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Article by DailyStocks_admin    (03-10-08 05:59 AM)

The Daily Magic Formula Stock for 03/08/2008 is Robert Half International Inc. According to the Magic Formula Investing Web Site, the ebit yield is 14% 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

Business

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 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.


CEO BACKGROUND

Mr. Gentzkow has been President and Chief Operating Officer-Staffing Services since February 2004. From 2000 until February 2004, he served as Executive Vice President, Operations. For more than five years prior to his election as an executive officer, he served as Director of Field Operations.

Mr. Glass has been Executive Vice President, Corporate Development since February 2004. From 1993 until February 2004, he served as Senior Vice President, Corporate Development. From 1987 until 1993 he served as Vice President.

Mr. Buckley has been Treasurer since 2004 and Executive Vice President and Chief Administrative Officer since February 2007. He was Vice President from 2001 through February 2007 and served as Controller, Corporate Accounting from 1999 until 2004. From 1995 through 1999, he held various other positions with the Company.

Mr. Karel has been General Counsel of the Company since 1989 and Secretary since 1993. He has been Senior Vice President since February 2007 and from 1989 through then was Vice President.

SHARE OWNERSHIP

(a) Information is as of December 31, 2006, the latest date for which information is available to the Company. According to a Schedule 13G filed by Barclays Global Investors, N.A., the shares are held by Barclays Global Investors, N.A. and the following affiliated entities: Barclays Global Fund Advisors, Barclays Global Investors, Ltd., Barclays Global Investors Japan Trust and Banking Company Limited and Barclays Global Investors Japan Limited, all of which hold such shares either in their capacities as banks or investment advisors. According to the Schedule 13G sole voting power is held with respect to 26,306,510 of such shares and sole dispositive power is held with respect to all of such shares.


(b) Information is as of December 31, 2006, the latest date for which information is available to the Company. According to a Schedule 13G filed by FMR Corp., Edward C. Johnson 3d, Chairman of FMR Corp., and members of his family, collectively own 49% of the voting power of FMR Corp. and may constitute a controlling group with respect to FMR Corp. The shares are held directly by the following entities controlled by FMR Corp.: Fidelity Management & Research Company, Fidelity Management Trust Company, Strategic Advisers, Inc., Pyramis Global Advisors, LLC and Pyramis Global Advisors Trust Company, all of which own such shares in their capacities as investment advisers, investment companies or investment managers. According to the Schedule 13G, Edward C. Johnson 3d and FMR Corp. each has sole dispositive power with respect to the 21,437,270 shares and sole voting power with respect to 604,500 shares. Neither Edward C. Johnson nor FMR Corp. has the sole power to vote or direct the voting of shares held by the Fidelity Funds, which power resides with the board of trustees of the Fidelity Funds.


(c) Information is as of December 31, 2006, the latest date for which information is available to the Company. According to a Schedule 13G filed by Capital Research and Management Company, which identified itself as an investment advisor and investment company in the Schedule 13G, sole dispositive power is held with respect to all of such shares and sole voting power is held with respect to 8,300,000 of such shares.

(d) Includes 153,000 shares that may be acquired upon the exercise of Exercisable Options, 66,000 shares which are pledged and as to which Mr. Berwick has voting power but not dispositive power and 3,700 shares acquired pursuant to Company benefit plans, as to which shares Mr. Berwick has sole voting power but as to which disposition is restricted pursuant to the terms of such plans.


(e) Includes 3,982,600 shares which are pledged and as to which Mr. Furth has voting power but not dispositive power, 179,800 shares owned by the Furth Family Foundation, a charitable foundation of which Mr. Furth is a director, as to which shares Mr. Furth has shared voting and dispositive powers, 153,000 shares that may be acquired upon the exercise of Exercisable Options and 3,700 shares acquired pursuant to Company benefit plans, as to which shares Mr. Furth has sole voting power but as to which disposition is restricted pursuant to the terms of such plans. Also includes 9,000 shares owned by Mr. Furth’s wife, as to which shares he has sole voting and dispositive power.


