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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
 FORM 10-Q
______________________
 (Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                      to                     .
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 
Suite 200
Menlo Park,California94025
(Address of principal executive offices) (zip-code)
Registrant’s telephone number, including area code: (650234-6000

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 $0.001 per shareRHINew York Stock Exchange
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 and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  
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 (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of October 31, 2020:
113,980,035 shares of $.001 par value Common Stock



PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
ROBERT HALF INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
(in thousands, except share amounts)

September 30,
2020
December 31, 2019
ASSETS
Cash and cash equivalents$587,000 $270,478 
Accounts receivable, net690,259 832,797 
Other current assets576,422 525,574 
Total current assets1,853,681 1,628,849 
Property and equipment, net117,695 128,385 
Right-of-use assets259,927 241,029 
Other intangible assets, net783 1,752 
Goodwill210,203 210,364 
Noncurrent deferred income taxes120,803 101,029 
Total assets$2,563,092 $2,311,408 
LIABILITIES
Accounts payable and accrued expenses$132,651 $123,841 
Accrued payroll and benefit costs827,748 743,602 
Income taxes payable15,583 1,623 
Notes payable, current233 218 
Current operating lease liabilities 76,570 71,408 
Total current liabilities1,052,785 940,692 
Notes payable, less current portion62 239 
Noncurrent operating lease liabilities223,136 201,961 
Other liabilities93,080 24,833 
Total liabilities1,369,063 1,167,725 
Commitments and Contingencies (Note I)
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 114,180,036 shares and 115,120,404 shares
114 115 
Additional paid-in capital1,167,109 1,127,487 
Accumulated other comprehensive income (loss)(15,996)(19,986)
Retained earnings42,802 36,067 
Total stockholders’ equity1,194,029 1,143,683 
Total liabilities and stockholders’ equity$2,563,092 $2,311,408 

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

2


ROBERT HALF INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)

 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2020201920202019
Service revenues$1,189,897 $1,552,132 $3,804,914 $4,537,047 
Costs of services
722,551 905,854 2,306,630 2,648,779 
Gross margin467,346 646,278 1,498,284 1,888,268 
Selling, general and administrative expenses390,799 484,837 1,240,879 1,454,374 
Income from investments held in employee deferred compensation
trusts (which is completely offset by related costs and expenses -Notes A and H)
(26,095)(1,450)(34,630)(34,628)
Amortization of intangible assets334 339 1,002 1,022 
Interest income, net(202)(1,230)(1,264)(3,768)
Income before income taxes102,510 163,782 292,297 471,268 
Provision for income taxes26,761 46,601 80,437 129,677 
Net income$75,749 $117,181 $211,860 $341,591 
Net income per share:
Basic$.67 $1.02 $1.88 $2.94 
Diluted$.67 $1.01 $1.87 $2.92 
Shares:
Basic112,809 115,181 112,953 116,203 
Diluted113,355 115,868 113,444 116,934 
Dividends declared per share$.34 $.31 $1.02 $.93 

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

3


ROBERT HALF INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(in thousands)

 Three Months Ended  September 30,Nine Months Ended  September 30,
 2020201920202019
COMPREHENSIVE INCOME (LOSS):
Net income$75,749 $117,181 $211,860 $341,591 
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax11,156 (10,011)3,990 (9,762)
Total comprehensive income (loss)$86,905 $107,170 $215,850 $331,829 

