-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H8QGdp3t6lhHf/fk0bXTghV1py4f2iNAgTiCFWRWuqkcrvI8akLuzmTSa5mg6PLk L5D1HlVNHJfdtVeJcyf6hQ== 0001047469-99-010073.txt : 19990318 0001047469-99-010073.hdr.sgml : 19990318 ACCESSION NUMBER: 0001047469-99-010073 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990317 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HALF ROBERT INTERNATIONAL INC /DE/ CENTRAL INDEX KEY: 0000315213 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 941648752 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-10427 FILM NUMBER: 99566830 BUSINESS ADDRESS: STREET 1: 2884 SAND HILL RD STREET 2: STE 200 CITY: MENLO PARK STATE: CA ZIP: 94025 BUSINESS PHONE: 6502346000 MAIL ADDRESS: STREET 1: 2884 SAND HILL ROAD STREET 2: STE 200 CITY: MENLO PARK STATE: CA ZIP: 94025 FORMER COMPANY: FORMER CONFORMED NAME: BOOTHE FINANCIAL CORP /DE/ DATE OF NAME CHANGE: 19870721 FORMER COMPANY: FORMER CONFORMED NAME: BOOTHE INTERIM CORP DATE OF NAME CHANGE: 19600201 10-K405 1 10-K405 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ COMMISSION FILE NUMBER 1-10427 ROBERT HALF INTERNATIONAL INC. (Exact name of registrant as specified in its charter) DELAWARE 94-1648752 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2884 SAND HILL ROAD, SUITE 200, MENLO PARK, CALIFORNIA 94025 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (650) 234-6000 ------------------------ Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED Common Stock, Par Value $.001 per Share New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None ------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ As of March 1, 1999, the aggregate market value of the Common Stock held by non-affiliates of the registrant was approximately $3,022,434,000 based on the closing sale price on that date. This amount excludes the market value of 8,008,598 shares of Common Stock directly or indirectly held by registrant's directors and officers and their affiliates. As of March 1, 1999, there were outstanding 91,099,568 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 1999, are incorporated by reference in Part III of this report. Except as expressly incorporated by reference, the registrant's Proxy Statement shall not be deemed to be part of this report. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS Robert Half International Inc. is the world's largest specialized provider of temporary and permanent personnel in the fields of accounting and finance. Its divisions include ACCOUNTEMPS-Registered Trademark- and ROBERT HALF-Registered Trademark-, providers of temporary and permanent personnel, respectively, in the fields of accounting and finance. The Company, utilizing its experience as a specialized provider of temporary and permanent personnel, has expanded into additional specialty fields. In 1991, the Company formed OFFICETEAM-Registered Trademark- to provide skilled temporary administrative and office personnel. In 1994, the Company established RHI CONSULTING-Registered Trademark- to concentrate on providing temporary and contract information technology professionals in positions ranging from PC support technician to chief information officer. In 1992, the Company acquired THE AFFILIATES-Registered Trademark-, which focuses on placing temporary and regular employees in paralegal, legal administrative and other legal support positions. In 1997, the Company established RHI MANAGEMENT RESOURCES-REGISTERED TRADEMARK- to provide senior level project professionals specializing in the accounting and finance fields. The Company's business was originally founded in 1948. Prior to 1986, the Company was primarily a franchisor of ACCOUNTEMPS and ROBERT HALF offices. Beginning in 1986, the Company and its current management embarked on a strategy of acquiring franchised locations and other local or regional independent providers of specialized temporary service personnel. The Company has acquired all but three of the ACCOUNTEMPS and ROBERT HALF franchises and has also acquired other local or regional providers of specialized temporary service personnel. Since 1986, the Company has significantly expanded operations at many of the acquired locations and has opened many new locations. The Company believes that direct ownership of offices allows it to better monitor and protect the image of its tradenames, promotes a more consistent and higher level of quality and service throughout its network of offices and improves profitability by centralizing many of its administrative functions. The Company currently has more than 230 offices in 39 states and six foreign countries and placed approximately 180,000 employees on temporary assignment with clients in 1998. ACCOUNTEMPS The ACCOUNTEMPS temporary services division offers customers a reliable and economical means of dealing with uneven or peak work loads for accounting, tax and finance personnel caused by such predictable events as vacations, taking inventories, tax work, month-end activities and special projects and such unpredictable events as illness and emergencies. Businesses increasingly view the use of temporary employees as a means of controlling personnel costs and converting such costs from fixed to variable. The cost and inconvenience to clients of hiring and firing permanent employees are eliminated by the use of ACCOUNTEMPS temporaries. The temporary workers are employees of ACCOUNTEMPS and are paid by ACCOUNTEMPS only when working on customer assignments. The customer pays a fixed rate only for hours worked. ACCOUNTEMPS clients may fill their permanent employment needs by using an ACCOUNTEMPS employee on a trial basis and, if so desired, "converting" the temporary position to a permanent position. The client typically pays a one-time fee for such conversions. OFFICETEAM The Company's OFFICETEAM division, which commenced operations in 1991, places temporary and permanent office and administrative personnel, ranging from word processors to office managers. OFFICETEAM operates in much the same fashion as the ACCOUNTEMPS and ROBERT HALF divisions. 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 1 personnel. Fees for successful permanent placements are paid only by the employer and are generally a percentage of the new employee's annual compensation. No fee for permanent placement services is charged to employment candidates. RHI CONSULTING The Company's RHI CONSULTING division, which commenced operations in 1994, specializes in providing information technology contract consultants and placing regular employees in areas ranging from multiple platform systems integration to end-user support, including specialists in programming, networking, systems integration, database design and help desk support. THE AFFILIATES 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. RHI MANAGEMENT RESOURCES The Company's RHI MANAGEMENT RESOURCES division, which commenced operations in 1997, specializes in providing senior level project professionals in the accounting and finance fields, including chief financial officers, controllers, and senior financial analysts, for such tasks as financial systems conversions, expansion into new markets, business process reengineering and post-merger financial consolidation. 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, websites, advertising on the internet 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, Corel Corporation (publisher of WordPerfect), Peachtree Software, Inc., Intuit and Computer Associates International, Inc. and typically provide for cooperative advertising, joint mailings and similar promotional activities. The Company also actively seeks endorsements and affiliations with professional organizations in the business management, office administration and professional secretarial fields. The Company also conducts public relations activities designed to enhance public recognition of the Company and its services. Local employees are encouraged to be active in civic organizations and industry trade groups. The Company owns many trademarks, service marks and tradenames, including the ROBERT HALF-Registered Trademark-, ACCOUNTEMPS-Registered Trademark-, OFFICETEAM-Registered Trademark-, THE AFFILIATES-Registered Trademark-, RHI CONSULTING-Registered Trademark- and RHI MANAGEMENT RESOURCES-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 230 offices in 39 states and six 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 5,200 full-time staff employees. The Company's offices placed approximately 180,000 employees on temporary assignments with clients during 1998. Temporary employees placed by the Company are the Company's employees for all purposes while they are working on assignments. The Company pays the related costs of employment, such as workers' compensation insurance, state and federal unemployment taxes, social security and certain fringe benefits. The Company provides voluntary health insurance coverage to interested temporary employees. OTHER INFORMATION The Company's current business constitutes two business segments. (See Note M of Notes to Consolidated Financial Statement in Item 8. Financial Statements and Supplementary Data for financial information about the Company's segments.) The Company is not dependent upon a single customer or a limited number of customers. The Company's operations are generally more active in the first and fourth quarters of a calendar year. Order backlog is not a material aspect of the Company's business and no material portion of the Company's business is subject to government contracts. Information about foreign operations is contained in Note M of Notes to Consolidated Financial Statements in Item 8. The Company does not have export sales. ITEM 2. PROPERTIES The Company's headquarters is located in Menlo Park, California. Placement activities are conducted through more than 230 offices located in the United States, Canada, the United Kingdom, Belgium, France, the Netherlands and Australia. 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, 1998, there were approximately 2,500 holders of record of the Common Stock. Following is a list by fiscal quarters of the sales prices of the stock, adjusted, as appropriate, to reflect the three-for-two stock split effected in the form of a stock dividend in September 1997:
SALES PRICES -------------------- 1998 HIGH LOW -------------------------------- -------- --------- 4th Quarter..................... $49.19 $29.00 3rd Quarter..................... $58.69 $41.00 2nd Quarter..................... $60.25 $47.13 1st Quarter..................... $49.25 $32.25 SALES PRICES -------------------- 1997 HIGH LOW -------------------------------- -------- --------- 4th Quarter..................... $43.06 $32.88 3rd Quarter..................... $42.67 $31.33 2nd Quarter..................... $31.50 $23.00 1st Quarter..................... $29.83 $22.25
No cash dividends were paid in 1998 or 1997. 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:
YEARS ENDED DECEMBER 31, -------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------ ------------ ---------- ---------- ---------- (IN THOUSANDS) INCOME STATEMENT DATA: Net service revenues............................. $ 1,793,041 $ 1,302,876 $ 898,635 $ 628,526 $ 446,328 Direct costs of services, consisting of payroll, payroll taxes and insurance costs for temporary employees....................................... 1,070,834 785,546 545,343 384,449 273,327 ------------ ------------ ---------- ---------- ---------- Gross margin..................................... 722,207 517,330 353,292 244,077 173,001 Selling, general and administrative expenses..... 501,626 357,766 246,485 170,684 121,640 Amortization of intangible assets................ 4,993 4,926 5,405 4,767 4,584 Interest (income) expense, net................... (5,588) (4,190) (2,243) (463) 1,570 ------------ ------------ ---------- ---------- ---------- Income before income taxes....................... 221,176 158,828 103,645 69,089 45,207 Provision for income taxes....................... 89,596 65,131 42,543 28,791 19,090 ------------ ------------ ---------- ---------- ---------- Net income....................................... $ 131,580 $ 93,697 $ 61,102 $ 40,298 $ 26,117 ------------ ------------ ---------- ---------- ---------- ------------ ------------ ---------- ---------- ----------
YEARS ENDED DECEMBER 31, ---------------------------------------------------------- 1998 1997 1996 1995 1994 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) NET INCOME PER SHARE: BASIC.............................................. $ 1.44 $ 1.03 $ .69 $ .47 $ .32 DILUTED............................................ $ 1.39 $ 1.00 $ .67 $ .46 $ .31 SHARES: BASIC.............................................. 91,650 90,668 88,267 85,479 82,095 DILUTED............................................ 94,822 93,999 91,522 88,488 85,051
DECEMBER 31, ---------------------------------------------------------- 1998 1997 1996 1995 1994 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS) BALANCE SHEET DATA: Intangible assets, net............................... $ 178,363 $ 177,425 $ 174,663 $ 155,441 $ 152,824 Total assets......................................... $ 703,719 $ 561,367 $ 416,012 $ 301,140 $ 227,761 Debt financing....................................... $ 4,712 $ 8,157 $ 6,611 $ 5,725 $ 4,214 Stockholders' equity................................. $ 522,470 $ 418,800 $ 308,445 $ 227,930 $ 176,995
All shares and per share amounts have been restated to retroactively reflect the three-for-two stock split effected in the form of a stock dividend in September 1997 and the two-for-one stock split effected in the form of a stock dividend in June 1996. 5 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain information contained in Management's Discussion and Analysis and in other parts of this report may be deemed forward-looking statements regarding events and financial trends that may affect the Company's future operating results or financial positions. Such statements may be identified by words such as "estimate", "project", "plan", "intend", "believe", "expect", "anticipate", or variations or negatives thereof or by similar or comparable words or phrases. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements. Such risks and uncertainties include, but are not limited to, the following: changes in general or local economic conditions or in the economic condition of any industry, the availability of qualified staff employees and temporary candidates, government regulation of the personnel services industry, general regulations relating to employers and employees, liability risks associated with the operation of a personnel services business, competitive conditions in the personnel services industry, and Year 2000 issues. In addition, it should be noted that, because long-term contracts are not a significant portion of the Company's business, future results cannot be reliably predicted by considering past trends or extrapolating past results. RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1998 Temporary services revenues were $1.65 billion, $1.20 billion and $829 million for the years ended December 31, 1998, 1997 and 1996, respectively, increasing by 38% during 1998 and 45% during 1997. The increase in revenues during these periods reflected in part revenues generated from the Company's OFFICETEAM, RHI CONSULTING, and RHI MANAGEMENT RESOURCES divisions, which were started in 1991, 1994 and 1997, respectively. Permanent placement revenues were $136 million, $100 million and $70 million for the years ended December 31, 1998, 1997 and 1996, respectively, increasing by 36% during 1998 and 43% during 1997. 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 1998, 1997 and 1996 were not material. The Company currently has more than 230 offices in 39 states and six foreign countries. Domestic operations represented 89% of revenues for the year ended December 31, 1998, and 90% of revenues for the years ended December 31, 1997 and 1996. Foreign operations represented 11% of revenues for the year ended December 31, 1998 and 10% of revenues for the years ended December 31, 1997 and 1996. Gross margin dollars from the Company's temporary services represent revenues less direct costs of services, which consist of payroll, payroll taxes and insurance costs for temporary employees. Gross margin dollars from permanent placement services are equal to revenues, as there are no direct costs associated with such revenues. Gross margin dollars for the Company's temporary services were $586 million, $417 million and $283 million for the years ended December 31, 1998, 1997 and 1996, respectively, increasing by 41% in 1998 and 47% in 1997. Gross margin amounts equaled 35% of revenues for temporary services for the years ended December 31, 1998 and 1997, and 34% for the year ended December 31, 1996, 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 $136 million, $100 million and $70 million for each of the years ended December 31, 1998, 1997 and 1996, respectively, increasing by 36% and 43% in 1998 and 1997, respectively. Selling, general and administrative expenses were $502 million during 1998, compared to $358 million in 1997 and $246 million in 1996. Selling, general and administrative expenses as a percentage of revenues were 28% for both the years ended December 31, 1998 and 1997 and 27% for the year ended December 31, 1996. 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 6 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, 1998. Intangible assets represented 25% of total assets and 34% of total stockholders' equity at December 31, 1998. Interest income for the years ended December 31, 1998, 1997 and 1996 was $6,947,000, $5,139,000 and $2,948,000, respectively. Interest expense for the years ended December 31, 1998, 1997 and 1996 was $1,359,000, $949,000 and $705,000, respectively. These changes primarily reflect an increase in cash and cash equivalents. The provision for income taxes was 41% for the years ended December 31, 1998, 1997, and 1996. LIQUIDITY AND CAPITAL RESOURCES The change in the Company's liquidity during the past three years is the net effect of funds generated by operations and the funds used for the staffing services acquisitions, capital expenditures and principal payments on outstanding notes payable. In October 1997, the Company authorized the repurchase, from time to time, of up to four million shares of the Company's common stock on the open market or in privately negotiated transactions, depending on market conditions. During the year ended December 31, 1998, the Company repurchased approximately 1,625,000 shares of common stock on the open market for a total cost of $66.3 million. Since 1997, the Company has repurchased approximately 1,725,000 shares on the open market pursuant to this program. For additional information regarding the Company's stock repurchase program, see Note F of the Notes to Consolidated Financial Statements. Repurchases of the securities have been funded with cash generated from operations. For the year ended December 31, 1998, the Company generated $155 million from operations, used $71 million in investing activities and used $49 million in financing activities. The Company's working capital at December 31, 1998, included $166 million in cash and cash equivalents. In addition, at December 31, 1998, the Company had available $73 million of its $80 million bank revolving line of credit. The Company's working capital requirements consist primarily of the financing of accounts receivable. While there can be no assurances in this regard, the Company expects that internally generated cash plus the bank revolving line of credit will be sufficient to support the working capital needs of the Company, the Company's fixed payments, and other obligations on both a short and long-term basis. As of December 31, 1998, the Company had no material capital commitments. The Company's primary exposures related to the Year 2000 are in its key internal information systems. The Company is addressing the Year 2000 exposures as part of its strategic plan for upgrading core systems. In 1997, the Company initiated a number of major system projects to replace core computer hardware, networking, and software systems in the U.S. with new technology. The Company has purchased software from outside vendors and is working with outside consultants to install the software and train employees. The Company's key vendors supplying this technology have asserted that these hardware, networking, and software systems are Year 2000 compliant. The Company does not plan to test these systems for Year 2000 compliance given the contractual representations made by its key vendors. The Company is currently rolling out these new systems throughout the organization in phases, by location. The first phase has been completed on schedule and the remaining are scheduled to be complete before the Year 2000. The Company is also in the process of upgrading all desktop computers to a model that is Year 2000 compliant and expects to complete this upgrade in 1999. The Company expects to spend 7 in excess of $44 million on these systems and desktop upgrade projects of which approximately $37 million has been incurred to date. The Company is undertaking steps to assess the effect of the Year 2000 issue with respect to its foreign operating units and suppliers and at this time, cannot determine the impact it will have. Contingency plans will be developed if it appears the Company or its key suppliers will not be Year 2000 compliant as noncompliance would have a material adverse impact on the Company's operations. The Company will adopt SOP 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED FOR INTERNAL USE, which requires the capitalization of certain costs related to the development of software for internal use in fiscal year 1999. The Company believes that the adoption of this standard will not have a material impact on its financial results. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's market risk sensitive instruments do not subject the Company to material market risk exposures. 8 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