(f) Includes 650,445 shares which are pledged and as to which Mr. Gibbons has voting power but not dispositive power and 129,000 shares that may be acquired upon the exercise of Exercisable Options and 3,700 shares acquired pursuant to Company benefit plans, as to which shares Mr. Gibbons has sole voting power but as to which disposition is restricted pursuant to the terms of such plans.


(g) Includes 2,983,114 shares that may be acquired upon the exercise of Exercisable Options, 551,893 shares acquired pursuant to Company benefit plans, as to which shares Mr. Messmer has sole voting power but as to which disposition is restricted pursuant to the terms of such plans, and 1,284,230 shares as to which Mr. Messmer shares voting and dispositive power with his wife.


(h) Includes 129,000 shares that may be acquired upon the exercise of Exercisable Options and 3,700 shares acquired pursuant to Company benefit plans, as to which shares Mr. Ryan has sole voting power but as to which disposition is restricted pursuant to the terms of such plans. Also includes 8,500 shares held by the Ryan Family Foundation, as to which shares Mr. Ryan shares voting and dispositive power but in which he has no pecuniary interest.


(i) Includes 129,000 shares that may be acquired upon the exercise of Exercisable Options, 40,000 shares as to which Mr. Schaub shares voting and dispositive power with his wife, 100,000 shares held by the Sunrise Investment Partners II, LP, of which Mr. Schaub is general partner and a limited partner, 38,000 shares held by The Schaub Foundation, as to which shares Mr. Schaub shares voting and dispositive power but in which he has no pecuniary interest and 1,704 shares owned by Mr. Schaub’s wife and 3,700 shares acquired pursuant to Company benefit plans, as to which shares Mr. Schaub has sole voting power but as to which disposition is restricted pursuant to the terms of such plans.


(j) Includes 1,710,908 shares that may be acquired upon the exercise of Exercisable Options, 345,310 shares acquired pursuant to Company benefit plans, as to which shares Mr. Waddell has sole voting power but as to which disposition is restricted pursuant to the terms of such plans and 948,050 shares as to which Mr. Waddell shares voting and dispositive power with his wife.


(k) Includes 1,422,110 shares that may be acquired upon the exercise of Exercisable Options, 253,750 shares that were acquired pursuant to company benefit plans, as to which shares Mr. Gentzkow has sole voting power but as to which disposition is restricted pursuant to the terms of such plans, and 372,836 shares as to which Mr. Gentzkow shares voting and dispositive power with his wife.


(l) Includes 371,622 shares that may be acquired upon the exercise of Exercisable Options, 77,001 shares acquired pursuant to Company benefit plans, as to which shares Mr. Glass has sole voting power but as to which disposition is restricted pursuant to the terms of such plans, 266,201 shares as to which Mr. Glass shares voting and dispositive power with his wife and 1,500 shares held by Mr. Glass’s minor children.


(m) Includes 117,395 shares that may be acquired upon the exercise of Exercisable Options, 56,125 shares acquired pursuant to Company benefit plans, as to which shares Mr. Buckley has sole voting power but as to which shares disposition is restricted pursuant to the terms of such plans and 22,597 shares as to which Mr. Buckley shares voting and dispositive power with his wife.

(n) Includes 35,901 shares that may be acquired upon the exercise of Exercisable Options, 72,751 shares acquired pursuant to Company benefit plans, as to which shares Mr. Karel has sole voting power but as to which disposition is restricted pursuant to the terms of such plans and 214,198 shares as to which Mr. Karel shares voting and dispositive power with his wife.

MANAGEMENT DISCUSSION FROM LATEST 10K

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 4.6% and 4.1% as of December 31, 2007 and 2006, respectively. As of December 31, 2007, 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 $1.4 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 strategies 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 $12.7 million were recorded as of December 31, 2007. 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 may exist.

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 each of the years ended December 31, 2007 and 2006, 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 $9.4 and $12.4 million, representing 0.27% and 0.39% of applicable U.S. revenue for the years ended December 31, 2007 and 2006, 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 year ended December 31, 2007, 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 $0.3 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. Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment (“SFAS 123(R)”), using the modified prospective transition method; accordingly, prior periods have not been restated. Stock-based compensation expense recognized in the Company’s Consolidated Financial Statements (“Financial Statements”) for the years ended December 31, 2007 and 2006 included compensation expense for stock options, which includes grants made prior to, but not yet vested as of December 31, 2005, as well as stock options granted subsequent to December 31, 2005.