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

4


ROBERT HALF INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(in thousands, except per share amounts)
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTotal
SharesPar Value
Balance at December 31, 2019
115,120 $115 $1,127,487 $(19,986)$36,067 $1,143,683 
Net income— — — — 89,915 89,915 
Adoption of accounting pronouncement— — — — (558)(558)
Other comprehensive income (loss)— — — (13,700)— (13,700)
Dividends declared ($.34 per share)
— — — — (39,441)(39,441)
Net issuances of restricted stock745 1 (1)— —  
Stock-based compensation— — 13,525 — — 13,525 
Repurchases of common stock(1,263)(1)— — (63,498)(63,499)
Balance at March 31, 2020
114,602 $115 $1,141,011 $(33,686)$22,485 $1,129,925 
Net income— — — — 46,196 46,196 
Other comprehensive income (loss)— — — 6,534 — 6,534 
Dividends declared ($.34 per share)
— — — — (38,975)(38,975)
Net issuances of restricted stock33 — — — —  
Stock-based compensation— — 13,035 — — 13,035 
Repurchases of common stock0 0 — — (9)(9)
Balance at June 30, 2020
114,635 $115 $1,154,046 $(27,152)$29,697 $1,156,706 
Net income— — — — 75,749 75,749 
Other comprehensive income (loss)— — — 11,156 — 11,156 
Dividends declared ($.34 per share)
— — — — (38,969)(38,969)
Net issuances of restricted stock(2)— — — —  
Stock-based compensation— — 13,063 — — 13,063 
Repurchases of common stock(453)(1)— — (23,675)(23,676)
Balance at September 30, 2020
114,180 $114 $1,167,109 $(15,996)$42,802 $1,194,029 


















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

5


ROBERT HALF INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)-(Continued)
(in thousands, except per share amounts)
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTotal
SharesPar Value
Balance at December 31, 2018
119,078 $119 $1,079,188 $(16,109)$ $1,063,198 
Net income— — — — 109,798 109,798 
Other comprehensive income (loss)— — — (1,897)— (1,897)
Dividends declared ($.31 per share)
— — — — (36,998)(36,998)
Net issuances of restricted stock281 — — — —  
Stock-based compensation— — 11,244 — — 11,244 
Repurchases of common stock(1,038)(1)— — (68,315)(68,316)
Balance at March 31, 2019
118,321 $118 $1,090,432 $(18,006)$4,485 $1,077,029 
Net income— — — — 114,612 114,612 
Other comprehensive income (loss)— — — 2,146 — 2,146 
Dividends declared ($.31 per share)
— — — — (36,597)(36,597)
Net issuances of restricted stock271 1 (1)— —  
Stock-based compensation— — 11,670 — — 11,670 
Repurchases of common stock(1,031)(1)— — (59,632)(59,633)
Balance at June 30, 2019
117,561 $118 $1,102,101 $(15,860)$22,868 $1,109,227 
Net income— — — — 117,181 117,181 
Other comprehensive income (loss)— — — (10,011)— (10,011)
Dividends declared ($.31 per share)
— — — — (36,235)(36,235)
Net issuances of restricted stock(3)— — — —  
Stock-based compensation— — 11,889 — — 11,889 
Repurchases of common stock(1,461)(2)— — (80,219)(80,221)
Balance at September 30, 2019
116,097 $116 $1,113,990 $(25,871)$23,595 $1,111,830 

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

6


ROBERT HALF INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)

 Nine Months Ended
September 30,
 20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$211,860 $341,591 
Adjustments to reconcile net income to net cash provided by operating activities:
Allowance for credit losses4,579 6,501 
Depreciation47,097 48,485 
Amortization of cloud computing implementation costs12,631 1,660 
Amortization of intangible assets1,002 1,022 
Realized and unrealized gain from investments held in employee deferred
compensation trusts
(32,743)(31,034)
Stock-based compensation39,623 34,803 
Deferred income taxes(20,021)(9,685)
Changes in operating assets and liabilities:
Accounts receivable138,350 (72,288)
Capitalized cloud computing implementation costs(26,121)(20,872)
Accounts payable and accrued expenses9,030 (7,537)
Accrued payroll and benefit cost152,007 138,200 
Income taxes payable15,284 (6,734)
Other assets and liabilities, net12,063 14,894 
Net cash flows provided by operating activities564,641 439,006 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures(28,878)(45,138)
Investments in employee deferred compensation trusts(48,205)(52,367)
Proceeds from employee deferred compensation trust redemptions33,651 23,976 
Net cash flows used in investing activities(43,432)(73,529)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable(162)(148)
Repurchases of common stock(91,013)(214,047)
Dividends paid(117,301)(109,702)
Net cash flows used in financing activities(208,476)(323,897)
Effect of exchange rate fluctuations3,789 (5,418)
Change in cash and cash equivalents316,522 36,162 
Cash and cash equivalents at beginning of period270,478 276,579 
Cash and cash equivalents at end of period$587,000 $312,741 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Non-cash items:
Stock repurchases awaiting settlement$2,640 $5,482 
Fund exchanges within employee deferred compensation trusts$182,616 $30,054 

