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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO _______________ .
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COMMISSION FILE NUMBER 1-10427
ROBERT HALF INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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, CALIFORNIA 94025
(Address of principal executive offices) (zip-code)
</TABLE>
Registrant's telephone number, including area code: (415) 854-9700
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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) had been subject to such
filing requirements for the past 90 days. Yes _X_ No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of April 30, 1994:
13,552,517 shares of $1 par value Common Stock
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER
1994 31, 1993
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(UNAUDITED)
<S> <C> <C>
ASSETS:
Cash and cash equivalents.......................................... $ 1,499 $ 1,773
Accounts receivable, less allowances of $2,475 and $2,194.......... 47,043 40,155
Other current assets............................................... 5,386 5,538
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Total current assets............................................. 53,928 47,466
Intangible assets, less accumulated amortization of $24,794 and
$23,665........................................................... 152,886 152,156
Other assets....................................................... 4,980 4,976
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Total assets..................................................... $ 211,794 $ 204,598
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses.............................. $ 6,504 $ 6,745
Accrued payroll costs.............................................. 16,032 13,243
Income taxes payable............................................... 3,631 1,792
Current portion of notes payable and other indebtedness............ 881 408
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Total current liabilities........................................ 27,048 22,188
Notes payable and other indebtedness, less current portion......... 2,080 2,032
Bank loan (revolving credit)....................................... 25,200 30,300
Deferred income taxes.............................................. 17,043 16,476
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Total liabilities.................................................. 71,371 70,996
STOCKHOLDERS' EQUITY:
Common stock, $1 par value:
authorized -- 30,000,000 shares;
issued and outstanding -- 13,550,495 and 13,418,402 shares...... 13,550 13,418
Capital surplus.................................................. 50,485 47,496
Deferred compensation............................................ (3,727) (2,113)
Accumulated translation adjustments.............................. (693) (589)
Retained earnings................................................ 80,808 75,390
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Total stockholders' equity..................................... 140,423 133,602
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Total liabilities and stockholders' equity....................... $ 211,794 $ 204,598
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</TABLE>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
1
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ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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1994 1993
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(UNAUDITED)
<S> <C> <C>
Net service revenues.................................................................... $ 99,896 $ 69,573
Direct costs of services, consisting of payroll, payroll taxes and insurance costs for
temporary employees.................................................................... 61,272 42,266
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Gross margin............................................................................ 38,624 27,307
Selling, general and administrative expenses............................................ 27,175 20,872
Amortization of intangible assets....................................................... 1,129 1,037
Interest expense........................................................................ 494 1,002
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Income before income taxes.............................................................. 9,826 4,396
Provision for income taxes.............................................................. 4,222 2,009
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Net income.............................................................................. $ 5,604 $ 2,387
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Net income per share.................................................................... $ .40 $ .20
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</TABLE>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
2
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ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1994 1993
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(UNAUDITED)
<S> <C> <C>
COMMON STOCK:
Balance at beginning of period.......................................................... $ 13,418 $ 11,821
Issuance of restricted stock, net -- par value.......................................... 75 6
Exercise of stock options -- par value.................................................. 63 92
Repurchases of common stock -- par value................................................ (6) (7)
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Balance at end of period................................................................ $ 13,550 $ 11,912
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CAPITAL SURPLUS:
Balance at beginning of period.......................................................... $ 47,496 $ 16,623
Issuance of restricted stock, net -- excess over par value.............................. 1,909 168
Exercises of stock options -- excess over par value..................................... 600 785
Tax benefits from exercises of stock options............................................ 480 231
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Balance at end of period................................................................ $ 50,485 $ 17,807
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DEFERRED COMPENSATION:
Balance at beginning of period.......................................................... $ (2,113) $ (2,208)
Issuance of restricted stock, net....................................................... (1,984) (174)
Amortization of deferred compensation................................................... 370 265
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Balance at end of period................................................................ $ (3,727) $ (2,117)
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ACCUMULATED TRANSLATION ADJUSTMENTS:
