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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
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
incorporation or organization)
 (I.R.S. Employer
Identification No.)
2884 Sand Hill Road, 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:
Title of each classTrading Symbol(s)Name of each exchange
on which registered
Common Stock, Par Value $.001 per ShareRHINew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None 
__________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes       No  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes      No  
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      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      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.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer
Accelerated filer Non-accelerated filer   Smaller reporting company   Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company.    Yes     No
As of June 30, 2019, the aggregate market value of the Common Stock held by non-affiliates of the registrant was approximately $6,518,872,985 based on the closing sale price on that date. This amount excludes the market value of 3,315,944 shares of Common Stock directly or indirectly held by registrant’s directors and officers and their affiliates.
As of January 31, 2020, there were 115,120,403 outstanding 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 2020, 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. (the “Company”) provides specialized staffing and risk consulting services through such divisions as Accountemps®, Robert Half® Finance & Accounting, OfficeTeam®, Robert Half® Technology, Robert Half® Management Resources, Robert Half® Legal, The Creative Group®, and Protiviti®. The Company, through its Accountemps, Robert Half Finance & Accounting, and Robert Half 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. Robert Half Technology provides information technology professionals. Robert Half Legal provides temporary, project, and full-time staffing of attorneys and specialized support personnel within law firms and corporate legal departments. The Creative Group provides project staffing in the digital, marketing, and creative fields. Protiviti, which began operations in 2002, is a global business consulting and internal audit firm. Protiviti, which primarily employs professionals specializing in risk, advisory and transactional services, is a wholly owned subsidiary of the Company.
The Company’s business was originally founded in 1948. Prior to 1986, the Company was primarily a franchisor, under the names Accountemps and Robert Half (now called Robert Half Finance & Accounting), of offices providing temporary and full-time professionals in the fields of accounting and finance. Beginning in 1986, the Company and its current management embarked on a strategy of acquiring franchised locations. All of the franchises have been acquired. The Company believes that direct ownership of offices allows it to better monitor and protect the image of its trade names, promotes a more consistent and higher level of quality and service throughout its network of offices and improves profitability by centralizing many of its administrative functions. Since 1986, the Company has significantly expanded operations at many of the acquired locations, opened many new locations and acquired other local or regional providers of specialized temporary service personnel. The Company has also expanded the scope of its services by launching the new product lines OfficeTeam, Robert Half Technology, Robert Half Management Resources, Robert Half Legal and The Creative Group.
In 2002, the Company hired more than 700 professionals who had been affiliated with the internal audit and business and technology risk consulting practice of Arthur Andersen LLP, including more than 50 individuals who had been partners of that firm. These professionals formed the base of the Company’s Protiviti Inc. subsidiary. Protiviti has enabled the Company to enter the market for business consulting and internal audit services, which market the Company believes offers synergies with its traditional lines of business.
Accountemps
The Accountemps temporary services division offers customers a reliable and economical means of dealing with uneven or peak workloads for accounting, finance, and bookkeeping 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 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 regular employees are eliminated by the use of Accountemps temporaries. The temporary workers are employees of Accountemps and are paid by Accountemps. The customer pays a fixed rate only for hours worked.
Accountemps clients may fill their regular employment needs by using an Accountemps employee on a trial basis and, if so desired, “converting” the temporary position to a regular 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 full-time office and administrative personnel, ranging from executive and administrative assistants to receptionists and customer service representatives. OfficeTeam operates in much the same fashion as the Accountemps division.
Robert Half Finance & Accounting
Established in 1948, the Company’s first division and specialized recruitment pioneer Robert Half Finance & Accounting specializes in the placement of full-time accounting, financial, tax and accounting operations personnel. Fees for successful placements are paid only by the employer and are generally a percentage of the new employee’s annual compensation. No fee for placement services is charged to employment candidates.
1


Robert Half Technology
The Company’s Robert Half Technology division, which commenced operations in 1994, specializes in providing information technology contract consultants, placing full-time employees, and offering managed services in areas ranging from multiple platform systems integration to end-user technical and desktop support, including specialists in application development (including mobile, cloud and enterprise applications), networking, systems integration and deployment, database design and administration, and security and business continuity.
Robert Half Legal
Since 1992, the Company has been placing temporary and full-time employees in attorney, paralegal, legal administrative and legal secretarial positions through its Robert Half Legal division. The legal profession’s requirements (the need for confidentiality, accuracy and reliability, a strong drive toward cost-effectiveness, and frequent peak caseload periods) are similar to the demands of the clients of the Accountemps division. Robert Half Legal offers a full suite of legal staffing and consulting services to help organizations manage constantly changing workloads and access expertise across in-demand legal practice areas.
Robert Half Management Resources
The Company’s Robert Half 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, senior financial analysts, internal auditors, and business systems analysts for such tasks as financial systems conversions, expansion into new markets, business process reengineering, business systems performance improvement, and post-merger financial consolidation.
The Creative Group
The Creative Group division commenced operations in 1999 and specializes in identifying for its clients creative professionals in the areas of interactive media, design, marketing, advertising and public relations. The division places freelance and project consultants in a variety of positions such as creative directors, graphics designers, web content developers, web designers, media buyers, brand managers, and public relations specialists.
Protiviti
Protiviti is a global consulting firm that delivers an expanding set of services across its defined solution offerings of Business Performance Improvement, Internal Audit, Managed Solutions, Risk and Compliance and Technology Consulting. Protiviti and its independently owned member firms works collaboratively with its clients in over 25 countries to help them achieve their business objectives and delivers confidence in an ever-evolving dynamic business world. Clients range from high-growth, pre-public/transactional established start-ups to the largest global companies, across seven focused industries.
Marketing and Recruiting
The Company markets its staffing services to clients and employment candidates via both national and local advertising activities. Advertising consists of client- and employment candidate-facing buys in radio, digital display, search engine marketing, social media, trade publications, job boards and events. The Company also markets its services, as well as hiring and career management advice and thought leadership, via its website, e-mail marketing program, social media and blog. Direct marketing via telephone solicitation is a significant portion of the Company’s total marketing efforts. Additionally, the Company has expanded its use of job boards and aggregators in all aspects of sales and recruitment. Joint marketing arrangements have been entered into with major software manufacturers and typically provide for the development of proprietary skills tests, cooperative advertising, joint campaigns, and similar promotional activities. The Company also actively seeks endorsements and affiliations with professional organizations in the accounting and finance, technology, legal, and creative and marketing fields. In addition, the Company conducts public relations activities designed to enhance public recognition of the Company and its services. This includes outreach to journalists, bloggers and social media influencers, and the distribution of print, digital, and video thought leadership. Robert Half staffing and recruiting professionals are encouraged to be active in civic organizations and industry trade groups in their local communities.
Protiviti markets its business consulting and internal audit services to a variety of clients in a range of industries. Industry and competency teams conduct targeted marketing efforts, locally, nationally and globally, including print advertising, production of thought leadership, and branded speaking events. National advertising conducted by Protiviti consists primarily
2


of print advertisements in magazines and selected trade journals. Protiviti regularly conducts a variety of programs to share its insights with clients on current topics such as risk, technology, corporate governance, and industry challenges. It conducts public relations activities, such as distributing press releases, white papers, case studies and newsletters, designed to enhance recognition for the Protiviti brand, establish its expertise in key issues surrounding its business and promote its services. Protiviti plans to expand both the services and value added content on the Protiviti.com website and increase traffic through targeted Internet advertising. Local employees are encouraged to be active in relevant social media communities, civic organizations and industry trade groups.
The Company and its subsidiaries own many trademarks, service marks and tradenames, including the Robert Half® Finance & Accounting, Accountemps®, OfficeTeam®, Robert Half® Technology, Robert Half® Management Resources, Robert Half® Legal, The Creative Group® and Protiviti® marks, which are registered in the United States and in a number of foreign countries.
Organization
Management of the Company’s staffing operations is coordinated from its headquarters facilities in Menlo Park and San Ramon, California. The Company’s headquarters provides support and centralized services to its offices in the administrative, marketing, public relations, accounting, information technology, training and legal areas, particularly as it relates to the standardization of the operating procedures of its offices. As of December 31, 2019, the Company conducted its staffing services operations through 326 offices in 42 states, the District of Columbia and 17 foreign countries. Office managers are responsible for most activities of their offices, including sales, local advertising and marketing and recruitment.
The day-to-day operations of Protiviti are managed by a chief executive officer and a senior management team with operational and administrative support provided by individuals located in San Ramon and Menlo Park, California. As of December 31, 2019, Protiviti had 62 offices in 23 states and 11 foreign countries.
Competition
The Company’s staffing services face competition in attracting clients as well as skilled specialized employment candidates. The staffing business is 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 staffing business 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.
Protiviti faces competition in its efforts to attract clients, expand relationships with existing clients and win proposal presentations. The global professional service business is highly competitive with a dynamic regulatory environment, disruptive new technologies, security and privacy concerns and high demand for skilled professionals all driving significant opportunities. The principal competitors of Protiviti remain the “big four” accounting firms. Significant competitive factors include reputation, technology, tools, project methodologies, price of services and depth of skills of personnel. Protiviti believes its competitive strengths lie in the collaborative approach they take to working with clients which drive knowledge transfer, understanding of client issues and value creation. This is coupled with a “configure-to-fit” resourcing model to create blended teams of full-time Protiviti professionals and engagement professionals from Robert Half’s network of specialized talent to precisely match expertise, approach and people to the changing global needs of clients on consulting and managed solutions projects.
Employees
The Company has approximately 16,000 full-time internal staff, including approximately 4,500 employees engaged directly in Protiviti operations. In addition, the Company placed approximately 205,600 engagement professionals on assignments with clients during 2019. In 2018, the Company had approximately 15,200 full-time internal staff, including approximately 4,000 employees engaged directly in Protiviti operations. In 2018, the Company placed approximately 216,500 engagement professionals on assignments with clients. The substantial majority of engagement professionals placed on assignment by the Company are the Company’s legal employees 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 access to voluntary health insurance coverage to interested employees.
3