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

7




ROBERT HALF INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2020

Note A—Summary of Significant Accounting Policies
Nature of Operations. 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 a specialized provider of temporary, full-time, and senior-level project professionals in the fields of accounting and finance. OfficeTeam specializes in highly skilled temporary administrative support professionals. Robert Half Technology provides project and full-time technology professionals. Robert Half Legal provides temporary, project, and full-time staffing of lawyers, paralegals and legal support personnel. The Creative Group provides creative, digital, marketing, advertising and public relations professionals. Protiviti is a global consulting firm that helps companies solve problems in finance, technology, operations, data, analytics, governance, risk and internal audit, and is a wholly-owned subsidiary of the Company. Revenues are predominantly derived from specialized staffing services. The Company operates in North America, South America, Europe, Asia and Australia. The Company is a Delaware corporation.
Basis of Presentation. The unaudited Condensed Consolidated Financial Statements (“Financial Statements”) of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”). The comparative year-end Condensed Consolidated Statement of Financial Position data presented was derived from audited financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) necessary for a fair statement of the financial position and results of operations for the periods presented have been included. These Financial Statements should be read in conjunction with the audited Consolidated Financial Statements of the Company for the year ended December 31, 2019, included in its Annual Report on Form 10-K. The results of operations for any interim period are not necessarily indicative of, nor comparable to, the results of operations for a full year. Certain reclassifications have been made to prior year’s condensed consolidated financial statements to conform to the 2020 presentation.
Principles of Consolidation. The Financial Statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. As of September 30, 2020, such estimates include allowances for credit losses, variable consideration, workers’ compensation losses, income and other taxes, and assumptions used in the Company’s goodwill impairment assessment and in the valuation of stock grants subject to market conditions.
We are continuing to monitor the efforts to mitigate the spread of coronavirus (“COVID-19”), including uncertainty around the duration and extent of the stay-at-home orders and the effect on the Company’s results of operations, financial condition, and liquidity. In light of the ongoing economic disruption, we continue to face a greater degree of uncertainty than normal in making the judgments and estimates needed to apply the Company’s significant accounting policies. As the situation continues to develop, we may make changes to these estimates and judgments over time, which could result in meaningful impacts to the Company’s financial statements in future periods. Actual results and outcomes may differ from management’s estimates and assumptions.
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 for further discussion of the revenue recognition accounting policy.

