -- 12,588
Issuances of restricted stock--excess over par value.......................... 24,019 6,886 4,615
Exercises of stock options--excess over par value............................. 4,120 3,818 1,948
Tax benefits from exercises of stock options and restricted stock vesting..... 12,566 6,438 2,544
Change in par value........................................................... -- -- 54,596
--------- --------- ---------
Balance at end of period.................................................... $ 140,473 $ 99,768 $ 82,626
--------- --------- ---------
--------- --------- ---------
DEFERRED COMPENSATION:
Balance at beginning of period................................................ $ (9,642) $ (5,533) $ (2,113)
Issuances of restricted stock................................................. (24,020) (6,887) (5,283)
Amortization.................................................................. 6,860 2,778 1,863
--------- --------- ---------
Balance at end of period.................................................... $ (26,802) $ (9,642) $ (5,533)
--------- --------- ---------
--------- --------- ---------
ACCUMULATED TRANSLATION ADJUSTMENTS:
Balance at beginning of period................................................ $ 51 $ (541) $ (589)
Translation adjustments....................................................... (28) 592 48
--------- --------- ---------
Balance at end of period.................................................... $ 23 $ 51 $ (541)
--------- --------- ---------
--------- --------- ---------
RETAINED EARNINGS:
Balance at beginning of period................................................ $ 137,695 $ 100,386 $ 76,295
Issuance of common stock for acquisition...................................... 1,285 -- --
Repurchases of common stock--excess over par value............................ (5,391) (2,989) (2,026)
Net income.................................................................... 61,102 40,298 26,117
--------- --------- ---------
Balance at end of period.................................................... $ 194,691 $ 137,695 $ 100,386
--------- --------- ---------
--------- --------- ---------
1995 and 1994 share amounts have been restated to retroactively reflect the
two-for-one stock split effected in the form of a stock dividend in June 1996.
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
10
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
[Enlarge/Download Table]
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
--------- --------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................... $ 61,102 $ 40,298 $ 26,117
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization of intangible assets......................................... 5,405 4,767 4,584
Depreciation expense...................................................... 6,457 3,564 2,673
Provision for deferred income taxes....................................... (1,702) (683) 1,096
Changes in assets and liabilities, net of effects of acquisitions:
Increase (decrease) in accounts receivable................................ (38,565) (24,289) (18,292)
Increase (decrease) in accounts payable, accrued expenses and accrued
payroll costs........................................................... 17,893 15,106 5,795
Increase (decrease) in income taxes payable............................... (1,274) 2,976 389
Change in other assets, net of change in other liabilities................ 5,109 432 2,997
--------- --------- ----------
Total adjustments........................................................... (6,677) 1,873 (758)
--------- --------- ----------
Net cash and cash equivalents provided by operating activities................ 54,425 42,171 25,359
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Acquisitions, net of cash acquired............................................ (4,620) (1,024) (4,406)
Capital expenditures.......................................................... (18,027) (8,417) (4,768)
--------- --------- ----------
Net cash and cash equivalents used in investing activities.................... (22,647) (9,441) (9,174)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net................................... -- -- 12,589
Borrowings under credit agreement............................................. -- -- 104,900
Repayments under credit agreement............................................. -- -- (135,200)
Principal payments on notes payable and other indebtedness.................... (4,239) (1,289) (384)
Proceeds and tax benefits from exercise of stock options and restricted stock
vesting..................................................................... 16,687 10,256 4,919
Repurchases of common stock and common stock equivalents...................... (5,391) (2,989) (2,144)
--------- --------- ----------
Net cash and cash equivalents provided by (used in) financing activities...... 7,057 5,978 (15,320)
--------- --------- ----------
Net increase in cash and cash equivalents..................................... 38,835 38,708 865
Cash and cash equivalents at beginning of period.............................. 41,346 2,638 1,773
--------- --------- ----------
Cash and cash equivalents at end of period.................................... $ 80,181 $ 41,346 $ 2,638
--------- --------- ----------
--------- --------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest.................................................................... $ 521 $ 405 $ 1,420
Income taxes................................................................ $ 32,163 $ 21,853 $ 14,609
Acquisitions:
Assets acquired--
Intangible assets......................................................... $ 9,932 $ 4,697 $ 5,452
Other..................................................................... 2,180 753 1,694
Liabilities incurred--
Notes payable and contracts............................................... (5,125) (2,800) (2,158)
Other..................................................................... (1,082) (1,626) (582)
Common stock issued......................................................... (1,285) -- --
--------- --------- ----------
Cash paid, net of cash acquired............................................. $ 4,620 $ 1,024 $ 4,406
--------- --------- ----------
--------- --------- ----------
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
11
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-REGISTERED TRADEMARK-, ROBERT HALF-REGISTERED TRADEMARK-,
OFFICETEAM-REGISTERED TRADEMARK- and RHI CONSULTING-REGISTERED TRADEMARK-. The
Company, through its ACCOUNTEMPS and ROBERT HALF divisions, is the world's
largest specialized provider of temporary and permanent personnel in the fields
of accounting and finance. OfficeTeam specializes in skilled temporary
administrative personnel and RHI Consulting provides contract information
technology professionals. Revenues are predominantly from temporary services.
