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Article by DailyStocks_admin    (12-30-08 06:38 AM)

The Daily Magic Formula Stock for 12/30/2008 is Robert Half International Inc. According to the Magic Formula Investing Web Site, the ebit yield is 18% and the EBIT ROIC is >100%.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


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BUSINESS OVERVIEW

Robert Half International Inc. (the “Company”) provides specialized staffing and risk consulting services through such divisions as Accountemps ® , Robert Half ® Finance & Accounting, OfficeTeam ® , Robert Half ® Technology, Robert Half ® Management Resources, Robert Half ® Legal, The Creative Group ® , and Protiviti ® . The Company, through its Accountemps, Robert Half Finance & Accounting , and Robert Half Management Resources divisions, is 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. Robert Half Technology provides information technology professionals. Robert Half Legal 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. Protiviti began operations in May 2002 and provides business and technology risk consulting and internal audit services. Protiviti , which primarily employs risk consulting and internal audit professionals is a wholly-owned subsidiary of the Company.

The Company’s business was originally founded in 1948. Prior to 1986, the Company was primarily a franchisor, under the names Accountemps and Robert Half (now called Robert Half Finance & Accounting ), of offices providing temporary and full-time professionals in the fields of accounting and finance. Beginning in 1986, the Company and its current management embarked on a strategy of acquiring franchised locations. All of the franchises have been acquired. 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. Since 1986, the Company has significantly expanded operations at many of the acquired locations, opened many new locations and acquired other local or regional providers of specialized temporary service personnel. The Company has also expanded the scope of its services by launching the new product lines OfficeTeam , Robert Half Technology , Robert Half Management Resources , Robert Half Legal and The Creative Group .

In 2002, the Company hired more than 700 professionals who had been affiliated with the internal audit and business and technology risk consulting practice of Arthur Andersen LLP, including more than 50 individuals who had been partners of Andersen. These professionals formed the base of the Company’s new Protiviti Inc. subsidiary. Protiviti ® has enabled the Company to enter the market for independent internal audit and business and technology risk consulting services, which market the Company believes offers synergies with its traditional lines of business.

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 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 regular employees are eliminated by the use of Accountemps temporaries. The temporary workers are employees of Accountemps and are paid by Accountemps . The customer pays a fixed rate only for hours worked.

Accountemps clients may fill their regular employment needs by using an Accountemps employee on a trial basis and, if so desired, “converting” the temporary position to a regular 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 full-time office and administrative personnel, ranging from word processors to office managers. OfficeTeam operates in much the same fashion as the Accountemps and Robert Half Finance & Accounting divisions.

Robert Half Finance & Accounting

The Company’s Robert Half Finance & Accounting division specializes in the placement of full-time accounting, financial, tax and banking personnel. Fees for successful placements are paid only by the employer and are generally a percentage of the new employee’s annual compensation. No fee for placement services is charged to employment candidates.

Robert Half Technology

The Company’s Robert Half Technology division, which commenced operations in 1994, specializes in providing information technology contract consultants and placing full-time 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.

Robert Half Legal

Since 1992, the Company has been placing temporary and full-time employees in attorney, paralegal, legal administrative and legal secretarial positions through its Robert Half Legal 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.

Robert Half Management Resources

The Company’s Robert Half 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 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.

Protiviti

Protiviti provides independent internal audit and business and technology risk consulting services. Protiviti helps clients identify, measure, and manage operational and technology-related risks they face within their industries and throughout their systems and processes. Protiviti offers a full spectrum of professional consulting services, technologies, and skills for business and technology risk management and the continual transformation of internal audit functions.

Marketing and Recruiting

The Company markets its staffing 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 of radio, yellow pages, websites and trade shows. Direct marketing through e-mail, regular 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 and of print advertisements in national newspapers, magazines and trade journals. Additionally, the Company has expanded its use of job boards in all aspects of sales and recruitment. Joint marketing arrangements have been entered into with major software manufacturers and typically provide for development of proprietary skills tests, 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 recognition of the Company and its services. Local employees are encouraged to be active in civic organizations and industry trade groups.

Protiviti markets its risk consulting and internal audit services to a variety of clients in a range of industries. Industry and competency teams conduct targeted marketing efforts, both locally and nationally, including print advertising and branded speaking events, with support from Protiviti management. National advertising conducted by Protiviti consists primarily of print advertisements in national newspapers, magazines and selected trade journals. Protiviti has initiated a national direct mail program to share information with clients on current corporate governance and risk management issues. It conducts public relations activities, such as press releases and newsletters, designed to enhance recognition for the Protiviti brand, establish its expertise in key issues surrounding its business and promote its services. Protiviti plans to expand both the services and value added content on the Protiviti.com website and increase traffic through targeted Internet advertising. Local employees are encouraged to be active in civic organizations and industry trade groups.