8




ROBERT HALF INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
September 30, 2020
Costs of Services. Direct costs of temporary and consultant staffing consist of payroll, payroll taxes and benefit costs for the Company’s engagement professionals, as well as reimbursable expenses. Direct costs of permanent placement staffing services consist of reimbursable expenses. Risk consulting and internal audit direct costs of services include professional staff payroll, contract labor payroll, payroll taxes and benefit costs, as well as reimbursable expenses.
Advertising Costs. The Company expenses all advertising costs as incurred. Advertising costs were $7.7 million and $28.9 million for the three and nine months ended September 30, 2020, respectively, and $13.6 million and $41.4 million for the three and nine months ended September 30, 2019, respectively.
Income from investments held in employee deferred compensation trusts. The Company has changed its Condensed Consolidated Statements of Operations to separately present income from investments held in employee deferred compensation trusts. Under the Company’s employee deferred compensation plans, employees direct the investment of their account balances, and the Company invests amounts held in the associated investment trusts consistent with these directions. As realized and unrealized investment gains and losses occur, the Company’s deferred compensation obligation to employees changes accordingly. Changes in the Company’s deferred compensation obligations will continue to be included in selling, general and administrative expenses or, in the case of risk consulting and internal audit services, direct cost. The value of the related investment trust assets also changes by an equal and offsetting amount, leaving no net cost to the Company. The Company’s income from investments held in employee deferred compensation trusts consists primarily of unrealized and realized gains and losses and dividend income from trust investments. Such amounts were previously presented as a component of selling, general and administrative expenses, or, in the case of risk consulting and internal audit services, direct cost. Reclassifications have been made to prior year’s condensed consolidated financial statements to conform to the 2020 presentation.
The following table presents the Company’s income from investments held in employee deferred compensation trusts (in thousands):
Three Months Ended  September 30,Nine Months Ended
September 30,
2020201920202019
Dividend income$443 $732 $1,887 $3,594 
Realized and unrealized gain25,652 718 32,743 31,034 
$26,095 $1,450 $34,630 $34,628 
Cash and Cash Equivalents. The Company considers all highly liquid investments with a maturity at the date of purchase of three months or less as cash equivalents. This includes money market funds that meet the requirements to be treated as cash equivalents. However, money market funds held in investment trusts that are being used as investments to satisfy the Company’s obligations under its deferred compensation plans are treated as investments and recorded within other current assets on the unaudited Condensed Consolidated Statement of Financial Position.
Fair Value of Financial Instruments. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market to measure fair value, summarized as follows:
Level 1: observable inputs for identical assets or liabilities, such as quoted prices in active markets
Level 2: inputs other than the quoted prices in active markets that are observable either directly or indirectly
Level 3: unobservable inputs in which there is little or no market data, which requires management’s best
estimates and assumptions that market participants would use in pricing the asset or liability


9




ROBERT HALF INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
September 30, 2020
The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximates fair value because of their short-term nature. The Company holds mutual funds and money market funds to help satisfy its obligations under its deferred compensation plans, which are carried at fair value based on quoted market prices in active markets for identical assets (level 1) and recorded within other current assets on the unaudited Condensed Consolidated Statement of Financial Position.
The following table sets forth the composition of the underlying assets which comprise the Company’s deferred compensation trust assets (in thousands):
Fair Value Measurements Using
Balance at September 30, 2020
Quoted Prices
in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Assets
Money market funds$151,171 $151,171   
Mutual funds - bond26,717 26,717   
Mutual funds - stock202,707 202,707   
Mutual funds - blend65,144 65,144   
$445,739 $445,739   
Fair Value Measurements Using
Balance at December 31, 2019
Quoted Prices
in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Assets
Money market funds$141,295 $141,295   
Mutual funds - bond28,451 28,451   
Mutual funds - stock170,469 170,469   
Mutual funds - blend58,227 58,227   
$398,442 $398,442   

Certain items such as goodwill and other intangible assets are recognized or disclosed at fair value on a non-recurring basis. The Company determines the fair value of these items using level 3 inputs. There are inherent limitations when estimating the fair value of financial instruments, and the fair values reported are not necessarily indicative of the amounts that would be realized in current market transactions.
Allowance for Credit Losses. The Company is exposed to credit losses resulting from the inability of its customers to make required payments. The Company establishes an allowance for these potential credit losses based on its review of customers’ credit profiles, historical loss statistics, prepayments, recoveries, current business conditions and macro-economic trends. The Company considers risk characteristics of trade receivables based on asset type, size, term, and geographical locations to evaluate trade receivables on a collective basis. The Company applies credit loss estimates to these pooled receivables to determine expected credit losses.

