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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q/A
AMENDMENT NO. 1
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(MARK ONE)
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED JUNE 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
</TABLE>
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 (I.R.S. Employer
of incorporation or organization) Identification No.)
2884 SAND HILL ROAD 94025
SUITE 200 (zip-code)
MENLO PARK, CALIFORNIA
(Address of principal executive
offices)
</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 June 30, 1996:
58,634,556 shares of $.001 par value Common Stock
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Registrant hereby amends to read in its entirety as set forth herein Part I
Item I, Financial Statements, and Part I Item II, Management's Discussion and
Analysis of Financial Condition and Results of Operations. The only portion of
Part I Item I that has been changed is the Consolidated Statements of
Stockholders' Equity to state the number of common shares effecting the
transactions disclosed.
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
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<S> <C> <C>
(UNAUDITED)
Cash and cash equivalents............................................................. $ 56,527 $ 41,346
Accounts receivable, less allowances of $3,599 and $3,067............................. 102,337 84,955
Other current assets.................................................................. 12,103 7,349
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Total current assets.............................................................. 170,967 133,650
Intangible assets, less accumulated amortization of $35,717 and $33,071............... 160,919 155,441
Other assets.......................................................................... 16,292 12,049
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Total assets...................................................................... $ 348,178 $ 301,140
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses................................................. $ 15,127 $ 12,631
Accrued payroll costs................................................................. 47,476 33,853
Income taxes payable.................................................................. 3,067 5,157
Current portion of notes payable and other indebtedness............................... 2,114 4,239
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Total current liabilities......................................................... 67,784 55,880
Notes payable and other indebtedness, less current portion............................ 2,604 1,486
Deferred income taxes................................................................. 15,746 15,844
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Total liabilities................................................................. 86,134 73,210
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value authorized 100,000,000 shares; issued and outstanding
58,741,516 and 57,784,622 shares.................................................... 59 58
Capital surplus....................................................................... 125,357 99,768
Deferred compensation................................................................. (25,820) (9,642)
Accumulated translation adjustments................................................... (225) 51
Retained earnings..................................................................... 162,673 137,695
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Total stockholders' equity........................................................ 262,044 227,930
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Total liabilities and stockholders' equity........................................ $ 348,178 $ 301,140
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</TABLE>
All shares and amounts have been restated to retroactively reflect the
two-for-one stock split effected in the form of a stock dividend in June 1996.
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
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ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1996 1995 1996 1995
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(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net service revenues............................................. $ 210,649 $ 148,570 $ 406,888 $ 293,309
Direct costs of services, consisting of payroll, payroll taxes
and insurance costs for temporary employees.................... 126,728 90,838 246,325 179,538
---------- ---------- ---------- ----------
Gross margin..................................................... 83,921 57,732 160,563 113,771
Selling, general and administrative expenses..................... 58,906 40,608 112,150 79,893
Amortization of intangible assets................................ 1,361 1,154 2,669 2,306
Net interest (income)/expense.................................... (580) (83) (968) 17
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Income before income taxes....................................... 24,234 16,053 46,712 31,555
Provision for income taxes....................................... 10,010 6,703 19,249 13,200
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Net income....................................................... $ 14,224 $ 9,350 $ 27,463 $ 18,355
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Net income per share............................................. $ .23 $ .16 $ .45 $ .31
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</TABLE>
All per share amounts have been restated to retroactively reflect
the two-for-one stock split effected in the form of a stock dividend in June
1996.
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
2
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ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
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1996 1995
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(UNAUDITED)
<S> <C> <C>
COMMON STOCK--SHARES:
Balance at beginning of period.......................................................... 57,784 56,304
Issuance of restricted stock, net....................................................... 635 276
Repurchases of common stock............................................................. (90) (166)
Exercise of stock options............................................................... 425 343
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Balance at end of period.............................................................. 58,754 56,757
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COMMON STOCK--PAR VALUE:
Balance at beginning of period.......................................................... $ 58 $ 56
Exercises of stock options.............................................................. 1 --
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Balance at end of period.............................................................. $ 59 $ 56
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CAPITAL SURPLUS:
Balance at beginning of period.......................................................... $ 99,768 $ 82,627
Issuance of restricted stock, net--excess over par value................................ 18,899 3,268
Exercises of stock options--excess over par value....................................... 1,805 1,185
Tax benefits from exercises of stock options............................................ 4,885 1,158
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Balance at end of period.............................................................. $ 125,357 $ 88,238
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DEFERRED COMPENSATION:
Balance at beginning of period.......................................................... $ (9,642) $ (5,533)
Issuance of restricted stock, net....................................................... (18,899) (3,268)
Amortization of deferred compensation................................................... 2,721 1,323
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Balance at end of period.............................................................. $ (25,820) $ (7,478)
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ACCUMULATED TRANSLATION ADJUSTMENTS:
Balance at beginning of period.......................................................... $ 51 $ (541)
Translation adjustments................................................................. (276) 388
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Balance at end of period.............................................................. $ (225) $ (153)
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RETAINED EARNINGS:
Balance at beginning of period.......................................................... $ 137,695 $ 100,386
Repurchases of common stock--excess over par value...................................... (2,485) (1,807)
Net income.............................................................................. 27,463 18,355
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Balance at end of period.............................................................. $ 162,673 $ 116,934
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</TABLE>
All shares and amounts have been restated to retroactively reflect the
two-for-one stock split effected in the form of a stock dividend in June 1996.