Other Information
The Company is not dependent upon a single customer or a limited number of customers. The Company’s staffing services operations are generally more active in the first and fourth quarters of a calendar year. Protiviti is generally more active in the third and fourth quarters of a calendar year. Order backlog is not a material aspect of the Company’s staffing services business. While backlog is of greater importance to Protiviti, the Company does not believe, based upon the length of time of the average Protiviti engagement, that backlog is a material aspect of the Protiviti business. No material portion of the Company’s business is subject to government contracts.
Available Information
The Company’s Internet address is www.roberthalf.com. The Company makes available, free of charge, through its website, its Annual Reports on Form 10-K, proxy statements for its annual meetings of stockholders, its Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and any amendments to those reports, as soon as is reasonably practicable after such reports are filed with or furnished to the Securities and Exchange Commission. Also available on the Company’s website are its Corporate Governance Guidelines, its Code of Business Conduct and Ethics, and the charters for its Audit Committee, Compensation Committee and Nominating and Governance Committee, each of which is available in print to any stockholder who makes a request to Robert Half International Inc., 2884 Sand Hill Road, Menlo Park, CA 94025, Attn: Corporate Secretary. The Company’s Code of Business Conduct and Ethics is the Code of Ethics required by Item 406 of Securities and Exchange Commission Regulation S-K. The Company intends to satisfy any disclosure obligations under Item 5.05 of Form 8-K regarding any amendment or waiver relating to its Code of Business Conduct and Ethics by posting such information on its website.
Item 1A.    Risk Factors
The Company’s business prospects are subject to various risks and uncertainties that impact its business. The most important of these risks and uncertainties are as follows:

Risks Related to the Company’s Business Environment

Any reduction in global economic activity may harm the Company’s business and financial condition. The demand for the Company’s services, in particular its staffing services, is highly dependent upon the state of the economy and upon the staffing needs of the Company’s clients. Certain of the Company’s markets have recently experienced economic uncertainty characterized by increasing unemployment, limited availability of credit and decreased consumer and business spending. In addition, certain geopolitical events, including ongoing trade negotiations and the ongoing negotiation of the United Kingdom’s withdrawal from the European Union (“Brexit”), have caused significant economic, market, political and regulatory uncertainty in some of the Company’s markets. Any decline in the economic condition or employment levels of the U.S. or of any of the foreign countries in which the Company does business, or in the economic condition of any region of any of the foregoing, or in any specific industry may severely reduce the demand for the Company’s services and thereby significantly decrease the Company’s revenues and profits. Further, continued or intensifying economic, political or regulatory uncertainty in the Company’s markets could reduce demand for the Company’s services.

The Company’s business depends on a strong reputation and anything that harms its reputation will likely harm its results. As a provider of temporary and permanent staffing solutions as well as consultant services, the Company’s reputation is dependent upon the performance of the employees it places with its clients and the services rendered by its consultants. The Company depends on its reputation and name recognition to secure engagements and to hire qualified employees and consultants. If the Company’s clients become dissatisfied with the performance of those employees or consultants or if any of those employees or consultants engage in or are believed to have engaged in conduct that is harmful to the Company’s clients, the Company’s ability to maintain or expand its client base may be harmed.

The Company faces risks in operating internationally. The Company depends on operations in international markets for a significant portion of its business. These international operations are subject to a number of risks, including general political and economic conditions in those foreign countries, the burden of complying with various foreign laws and technical standards and unpredictable changes in foreign regulations, U.S. legal requirements governing U.S. companies operating in foreign countries, legal and cultural differences in the conduct of business, potential adverse tax consequences and difficulty in staffing and managing international operations. In addition, the Company’s business may be affected by foreign currency exchange fluctuations. In particular, the Company is subject to risk in translating its results in foreign currencies into the U.S. dollar. If the value of the U.S. dollar strengthens relative to other currencies, the Company’s reported income from these operations could decrease. The value of the U.S. dollar has recently strengthened considerably against a number of major foreign currencies, and
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a continuation or extension of this strength relative to these other currencies could adversely impact the Company’s reported income from its international markets and cause its revenue in such markets, when translated into U.S. dollars, to decline.

Significant U.K. or European developments stemming from the U.K.’s decision to withdraw from the European Union could have a material adverse effect on the Company. In the past several years, the European market experienced economic uncertainty, which adversely affected, and the return of which may in the future adversely affect, the Company’s operations in Europe. In particular, Brexit has contributed to, and may continue to contribute to, European economic, market and regulatory uncertainty and could adversely affect European or worldwide economic, market, regulatory, or political conditions. To the extent that adverse economic conditions and uncertainty in Europe (related to Brexit or otherwise) worsen, demand for the Company’s services may decline, which could significantly harm its business and results of operations.

Natural disasters and unusual weather conditions, pandemic outbreaks, terrorist acts, global political events and other serious catastrophic events could disrupt business and otherwise materially adversely affect our business and financial condition. With operations in many states and multiple foreign countries, we are subject to numerous risks outside of our control, including risks arising from natural disasters, such as fires, earthquakes, hurricanes, floods, tornadoes, unusual weather conditions, pandemic outbreaks and other global health emergencies, terrorist acts or disruptive global political events, or similar disruptions that could materially adversely affect our business and financial performance. For example, the Company’s operations are heavily dependent on the ability of employees and consultants to travel from business to business and from location to location. Any public health emergencies, including a real or potential global pandemic such as those caused by the avian flu, SARS, Ebola, Coronavirus, or even a particularly virulent flu, could decrease demand for our services and our ability to offer them. Uncharacteristic or significant weather conditions can affect travel and the ability of businesses to remain open, which could lead to decreased ability to offer our services and materially adversely affect our short-term results of operations. In addition, these events could result in delays in placing employees and consultants, the temporary disruption in the transport of employees and consultants overseas and domestically, the inability of employees and consultants to reach or have transportation to clients directly affected by such events and disruption to our information systems. Although it is not possible to predict such events or their consequences, these events could materially adversely affect our reputation, business and financial condition.

Risks Related to the Company’s Operations

The Company may be unable to find sufficient candidates for its staffing business. The Company’s staffing services business consists of the placement of individuals seeking employment. There can be no assurance that candidates for employment will continue to seek employment through the Company. Candidates generally seek temporary or regular positions through multiple sources, including the Company and its competitors. Unemployment in the United States has been low in the past couple of years and has recently decreased further; some economists have speculated that in certain markets, the U.S. could be at or near full employment. This phenomenon has made finding sufficient eligible candidates to meet employers’ demands more challenging and further decreases in the employment rates could compound these difficulties. Any shortage of candidates could materially adversely affect the Company.

The Company operates in a highly competitive business and may be unable to retain clients or market share. The staffing services business is highly competitive and, because it is a service business, the barriers to entry are quite low. There are many competitors, some of which have greater resources than the Company, and new competitors are entering the market all the time. In addition, long-term contracts form a negligible portion of the Company’s revenue. Therefore, there can be no assurance that the Company will be able to retain clients or market share in the future. Nor can there be any assurance that the Company will, in light of competitive pressures, be able to remain profitable or, if profitable, maintain its current profit margins.

The Company may incur potential liability to employees and clients. The Company’s temporary services business entails employing individuals on a temporary basis and placing such individuals in clients’ workplaces. The Company’s ability to control the workplace environment is limited. As the employer of record of its temporary employees, the Company incurs a risk of liability to its temporary employees for various workplace events, including claims of physical injury, discrimination, harassment or failure to protect confidential personal information. While such claims have not historically had a material adverse effect upon the Company, there can be no assurance that such claims in the future will not result in adverse publicity or have a material adverse effect upon the Company. The Company also incurs a risk of liability to its clients resulting from allegations of errors, omissions or theft by its temporary employees, or allegations of misuse of client confidential information. In many cases, the Company has agreed to indemnify its clients in respect of these types of claims. The Company maintains insurance with respect to many of such claims. While such claims have not historically had a material adverse effect upon the Company, there can be no assurance that the Company will continue to be able to obtain insurance at a cost that does not have a material adverse effect upon the Company or that such claims (whether by reason of the Company not having sufficient
5


insurance or by reason of such claims being outside the scope of the Company’s insurance) will not have a material adverse effect upon the Company.