The Company operates in the United States, Canada and Europe. 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 1995 and 1994 financial statements to
conform to the 1996 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 an original 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 is less
than their carrying value. Based upon its most recent analysis, the Company
believes that no material impairment of intangible assets exists at December 31,
1996.
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 are translated at the current exchange rates at the end of the
period, and the related translation adjustments are recorded as part of
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.
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 64 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 personnel
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE B--ACQUISITIONS (CONTINUED)
services businesses. The Company has paid approximately $206 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.
The acquisitions made during 1996, 1995 and 1994 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. These are due in varying installments,
carry varying interest rates and in aggregate amounted to $6,611,000 at December
31, 1996 and $5,725,000 at December 31, 1995. At December 31, 1996, $5,965,000
of the notes was 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, 1996 (in thousands):
[Download Table]
1997................................................................ $ 1,542
1998................................................................ 2,370
1999................................................................ 46
2000................................................................ 53
2001................................................................ 57
Thereafter.......................................................... 2,543
---------
$ 6,611
---------
---------
At December 31, 1996, all of the notes carried fixed rates and the weighted
average interest rate for the above was approximately 6.9%, 7.3% and 8.2% for
the years ended December 31, 1996, 1995 and 1994, respectively.
NOTE D--BANK LOAN (REVOLVING CREDIT)
The bank loan is an unsecured credit facility which provides a line of
credit of up to $75,000,000, 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.
As of December 31, 1996 and 1995, the Company had no borrowings on the line
of credit outstanding and had used $8,683,000 and $3,408,000 in debt support
standby letters of credit, respectively. There is a commitment fee on the unused
portion of the entire credit facility of .175%. The loan is subject to certain
financial covenants which also affect the interest rates charged.
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE D--BANK LOAN (REVOLVING CREDIT) (CONTINUED)
The credit facility has the following scheduled reduction in availability
(in thousands):
[Download Table]
1997............................................................... $ 15,000
1998............................................................... $ 15,000
1999............................................................... $ 15,000
2000............................................................... $ 15,000
2001............................................................... $ 15,000
The final maturity date for the credit facility is August 31, 2001.
NOTE E--ACCRUED PAYROLL COSTS
Accrued payroll costs consists of the following at December 31, 1996 and
1995 (in thousands):
[Enlarge/Download Table]
1996 1995
--------- ---------
Payroll and bonuses..................................................... $ 28,374 $ 15,856
Employee benefits and workers' compensation............................. 30,126 11,182
Payroll taxes........................................................... 7,587 6,815
--------- ---------
$ 66,087 $ 33,853
--------- ---------
--------- ---------
NOTE F--STOCKHOLDERS' EQUITY
In June 1996, the Company effected a two-for-one stock split in the form of
a stock dividend. 1995 and 1994 share and per share amounts have been restated
to retroactively reflect the two-for-one stock split. In August 1994, the
Company effected a two-for-one stock split in the form of a stock dividend. 1994
share and per share amounts have been restated to retroactively reflect the
two-for-one stock split.
