- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q (MARK ONE) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . ------------------------ COMMISSION FILE NUMBER 1-10427 ROBERT HALF INTERNATIONAL INC. (Exact name of registrant as specified in its charter) DELAWARE 94-1648752 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 2884 SAND HILL ROAD SUITE 200 MENLO PARK, CALIFORNIA (Address of principal executive 94025 offices) (zip-code) Registrant's telephone number, including area code: (415) 854-9700 ------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) had been subject to such filing requirements for the past 90 days. Yes _X_ No ____ Indicate the number of shares outstanding of each of the issuer's classes of common stock as of June 30, 1996: 58,634,556 shares of $.001 par value Common Stock - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (IN THOUSANDS, EXCEPT SHARE AMOUNTS) ASSETS: <TABLE> <CAPTION> JUNE 30, DECEMBER 31, 1996 1995 ------------- ----------------- (UNAUDITED) <S> <C> <C> Cash and cash equivalents....................................................................... $ 56,527 $ 41,346 Accounts receivable, less allowances of $3,599 and $3,067....................................... 102,337 84,955 Other current assets............................................................................ 12,103 7,349 ------------- ----------------- Total current assets........................................................................ 170,967 133,650 Intangible assets, less accumulated amortization of $35,717 and $33,071......................... 160,919 155,441 Other assets.................................................................................... 16,292 12,049 ------------- ----------------- Total assets................................................................................ $348,178 $301,140 ------------- ----------------- ------------- ----------------- LIABILITIES AND STOCKHOLDERS' EQUITY: Accounts payable and accrued expenses........................................................... $ 15,127 $ 12,631 Accrued payroll costs........................................................................... 47,476 33,853 Income taxes payable............................................................................ 3,067 5,157 Current portion of notes payable and other indebtedness......................................... 2,114 4,239 ------------- ----------------- Total current liabilities................................................................... 67,784 55,880 Notes payable and other indebtedness, less current portion...................................... 2,604 1,486 Deferred income taxes........................................................................... 15,746 15,844 ------------- ----------------- Total liabilities........................................................................... 86,134 73,210 STOCKHOLDERS' EQUITY: Common stock, $.001 par value authorized 100,000,000 shares; issued and outstanding 58,741,516 and 57,784,622 shares.......................................................................... 59 58 Capital surplus................................................................................. 125,357 99,768 Deferred compensation........................................................................... (25,820) (9,642) Accumulated translation adjustments............................................................. (225) 51 Retained earnings............................................................................... 162,673 137,695 ------------- ----------------- Total stockholders' equity.................................................................. 262,044 227,930 ------------- ----------------- Total liabilities and stockholders' equity.................................................. $348,178 $301,140 ------------- ----------------- ------------- ----------------- </TABLE> All share amounts have been restated to retroactively reflect the two-for-one stock split effected in the form of a stock dividend in June 1996. The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 1
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) <TABLE> <CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------ ------------------ 1996 1995 1996 1995 -------- -------- -------- -------- (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> Net service revenues...................................................................... $210,649 $148,570 $406,888 $293,309 Direct costs of services, consisting of payroll, payroll taxes and insurance costs for temporary employees . 126,728 90,838 246,325 179,538 -------- -------- -------- -------- Gross margin.............................................................................. 83,921 57,732 160,563 113,771 Selling, general and administrative expenses.............................................. 58,906 40,608 112,150 79,893 Amortization of intangible assets......................................................... 1,361 1,154 2,669 2,306 Net interest (income)/expense............................................................. (580) (83) (968) 17 -------- -------- -------- -------- Income before income taxes................................................................ 24,234 16,053 46,712 31,555 Provision for income taxes................................................................ 10,010 6,703 19,249 13,200 -------- -------- -------- -------- Net income................................................................................ $ 14,224 $ 9,350 $ 27,463 $ 18,355 -------- -------- -------- -------- -------- -------- -------- -------- Net income per share...................................................................... $ .23 $ .16 $ .45 $ .31 -------- -------- -------- -------- -------- -------- -------- -------- </TABLE> All per share amounts have been restated to retroactively reflect the two-for-one stock split effected in the form of a stock dividend in June 1996. The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 2
