<PAGE>
- --------------------------------------------------------------------------------
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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
------------------------
COMMISSION FILE NUMBER 1-10427
ROBERT HALF INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-1648752
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2884 SAND HILL ROAD, SUITE 200, MENLO PARK, CALIFORNIA 94025
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (650) 234-6000
------------------------
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, Par Value $.001 per Share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
As of February 29, 2000, the aggregate market value of the Common Stock held
by non-affiliates of the registrant was approximately $3,431,682,000 based on
the closing sale price on that date. This amount excludes the market value of
7,339,279 shares of Common Stock directly or indirectly held by registrant's
directors and officers and their affiliates.
As of February 29, 2000, there were outstanding 88,562,533 shares of the
registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement to be mailed to stockholders in
connection with the registrant's annual meeting of stockholders, scheduled to be
held in May 2000, are incorporated by reference in Part III of this report.
Except as expressly incorporated by reference, the registrant's Proxy Statement
shall not be deemed to be part of this report.
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<PAGE>
PART I
ITEM 1. BUSINESS
Robert Half International Inc. is the world's largest specialized provider
of temporary and permanent personnel in the fields of accounting and finance.
Its divisions include ACCOUNTEMPS-Registered Trademark- and ROBERT
HALF-Registered Trademark-, providers of temporary and permanent personnel,
respectively, in the fields of accounting and finance. The Company, utilizing
its experience as a specialized provider of temporary and permanent personnel,
has expanded into additional specialty fields. In 1991, the Company formed
OFFICETEAM-Registered Trademark- to provide skilled temporary administrative and
office personnel. In 1994, the Company established RHI
CONSULTING-Registered Trademark- to concentrate on providing temporary and
contract information technology professionals in positions ranging from PC
support technician to chief information officer. In 1992, the Company acquired
THE AFFILIATES-Registered Trademark-, which focuses on placing temporary and
regular employees in paralegal, legal administrative and other legal support
positions. In 1997, the Company established RHI MANAGEMENT
RESOURCES-REGISTERED TRADEMARK- to provide senior level project professionals
specializing in the accounting and finance fields. THE CREATIVE GROUP(SM)
provides project staffing in the advertising, marketing and web design fields.
The Company's business was originally founded in 1948. Prior to 1986, the
Company was primarily a franchisor of ACCOUNTEMPS and ROBERT HALF offices.
Beginning in 1986, the Company and its current management embarked on a strategy
of acquiring franchised locations and other local or regional independent
providers of specialized temporary service personnel. The Company has acquired
all but three of the ACCOUNTEMPS and ROBERT HALF franchises and has also
acquired other local or regional providers of specialized temporary service
personnel. Since 1986, the Company has significantly expanded operations at many
of the acquired locations and has opened many new locations. The Company
believes that direct ownership of offices allows it to better monitor and
protect the image of its tradenames, promotes a more consistent and higher level
of quality and service throughout its network of offices and improves
profitability by centralizing many of its administrative functions. The Company
currently has more than 270 offices in 40 states and seven foreign countries and
placed approximately 200,000 employees on temporary assignment with clients in
1999.
ACCOUNTEMPS
The ACCOUNTEMPS temporary services division offers customers a reliable and
economical means of dealing with uneven or peak work loads for accounting, tax
and finance personnel caused by such predictable events as vacations, taking
inventories, tax work, month-end activities and special projects and such
unpredictable events as illness and emergencies. Businesses increasingly view
the use of temporary employees as a means of controlling personnel costs and
converting such costs from fixed to variable. The cost and inconvenience to
clients of hiring and firing permanent employees are eliminated by the use of
ACCOUNTEMPS temporaries. The temporary workers are employees of ACCOUNTEMPS and
are paid by ACCOUNTEMPS only when working on customer assignments. The customer
pays a fixed rate only for hours worked.
ACCOUNTEMPS clients may fill their permanent employment needs by using an
ACCOUNTEMPS employee on a trial basis and, if so desired, "converting" the
temporary position to a permanent position. The client typically pays a one-time
fee for such conversions.
OFFICETEAM
The Company's OFFICETEAM division, which commenced operations in 1991,
places temporary and permanent office and administrative personnel, ranging from
word processors to office managers. OFFICETEAM operates in much the same fashion
as the ACCOUNTEMPS and ROBERT HALF divisions.
1
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ROBERT HALF
The Company offers permanent placement services through its office network
under the name ROBERT HALF. The Company's ROBERT HALF division specializes in
placing accounting, financial, tax and banking personnel. Fees for successful
permanent placements are paid only by the employer and are generally a
percentage of the new employee's annual compensation. No fee for permanent
placement services is charged to employment candidates.
RHI CONSULTING
The Company's RHI CONSULTING division, which commenced operations in 1994,
specializes in providing information technology contract consultants and placing
regular employees in areas ranging from multiple platform systems integration to
end-user support, including specialists in programming, networking, systems
integration, database design and help desk support.
THE AFFILIATES
Since 1992, the Company has been placing temporary and permanent employees
in attorney, paralegal, legal administrative and legal secretarial positions
through its THE AFFILIATES division. The legal profession's requirements (the
need for confidentiality, accuracy and reliability, a strong drive toward cost-
effectiveness, and frequent peak workload periods) are similar to the demands of
the clients of the ACCOUNTEMPS division.
RHI MANAGEMENT RESOURCES
The Company's RHI MANAGEMENT RESOURCES division, which commenced operations
in 1997, specializes in providing senior level project professionals in the
accounting and finance fields, including chief financial officers, controllers,
and senior financial analysts, for such tasks as financial systems conversions,
expansion into new markets, business process reengineering and post-merger
financial consolidation.
THE CREATIVE GROUP
THE CREATIVE GROUP division, the Company's newest division, commenced
operations in 1999 and serves clients in the areas of advertising, marketing and
web design and places project consultants in a variety of positions such as
creative directors, graphics designers, web content developers, web designers,
media buyers, and public relations specialists.
MARKETING AND RECRUITING
The Company markets its services to clients as well as employment
candidates. Local marketing and recruiting are generally conducted by each
office or related group of offices. Local advertising directed to clients and
employment candidates consists primarily of yellow pages advertisements,
classified advertisements, websites and advertising on the internet. Direct
marketing through mail and telephone solicitation also constitutes a significant
portion of the Company's total advertising. National advertising conducted by
the Company consists primarily of radio, print advertisements in national
newspapers, magazines and certain trade journals. The Company has initiated
programs to take advantage of the Internet as a resource for recruiting
candidates and filling client orders. Recent Internet initiatives include
forging traffic building alliances with leading Internet career search sites.
The Company plans to expand its use of the Internet in all aspects of sales and
recruitment. Joint marketing arrangements have been entered into with Microsoft,
Lotus Development Corporation, Corel Corporation (publisher of WordPerfect),
Peachtree Software, Inc., Intuit and Computer Associates International, Inc. and
typically provide for cooperative advertising, joint mailings and similar
promotional activities. The Company also actively seeks endorsements and
affiliations with professional organizations in the business management, office
administration and professional secretarial fields. The Company also conducts
public relations activities designed to enhance public
2
<PAGE>
recognition of the Company and its services. Local employees are encouraged to
be active in civic organizations and industry trade groups.
The Company owns many trademarks, service marks and tradenames, including
the ROBERT HALF-Registered Trademark-, ACCOUNTEMPS-Registered Trademark-,
OFFICETEAM-Registered Trademark-, THE AFFILIATES-Registered Trademark-, RHI
CONSULTING-Registered Trademark-, RHI MANAGEMENT RESOURCES-REGISTERED TRADEMARK-
and THE CREATIVE GROUP-SM- marks, which are registered in the United States and
in a number of foreign countries.
ORGANIZATION
Management of the Company's operations is coordinated from its headquarters
in Menlo Park, California. The Company's headquarters provides support and
centralized services to its offices in the administrative, marketing,
accounting, training and legal areas, particularly as it relates to the
standardization of the operating procedures of its offices. The Company has more
than 270 offices in 40 states and seven foreign countries. Office managers are
responsible for most activities of their offices, including sales, local
advertising and marketing and recruitment.
COMPETITION
The Company faces competition in its efforts to attract clients as well as
high-quality specialized employment candidates. The temporary and permanent
placement businesses are highly competitive, with a number of firms offering
services similar to those provided by the Company on a national, regional or
local basis. In many areas the local companies are the strongest competitors.
The most significant competitive factors in the temporary and permanent
placement businesses are price and the reliability of service, both of which are
often a function of the availability and quality of personnel. The Company
believes it derives a competitive advantage from its long experience with and
commitment to the specialized employment market, its national presence, and its
various marketing activities.
EMPLOYEES
The Company has approximately 6,300 full-time staff employees. The Company's
offices placed approximately 200,000 employees on temporary assignments with
clients during 1999. Temporary employees placed by the Company are the Company's
employees for all purposes while they are working on assignments. The Company
pays the related costs of employment, such as workers' compensation insurance,
state and federal unemployment taxes, social security and certain fringe
benefits. The Company provides voluntary health insurance coverage to interested
temporary employees.
OTHER INFORMATION
The Company's current business constitutes two business segments. (See
Note M of Notes to Consolidated Financial Statement in Item 8. Financial
Statements and Supplementary Data for financial information about the Company's
segments.)