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
3
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ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
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1996 1995
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(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................................ $ 27,463 $ 18,355
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible assets....................................................... 2,669 2,306
Depreciation expense.................................................................... 2,540 1,531
Deferred income taxes................................................................... (1,513) 1,325
Changes in assets and liabilities, net of effects of acquisitions:
Increase in accounts receivable....................................................... (17,033) (10,838)
Increase in accounts payable, accrued expenses and accrued payroll costs.............. 11,821 9,331
Increase (decrease) in income taxes payable........................................... (2,090) 2,181
Change in other assets, net of change in other liabilities............................ (734) 1,305
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Total adjustments..................................................................... (4,340) 7,141
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Net cash and cash equivalents provided by operating activities............................ 23,123 25,496
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisitions, net of cash acquired...................................................... (1,725) (226)
Capital expenditures.................................................................... (6,791) (3,464)
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Cash and cash equivalents used in investing activities.................................... (8,516) (3,690)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Repurchases of common stock or common stock equivalents................................. (2,485) (1,807)
Principal payments on notes payable and other indebtedness.............................. (3,632) (1,057)
Proceeds and tax benefits from exercise of stock options................................ 6,691 2,343
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Net cash and cash equivalents provided by (used in) financing activities.................. 574 (521)
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Net decrease in cash and cash equivalents................................................. 15,181 21,285
Cash and cash equivalents at beginning of period.......................................... 41,346 2,638
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Cash and cash equivalents at end of period................................................ $ 56,527 $ 23,923
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest................................................................................ $ 332 $ 311
Income taxes............................................................................ 17,055 6,072
Acquisitions:
Fair value of assets acquired--
Intangible assets..................................................................... $ 4,155 $ 207
Other................................................................................. 445 28
Liabilities incurred--
Notes payable and contracts........................................................... (2,625) (9)
Other................................................................................. (250) --
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Cash paid, net of cash acquired......................................................... $ 1,725 $ 226
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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
JUNE 30, 1996
(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 1995 financial statements to conform to
the 1996 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 and six months ended June 30, 1996, and
1995 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, 1995.
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. The carrying value of intangible assets is periodically reviewed by
the Company and impairments are recognized when the expected future operating
cash flows derived from such intangible assets are less than their carrying
value. Based upon its most recent analysis, the Company believes that no
material impairment of intangible assets exist at June 30, 1996.
INCOME TAXES. Deferred taxes are computed based on the difference between
the financial statement and income tax bases of assets and liabilities using the
enacted marginal tax rate.
NOTE B--STOCK SPLIT
In June 1996, the Company effected a two-for-one stock split in the form of
a stock dividend. All share and per share amounts in the financial statements
have been restated to retroactively reflect the two-for-one stock split.
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 AND SIX MONTHS ENDED JUNE
30, 1996 AND 1995
Temporary services revenues were $194 million and $135 million for the three
months ended June 30, 1996 and 1995, respectively, increasing by 44% during the
three months ended June 30, 1996 compared to the same period in 1995. Temporary
services revenues were $374 million and $268 million for the six months ended
June 30, 1996 and 1995, respectively, increasing by 40% during the six months
ended June 30, 1996 compared to the same period in 1995. Permanent placement
revenues were $17 million and $13 million for the three months ended June 30,
1996 and 1995, respectively, increasing by 31% during the three months ended
June 30, 1996 compared to the same period in 1995. Permanent placement revenues
were $33 million and $25 million for the six months ended June 30, 1996 and
1995, respectively, increasing by 32% during the six months ended June 30, 1996
compared to the same period in 1995. Overall revenue increases reflect continued
improvement in demand for the Company's services, which the Company believes is
a result of increased acceptance in the use of professional staffing services.
Revenues from companies acquired during the six months ended June 30, 1996 were
not material.
The Company currently has more than 190 offices in 36 states and five
foreign countries. Domestic operations represented 91% and 90% of revenues the
three and six months ended June 30, 1996, respectively, and 90% of revenues for
both the three and six months ended June 30, 1995. Foreign operations
represented 9% and 10% of revenues for both the three and six months ended June
30, 1996, respectively, and 10% of revenues for both the three and six months
ended June 30, 1995.