The Company and its subsidiaries own many trademarks, service marks and tradenames, including the Robert Half ® Finance & Accounting, Accountemps ® , OfficeTeam ® , Robert Half ® Technology, Robert Half ® Management Resources, Robert Half ® Legal, The Creative Group ® and Protiviti ® marks, which are registered in the United States and in a number of foreign countries.

Organization

Management of the Company’s staffing operations is coordinated from its headquarters facilities in Menlo Park and Pleasanton, California. The Company’s headquarters provides support and centralized services to its offices in the administrative, marketing, public relations, accounting, training and legal areas, particularly as it relates to the standardization of the operating procedures of its offices. As of December 31, 2007, the Company conducted its staffing services operations through more than 360 offices in 42 states, the District of Columbia and eighteen foreign countries. Office managers are responsible for most activities of their offices, including sales, local advertising and marketing and recruitment.

The day-to-day operations of Protiviti are managed by a chief executive officer and a senior management team with operational and administrative support provided by individuals located in Pleasanton and Menlo Park, California. As of December 31, 2007, Protiviti had 60 offices in 22 states and fourteen foreign countries.

Competition

The Company’s staffing services face competition in attracting clients as well as skilled specialized employment candidates. The staffing business is 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 staffing business 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.

Protiviti faces competition in its efforts to attract clients and win proposal presentations. The risk consulting and internal audit businesses are highly competitive due to many new firms entering the market and the evolution of established firms in the business space. In addition, the changing regulatory environment is increasing opportunities for non-attestation audit and risk consulting services. The principal competitors of Protiviti remain the “big four” accounting firms. Significant competitive factors include reputation, technology, tools, project methodologies, price of services and depth of skills of personnel. Protiviti believes its competitive strengths lie in its unique ability to couple the deep skills and proven methodologies of its “big four” heritage with the customer focus and attention of a smaller organization.

Employees

The Company has approximately 15,300 full-time employees, including approximately 3,300 engaged directly in Protiviti operations. In addition, the Company placed approximately 257,000 temporary employees on assignments with clients during 2007. Employees placed by the Company on assignment with clients 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 access to voluntary health insurance coverage to interested temporary employees.

Other Information

The Company’s current business constitutes three 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 staffing services operations are generally more active in the first and fourth quarters of a calendar year. Protiviti has been in operation since May 2002. Protiviti is generally more active in the third and fourth quarters of a calendar year. Order backlog is not a material aspect of the Company’s staffing services business. While backlog is of greater importance to Protiviti , the Company does not believe, based upon the length of time of the average Protiviti engagement, that backlog is a material aspect of the Protiviti business. 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.

Available Information

The Company’s Internet address is www.rhi.com . The Company makes available, free of charge, through its website, its Annual Reports on Form 10-K, proxy statements for its annual meetings of stockholders, its Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and any amendments to those reports, as soon as is reasonably practicable after such reports are filed with or furnished to the Securities and Exchange Commission. Also available on the Company’s website are its Corporate Governance Guidelines, its Code of Business Conduct and Ethics, and the charters for its Audit Committee, Compensation Committee and Nominating and Governance Committee, each of which is available in print to any stockholder who makes a request to Robert Half International Inc., 2884 Sand Hill Road, Menlo Park, CA 94025, Attn: Corporate Secretary. The Company’s Code of Business Conduct and Ethics is the Code of Ethics required by Item 406 of Securities and Exchange Commission Regulation S-K. The Company intends to satisfy any disclosure obligations under Item 5.05 of Form 8-K regarding any amendment or waiver relating to its Code of Business Conduct and Ethics by posting such information on its website.

MANAGEMENT DISCUSSION FOR LATEST QUARTER


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. These statements may be identified by words such as “estimate”, “forecast”, “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. These risks and uncertainties include, but are not limited to, the following: changes in levels of unemployment and other economic conditions in the United States or foreign countries where the Company does business, or in particular regions or industries; the impact of the current global financial crisis on our business and financial condition; reduction in the supply of candidates for temporary employment or the Company’s ability to attract candidates; the entry of new competitors into the marketplace or expansion by existing competitors; the ability of the Company to maintain existing client relationships and attract new clients in the context of changing economic or competitive conditions; the impact of competitive pressures, including any change in the demand for the Company’s services, on the Company’s ability to maintain its margins; the possibility of the Company incurring liability for its activities, including the activities of its temporary employees, or for events impacting its temporary employees on clients’ premises; the possibility that adverse publicity could impact the Company’s ability to attract and retain clients and candidates; the success of the Company in attracting, training, and retaining qualified management personnel and other staff employees; whether governments will impose additional regulations or licensing requirements on personnel services businesses in particular or on employer/employee relationships in general; whether there will be ongoing demand for Sarbanes-Oxley or other regulatory compliance services; and litigation relating to prior or current transactions or activities, including litigation that may be disclosed from time to time in the Company’s SEC filings. Additionally, with respect to Protiviti, other risks and uncertainties include the fact that future success will depend on its ability to retain employees and attract clients; there can be no assurance that there will be ongoing demand for Sarbanes-Oxley or other regulatory compliance services; failure to produce projected revenues could adversely affect financial results; and there is the possibility of involvement in litigation relating to prior or current transactions or activities. Because long-term contracts are not a significant part of the Company’s business, future results cannot be reliably predicted by considering past trends or extrapolating past results.