The Company is not dependent upon a single customer or a limited number of
customers. The Company's operations are generally more active in the first and
fourth quarters of a calendar year. Order backlog is not a material aspect of
the Company's business and no material portion of the Company's business is
subject to government contracts.
Information about foreign operations is contained in Note M of Notes to
Consolidated Financial Statements in Item 8. The Company does not have export
sales.
ITEM 2. PROPERTIES
The Company's headquarters is located in Menlo Park, California. Placement
activities are conducted through more than 270 offices located in the United
States, Canada, the United Kingdom, Belgium, France, the Netherlands, Germany
and Australia. All of the offices are leased.
3
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ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings other
than routine litigation incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's security holders during
the fourth quarter of the fiscal year covered by this report.
4
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed for trading on the New York Stock
Exchange under the symbol "RHI". On December 31, 1999, there were approximately
2,400 holders of record of the Common Stock.
Following is a list by fiscal quarters of the sales prices of the stock:
<TABLE>
<CAPTION>
SALES PRICES
-------------------
1999 HIGH LOW
- ---- -------- --------
<S> <C> <C>
4th Quarter......................................... $30.00 $20.44
3rd Quarter......................................... $27.18 $21.63
2nd Quarter......................................... $37.50 $21.88
1st Quarter......................................... $48.38 $30.00
<CAPTION>
SALES PRICES
-------------------
1998 HIGH LOW
- ---- -------- --------
<S> <C> <C>
4th Quarter......................................... $49.19 $29.00
3rd Quarter......................................... $58.69 $41.00
2nd Quarter......................................... $60.25 $47.13
1st Quarter......................................... $49.25 $32.25
</TABLE>
No cash dividends were paid in 1999 or 1998. The Company, as it deems
appropriate, may continue to retain all earnings for use in its business or may
consider paying a dividend in the future.
5
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ITEM 6. SELECTED FINANCIAL DATA
Following is a table of selected financial data of the Company for the last
five years:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net service revenues.................. $2,081,321 $1,793,041 $1,302,876 $898,635 $628,526
Direct costs of services, consisting
of payroll, payroll taxes and
insurance costs for temporary
employees............................ 1,219,270 1,070,834 785,546 545,343 384,449
---------- ---------- ---------- -------- --------
Gross margin.......................... 862,051 722,207 517,330 353,292 244,077
Selling, general and administrative
expenses............................. 628,405 501,626 357,766 246,485 170,684
Amortization of intangible assets..... 4,990 4,993 4,926 5,405 4,767
Interest income, net.................. (6,041) (5,588) (4,190) (2,243) (463)
---------- ---------- ---------- -------- --------
Income before income taxes............ 234,697 221,176 158,828 103,645 69,089
Provision for income taxes............ 93,256 89,596 65,131 42,543 28,791
---------- ---------- ---------- -------- --------
Net income............................ $ 141,441 $ 131,580 $ 93,697 $ 61,102 $ 40,298
========== ========== ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
NET INCOME PER SHARE:
BASIC................................... $ 1.57 $ 1.44 $ 1.03 $ .69 $ .47
DILUTED................................. $ 1.53 $ 1.39 $ 1.00 $ .67 $ .46
SHARES:
BASIC................................... 90,223 91,650 90,668 88,267 85,479
DILUTED................................. 92,294 94,822 93,999 91,522 88,488
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Intangible assets, net.................... $175,747 $178,363 $177,425 $174,663 $155,441
Total assets.............................. $777,188 $703,719 $561,367 $416,012 $301,140
Debt financing............................ $ 3,495 $ 4,712 $ 8,157 $ 6,611 $ 5,725
Stockholders' equity...................... $576,103 $522,470 $418,800 $308,445 $227,930
</TABLE>
All shares and per share amounts have been restated to retroactively reflect
the three-for-two stock split effected in the form of a stock dividend in
September 1997 and the two-for-one stock split effected in the form of a stock
dividend in June 1996.
6
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain information contained in Management's Discussion and Analysis and in
other parts of this report may be deemed forward-looking statements regarding
events and financial trends that may affect the Company's future operating
results or financial positions. Such statements may be identified by words such
as "estimate", "project", "plan", "intend", "believe", "expect", "anticipate",
or variations or negatives thereof or by similar or comparable words or phrases.
Forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from those expressed in the
statements. Such risks and uncertainties include, but are not limited to, the
following: changes in general or local economic conditions or in the economic
condition of any industry, the availability of qualified staff employees and
temporary candidates, government regulation of the personnel services industry,
general regulations relating to employers and employees, liability risks
associated with the operation of a personnel services business, competitive
conditions in the personnel services industry, and Year 2000 issues. In
addition, it should be noted that, because long-term contracts are not a
significant portion of the Company's business, future results cannot be reliably
predicted by considering past trends or extrapolating past results.
RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1999
Temporary services revenues were $1.92 billion, $1.66 billion and $1.20
billion for the years ended December 31, 1999, 1998 and 1997, respectively,
increasing by 16% during 1999 and 38% during 1998. The increase in revenues
during these periods reflected in part revenues generated from the Company's
OFFICETEAM, RHI CONSULTING, and RHI MANAGEMENT RESOURCES divisions, which were
started in 1991, 1994 and 1997, respectively. Permanent placement revenues were
$159 million, $136 million and $101 million for the years ended December 31,
1999, 1998 and 1997, respectively, increasing by 17% during 1999 and 35% during
1998. Overall revenue increases reflect continued demand for the Company's
services, which the Company believes is a result of increased acceptance in the
use of professional staffing services. Revenue growth rates in 1999 were
impacted by tight labor supply conditions resulting from record low unemployment
levels.
The Company currently has more than 270 offices in 40 states and seven
foreign countries. Domestic operations represented 88% of revenues for the year
ended December 31, 1999, 89% of revenues for the year ended December 31, 1998,
and 90% of the revenues for the year ended December 31, 1997. Foreign operations
represented 12% of revenues for the year ended December 31, 1999, 11% of
revenues for the year ended December 31, 1998 and 10% of revenues for the year
ended December 31, 1997.
Gross margin dollars from the Company's temporary services represent
revenues less direct costs of services, which consist of payroll, payroll taxes
and insurance costs for temporary employees. Gross margin dollars from permanent
placement services are equal to revenues, as there are no direct costs
associated with such revenues. Gross margin dollars for the Company's temporary
services were $703 million, $586 million and $417 million for the years ended
December 31, 1999, 1998 and 1997, respectively, increasing by 20% in 1999 and
41% in 1998. Gross margin amounts equaled 37% of revenues for temporary services
for the year ended December 31, 1999 and 35% of revenues for temporary services
for both the years ended December 31, 1998 and 1997, 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 $159 million, $136 million and $101 million for each of the years ended
December 31, 1999, 1998 and 1997, respectively, increasing by 17% and 35% in
1999 and 1998, respectively.
Selling, general and administrative expenses were $628 million during 1999,
compared to $502 million in 1998 and $358 million in 1997. Selling, general and
administrative expenses as a percentage of revenues were 30% for the year ended
December 31, 1999, and 28% for both the years ended December 31, 1998 and 1997.
Selling, general and administrative expenses consist primarily of staff
compensation, advertising,
7
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depreciation and occupancy costs. The increase in 1999 relates primarily to
various candidate recruitment initiatives, including those related to the
internet.
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 recent analysis, the Company believes that
no material impairment of intangible assets existed at December 31, 1999.
Intangible assets represented 23% of total assets and 31% of total stockholders'
equity at December 31, 1999.
Interest income for the years ended December 31, 1999, 1998 and 1997 was
$6,782,000, $6,947,000 and $5,139,000, respectively. Interest expense for the
years ended December 31, 1999, 1998 and 1997 was $741,000, $1,359,000 and
$949,000, respectively.
The provision for income taxes was 40% for the year ended December 31, 1999,
and 41% for the years ended December 31, 1998 and 1997.
LIQUIDITY AND CAPITAL RESOURCES
The change in the Company's liquidity during the past three years is the net
effect of funds generated by operations and the funds used for the staffing
services acquisitions, capital expenditures, repurchases of common stock, and
principal payments on outstanding notes payable. As of December 31, 1999, the
Company has authorized the repurchase, from time to time, of up to nine million
shares of the Company's common stock on the open market or in privately
negotiated transactions, depending on market conditions. During the year ended
December 31, 1999, the Company repurchased approximately 4,183,000 shares of
common stock on the open market for a total cost of $108.5 million. Since 1997,
the Company has repurchased approximately 5,907,000 shares on the open market
pursuant this program. Repurchases of the securities have been funded with cash
generated from operations. For the year ended December 31, 1999, the Company
generated $147 million from operations, used $53 million in investing activities
and used $110 million in financing activities.
The Company's working capital at December 31, 1999, included $151 million in
cash and cash equivalents. In addition, at December 31, 1999, the Company had
available $75 million of its $80 million bank revolving line of credit. The
Company's working capital requirements consist primarily of the financing of
accounts receivable. While there can be no assurances in this regard, the
Company expects that internally generated cash plus the bank revolving line of
credit will be sufficient to support the working capital needs of the Company,
the Company's fixed payments, and other obligations on both a short and
long-term basis. As of December 31, 1999, the Company had no material capital
commitments.
The Company's primary exposures related to the Year 2000 were in its key
internal information systems. The Company addressed the Year 2000 exposures as
part of its strategic plan for upgrading core systems. The Company was
successful in upgrading its core systems on a timely basis. The Company
encountered no material issues related to the Year 2000. The Company spent $44
million on these systems, which was in line with its estimate.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk sensitive instruments do not subject the Company
to material market risk exposures.