The Company is dependent on its management personnel and employees and a failure to attract and retain such personnel could harm its business. The Company is engaged in the services business. As such, its success or failure is highly dependent upon the performance of its management personnel and employees, rather than upon technology or upon tangible assets (of which the Company has few). There can be no assurance that the Company will be able to attract and retain the personnel that are essential to its success.

The Company’s results of operations and ability to grow could be materially negatively affected if it cannot successfully keep pace with technological changes impacting the development and implementation of its services and the evolving needs of its clients. The Company’s success depends on its ability to keep pace with rapid technological changes affecting both the development and implementation of its services and the staffing needs of its clients. Technological advances such as artificial intelligence, machine learning, and automation are impacting industries served by all our lines of business. In addition, the Company’s business relies on a variety of technologies, including those that support hiring and tracking, order management, billing, and client data analytics. If the Company does not sufficiently invest in new technology and industry developments, appropriately implement new technologies, or evolve its business at sufficient speed and scale in response to such developments, or if it does not make the right strategic investments to respond to these developments, the Company’s services, results of operations, and ability to develop and maintain its business could be negatively affected.

The demand for the Company’s services related to Sarbanes-Oxley or other regulatory compliance may decline. The operations of both the staffing services business and Protiviti include services related to Sarbanes-Oxley and other regulatory compliance. There can be no assurance that there will be ongoing demand for these services. For example, the Jumpstart Our Business Startup (“JOBS”) Act signed into law in April of 2012 allows most companies going public in the U.S. to defer implementation of some of the provisions of Sarbanes-Oxley for up to five years after their initial public offering. Similarly there are a number of proposals currently being considered by the U.S. Congress to further delay or, in some cases, remove the requirements of Sarbanes-Oxley for a number of public companies. Further, many analysts are expecting the U.S. Congress and President Trump to seek to repeal or modify legislation that is viewed as having over-regulated certain sectors of the U.S. economy and decreased the incentive for U.S. companies to go public and their ability to effectively compete with foreign competition. These or other similar modifications of the regulatory requirements could decrease demand for Protiviti’s services.

Long-term contracts do not comprise a significant portion of the Company’s revenue. Because long-term contracts are not a significant part of the Company’s staffing services business, future results cannot be reliably predicted by considering past trends or extrapolating past results. Additionally, the Company’s clients will frequently enter into non-exclusive arrangements with several firms, which the client is generally able to terminate on short notice and without penalty. The nature of these arrangements further exacerbates the difficulty in predicting our future results.

Protiviti may be unable to attract and retain key personnel. Protiviti is a services business, and is dependent upon its ability to attract and retain qualified, skilled personnel. While Protiviti has retained its key personnel to date, there can be no assurance that it will continue to be able to do so.

Protiviti operates in a highly competitive business and faces competitors who are significantly larger and have more established reputations. Protiviti operates in a highly competitive business. As with the Company’s staffing services business, the barriers to entry are quite low. There are many competitors, some of which have greater resources than Protiviti and many of which have been in operation far longer than Protiviti. In particular, Protiviti faces competition from the “big four” accounting firms, which have been in operation for a considerable period of time and have established reputations and client bases. Because the principal factors upon which competition is based are reputation, technology, tools, project methodologies, price of services and depth of skills of personnel, there can be no assurance that Protiviti will be successful in attracting and retaining clients or be able to maintain the technology, personnel and other requirements to successfully compete.

Protiviti’s operations could subject it to liability. The business of Protiviti consists of providing business consulting and internal audit services. Liability could be incurred, or litigation could be instituted against the Company or Protiviti for claims related to these activities or to prior transactions or activities. There can be no assurance that such liability or litigation will not have a material adverse impact on Protiviti or the Company.




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Legal and Regulatory Risks

The Company and certain subsidiaries are defendants in several lawsuits that could cause the Company to incur substantial liabilities. The Company and certain subsidiaries are defendants in several actual or asserted class and representative action lawsuits brought by or on behalf of the Company’s current and former employees alleging violations of federal and state law with respect to certain wage and hour related matters, as well as claims challenging the Company’s compliance with the Fair Credit Reporting Act. The various claims made in one or more of such lawsuits include, among other things, the misclassification of certain employees as exempt employees under applicable law, failure to comply with wage statement requirements, failure to compensate certain employees for time spent performing activities related to the interviewing process, and other related wage and hour violations. Such suits seek, as applicable, unspecified amounts for unpaid overtime compensation, penalties, and other damages, as well as attorneys’ fees. It is not possible to predict the outcome of these lawsuits. However, these lawsuits may consume substantial amounts of the Company’s financial and managerial resources and might result in adverse publicity, regardless of the ultimate outcome of the lawsuits. In addition, the Company and its subsidiaries may become subject to similar lawsuits in the same or other jurisdictions, or to various other claims, disputes, and legal or regulatory proceedings that arise in the ordinary course of business. An unfavorable outcome with respect to these lawsuits and any future lawsuits or regulatory proceedings could, individually or in the aggregate, cause the Company to incur substantial liabilities or impact its operations in such a way that may have a material adverse effect upon the Company’s business, financial condition or results of operations. Furthermore, any future lawsuits, claims, disputes, or legal or regulatory proceedings may also consume substantial amounts of the Company’s financial and managerial resources and might result in adverse publicity, regardless of the ultimate outcome. In addition, an unfavorable outcome in one or more of these cases could cause the Company to change its compensation plans for its employees, which could have a material adverse effect upon the Company’s business.

Government regulations may result in prohibition or restriction of certain types of employment services or the imposition of additional licensing or tax requirements that may reduce the Company’s future earnings. In many jurisdictions in which the Company operates, the employment services industry is heavily regulated. For example, governmental regulations in some countries restrict the length of contracts and the industries in which the Company’s employees may be used. In other countries, special taxes, fees or costs are imposed in connection with the use of its employees. Additionally, trade unions in some countries have used the political process to target the industry, in an effort to increase the regulatory burden and expense associated with offering or utilizing temporary staffing solutions.

The countries in which we operate may, among other things:
create additional regulations that prohibit or restrict the types of employment services that the Company currently provides;
require new or additional benefits be paid to the Company’s employees;
require the Company to obtain additional licensing to provide employment services; or
increase taxes, such as sales or value-added taxes, payable by the providers of temporary workers.

Any future regulations may have a material adverse effect on the Company’s business and financial results because they may make it more difficult or expensive for the Company to continue to provide employment services. Additionally, as the Company expands existing service offerings, adds new service offerings, or enters new markets, it may become subject to additional restrictions and regulations which may impede its business, increase costs and impact profitability.

The Company’s business is subject to extensive government regulation and a failure to comply with regulations could harm its business. The Company’s business is subject to regulation or licensing in many states in the U.S. and in certain foreign countries. While the Company has had no material difficulty complying with regulations in the past, there can be no assurance that the Company will be able to continue to obtain all necessary licenses or approvals or that the cost of compliance will not prove to be material. Any inability of the Company to comply with government regulation or licensing requirements could materially adversely affect the Company. Further, changes to existing regulation or licensing requirements could impose additional costs and other burdens or limitations on the Company’s operations. In addition, the Company’s temporary services business entails employing individuals on a temporary basis and placing such individuals in clients’ workplaces. Increased government regulation of the workplace or of the employer-employee relationship, or judicial or administrative proceedings related to such regulation, could materially adversely affect the Company. In addition, to the extent that government regulation imposes increased costs upon the Company, such as unemployment insurance taxes, there can be no assurance that such costs will not adversely impact the Company’s profit margins. Further, lawsuits or other proceedings related to the Company’s compliance with government regulations or licensing requirements could materially adversely affect the Company. For example, the Company is currently named as a defendant in litigation challenging its compliance with the Fair Credit Reporting Act. It is not possible to predict the outcome of such litigation; however, such litigation or any future lawsuits or proceedings related to the Company’s compliance with government regulation or licensing requirements could consume substantial amounts
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of the Company’s financial and managerial resources and might result in adverse publicity, regardless of the ultimate outcome of any such lawsuits or other proceedings. An unfavorable outcome with respect to such litigation or any future lawsuits or proceedings could, individually or in the aggregate, cause the Company to incur substantial liabilities that may have a material adverse effect upon the Company’s business, financial condition or results of operations.

The Company’s compliance policies and controls may not prevent violations that could result in significant fines and penalties. The Company could also be exposed to fines and penalties under U.S. or local jurisdiction trade sanctions and controls as well as laws prohibiting corrupt payments to governmental officials including the Foreign Corrupt Practices Act and similar laws that prohibit payments to foreign officials. Failure to comply with local laws in a particular market may result in substantial liability and could have a significant and negative effect not only on our business in that market but also on our reputation generally. Although the Company has implemented policies and procedures designed to ensure compliance with these laws, it cannot be sure that its employees, contractors or agents will not violate such policies. Any such violations could materially damage the Company’s reputation, brand, business and operating results.