Beginning in 2005, the Company significantly decreased its use of stock options as part of its compensation programs. For the years ended December 31, 2007 and 2006, the Company’s pre-tax stock-based compensation cost from options totaled $9.2 million and $17.6 million, respectively. Under both SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), and SFAS 123(R) the Company determined the fair value of stock options using the Black-Scholes valuation model.

SFAS 123(R) requires the Company to recognize compensation expense for only the portion of restricted stock and stock units that is expected to vest, rather than record forfeitures when they occur, as previously permitted. If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods. For the years ended December 31, 2007 and 2006, compensation expense related to restricted stock and stock units was $53.8 million and $40.8 million, respectively, of which $21.1 million and $10.2 million was related to grants made in 2007 and 2006, respectively. A one-percentage point deviation in the estimated forfeiture rates would have resulted in a $0.5 million and $0.4 million increase or decrease in compensation expense related to restricted stock and stock units for the years ended December 31, 2007 and 2006, respectively.

Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”), which gives entities the option to measure eligible financial assets, and financial liabilities at fair value on an instrument by instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability. Subsequent changes in fair value must be recorded in earnings. This statement is effective as of January 1, 2008. The Company does not expect the adoption of SFAS 159 to have a material impact on its Financial Statements.

In June 2007, the FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards (“EITF 06-11”). EITF 06-11 requires that tax benefits generated by dividends paid during the vesting period on certain equity-classified share-based compensation awards be classified as additional paid-in capital and included in a pool of excess tax benefits available to absorb tax deficiencies from share-based payment awards. EITF 06-11 is effective as of January 1, 2008. The Company does not expect the adoption of EITF 06-11 to have a material impact on its Financial Statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS No. 141(R)”). SFAS No. 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 No. 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS No. 141(R) is effective for fiscal years beginning after December 15, 2008. The Company is in the process of analyzing the impact of SFAS No. 141(R) 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 No. 160”). SFAS No. 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 No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. The Company is in the process of analyzing the impact of SFAS No. 160 on its Financial Statements.

Results of Operations for the Three Years Ended December 31, 2007

Temporary and consultant staffing services revenues were $3.6 billion, $3.1 billion and $2.6 billion for the years ended December 31, 2007, 2006 and 2005, respectively, increasing by 16% and 19% in 2007 and 2006, respectively. On a constant-currency basis, temporary and consultant staffing services revenues increased 14% and 18% for the years ended December 31, 2007 and 2006, respectively. Permanent placement revenues were $444 million, $336 million and $219 million for the years ended December 31, 2007, 2006 and 2005, respectively, increasing by 32% and 53% in 2007 and 2006, respectively. On a constant-currency basis, permanent placement services revenues increased 29% and 52% for the years ended December 31, 2007 and 2006, respectively. Improvement in both domestic and international markets, particularly Continental Europe, contributed to the increase in temporary and permanent staffing services revenues for the year ended December 31, 2007. Risk consulting and internal audit services revenues were $552 million, $543 million and $479 million for the years ended December 31, 2007, 2006 and 2005, respectively, increasing by 2% and 13% in 2007 and 2006, respectively. On a constant-currency basis, risk consulting and internal audit services revenues were flat and increased 13% for the years ended December 31, 2007 and 2006, respectively. The 2007 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 360 offices in 42 states, the District of Columbia and eighteen foreign countries, while Protiviti has 60 offices in 22 states and fourteen foreign countries. Revenues from foreign operations represented 24%, 21% and 19% of revenues for the years ended December 31, 2007, 2006 and 2005, 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 from permanent placement staffing services represent revenues less reimbursable expenses. 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 temporary and consultant staffing services were $1.4 billion, $1.2 billion and $963 million for the years ended December 31, 2007, 2006 and 2005, respectively, increasing by 17% and 20% in 2007 and 2006, respectively. On a constant-currency basis, temporary and consultant staffing services gross margin dollars increased 15% and 18% for the years ended December 31, 2007 and 2006, respectively. Gross margin amounts equaled 37%, 37% and 36% of revenues for temporary and consultant staffing services for the years ended December 31, 2007, 2006 and 2005, respectively.