10




ROBERT HALF INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
September 30, 2020
The following table sets forth the activity in the allowance for credit losses from December 31, 2019, through September 30, 2020 (in thousands):
Allowance for Credit Losses
Balance as of December 31, 2019
$22,885 
Adoption of accounting pronouncement558 
Balance as of January 1, 2020
$23,443 
Charges to expense4,579 
Deductions(6,308)
Other, including translation adjustments(496)
Balance as of September 30, 2020
$21,218 

Goodwill and Intangible Assets. Goodwill and intangible assets primarily consist of the cost of acquired companies in excess of the fair market value of their net tangible assets at the date of acquisition. Identifiable intangible assets are amortized over their lives, typically ranging from two to five years. Goodwill is not amortized, but is tested at least annually for impairment, or on an as needed interim basis.
Internal-use Software. The Company capitalizes direct costs incurred in the development of internal-use software. Cloud computing implementation costs incurred in hosting arrangements are capitalized and reported as a component of other current assets. All other internal-use software development costs are capitalized and reported as a component of computer software within property and equipment on the unaudited Condensed Consolidated Statement of Financial Position. Capitalized internal-use software development costs were $8.8 million and $31.7 million for the three and nine months ended September 30, 2020, respectively, and $11.4 million and $24.3 million for the three and nine months ended September 30, 2019, respectively.
Note B—New Accounting Pronouncements

Recently Adopted Accounting Pronouncements
Current Expected Credit Losses Model. In June 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance amending how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected losses. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2019. The Company has adopted the new guidance prospectively as of January 1, 2020, and the impact of adoption was not material to its financial statements.
Simplifying the Test for Goodwill Impairment. In January 2017, the FASB issued authoritative guidance to simplify the goodwill impairment testing process. The new standard eliminates Step 2 of the goodwill impairment test. If a company determines in Step 1 of the goodwill impairment test that the carrying value of goodwill is greater than the fair value, an impairment in that amount should be recorded to the income statement, rather than proceeding to Step 2. The new guidance is effective for the Company for fiscal years beginning after December 15, 2019, although early adoption is permitted. The Company has adopted the new guidance prospectively as of January 1, 2020, and the impact of adoption was not material to its financial statements.

11




ROBERT HALF INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
September 30, 2020
Recently Issued Accounting Pronouncements Not Yet Adopted
Reference Rate Reform. In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company believes this guidance will not have a material impact on its financial statements.
Note C—Revenue Recognition

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. Service revenues as presented in the unaudited Condensed Consolidated Statements of Operations represent services rendered to customers less variable consideration, such as sales adjustments and allowances. Reimbursements, including those related to travel and out-of-pocket expenses, are also included in service revenues and equivalent amounts of reimbursable expenses are included in costs of services.

Temporary and consultant staffing revenues. Temporary and consultant staffing revenues from contracts with customers are recognized in the amount to which the Company has a right to invoice, when the services are rendered by the Company’s engagement professionals. 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 all related costs of employment, including workers’ compensation insurance, state and federal unemployment taxes, social security and certain fringe benefits. The Company assumes the risk of acceptability of its employees to its customers.

The Company records temporary and consultant staffing revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of revenues and expenses. The Company has concluded that gross reporting is appropriate because the Company (i) has the risk of identifying and hiring qualified employees, (ii) has the discretion to select the employees and establish their price and duties and (iii) bears the risk for services that are not fully paid for by customers. Fees paid to Time Management or Vendor Management service providers selected by clients are recorded as a reduction of revenues, as the Company is not the primary obligor with respect to those services.

Permanent placement staffing revenues. Permanent placement staffing revenues from contracts with customers are primarily recognized when employment candidates accept offers of permanent employment. The Company has a substantial history of estimating the financial impact of permanent placement candidates who do not remain with its clients through the 90-day guarantee period. These amounts are established based primarily on historical data and are recorded as liabilities. Fees to clients are generally calculated as a percentage of the new employee’s annual compensation. No fees for permanent placement services are charged to employment candidates.


12




ROBERT HALF INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
September 30, 2020
Risk consulting and internal audit services revenues. Risk consulting and internal audit services are generally provided on a time-and-material basis or fixed-fee basis. Revenues earned under time-and-material arrangements and fixed-fee arrangements are recognized using a proportional performance method. Revenue is measured using cost incurred relative to total estimated cost for the engagement to measure progress towards satisfying the Company’s performance obligations. Cost incurred represents work performed and thereby best depicts the transfer of control to the customer. Risk consulting and internal audit services generally contain one or more performance obligation(s) which are satisfied over a period of time. Revenues are recognized over time as the performance obligations are satisfied, because the services provided do not have any alternative use to the Company, and contracts generally include language giving the Company an enforceable right to payment for services provided to date.
The Company periodically evaluates the need to provide for any losses on these projects, and losses are recognized when it is probable that a loss will be incurred.