Balance at beginning of period.......................................................... $ (589) $ (257)
Translation adjustments................................................................. (104) 11
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Balance at end of period................................................................ $ (693) $ (246)
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RETAINED EARNINGS:
Balance at beginning of period.......................................................... $ 75,390 $ 64,993
Repurchases of common stock -- excess over par value.................................... (186) (87)
Net income.............................................................................. 5,604 2,387
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Balance at end of period................................................................ $ 80,808 $ 67,293
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</TABLE>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
3
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ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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1994 1993
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(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................................................. $ 5,604 $ 2,387
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible assets..................................................... 1,129 1,037
Depreciation expense.................................................................. 630 587
Deferred income taxes................................................................. 301 240
Changes in assets and liabilities, net of effects of acquisitions:
Increase in accounts receivable..................................................... (6,336) (3,905)
Increase in accounts payable, accrued expenses and accrued payroll costs............ 2,509 3,304
Change in other assets, net of change in other liabilities.......................... 2,729 (719)
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Total adjustments....................................................................... 962 544
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Net cash and cash equivalents provided by operating activities.......................... 6,566 2,931
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisitions, net of cash acquired.................................................... (1,955) (880)
Capital expenditures.................................................................. (657) (345)
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Cash and cash equivalents used in investing activities.................................. (2,612) (1,225)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Borrowings under credit agreement..................................................... 21,300 17,800
Repayments under credit agreement..................................................... (26,400) (20,100)
Repurchases of common stock or common stock equivalents............................... (192) (94)
Principal payments on notes payable and other indebtedness............................ (79) (575)
Proceeds and tax benefits from exercise of stock options.............................. 1,143 1,108
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Net cash and cash equivalents used in financing activities.............................. (4,228) (1,861)
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Net decrease in cash and cash equivalents............................................... (274) (155)
Cash and cash equivalents at beginning of period........................................ 1,773 560
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Cash and cash equivalents at end of period.............................................. $ 1,499 $ 405
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.............................................................................. $ 433 $ 1,671
Income taxes.......................................................................... 1,384 532
Acquisitions:
Fair value of assets acquired --
Intangible assets................................................................... $ 2,021 $ 315
Other............................................................................... 554 1,035
Liabilities incurred --
Notes payable and contracts......................................................... (600) --
Other............................................................................... (20) (470)
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Cash paid, net of cash acquired....................................................... $ 1,955 $ 880
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</TABLE>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
4
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ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The Consolidated Financial Statements include
the accounts of Robert Half International Inc. (the "Company") and its
subsidiaries, all of which are wholly-owned. The company is a Delaware
corporation. All significant intercompany balances have been eliminated. Certain
reclassifications have been made to the 1993 financial statements to conform to
the 1994 presentation.
INTERIM FINANCIAL INFORMATION. The Consolidated Financial Statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC") and, in management's opinion, include all
adjustments necessary for a fair statement of results for such interim periods.
Certain information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to SEC rules or regulations; however,
the Company believes that the disclosures made are adequate to make the
information presented not misleading.
The interim results for the three months ended March 31, 1994, and 1993 are
not necessarily indicative of results for the full year. It is suggested that
these financial statements be read in conjunction with the financial statements
and the notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1993.
REVENUE RECOGNITION. Temporary service revenues are recognized when the
services are rendered by the Company's temporary employees. Permanent placement
revenues are recognized when employment candidates accept offers of permanent
employment. Reserves are established to estimate losses due to placed candidates
not remaining in employment for the Company's guarantee period, typically 90
days.
FOREIGN CURRENCY TRANSLATION. Foreign income statement items are translated
at the monthly average exchange rates prevailing during the period. Foreign
balance sheets are translated at the current exchange rates at the end of the
period, and the related translation adjustments are recorded as part of
Stockholders' Equity. Gains and losses resulting from foreign currency
transactions are included in the consolidated statements of income.
CASH AND CASH EQUIVALENTS. For purposes of the Consolidated Statements of
Cash Flows, the Company classifies all highly-liquid investments with a maturity
of three months or less as cash equivalents.