DECEMBER 31, ---------------------- 1998 1997 ---------- ---------- ASSETS: Cash and cash equivalents................................................................. $ 166,060 $ 131,349 Accounts receivable, less allowances of $10,176 and $7,164................................ 240,690 186,899 Other current assets...................................................................... 23,656 15,757 ---------- ---------- Total current assets.................................................................... 430,406 334,005 Intangible assets, less accumulated amortization of $53,236 and $46,001................... 178,363 177,425 Property and equipment, less accumulated depreciation of $48,900 and $29,962.............. 94,950 49,937 ---------- ---------- Total assets............................................................................ $ 703,719 $ 561,367 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY: Accounts payable and accrued expenses..................................................... $ 23,659 $ 20,285 Accrued payroll costs..................................................................... 124,068 95,925 Income taxes payable...................................................................... 3,810 2,258 Current portion of notes payable and other indebtedness................................... 1,308 3,627 ---------- ---------- Total current liabilities............................................................... 152,845 122,095 Notes payable and other indebtedness, less current portion................................ 3,404 4,530 Deferred income taxes..................................................................... 25,000 15,942 ---------- ---------- Total liabilities....................................................................... 181,249 142,567 ---------- ---------- Commitments and Contingencies STOCKHOLDERS' EQUITY: Common stock, $.001 par value authorized 260,000,000 shares; issued and outstanding 91,225,353 and 91,208,029 shares........................................................ 91 91 Capital surplus........................................................................... 270,609 196,888 Deferred compensation..................................................................... (56,790) (44,276) Accumulated other comprehensive income.................................................... (1,244) (1,347) Retained earnings......................................................................... 309,804 267,444 ---------- ---------- Total stockholders' equity.............................................................. 522,470 418,800 ---------- ---------- Total liabilities and stockholders' equity.............................................. $ 703,719 $ 561,367 ---------- ---------- ---------- ----------
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 9 ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, -------------------------------------- 1998 1997 1996 ------------ ------------ ---------- Net service revenues...................................................... $ 1,793,041 $ 1,302,876 $ 898,635 Direct costs of services, consisting of payroll, payroll taxes and insurance costs for temporary employees................................. 1,070,834 785,546 545,343 ------------ ------------ ---------- Gross margin.............................................................. 722,207 517,330 353,292 Selling, general and administrative expenses.............................. 501,626 357,766 246,485 Amortization of intangible assets......................................... 4,993 4,926 5,405 Interest income, net...................................................... (5,588) (4,190) (2,243) ------------ ------------ ---------- Income before income taxes................................................ 221,176 158,828 103,645 Provision for income taxes................................................ 89,596 65,131 42,543 ------------ ------------ ---------- Net income................................................................ $ 131,580 $ 93,697 $ 61,102 ------------ ------------ ---------- ------------ ------------ ---------- Basic net income per share................................................ $ 1.44 $ 1.03 $ .69 Diluted net income per share.............................................. $ 1.39 $ 1.00 $ .67
All per share amounts have been restated to retroactively reflect the three-for-two stock split effected in the form of a stock dividend in September 1997. The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 10 ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
YEARS ENDED DECEMBER 31, ------------------------------- 1998 1997 1996 --------- --------- --------- COMMON STOCK--SHARES: Balance at beginning of period................................................... 91,208 89,622 86,677 Issuances of restricted stock.................................................... 735 802 989 Repurchases of common stock...................................................... (2,118) (676) (296) Exercises of stock options....................................................... 1,400 1,446 1,709 Issuance of common stock for acquisitions........................................ -- 14 543 --------- --------- --------- Balance at end of period....................................................... 91,225 91,208 89,622 --------- --------- --------- --------- --------- --------- COMMON STOCK--PAR VALUE: Balance at beginning of period................................................... $ 91 $ 90 $ 87 Issuances of restricted stock.................................................... 1 1 1 Repurchases of common stock...................................................... (2) (1) -- Exercises of stock options....................................................... 1 1 2 --------- --------- --------- Balance at end of period....................................................... $ 91 $ 91 $ 90 --------- --------- --------- --------- --------- --------- CAPITAL SURPLUS: Balance at beginning of period................................................... $ 196,888 $ 140,443 $ 99,739 Issuances of restricted stock--excess over par value............................. 31,514 29,189 24,019 Exercises of stock options--excess over par value................................ 8,452 5,755 4,119 Issuance of common stock for acquisition......................................... -- 400 -- Capital impact of equity incentive plans......................................... 33,755 21,101 12,566 --------- --------- --------- Balance at end of period....................................................... $ 270,609 $ 196,888 $ 140,443 --------- --------- --------- --------- --------- --------- DEFERRED COMPENSATION: Balance at beginning of period................................................... $ (44,276) $ (26,802) $ (9,642) Issuances of restricted stock.................................................... (31,515) (29,190) (24,020) Amortization of deferred compensation............................................ 19,001 11,716 6,860 --------- --------- --------- Balance at end of period....................................................... $ (56,790) $ (44,276) $ (26,802) --------- --------- --------- --------- --------- --------- ACCUMULATED OTHER COMPREHENSIVE INCOME: Balance at beginning of period................................................... $ (1,347) $ 23 $ 51 Translation adjustments.......................................................... 103 (1,370) (28) --------- --------- --------- Balance at end of period....................................................... $ (1,244) $ (1,347) $ 23 --------- --------- --------- --------- --------- --------- RETAINED EARNINGS: Balance at beginning of period................................................... $ 267,444 $ 194,691 $ 137,695 Repurchases of common stock--excess over par value............................... (89,220) (20,944) (5,391) Issuance of common stock for acquisition......................................... -- -- 1,285 Net income....................................................................... 131,580 93,697 61,102 --------- --------- --------- Balance at end of period....................................................... $ 309,804 $ 267,444 $ 194,691 --------- --------- --------- --------- --------- --------- COMPREHENSIVE INCOME: Net income....................................................................... $ 131,580 $ 93,697 $ 61,102 Translation adjustments.......................................................... 103 (1,370) (28) --------- --------- --------- Total comprehensive income..................................................... $ 131,683 $ 92,327 $ 61,074 --------- --------- --------- --------- --------- ---------
All shares and amounts have been restated to retroactively reflect the three-for-two stock split effected in the form of a stock dividend in September 1997. The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 11 ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEARS ENDED DECEMBER 31, -------------------------------- 1998 1997 1996 ---------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income.................................................................... $ 131,580 $ 93,697 $ 61,102 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of intangible assets......................................... 4,993 4,926 5,405 Depreciation expense...................................................... 19,643 12,726 6,457 Provision for deferred income taxes....................................... 1,902 (5,135) (1,702) Changes in assets and liabilities, net of effects of acquisitions: Increase in accounts receivable........................................... (53,205) (61,027) (38,565) Increase in accounts payable, accrued expenses and accrued payroll costs.. 27,761 27,878 17,893 Increase (decrease) in income taxes payable............................... 1,552 (1,625) (1,274) Change in other assets, net of change in other liabilities................ 21,101 10,517 5,109 ---------- --------- --------- Total adjustments........................................................... 23,747 (11,740) (6,677) ---------- --------- --------- Net cash and cash equivalents provided by operating activities................ 155,327 81,957 54,425 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions, net of cash acquired............................................ (4,187) (3,338) (4,620) Capital expenditures.......................................................... (67,229) (31,958) (18,027) ---------- --------- --------- Net cash and cash equivalents used in investing activities.................... (71,416) (35,296) (22,647) CASH FLOWS FROM FINANCING ACTIVITIES: Repurchases of common stock and common stock equivalents...................... (89,222) (20,945) (5,391) Principal payments on notes payable and other indebtedness.................... (2,186) (1,405) (4,239) Proceeds and capital impact of equity incentive plans......................... 42,208 26,857 16,687 ---------- --------- --------- Net cash and cash equivalents (used in) provided by financing activities...... (49,200) 4,507 7,057 ---------- --------- --------- Net increase in cash and cash equivalents....................................... 34,711 51,168 38,835 Cash and cash equivalents at beginning of period................................ 131,349 80,181 41,346 ---------- --------- --------- Cash and cash equivalents at end of period...................................... $ 166,060 $ 131,349 $ 80,181 ---------- --------- --------- ---------- --------- --------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest.................................................................... $ 379 $ 476 $ 521 Income taxes................................................................ $ 54,538 $ 50,340 $ 32,163 Acquisitions: Assets acquired-- Intangible assets......................................................... $ 3,967 $ 4,079 $ 9,932 Other..................................................................... 622 499 2,180 Liabilities incurred-- Notes payable and contracts............................................... -- (536) (5,125) Other..................................................................... (402) (304) (1,082) Common stock issued......................................................... -- (400) (1,285) ---------- --------- --------- Cash paid, net of cash acquired............................................. $ 4,187 $ 3,338 $ 4,620 ---------- --------- --------- ---------- --------- ---------