Critical Accounting Policies and Estimates

As described below, the Company’s most critical accounting policies and estimates are those that involve subjective decisions or assessments.

Accounts Receivable Allowances. The Company maintains allowances for estimated losses resulting from (i) the inability of its customers to make required payments, (ii) temporary placement sales adjustments, and (iii) permanent placement candidates not remaining with the client through the 90-day guarantee period, commonly referred to as “fall offs”. The Company establishes these allowances based on its review of customers’ credit profiles, historical loss statistics and current trends. The adequacy of these allowances is reviewed each reporting period. Historically, the Company’s actual losses and credits have been consistent with these allowances. As a percentage of gross accounts receivable, the Company’s accounts receivable allowances totaled 5.2% and 4.6% as of September 30, 2008, and December 31, 2007, respectively. As of September 30, 2008, a five-percentage point deviation in the Company’s accounts receivable allowances balance would have resulted in an increase or decrease in the allowance of $1.6 million. Although future results cannot always be predicted by extrapolating past results, management believes that it is reasonably likely that future results will be consistent with historical trends and experience. However, if the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, or if unexpected events or significant future changes in trends were to occur, additional allowances may be required.

Income Tax Assets and Liabilities. In establishing its deferred income tax assets and liabilities, the Company makes judgments and interpretations based on the enacted tax laws and published tax guidance that are applicable to its operations. Deferred tax assets and liabilities are measured and recorded using current enacted tax rates, which the Company expects will apply to taxable income in the years in which those temporary differences are recovered or settled. The likelihood of a material change in the Company’s expected realization of these assets is dependent on future taxable income, its ability to use foreign tax credit carryforwards and carrybacks, final U.S. and foreign tax settlements, and the effectiveness of its tax planning in the various relevant jurisdictions.

The Company also evaluates the need for valuation allowances to reduce the deferred tax assets to realizable amounts. Management evaluates all positive and negative evidence and uses judgment regarding past and future events, including operating results, to help determine when it is more likely than not that all or some portion of our deferred tax assets may not be realized. When appropriate, a valuation allowance is recorded against deferred tax assets to offset future tax benefits that may not be realized. In relation to actual net operating losses in certain foreign operations, valuation allowances of $14.5 million were recorded as of September 30, 2008. If such losses are ultimately utilized to offset future operating income, the Company will benefit its deferred tax assets up to the full amount of the valuation reserve.

While management believes that its judgments and interpretations regarding income taxes are appropriate, significant differences in actual experience may materially affect the future financial results of the Company.

Goodwill Impairment. The Company assesses the impairment of goodwill annually, or more often if events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment assessments for goodwill are done at a reporting unit level. For purposes of this assessment, the Company’s reporting units are its lines of business. In performing periodic impairment tests, the fair value of the reporting unit is compared to the carrying value, including goodwill and intangible assets. If the fair value exceeds the carrying value, there is no impairment. If the carrying value exceeds the fair value, however, an impairment condition exists.

The goodwill impairment assessment is based upon a discounted cash flow analysis. The estimate of future cash flows is based upon, among other things, a discount rate and certain assumptions about expected future operating performance. The discount rate used by management has been calculated on a consistent basis and has not fluctuated significantly. The primary assumptions related to future operating performance include revenue growth rates and expense levels. These assumptions are updated annually and are primarily based upon historical trends. Although management does not anticipate that these assumptions will change materially in the future, the Company’s estimates of discounted cash flow may differ from actual cash flow due to, among other things, economic conditions, changes to its business model or changes in its operating performance. The Company completed its annual goodwill impairment analysis during the three months ended June 30, 2008, and determined that no adjustment to the carrying value of goodwill was required. Based upon the Company’s most recent goodwill impairment analysis, management believes that unless a reporting unit were to be abandoned, the possibility of goodwill impairment as a result of a change in assumptions is unlikely.