8
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
ASSETS:
Cash and cash equivalents................................... $151,074 $166,060
Accounts receivable, less allowances of $13,424 and
$10,176................................................... 309,278 240,690
Other current assets........................................ 30,187 23,656
-------- --------
Total current assets...................................... 490,539 430,406
Intangible assets, less accumulated amortization of $60,889
and $53,236............................................... 175,747 178,363
Property and equipment, less accumulated depreciation of
$82,413 and $48,900....................................... 110,902 94,950
-------- --------
Total assets.............................................. $777,188 $703,719
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses....................... $ 29,835 $ 29,438
Accrued payroll costs....................................... 145,410 118,289
Income taxes payable........................................ 64 3,810
Current portion of notes payable and other indebtedness..... 898 1,308
-------- --------
Total current liabilities................................. 176,207 152,845
Notes payable and other indebtedness, less current
portion................................................... 2,597 3,404
Deferred income taxes....................................... 22,281 25,000
-------- --------
Total liabilities......................................... 201,085 181,249
-------- --------
Commitments and Contingencies
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value authorized 260,000,000 shares;
issued and outstanding 88,073,937 and 91,225,353 shares... 88 91
Capital surplus............................................. 303,093 270,609
Deferred compensation....................................... (54,127) (56,790)
Accumulated other comprehensive income...................... (2,420) (1,244)
Retained earnings........................................... 329,469 309,804
-------- --------
Total stockholders' equity................................ 576,103 522,470
-------- --------
Total liabilities and stockholders' equity................ $777,188 $703,719
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
9
<PAGE>
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net service revenues..................................... $2,081,321 $1,793,041 $1,302,876
Direct costs of services, consisting of payroll, payroll
taxes and insurance costs for temporary employees...... 1,219,270 1,070,834 785,546
---------- ---------- ----------
Gross margin............................................. 862,051 722,207 517,330
Selling, general and administrative expenses............. 628,405 501,626 357,766
Amortization of intangible assets........................ 4,990 4,993 4,926
Interest income, net..................................... (6,041) (5,588) (4,190)
---------- ---------- ----------
Income before income taxes............................... 234,697 221,176 158,828
Provision for income taxes............................... 93,256 89,596 65,131
---------- ---------- ----------
Net income............................................... $ 141,441 $ 131,580 $ 93,697
========== ========== ==========
Basic net income per share............................... $ 1.57 $ 1.44 $ 1.03
Diluted net income per share............................. $ 1.53 $ 1.39 $ 1.00
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
10
<PAGE>
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
COMMON STOCK--SHARES:
Balance at beginning of period............................ 91,225 91,208 89,622
Issuances of restricted stock............................. 1,018 735 802
Repurchases of common stock............................... (4,530) (2,118) (676)
Exercises of stock options................................ 361 1,400 1,446
Issuance of common stock for acquisitions................. -- -- 14
-------- -------- --------
Balance at end of period................................ 88,074 91,225 91,208
======== ======== ========
COMMON STOCK--PAR VALUE:
Balance at beginning of period............................ $ 91 $ 91 $ 90
Issuances of restricted stock............................. 1 1 1
Repurchases of common stock............................... (4) (2) (1)
Exercises of stock options................................ -- 1 1
-------- -------- --------
Balance at end of period................................ $ 88 $ 91 $ 91
======== ======== ========
CAPITAL SURPLUS:
Balance at beginning of period............................ $270,609 $196,888 $140,443
Issuances of restricted stock--excess over par value...... 20,663 31,514 29,189
Exercises of stock options--excess over par value......... 1,968 8,452 5,755
Issuance of common stock for acquisition.................. -- -- 400
Capital impact of equity incentive plans.................. 9,853 33,755 21,101
-------- -------- --------
Balance at end of period................................ $303,093 $270,609 $196,888
======== ======== ========
DEFERRED COMPENSATION:
Balance at beginning of period............................ $(56,790) $(44,276) $(26,802)
Issuances of restricted stock............................. (20,664) (31,515) (29,190)
Amortization of deferred compensation..................... 23,327 19,001 11,716
-------- -------- --------
Balance at end of period................................ $(54,127) $(56,790) $(44,276)
======== ======== ========
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance at beginning of period............................ $ (1,244) $ (1,347) $ 23
Translation adjustments................................... (1,176) 103 (1,370)
-------- -------- --------
Balance at end of period................................ $ (2,420) $ (1,244) $ (1,347)
======== ======== ========
RETAINED EARNINGS:
Balance at beginning of period............................ $309,804 $267,444 $194,691
Repurchases of common stock--excess over par value........ (121,776) (89,220) (20,944)
Net income................................................ 141,441 131,580 93,697
-------- -------- --------
Balance at end of period................................ $329,469 $309,804 $267,444
======== ======== ========
COMPREHENSIVE INCOME:
Net income................................................ $141,441 $131,580 $ 93,697
Translation adjustments................................... (1,176) 103 (1,370)
-------- -------- --------
Total comprehensive income.............................. $140,265 $131,683 $ 92,327
======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
11
<PAGE>
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $141,441 $131,580 $ 93,697
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of intangible assets..................... 4,990 4,993 4,926
Depreciation expense.................................. 34,124 19,643 12,726
Provision for deferred income taxes................... (6,894) 1,902 (5,135)
Changes in assets and liabilities, net of effects of
acquisitions:
Increase in accounts receivable....................... (68,588) (53,205) (61,027)
Increase in accounts payable, accrued expenses and
accrued payroll costs............................... 23,297 27,761 27,878
Increase (decrease) in income taxes payable........... (3,746) 1,552 (1,625)
Change in other assets, net of change in other
liabilities......................................... 22,866 21,101 10,517
-------- -------- --------
Total adjustments....................................... 6,049 23,747 (11,740)
-------- -------- --------
Net cash and cash equivalents provided by operating
activities.............................................. 147,490 155,327 81,957
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired........................ -- (4,187) (3,338)
Capital expenditures...................................... (52,558) (67,229) (31,958)
-------- -------- --------
Net cash and cash equivalents used in investing
activities.............................................. (52,558) (71,416) (35,296)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchases of common stock and common stock
equivalents............................................. (121,780) (89,222) (20,945)
Principal payments on notes payable and other
indebtedness............................................ 41 (2,186) (1,405)
Proceeds and capital impact of equity incentive plans..... 11,821 42,208 26,857
-------- -------- --------
Net cash and cash equivalents (used in) provided by
financing activities.................................... (109,918) (49,200) 4,507
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........ (14,986) 34,711 51,168
Cash and cash equivalents at beginning of period............ 166,060 131,349 80,181
-------- -------- --------
Cash and cash equivalents at end of period.................. $151,074 $166,060 $131,349
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest................................................ $ 387 $ 379 $ 476
Income taxes............................................ $ 95,002 $ 54,538 $ 50,340
Acquisitions:
Assets acquired--
Intangible assets..................................... -- $ 3,967 $ 4,079
Other................................................. -- 622 499
Liabilities incurred--
Notes payable and contracts........................... -- -- (536)
Other................................................. -- (402) (304)
Common stock issued..................................... -- -- (400)
-------- -------- --------
Cash paid, net of cash acquired......................... -- $ 4,187 $ 3,338
======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS. Robert Half International Inc. (the "Company")
provides specialized staffing services through such divisions as ACCOUNTEMPS,
ROBERT HALF, OFFICETEAM, RHI CONSULTING, RHI MANAGEMENT RESOURCES, THE
AFFILIATES and THE CREATIVE GROUP. The Company, through its ACCOUNTEMPS, ROBERT
HALF, and RHI MANAGEMENT RESOURCES divisions, is the world's largest specialized
provider of temporary, full-time, and project professionals in the fields of
accounting and finance. OFFICETEAM specializes in highly skilled temporary
administrative support personnel. RHI CONSULTING provides contract information
technology professionals. THE AFFILIATES provides temporary, project, and
full-time staffing of attorneys and specialized support personnel within law
firms and corporate legal departments. THE CREATIVE GROUP provides project
staffing in the advertising, marketing, and Web design fields. Revenues are
predominantly from temporary services. The Company operates in the United
States, Canada, Europe, and Australia. The Company is a Delaware corporation.
PRINCIPLES OF CONSOLIDATION. The Consolidated Financial Statements include
the accounts of the Company and its subsidiaries, all of which are wholly-owned.
All significant intercompany balances have been eliminated. Certain
reclassifications have been made to the 1998 and 1997 financial statements to
conform to the 1999 presentation.
REVENUE RECOGNITION. Temporary services revenues are recognized when the
services are rendered by the Company's temporary employees. Permanent placement
revenues are recognized when employment candidates accept offers of permanent
employment. Allowances are established to estimate losses due to placed
candidates not remaining employed for the Company's guarantee period, typically
90 days.
CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
investments with a maturity of three months or less as cash equivalents.
INTANGIBLE ASSETS. Intangible assets primarily consist of the cost of
acquired companies in excess of the fair market value of their net tangible
assets at acquisition date, which are being amortized on a straight-line basis
over a period of 40 years. The carrying value of intangible assets is
periodically reviewed by the Company and impairments are recognized when the
expected future operating cash flows derived from such intangible assets are
less than their carrying value. Based upon its most recent analysis, the Company
believes that no material impairment of intangible assets existed at December
31, 1999.