Gross margin dollars for the Company’s permanent placement staffing division were $444 million, $336 million and $219 million for the years ended December 31, 2007, 2006 and 2005, respectively, increasing by 32% and 53% in 2007 and 2006, respectively. On a constant-currency basis, permanent placement staffing services gross margin dollars increased 29% and 52% for the years ended December 31, 2007 and 2006, respectively.

Gross margin dollars for the Company’s risk consulting and internal audit division were $175 million, $199 million and $190 million for the years ended December 31, 2007, 2006 and 2005, respectively, decreasing by 12% in 2007 and increasing by 5% in 2006. On a constant-currency basis, risk consulting and internal audit services gross margin dollars decreased 13% and increased 5% for the years ended December 31, 2007 and 2006, respectively. Gross margin amounts equaled 32%, 37% and 40% of revenues for risk consulting and internal audit services for the years ended December 31, 2007, 2006 and 2005, respectively. The 2007 and 2006 decreases in gross margin percentage are primarily the result of additional professional staff related to the expansion of international operations as well as lower utilization of the professional staff in the United States.

Selling, general and administrative expenses were $1.5 billion in 2007, compared to $1.2 billion in 2006 and $991 million in 2005. Selling, general and administrative expenses as a percentage of revenues were 32%, 31% and 30% for the years ended December 31, 2007, 2006 and 2005, respectively. Selling, general and administrative expenses consist primarily of staff compensation, advertising, depreciation and occupancy costs. The 2007 increase relates primarily to higher staff compensation 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 each of the years ended December 31, 2007 and 2006, 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 20% of total stockholders’ equity at December 31, 2007.

Interest income for the years ended December 31, 2007, 2006 and 2005 was $17.2 million, $19.3 million and $12.1 million, respectively. Lower 2007 interest income resulted from lower average cash balances, partially offset by higher interest rates. Interest expense for the years ended December 31, 2007, 2006 and 2005 was $4.1 million, $2.5 million and $1.1 million, respectively.

The provision for income taxes was 40%, 39% and 39% of income before taxes for the years ended December 31, 2007, 2006 and 2005, respectively.

Liquidity and Capital Resources

The change in the Company’s liquidity during the years ended December 31, 2007, 2006 and 2005 is primarily the net effect of funds generated by operations and the funds used for capital expenditures, repurchases of common stock, payment of dividends and principal payments on outstanding notes payable.

Cash and cash equivalents were $310 million, $447 million and $458 million at December 31, 2007, 2006 and 2005, respectively. Operating activities provided $411 million during the year ended December 31, 2007, partially offset by $116 million and $452 million of net cash used in investing activities and financing activities, respectively. Operating activities provided $376 million during the year ended December 31, 2006, partially offset by $96 million and $299 million of net cash used in investing activities and financing activities, respectively. Operating activities and investing actives provided $328 million and $22 million, respectively, during the year ended December 31, 2005, partially offset by $232 million of net cash used in financing activities.

Operating activities—Net cash provided by operating activities for the year ended December 31, 2007 was composed of net income of $296 million adjusted for non-cash items of $124 million, and net cash used by changes in working capital of $9 million. Net cash provided by operating activities for the year ended December 31, 2006 was composed of net income of $283 million adjusted for non-cash items of $58 million, and net cash provided by changes in working capital of $35 million. Net cash provided by operating activities for the year ended December 31, 2005 was composed of net income of $238 million adjusted for non-cash items of $122 million, and net cash used for changes in working capital of $32 million.

Investing activities—Cash used in investing activities for the year ended December 31, 2007 was $116 million. This was composed of capital expenditures of $84 million, purchases of goodwill and other intangible assets of $19 million, and deposits to trusts for employee benefits and retirement plans of $13 million. Cash used in investing activities for the year ended December 31, 2006 was $96 million. This was composed of capital expenditures of $80 million, purchases of goodwill and other intangible assets of $12 million, and deposits to trusts for employee benefits and retirement plans of $4 million. Cash provided by investing activities for the year ended December 31, 2005 was $22 million. This was primarily composed of proceeds from sales and maturities of marketable securities of $92 million, partially offset by capital expenditures of $62 million, purchases of goodwill and other intangible assets of $4 million, and deposits to trusts for employee benefits and retirement plans of $3 million.