Workers’ Compensation . Except for states which require participation in state-operated insurance funds, the Company retains the economic burden for the first $0.5 million per occurrence in workers’ compensation claims. Workers’ compensation includes ongoing healthcare and indemnity coverage for claims and may be paid over numerous years following the date of injury. Claims in excess of $0.5 million are insured. Workers’ compensation expense includes the insurance premiums for claims in excess of $0.5 million, claims administration fees charged by the Company’s workers’ compensation administrator, premiums paid to state-operated insurance funds, and an estimate for the Company’s liability for Incurred But Not Reported (“IBNR”) claims and for the ongoing development of existing claims. Total workers’ compensation expense was $14.0 million and $11.2 million, representing 0.54% and 0.43% of applicable U.S. revenue for the nine months ended September 30, 2008 and 2007, respectively.

The accrual for IBNR claims and for the ongoing development of existing claims in each reporting period includes estimates. The Company has established reserves for workers’ compensation claims using loss development rates which are estimated using periodic third-party actuarial valuations based upon historical loss statistics which include the Company’s historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. While management believes that its assumptions and estimates are appropriate, significant differences in actual experience or significant changes in assumptions may materially affect the Company’s future results. Based on the Company’s results for the nine months ended September 30, 2008, a five-percentage point deviation in the Company’s estimated loss development rates would have resulted in an increase or decrease in the allowance of $0.6 million.

Stock-based Compensation. Under various stock plans, officers, employees and outside directors have received or may receive grants of restricted stock, stock units, stock appreciation rights or options to purchase common stock.

Compensation expense for restricted stock and stock units is generally recognized on a straight-line basis over the vesting period, based on the stock’s fair market value on the grant date. The Company recognizes compensation expense for only the portion of restricted stock and stock units that is expected to vest, rather than record forfeitures when they occur. If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods. For purposes of calculating stock-based compensation expense for retirement-eligible employees, the service period is assumed to be met on the grant date or retirement-eligible date, whichever is later.

No stock appreciation rights have been granted under the Company’s existing stock plans.

The Company determines the fair value of options to purchase common stock using the Black-Scholes valuation model. The Company recognizes expense over the service period for options that are expected to vest and records adjustments to compensation expense at the end of the service period if actual forfeitures differ from original estimates. The Company has not granted any options to purchase common stock since 2006.

For the three and nine months ended September 30, 2008, compensation expense related to restricted stock and stock units was $16.5 million and $48.7 million, respectively, of which $5.1 million and $12.4 million, respectively, was related to grants made in 2008. A one-percentage point deviation in the estimated forfeiture rates would have resulted in a $0.2 million and $0.5 million increase or decrease in compensation expense related to restricted stock and stock units for the three and nine months ended September 30, 2008, respectively.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141(R), Business Combinations (“SFAS 141(R)”). SFAS 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree, and the goodwill acquired. SFAS 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008. The Company does not expect the adoption of SFAS 141(R) to have a material effect on its Financial Statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51 (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained, noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company does not expect the adoption of SFAS 160 to have a material effect on its Financial Statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. Subsequently in February 2008, the FASB issued FASB Staff Position 157-2, Effective Date of FASB Statement No. 157 , which delays the effective date of SFAS 157 for non-financial assets and liabilities, except for items that are recognized and disclosed at fair value in the financial statements on a recurring basis, until fiscal years beginning after November 15, 2008. The implementation of SFAS 157 for financial assets and liabilities, effective January 1, 2008, did not impact the Company’s consolidated Financial Statements. The Company does not expect the adoption of SFAS 157 for non-financial assets and liabilities to have a material effect on its Financial Statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 expands quarterly disclosure requirements included in SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), about an entity’s derivative instruments and hedging activities. SFAS No. 161 is effective for fiscal years beginning after November 15, 2008. The Company does not expect the adoption of SFAS 161 to have a material effect on its Financial Statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles . The Company does not expect the adoption of SFAS 162 to have a material effect on its Financial Statements.

In June 2008, the FASB issued Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends are participating securities and should be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008. The Company does not expect the adoption of FSP EITF 03-6-1 to have a material effect on its Financial Statements.

Results of Operations for the Three and Nine Months Ended September 30, 2008 and 2007

Temporary and consultant staffing services revenues were $912 million and $926 million for the three months ended September 30, 2008 and 2007, respectively, decreasing by 1% during the three months ended September 30, 2008, compared to the same period in 2007. On a constant-currency basis, temporary and consultant staffing services revenues decreased 2% during the three months ended September 30, 2008, compared to the same period in 2007. Temporary and consultant staffing services revenues were $2.8 billion and $2.7 billion for the nine months ended September 30, 2008 and 2007, respectively, increasing by 5% during the nine months ended September 30, 2008, compared to the same period in 2007. On a constant-currency basis, temporary and consultant staffing services revenues increased 3% during the nine months ended September 30, 2008, compared to the same period in 2007. The 2008 increase in temporary and consultant staffing services revenues is due to higher international revenues, particularly in Continental Europe.