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS. Robert Half International Inc. (the "Company") provides specialized staffing services through such divisions as ACCOUNTEMPS, ROBERT HALF, OFFICETEAM, RHI CONSULTING, RHI MANAGEMENT RESOURCES, and THE AFFILIATES. The Company, through its ACCOUNTEMPS, ROBERT HALF, and RHI MANAGEMENT RESOURCES divisions, is the world's largest specialized provider of temporary, full-time, and project professionals in the fields of accounting and finance. OFFICETEAM specializes in highly skilled temporary administrative support personnel. RHI CONSULTING provides contract information technology professionals. THE AFFILIATES provides temporary, project, and full-time staffing of attorneys and specialized support personnel within law firms and corporate legal departments. Revenues are predominantly from temporary services. The Company operates in the United States, Canada, Europe, and Australia. The Company is a Delaware corporation. PRINCIPLES OF CONSOLIDATION. The Consolidated Financial Statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany balances have been eliminated. Certain reclassifications have been made to the 1997 and 1996 financial statements to conform to the 1998 presentation. REVENUE RECOGNITION. Temporary services revenues are recognized when the services are rendered by the Company's temporary employees. Permanent placement revenues are recognized when employment candidates accept offers of permanent employment. Allowances are established to estimate losses due to placed candidates not remaining employed for the Company's guarantee period, typically 90 days. CASH AND CASH EQUIVALENTS. The Company considers all highly liquid investments with a maturity of three months or less as cash equivalents. INTANGIBLE ASSETS. Intangible assets primarily consist of the cost of acquired companies in excess of the fair market value of their net tangible assets at acquisition date, which are being amortized on a straight-line basis over a period of 40 years. The carrying value of intangible assets is periodically reviewed by the Company and impairments are recognized when the expected future operating cash flows derived from such intangible assets are less than their carrying value. Based upon its most recent analysis, the Company believes that no material impairment of intangible assets existed at December 31, 1998. INCOME TAXES. Deferred taxes are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rates. FOREIGN CURRENCY TRANSLATION. The results of operations of the Company's foreign subsidiaries are translated at the monthly average exchange rates prevailing during the period. The financial position of the Company's foreign subsidiaries is translated at the current exchange rates at the end of the period, and the related translation adjustments are recorded as 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. PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the life of the related asset or the life of the lease. 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE B--ACQUISITIONS In July 1986, the Company acquired all of the outstanding stock of Robert Half Incorporated, the franchisor of the ACCOUNTEMPS and ROBERT HALF operations. Subsequently, in 66 separate transactions the Company acquired all of the outstanding stock of certain corporations operating ACCOUNTEMPS and ROBERT HALF franchised offices in the United States, the United Kingdom and Canada as well as other staffing services businesses. The Company has paid approximately $215 million in cash, stock, notes and other indebtedness in these acquisitions, excluding transaction costs and cash acquired. These acquisitions were primarily accounted for as purchases, and the excess of cost of the acquired companies in excess of the fair market value of the net tangible assets acquired is being amortized over 40 years using the straight-line method. Results of operations of the acquired companies are included in the Consolidated Statements of Income from the dates of acquisition. The acquisitions made during 1998, 1997 and 1996 had no material pro forma impact on the results of operations. NOTE C--NOTES PAYABLE AND OTHER INDEBTEDNESS The Company issued promissory notes as well as other forms of indebtedness in connection with certain acquisitions and other payment obligations. These are due in varying installments, carry varying interest rates and, in aggregate, amounted to $4,712,000 at December 31, 1998 and $8,157,000 at December 31, 1997. At December 31, 1998, $2,441,000 of the notes were secured by a standby letter of credit (see Note D). The following table shows the schedule of maturities for notes payable and other indebtedness at December 31, 1998 (in thousands): 1999................................................................ $ 1,308 2000................................................................ 807 2001................................................................ 57 2002................................................................ 61 2003................................................................ 66 Thereafter.......................................................... 2,413 --------- $ 4,712 --------- ---------
At December 31, 1998, the notes carried fixed rates and the weighted average interest rate for the above was approximately 8.2%, 7.0% and 6.9% for the years ended December 31, 1998, 1997 and 1996, respectively. NOTE D--BANK LOAN (REVOLVING CREDIT) The Company has an unsecured credit facility which provides a line of credit of up to $80,000,000, which is available to fund the Company's general business and working capital needs, including acquisitions and the purchase of the Company's common stock, and to cover the issuance of debt support standby letters of credit up to $15,000,000. As of December 31, 1998 and 1997, the Company had no borrowings on the line of credit outstanding and had used $6,799,000 and $8,583,000 in debt support standby letters of credit, respectively. There is a commitment fee on the unused portion of the entire credit facility of .09%. The loan is subject to certain financial covenants which also affect the interest rates charged. The final maturity date for the credit facility is August 31, 2002. 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE E--ACCRUED PAYROLL COSTS Accrued payroll costs consisted of the following (in thousands):
DECEMBER 31, --------------------- 1998 1997 ---------- --------- Payroll and bonuses.................................................... $ 56,943 $ 36,493 Employee benefits and workers' compensation............................ 49,926 42,042 Payroll taxes.......................................................... 17,199 17,390 ---------- --------- $ 124,068 $ 95,925 ---------- --------- ---------- ---------
NOTE F--STOCKHOLDERS' EQUITY STOCK REPURCHASE PROGRAM--In October 1997, the Company's Board of Directors authorized the repurchase, from time to time, of up to four million shares of the Company's common stock on the open market or in privately negotiated transactions, depending on market conditions. During the year ended December 31, 1998, the Company repurchased approximately 1,625,000 shares on the open market for a total cost of $66.3 million. Since 1997, the Company repurchased approximately 1,725,000 shares of common stock on the open market pursuant to this program. NOTE G--INCOME TAXES The provision for income taxes for the years ended December 31, 1998, 1997 and 1996 consisted of the following (in thousands):
YEARS ENDED DECEMBER 31, ------------------------------- 1998 1997 1996 --------- --------- --------- Current: Federal.................................................... $ 66,127 $ 53,973 $ 34,392 State...................................................... 15,243 12,261 7,457 Foreign.................................................... 6,324 4,032 2,396 Deferred--principally domestic............................... 1,902 (5,135) (1,702) --------- --------- --------- $ 89,596 $ 65,131 $ 42,543 --------- --------- --------- --------- --------- ---------
The income taxes shown above varied from the statutory federal income tax rates for these periods as follows:
YEARS ENDED DECEMBER 31, ---------------------------- 1998 1997 1996 ---- ---- ---- Federal U.S. income tax rate................................ 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit.............. 4.6 4.6 4.5 Amortization of intangible assets........................... .6 .8 1.0 Tax-free interest income.................................... (.4) -- -- Other, net.................................................. .7 .6 .5 ---- ---- ---- Effective tax rate.......................................... 40.5% 41.0% 41.0% ---- ---- ---- ---- ---- ----
15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE G--INCOME TAXES (CONTINUED) The deferred portion of the tax provisions consisted of the following (in thousands):
YEARS ENDED DECEMBER 31, ------------------------------- 1998 1997 1996 --------- --------- --------- Amortization of franchise rights.............................. $ (74) $ 66 $ 691 Accrued expenses, deducted for tax when paid.................. (7,317) (7,612) (2,468) Capitalized costs for books, deducted for tax................. 9,660 2,101 -- Other, net.................................................... (367) 310 75 --------- --------- --------- $ 1,902 $ (5,135) $ (1,702) --------- --------- --------- --------- --------- ---------
The deferred income tax amounts included on the balance sheet are comprised of the following (in thousands):
DECEMBER 31, --------------------- 1998 1997 ---------- --------- Current deferred income tax assets, net................................ $ (12,542) $ (8,445) Long-term deferred income tax liabilities, net......................... 25,000 15,942 ---------- --------- $ 12,458 $ 7,497 ---------- --------- ---------- ---------
No valuation allowances against deferred tax assets were required for the years ended December 31, 1998 and 1997. The components of the deferred income tax amounts at December 31, 1998 and 1997, were as follows (in thousands):
DECEMBER 31, -------------------- 1998 1997 --------- --------- Amortization of intangible assets....................................... $ 16,662 $ 17,026 Accrued expenses, deducted for tax when paid............................ (5,603) (3,360) Other, net.............................................................. 1,399 (6,169) --------- --------- $ 12,458 $ 7,497 --------- --------- --------- ---------
NOTE H--COMMITMENTS Rental expense, primarily for office premises, amounted to $30,146,000, $19,594,000 and $13,315,000 for the years ended December 31, 1998, 1997 and 1996, respectively. The approximate minimum rental commitments for 1999 and thereafter under non-cancelable leases in effect at December 31, 1998, were as follows (in thousands): 1999............................................................... $ 31,734 2000............................................................... 30,081 2001............................................................... 26,915 2002............................................................... 21,637 2003............................................................... 14,748 Thereafter......................................................... 45,651
16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE I--STOCK PLANS Under various stock plans, officers, employees and outside directors may receive grants of restricted stock or options to purchase common stock. Grants are made at the discretion of the Stock Plan Committee of the Board of Directors. Grants generally vest between 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, the Company's pro forma net income and net income per share would have been as follows (in thousands, except per share amounts):