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS) <TABLE> <CAPTION> SIX MONTHS ENDED JUNE 30, -------------------- 1996 1995 --------- --------- (UNAUDITED) <S> <C> <C> COMMON STOCK: Balance at beginning of period...................................................................... $ 58 $ 56 Exercises of stock options -- par value............................................................. 1 -- --------- --------- Balance at end of period.......................................................................... $ 59 $ 56 --------- --------- --------- --------- CAPITAL SURPLUS: Balance at beginning of period...................................................................... $ 99,768 $ 82,627 Issuance of restricted stock, net -- excess over par value.......................................... 18,899 3,268 Exercises of stock options -- excess over par value................................................. 1,805 1,185 Tax benefits from exercises of stock options........................................................ 4,885 1,158 --------- --------- Balance at end of period.......................................................................... $ 125,357 $ 88,238 --------- --------- --------- --------- DEFERRED COMPENSATION: Balance at beginning of period...................................................................... $ (9,642) $ (5,533) Issuance of restricted stock, net................................................................... (18,899) (3,268) Amortization of deferred compensation............................................................... 2,721 1,323 --------- --------- Balance at end of period.......................................................................... $ (25,820) $ (7,478) --------- --------- --------- --------- ACCUMULATED TRANSLATION ADJUSTMENTS: Balance at beginning of period...................................................................... $ 51 $ (541) Translation adjustments............................................................................. (276) 388 --------- --------- Balance at end of period.......................................................................... $ (225) $ (153) --------- --------- --------- --------- RETAINED EARNINGS: Balance at beginning of period...................................................................... $ 137,695 $ 100,386 Repurchases of common stock -- excess over par value................................................ (2,485) (1,807) Net income.......................................................................................... 27,463 18,355 --------- --------- Balance at end of period.......................................................................... $ 162,673 $ 116,934 --------- --------- --------- --------- </TABLE> All amounts have been restated to retroactively reflect the two-for-one stock split effected in the form of a stock dividend in June 1996. The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 3
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) <TABLE> <CAPTION> SIX MONTHS ENDED JUNE 30, ---------------- 1996 1995 ------- ------- (UNAUDITED) <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income.................................................................................................... $27,463 $18,355 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of intangible assets........................................................................... 2,669 2,306 Depreciation expense........................................................................................ 2,540 1,531 Deferred income taxes....................................................................................... (1,513) 1,325 Changes in assets and liabilities, net of effects of acquisitions: Increase in accounts receivable........................................................................... (17,033) (10,838) Increase in accounts payable, accrued expenses and accrued payroll costs.................................. 11,821 9,331 Increase (decrease) in income taxes payable............................................................... (2,090) 2,181 Change in other assets, net of change in other liabilities................................................ (734) 1,305 ------- ------- Total adjustments......................................................................................... (4,340) 7,141 ------- ------- Net cash and cash equivalents provided by operating activities................................................ 23,123 25,496 CASH FLOWS USED IN INVESTING ACTIVITIES: Acquisitions, net of cash acquired.......................................................................... (1,725) (226) Capital expenditures........................................................................................ (6,791) (3,464) ------- ------- Cash and cash equivalents used in investing activities........................................................ (8,516) (3,690) CASH FLOWS USED IN FINANCING ACTIVITIES: Repurchases of common stock or common stock equivalents..................................................... (2,485) (1,807) Principal payments on notes payable and other indebtedness.................................................. (3,632) (1,057) Proceeds and tax benefits from exercise of stock options.................................................... 6,691 2,343 ------- ------- Net cash and cash equivalents provided by (used in) financing activities...................................... 574 (521) ------- ------- Net decrease in cash and cash equivalents..................................................................... 15,181 21,285 Cash and cash equivalents at beginning of period.............................................................. 41,346 2,638 ------- ------- Cash and cash equivalents at end of period.................................................................... $56,527 $23,923 ------- ------- ------- ------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest.................................................................................................... $ 332 $ 311 Income taxes................................................................................................ 17,055 6,072 Acquisitions: Fair value of assets acquired -- Intangible assets......................................................................................... $ 4,155 $ 207 Other..................................................................................................... 445 28 Liabilities incurred -- Notes payable and contracts............................................................................... (2,625) (9) Other..................................................................................................... (250) -- ------- ------- Cash paid, net of cash acquired............................................................................. $ 1,725 $ 226 ------- ------- ------- ------- </TABLE> The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 4
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1995 (UNAUDITED) NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION. The Consolidated Financial Statements include the accounts of Robert Half International Inc. (the "Company") and its subsidiaries, all of which are wholly-owned. The company is a Delaware corporation. All significant intercompany balances have been eliminated. Certain reclassifications have been made to the 1995 financial statements to conform to the 1996 presentation. INTERIM FINANCIAL INFORMATION. The Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and, in management's opinion, include all adjustments necessary for a fair statement of results for such interim periods. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules or regulations; however, the Company believes that the disclosures made are adequate to make the information presented not misleading. The interim results for the three and six months ended June 30, 1996, and 1995 are not necessarily indicative of results for the full year. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. REVENUE RECOGNITION. Temporary service revenues are recognized when the services are rendered by the Company's temporary employees. Permanent placement revenues are recognized when employment candidates accept offers of permanent employment. Reserves are established to estimate losses due to placed candidates not remaining in employment for the Company's guarantee period, typically 90 days. FOREIGN CURRENCY TRANSLATION. Foreign income statement items are translated at the monthly average exchange rates prevailing during the period. Foreign balance sheets are translated at the current exchange rates at the end of the period, and the related translation adjustments are recorded as part of Stockholders' Equity. Gains and losses resulting from foreign currency transactions are included in the consolidated statements of income. CASH AND CASH EQUIVALENTS. For purposes of the Consolidated Statements of Cash Flows, the Company classifies all highly-liquid investments with a maturity of three months or less as cash equivalents. INTANGIBLE ASSETS. Intangible assets represent the cost of acquired companies in excess of the fair market value of their net tangible assets at the acquisition date, and are being amortized on a straight-line basis over a period of 40 years. The carrying value of intangible assets is periodically reviewed by the Company and impairments are recognized when the expected future operating cash flows derived from such intangible assets are less than their carrying value. Based upon its most recent analysis, the Company believes that no material impairment of intangible assets exist at June 30, 1996. INCOME TAXES. Deferred taxes are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. NOTE B -- STOCK SPLIT In June 1996, the Company effected a two-for-one stock split in the form of a stock dividend. All share and per share amounts in the financial statements have been restated to retroactively reflect the two-for-one stock split. 