Permanent placement revenues were $108 million and $113 million for the three months ended September 30, 2008 and 2007, respectively, decreasing by 4% during the three months ended September 30, 2008, compared to the same period in 2007. On a constant-currency basis, permanent placement revenues decreased 5% during the three months ended September 30, 2008, compared to the same period in 2007. Permanent placement revenues were $352 million and $327 million for the nine months ended September 30, 2008 and 2007, respectively, increasing by 8% during the nine months ended September 30, 2008, compared to the same period in 2007. On a constant-currency basis, permanent placement revenues increased 4% during the nine months ended September 30, 2008, compared to the same period in 2007. The 2008 increase in permanent placement revenues is due to higher international revenues, particularly in Continental Europe.

Risk consulting and internal audit services revenues were $139 million and $141 million for the three months ended September 30, 2008 and 2007, respectively, decreasing by 1% during the three months ended September 30, 2008, compared to the same period in 2007. On a constant-currency basis, risk consulting and internal audit services revenues decreased 2% during the three months ended September 30, 2008, compared to the same period in 2007. Risk consulting and internal audit services revenues were $423 million and $401 million for the nine months ended September 30, 2008 and 2007, respectively, increasing by 5% during the nine months ended September 30, 2008, compared to the same period in 2007. On a constant-currency basis, risk consulting and internal audit services revenues increased 3% during the nine months ended September 30, 2008, compared to the same period in 2007. The 2008 increase in risk consulting and internal audit services revenues is primarily due to higher international revenues, particularly in Asia.

There can be no assurances that there will be ongoing demand for Sarbanes-Oxley or other regulatory compliance services, or that future results can be reliably predicted by considering past trends or extrapolating past results. We expect total Company revenues to continue to be impacted by general macroeconomic conditions in 2008.

The Company’s temporary and permanent staffing services business has more than 370 offices in 42 states, the District of Columbia and 20 foreign countries, while Protiviti has more than 60 offices in 23 states and 15 foreign countries. Revenues from foreign operations represented 29% and 24% of revenues for the nine months ended September 30, 2008 and 2007, respectively.

Gross margin dollars from the Company’s temporary and consultant staffing services represent revenues less direct costs of services, which consist of payroll, payroll taxes and insurance costs for temporary employees, and reimbursable expenses. Gross margin dollars for the Company’s temporary and consultant staffing services were $334 million and $346 million for the three months ended September 30, 2008 and 2007, respectively, decreasing by 3% during the three months ended September 30, 2008, compared to the same period in 2007. On a constant-currency basis, temporary and consultant staffing services gross margin dollars decreased 4% for the three months ended September 30, 2008, compared to the same period in 2007. Gross margin amounts equaled 37% of revenues for temporary and consultant staffing services for both the three months ended September 30, 2008 and 2007. Gross margin dollars for the Company’s temporary and consultant staffing services were $1.0 billion for both the nine months ended September 30, 2008 and 2007. On a constant-currency basis, temporary and consultant staffing services gross margin dollars increased 2% for the nine months ended September 30, 2008, compared to the same period in 2007. Gross margin amounts equaled 37% of revenues for temporary and consultant staffing services for both the nine months ended September 30, 2008 and 2007.

Gross margin dollars from permanent placement staffing services represent revenues less reimbursable expenses. Gross margin dollars for the Company’s permanent placement staffing division were $108 million and $113 million for the three months ended September 30, 2008 and 2007, respectively, decreasing by 4% during the three months ended September 30, 2008, compared to the same period in 2007. On a constant currency basis, permanent placement staffing services gross margin dollars decreased 5% for the three months ended September 30, 2008, compared to the same period in 2007. Gross margin dollars for the Company’s permanent placement staffing division were $352 million and $327 million for the nine months ended September 30, 2008 and 2007, respectively, increasing by 8% during the nine months ended September 30, 2008, compared to the same period in 2007. On a constant currency basis, permanent placement staffing services gross margin dollars increased 4% for the nine months ended September 30, 2008, compared to the same period in 2007.

Gross margin dollars for risk consulting and internal audit services represent revenues less direct costs of services, which consist primarily of professional staff payroll, payroll taxes, insurance costs and reimbursable expenses. Gross margin dollars for the Company’s risk consulting and internal audit division were $41 million and $42 million for the three months ended September 30, 2008 and 2007, respectively, decreasing by 4% in 2008. On a constant currency basis, risk consulting and internal audit services gross margin dollars decreased 5% for the three months ended September 30, 2008, compared to the same period in 2007. Gross margin amounts equaled 29% and 30% of revenues for risk consulting and internal audit services for the three months ended September 30, 2008 and 2007, respectively. Gross margin dollars for the Company’s risk consulting and internal audit division were $120 million and $126 million for the nine months ended September 30, 2008 and 2007, respectively, decreasing by 5% in 2008. On a constant currency basis, risk consulting and internal audit services gross margin dollars decreased 7% for the nine months ended September 30, 2008, compared to the same period in 2007. Gross margin amounts equaled 28% and 31% of revenues for risk consulting and internal audit services for the nine months ended September 30, 2008 and 2007, respectively. The year-over-year margin decline is due primarily to the higher mix of non-U.S. revenues.