Further, changes in U.S. laws and policies governing foreign trade or investment and use of foreign operations or workers, and any negative sentiments towards the United States as a result of such changes, could adversely affect the Company’s operations.

Health care reform could increase the costs of the Company’s temporary staffing operations. In March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (the “PPACA”) was signed into law in the United States. In 2015, the Company redesigned its employee benefits to offer health insurance coverage to its temporary candidates in order to meet the requirements of the PPACA’s employer mandate.

President Trump and the U.S. Congress have and likely will continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the PPACA. The U.S. Congress has made several attempts to repeal or modify the PPACA and in 2019, the U.S. Court of Appeals for the Fifth Circuit invalidated significant portions of the PPACA. In 2020, the U.S. House of Representatives petitioned the U.S. Supreme Court to review the Fifth Circuit’s decision. It is unclear at this point what the scope of any future such legislation will be and when it will become effective. Because of the uncertainty surrounding this replacement health care reform legislation, we cannot predict with any certainty the likely impact of the PPACA’s repeal or the adoption of any other health care reform legislation on the Company’s financial condition or operating results. Whether or not there is alternative health care legislation enacted in the U.S., there is likely to be significant disruption to the health care market in the coming months and years and the costs of the Company’s health care expenditures may increase.

U.S. federal tax regulations and interpretations could adversely affect the Company. On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA”) was signed into law. Notwithstanding the reduction in the corporate income tax rate, the overall impact of these changes on the Company’s results of operations will likely evolve as new regulations and interpretations relating to the TCJA are implemented. In addition, various political figures have pledged their support to overturning or modifying key aspects of the TCJA which could further increase the uncertainty relating to the impact of this or any future tax legislation on the Company’s results of operations.

Risks Related to the Company’s Information Technology, Cybersecurity and Data Protection

The Company’s computer and communications hardware and software systems are vulnerable to damage and interruption. The Company’s ability to manage its operations successfully is critical to its success and largely depends upon the efficient and uninterrupted operation of its computer and communications hardware and software systems, some of which are managed by third-party vendors. The Company’s primary computer systems and operations are vulnerable to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, catastrophic events and errors in usage by the Company’s employees and those of the Company’s vendors.

The Company’s employees or vendors may have access or exposure to personally identifiable or otherwise confidential information and customer data and systems, the misuse of which could result in legal liability. Cyber-attacks, including attacks motivated by grievances against the business services industry in general or against the Company in particular, may disable or damage its systems. It is possible that the Company’s security controls or those of its third-party vendors over personal and other data and other practices it follows may not prevent the improper access to or disclosure of personally identifiable or otherwise confidential information. Such disclosure or damage to the Company’s systems could harm its reputation and subject it to government sanctions and liability under its contracts and laws that protect personal data and confidential information, resulting in increased costs or loss of revenue. The potential risk of security breaches and cyber-attacks may increase as the Company introduces new service offerings.

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Changes in data privacy and protection laws and regulations in respect of control of personal information could increase the Company’s costs or otherwise adversely impact its operations. In the ordinary course of business, the Company collects, uses, and retains personal information from its employees, employment candidates, and contractors, including, without limitation, full names, government-issued identification numbers, addresses, birth dates, and payroll-related information. The possession and use of personal information in conducting the Company’s business subjects it to a variety of complex and evolving domestic and foreign laws and regulations regarding data privacy, protection and security, which, in many cases, apply not only to third-party transactions, but also to transfers of information among the Company and its subsidiaries. For example, the European Union’s General Data Protection Regulation (“GDPR”), which became effective in May 2018, imposes stringent operational requirements for entities processing personal information, such as strong safeguards for data transfers to countries outside the European Union and strong enforcement authorities and mechanisms. Complying with the enhanced obligations imposed by the GDPR and other current and future laws and regulations relating to data transfer, residency, privacy and protection has increased and may continue to increase the Company’s operating costs and require significant management time and attention, while any failure by the Company or its subsidiaries to comply with applicable laws could result in governmental enforcement actions, fines, and other penalties that could potentially have an adverse effect on the Company’s operations and reputation.

Risks Related to the Company’s Internal Controls and Accounting Policies

Failure to maintain adequate financial and management processes and controls could lead to errors in the Company’s financial reporting. Failure to maintain adequate financial and management processes and controls could lead to errors in the Company’s financial reporting. If the Company’s management is unable to certify the effectiveness of its internal controls or if its independent registered public accounting firm cannot render an opinion on the effectiveness of its internal control over financial reporting, or if material weaknesses in the Company’s internal controls are identified, the Company could be subject to regulatory scrutiny and a loss of public confidence. In addition, if the Company does not maintain adequate financial and management personnel, processes and controls, it may not be able to accurately report its financial performance on a timely basis, which could cause its stock price to fall.

Failure to identify and respond to risk issues in a timely manner could have a material adverse effect on our business. Although we have processes in place to attempt to identify and respond to risk issues in a timely manner, our efforts may not be sufficient.

The Company’s culture may not sufficiently encourage timely identification and escalation of significant risk issues. The collective impact of the tone at the top, tone in the middle and tone at the bottom on risk management, compliance and responsible business behavior has a huge effect on timely escalation of risk issues, particularly those affecting core operations.
Item 1B.    Unresolved Staff Comments.
Not applicable.
Item 2.    Properties
The Company’s headquarters operations are located in Menlo Park and San Ramon, California. As of December 31, 2019, placement activities were conducted through 326 offices located in the United States, Canada, the United Kingdom, Belgium, Brazil, France, the Netherlands, Germany, Luxembourg, Switzerland, Japan, China, Singapore, Australia, New Zealand, Austria, the United Arab Emirates, and Chile. As of December 31, 2019, Protiviti had 62 offices in the United States, Canada, Australia, China, France, Germany, Italy, the Netherlands, Japan, Singapore, India and the United Kingdom. All of the offices are leased.
Item 3.    Legal Proceedings
On March 23, 2015, Plaintiff Jessica Gentry, on her own behalf and on behalf of a putative class of allegedly similarly situated individuals, filed a complaint against the Company in the Superior Court of California, San Francisco County, which was subsequently amended on October 23, 2015. The complaint alleges that a putative class of current and former employees of the Company working in California since March 13, 2010 were denied compensation for the time they spent interviewing “for temporary and permanent employment opportunities” as well as performing activities related to the interview process. Gentry seeks recovery on her own behalf and on behalf of the putative class in an unspecified amount for this allegedly unpaid compensation. Gentry also seeks recovery of an unspecified amount for the alleged failure of the Company to provide her and
9


the putative class with accurate wage statements. Gentry also seeks an unspecified amount of other damages, attorneys’ fees, and statutory penalties, including penalties for allegedly not paying all wages due upon separation to former employees and statutory penalties on behalf of herself and other allegedly “aggrieved employees” as defined by California’s Labor Code Private Attorneys General Act (“PAGA”). On January 4, 2016, the Court denied a motion by the Company to compel all of Gentry’s claims, except the PAGA claim, to individual arbitration. At this stage of the litigation, it is not feasible to predict the outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts have been provided in the Company’s Financial Statements. The Company believes it has meritorious defenses to the allegations and the Company intends to continue to vigorously defend against the litigation.
On April 6, 2018, Plaintiff Shari Dorff, on her own behalf and on behalf of a putative class of allegedly similarly situated individuals, filed a complaint against the Company in the Superior Court of California, County of Los Angeles. In addition to certain claims individual to Plaintiff Dorff, the complaint alleges that salaried recruiters based in California have been misclassified as exempt employees and seeks an unspecified amount for: unpaid wages resulting from such alleged misclassification; alleged failure to provide a reasonable opportunity to take meal periods and rest breaks; alleged failure to pay wages on a timely basis both during employment and upon separation; alleged failure to comply with California requirements regarding wage statements and record-keeping; and alleged improper denial of expense reimbursement. Plaintiff Dorff also seeks an unspecified amount of other damages, attorneys’ fees, and penalties, including but not limited to statutory penalties on behalf of herself and other allegedly “aggrieved employees” as defined by PAGA. At this stage of the litigation, it is not feasible to predict the outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts have been provided in the Company’s Financial Statements. The Company believes it has meritorious defenses to the allegations and the Company intends to continue to vigorously defend against the litigation.
The Company is involved in a number of other lawsuits arising in the ordinary course of business. While management does not expect any of these other matters to have a material adverse effect on the Company’s results of operations, financial position or cash flows, litigation is subject to certain inherent uncertainties.
Item 4.    Mine Safety Disclosure
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Price, Dividends and Related Matters
The Company’s Common Stock is listed for trading on the New York Stock Exchange under the symbol “RHI”. On January 31, 2019, there were 1,210 holders of record of the Common Stock.
Issuer Purchases of Equity Securities
 
Total
Number of
Shares
Purchased
Average
Price Paid
Per Share
Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans
Maximum
Number of
Shares that May
Yet Be
Purchased
Under Publicly
Announced
Plans (b)
October 1, 2019 to October 31, 2019—  $—  —  3,441,444  
November 1, 2019 to November 30, 2019425,242    $57.85  425,242  3,016,202  
December 1, 2019 to December 31, 2019649,526(a)$61.39  562,4362,453,766  
Total October 1, 2019 to December 31, 20191,074,768    987,678  
 
(a)Includes 87,090 shares repurchased in connection with employee stock plans, whereby Company shares were tendered by employees for the payment of applicable withholding taxes.
(b)Commencing in October 1997, the Company’s Board of Directors has, at various times, authorized the repurchase, from time to time, of the Company’s common stock on the open market or in privately negotiated transactions depending on market conditions. Since plan inception, a total of 118,000,000 shares have been authorized for repurchase of which 115,546,234 shares have been repurchased as of December 31, 2019.