Financing activities—Cash used in financing activities for the year ended December 31, 2007 was $452 million. This included repurchases of $453 million in common stock and $66 million in cash dividends to stockholders, partially offset by proceeds of $52 million from exercises of stock options and the excess tax benefits from stock-based compensation of $15 million. Cash used in financing activities for the year ended December 31, 2006 was $299 million. This included repurchases of $400 million in common stock and $54 million in cash dividends to stockholders, partially offset by proceeds of $105 million from exercises of stock options and the excess tax benefits from stock-based compensation of $50 million. Cash used in financing activities for the year ended December 31, 2005 was $232 million. This included repurchases of $262 million in common stock and $48 million in cash dividends to stockholders, partially offset by proceeds of $77 million from exercises of stock options.

As of December 31, 2007, the Company is authorized to repurchase, from time to time, up to 9.2 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions. During the years ended December 31, 2007, 2006 and 2005, the Company repurchased approximately 12.2 million shares, 7.9 million shares and 7.6 million shares of common stock on the open market for a total cost of $397 million, $273 million and $222 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 the years ended December 31, 2007, 2006 and 2005, such repurchases totaled approximately 1.6 million shares, 3.3 million shares and 1.6 million shares at a cost of $58 million, $127 million and $53 million, respectively. Repurchases of securities have been funded with cash generated from operations.

The Company’s working capital at December 31, 2007 included $310 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.

On February 13, 2008, the Company announced a quarterly dividend of $.11 per share to be paid to all shareholders of record on February 25, 2008. The dividend will be paid on March 14, 2008.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

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 3.9% and 4.1% as of September 30, 2007 and December 31, 2006, respectively. As of September 30, 2007, 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 $1.3 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 strategies 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 $14.1 million were recorded as of September 30, 2007. 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, 2007, 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 $11.2 million and $11.0 million, representing 0.43% and 0.47% of applicable U.S. revenue for the nine months ended September 30, 2007 and 2006, 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, 2007, 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 $0.4 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. Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment (“SFAS 123(R)”). SFAS 123(R) requires the Company to recognize 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 the three and nine months ended September 30, 2007, compensation expense related to restricted stock and stock units was $14.1 million and $39.5 million, respectively, of which $6.4 million and $14.9 million, respectively, related to grants made in 2007. A one-percentage point deviation in the estimated forfeiture rates would have resulted in a $0.1 million and $0.4 million increase or decrease in compensation expense related to restricted stock and stock units for the three and nine months ended September 30, 2007, respectively.

Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”), which gives entities the option to measure eligible financial assets, and financial liabilities at fair value on an instrument by instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability. Subsequent changes in fair value must be recorded in earnings. This statement is effective as of the beginning of a company’s first fiscal year after November 15, 2007. The Company does not expect the adoption of SFAS 159 to have a material impact on its Financial Statements.

In June 2007, the FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards (“EITF 06-11”). EITF 06-11 requires that tax benefits generated by dividends paid during the vesting period on certain equity-classified share-based compensation awards be classified as additional paid-in capital and included in a pool of excess tax benefits available to absorb tax deficiencies from share-based payment awards. EITF 06-11 is effective as of January 1, 2008. The Company is in the process of analyzing the impact of EITF 06-11 on its Financial Statements.

Results of Operations for the Three and Nine Months Ended September 30, 2007 and 2006

Temporary and consultant staffing services revenues were $926 million and $797 million for the three months ended September 30, 2007 and 2006, respectively, increasing by 16% during the three months ended September 30, 2007 compared to the same period in 2006. Temporary and consultant staffing services revenues were $2.7 billion and $2.3 billion for the nine months ended September 30, 2007 and 2006, respectively, increasing by 17% during the nine months ended September 30, 2007 compared to the same period in 2006.