Selling, general and administrative expenses were $374 million and $1.2 billion in the three and nine months ended September 30, 2008, compared to $381 million and $1.1 billion in the three and nine months ended September 30, 2007. Selling, general and administrative expenses as a percentage of revenues were 32% for both the three and nine months ended September 30, 2008 and 2007. Selling, general and administrative expenses consist primarily of staff compensation, advertising, depreciation and occupancy costs.

For acquisitions, 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. Identifiable intangible assets are amortized over their lives, typically ranging from two to five years. Goodwill is not amortized, but is tested at least annually for impairment. The Company completed its annual goodwill impairment analysis during the three months ended June 30, 2008, and determined that no adjustment to the carrying value of goodwill was required. Net intangible assets, consisting primarily of goodwill, represented 13% of total assets and 18% of total stockholders’ equity at September 30, 2008.

Interest income for the three months ended September 30, 2008 and 2007, was $2.8 million and $4.1 million, respectively. Interest income for the nine months ended September 30, 2008 and 2007, was $8.8 million and $13.3 million, respectively. The lower 2008 interest income was primarily due to lower average cash balances and lower interest rates. Interest expense for the three months ended September 30, 2008 and 2007, was $1.5 million and $0.9 million, respectively. Interest expense for the nine months ended September 30, 2008 and 2007, was $4.0 million and $3.1 million, respectively.

The provision for income taxes was 40% of income before taxes for both the three and nine months ended September 30, 2008, and 39% for both the three and nine months ended September 30, 2007.

Liquidity and Capital Resources

The change in the Company’s liquidity during the nine months ended September 30, 2008 and 2007, is primarily the net effect of funds generated by operations and the funds used for capital expenditures, repurchases of common stock and payment of dividends.


Cash, and cash equivalents were $374 million and $329 million at September 30, 2008 and 2007, respectively. Operating activities provided $333 million during the nine months ended September 30, 2008, partially offset by $63 million and $194 million of net cash used in investing activities and financing activities, respectively. Operating activities provided $311 million during the nine months ended September 30, 2007, offset by $94 million and $354 million of net cash used in investing activities and financing activities, respectively.

Operating activities—Net cash provided by operating activities for the nine months ended September 30, 2008, was composed of net income of $211 million, adjusted for non-cash items of $111 million, and net cash provided by changes in working capital of $11 million. Net cash provided by operating activities for the nine months ended September 30, 2007 was composed of net income of $217 million adjusted for non-cash items of $90 million, and net cash provided by changes in working capital of $4 million.

Investing activities—Cash used in investing activities for the nine months ended September 30, 2008, was $63 million. This was primarily composed of capital expenditures of $55 million and deposits to trusts for employee benefits and retirement plans of $7 million. Cash used in investing activities for the nine months ended September 30, 2007 was $94 million. This was primarily composed of capital expenditures of $64 million, purchases of goodwill and other intangible assets of $19 million and deposits to trusts for employee benefits and retirement plans of $11 million.

Financing activities—Cash used in financing activities for the nine months ended September 30, 2008, was $194 million. This included repurchases of $169 million in common stock and $52 million in cash dividends to stockholders, offset primarily by proceeds of $27 million from exercises of stock options. Cash used in financing activities for the nine months ended September 30, 2007 was $354 million. This included repurchases of $368 million in common stock and $50 million in cash dividends to stockholders, partially offset by proceeds of $49 million from exercises of stock options and the excess tax benefits from stock-based compensation of $15 million.

As of September 30, 2008, the Company is authorized to repurchase, from time to time, up to 13.8 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions. During the nine months ended September 30, 2008 and 2007, the Company repurchased 5.4 million shares and 9.2 million shares of common stock on the open market for a total cost of $131 million and $315 million, respectively. Additional stock repurchases were made in connection with employee stock plans, whereby Company shares were tendered by employees for the payment of exercise price and applicable statutory withholding taxes. During both the nine months ended September 30, 2008 and 2007, such repurchases totaled 1.5 million shares, at a cost of $38 million and $55 million, respectively. Repurchases of securities have been funded with cash generated from operations.