NOTE G--INCOME TAXES
The provision for income taxes for the years ended December 31, 1996, 1995
and 1994 consisted of the following (in thousands):
[Enlarge/Download Table]
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
Current:
Federal.................................................... $ 34,392 $ 22,061 $ 14,072
State...................................................... 7,457 4,728 3,155
Foreign.................................................... 2,396 2,685 767
Deferred--principally domestic............................... (1,702) (683) 1,096
--------- --------- ---------
$ 42,543 $ 28,791 $ 19,090
--------- --------- ---------
--------- --------- ---------
14
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:
[Enlarge/Download Table]
YEARS ENDED DECEMBER 31,
----------------------------
1996 1995 1994
---- ---- ----
Federal U.S. income tax rate................................ 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit.............. 4.5 4.5 4.7
Amortization of intangible assets........................... 1.0 1.5 2.0
Other, net.................................................. .5 .7 .5
---- ---- ----
Effective tax rate.......................................... 41.0% 41.7% 42.2%
---- ---- ----
---- ---- ----
The deferred portion of the tax provisions consisted of the following (in
thousands):
[Enlarge/Download Table]
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
Amortization of franchise rights............................... $ 691 $ 1,650 $ 1,629
Accrued expenses, deducted for tax when paid................... (2,468) (2,068) (524)
Other, net..................................................... 75 (265) (9)
--------- --------- ---------
$ (1,702) $ (683) $ 1,096
--------- --------- ---------
--------- --------- ---------
The net deferred income tax liability shown on the balance sheet is
comprised of the following (in thousands):
[Enlarge/Download Table]
DECEMBER 31,
--------------------
1996 1995
--------- ---------
Deferred income tax assets.............................................. $ (2,536) $ (1,304)
Deferred income tax liabilities......................................... 18,473 17,148
--------- ---------
$ 15,937 $ 15,844
--------- ---------
--------- ---------
No valuation allowances against deferred tax assets were required for the
years ended December 31, 1996 and 1995.
The components of the net deferred income tax liability at December 31, 1996
and 1995, were as follows (in thousands):
[Enlarge/Download Table]
DECEMBER 31,
--------------------
1996 1995
--------- ---------
Amortization of intangible assets....................................... $ 16,954 $ 16,216
Foreign taxes........................................................... 151 200
Other................................................................... (1,168) (572)
--------- ---------
$ 15,937 $ 15,844
--------- ---------
--------- ---------
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE H--COMMITMENTS
Rental expense, primarily for office premises, amounted to $13,315,000,
$11,027,000 and $9,183,000 for the years ended December 31, 1996, 1995 and 1994,
respectively. The approximate minimum rental commitments for 1997 and thereafter
under non-cancelable leases in effect at December 31, 1996, are as follows (in
thousands):
[Download Table]
1997............................................................... $ 14,429
1998............................................................... 13,636
1999............................................................... 11,936
2000............................................................... 9,110
2001............................................................... 6,442
Thereafter......................................................... 14,481
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 Compensation Committee of the Board of
Directors. Grants vest between four 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, and generally have a term of ten 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 (SFAS 123), the Company's
pro forma net income and earnings per share would been as follows:
[Enlarge/Download Table]
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1995
------------- -------------
Net Income (in thousands) As Reported........................ $ 61,102 $ 40,298
Pro forma............................ $ 59,666 $ 40,174
Income per Share As Reported......................... $ 1.00 $ .68
Pro forma............................ $ .98 $ .68
1995 per share amounts have been restated to retroactively reflect the
two-for-one stock split effected in the form of a stock dividend in June 1996.
Since the pro forma amounts do not include amounts for stock options granted
before January 1, 1995, the pro forma amounts may not be representative of the
disclosed effects on pro forma net income and 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 1996 and 1995, respectively: no dividend yield for both years;
expected volatility of 32% to 33%; risk free interest rates of 5.3% to 6.7% and
5.4% to 7.9%; and expected lives of 5.5 to 7.2 years for both years.