The following table presents the Company’s service revenues disaggregated by line of business (in thousands):
Three Months Ended  September 30,Nine Months Ended
September 30,
2020201920202019
Accountemps$351,598 $501,905 $1,173,024 $1,486,571 
OfficeTeam173,685 267,023 549,963 781,607 
Robert Half Technology161,007 195,630 519,687 567,517 
Robert Half Management Resources154,917 200,421 531,826 591,660 
Elimination of intersegment revenues (a)(59,816)(46,518)(147,603)(121,555)
Temporary and consulting staffing781,391 1,118,461 2,626,897 3,305,800 
Permanent placement staffing87,203 134,582 278,722 407,038 
Risk consulting and internal audit services321,303 299,089 899,295 824,209 
Service revenues$1,189,897 $1,552,132 $3,804,914 $4,537,047 

(a) Service revenues for Accountemps, OfficeTeam, Robert Half Technology and Robert Half Management Resources include intersegment revenues, which represent revenues from services provided to the Company’s risk consulting and internal audit services segment in connection with the Company’s blended business solutions. Intersegment revenues for each line of business are aggregated and then eliminated as a single line.

Payment terms in the Company’s contracts vary by the type and location of the Company’s customer and the services offered. The term between invoicing and when payment is due is not significant.

Contracts with multiple performance obligations are recognized as performance obligations are delivered, and contract value is allocated based on relative stand-alone selling values of the services and products in the arrangement. As of September 30, 2020, aggregate transaction price allocated to the performance obligations that are unsatisfied for contracts with an expected duration of greater than one year was $108.2 million. Of this amount, $99.5 million is expected to be recognized within the next twelve months. As of September 30, 2019, aggregate transaction price allocated to the performance obligations that are unsatisfied for contracts with an expected duration of greater than one year was $76.9 million.


13




ROBERT HALF INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
September 30, 2020
Contract liabilities are recorded when cash payments are received or due in advance of performance and are reflected in accounts payable and accrued expenses on the unaudited Condensed Consolidated Statement of Financial Position. The following table sets forth the activity in contract liabilities from December 31, 2018, through September 30, 2020 (in thousands):
Contract Liabilities
Balance as of December 31, 2018
$12,997 
    Payments in advance of satisfaction of performance obligations13,030 
    Revenue recognized(12,072)
    Other, including translation adjustments(1,007)
Balance as of December 31, 2019
$12,948 
    Payments in advance of satisfaction of performance obligations14,505 
    Revenue recognized(15,333)
    Other, including translation adjustments399 
Balance as of September 30, 2020
$12,519 

Note D—Other Current Assets
Other current assets consisted of the following (in thousands):
September 30,
2020
December 31, 2019
Deferred compensation trust assets$445,739 $398,442 
Prepaid expenses83,731 84,364 
Other46,952 42,768 
Other current assets$576,422 $525,574 

Deferred compensation trust assets were $445.7 million and $398.4 million as of September 30, 2020, and December 31, 2019, respectively. These assets include publicly traded mutual funds and money market funds used to satisfy the Company’s liabilities under its deferred compensation plans.
Note E—Property and Equipment, Net
Property and equipment consisted of the following (in thousands):
September 30,
2020
December 31, 2019
Computer hardware$156,579 $164,547 
Computer software247,164 291,681 
Furniture and equipment90,991 88,136 
Leasehold improvements161,729 150,644 
Property and equipment, cost656,463 695,008 
Accumulated depreciation(538,768)(566,623)
Property and equipment, net$117,695 $128,385 


14




ROBERT HALF INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
September 30, 2020
Note F—Leases

The Company has operating leases for corporate and field offices, and certain equipment. The Company’s leases have remaining lease terms of less than 1 year to 10 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year. Operating lease expenses were $20.6 million and $60.5 million for the three and nine months ended September 30, 2020, respectively, $19.7 million and $57.3 million for the three and nine months ended September 30, 2019, respectively.