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FOR EACH OF THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995. Net service revenues increased 41.8% during the second quarter of 1996 compared to the same period in 1995. Net service revenues for the six months ended June 30, 1996 increased 38.7% compared to the six months ended June 30, 1995. Temporary service revenues increased approximately 42.3% and 39.6% during the three and six months ended June 30, 1996, relative to the three and six months ended June 30, 1995. Permanent placement revenues increased 36.1% and 29.6% during the comparable three and six months ended June 30, 1996. The revenue comparisons reflect continued improvement in the demand for the Company's specialized staffing services. Gross margin dollars increased 45.4% and 41.1% during the three and six month periods ended June 30, 1996, compared with the corresponding three and six month periods ended June 30, 1995. Gross margin amounts equaled 39.8% and 39.5% of revenue for the three and six month periods ended June 30, 1996 compared to 38.9% and 38.8% of revenue for the three and six month periods ended June 30, 1995. Selling, general and administrative expenses were approximately $59 million and $112 million during the three and six months ended June 30, 1996 compared to approximately $41 million and $80 million during the three and six months ended June 30, 1995. Selling, general and administrative expenses as a percentage of revenues was 28.0% and 27.6% in the three and six months ended June 30, 1996 compared to 27.3% and 27.2% in the three and six months ended June 30, 1995. Net interest income for the three months ended June 30, 1996 increased by 598.8% compared to the comparable period in 1995. For the six months ended June 30, 1996, interest income was $968,000 compared to interest expense of $17,000 for the comparative period in 1995. These increases are due to the increase in cash and cash equivalents. The provision for income taxes for the three and six months ended June 30, 1996, was 41.3% and 41.2% compared to 41.8% of income before taxes for the same periods in 1994. The decrease in 1996 is the result of a smaller percentage of non-deductible intangible expenses relative to income. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1996 the Company's sources of liquidity included approximately $56.5 million in cash and cash equivalents and $103.2 million in net working capital. In addition, as of June 30, 1996 $77.5 million is available for borrowing under the Company's $80.0 million bank revolving credit facility at interest rates of either the Eurodollar rate plus .6% or at prime. The Company's liquidity during the first six months of 1996 has increased by $23.1 million from funds generated by operating activities. In June 1996, the Company effected a two-for-one stock split in the form of a stock dividend. All share and per share amounts in the financial statements have been restated to retroactively reflect the two-for-one stock split. 6
PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On May 1, 1996, registrant held its annual meeting of stockholders. The four matters presented to stockholders at the annual meeting were the election of three directors to Class II, the approval of an amendment to the registrant's Outside Directors' Option Plan, the approval of amendments to the registrant's 1993 Incentive Plan and the approval of amendments to the registrant's Annual Performance Bonus Plan. The vote for director was as follows: <TABLE> <CAPTION> NOMINEE SHARES FOR SHARES WITHHELD - ---------------------------------------------------- ------------- --------------- <S> <C> <C> Frederick A. Richman................................ 22,201,674 192,925 Thomas J. Ryan...................................... 22,286,474 108,125 J. Stephen Schaub................................... 22,361,874 32,725 </TABLE> The continuing directors, whose terms of office did not expire at the meeting, are Andrew S. Berwick, Jr., Frederick P. Furth, Edward W. Gibbons and Harold M. Messmer, Jr. The amendment to the Outside Directors' Option Plan was approved by the following vote: <TABLE> <S> <C> For: 15,775,143 Against: 6,438,962 Abstain: 124,694 Broker Nonvote: 55,800 </TABLE> The amendments to the 1993 Incentive Plan were approved by the following vote: <TABLE> <S> <C> For: 21,582,822 Against: 736,571 Abstain: 75,206 Broker Nonvote: 0 </TABLE> The amendments to the Annual Performance Bonus Plan were approved by the following vote: <TABLE> <S> <C> For: 22,008,215 Against: 208,466 Abstain: 177,918 Broker Nonvote: 0 </TABLE> No other matters were voted upon at the annual meeting. The foregoing numbers are the actual totals and have NOT been adjusted to reflect the two-for-one stock split effected in the form of a one-for-one stock dividend on June 7, 1996. ITEM 5. OTHER INFORMATION None 7
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. <TABLE> <CAPTION> EXHIBIT NO. - ----------- <S> <C> 3.1 By-laws. 10.1 Outside Directors' Option Plan. 10.2 1989 Restricted Stock Plan. 10.3 StockPlus Plan. 10.4 1993 Incentive Plan. 10.5 Annual Performance Bonus Plan. 11 Computation of Per Share Earnings. 27 Financial Data Schedules. </TABLE> (b) The registrant filed no current report on Form 8-K during the quarter covered by this report. 8
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ROBERT HALF INTERNATIONAL INC. (Registrant) /s/ M. KEITH WADDELL -------------------------------------- M. Keith Waddell SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER (PRINCIPAL FINANCIAL OFFICER AND DULY AUTHORIZED SIGNATORY) Date: August 8, 1996 9
EXHIBIT INDEX <TABLE> <CAPTION> SEQUENTIALLY EXHIBITS DESCRIPTION NUMBERED PAGE - ---------- ------------------------------------------------------------------------------------------- ------------- <C> <S> <C> 3.1 By-laws. 10.1 Outside Directors' Option Plan. 10.2 1989 Restricted Stock Plan. 10.3 StockPlus Plan. 10.4 1993 Incentive Plan. 10.5 Annual Performance Bonus Plan. 11 Computation of Per Share Earnings. 27 Financial Data Schedules. </TABLE>