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE I--STOCK PLANS (CONTINUED)
The following table reflects activity under all stock plans from January 1,
1994 through December 31, 1996, and the exercise prices:
[Enlarge/Download Table]
STOCK OPTION PLANS
-------------------------------
WEIGHTED
RESTRICTED NUMBER OF AVERAGE PRICE
STOCK PLANS SHARES PER SHARE
------------- ---------- -------------------
Outstanding, January 1, 1994.................................. 903,202 5,885,000 $ 3.61
Granted..................................................... 689,628 1,673,768 $ 10.38
Exercised................................................... -- (927,030) $ 2.56
Restrictions lapsed......................................... (312,200) -- --
Forfeited................................................... (27,294) (365,616) $ 4.02
------------- ---------- --------
Outstanding, December 31, 1994................................ 1,253,336 6,266,122 $ 5.55
Granted..................................................... 496,784 1,381,262 $ 19.01
Exercised................................................... -- (1,240,814) $ 3.08
Restrictions lapsed......................................... (375,542) -- --
Forfeited................................................... (28,564) (361,338) $ 7.18
------------- ---------- --------
Outstanding, December 31, 1995................................ 1,346,014 6,045,232 $ 9.06
Granted..................................................... 665,661 1,126,429 $ 31.41
Exercised................................................... -- (1,139,021) $ 3.61
Restrictions lapsed......................................... (274,886) -- --
Forfeited................................................... (6,066) (258,286) $ 14.90
------------- ---------- --------
Outstanding, December 31, 1996 1,730,723 5,774,354 $ 14.29
------------- ---------- --------
------------- ---------- --------
All share and per share amounts have been restated to retroactively reflect
the two-for-one stock split effected in the form of a stock dividend in June
1996. The options outstanding at December 31, 1996 have a weighted average
exercise price of $14.29 and a weighted average remaining life of approximately
8 years.
As of December 31, 1996, an aggregate of 2,317,777 options to purchase
common stock were vested with a weighted average exercise price of $6.75. At
December 31, 1996, the total number of available shares to grant under the plans
(consisting of either restricted stock or options) was 860,388.
NOTE J--PREFERRED SHARE PURCHASE RIGHTS
Pursuant to the Company's stockholder rights agreement, each share of common
stock carries one right to purchase one one-hundredth of a share 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 $100 per right, subject to adjustment.
Following certain other events after the rights become exercisable, each right
entitles its holder to purchase for $100 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.
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE K--INCOME PER SHARE
Income per fully diluted share has been computed using the weighted average
number of shares of fully diluted common stock and common stock equivalents
outstanding during each period (61,178,000, 59,417,000 and 56,969,000 shares for
the years ending December 31, 1996, 1995 and 1994, respectively).
NOTE L--QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tabulation shows certain quarterly financial data for 1996 and
1995 (in thousands, except per share amounts):
[Enlarge/Download Table]
QUARTER
----------------------------------------------
1996 1 2 3 4 YEAR
----------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Net service revenues................................. $ 196,239 $ 210,649 $ 232,950 $ 258,797 $ 898,635
Gross margin......................................... 76,642 83,921 91,788 100,941 353,292
Income before income taxes........................... 22,478 24,234 27,058 29,875 103,645
Net income........................................... 13,239 14,224 15,946 17,693 61,102
Income per share..................................... $ .22 $ .23 $ .26 $ .29 $ 1.00
QUARTER
----------------------------------------------
1995 1 2 3 4 YEAR
----------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Net service revenues................................. $ 144,739 $ 148,570 $ 159,303 $ 175,914 $ 628,526
Gross margin......................................... 56,039 57,732 62,196 68,110 244,077
Income before income taxes........................... 15,502 16,053 17,865 19,669 69,089
Net income........................................... 9,005 9,350 10,463 11,480 40,298
Income per share..................................... $ .15 $ .16 $ .18 $ .19 $ .68
All share and per share amounts have been restated to retroactively reflect
the two-for-one stock split effected in the form of a stock dividend in June
1996.