YEARS ENDED DECEMBER 31, ---------------------------------------------- 1998 1997 1996 -------------- ------------- ------------- Net Income As Reported................................................ $ 131,580 $ 93,697 $ 61,102 Pro forma.................................................. $ 124,622 $ 90,212 $ 59,666 Net Income Per Share Basic As Reported.............................................. $ 1.44 $ 1.03 $ .69 Pro forma................................................ $ 1.36 $ .99 $ .68 Diluted As Reported.............................................. $ 1.39 $ 1.00 $ .67 Pro forma................................................ $ 1.33 $ .97 $ .66
The pro forma amounts do not include amounts for stock options granted before January 1, 1995. Therefore, the pro forma amounts may not be representative of the disclosed effects on pro forma net income and net income per share for future years. The fair value of each option is estimated, as of the grant date, using the Black-Scholes option pricing model with the following assumptions used for grants in 1998, 1997 and 1996, respectively: no dividend yield for any year; expected volatility of 33% to 36%; risk-free interest rates of 4.6% to 5.7%, 5.7% to 6.9% and 5.3% to 6.7%; and expected lives of 4.5 to 7.3 years for all three years. 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE I--STOCK PLANS (CONTINUED) The following table reflects activity under all stock plans from December 31, 1995 through December 31, 1998, and the weighted average exercise prices:
STOCK OPTION PLANS ---------------------- WEIGHTED AVERAGE RESTRICTED NUMBER OF PRICE STOCK PLANS SHARES PER SHARE ------------- ---------- ---------- Outstanding, December 31, 1995................................ 1,896,491 9,067,848 $ 6.04 Granted..................................................... 998,492 1,689,644 $ 20.94 Exercised................................................... -- (1,708,532) $ 2.41 Restrictions lapsed......................................... (412,329) -- -- Forfeited................................................... (9,099) (387,429) $ 9.33 ------------- ---------- ---------- Outstanding, December 31, 1996................................ 2,473,555 8,661,531 $ 9.53 Granted..................................................... 847,469 1,944,656 $ 29.68 Exercised................................................... -- (1,446,404) $ 3.98 Restrictions lapsed......................................... (859,399) -- -- Forfeited................................................... (45,578) (515,537) $ 15.29 ------------- ---------- ---------- Outstanding, December 31, 1997................................ 2,416,047 8,644,246 $ 14.52 Granted..................................................... 759,377 3,523,816 $ 40.11 Exercised................................................... -- (1,400,023) $ 6.04 Restrictions lapsed......................................... (737,938) -- -- Forfeited................................................... (25,066) (412,977) $ 26.05 ------------- ---------- ---------- Outstanding, December 31, 1998................................ 2,412,420 10,355,062 $ 23.93 ------------- ---------- ---------- ------------- ---------- ----------
The following table summarizes information about options outstanding as of December 31, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ---------------------------------------------------- ------------------------------ NUMBER NUMBER OUTSTANDING AS WEIGHTED WEIGHTED EXERCISABLE AS WEIGHTED OF AVERAGE AVERAGE OF AVERAGE DECEMBER 31, REMAINING EXERCISE DECEMBER 31, EXERCISE RANGE OF EXERCISE PRICES 1998 CONTRACTUAL LIFE PRICE 1998 PRICE - ----------------------------------------- ---------------- ------------------- ------------- --------------- ------------- $1.44 to $8.00........................... 2,458,487 4.90 $ 5.16 2,296,205 $ 5.10 $8.58 to $19.46.......................... 2,216,922 7.02 $ 15.32 936,072 $ 14.68 $20.21 to $35.50......................... 2,094,117 8.27 $ 26.38 587,369 $ 25.59 $36.00 to $38.63......................... 2,126,734 9.65 $ 38.48 105,764 $ 37.91 $38.69 to $59.00......................... 1,458,802 9.42 $ 43.95 1,812 $ 40.57 ---------------- --- ------ --------------- ------ 10,355,062 7.65 $ 23.93 3,927,222 $ 11.35 ---------------- --- ------ --------------- ------ ---------------- --- ------ --------------- ------
At December 31, 1998, the total number of available shares to grant under the plans (consisting of either restricted stock or options) was 561,863. NOTE J--PREFERRED SHARE PURCHASE RIGHTS Pursuant to the Company's stockholder rights agreement, each share of common stock carries one right to purchase .0067 shares of preferred stock. The rights become exercisable in certain limited circumstances involving a potential business combination transaction or an acquisition of shares of the Company and are exercisable at a price of $66.67 per right, subject to adjustment. Following certain other events after the rights become exercisable, each right entitles its holder to purchase for $66.67 an amount 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE J--PREFERRED SHARE PURCHASE RIGHTS (CONTINUED) of common stock of the Company, or, in certain circumstances, securities of the acquiror, having a then-current market value of twice the exercise price of the right. The rights are redeemable and may be amended at the Company's option before they become exercisable. Until a right is exercised, the holder of a right has no rights as a stockholder of the Company. The rights expire on July 23, 2000. NOTE K--NET INCOME PER SHARE The calculation of net income per share for the three years ended December 31, 1998 is reflected in the following table (in thousands, except per share amounts):
YEARS ENDED DECEMBER 31, -------------------------------- 1998 1997 1996 ---------- --------- --------- Net Income.................................................. $ 131,580 $ 93,697 $ 61,102 Basic: Weighted average shares................................... 91,650 90,668 88,267 ---------- --------- --------- ---------- --------- --------- Diluted: Weighted average shares................................... 91,650 90,668 88,267 Common stock equivalents--stock options................... 3,172 3,331 3,255 ---------- --------- --------- Diluted shares............................................ 94,822 93,999 91,522 ---------- --------- --------- ---------- --------- --------- Net Income Per Share: Basic..................................................... $ 1.44 $ 1.03 $ .69 Diluted................................................... $ 1.39 $ 1.00 $ .67
NOTE L--QUARTERLY FINANCIAL DATA (UNAUDITED) The following tabulation shows certain quarterly financial data for 1998 and 1997 (in thousands, except per share amounts):
QUARTER ---------------------------------------------- YEAR ENDED 1998 1 2 3 4 DECEMBER 31, - -------------------------------------------------- ---------- ---------- ---------- ---------- ------------ Net service revenues.............................. $ 401,296 $ 442,153 $ 470,650 $ 478,942 $1,793,041 Gross margin...................................... $ 160,971 $ 177,693 $ 190,033 $ 193,510 $ 722,207 Income before income taxes........................ $ 48,942 $ 54,426 $ 58,530 $ 59,278 $ 221,176 Net income........................................ $ 29,050 $ 32,280 $ 34,974 $ 35,276 $ 131,580 Basic net income per share........................ $ .32 $ .35 $ .38 $ .39 $ 1.44 Diluted net income per share...................... $ .31 $ .34 $ .37 $ .38 $ 1.39 QUARTER ---------------------------------------------- YEAR ENDED 1997 1 2 3 4 DECEMBER 31, - -------------------------------------------------- ---------- ---------- ---------- ---------- ------------ Net service revenues.............................. $ 283,023 $ 311,622 $ 339,754 $ 368,477 $1,302,876 Gross margin...................................... $ 111,894 $ 124,140 $ 135,200 $ 146,096 $ 517,330 Income before income taxes........................ $ 33,777 $ 37,613 $ 41,710 $ 45,728 $ 158,828 Net income........................................ $ 19,920 $ 22,210 $ 24,631 $ 26,936 $ 93,697 Basic net income per share........................ $ .22 $ .24 $ .27 $ .30 $ 1.03 Diluted net income per share...................... $ .21 $ .24 $ .26 $ .29 $ 1.00
19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE M--BUSINESS SEGMENTS In 1998, the Company adopted Statement of Financial Accounting Standard No. 131 (SFAS No. 131), DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. The Company has defined its business segments based on the nature of services for the purposes of reporting under SFAS No. 131. The Company is managed in a matrix form of organization with certain managers responsible for service lines while other managers are responsible for geographic territories. As such, both service line and geographic information is used in allocating resources and measuring performance. The Company has two reportable segments: temporary and consultant staffing; and permanent placement staffing. The temporary and consultant staffing segment provides specialized personnel in the accounting and finance, administrative and office, information technology, and legal fields. The permanent placement staffing segment provides full-time personnel in the accounting, finance, and legal fields. The accounting policies of the segments are the same as those described in Note A: Summary of Significant Accounting Policies. The Company evaluates performance based on profit or loss from operations before interest expense, intangible amortization expense, and income taxes. The following table provides a reconciliation of revenue and operating profit by reportable segment to consolidated results (in thousands):
YEARS ENDED DECEMBER 31, -------------------------------------- 1998 1997 1996 ------------ ------------ ---------- Net service revenues Temporary and consultant staffing................... $ 1,652,678 $ 1,199,190 $ 826,283 Permanent placement staffing........................ 140,363 103,686 72,352 ------------ ------------ ---------- $ 1,793,041 $ 1,302,876 $ 898,635 ------------ ------------ ---------- ------------ ------------ ---------- Operating income Temporary and consultant staffing................... $ 185,007 $ 132,416 $ 89,756 Permanent placement staffing........................ 35,574 27,148 17,051 ------------ ------------ ---------- 220,581 159,564 106,807 Amortization of intangible assets..................... 4,993 4,926 5,405 Interest income, net.................................. (5,588) (4,190) (2,243) ------------ ------------ ---------- Income before income taxes............................ $ 221,176 $ 158,828 $ 103,645 ------------ ------------ ---------- ------------ ------------ ----------
The Company does not report total assets by segment. The following table represents identifiable assets by business segment (in thousands):
DECEMBER 31, -------------------------------------- 1998 1997 1996 ------------ ------------ ---------- Accounts receivable Temporary and consultant staffing................... $ 229,841 $ 176,185 $ 117,533 Permanent placement staffing........................ 21,025 17,878 11,866 ------------ ------------ ---------- $ 250,866 $ 194,063 $ 129,399 ------------ ------------ ---------- ------------ ------------ ----------