INTANGIBLE ASSETS. Intangible assets represent the cost of acquired
companies in excess of the fair market value of their net tangible assets at the
acquisition date, and are being amortized on a straight-line basis over a period
of 40 years.
INCOME TAXES. Deferred taxes are computed based on the difference between
the financial statement and income tax bases of assets and liabilities using the
enacted marginal tax rate.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS FOR EACH OF THE THREE MONTHS ENDED MARCH 31, 1994 AND
1993.
Net service revenues increased approximately 43.6% during the first quarter
of 1994 compared to the same period in 1993. Temporary service revenues
increased approximately 43.7% during the three months ended March 31, 1994,
relative to the three months ended March 31, 1993. Permanent placement revenues
increased 36.9% during the comparable three months ending March 31, 1994 and
1993. The revenue comparisons reflect continued improvement in the demand for
the Company's specialized staffing services.
Gross margin dollars increased 41.4% during the three month period ending
March 31, 1994, compared with the corresponding three month period ending March
31, 1993. Gross margin amounts equaled 38.7% of revenue for the three month
period ending March 31, 1994 and 39.2% of revenue for the three month period
ending March 31, 1993. The percentage declines related principally to a lower
mix of the higher permanent placement gross margins.
Selling, general and administrative expenses were approximately $27 million
during the three months ended March 31, 1994 compared to approximately $21
million during the three months ended March 31, 1993. Selling, general and
administrative expenses as a percentage of revenues was 27.2% in 1994 compared
to 30% in 1993. The percentage declines were attributable to increased coverage
of fixed costs due to revenue growth coupled with the Company's continued cost
containment measures.
Interest expense for the three months ended March 31, 1994 decreased 50.7%
over the comparable 1993 period due primarily to the conversion and redemption
of the Convertible Subordinated Debentures in the fourth quarter of 1993 and the
reduction in outstanding indebtedness.
The provision for income taxes for the three months ended March 31, 1994,
was 43.0% compared to 45.7% of income before taxes for the same period in 1993.
The decrease in 1994 is the result of a smaller percentage of non-deductible
intangible expenses relative to income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity during the first quarter of 1994 was impacted by the
net effect of the funds generated by operations and the funds used for payment
on outstanding indebtedness, capital expenditures and the personnel services
acquisitions.
The Company's working capital requirements consist primarily of the
financing of accounts receivable. While there can be no assurances in this
regard, the Company expects that internally generated cash plus the bank
revolving line of credit will be sufficient to support the working capital needs
of the Company's offices, fixed payments and other long-term obligations.
6
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
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<C> <S>
11 Computation of Per Share Earnings.
</TABLE>
(b) The registrant filed no current reports on Form 8-K during the quarter
covered by this report.
7
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROBERT HALF INTERNATIONAL INC.
(Registrant)
Date: May 9, 1994 /s/ M. KEITH WADDELL
----------------------------------------
M. Keith Waddell
Vice President, Chief Financial Officer
and Treasurer (Principal Financial
Officer and duly authorized
signatory)
8
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER EXHIBIT PAGE
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<C> <S> <C>
11 Computation of Per Share Earnings.
</TABLE>
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EXHIBIT 11
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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1994 1993
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(UNAUDITED)
<S> <C> <C>
NET INCOME.............................................................................. $ 5,604 $ 2,387
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
PRIMARY:
Common stock........................................................................ 13,519 11,846
Common stock equivalents
Stock options (A)................................................................... 444 294
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Primary shares outstanding.......................................................... 13,963 12,140
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FULLY DILUTED:
Common stock........................................................................ 13,519 11,846
Common stock equivalents
Stock options (A)................................................................... 450 357
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Fully diluted shares outstanding.................................................... 13,969 12,203
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NET INCOME PER SHARE:
Primary............................................................................. $ .40 $ .20
Fully diluted....................................................................... $ .40 $ .20
<FN>
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(A) The treasury stock method was used to determine the weighted average
number of shares of common stock equivalents outstanding during the
periods.
</TABLE>