Equity Compensation Plan Information
 
Plan CategoryNumber of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
A
Weighted average
exercise price of
outstanding options,
warrants and rights
B
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column A)
C
Equity compensation plans approved by security holders
—  —  4,823,372  
Equity compensation plans not approved by security holders
—  —  —  
Total—  —  4,823,372  
 
Since May 2005, all grants have been made pursuant to the Stock Incentive Plan, which was approved by stockholders in May 2005 and re-approved in May 2008, May 2011, May 2013, May 2014, and May 2019. Such plan authorizes the issuance of stock options, restricted stock, stock units and stock appreciation rights to directors, executive officers and employees.
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Stock Performance Graph
The following graph compares, through December 31, 2019, the cumulative total return of the Company’s Common Stock, an index of certain publicly traded employment services companies, and the S&P 500. The graph assumes the investment of $100 at the beginning of the period depicted in the chart and reinvestment of all dividends. The peer companies are weighted by their respective market caps at the beginning of each period. The information presented in the graph was obtained by the Company from outside sources it considers to be reliable but has not been independently verified by the Company.

rhi-20191231_g1.jpg

(a)This index represents the cumulative total return of the Company and the following corporations providing temporary or permanent employment services: Kelly Services, Inc.; Kforce Inc.; ManpowerGroup; and Resources Connection Inc.

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Item 6. Selected Financial Data
The selected five-year financial data presented below should be read in conjunction with the information contained in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Company’s Consolidated Financial Statements and the Notes thereto contained in Item 8. Financial Statements and Supplementary Data.
 
 Years Ended December 31,
 20192018201720162015
 (in thousands)
Income Statement Data:
Service revenues$6,074,432  $5,800,271  $5,266,789  $5,250,399  $5,094,933  
Costs of services3,543,913  3,390,257  3,102,977  3,089,723  2,980,462  
Gross margin2,530,519  2,410,014  2,163,812  2,160,676  2,114,471  
Selling, general and administrative expenses
1,908,768  1,821,089  1,646,532  1,606,217  1,533,799  
Amortization of intangible assets1,361  1,705  1,563  1,237  192  
Interest income, net(5,125) (4,382) (1,799) (888) (550) 
Income before income taxes625,515  591,602  517,516  554,110  581,030  
Provision for income taxes171,082  157,314  226,932  210,721  223,234  
Net income$454,433  $434,288  $290,584  $343,389  $357,796  
 Years Ended December 31,
 20192018201720162015
 (in thousands, except per share amounts)
Net Income Per Share:
Basic$3.93  $3.60  $2.34  $2.68  $2.72  
Diluted$3.90  $3.57  $2.33  $2.67  $2.69  
Shares:
Basic115,656  120,513  124,152  127,991  131,749  
Diluted116,411  121,602  124,892  128,766  132,930  
Dividends Declared Per Share$1.24  $1.12  $.96  $.88  $.80  
 December 31,
 20192018201720162015
 (in thousands)
Balance Sheet Data:
Total assets$2,311,408  $1,903,097  $1,867,454  $1,777,971  $1,671,044  
Notes payable, less current portion
$239  $457  $657  $840  $1,007  
Stockholders’ equity$1,143,683  $1,063,198  $1,105,265  $1,086,599  $1,003,781  


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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. These statements may be identified by words such as “estimate”, “forecast”, “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. These risks and uncertainties include, but are not limited to, the following: changes to or new interpretations of U.S. or international tax regulations; the global financial and economic situation; changes in levels of unemployment and other economic conditions in the United States or foreign countries where the Company does business, or in particular regions or industries; reduction in the supply of candidates for temporary employment or the Company’s ability to attract candidates; the entry of new competitors into the marketplace or expansion by existing competitors; the ability of the Company to maintain existing client relationships and attract new clients in the context of changing economic or competitive conditions; the impact of competitive pressures, including any change in the demand for the Company’s services, on the Company’s ability to maintain its margins; the possibility of the Company incurring liability for its activities, including the activities of its engagement professionals, or for events impacting its engagement professionals on clients’ premises; the possibility that adverse publicity could impact the Company’s ability to attract and retain clients and candidates; the success of the Company in attracting, training, and retaining qualified management personnel and other staff employees and in managing the recently announced leadership transition; the Company’s ability to comply with governmental regulations affecting personnel services businesses in particular or employer/employee relationships in general; whether there will be ongoing demand for Sarbanes-Oxley or other regulatory compliance services; the Company’s reliance on short-term contracts for a significant percentage of its business; litigation relating to prior or current transactions or activities, including litigation that may be disclosed from time to time in the Company’s Securities and Exchange Commission (“SEC”) filings; the ability of the Company to manage its international operations and comply with foreign laws and regulations; the impact of fluctuations in foreign currency exchange rates; the possibility that the additional costs the Company will incur as a result of health care reform legislation may adversely affect the Company’s profit margins or the demand for the Company’s services; the possibility that the Company’s computer and communications hardware and software systems could be damaged or their service interrupted or the Company could experience a cybersecurity breach; and the possibility that the Company may fail to maintain adequate financial and management controls and as a result suffer errors in its financial reporting. Additionally, with respect to Protiviti, other risks and uncertainties include the fact that future success will depend on its ability to retain employees and attract clients; there can be no assurance that there will be ongoing demand for Sarbanes-Oxley or other regulatory compliance services; failure to produce projected revenues could adversely affect financial results; and there is the possibility of involvement in litigation relating to prior or current transactions or activities. Because long-term contracts are not a significant part of the Company’s business, future results cannot be reliably predicted by considering past trends or extrapolating past results. Further information regarding these and other risks and uncertainties is contained in Item 1A. “Risk Factors.”

Executive Overview
Demand for the Company’s temporary and consultant staffing, permanent placement staffing and risk consulting and internal audit services is largely dependent upon general economic and labor trends both domestically and abroad. Annual service revenues reached $6.07 billion in 2019, an increase of 5% from the prior year. Full-year 2019 net income increased to $454 million and diluted net income per share increased to $3.90. All three of the Company’s reportable segments experienced revenue growth, led by risk consulting and internal audit services which increased 18% in 2019 compared to last year.
We believe that the Company is well positioned in the current macroeconomic environment. The United States economic backdrop during 2019 was conducive to growth for the Company as real gross domestic product (“GDP”) grew an estimated 2.3%, while the unemployment rate declined from 3.9% in December 2018 to 3.5% in December 2019. In the United States, the number of job openings has exceeded the number of hires since February 2015, creating competition for skilled talent that increases the Company’s value to clients. The U.S. labor market remains robust, with significant demand due to talent shortages across our professional disciplines, where unemployment remains near a 50-year low.
Demand for Protiviti’s services was broad-based across all of its consulting and internal audit solutions. Protiviti continues to nurture and grow a loyal client base.
We monitor various economic indicators and business trends in all of the countries in which we operate to anticipate demand for the Company’s services. We evaluate these trends to determine the appropriate level of investment, including personnel, which will best position the Company for success in the current and future global macroeconomic environment. The
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Company’s investments in headcount are typically structured to proactively support and align with expected revenue growth trends. As such, during 2019, we added headcount in all of our lines of business compared to prior year-end levels.
We have limited visibility into future revenues not only due to the dependence on macroeconomic conditions noted above, but also because of the relatively short duration of the Company’s client engagements. Accordingly, we typically assess headcount and other investments on at least a quarterly basis. That said, based on current trends and conditions, we expect headcount levels for our full-time staff to remain relatively flat for each of our reporting segments throughout the first quarter of 2020.
Capital expenditures, including $30 million related to cloud computing implementations, in 2019, totaled $90 million, approximately 62% of which represented investments in software initiatives and technology infrastructure, both of which are important to the Company’s future growth opportunities. Capital expenditures for cloud computing implementation costs are included in cash flows from operating activities on the Company’s Condensed Consolidated Statements of Cash Flows. Capital expenditures also included amounts spent on tenant improvements and furniture and equipment in the Company’s leased offices. We currently expect that 2020 capitalized expenditures will range from $100 million to $110 million, of which $50 million to $60 million relates to software initiatives and technology infrastructure, including capitalized costs relating to the implementation of cloud computing arrangements.
Critical Accounting Policies and Estimates
As described below, the Company’s most critical accounting policies and estimates are those that involve subjective decisions or assessments.
Service Revenues.    The Company derives its revenues from three segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. Revenues are recognized when promised goods or services are delivered to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. See Note C—“Revenue Recognition” to the Company’s Consolidated Financial Statements included under Part II—Item 8 of this report.
Income Taxes.    The Company’s operations are subject to U.S. federal, state and local, and foreign income taxes. In establishing its deferred income tax assets and liabilities and its provision for income taxes, the Company makes judgments and interpretations based on the enacted tax laws that are applicable to its operations in various jurisdictions. Deferred tax assets and liabilities are measured and recorded using current enacted tax rates, which the Company expects will apply to taxable income in the years in which those temporary differences are recovered or settled. The likelihood of a material change in the Company’s expected realization of its deferred tax assets is dependent on future taxable income and the effectiveness of its tax planning in the various relevant jurisdictions.