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE M--SEGMENT REPORTING
Information about the Company's operations in different geographic locations
for each of the three years in the period ended December 31, 1996, is shown
below. The Company's areas of operations outside of the United States include
Canada, the United Kingdom, Belgium, France and the Netherlands. Revenues
represent total net revenues from the respective geographic areas. Operating
income is net revenues less operating costs and expenses pertaining to specific
geographic areas. Foreign operating income reflects charges for U.S. management
fees and amortization of intangible assets of $1,533,000, $992,000 and $956,000
for the years ended December 31, 1996, 1995 and 1994, respectively. Domestic
operating income reflects charges for amortization of intangibles of $4,935,000
and $4,307,000 and $4,137,000 for the years ended December 31, 1996, 1995 and
1994, respectively. Identifiable assets are those assets used in the geographic
areas and are after elimination of intercompany balances.
[Enlarge/Download Table]
YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
(IN THOUSANDS)
Revenues
Domestic............................................... $ 812,751 $ 564,564 $ 404,852
Foreign................................................ 85,884 63,962 41,476
---------- ---------- ----------
$ 898,635 $ 628,526 $ 446,328
---------- ---------- ----------
---------- ---------- ----------
Operating Income
Domestic............................................... $ 94,260 $ 63,861 $ 44,700
Foreign................................................ 7,142 4,765 2,077
---------- ---------- ----------
$ 101,402 $ 68,626 $ 46,777
---------- ---------- ----------
---------- ---------- ----------
Assets
Domestic............................................... $ 375,576 $ 267,487 $ 200,329
Foreign................................................ 40,436 33,653 27,432
---------- ---------- ----------
$ 416,012 $ 301,140 $ 227,761
---------- ---------- ----------
---------- ---------- ----------
19
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, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1996. 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, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
January 24, 1997
20
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 1997.
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, 1996 and
1995.
Consolidated statements of income for the years ended December 31, 1996,
1995 and 1994.
Consolidated statements of stockholders' equity for the years ended
December 31, 1996, 1995 and 1994.
Consolidated statements of cash flows for the years ended December 31,
1996, 1995 and 1994.
Notes to consolidated financial statements.
Report of independent public accountants.
Selected quarterly financial data for the years ended December 31, 1996 and
1995 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
[Download Table]
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, 1996.
3.2 By-Laws.
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 August 15, 1996,
incorporated by reference to Exhibit 1 to Registrant's Form 8-A/A Amendment
No. 3 filed on August 16, 1996.
21
[Download Table]
EXHIBIT
NO. EXHIBIT
------- ---------------------------------------------------------------------------
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. The Second Amendment to the Credit Agreement is filed
with this Annual Report on Form 10-K for the fiscal year ended December 31,
1995. The original Credit Agreement and the First Amendment thereto are
incorporated by reference to Exhibit 10 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1993 and
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1995.
*10.2 Employment Agreement dated as of October 2, 1985, between the Registrant
and Harold M. Messmer, Jr. The Eleventh Amendment to the Employment
Agreement is filed with this Annual Report on Form 10-K for the fiscal year
ended December 31, 1996. The original Employment Agreement and the first
ten 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 and (x) Exhibit 10.7 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995.
*10.3 Key Executive Retirement Plan--Level II, as amended.
*10.4 Restated Retirement Agreement between the Registrant and Harold M. Messmer,
Jr.
*10.5 1985 Stock Option Plan, as amended, incorporated by reference to Exhibit
10.5 to the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1996.
*10.6 Excise Tax Restoration Agreement dated November 5, 1996.
*10.7 Outside Directors' Option Plan, as amended.
*10.8 1989 Restricted Stock Plan, as amended.
*10.9 StockPlus Plan, as amended, incorporated by reference to Exhibit 10.3 to
the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1996.
*10.10 1993 Incentive Plan, as amended.
*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 Severance Agreement, incorporated by reference to (i) Exhibit 10.26
to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989 and (ii) Exhibit 19.2 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1990.