INCOME TAXES. Deferred taxes are computed based on the difference between
the financial statement and income tax bases of assets and liabilities using the
enacted marginal tax rates.
FOREIGN CURRENCY TRANSLATION. The results of operations of the Company's
foreign subsidiaries are translated at the monthly average exchange rates
prevailing during the period. The financial position of the Company's foreign
subsidiaries is translated at the current exchange rates at the end of the
period, and the related translation adjustments are recorded as a component of
comprehensive income within Stockholders' Equity. Gains and losses resulting
from foreign currency transactions are included in the Consolidated Statements
of Income.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.
13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost.
Depreciation expense is computed using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are amortized over
the shorter of the life of the related asset or the life of the lease.
NOTE B--ACQUISITIONS
In July 1986, the Company acquired all of the outstanding stock of Robert
Half Incorporated, the franchisor of the ACCOUNTEMPS and ROBERT HALF operations.
Subsequently, in 66 separate transactions the Company acquired all of the
outstanding stock of certain corporations operating ACCOUNTEMPS and ROBERT HALF
franchised offices in the United States, the United Kingdom and Canada as well
as other staffing services businesses. The Company has paid approximately
$215 million in cash, stock, notes and other indebtedness in these acquisitions,
excluding transaction costs and cash acquired.
These acquisitions were primarily accounted for as purchases, and the excess
of cost of the acquired companies in excess of the fair market value of the net
tangible assets acquired is being amortized over 40 years using the
straight-line method. Results of operations of the acquired companies are
included in the Consolidated Statements of Income from the dates of acquisition.
There were no acquisitions made in 1999. The acquisitions made during 1998 and
1997 had no material pro forma impact on the results of operations.
NOTE C--NOTES PAYABLE AND OTHER INDEBTEDNESS
The Company issued promissory notes as well as other forms of indebtedness
in connection with certain acquisitions and other payment obligations. These are
due in varying installments, carry varying interest rates and, in aggregate,
amounted to $3,495,000 at December 31, 1999 and $4,712,000 at December 31, 1998.
At December 31, 1999, $2,408,000 of the notes were secured by a standby letter
of credit (see Note D). The following table shows the schedule of maturities for
notes payable and other indebtedness at December 31, 1999 (in thousands):
<TABLE>
<S> <C>
2000........................................................ $ 898
2001........................................................ 56
2002........................................................ 61
2003........................................................ 66
2004........................................................ 71
Thereafter.................................................. 2,343
------
$3,495
======
</TABLE>
At December 31, 1999, the notes carried fixed rates and the weighted average
interest rate for the above was approximately 8.1%, 8.2% and 7.0% for the years
ended December 31, 1999, 1998 and 1997, respectively.
NOTE D--BANK LOAN (REVOLVING CREDIT)
The Company has an unsecured credit facility which provides a line of credit
of up to $80,000,000, which is available to fund the Company's general business
and working capital needs, including acquisitions and the purchase of the
Company's common stock, and to cover the issuance of debt support standby
letters of credit up to $15,000,000.
14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE D--BANK LOAN (REVOLVING CREDIT) (CONTINUED)
As of December 31, 1999 and 1998, the Company had no borrowings on the line
of credit outstanding and had used $5,208,000 and $6,799,000 in debt support
standby letters of credit, respectively. There is a commitment fee on the unused
portion of the entire credit facility of .09%. The loan is subject to certain
financial covenants which also affect the interest rates charged. The final
maturity date for the credit facility is August 31, 2002.
NOTE E--ACCRUED PAYROLL COSTS
Accrued payroll costs consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Payroll and bonuses..................................... $ 76,026 $ 56,943
Employee benefits and workers' compensation............. 60,359 49,926
Payroll taxes........................................... 9,025 11,420
-------- --------
$145,410 $118,289
======== ========
</TABLE>
NOTE F--STOCKHOLDERS' EQUITY
STOCK REPURCHASE PROGRAM--As of December 31, 1999, the Company's Board of
Directors has authorized the repurchase, from time to time, of up to nine
million shares of the Company's common stock on the open market or in privately
negotiated transactions, depending on market conditions. During the year ended
December 31, 1999, the Company repurchased approximately 4,183,000 shares on the
open market for a total cost of $108.5 million. Since 1997, the Company
repurchased approximately 5,907,000 shares of common stock on the open market
pursuant to this program.
NOTE G--INCOME TAXES
The provision for income taxes for the years ended December 31, 1999, 1998
and 1997 consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal........................................ $79,061 $66,127 $53,973
State.......................................... 13,292 15,243 12,261
Foreign........................................ 7,797 6,324 4,032
Deferred--principally domestic................... (6,894) 1,902 (5,135)
------- ------- -------
$93,256 $89,596 $65,131
======= ======= =======
</TABLE>
15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE G--INCOME TAXES (CONTINUED)
The income taxes shown above varied from the statutory federal income tax
rates for these periods as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Federal U.S. income tax rate......................... 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit....... 4.3 4.6 4.6
Amortization of intangible assets.................... .5 .6 .8
Tax-free interest income............................. (.4) (.4) --
Other, net........................................... .3 .7 .6
---- ---- ----
Effective tax rate................................... 39.7% 40.5% 41.0%
==== ==== ====
</TABLE>
The deferred portion of the tax provisions consisted of the following (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Amortization of franchise rights............... $ (74) $ (74) $ 66
Accrued expenses, deducted for tax when paid... (7,515) (7,317) (7,612)
Capitalized costs for books, deducted for
tax.......................................... 212 9,660 2,101
Other, net..................................... 483 (367) 310
-------- -------- --------
$ (6,894) $ 1,902 $ (5,135)
======== ======== ========
</TABLE>
The deferred income tax amounts included on the balance sheet are comprised
of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Current deferred income tax assets, net................. $(16,717) $(12,542)
Long-term deferred income tax liabilities, net.......... 22,281 25,000
-------- --------
$ 5,564 $ 12,458
======== ========
</TABLE>
No valuation allowances against deferred tax assets were required for the
years ended December 31, 1999 and 1998.
The components of the deferred income tax amounts at December 31, 1999 and
1998, were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Amortization of intangible assets....................... $ 16,859 $ 16,662
Accrued expenses, deducted for tax when paid............ (9,010) (5,603)
Other, net.............................................. (2,285) 1,399
-------- --------
$ 5,564 $ 12,458
======== ========
</TABLE>
16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE H--COMMITMENTS
Rental expense, primarily for office premises, amounted to $37,384,000,
$30,146,000 and $19,594,000 for the years ended December 31, 1999, 1998 and
1997, respectively. The approximate minimum rental commitments for 2000 and
thereafter under non-cancelable leases in effect at December 31, 1999, were as
follows (in thousands):
<TABLE>
<S> <C>
2000........................................................ $40,983
2001........................................................ $40,260
2002........................................................ $35,456
2003........................................................ $28,662
2004........................................................ $23,710
Thereafter.................................................. $65,323
</TABLE>
NOTE I--STOCK PLANS
Under various stock plans, officers, employees and outside directors may
receive grants of restricted stock or options to purchase common stock. Grants
are made at the discretion of the Stock Plan Committee of the Board of
Directors. Grants generally vest between two and seven years.
Options granted under the plans have exercise prices ranging from 85% to
100% of the fair market value of the Company's common stock at the date of
grant, consist of both incentive stock options and nonstatutory stock options
under the Internal Revenue Code. The terms range from 27 months to 10 years.
Recipients of restricted stock do not pay any cash consideration to the
Company for the shares, have the right to vote all shares subject to such grant,
and receive all dividends with respect to such shares, whether or not the shares
have vested. Compensation expense is recognized on a straight-line basis over
the vesting period. Vesting is accelerated upon the death or disability of the
recipients.
The Company accounts for these plans under APB Opinion 25. Therefore, no
compensation cost has been recognized for its stock option plans. Had
compensation cost for the stock options granted subsequent to January 1, 1995,
been based on the estimated fair value at the award dates, as prescribed by
Statement of Financial Accounting Standards No. 123, the Company's pro forma net
income and net income per share would have been as follows (in thousands, except
per share amounts):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net Income
As Reported.................................. $141,441 $131,580 $93,697
Pro forma.................................... $127,924 $124,622 $90,212
Net Income Per Share
Basic
As Reported................................ $ 1.57 $ 1.44 $ 1.03
Pro forma.................................. $ 1.42 $ 1.36 $ .99
Diluted
As Reported................................ $ 1.53 $ 1.39 $ 1.00
Pro forma.................................. $ 1.41 $ 1.33 $ .97
</TABLE>
17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE I--STOCK PLANS (CONTINUED)
The pro forma amounts do not include amounts for stock options granted
before January 1, 1995. Therefore, the pro forma amounts may not be
representative of the disclosed effects on pro forma net income and net income
per share for future years.
The fair value of each option is estimated, as of the grant date, using the
Black-Scholes option pricing model with the following assumptions used for
grants in 1999, 1998 and 1997, respectively: no dividend yield for any year;
expected volatility of 43% to 52%; risk-free interest rates of 4.6% to 6.4%,
4.6% to 5.7% and 5.7% to 6.9%, respectively, and expected lives of 1.5 to 5.5
years for 1999 and 4.5 to 7.3 years for both 1998 and 1997.