20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE M--BUSINESS SEGMENTS (CONTINUED) The Company operates internationally, with operations in the United States, Canada, Europe, and Australia. The following tables represent revenues and long-lived assets by geographic location (in thousands):
YEARS ENDED DECEMBER 31, -------------------------------------- 1998 1997 1996 ------------ ------------ ---------- Revenues Domestic............................................ $ 1,595,029 $ 1,176,888 $ 812,753 Foreign............................................. 198,012 125,988 85,882 ------------ ------------ ---------- $ 1,793,041 $ 1,302,876 $ 898,635 ------------ ------------ ---------- ------------ ------------ ----------
DECEMBER 31, -------------------------------------- 1998 1997 1996 ------------ ------------ ---------- Assets, long-lived Domestic............................................ $ 253,514 $ 209,457 $ 183,990 Foreign............................................. 19,799 17,905 17,208 ------------ ------------ ---------- $ 273,313 $ 227,362 $ 210,198 ------------ ------------ ---------- ------------ ------------ ----------
21 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and the Board of Directors of Robert Half International Inc.: We have audited the accompanying consolidated statements of financial position of Robert Half International Inc. (a Delaware corporation) and subsidiaries, as of December 31, 1998 and 1997, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP San Francisco, California January 22, 1999 22 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III The information required by Items 10 through 13 of Part III is incorporated by reference from the registrant's Proxy Statement, under the captions "NOMINATION AND ELECTION OF DIRECTORS," "BENEFICIAL STOCK OWNERSHIP," "COMPENSATION OF DIRECTORS," "COMPENSATION OF EXECUTIVE OFFICERS" AND "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION AND CERTAIN TRANSACTIONS," which Proxy Statement will be mailed to stockholders in connection with the registrant's annual meeting of stockholders which is scheduled to be held in May 1999. 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, 1998 and 1997. Consolidated statements of income for the years ended December 31, 1998, 1997 and 1996. Consolidated statements of stockholders' equity for the years ended December 31, 1998, 1997 and 1996. Consolidated statements of cash flows for the years ended December 31, 1998, 1997 and 1996. Notes to consolidated financial statements. Report of independent public accountants. Selected quarterly financial data for the years ended December 31, 1998 and 1997 are set forth in Note L--Quarterly Financial Data (Unaudited) included in Item 8 of this report. 2. FINANCIAL STATEMENT SCHEDULES Schedules I through V have been omitted as they are not applicable. 3. EXHIBITS
EXHIBIT NO. EXHIBIT - ------- --------------------------------------------------------------------------- 3.1 Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1998. 3.2 By-Laws, incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. 4.1 Indenture dated as of October 1, 1972, as amended, between IDS Realty Trust and First National Bank of Minneapolis, incorporated by reference to Exhibits 6(t) and 6(v) to the Form S-14 Registration Statement of the Registrant (formerly known as Boothe Interim Corporation) filed with the Securities and Exchange Commission on December 31, 1979. 4.2 Restated Certificate of Incorporation of Registrant (filed as Exhibit 3.1).
23
EXHIBIT NO. EXHIBIT - ------- --------------------------------------------------------------------------- 4.3 Rights Agreement, dated as of July 23, 1990, between the Registrant and The Chase Manhattan Bank (formerly Manufacturers Hanover Trust Company of California), as amended and restated effective April 30, 1997, incorporated by reference to Exhibit 1 to Registrant's Form 8-A/A Amendment No. 4 filed on May 1, 1997. 10.1 Credit Agreement dated as of November 1, 1993, among the Registrant, NationsBank of North Carolina, N.A. and Bank of America National Trust and Savings Association, as amended, incorporated by reference to (i) Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1993, (ii) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1995, (iii) Exhibit 10.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, and (iv) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997. *10.2 Employment Agreement dated as of October 2, 1985, between the Registrant and Harold M. Messmer, Jr. The Thirteenth Amendment to the Employment Agreement is filed with this Annual Report on Form 10-K for the fiscal year ended December 31, 1998. The original Employment Agreement and the first twelve amendments thereto are incorporated by reference to (i) Exhibit 10.(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1985, (ii) Exhibit 10.2(b) to Registrant's Registration Statement on Form S-1 (No. 33-15171), (iii) Exhibit 10.2(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, (iv) Exhibit 10.2(d) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, (v) Exhibit 28.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1990, (vi) Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, (vii) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1993, (viii) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, (ix) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1995, (x) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, (xi) Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and (xii) Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. *10.3 Key Executive Retirement Plan--Level II, as amended, incorporated by reference to Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.4 Restated Retirement Agreement between the Registrant and Harold M. Messmer, Jr., incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.5 1985 Stock Option Plan, as amended, incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997. *10.6 Excise Tax Restoration Agreement dated November 5, 1996, incorporated by reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.7 Outside Directors' Option Plan, as amended, incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1998. *10.8 1989 Restricted Stock Plan, as amended, incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997. *10.9 StockPlus Plan, as amended, incorporated by reference to Exhibit 10.9 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. *10.10 1993 Incentive Plan, as amended, incorporated by reference to Exhibit 10.10 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997.
24
EXHIBIT NO. EXHIBIT - ------- --------------------------------------------------------------------------- *10.11 Deferred Compensation Plan, incorporated by reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. *10.12 Annual Performance Bonus Plan, incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996. *10.13 Form of 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, incorporated by reference to Exhibit 10.16 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.17 Collateral Assignment of Split Dollar Insurance Agreement, incorporated by reference to Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.18 Form of Consulting Agreement. 21 Subsidiaries of the Registrant. 23 Accountants' Consent 27 Financial Data Schedule.
- ------------------------ * Management contract or compensatory plan required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K. (b) Reports on Form 8-K The Registrant filed no reports on Form 8-K during the fiscal quarter ending December 31, 1998. 25 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ROBERT HALF INTERNATIONAL INC. (Registrant) Date: March 16, 1999 By: /S/ M. KEITH WADDELL ------------------------------------ M. Keith Waddell Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) 26 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: March 16, 1999 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 16, 1999 By: /S/ ANDREW S. BERWICK, JR. ------------------------------------------ Andrew S. Berwick, Jr., Director Date: March 16, 1999 By: /S/ FREDERICK P. FURTH ------------------------------------------ Frederick P. Furth, Director Date: March 16, 1999 By: /S/ EDWARD W. GIBBONS ------------------------------------------ Edward W. Gibbons, Director Date: March 16, 1999 By: /S/ FREDERICK A. RICHMAN ------------------------------------------ Frederick A. Richman, Director Date: March 16, 1999 By: /S/ THOMAS J. RYAN ------------------------------------------ Thomas J. Ryan, Director Date: March 16, 1999 By: /S/ J. STEPHEN SCHAUB ------------------------------------------ J. Stephen Schaub, Director Date: March 16, 1999 By: /S/ M. KEITH WADDELL ------------------------------------------ M. Keith Waddell Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) Date: March 16, 1999 By: /S/ BARBARA J. FORSBERG ------------------------------------------ Barbara J. Forsberg Vice President and Controller (Principal Accounting Officer)
27 EXHIBIT INDEX
EXHIBIT NO. EXHIBIT - ------- --------------------------------------------------------------------------- 3.1 Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1998. 3.2 By-Laws, incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. 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 April 30, 1997, incorporated by reference to Exhibit 1 to Registrant's Form 8-A/A Amendment No. 4 filed on May 1, 1997. 10.1 Credit Agreement dated as of November 1, 1993, among the Registrant, NationsBank of North Carolina, N.A. and Bank of America National Trust and Savings Association, as amended, incorporated by reference to (i) Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1993, (ii) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1995, (iii) Exhibit 10.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, and (iv) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997. *10.2 Employment Agreement dated as of October 2, 1985, between the Registrant and Harold M. Messmer, Jr. The Thirteenth Amendment to the Employment Agreement is filed with this Annual Report on Form 10-K for the fiscal year ended December 31, 1998. The original Employment Agreement and the first twelve amendments thereto are incorporated by reference to (i) Exhibit 10.(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1985, (ii) Exhibit 10.2(b) to Registrant's Registration Statement on Form S-1 (No. 33-15171), (iii) Exhibit 10.2(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, (iv) Exhibit 10.2(d) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, (v) Exhibit 28.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1990, (vi) Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, (vii) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1993, (viii) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, (ix) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1995, (x) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, (xi) Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and (xii) Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. *10.3 Key Executive Retirement Plan--Level II, as amended, incorporated by reference to Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.4 Restated Retirement Agreement between the Registrant and Harold M. Messmer, Jr., incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.5 1985 Stock Option Plan, as amended, incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997. *10.6 Excise Tax Restoration Agreement dated November 5, 1996, incorporated by reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.