*10.14 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.
*10.15 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.
*10.16 Senior Executive Retirement Plan, as amended.
*10.17 Collateral Assignment of Split Dollar Insurance Agreement.
22
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EXHIBIT
NO. EXHIBIT
------- ---------------------------------------------------------------------------
11 Statement re computation of per share earnings.
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 the following report on Form 8-K during the fiscal
quarter ending December 31, 1996:
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DATE ITEM REPORTED
---------------------- -------------------------
November 15, 1996 Item 5--Other Events
23
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 20, 1997 By: /S/ M. KEITH WADDELL
------------------------------------
M. Keith Waddell
Senior Vice President, Chief
Financial
Officer and Treasurer
(Principal Financial Officer)
24
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.
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Date: March 20, 1997 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 20, 1997 By: /S/ ANDREW S. BERWICK, JR.
------------------------------------------
Andrew S. Berwick, Jr., Director
Date: March 20, 1997 By: /S/ FREDERICK P. FURTH
------------------------------------------
Frederick P. Furth, Director
Date: March 20, 1997 By: /S/ EDWARD W. GIBBONS
------------------------------------------
Edward W. Gibbons, Director
Date: March 20, 1997 By: /S/ FREDERICK A. RICHMAN
------------------------------------------
Frederick A. Richman, Director
Date: March 20, 1997 By: /S/ THOMAS J. RYAN
------------------------------------------
Thomas J. Ryan, Director
Date: March 20, 1997 By: /S/ J. STEPHEN SCHAUB
------------------------------------------
J. Stephen Schaub, Director
Date: March 20, 1997 By: /S/ M. KEITH WADDELL
------------------------------------------
M. Keith Waddell
Senior Vice President, Chief Financial
Officer and Treasurer
(Principal Financial Officer)
Date: March 20, 1997 By: /S/ BARBARA J. FORSBERG
------------------------------------------
Barbara J. Forsberg
Vice President and Controller
(Principal Accounting Officer)
25
EXHIBIT INDEX
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EXHIBIT
NO. EXHIBIT
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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, 1996.
3.2 By-Laws.
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 August 15, 1996,
incorporated by reference to Exhibit 1 to Registrant's Form 8-A/A Amendment
No. 3 filed on August 16, 1996.
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. The Second Amendment to the Credit Agreement is filed
with this Annual Report on Form 10-K for the fiscal year ended December 31,
1995. The original Credit Agreement and the First Amendment thereto are
incorporated by reference to Exhibit 10 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1993 and
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1995.
*10.2 Employment Agreement dated as of October 2, 1985, between the Registrant
and Harold M. Messmer, Jr. The Eleventh Amendment to the Employment
Agreement is filed with this Annual Report on Form 10-K for the fiscal year
ended December 31, 1996. The original Employment Agreement and the first
ten 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 and (x) Exhibit 10.7 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995.
*10.3 Key Executive Retirement Plan--Level II, as amended.
*10.4 Restated Retirement Agreement between the Registrant and Harold M. Messmer,
Jr.
*10.5 1985 Stock Option Plan, as amended, incorporated by reference to Exhibit
10.5 to the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1996.
*10.6 Excise Tax Restoration Agreement dated November 5, 1996.
*10.7 Outside Directors' Option Plan, as amended.
*10.8 1989 Restricted Stock Plan, as amended.
*10.9 StockPlus Plan, as amended, incorporated by reference to Exhibit 10.3 to
the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1996.
*10.10 1993 Incentive Plan, as amended.
*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.
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EXHIBIT
NO. EXHIBIT
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*10.13 Form of Severance Agreement, incorporated by reference to (i) Exhibit 10.26
to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989 and (ii) Exhibit 19.2 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1990.
*10.14 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.
*10.15 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.
*10.16 Senior Executive Retirement Plan, as amended.
*10.17 Collateral Assignment of Split Dollar Insurance Agreement.
11 Statement re computation of per share earnings.
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.
Dates Referenced Herein and Documents Incorporated by Reference
4 Subsequent Filings that Reference this Filing
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