The Company’s working capital at September 30, 2008, included $374 million in cash and cash equivalents. The Company’s working capital requirements relate primarily to accounts receivable. While there can be no assurances in this regard, the Company expects that internally generated cash will be sufficient to support the working capital needs of the Company, the Company’s fixed payments, dividends, and other obligations on both a short- and long-term basis. However, continued or increased volatility and disruption in the global capital and credit markets could negatively impact the Company’s business operations and therefore its liquidity and ability to meet working capital needs.

On October 29, 2008, the Company announced a quarterly dividend of $.11 per share to be paid to all shareholders of record on November 25, 2008. The dividend will be paid on December 15, 2008.

CONF CALL

Harold Messmer (Max)

Thank you and good afternoon, everyone. We appreciate you joining us. I’ll start by reminding everyone that comments made on this call contain predictions, estimates and other forward-looking statements. These statements represent our current judgment of what the future holds and they include words such as forecast, estimate, project, expect, believe, guidance, and similar expressions.

We believe these remarks to be reasonable, but they are subject to risks and uncertainties that could cause the actual results to differ materially from the forward-looking statements. Some of these risks and uncertainties are described in the press release we issued today and in our SEC filings. We assume no obligation to update the statements made in this call.

Now let's view the third quarter results. revenues for the third quarter were $1.16 billion, down 2% from the third quarter of last year. Income per share was $0.43, down 6% from the prior year's third quarter.

During the third quarter, cash flow from operations was $96 million and capital expenditures were $22 million during the third quarter.

We paid a quarterly cash dividend to stockholders of $0.11 per share for a total of $17 million. We paid a quarterly cash dividend to stockholders of $0.11 per share for a total of $17 million dollars. During the third quarter, we repurchased $900,000 RHI shares at a cost of $21 million. Approximately $13 million shares remain available for repurchase under our board approved stock repurchase plan.

Our third quarter results clearly were impacted by the Trim Oil in the global financial markets. Clients did become increasingly cautious with their hiring actions as the quarter progressed.

The quarter was not without its bright spots however. Revenues from our international operations grew 15% year-over-year on a constant currency basis.

Our technology division also reported positive year-over-year revenue growth and our return on equity was 26% for the quarter. Our return on equity has averaged 26% for the past five years.

Now, I’ll turn the call over to Keith to provide a more detailed analysis for our third quarter financial results and then we’ll have time for questions after our prepared remarks.

Keith Waddell

Thank you, Max. We’ll start with company-wide revenues. Third quarter revenues were $1.16 billion, a decrease of 2% from the third quarter of last year and down 5% sequentially. There were 64 billing days in the third quarter of this year compared with 63 billing days in the third quarter of last year and 64 for the second quarter sequentially.

Revenues for Accountemps were $435 million, which are down 2% from the third quarter of last year and down 6% sequentially on a same-day basis. Accountemps is our largest staffing division with 375 offices worldwide. It accounts for 38% of company revenues.

OfficeTeam had revenues of $209 million in the third quarter, down 3% from the third quarter of last year and down 5% sequentially on a same day basis.

OfficeTeam was introduced in 1991 and is our high end administrator staffing division, represents 18% of company revenues. There are 329 OfficeTeam locations worldwide. Third quarter revenues for Robert Half Management Resources were $156 million, flat with the third quarter of 2007 and down 6% sequentially on a same-day basis. This division was introduced in 1997 and places senior level accounting and finance professionals on a project basis. It has 152 locations worldwide and makes up 13% of company revenues.

Robert Half Technology revenues were $112 million in the third quarter, up 2% from the third quarter of last year and down 1% sequentially on a same-day basis. Robert Half Technology was introduced in 1994 and places information technology professionals on a consulting and full-time basis. This business operates in 112 locations worldwide and accounts for 10% of company revenues.

Robert Half Finance and Accounting, a permanent placement division, had revenues of $108 million in the third quarter, down 4% from the third quarter of 2007 and down 15% on a same-day sequential basis. This business was established in 1948 and operates in 375 locations worldwide. It accounts for 9% of company revenues.

Third quarter revenues for our international staffing operations were $303 million, up 18% from the third quarter of 2007 and down 5% sequentially on a same-day basis. On a constant-currency basis, these growth rates were up 15% compared to the third quarter of the last year and down only 1% sequentially. We have staffing operations in 110 locations in 20 countries outside the United States. International staffing operations represents 30% of total staffing revenues.

Protiviti revenues were a $139 million in the third quarter, down 1% from one year ago and down 1% sequentially. Formed in 2002, Protiviti is a global consulting and internal audit firm composed of experts and risk and advisory services. It has 61 locations in 16 countries and accounts for 12% of total RHI revenues. Protiviti's international operations represent 29% of total Protiviti revenues.