Gross margin dollars from the Company's temporary services represent
revenues less direct costs of services, which consists of payroll, payroll taxes
and insurance costs for temporary employees. Gross margin dollars from permanent
placement services are equal to revenues, as there are no direct costs
associated with such revenues. Gross margin dollars for the Company's temporary
services were $67 million and $128 million for the three and six months ended
June 30, 1996, respectively, compared to $45 million and $89 million for the
comparable periods in 1995, increasing by 49% and 44% for the three and six
months ended June 30, 1996, respectively. Gross margin amounts equaled 35% and
34% of revenues for temporary services for the three and six months ended June
30, 1996, respectively, compared to 33% of temporary service revenues for both
the three and six months ended June 30, 1995 which the Company believes reflects
its ability to adjust billing rates and wage rates to underlying market
conditions. Gross margin dollars for the Company's permanent placement division
were $17 million and $33 million for the three and six months ended June 30,
1996, respectively, compared to $13 million and $25 million for the comparable
periods in 1995, increasing by 31% and 32% for the three and six months ended
June 30, 1996, respectively.
Selling, general and administrative expenses were $59 million and $112
million for the three and six months ended June 30, 1996, respectively, compared
to approximately $41 million and $80 million during the three and six months
ended June 30, 1995, respectively. Selling, general and administrative expenses
as a percentage of revenues were 28% in both the three and six months ended June
30, 1996 compared to 28% and 27% for the three and six months ended June 30,
1995, respectively. Selling, general and administrative expenses consist
primarily of staff compensation, advertising and occupancy costs, most of which
generally follow changes in revenues.
The Company allocates the excess of cost over the fair market value of the
net tangible assets first to identifiable intangible assets, if any, and then to
goodwill. Although management believes that goodwill has an unlimited life, the
Company amortizes these costs over 40 years. Management believes that its
strategy of making acquisitions of established companies in established markets
and maintaining its presence in these markets preserves the goodwill for an
indeterminate period. The carrying value of intangible assets is periodically
reviewed by the Company and impairments are recognized when the expected future
operating cash flows derived from such intangible assets is less than their
carrying value. Based upon its most
6
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recent analysis, the Company believes that no material impairment of intangible
assets existed at June 30, 1996. Intangible assets represented 46% of total
assets and 61% of total stockholders' equity at June 30, 1996.
Interest income for the three months ended June 30, 1996 and 1995 was
$679,000 and $259,000, respectively, while interest expense for the three months
ended June 30, 1996 and 1995 was $99,000 and $176,000, respectively. Interest
income for the six months ended June 30, 1996 and 1995 was $1,223,000 and
$358,000, respectively, while interest expense for the six months ended June 30,
1996 and 1995 was $255,000 and $375,000, respectively. These changes reflect an
increase in cash and cash equivalents and a decrease in outstanding
indebtedness.
The provision for income taxes for both the three and six months ended June
30, 1996 was 41% compared to 42% of income before taxes for the same periods in
1995. The decrease in 1996 is the result of a smaller percentage of
non-deductible intangible expenses relative to income.
LIQUIDITY AND CAPITAL RESOURCES
The change in the Company's liquidity during six months ended June 30, 1996
is the net effect of funds generated by operations and the funds used for the
personnel services acquisitions, capital expenditures and principal payments on
outstanding notes payable. No open market purchases of the Company's stock were
made during the six months ended June 30, 1996. For the six months ended June
30, 1996, the Company generated $23.1 million from operations, used $8.5 million
in investing activities and provided $.6 million by financing activities.
The Company's working capital at June 30, 1996 included $56.5 million in
cash and cash equivalents. In addition at June 30, 1996, the Company had
available $71.3 million of its $77.5 million bank revolving line of credit. The
Company's working capital requirements consist primarily of the financing of
accounts receivable. While there can be no assurances in this regard, the
Company expects that internally generated cash plus the bank revolving line of
credit will be sufficient to support the working capital needs of the Company,
the Company's fixed payments and other obligations on both a short and long term
basis. As of June 30, 1996, the Company had no material capital commitments. The
Company's revolving bank line has scheduled reductions in availability through
2001 when the agreement terminates.
In June 1996, the company effected a two-for-one stock split in the form of
a stock dividend. All share and per share amounts in the financial statements
have been restated to retroactively reflect the two-for-one stock split.
In 1996, the Company adopted the Financial Accounting Standards Board's
Statement of Financial Accounting Standard ("SFAS") No. 121, "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of".
The adoption of SFAS No. 121 did not have a material impact upon the Company's
financial statements.
7
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment No. 1 to Report on Form 10-Q to be
signed on its behalf by the undersigned, thereunto duly authorized.
ROBERT HALF INTERNATIONAL INC.
(Registrant)
By /s/ M. KEITH WADDELL
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M. Keith Waddell,
SENIOR VICE PRESIDENT, CHIEF
FINANCIAL
OFFICER AND TREASURER
(PRINCIPAL FINANCIAL OFFICER
AND DULY AUTHORIZED SIGNATORY)
Date: October 10, 1996
8