The Company also evaluates the need for valuation allowances to reduce the deferred tax assets to realizable amounts. Management evaluates all positive and negative evidence and uses judgment regarding past and future events, including operating results, to help determine when it is more likely than not that all or some portion of the deferred tax assets may not be realized. When appropriate, a valuation allowance is recorded against deferred tax assets to offset future tax benefits that may not be realized. Valuation allowances of $21.6 million and $23.1 million were recorded as of December 31, 2019 and 2018, respectively. The valuation allowances recorded relate primarily to net operating losses in certain foreign operations. If such losses are ultimately utilized to offset future operating income, the Company will recognize a tax benefit up to the full amount of the related valuation reserve.
While management believes that its judgments and interpretations regarding income taxes are appropriate, significant differences in actual experience may materially affect the future financial results of the Company.
Recent Accounting Pronouncements
See Note B—“New Accounting Pronouncements” to the Company’s Consolidated Financial Statements included under Part II—Item 8 of this report.
Results of Operations
Demand for the Company’s temporary and consultant staffing, permanent placement staffing and risk consulting and internal audit services is largely dependent upon general economic and labor market conditions both domestically and abroad. Because of the inherent difficulty in predicting economic trends and the absence of material long-term contracts in any of the Company’s business units, future demand for the Company’s services cannot be forecasted with certainty. We believe the Company is well positioned in the current macroeconomic environment.
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The Company’s temporary and permanent staffing business conducts placement activities through 326 offices in 42 states, the District of Columbia and 17 foreign countries, while Protiviti has 62 offices in 23 states and 11 foreign countries.
Non-GAAP Financial Measures
The financial results of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the SEC. To help readers understand the Company’s financial performance, the Company supplements its GAAP financial results with revenue growth rates derived from non-GAAP revenue amounts.
Variations in the Company’s financial results include the impact of changes in foreign currency exchange rates, billing days, and certain intercompany adjustments. The Company provides “as adjusted” revenue growth calculations to remove the impact of these items. These calculations show the year-over-year revenue growth rates for the Company’s reportable segments on both a reported basis and also on an as adjusted basis for global, U.S. and international operations. The Company has provided this data because it focuses on the Company’s revenue growth rates attributable to operating activities and aids in evaluating revenue trends over time. The Company expresses year-over-year revenue changes as calculated percentages using the same number of billing days, constant currency exchange rates, and certain intercompany adjustments.
In order to calculate constant currency revenue growth rates, as reported amounts are retranslated using foreign currency exchange rates from the prior year’s comparable period. Management then calculates a global, weighted-average number of billing days for each reporting period based upon input from all countries and all lines of business. In order to remove the fluctuations caused by comparable periods having different billing days, the Company calculates same billing day revenue growth rates by dividing each comparative period’s reported revenues by the calculated number of billing days for that period to arrive at a per billing day amount. Same billing day growth rates are then calculated based upon the per billing day amounts. In order to remove the fluctuations caused by the impact of certain intercompany adjustments, applicable comparative period revenues are reclassified to conform with the current period presentation. The term “as adjusted” means that the impact of different billing days, constant currency fluctuations, and certain intercompany adjustments are removed from the revenue growth rate calculation.
The non-GAAP financial measures provided herein may not provide information that is directly comparable to that provided by other companies in the Company’s industry, as other companies may calculate such financial results differently. The Company’s non-GAAP financial measures are not measurements of financial performance under GAAP, and should not be considered as alternatives to actual revenue growth derived from revenue amounts presented in accordance with GAAP. The Company does not consider these non-GAAP financial measures to be a substitute for, or superior to, the information provided by GAAP financial results. A reconciliation of the as adjusted revenue growth rates to the reported revenue growth rates is provided herein.
Refer to Item 7a. “Quantitative and Qualitative Disclosures About Market Risk” for further discussion of the impact of foreign currency exchange rates on the Company’s results of operations and financial condition.
Years ended December 31, 2019 and 2018
Revenues.    The Company’s revenues were $6.07 billion for the year ended December 31, 2019, increasing by 4.7% compared to $5.80 billion for the year ended December 31, 2018. Revenues from foreign operations represented 22% and 24% of total revenues for the years ended December 31, 2019 and 2018, respectively. The Company analyzes its revenues for three reportable segments: temporary and consultant staffing, permanent placement staffing and risk consulting and internal audit services. In 2019, revenues for all three of the Company’s reportable segments were up compared to 2018. Revenue growth was strongest domestically. Risk consulting and internal audit services continued to post strong growth rates. Contributing factors for each reportable segment are discussed below in further detail.
Temporary and consultant staffing revenues were $4.41 billion for the year ended December 31, 2019, increasing by 1.9% compared to revenues of $4.33 billion for the year ended December 31, 2018. Key drivers of temporary and consultant staffing revenues include average hourly bill rates and the number of hours worked by the Company’s engagement professionals on client engagements. On an as adjusted basis, temporary and consultant staffing revenues increased 3.8% for 2019, compared to 2018, due primarily to a 5.2% increase in average bill rates, partially offset by fewer hours worked by the Company’s engagement professionals. In the U.S., 2019 revenues increased 3.9% on an as reported basis and 4.1% on an as adjusted basis, compared to 2018. For the Company’s international operations, 2019 revenues decreased 4.8% on an as reported basis and increased 2.8% on an as adjusted basis, compared to 2018.
Permanent placement staffing revenues were $533 million for the year ended December 31, 2019, increasing by 4.2% compared to revenues of $512 million for the year ended December 31, 2018. Key drivers of permanent placement staffing revenues consist of the number of candidate placements and average fees earned per placement. On an as adjusted basis,
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permanent placement staffing revenues increased 5.6% for 2019 compared to 2018, driven by increases in number of placements and average fees earned per placement. In the U.S., 2019 revenues increased 6.5% on an as reported basis and 6.7% on an as adjusted basis, compared to 2018. For the Company’s international operations, 2019 revenues decreased 0.8% on an as reported basis, and increased 2.9% on an as adjusted basis, compared to 2018. Historically, demand for permanent placement services is even more sensitive to economic and labor market conditions than demand for temporary and consulting staffing and this is expected to continue.
Risk consulting and internal audit services revenues were $1.13 billion for the year ended December 31, 2019, increasing by 17.9% compared to revenues of $958 million for the year ended December 31, 2018. Key drivers of risk consulting and internal audit services revenues are the billable hours worked by consultants on client engagements and average hourly bill rates. On an as adjusted basis, risk consulting and internal audit services revenues increased 15.0% for 2019 compared to 2018, driven primarily by an increase in billable hours. In the U.S., 2019 revenues increased 16.2% on an as reported basis, or 16.5% on an as adjusted basis, compared to 2018. For the Company’s international operations, 2019 revenues increased 24.1% on an as reported basis, or 10.1% on an as adjusted basis, compared to 2018.
A reconciliation of the non-GAAP year-over-year revenue growth rates to the as reported year-over-year revenue growth rates for the year ended December 31, 2019, is presented in the following table:
GlobalUnited StatesInternational
Temporary and consultant staffing
As Reported1.9 %3.9 %-4.8 %
Billing Days Impact—  0.2 %-0.5 %
Currency Impact1.1 %—  4.8 %
Intercompany Adjustments0.8 %—  3.3 %
As Adjusted3.8 %4.1 %2.8 %
Permanent placement staffing
As Reported4.2 %6.5 %-0.8 %
Billing Days Impact0.1 %0.2 %-0.5 %
Currency Impact1.3 %—  4.2 %
As Adjusted5.6 %6.7 %2.9 %
Risk consulting and internal audit services
As Reported17.9 %16.2 %24.1 %
Billing Days Impact—  0.3 %-0.6 %
Currency Impact1.0 %—  4.0 %
Intercompany Adjustments-3.9 %—  -17.4 %
As Adjusted15.0 %16.5 %10.1 %
Gross Margin.    The Company’s gross margin dollars were $2.53 billion for the year ended December 31, 2019, up 5.0% from $2.41 billion for the year ended December 31, 2018. Contributing factors for each reportable segment are discussed below in further detail.
Gross margin dollars for temporary and consultant staffing represent revenues less costs of services, which consist of payroll, payroll taxes and benefit costs for engagement professionals, and reimbursable expenses. The key drivers of gross margin are: i) pay-bill spreads, which represent the differential between wages paid to engagement professionals and amounts billed to clients; ii) fringe costs, which are primarily composed of payroll taxes and benefit costs for temporary and consultant staffing employees; and iii) conversion revenues, which are earned when a temporary position converts to a permanent position with the Company’s client. Gross margin dollars for the Company’s temporary and consultant staffing division were $1.68 billion for the year ended December 31, 2019, up 2.9% from $1.63 billion for the year ended December 31, 2018. As a percentage of revenues, gross margin dollars for temporary and consultant staffing were 38.0% in 2019, up from 37.6% in 2018. This year-over-year improvement in gross margin percentage was primarily attributable to higher pay-bill spreads.