The following table reflects activity under all stock plans from
December 31, 1996 through December 31, 1999, and the weighted average exercise
prices:
<TABLE>
<CAPTION>
STOCK OPTION PLANS
----------------------------
WEIGHTED
RESTRICTED NUMBER OF AVERAGE PRICE
STOCK PLANS SHARES PER SHARE
----------- ------------ -------------
<S> <C> <C> <C>
Outstanding, December 31, 1996.......... 2,473,555 8,661,531 $ 9.53
Granted............................... 847,469 1,944,656 $29.68
Exercised............................. -- (1,446,404) $ 3.98
Restrictions lapsed................... (859,399) -- --
Forfeited............................. (45,578) (515,537) $15.29
--------- ------------ ------
Outstanding, December 31, 1997.......... 2,416,047 8,644,246 $14.52
Granted............................... 759,377 3,523,816 $40.11
Exercised............................. -- (1,400,023) $ 6.04
Restrictions lapsed................... (737,938) -- --
Forfeited............................. (25,066) (412,977) $26.05
--------- ------------ ------
Outstanding, December 31, 1998.......... 2,412,420 10,355,062 $23.93
Granted............................... 1,146,390 3,401,420 $24.77
Exercised............................. -- (360,322) $ 5.46
Restrictions lapsed................... (783,683) -- --
Forfeited............................. (47,949) (609,442) $31.76
--------- ------------ ------
Outstanding, December 31, 1999.......... 2,727,178 12,786,718 $24.25
========= ============ ======
</TABLE>
The following table summarizes information about options outstanding as of
December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------ -----------------------------------
NUMBER WEIGHTED AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING AS OF REMAINING AVERAGE EXERCISABLE AS OF AVERAGE
RANGE OF EXERCISE PRICES DECEMBER 31, 1999 CONTRACTUAL LIFE EXERCISE PRICE DECEMBER 31, 1999 EXERCISE PRICE
- ------------------------ ------------------ ---------------- -------------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
$ 1.44 to $12.13............... 2,934,188 4.53 $ 7.19 2,934,188 $ 7.19
$13.04 to $20.81............... 2,796,398 8.02 $19.18 639,306 $18.27
$21.25 to $27.63............... 2,726,785 6.61 $23.38 692,473 $22.69
$27.88 to $38.63............... 2,718,647 8.55 $37.28 869,030 $37.49
$38.69 to $59.00............... 1,610,700 8.53 $43.60 310,435 $44.64
---------- ---- ------ --------- ------
12,786,718 7.10 $24.25 5,445,432 $17.43
========== ==== ====== ========= ======
</TABLE>
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE I--STOCK PLANS (CONTINUED)
At December 31, 1999, the total number of available shares to grant under
the plans (consisting of either restricted stock or options) was 1,144,872.
NOTE J--PREFERRED SHARE PURCHASE RIGHTS
Pursuant to the Company's stockholder rights agreement, each share of common
stock carries one right to purchase .0067 shares of preferred stock. The rights
become exercisable in certain limited circumstances involving a potential
business combination transaction or an acquisition of shares of the Company and
are exercisable at a price of $66.67 per right, subject to adjustment. Following
certain other events after the rights become exercisable, each right entitles
its holder to purchase for $66.67 an amount of common stock of the Company, or,
in certain circumstances, securities of the acquiror, having a then-current
market value of twice the exercise price of the right. The rights are redeemable
and may be amended at the Company's option before they become exercisable. Until
a right is exercised, the holder of a right has no rights as a stockholder of
the Company. The rights expire on July 23, 2000.
NOTE K--NET INCOME PER SHARE
The calculation of net income per share for the three years ended
December 31, 1999 is reflected in the following table (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net Income........................................ $141,441 $131,580 $93,697
Basic:
Weighted average shares......................... 90,223 91,650 90,668
======== ======== =======
Diluted:
Weighted average shares......................... 90,223 91,650 90,668
Common stock equivalents--stock options......... 2,071 3,172 3,331
-------- -------- -------
Diluted shares.................................. 92,294 94,822 93,999
======== ======== =======
Net Income Per Share:
Basic........................................... $ 1.57 $ 1.44 $ 1.03
Diluted......................................... $ 1.53 $ 1.39 $ 1.00
</TABLE>
NOTE L--QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tabulation shows certain quarterly financial data for 1999 and
1998 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
QUARTER
------------------------------------------------- YEAR ENDED
1999 1 2 3 4 DECEMBER 31,
- ---- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Net service revenues................ $ 484,988 $ 497,060 $ 529,462 $ 569,811 $ 2,081,321
Gross margin........................ $ 197,895 $ 204,390 $ 221,404 $ 238,362 $ 862,051
Income before income taxes.......... $ 58,983 $ 55,943 $ 57,243 $ 62,528 $ 234,697
Net income.......................... $ 35,310 $ 33,939 $ 34,549 $ 37,643 $ 141,441
Basic net income per share.......... $ 0.39 $ 0.37 $ 0.38 $ 0.43 $ 1.57
Diluted net income per share........ $ 0.38 $ 0.37 $ 0.38 $ 0.41 $ 1.53
</TABLE>
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE L--QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
QUARTER
------------------------------------------------- YEAR ENDED
1998 1 2 3 4 DECEMBER 31,
- ---- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Net service revenues................ $ 401,296 $ 442,153 $ 470,650 $ 478,942 $ 1,793,041
Gross margin........................ $ 160,971 $ 177,693 $ 190,033 $ 193,510 $ 722,207
Income before income taxes.......... $ 48,942 $ 54,426 $ 58,530 $ 59,278 $ 221,176
Net income.......................... $ 29,050 $ 32,280 $ 34,974 $ 35,276 $ 131,580
Basic net income per share.......... $ .32 $ .35 $ .38 $ .39 $ 1.44
Diluted net income per share........ $ .31 $ .34 $ .37 $ .38 $ 1.39
</TABLE>
NOTE M--BUSINESS SEGMENTS
The Company has two reportable segments: temporary and consultant staffing;
and permanent placement staffing. The temporary and consultant staffing segment
provides specialized personnel in the accounting and finance, administrative and
office, information technology, legal, advertising, marketing, and Web design
fields. The permanent placement staffing segment provides full-time personnel in
the accounting, finance, and information technology fields.
The accounting policies of the segments are the same as those described in
Note A: Summary of Significant Accounting Policies. The Company evaluates
performance based on profit or loss from operations before interest expense,
intangible amortization expense, and income taxes.
The following table provides a reconciliation of revenue and operating
profit by reportable segment to consolidated results (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net service revenues
Temporary and consultant staffing...... $1,922,111 $1,657,314 $1,201,562
Permanent placement staffing........... 159,210 135,727 101,314
---------- ---------- ----------
$2,081,321 $1,793,041 $1,302,876
========== ========== ==========
Operating income
Temporary and consultant staffing...... $ 194,333 $ 186,565 $ 133,855
Permanent placement staffing........... 39,313 34,016 25,709
---------- ---------- ----------
233,646 220,581 159,564
Amortization of intangible assets........ 4,990 4,993 4,926
Interest income, net..................... (6,041) (5,588) (4,190)
---------- ---------- ----------
Income before income taxes............... $ 234,697 $ 221,176 $ 158,828
========== ========== ==========
</TABLE>
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE M--BUSINESS SEGMENTS (CONTINUED)
The Company does not report total assets by segment. The following table
represents identifiable assets by business segment (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Accounts receivable
Temporary and consultant staffing........... $294,878 $231,754 $179,656
Permanent placement staffing................ 27,824 19,112 14,407
-------- -------- --------
$322,702 $250,866 $194,063
======== ======== ========
</TABLE>
The Company operates internationally, with operations in the United States,
Canada, Europe, and Australia. The following tables represent revenues and
long-lived assets by geographic location (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues
Domestic............................... $1,829,275 $1,595,029 $1,176,888
Foreign................................ 252,046 198,012 125,988
---------- ---------- ----------
$2,081,321 $1,793,041 $1,302,876
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Assets, long-lived
Domestic............................... $ 264,048 $ 253,514 $ 209,457
Foreign................................ 22,601 19,799 17,905
---------- ---------- ----------
$ 286,649 $ 273,313 $ 227,362
========== ========== ==========
</TABLE>
21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and the Board of Directors
of Robert Half International Inc.:
We have audited the accompanying consolidated statements of financial
position of Robert Half International Inc. (a Delaware corporation) and
subsidiaries, as of December 31, 1999 and 1998, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Robert Half International
Inc. and subsidiaries, as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
San Francisco, California
January 21, 2000
22
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
The information required by Items 10 through 13 of Part III is incorporated
by reference from the registrant's Proxy Statement, under the captions
"NOMINATION AND ELECTION OF DIRECTORS," "BENEFICIAL STOCK OWNERSHIP,"
"COMPENSATION OF DIRECTORS," "COMPENSATION OF EXECUTIVE OFFICERS" AND
"COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION AND CERTAIN
TRANSACTIONS," which Proxy Statement will be mailed to stockholders in
connection with the registrant's annual meeting of stockholders which is
scheduled to be held in May 2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company and its
subsidiaries are included in Item 8 of this report:
Consolidated statements of financial position at December 31, 1999 and
1998.
Consolidated statements of income for the years ended December 31, 1999,
1998 and 1997.
Consolidated statements of stockholders' equity for the years ended
December 31, 1999, 1998 and 1997.
Consolidated statements of cash flows for the years ended December 31,
1999, 1998 and 1997.
Notes to consolidated financial statements.
Report of independent public accountants.
