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.
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.
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.
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.
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.
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.
PART II
ITEM 5.
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:
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.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Following is a table of selected financial data of the Company for the last five years:
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.
ITEM 7.
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.
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.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
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.
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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.
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
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.
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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
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):
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.
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):
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):
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):
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:
The deferred portion of the tax provisions consisted of the following (in thousands):
The net deferred income tax liability shown on the balance sheet is comprised of the following (in thousands):
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):
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):
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:
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.
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:
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.
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):
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.
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.
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
ITEM 9.
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.
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
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* 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:
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)
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.
EXHIBIT INDEX
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* Management contract or compensatory plan required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.