Supplemental cash flow information related to leases consisted of the following (in thousands):
Nine Months Ended
September 30,
20202019
Cash paid for operating lease liabilities$62,873 $57,912 
Right-of-use assets obtained in exchange for new operating lease liabilities$34,530 $25,137 

Supplemental balance sheet information related to leases consisted of the following:
September 30,
2020
December 31,
2019
Weighted average remaining lease term for operating leases4.7 years4.8 years
Weighted average discount rate for operating leases2.7 %3.0 %

Future minimum lease payments under non-cancellable leases as of September 30, 2020, were as follows (in thousands):
2020 (excluding the nine months ended September 30, 2020)
$21,126 
202180,205 
202265,237 
202354,750 
202444,236 
Thereafter53,806 
Less: Imputed interest(19,654)
Present value of operating lease liabilities (a)$299,706 
(a) Includes current portion of $76.6 million for operating leases.

As of September 30, 2020, the Company had no material future minimum lease obligations that had not yet commenced.

15




ROBERT HALF INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
September 30, 2020
Note G—Goodwill
The following table sets forth the activity in goodwill from December 31, 2019, through September 30, 2020 (in thousands):
Goodwill
  
Temporary and consultant staffingPermanent placement staffingRisk consulting and internal audit services Total
Balance as of December 31, 2019
$134,210 $26,097 $50,057 $210,364 
Foreign currency translation adjustments(29)(7)(125)(161)
Balance as of September 30, 2020
$134,181 $26,090 $49,932 $210,203 

Note H—Accrued Payroll and Benefit Costs
Accrued payroll and benefit costs consisted of the following (in thousands):
September 30,
2020
December 31, 2019
Employee deferred compensation plans$465,299 $421,198 
Payroll and benefits314,299 280,918 
Payroll taxes26,273 21,831 
Workers’ compensation21,877 19,655 
Accrued payroll and benefit costs$827,748 $743,602 
The Company, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, deferred paying $68.3 million of applicable payroll taxes as of September 30, 2020, which is included in other liabilities in the unaudited Condensed Consolidated Statements of Financial Position.
The Company provides various qualified defined contribution 401(k) plans covering eligible employees. The plans offer a savings feature with the Company matching employee contributions. Assets of these plans are held by an independent trustee for the sole benefit of participating employees. Nonqualified plans are provided for employees not eligible for the qualified plans. These plans include provisions for salary deferrals and Company matching and discretionary contributions. The asset value of the nonqualified plans was $445.7 million and $398.4 million as of September 30, 2020, and December 31, 2019, respectively, and are included in other current assets in the unaudited Condensed Consolidated Statements of Financial Position. The Company holds these assets to satisfy the Company’s liabilities under its deferred compensation plans.
The liability value for the nonqualified plans was $465.3 million and $421.2 million as of September 30, 2020, and December 31, 2019, respectively, and is included in accrued payroll and benefit costs in the unaudited Condensed Consolidated Statements of Financial Position. Deferred compensation plan and other benefits related to the Company’s executive chairman were $88.6 million and $91.8 million as of September 30, 2020, and December 31, 2019, respectively, and are included in the liability value for the nonqualified plans.

16




ROBERT HALF INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
September 30, 2020
The following table presents the Company’s compensation expense related to its qualified defined contribution plans and nonqualified plans (in thousands):
Three Months Ended  September 30,Nine Months Ended
September 30,
2020201920202019
Contribution expense $9,753 $6,943 $28,111 $19,362 
Deferred compensation expense related to changes in the fair value of
trust assets
26,095 1,450 34,630 34,628 
$35,848 $8,393 $62,741 $53,990 
The Company has statutory defined contribution plans and defined benefit plans outside the U.S., which are not material.
Note I—Commitments and Contingencies
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 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 Attorney 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.
Legal costs associated with the resolution of claims, lawsuits and other contingencies are expensed as incurred.