Selected quarterly financial data for the years ended December 31, 1999 and
1998 are set forth in Note L--Quarterly Financial Data (Unaudited) included
in Item 8 of this report.
2. FINANCIAL STATEMENT SCHEDULES
Schedules I through V have been omitted as they are not applicable.
3. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- ------------------------------------------------------------
<C> <S>
3.1 Restated Certificate of Incorporation, incorporated by
reference to Exhibit 3.1 to Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1998.
3.2 By-Laws, incorporated by reference to Exhibit 3.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1999.
4.1 Indenture dated as of October 1, 1972, as amended, between
IDS Realty Trust and First National Bank of Minneapolis,
incorporated by reference to Exhibits 6(t) and 6(v) to the
Form S-14 Registration Statement of the Registrant (formerly
known as Boothe Interim Corporation) filed with the
Securities and Exchange Commission on December 31, 1979.
4.2 Restated Certificate of Incorporation of Registrant (filed
as Exhibit 3.1).
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- ------------------------------------------------------------
<C> <S>
4.3 Rights Agreement, dated as of July 23, 1990, between the
Registrant and The Chase Manhattan Bank (formerly
Manufacturers Hanover Trust Company of California), as
amended and restated effective May 17, 1999, incorporated by
reference to Exhibit 1 to Registrant's Form 8-A/A Amendment
No. 5 filed on May 21, 1999.
10.1 Credit Agreement dated as of November 1, 1993, among the
Registrant, NationsBank of North Carolina, N.A. and Bank of
America National Trust and Savings Association, as amended,
incorporated by reference to (i) Exhibit 10 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1993, (ii) Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1995, (iii) Exhibit 10.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, and (iv) Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1997.
*10.2 Employment Agreement dated as of October 2, 1985, between
the Registrant and Harold M. Messmer, Jr. The Fourteenth
Amendment to the Employment Agreement is filed with this
Annual Report on Form 10-K for the fiscal year ended
December 31, 1999. The original Employment Agreement and the
first thirteen amendments thereto are incorporated by
reference to (i) Exhibit 10.(c) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1985, (ii) Exhibit 10.2(b) to Registrant's Registration
Statement on Form S-1 (No. 33-15171),
(iii) Exhibit 10.2(c) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1987,
(iv) Exhibit 10.2(d) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1988,
(v) Exhibit 28.1 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1990,
(vi) Exhibit 10.8 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991,
(vii) Exhibit 10.1 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1993,
(viii) Exhibit 10.7 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993, (ix)
Exhibit 10.1 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1995,
(x) Exhibit 10.7 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1995,
(xi) Exhibit 10.2 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996,
(xii) Exhibit 10.2 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 and (xiii)
Exhibit 10.2 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998.
*10.3 Key Executive Retirement Plan--Level II, as amended,
incorporated by reference to Exhibit 10.3 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
*10.4 Restated Retirement Agreement between the Registrant and
Harold M. Messmer, Jr., incorporated by reference to
Exhibit 10.4 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.
*10.5 1985 Stock Option Plan, as amended, incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended
September 30, 1997.
*10.6 Excise Tax Restoration Agreement dated November 5, 1996,
incorporated by reference to Exhibit 10.6 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
*10.7 Outside Directors' Option Plan, as amended, incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30,
1999.
*10.8 1989 Restricted Stock Plan, as amended, incorporated by
reference to Exhibit 10.4 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended
September 30, 1997.
*10.9 StockPlus Plan, as amended, incorporated by reference to
Exhibit 10.2 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1999.
*10.10 1993 Incentive Plan, as amended, incorporated by reference
to Exhibit 10.10 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- ------------------------------------------------------------
<C> <S>
*10.11 Deferred Compensation Plan, incorporated by reference to
Exhibit 10.24 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1989.
*10.12 Annual Performance Bonus Plan, incorporated by reference to
Exhibit 10.5 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1996.
*10.13 Form of Amended and Restated Severance Agreement.
*10.14 Form of Change in Control Severance Agreement.
*10.15 Form of Indemnification Agreement for Directors of the
Registrant, incorporated by reference to (i) Exhibit 10.27
to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 and (ii) Exhibit 10.19
to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.
*10.16 Form of Indemnification Agreement for Executive Officers of
Registrant, incorporated by reference to Exhibit 10.28 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989.
*10.17 Senior Executive Retirement Plan, as amended, incorporated
by reference to Exhibit 10.16 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1996.
*10.18 Collateral Assignment of Split Dollar Insurance Agreement,
incorporated by reference to Exhibit 10.17 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
*10.19 Form of Consulting Agreement, incorporated by reference to
Exhibit 10.18 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998.
21 Subsidiaries of the Registrant.
23 Accountants' Consent
27 Financial Data Schedule.
</TABLE>
- ------------------------
* Management contract or compensatory plan required to be filed as an exhibit
pursuant to Item 14(c) of Form 10-K.
(b) Reports on Form 8-K
The Registrant filed no reports on Form 8-K during the fiscal quarter
ending December 31, 1999.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ROBERT HALF INTERNATIONAL INC.
(Registrant)
Date: March 8, 2000 By: /S/ M. KEITH WADDELL
------------------------------------
M. Keith Waddell
Vice Chairman, Chief Financial
Officer and Treasurer
(Principal Financial Officer)
26
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
Date: March 8, 2000 By: /S/ HAROLD M. MESSMER, JR.
------------------------------------------
Harold M. Messmer, Jr.
Chairman of the Board, President,
Chief Executive Officer,
and a Director
(Principal Executive Officer)
Date: March 8, 2000 By: /S/ ANDREW S. BERWICK, JR.
------------------------------------------
Andrew S. Berwick, Jr., Director
Date: March 8, 2000 By: /S/ FREDERICK P. FURTH
------------------------------------------
Frederick P. Furth, Director
Date: March 8, 2000 By: /S/ EDWARD W. GIBBONS
------------------------------------------
Edward W. Gibbons, Director
Date: March 8, 2000 By: /S/ FREDERICK A. RICHMAN
------------------------------------------
Frederick A. Richman, Director
Date: March 8, 2000 By: /S/ THOMAS J. RYAN
------------------------------------------
Thomas J. Ryan, Director
Date: March 8, 2000 By: /S/ J. STEPHEN SCHAUB
------------------------------------------
J. Stephen Schaub, Director
Date: March 8, 2000 By: /S/ M. KEITH WADDELL
------------------------------------------
M. Keith Waddell
Vice Chairman, Chief Financial
Officer, Treasurer and a Director
(Principal Financial Officer)
Date: March 8, 2000 By: /S/ BARBARA J. FORSBERG
------------------------------------------
Barbara J. Forsberg
Senior Vice President, Corporate Services
(Principal Accounting Officer)
</TABLE>
27
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- ------------------------------------------------------------
<C> <S>
3.1 Restated Certificate of Incorporation, incorporated by
reference to Exhibit 3.1 to Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1998.
3.2 By-Laws, incorporated by reference to Exhibit 3.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1999.
4.1 Indenture dated as of October 1, 1972, as amended, between
IDS Realty Trust and First National Bank of Minneapolis,
incorporated by reference to Exhibits 6(t) and 6(v) to the
Form S-14 Registration Statement of the Registrant (formerly
known as Boothe Interim Corporation) filed with the
Securities and Exchange Commission on December 31, 1979.
4.2 Restated Certificate of Incorporation of Registrant (filed
as Exhibit 3.1).
4.3 Rights Agreement, dated as of July 23, 1990, between the
Registrant and The Chase Manhattan Bank (formerly
Manufacturers Hanover Trust Company of California), as
amended and restated effective May 17, 1999, incorporated by
reference to Exhibit 1 to Registrant's Form 8-A/A Amendment
No. 5 filed on May 21, 1999.
10.1 Credit Agreement dated as of November 1, 1993, among the
Registrant, NationsBank of North Carolina, N.A. and Bank of
America National Trust and Savings Association, as amended,
incorporated by reference to (i) Exhibit 10 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1993, (ii) Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1995, (iii) Exhibit 10.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, and (iv) Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1997.
*10.2 Employment Agreement dated as of October 2, 1985, between
the Registrant and Harold M. Messmer, Jr. The Fourteenth
Amendment to the Employment Agreement is filed with this
Annual Report on Form 10-K for the fiscal year ended
December 31, 1999. The original Employment Agreement and the
first thirteen amendments thereto are incorporated by
reference to (i) Exhibit 10.(c) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1985, (ii) Exhibit 10.2(b) to Registrant's Registration
Statement on Form S-1 (No. 33-15171),
(iii) Exhibit 10.2(c) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1987,
(iv) Exhibit 10.2(d) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1988,
(v) Exhibit 28.1 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1990,
(vi) Exhibit 10.8 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991,
(vii) Exhibit 10.1 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1993,
(viii) Exhibit 10.7 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993, (ix)
Exhibit 10.1 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1995,
(x) Exhibit 10.7 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1995,
(xi) Exhibit 10.2 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996,
(xii) Exhibit 10.2 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997 and
(xiii) Exhibit 10.2 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998.
*10.3 Key Executive Retirement Plan--Level II, as amended,
incorporated by reference to Exhibit 10.3 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
*10.4 Restated Retirement Agreement between the Registrant and
Harold M. Messmer, Jr., incorporated by reference to
Exhibit 10.4 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.
*10.5 1985 Stock Option Plan, as amended, incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended
September 30, 1997.