Gross margin dollars for permanent placement staffing represent revenues less reimbursable expenses. Gross margin dollars for the Company’s permanent placement staffing division were $532 million for the year ended December 31, 2019, up 4.2% from $511 million for the year ended December 31, 2018. Because reimbursable expenses for permanent placement staffing services are de minimis, the increase in gross margin dollars is substantially explained by the increase in revenues previously discussed.
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Gross margin dollars for risk consulting and internal audit services represent revenues less costs of services, which consist primarily of professional staff payroll, payroll taxes, benefit costs and reimbursable expenses. The primary drivers of risk consulting and internal audit services gross margin are: i) the relative composition of and number of professional staff and their respective pay and bill rates; and ii) staff utilization, which is the relationship of time spent on client engagements in proportion to the total time available for the Company’s risk consulting and internal audit services staff. Gross margin dollars for the Company’s risk consulting and internal audit division were $321 million for the year ended December 31, 2019, up 19.0% from $269 million for the year ended December 31, 2018. As a percentage of revenues, gross margin dollars for risk consulting and internal audit services were 28.4% in 2019, up from 28.1% in 2018. The year-over-year improvement in gross margin percentage was due primarily to improved staff utilization.
Selling, General and Administrative Expenses.    The Company’s selling, general and administrative expenses consist primarily of staff compensation, advertising, variable overhead, depreciation and occupancy costs. The Company’s selling, general and administrative expenses were $1.91 billion for the year ended December 31, 2019, up 4.8% from $1.82 billion for the year ended December 31, 2018. As a percentage of revenues, the Company’s selling, general and administrative expenses were 31.4% for both the years ended December 31, 2019, and 2018. Contributing factors for each reportable segment are discussed below in further detail.
Selling, general and administrative expenses for the Company’s temporary and consultant staffing division were $1.27 billion for the year ended December 31, 2019, increasing by 3.5% from $1.22 billion for the year ended December 31, 2018. As a percentage of revenues, selling, general and administrative expenses for temporary and consultant staffing were 28.7% in 2019, up from 28.3% in 2018 due primarily to negative leverage resulting from the Company’s international operations.
Selling, general and administrative expenses for the Company’s permanent placement staffing division were $449 million for the year ended December 31, 2019, increasing by 6.7% from $420 million for the year ended December 31, 2018. As a percentage of revenues, selling, general and administrative expenses for permanent placement staffing services were 84.1% in 2019, up from 82.1% in 2018 due primarily to negative leverage resulting from the Company’s international operations.
Selling, general and administrative expenses for the Company’s risk consulting and internal audit services division were $193 million for the year ended December 31, 2019, increasing by 9.6% from $176 million for the year ended December 31, 2018. As a percentage of revenues, selling, general and administrative expenses for risk consulting and internal audit services were 17.1% in 2019, down from 18.4% in 2018. The decrease in selling, general and administrative expenses as a percentage of revenue is primarily due to positive operating leverage resulting from increased revenue.
Operating Income.    The Company’s total operating income was $622 million, or 10.2% of revenues, for the year ended December 31, 2019, up 5.6% from $589 million, or 10.2% of revenues, for the year ended December 31, 2018. For the Company’s temporary and consultant staffing division, operating income was $410 million, or 9.3% of applicable revenues, up 1.3% from $405 million, or 9.3% of applicable revenues, in 2018. For the Company’s permanent placement staffing division, operating income was $84 million, or 15.7% of applicable revenues, down 7.6% from operating income of $91 million, or 17.7% of applicable revenues, in 2018. For the Company’s risk consulting and internal audit services division, operating income was $128 million, or 11.3% of applicable revenues, up 36.8% from operating income of $93 million, or 9.7% of applicable revenues, in 2018.
Provision for income taxes.    The provision for income taxes was 27.4% and 26.6% for the years ended December 31, 2019 and 2018, respectively. The higher tax rate in 2019 is primarily due to an increase in permanent non-deductible expenses and a return-to-provision tax rate benefit from changes the Company made in connection with the Tax Cuts and Jobs Act in 2018.
Years ended December 31, 2018 and 2017
A discussion of changes regarding our financial condition and results of operations for the year ended December 31, 2018, compared to the year ended December 31, 2017, can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on February 15, 2019, which is available free of charge on the SEC’s website at www.sec.gov and at www.roberthalf.com/investor-center.
Liquidity and Capital Resources
The change in the Company’s liquidity during the years ended December 31, 2019 and 2018, is primarily the net effect of funds generated by operations and the funds used for capital expenditures, payments for employee deferred compensation plans, repurchases of common stock, and payment of dividends.
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Cash and cash equivalents were $270 million and $277 million at December 31, 2019 and 2018, respectively. Operating activities provided $520 million during the year ended December 31, 2019, offset by $102 million and $423 million of net cash used in investing activities and financing activities, respectively. Operating activities provided $572 million during the year ended December 31, 2018, offset by $89 million and $490 million of net cash used in investing activities and financing activities, respectively.
Operating activities—Net cash provided by operating activities for the year ended December 31, 2019, was $520 million. This was composed of net income of $454 million adjusted upward for non-cash items of $118 million, offset by changes in working capital of $52 million. Net cash provided by operating activities for the year ended December 31, 2018, was $572 million. This was composed of net income of $434 million adjusted upward for non-cash items of $107 million and net cash provided by changes in working capital of $31 million.
Investing activities—Cash used in investing activities for the year ended December 31, 2019, was $102 million. This was composed of capital expenditures of $59 million and net payments for employee deferred compensation plans of $43 million. Cash used in investing activities for the year ended December 31, 2018, was $89 million. This was primarily composed of capital expenditures of $43 million and net payments for employee deferred compensation plans of $46 million.
Financing activities—Cash used in financing activities for the year ended December 31, 2019, was $423 million. This included repurchases of $277 million in common stock and $146 million in dividends paid to stockholders. Cash used in financing activities for the year ended December 31, 2018, was $490 million. This included repurchases of $354 million in common stock and $136 million in dividends paid to stockholders.
As of December 31, 2019, the Company is authorized to repurchase, from time to time, up to 2.5 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions. During the years ended December 31, 2019 and 2018, the Company repurchased approximately 4.3 million shares and 5.6 million shares of common stock on the open market for a total cost of $250 million and $351 million, respectively. Additional stock repurchases were made in connection with employee stock plans, whereby Company shares were tendered by employees for the payment of applicable statutory withholding taxes. During the years ended December 31, 2019 and 2018, such repurchases totaled approximately 0.4 million shares and 0.2 million shares at a cost of $22 million and $14 million, respectively. Repurchases of shares have been funded with cash generated from operations.
The Company’s working capital at December 31, 2019, included $270 million in cash and cash equivalents. The Company expects that internally generated cash will be sufficient to support the working capital needs of the Company, the Company’s fixed payments, dividends, and other obligations on both a short-term and long-term basis.
In March 2019, the Company entered into an uncommitted credit facility (the “Credit Agreement”) of up to $100 million. The Company may request borrowings under the Credit Agreement that are denominated in U.S. dollars and each request is subject to approval by the lender. The Company must repay the aggregate principal amount of loans outstanding under the Credit Agreement on the termination date of each borrowing. Borrowings under the Credit Agreement will bear interest in accordance with the terms of the borrowing, which typically will be calculated according to the London Interbank Offered Rate plus an applicable margin. There were no borrowings under the Credit Agreement as of December 31, 2019. The Company intends to renew this facility prior to its March 19, 2020, expiration.
On February 12, 2020, the Company announced a quarterly dividend of $.34 per share to be paid to all shareholders of record on February 25, 2020. The dividend will be paid on March 16, 2020.
The Company’s cash flows generated from operations are also the primary source for funding various contractual obligations. The table below summarizes the Company’s major commitments as of December 31, 2019 (in thousands):
 