17




ROBERT HALF INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
September 30, 2020
In May 2020, the Company entered into a new $100 million unsecured revolving credit facility (the “364-Day Credit Agreement”). Borrowings under the 364-Day Credit Agreement will bear interest in accordance with the terms of the borrowing, which typically will be calculated according to the LIBOR plus an applicable margin. The 364-Day Credit Agreement is subject to certain financial covenants and the Company was in compliance with these covenants as of September 30, 2020. There were no borrowings under the 364-Day Credit Agreement as of September 30, 2020.
Note J—Stockholders’ Equity
Stock Repurchase Program. As of September 30, 2020, the Company is authorized to repurchase, from time to time, up to 1.0 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions. The number and the cost of common stock shares repurchased during the nine months ended September 30, 2020 and 2019, are reflected in the following table (in thousands):
 Nine Months Ended
September 30,
 20202019
Common stock repurchased (in shares)1,432 3,266 
Common stock repurchased$74,981 $191,048 
 
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. The number and the cost of repurchases related to employee stock plans made during the nine months ended September 30, 2020 and 2019, are reflected in the following table (in thousands):
 Nine Months Ended
September 30,
 20202019
Repurchases related to employee stock plans (in shares)284 264 
Repurchases related to employee stock plans$12,203 $17,122 
The repurchased shares are held in treasury and are presented as if constructively retired. Treasury stock is accounted for using the cost method. Repurchase activity for the three and nine months ended September 30, 2020 and 2019, is presented in the unaudited Condensed Consolidated Statements of Stockholders’ Equity.
Repurchases of shares and issuances of dividends are applied first to the extent of retained earnings and any remaining amounts are applied to additional paid-in capital.

18




ROBERT HALF INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
September 30, 2020
Note K—Net Income Per Share
The calculation of net income per share for the three and nine months ended September 30, 2020 and 2019, is reflected in the following table (in thousands, except per share amounts):
 Three Months Ended
September 30,
Nine Months Ended  September 30,
 2020201920202019
Net income$75,749 $117,181 $211,860 $341,591 
Basic:
Weighted average shares
112,809 115,181 112,953 116,203 
Diluted:
Weighted average shares
112,809 115,181 112,953 116,203 
Dilutive effect of potential common shares546 687 491 731 
Diluted weighted average shares113,355 115,868 113,444 116,934 
Net income per share:
Basic$.67 $1.02 $1.88 $2.94 
Diluted$.67 $1.01 $1.87 $2.92 
 
Note L—Business Segments
The Company has three reportable segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. Operating segments are defined as components of the Company for which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assess performance. The temporary and consultant staffing segment provides specialized staffing in the accounting and finance, administrative and office, information technology, legal, advertising, marketing and web design fields. The permanent placement staffing segment provides full-time personnel in the accounting, finance, administrative and office, and information technology fields. The risk consulting and internal audit services segment provides business and technology risk consulting and internal audit services.
The accounting policies of the segments are set forth in Note A—“Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The Company evaluates performance based on income before net interest income, intangible assets amortization expense, and income taxes.

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ROBERT HALF INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
September 30, 2020
The following table provides a reconciliation of service revenues and segment income by reportable segment to consolidated results for the three and nine months ended September 30, 2020 and 2019 (in thousands):

 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2020201920202019
Service revenues
Temporary and consultant staffing$781,391 $1,118,461 $2,626,897 $3,305,800 
Permanent placement staffing87,203 134,582 278,722 407,038 
Risk consulting and internal audit services321,303 299,089 899,295 824,209 
$1,189,897 $1,552,132 $3,804,914 $4,537,047 
Segment income
Temporary and consultant staffing$43,779 $101,428 $165,933 $312,684 
Permanent placement staffing10,128 21,817 20,791