*10.6 Excise Tax Restoration Agreement dated November 5, 1996,
incorporated by reference to Exhibit 10.6 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- ------------------------------------------------------------
<C> <S>
*10.7 Outside Directors' Option Plan, as amended, incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30,
1999.
*10.8 1989 Restricted Stock Plan, as amended, incorporated by
reference to Exhibit 10.4 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended
September 30, 1997.
*10.9 StockPlus Plan, as amended, incorporated by reference to
Exhibit 10.2 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1999.
*10.10 1993 Incentive Plan, as amended, incorporated by reference
to Exhibit 10.10 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.
*10.11 Deferred Compensation Plan, incorporated by reference to
Exhibit 10.24 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989.
*10.12 Annual Performance Bonus Plan, incorporated by reference to
Exhibit 10.5 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1996.
*10.13 Form of Amended and Restated Severance Agreement.
*10.14 Form of Change in Control Severance Agreement.
*10.15 Form of Indemnification Agreement for Directors of the
Registrant, incorporated by reference to (i) Exhibit 10.27
to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 and (ii) Exhibit 10.19
to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.
*10.16 Form of Indemnification Agreement for Executive Officers of
Registrant, incorporated by reference to Exhibit 10.28 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989.
*10.17 Senior Executive Retirement Plan, as amended, incorporated
by reference to Exhibit 10.16 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1996.
*10.18 Collateral Assignment of Split Dollar Insurance Agreement,
incorporated by reference to Exhibit 10.17 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
*10.19 Form of Consulting Agreement, incorporated by reference to
Exhibit 10.18 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998.
21 Subsidiaries of the Registrant.
23 Accountants' Consent
27 Financial Data Schedule.
</TABLE>
- ------------------------
* Management contract or compensatory plan required to be filed as an exhibit
pursuant to Item 14(c) of Form 10-K.
<PAGE>
EXHIBIT 10.2
FOURTEENTH AMENDMENT TO EMPLOYMENT AGREEMENT
This Fourteenth Amendment to Employment Agreement is made and entered
into as of January 1, 2000, by and between Robert Half International Inc.
(formerly Boothe Financial Corporation), a Delaware corporation,
("Corporation") and Harold M. Messmer, Jr. ("Officer").
1. The Employment Agreement dated as of October 2, 1985, as amended,
between Corporation and Officer (the "Employment Agreement") is hereby
amended as follows:
a. Section 2.1(d) is amended to delete "30 days following a Change in
Control" and insert, in lieu thereof, "one year following a Change in
Control".
b. Section 4.1 is amended to delete "plus an equal amount in lieu of
bonus" and insert, in lieu thereof, "plus an amount equal to the annual cash
bonus paid (or to be paid) to Officer with respect to the last full calendar
year completed prior to the Termination".
c. Section 4.6 is amended to delete "the later to occur of (a)
Officer's 55th birthday or (b) the 20th anniversary of Officer's first day of
service with the Corporation as a director or full-time employee" and insert,
in lieu thereof, "January 1, 2000".
2. In all other respects, the Employment Agreement is hereby ratified
and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed this agreement
effective as of the day and year first written above.
ROBERT HALF INTERNATIONAL INC.
By /s/ M. Keith Waddell
----------------------------
M. Keith Waddell
Vice Chairman
/s/ Harold M. Messmer, Jr.
------------------------------
Harold M. Messmer, Jr.
<PAGE>
EXHIBIT 10.13
FORM OF AMENDED AND RESTATED SEVERANCE AGREEMENT
Effective January 1, 2000, the Registrant entered into an Amended and
Restated Severance Agreement in the form attached hereto with Harold M.
Messmer, Jr., M. Keith Waddell, Robert W. Glass and Steven Karel. Pursuant
to Instruction 2 to Item 601 of Regulation S-K, the individual agreements are
not being filed.
<PAGE>
AMENDED AND RESTATED SEVERANCE AGREEMENT
This Agreement is entered as of January 1, 2000, by and between Robert
Half International Inc., a Delaware corporation (the "Company") and Harold M.
Messmer, Jr. (the "Employee").
WHEREAS, the Company and Employee have previously entered into a
Severance Agreement dated as of January 8, 1990, amended effective as of May
15, 1990.
WHEREAS, the Severance Agreement was entered into because the Company
believed it to be in the best interest of the Company and its shareholders to
provide for stability in the management of the Company.
WHEREAS, the Compensation Committee of the Board of Directors of the
Company has approved certain amendments to the Severance Agreement.
WHEREAS, certain modifications to the wording of certain sections of the
Severance Agreement, as amended, are deemed advisable in order to clarify the
intent of the parties.
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions set forth herein, the Company and the Employee hereby agree that
the Severance Agreement be amended and restated as follows:
1. DEFINITIONS
"Change in Control" shall have the meaning specified in the Company's
1993 Incentive Plan.
"Continuation Period" means (a) 36 months following the Termination
Date, if Employee has served as a Director of the Company at any time prior
to the Termination Date, and (b) 24 months following the Termination Date in
all other cases.
"Stock" means the Common Stock, $.001 par value, of the Company.
"Termination Date" means the date on which Employee's employment with
the Company is terminated.
"Termination For Cause" means termination by the Company of Employee's
employment by the Company by reason of Employee's willful dishonesty towards,
fraud upon, or deliberate injury or attempted injury to the Company, or by
reason of Employee's willful material breach of any employment agreement with
the Company, which has resulted in material injury to the Company; provided,
however, that
<PAGE>
Employee's employment shall not be deemed to have terminated in a Termination
For Cause if such termination took place as a result of any act or omission
believed by Employee in good faith to have been in the interest of the
Company.
"Termination Without Cause" means termination of Employee's employment
other than pursuant to a Termination For Cause. Termination Without Cause
includes a termination by Employee following (a) a reduction by more than 5%
of Employee's base salary per month, exclusive of bonus, fringe benefits and
other non-salary compensation, (the "Monthly Base Salary") or (b) a request
by the Company that Employee relocate more than 50 miles away from the
current location of the principal executive offices of the Company.
"Termination Following a Change in Control" means a voluntary
termination by Employee within one year following Change in Control.
2. PAYMENTS AND BENEFITS UPON TERMINATION WITHOUT CAUSE. In the
event of a Termination Without Cause, the Employee shall be entitled to
receive the following:
2.1. MONTHLY BASE SALARY. Commencing on the Termination Date,
Employee shall receive Monthly Base Salary, at a rate equal to the highest
Monthly Base Salary paid to Employee within the six (6) months preceding the
Termination Date, each month during the Continuation Period. At the option
of the Company, all or part of such Monthly Base Salary may be paid in a lump
sum.
2.2. BONUS.
(a) If the Termination Date occurs within 12 months after a Change in
Control, then, commencing on the Termination Date, Employee shall receive,
each month during the Continuation Period, an amount equal to 1/12 of the
annual cash bonus paid (or to be paid) to Employee with respect to the last
full calendar year completed prior to the Change in Control. At the option
of the Company, all or part of such payments may be paid in a lump sum.
(b) If the Termination Date does not occur within 12 months after a Change
in Control, Employee shall be paid, when such bonus payments would otherwise
typically be made to Employee, the amount determined by multiplying (i) a
fraction, the numerator of which shall be the number of months that, as of
the last day of the month in which the Termination Date occurs, shall have
passed since the beginning of that calendar year, and the denominator of
which shall be twelve and (ii) the bonus to which Employee would have been
entitled had such termination not occurred. For purposes of the foregoing
clause (ii), Employee shall be not be entitled to a pro rata amount of bonus
that is discretionary unless such Employee is specifically awarded such
discretionary amount in accordance with the terms and conditions of the
applicable bonus plan or program.
2.3. BENEFITS. During the Continuation Period or until Employee is
reemployed, whichever first occurs, Employee also shall be entitled to all
employee
<PAGE>
benefits, including medical and life insurance, pension, retirement and other
benefits to which Employee was entitled on the Termination Date.
2.4. VESTING. If, on the Termination Date, Employee holds any
Stock or options or other rights to acquire Stock which are subject to
restrictions or vesting based on continued employment with the Company, such
restrictions shall lapse and such vesting shall occur effective as of the
Termination Date. Each option held by Employee shall remain outstanding and
exercisable until the earlier of its exercise or its original expiration
date. In addition, if Employee is a participant in the Company's Deferred
Compensation Plan or any successor plan, all amounts credited under such plan
to Employee shall become fully vested and nonforfeitable.
2.5. OUTPLACEMENT SERVICES. The Company shall pay, on behalf of
Employee, expenses and fees relating to outplacement services utilized by
Employee, in an amount that is the usual and customary rate for such services
for an individual at Employee's level.
2.6. MULTIPLE BENEFITS. To the extent that any other agreement
("Other Agreement") between the Employee and the Company would provide for
salary continuation (or a lump sum payment in lieu of salary continuation)
and bonus payments under the same circumstances as such benefits would be
provided pursuant to Sections 2.1 and 2.2 hereof, then Employee shall not
receive such benefits under both the Other Agreement and Sections 2.1 and
2.2, but shall instead receive the greater of the salary continuation benefit
payable under either Section 2.1 or the Other Agreement and the greater of
the bonus benefit payable under either Section 2.2 and the Other Agreement.
Except as provided by the foregoing sentence, the benefits payable under this
Agreement shall be in addition to, and not in lieu of, any other benefits
that may be provided under any plan, program or agreement.