EXHIBIT NO. EXHIBIT - ------- --------------------------------------------------------------------------- *10.7 Outside Directors' Option Plan, as amended, incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1998. *10.8 1989 Restricted Stock Plan, as amended, incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997. *10.9 StockPlus Plan, as amended, incorporated by reference to Exhibit 10.9 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. *10.10 1993 Incentive Plan, as amended, incorporated by reference to Exhibit 10.10 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. *10.11 Deferred Compensation Plan, incorporated by reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. *10.12 Annual Performance Bonus Plan, incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996. *10.13 Form of 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, incorporated by reference to Exhibit 10.16 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.17 Collateral Assignment of Split Dollar Insurance Agreement, incorporated by reference to Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10.18 Form of Consulting Agreement. 21 Subsidiaries of the Registrant. 23 Accountants' Consent 27 Financial Data Schedule.
- ------------------------ * Management contract or compensatory plan required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K. EX-10.2 2 EXHIBIT 10.2 EXHIBIT 10.2 THIRTEENTH AMENDMENT TO EMPLOYMENT AGREEMENT This Thirteenth Amendment to Employment Agreement is made and entered into as of January 1, 1999, by and between Robert Half International Inc. (formerly Boothe Financial Corporation), a Delaware corporation, ("Corporation") and Harold M. Messmer, Jr. ("Officer"). 1. The Employment Agreement dated as of October 2, 1985, as amended, between Corporation and Officer (the "Employment Agreement") is hereby amended to add the following Section 4.6 thereto: "4.6 MEDICAL BENEFITS. In the event of a termination of Officer's employment on or after the later to occur of (a) Officer's 55th birthday of (b) the 20th anniversary of Officer's first day of service with the Corporation as a director or full-time employee, other than a Termination for Cause, Officer and his then current wife shall each continue to participate until his or her death, at the Corporation's expense, in whatever healthcare plan may be maintained by the Corporation from time to time for its then current employees as if Officer were still a full time employee of the Corporation." 2. In all other respects, the Employment Agreement is hereby ratified and confirmed. IN WITNESS WHEREOF, the parties hereto have executed this agreement effective as of the day and year first written above. ROBERT HALF INTERNATIONAL INC. By /s/ M. KEITH WADDELL ------------------------------- M. Keith Waddell Senior Vice President /s/ HAROLD M. MESSMER, JR. ------------------------------- Harold M. Messmer, Jr. EX-10.18 3 EXHIBIT 10.18 EXHIBIT 10.18 The attached form of Consulting Agreement has been entered into effective January 1, 1999, between registrant and each of the following executive officers: Harold M. Messmer, Jr. M. Keith Waddell Robert W. Glass Steven Karel Barbara J. Forsberg Pursuant to Instruction 2 to Item 601 of Regulation S-K, the individual Consulting Agreements are not being filed. CONSULTING AGREEMENT THIS AGREEMENT is made as of _________________, by and between ROBERT HALF INTERNATIONAL INC. ("Company") and ___________ ("Consultant"). Whereas, Consultant currently serves as an Executive Officer of Company. Whereas, Company wishes to make arrangements now to insure the availability of the advice, counsel and experience of Consultant after Consultant retires and the Company considers such services to be very important in view of the personal service nature of the Company's business and Consultant's vital role in helping to build such business. NOW, THEREFORE, Company and Consultant agree as follows: 1. ENGAGEMENT. Commencing on the date of Consultant's Retirement, Company engages Consultant and Consultant accepts such engagement during the Consulting Period upon the terms and conditions hereinafter set forth. Nothing herein shall in any way modify, affect or govern the terms and conditions of Consultant's employment by the Company prior to the Consulting Commencement Date. If Consultant's full-time employment with the Company shall terminate prior to the Consulting Commencement Date under any circumstances other than Consultant's Retirement, this Agreement shall immediately terminate and be of no further force or effect. 2. SERVICES. During the Consulting Period, Consultant shall provide advice and counsel to Company as reasonably requested from time to time. Subject to the reasonable requirements of the engagement, Consultant may select the time and place at which Consultant performs such services. Company agrees that Consultant shall not be required to render more than 40 hours of services during any calendar quarter during the Consulting Period, nor shall Consultant be required to (a) travel outside the United States, (b) travel more than 100 miles from Consultant's home (other than to appear at the Company's headquarters) more than once in any year, or (c) render services during other than ordinary business hours. Consultant agrees, if requested by the Company, to be a nominee for and, if elected, serve as a Director of the Company. The terms of Consultant's engagement are determined hereunder and no employee manual, policy statement or similar item issued from time to time by Company to its employees shall constitute part of this Agreement or modify, affect or govern the terms of the engagement of Consultant during the Consulting Period. 3. COMPENSATION. (a) Consultant shall be paid a monthly fee equal to 1/12 of the product of (i) 8% and (ii) Consultant's total base salary and cash bonus with respect to the last complete calendar year prior to the Consulting Commencement Date. (b) Consultant shall be reimbursed, upon presentation of proper receipts, for Consultant's reasonable business expenses related to travel requested by Company. (c) Any options or shares of restricted stock granted under the 1993 Incentive Plan after December 1, 1997, and held by Consultant on the Consulting Commencement Date shall remain outstanding and shall continue to vest in accordance with their existing terms, notwithstanding the termination of Consultant's full-time employment by the Company that shall have occurred on the Consulting Commencement Date. (d) Consultant understands that, because Consultant is an independent contractor during the Consulting Period, Company will not be withholding taxes from payments due Consultant. Consultant agrees to pay all required taxes, including income taxes, resulting from the engagement hereunder. 4. OWNERSHIP OF RESULTS. Any ideas, concepts, documents, written materials or other creation of any type developed by Consultant during the Consulting Period ("Creations"), whether or not incorporating confidential or proprietary information or trade secrets of Company, shall be the sole and exclusive property of Company and Consultant hereby irrevocably assigns any and all rights thereto to Company, including, but not limited to, any copyright interest. All Creations constitute "work for hire" within the meaning of the U.S. copyright laws. Consultant shall, without further compensation, execute any and all instruments and take whatever action may be deemed necessary by Company to fully vest all rights in any Creations in Company, including, but not limited to, cooperating with Company in the registration of the copyright of the Creations. Consultant shall not, before or after completion of the engagement, use any Creations for any purpose other than the engagement. The provisions of this Section, however, shall not apply to any Creation with respect to which applicable statute prohibits assignment of rights by Consultant to Company. 5. USE OF NAME. Consultant hereby consents to the use and publication, without further consideration, of his name, picture and image in training materials and other materials relating to the business of any of the RHI Companies, regardless of whether such use or publication is in the form of printed matter, photographs, audio tape, video tape, computer disk, electronic transmission, or otherwise. Such consent applies to both the use and publication of such items during Consultant's engagement. 6. DISCLOSURE OR MISUSE OF CONFIDENTIAL INFORMATION. Consultant shall not, at any time during the Consulting Period or thereafter, directly or indirectly, disclose, furnish or make accessible to any person, firm, corporation, or other entity, or make use of, any confidential information obtained at any time from any of the RHI Companies (whether prior or subsequent to the Consulting Commencement Date), including, without limitation, information with respect to the name, address, contact persons or requirements of any customer, client, applicant or employee of any of the RHI Companies (whether having to do with temporary or permanent employment) and information with respect to the procedures, advertising, finances, organization, personnel, plans, objectives or strategies of the RHI Companies). Consultant acknowledges that such information is safeguarded by the RHI Companies as trade secrets. Upon termination of Consultant's engagement, Consultant shall deliver to the RHI Companies all copies of all records, manuals, training kits, and other property belonging to the RHI Companies or used in connection with their business which may be in Consultant's possession. The provisions of this Section shall survive termination of either Consultant's engagement or this Agreement for any reason. 7. RESTRICTIVE COVENANT. In consideration and view of (i) the valuable consideration furnished to Consultant by Company engaging Consultant and entering into this Agreement, (ii) Consultant's access to confidential information and trade secrets of the RHI Companies and (iii) the value of such confidential information and trade secrets to the RHI Companies, during the period commencing on the Consulting Commencement Date and ending on the fourth anniversary thereof, Consultant shall not render services to any other firm, person, corporation, partnership or other entity or individual engaged in the business of temporary, contract or permanent placement of individuals or in the staffing services business (including, but not limited to, any executive recruiting firm, employment agency or temporary personnel service). The covenants of Consultant contained in this section are in addition to, and not in amendment, modification or replacement of, any obligations of Consultant contained in any other agreement between Consultant and Company. 