 Payments due by period
Contractual Obligations20202021 and 20222023 and 2024ThereafterTotal
Long-term debt obligations$252  $252  $—  $—  $504  
Operating lease obligations82,025  125,715  86,046  45,458  339,244  
Purchase obligations76,783  54,942  6,643  7,659  146,027  
Other liabilities1,528  1,461  1,212  5,535  9,736  
Total$160,588  $182,370  $93,901  $58,652  $495,511  

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Long-term debt obligations consist of promissory notes and related interest as well as other forms of indebtedness issued in connection with certain acquisitions and other payment obligations. Operating lease obligations consist of undiscounted minimum rental commitments for 2020 and thereafter under non-cancelable lease contracts executed as of December 31, 2019. Purchase obligations consist of purchase commitments primarily related to telecom service agreements, software subscriptions, and computer hardware and software maintenance agreements. Other liabilities consist of asset retirement and deferred compensation obligations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Because a portion of the Company’s net revenues are derived from its operations outside the U.S. and are denominated in
local currencies, the Company is exposed to the impact of foreign currency fluctuations. The Company’s exposure to foreign currency exchange rates relates primarily to the Company’s foreign subsidiaries. Exchange rates impact the U.S. dollar value of the Company’s reported revenues, expenses, earnings, assets and liabilities.
For the year ended December 31, 2019, approximately 22% of the Company’s revenues were generated outside of the United States. These operations transact business in their functional currency, which is the same as their local currency. As a result, fluctuations in the value of foreign currencies against the U.S. dollar, particularly the Canadian dollar, British pound, Euro, and Australian dollar have an impact on the Company’s reported results. Under GAAP, revenues and expenses denominated in foreign currencies are translated into U.S. dollars at the monthly average exchange rates prevailing during the period. Consequently, as the value of the U.S. dollar changes relative to the currencies of the Company’s non-U.S. markets, the Company’s reported results vary.
During 2019, the U.S. dollar fluctuated, but generally strengthened, against the primary currencies in which the Company conducts business, compared to one year ago. Currency exchange rates had the effect of decreasing reported service revenues by $62.8 million, or 1.1%, in 2019 compared to prior year. The general strengthening of the U.S. dollar also affected the reported level of expenses incurred in the Company’s foreign operations. Because substantially all of the Company’s foreign operations generated revenues and incurred expenses within the same country and currency, the effect of lower reported revenues is largely offset by the decrease in reported operating expenses. Reported net income was $2.5 million, or 0.6%, lower in the year ended December 31, 2019, compared to prior year due to the effect of currency exchange rates.
For the one month ended January 31, 2020, the U.S. dollar has strengthened against the Euro, British pound, Canadian dollar, and Australian dollar since December 31, 2019. If currency exchange rates were to remain at January 2020 levels throughout 2020, the Company’s 2020 full-year reported revenues would be impacted unfavorably, mostly offset by a favorable impact to operating expenses. Thus, the impact to reported net income would likely be immaterial.
Fluctuations in currency exchange rates impact the U.S. dollar amount of the Company’s stockholders’ equity. The assets and liabilities of the Company’s non-U.S. subsidiaries are translated into U.S. dollars at the exchange rates in effect at period end. The resulting translation adjustments are recorded in stockholders’ equity as a component of accumulated other comprehensive income. Although currency fluctuations impact the Company’s reported results and shareholders’ equity, such fluctuations generally do not affect cash flow or result in actual economic gains or losses. The Company generally has few cross-border transfers of funds, except for transfers to the U.S. for payment of intercompany loans, working capital loans made between the U.S. and the Company’s foreign subsidiaries, and dividends from the Company’s foreign subsidiaries.

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Item 8. Financial Statements and Supplementary Data
ROBERT HALF INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands, except share amounts)

 
 December 31,
 20192018
ASSETS
Cash and cash equivalents$270,478  $276,579  
Accounts receivable, less allowances of $28,756 and $27,678832,797  794,446  
Other current assets 525,574  402,585  
Total current assets1,628,849  1,473,610  
Property and equipment, net128,385  125,176  
Right-of-use assets241,029  —  
Other intangible assets, net1,752  3,149  
Goodwill210,364  209,958  
Noncurrent deferred income taxes101,029  91,204  
Total assets$2,311,408  $1,903,097  
LIABILITIES
Accounts payable and accrued expenses$123,841  $168,031  
Accrued payroll and benefit costs743,602  638,769  
Income taxes payable1,623  12,536  
Notes payable, current218  200  
Current operating lease liabilities71,408  —  
Total current liabilities940,692  819,536  
Notes payable, less current portion239  457  
Noncurrent operating lease liabilities201,961  —  
Other liabilities24,833  19,906  
Total liabilities1,167,725  839,899  
Commitments and Contingencies (Note K)
STOCKHOLDERS’ EQUITY
Preferred stock, $.001 par value; authorized 5,000,000 shares; none issued    
Common stock, $.001 par value; authorized 260,000,000 shares; issued and
outstanding 115,120,404 and 119,078,491 shares
115  119  
Additional paid-in capital1,127,487  1,079,188  
Accumulated other comprehensive income (loss)(19,986) (16,109) 
Retained earnings36,067    
Total stockholders’ equity1,143,683  1,063,198  
Total liabilities and stockholders’ equity$2,311,408  $1,903,097  

The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.

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ROBERT HALF INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
 
 Years Ended December 31,
 201920182017
Service revenues$6,074,432  $5,800,271  $5,266,789  
Costs of services3,543,913  3,390,257  3,102,977  
Gross margin2,530,519  2,410,014  2,163,812  
Selling, general and administrative expenses1,908,768  1,821,089  1,646,532  
Amortization of intangible assets1,361  1,705  1,563  
Interest income, net(5,125) (4,382) (1,799) 
Income before income taxes625,515  591,602  517,516  
Provision for income taxes171,082  157,314  226,932  
Net income$454,433  $434,288  $290,584  
Net income per share:
Basic$3.93  $3.60  $2.34  
Diluted$3.90  $3.57  $2.33  
Shares:
Basic115,656  120,513  124,152  
Diluted116,411  121,602  124,892  
Dividends declared per share$1.24  $1.12  $.96  

The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.

22



ROBERT HALF INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
 
 Years Ended December 31,
 201920182017
COMPREHENSIVE INCOME (LOSS):
Net income$454,433  $434,288  $290,584  
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax(1,553) (19,616) 24,009  
Foreign defined benefit plans, net of tax(2,324)     
Total other comprehensive income (loss)(3,877) (19,616) 24,009  
Total comprehensive income (loss)$450,556  $414,672  $314,593  

The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.

23



ROBERT HALF INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except per share amounts)

Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTotal
SharesPar Value
Balance at December 31, 2016127,797$128  $1,022,411  $(20,502) $84,562  $1,086,599  
Net income290,584290,584
Other comprehensive income (loss)24,00924,009
Dividends declared ($.96 per share)(121,082)(121,082)
Net issuances of restricted stock9181(1)
Stock-based compensation42,19142,191
Repurchases of common stock(4,454)(5)(217,031)(217,036)
Balance at December 31, 2017124,261$124  $1,064,601  $3,507  $37,033  $1,105,265  
Net income434,288434,288
Other comprehensive income (loss)(19,616)(19,616)
Dividends declared ($1.12 per share)(30,365)(106,459)(136,824)
Net issuances of restricted stock6661(1)
Stock-based compensation44,95344,953
Repurchases of common stock(5,849)(6)(364,862)(364,868)
Balance at December 31, 2018119,078$119  $1,079,188  $(16,109) $  $1,063,198  
Net income454,433454,433
Other comprehensive income (loss)(3,877)(3,877)
Dividends declared ($1.24 per share)(145,726)(145,726)
Net issuances of restricted stock6471(1)
Stock-based compensation48,30048,300
Repurchases of common stock(4,605)(5)(272,640)(272,645)
Balance at December 31, 2019115,120$115  $1,127,487  $(19,986) $36,067  $1,143,683  

The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.

24



ROBERT HALF INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Years Ended December 31,
 201920182017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$454,433  $434,288  $290,584  
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts9,868  11,914  8,022  
Depreciation64,264  64,244  63,930  
Amortization of cloud computing implementation costs3,624      
Amortization of intangible assets1,361  1,705  1,563  
Stock-based compensation48,300  44,953  42,191  
Deferred income taxes(9,473) (15,885) 44,091  
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable(48,461) (86,217) (17,039) 
Capitalized cloud computing implementation costs(30,338)     
Accounts payable and accrued expenses(9,204) 32,428  1,328  
Accrued payroll and benefit cost60,883  57,287  46,504  
Income taxes payable(18,798) 28,900  (9,655) 
Other assets and liabilities, net(6,830) (1,295) (18,528) 
Net cash flows provided by operating activities519,629  572,322  452,991  
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures(59,464) (42,484) (40,753) 
Payments for employee deferred compensation plans(71,432) (69,716) (56,924) 
Redemptions from employee deferred compensation plans28,758  23,691  20,340  
Payments for acquisitions, net of cash acquired    (1,160) 
Net cash flows used in investing activities(102,138) (88,509) (78,497) 
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable(200) (183) (167) 
Repurchases of common stock(277,535) (353,509) (231,724) 
Dividends paid(145,631) (136,423) (121,000) 
Net cash flows used in financing activities(423,366) (490,115) (352,891) 
Effect of exchange rate fluctuations(226) (11,872) 12,949  
Change in cash and cash equivalents(6,101) (18,174) 34,552  
Cash and cash equivalents at beginning of period276,579  294,753  260,201  
Cash and cash equivalents at end of period$270,478  $276,579  $294,753  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest$232  $233  $278  
Income taxes, net of refunds$191,522  $137,147  $190,954  
Non-cash items:
Stock repurchases awaiting settlement$6,469  $11,359