3. TERMINATION FOLLOWING A CHANGE IN CONTROL. If Employee has served
as a Director of the Company at any time prior to the Termination Date,
Employee shall be entitled to the benefits described in Section 2 hereof in
the event of a Termination Following a Change in Control.
4. ADDITIONAL MEDICAL BENEFITS. If Employee has served as a Director
of the Company at any time prior to the Termination Date, then, in the event
of any termination of Employee's employment on or after the first January 1
occurring after the Employee's 53rd birthday, other than a Termination For
Cause, Employee and his then current wife shall each continue to participate
until his or her death, at the Company's expense, in whatever healthcare plan
may be maintained by the Company from time to time for its then current
employees as if Employee were still a full time employee of the Company.
5. EMPLOYMENT. The sole purpose of this Agreement is to provide
Employee with severance benefits in the event Employee is Terminated Without
Cause. This Agreement is not an employment agreement. This Agreement shall
not affect any right of the Company to terminate Employee's employment at any
time.
<PAGE>
6. HEADINGS. The headings used in this Agreement are for convenience
only, and shall not be used to construe the terms and conditions of the
Agreement.
7. GOVERNING LAW. This Agreement shall be governed by and construed
according to the laws of the State of California. The terms of this
Agreement shall bind and shall inure to the benefit of the successors and
assigns of the parties hereto.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the date first set forth above.
ROBERT HALF INTERNATIONAL INC.
-------------------------
-------------------------
Employee
<PAGE>
EXHIBIT 10.14
FORM OF CHANGE IN CONTROL SEVERANCE AGREEMENT
Effective January 1, 2000, the Registrant entered into a Change in
Control Severance Agreement in the form attached hereto with Barbara J.
Forsberg, Lynn Taylor, Paul F. Gentzkow and James M. Taylor. Pursuant to
Instruction 2 to Item 601 of Regulation S-K, the individual agreements are
not being filed.
<PAGE>
CHANGE IN CONTROL SEVERANCE AGREEMENT
This Agreement is entered as of January 1, 2000, by and between Robert
Half International Inc., a Delaware corporation (the "Company") and
______________ (the "Employee").
WHEREAS, the Employee currently is employed by the Company.
WHEREAS, the Company believes that it is in the best interest of the
Company and its shareholders to enter into this Agreement in order to provide
for stability in the management of the Company.
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions set forth herein, the Company and the Employee hereby agree as
follows:
1. DEFINITIONS
"Board" means the Board of Directors of the Company.
"Change in Control" shall have the meaning specified in the Company's
1993 Incentive Plan
"Continuation Period" means (a) 36 months following the Termination
Date, if Employee has served as a Director of the Company at any time prior
to the Termination Date, and (b) 24 months following the Termination Date in
all other cases.
"Termination Date" means the date on which Employee's employment with
the Company is terminated.
"Termination For Cause" means termination by the Company of Employee's
employment by the Company by reason of Employee's willful dishonesty towards,
fraud upon, or deliberate injury or attempted injury to the Company, or by
reason of Employee's willful material breach of any employment agreement with
the Company, which has resulted in material injury to the Company; provided,
however, that Employee's employment shall not be deemed to have terminated in
a Termination For Cause if such termination took place as a result of any act
or omission believed by Employee in good faith to have been in the interest
of the Company.
"Termination Following a Change in Control" means termination of
Employee's employment, within twelve months following a Change in Control,
other than pursuant to a Termination For Cause. Termination Following a
Change in Control includes a termination by Employee during such twelve month
period following (a) a reduction by more than 5% of Employee's base salary
per month, exclusive of bonus, fringe benefits
<PAGE>
and other non-salary compensation, (the "Monthly Base Salary") or (b) a
request by the Company that Employee relocate more than 50 miles away from
the current location of the principal executive offices of the Company.
2. BENEFITS IN THE EVENT OF A TERMINATION FOLLOWING A CHANGE IN
CONTROL. In the event of a Termination Following a Change in Control, the
Employee shall be entitled to receive the following:
2.1. MONTHLY BASE SALARY. Commencing on the Termination Date,
Employee shall receive Monthly Base Salary, at a rate equal to the highest
Monthly Base Salary paid to Employee within the six (6) months preceding the
Termination Date, each month during the Continuation Period. At the option
of the Company, all or part of such Monthly Base Salary may be paid in a lump
sum.
2.2. BONUS. Commencing on the Termination Date, Employee shall
receive, each month during the Continuation Period, an amount equal to 1/12
of the annual cash bonus paid (or to be paid) to Employee with respect to the
last full calendar year completed prior to the Change in Control. At the
option of the Company, all or part of such payments may be made in a lump sum.
3. MULTIPLE BENEFITS. To the extent that any other agreement ("Other
Agreement") between the Employee and the Company would provide for salary
continuation (or a lump sum payment in lieu of salary continuation) and bonus
payments under the same circumstances as such benefits would be provided
pursuant to Sections 2.1 and 2.2 hereof, then Employee shall not receive such
benefits under both the Other Agreement and Sections 2.1 and 2.2, but shall
instead receive the greater of the salary continuation benefit payable under
either Section 2.1 or the Other Agreement and the greater of the bonus
benefit payable under either Section 2.2 and the Other Agreement. Except as
provided by the foregoing sentence, the benefits payable under this Agreement
shall be in addition to, and not in lieu of, any other benefits that may be
provided under any plan, program or agreement.
4. EMPLOYMENT. The sole purpose of this Agreement is to provide
Employee with severance benefits in the event of a Termination Following a
Change in Control. This Agreement is not an employment agreement. This
Agreement shall not affect any right of the Company to terminate Employee's
employment at any time.
5. HEADINGS. The headings used in this Agreement are for convenience
only, and shall not be used to construe the terms and conditions of the
Agreement.
6. GOVERNING LAW. This Agreement shall be governed by and construed
according to the laws of the State of California. The terms of this
Agreement shall bind and shall inure to the benefit of the successors and
assigns of the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the date first set forth above.
ROBERT HALF INTERNATIONAL INC.
-------------------------
-------------------------
Employee
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF SUBSIDIARY INCORPORATION
- ------------------------------------------------------------------------ --------------------
<S> <C>
RH Holding Company, Inc. California
LegalTeam, Inc. California
Benchmark Staffing, Inc. California
Benchmark Resources, Inc. California
Robert Half Licensing, Inc. California
Robert Half of California, Inc. California
Cooperative Resources, Inc. California
Golden State Temporaries, Inc. California
Merlin Freelancers, Inc. California
TM Holdings, Inc. California
Robert Half of Texas G.P. Ltd. Delaware
XYZ-II, Inc. Delaware
Atlantic Temporaries, Inc. Delaware
Texas Temp Gen, Inc. Delaware
Texas Temp Lim, Inc. Delaware
Jersey Temporaries, Inc. Delaware
TM Digital, Inc. Delaware
Robert Half Incorporated Florida
R-H International Advertising Fund, Inc. Florida
OfficeTeam Inc. Louisiana
Robert Half Corporation Nevada
Robert Half Nevada Staff, Inc. Nevada
Tripoli Associates Corporation New York
Robert Half of Pennsylvania, Inc. Pennsylvania
Texas Temp Limited Partnership Texas
RHT, L.P. (a limited partnership) Texas
Robert Half Australia Pty. Ltd. Australia
RHI Belgium S.A./N.V. Belgium
Robert Half Belgium S.A./N.V. Belgium
Robert Half Canada Inc. Canada
Robert Half France S.A. France
Accountemps S.A.R.L. France
Robert Half S.A. France
Robert Half Limited United Kingdom
Robert Half Personnel (Midlands) Limited United Kingdom
Envaward Limited United Kingdom
Hatlon Limited United Kingdom
Smiths Recruitment Limited United Kingdom
Robert Half Deutschland Germany
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants we hereby consent to the incorporation by
reference of our report dated January 21, 2000 into the Company's Registration
Statements on Form S-8 (nos. 33-14706, 33-32622, 33-32623, 33-39187, 33-39204,
33-40795, 33-52617, 33-56639, 33-56641, 33-57763, 33-62138, 33-62140, 33-65401,
33-65403, 333-05743, 333-05745, 333-18283, 333-18339, 333-42471, 333-42573,
333-42343, 333-42269, 333-68193, 333-68135, 333-68273, 333-79793, 333-79829,
333-88001, 333-91173, 333-91151 and 333-91167).
/s/ ARTHUR ANDERSEN LLP
San Francisco, California
January 21, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 151,074
<SECURITIES> 0
<RECEIVABLES> 322,702
<ALLOWANCES> 13,424
<INVENTORY> 0
<CURRENT-ASSETS> 490,539
<PP&E> 193,315
<DEPRECIATION> 82,413
<TOTAL-ASSETS> 777,188
<CURRENT-LIABILITIES> 176,207
<BONDS> 3,495
0
0
<COMMON> 88
<OTHER-SE> 576,015
<TOTAL-LIABILITY-AND-EQUITY> 777,188
<SALES> 0
<TOTAL-REVENUES> 2,081,321
<CGS> 0
<TOTAL-COSTS> 1,219,270
<OTHER-EXPENSES> 4,990
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6,041)
<INCOME-PRETAX> 234,697
<INCOME-TAX> 93,256
<INCOME-CONTINUING> 141,441
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 141,441
<EPS-BASIC> 1.57
<EPS-DILUTED> 1.53
</TABLE>