8. NON-SOLICITATION OF OTHER EMPLOYEES. In consideration and view of (i) the valuable consideration furnished to Consultant by Company engaging Consultant and entering into this Agreement, (ii) Consultant's access to confidential information and trade secrets of the RHI Companies, and (iii) the value of such confidential information and trade secrets to the RHI Companies, during the period commencing on the Consulting Commencement Date and ending on the fourth anniversary thereof, Consultant shall not, directly or indirectly, solicit, induce, encourage (or assist any other person, firm, entity, business or organization in soliciting, inducing or encouraging) any employee of any of the RHI Companies to leave the employ of the RHI Companies. The covenants of Consultant contained in this section are in addition to, and not in amendment, modification or replacement of, any obligations of Consultant contained in any other agreement between Consultant and Company. 9. INJUNCTION. In view of Consultant's access to confidential information and trade secrets and in consideration of the value of such property to the RHI Companies, Consultant expressly acknowledges that the covenants set forth herein are reasonable and necessary in order to protect and maintain the proprietary and other legitimate business interests of the RHI Companies, and that the enforcement thereof would not prevent Consultant from earning a livelihood. Consultant further agrees that in the event of an actual or threatened breach by Consultant of such covenants, the RHI Companies would be irreparably harmed and the full extent of injury resulting therefrom would be impossible to calculate and the RHI Companies therefore will not have an adequate remedy at law. Accordingly, Consultant agrees that temporary and permanent injunctive relief would be appropriate remedies against such breach, without bond or security; provided, that nothing herein shall be construed as limiting any other legal or equitable remedies the RHI Companies might have. 10. TERMINATION. (a) Consultant may terminate Consultant's engagement hereunder at any time on written notice to the Company. (b) Company may terminate Consultant's engagement hereunder, at any time on written notice to Consultant. (c) If Consultant's engagement hereunder is terminated on or after the Consulting Commencement Date and prior to the fourth anniversary of the Consulting Commencement Date (1) by Consultant as a result of a willful and material breach of this agreement by Company or (2) by Company other than for Cause, Company shall continue to pay Consultant the consulting fees specified herein until the earlier of (i) the fourth anniversary of the Consulting Commencement Date, or (ii) any breach by Consultant of the provisions of Sections 6, 7, or 8, hereof. In addition, effective upon the date of such termination, (i) any unvested options granted under the 1993 Incentive Plan subsequent to the date hereof and then held by Consultant shall vest and shall not be subject to forfeiture, (ii) any outstanding options granted under the 1993 Incentive Plan subsequent to the date hereof and then held by Consultant shall remain outstanding for the full length of their original term, and (iii) any unvested shares of restricted stock granted under the 1993 Incentive Plan subsequent to the date hereof and then held by Consultant shall vest and shall not be forfeited. (d) If the Consulting Period ends on the fourth anniversary of the Consulting Commencement Date, then any outstanding options granted under the 1993 Incentive Plan subsequent to the date hereof and then held by Consultant shall remain outstanding for the full length of their original term. 11. WAIVER. Failure of any party to insist upon strict compliance with any of the terms, covenants and conditions hereof shall not be deemed a waiver or relinquishment of the right to subsequently insist upon strict compliance with such term, covenant or condition or a waiver or relinquishment of any similar right or power hereunder at any subsequent time. 12. AMENDMENT. No provision of this Agreement may be changed or waived except by an agreement in writing signed by the party against whom enforcement of any such waiver or change is sought. 13. SEVERABILITY. The provisions of this Agreement are severable. If any provision is found by any court of competent jurisdiction to be unreasonable and invalid, that determination shall not affect the enforceability of the other provisions. Furthermore, if any of the restrictions against various activities is found to be unreasonable and invalid, the court before which the matter is pending shall enforce the restriction to the maximum extent it deems to be valid. Such restrictions shall be considered divisible both as to time and as to geographical area, with each month being deemed a separate period of time and each one mile radius from any office being deemed a separate geographical area. The restriction shall remain effective so long as the same is not unreasonable, arbitrary or against public policy. 14. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the state of California, except with respect to Sections 6, 7, 8 and 9, which shall be governed by and construed in accordance with the law of the jurisdiction in which an activity in violation thereof occurred or threatens to occur and with respect to which legal and equitable relief is sought. In no event shall the choice of law be predicated upon the fact that Company is incorporated or has its corporate headquarters in a certain state. 15. ENTIRE AGREEMENT. This Agreement contains all of the agreements, conditions, promises and covenants between the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous agreements, representations, arrangements or understandings, whether written or oral, with respect to the subject matter hereof. 16. COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which shall constitute one agreement. 17. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of Company (including its direct and indirect subsidiaries) and its successors and assigns. This Agreement may not be assigned by Consultant. 18. THIRD PARTY BENEFICIARY. Each of the RHI Companies is a third party beneficiary of this Agreement and each of them has the full right and power to enforce rights, interests and obligations under this Agreement without limitation or other restriction. 19. DEFINITIONS. "Cause" shall mean termination by Company of Consultant's engagement by Company by reason of (a) Consultant's willful dishonesty towards, fraud upon, or deliberate injury or attempted injury to Company which has resulted in material injury to Company; provided, however, that Consultant's engagement shall not be deemed to have been terminated for "Cause" if such termination took place as a result of any act or omission believed by Consultant in good faith to have been in the interest of Company, (b) violation by Consultant of the provisions of Section 6, 7, or 8 hereof or (c) repeated failure by Consultant, following written notice, to materially perform the service obligations contained in Section 2 hereof. "Consulting Commencement Date" shall be the date of Consultant's Retirement. "Consulting Period" means the period of time commencing on the Consulting Commencement Date and ending on the earlier to occur of (a) the fourth anniversary of the Consulting Commencement Date or (b) the date on which this agreement is terminated in accordance with the terms hereof. "Retirement" means any termination by Consultant of Consultant's full-time employment with the Company on or after the later to occur of (a) Consultant's 55th birthday, or (b) the 20th anniversary of Consultant's first day of service with the Company as a director or full-time employee. "RHI Companies" means the Company and its subsidiaries and affiliates. IN WITNESS WHEREOF, the parties have set their hands hereto as of the date first above written. ROBERT HALF INTERNATIONAL INC. By __________________________ ___________________________ Consultant EX-21 4 EXHIBIT 21 EXHIBIT 21 LIST OF SUBSIDIARIES
JURISDICTION OF NAME OF SUBSIDIARY INCORPORATION - ------------------------------------------------------------------------ -------------------- RH Holding Company, Inc. California LegalTeam, Inc. California Benchmark Staffing, Inc. California Benchmark Resources, Inc. California Robert Half Licensing, Inc. California Robert Half of California, Inc. California Cooperative Resources, Inc. California Golden State Temporaries, Inc. California Merlin Freelancers, Inc. California Robert Half of Texas G.P. Ltd. Delaware XYZ-II, Inc. Delaware Atlantic Temporaries, Inc. Delaware Texas Temp Gen, Inc. Delaware Texas Temp Lim, Inc. Delaware Jersey Temporaries, Inc. Delaware Robert Half Incorporated Florida R-H International Advertising Fund, Inc. Florida OfficeTeam Inc. Louisiana Robert Half Corporation Nevada Robert Half Nevada Staff, Inc. Nevada Tripoli Associates Corporation New York Robert Half of Pennsylvania, Inc. Pennsylvania Texas Temp Limited Partnership Texas RHT, L.P. (a limited partnership) Texas Robert Half Australia Pty. Ltd. Australia RHI Belgium S.A./N.V. Belgium Robert Half Belgium S.A./N.V. Belgium Robert Half Canada Inc. Canada Robert Half France S.A. France Accountemps S.A.R.L. France Robert Half S.A. France Robert Half Limited United Kingdom Robert Half Personnel (Midlands) Limited United Kingdom Envaward Limited United Kingdom Hatlon Limited United Kingdom Smiths Recruitment Limited United Kingdom
EX-23 5 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants we hereby consent to the incorporation by reference of our report dated January 22, 1999 into the Company's Registration Statements on Form S-8 (nos. 33-14706, 33-32622, 33-32623, 33-39187, 33-39204, 33-40795, 33-52617, 33-56639, 33-56641, 33-57763, 33-62138, 33-62140, 33-65401, 33-65403, 333-05743, 333-05745, 333-18283, 333-18339, 333-42471, 333-42573, 333-42343, and 333-42269, 333-68193, 333-68135 and 333-68273). /s/ ARTHUR ANDERSEN LLP San Francisco, California January 22, 1999 EX-27 6 EX. 27
5 THIS SCHEDULES CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 166,060 0 250,866 10,176 0 430,406 143,850 48,900 703,719 152,845 4,712 0 0 91 522,379 703,719 0 1,793,041 0 1,070,834 4,993 0 (5,588) 221,176 89,596 131,580 0 0 0 131,580 1.44 1.39
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