Now let's review gross margin. Third quarter gross margin in our temporary and consulting staffing operations was $334 million or 36.7% of applicable revenues. This compares with 37.3% of revenues for the third quarter of the last year and 36.5% of revenues for the second quarter of this year.

Lower conversion revenues during the quarter contributed to the lower margin percentages, although on a sequential basis, this was offset by lower payroll taxes.

Overall staffing gross margin was $443 million for the third quarter or 43.4% of staffing revenues. This compares to 44.1% of revenues in Q3 last year and 44% of revenues in Q2 this year. The sequential percentage decline reflects a lower mix of permanent placement revenues.

Third quarter gross margin for Protiviti was $41 million or 29.2% of Protiviti revenues. This compares to 30.2% of Protiviti revenues in Q3 last year and 28% of its revenues in the second quarter of this year.

Now turning to selling, general and administrative cost, staffing SG&A cost for the third quarter were $337 million or 33.1% of staffing revenues. This compares to $343 million or 33% of revenues for the third quarter of last year and $355 million or 32.8% of revenues for the second quarter of 2008. Staffing SG&A cost were reduced by 5% on a sequential basis and 2% year-over-year.

Third quarter SG&A cost for Protiviti were $37 million or 26.4% of revenues. This compares to $38 million or 27.4% of revenues for the third quarter of 2007 and $38 million or 27.1% of revenues for the second quarter of 2008. SG&A costs were reduced 4% on both a sequential and year-over-year basis.

Operating income from our staffing division was $105 million during the third quarter or 10.3% of staffing revenues. The temporary and consulting divisions contributed $90 million of this amount or 9.9% of applicable revenues. Third quarter operating income for our permanent placement division was $15 million or 14.1% of applicable revenues.

Operating income for Protiviti was $4 million in the third quarter or 2.9% of revenues. This compares to $1 million in the second quarter of 2008 or 0.9% of revenues.

The increase in operating income is primarily the result of Protiviti’s cost cutting measures, which are ongoing.

Turning to accounts receivable at the end of the third quarter, accounts receivable were $587 million with imply days outstanding 46 days, which compared favorably to the 48.5 days at the end of the third quarter a year ago.

Now let’s talk about guidance. We saw the following trends in our business during the third quarter and the first few weeks of October. On a same day sequential basis, temporary and consulting revenues were down in July, down in August, and flat in September. On a same day basis, permanent placement revenues were down sequentially during all three months of the quarter.

During the first two weeks of October, revenues from our temporary and consulting businesses were down 9% compared to the same period last year and for the first three weeks of October, revenues from our permanent placement division were down 26% compared to the same period last year. As we've said many times before, it's very difficult to evaluate perm trends over short time periods.

Taking into account these trends and the current economic environment, we offer the following fourth quarter guidance. Revenues $1 billion-35 million to $1 billion-85 million. Income per share $0.25 to $0.30. As you know, we limit our guidance to one quarter. We broadened our guidance range this quarter to reflect current economic conditions. The estimates we provided on this call are subject to the risks mentioned in today's press release.

Now I'll turn the call back over to Max.

Harold Messmer (Max)

Thank you, Keith.

Our results clearly were impacted by the turmoil in the financial markets and its effect on businesses of all sizes. Many companies put hiring plans on hold during the third quarter while others took much longer to make hiring decisions. The mood worsened as the quarter progressed.

Employers are understandably cautious right now. The credit crisis and market instability have taken on global proportions. Obviously these conditions are unprecedented, which makes it difficult to provide you with any clear insight into what we may or may not expect to see from a business perspective in the next few months.

As we have said in the past, however, we do feel the company is very well positioned to deal with an economic downturn. We have an experience field management team and I am confident in their abilities. We have essentially no debt and have maintained excellent cash liquidity.

We have a cash balance of over $370 million dollars. We have demonstrated that we can maintain cash flows even in a downturn between 2001 and 2003 when the United States as last in a recession, RHI generated more than $550 in cash from operating activities.

Our client and geographical diversity work in our favor. We have an extremely broad customer base without significant concentration in any one industry. We have a wide international presence than we have had in past downturns, which further diversifies our operations.

International operations now represent 30% of our company’s total staffing revenues and make up 29% of Protiviti’s total revenues.

During the past 60 years, Robert Half has grown market share even in downturns, as some of our smaller competitors were forced to close operations. There are few staffing firms that have our longevity, reputation, and resources. We think we provide considerable value to clients by offering cost effective solutions to their most immediate staffing needs.

Protiviti further enhances and diversifies the suite of services its professionals continue to help organizations solve problems in finance, operations, technology, litigation, and compliance. Protiviti also remains a leader in internal audit.

At this time Keith and I will be happy to answer questions. We would ask that you please limit yourself to one question and a single follow-up as needed. If you have additional questions, we will certainly try to return to you later in the call.





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