Permanent placement revenues were $113 million and $88 million for the three months ended September 30, 2007 and 2006, respectively, increasing by 28% during the three months ended September 30, 2007 compared to the same period in 2006. Permanent placement revenues were $327 million and $249 million for the nine months ended September 30, 2007 and 2006, respectively, increasing by 31% during the nine months ended September 30, 2007 compared to the same period in 2006.

Improvement in both domestic and international labor markets, particularly Continental Europe, contributed to the increase in temporary and permanent staffing services revenues for the three and nine months ended September 30, 2007.

Risk consulting and internal audit services revenues were $141 million and $142 million for the three months ended September 30, 2007 and 2006, respectively, decreasing by 1% during the three months ended September 30, 2007 compared to the same period in 2006. The year-over-year quarterly decrease in risk consulting and internal audit services revenues is primarily due to lower U.S. Sarbanes-Oxley consulting revenues. Risk consulting and internal audit services revenues were $401 million and $391 million for the nine months ended September 30, 2007 and 2006, respectively, increasing by 3% during the nine months ended September 30, 2007 compared to the same period in 2006. The 2007 increase in risk consulting and internal audit services revenues is primarily due to higher international revenues, particularly in Asia and Continental Europe.

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 2007.

The Company’s temporary and permanent staffing services business has 366 offices in 42 states, the District of Columbia and 18 foreign countries, while Protiviti has 60 offices in 22 states and 14 foreign countries. Revenues from foreign operations represented 24% and 20% of revenues for the nine months ended September 30, 2007 and 2006, 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. Gross margin dollars from permanent placement staffing services are equal to revenues, as there are no direct costs associated with such revenues. 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 temporary and consultant staffing services were $346 million and $293 million for the three months ended September 30, 2007 and 2006, respectively, increasing by 18% during the three months ended September 30, 2007 compared to the same period in 2006. Gross margin dollars for the Company’s temporary and consultant staffing services were $1.0 billion and $854 million for the nine months ended September 30, 2007 and 2006, respectively, increasing by 17% during the nine months ended September 30, 2007 compared to the same period in 2006. Gross margin amounts equaled 37% of revenues for temporary and consultant staffing services for both the three and nine months ended September 30, 2007 and 2006.

Gross margin dollars for the Company’s permanent placement staffing division were equal to revenues, as there are no direct costs associated with permanent placement revenues.

Gross margin dollars for the Company’s risk consulting and internal audit division were $42 million and $50 million for the three months ended September 30, 2007 and 2006, respectively, decreasing by 16% in 2007. Gross margin dollars for the Company’s risk consulting and internal audit division were $126 million and $140 million for the nine months ended September 30, 2007 and 2006, respectively, decreasing by 10% in 2007. Gross margin amounts equaled 30% and 36% of revenues for risk consulting and internal audit services for the three months ended September 30, 2007 and 2006, respectively. Gross margin amounts equaled 31% and 36% of revenues for risk consulting and internal audit services for the nine months ended September 30, 2007 and 2006, respectively. The 2007 decrease in gross margin percentage is primarily the result of lower staff utilization rates in both U.S. and international operations.

Selling, general and administrative expenses were $381 million and $1.1 billion in the three and nine months ended September 30, 2007, compared to $317 million and $912 million during the three and nine months ended September 30, 2006. Selling, general and administrative expenses as a percentage of revenues were 32% for both the three and nine months ended September 30, 2007, compared to 31% for both the three and nine months ended September 30, 2006. Selling, general and administrative expenses consist primarily of staff compensation, advertising, depreciation and occupancy costs. The higher mix of permanent placement activities and the continuing additions to professional staff all contributed to the higher percentage of 2007 selling, general and administrative expenses.

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, 2007, 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 20% of total stockholders’ equity at September 30, 2007.

Interest income for the three months ended September 30, 2007 and 2006 was $4.1 million and $5.3 million, respectively. Interest income for the nine months ended September 30, 2007 and 2006 was $13.3 million and $13.8 million, respectively. The lower 2007 interest income resulted from lower average cash balances partially offset by higher interest rates. Interest expense for the three months ended September 30, 2007 and 2006 was $0.9 million and $0.4 million, respectively. Interest expense for the nine months ended September 30, 2007 and 2006 was $3.1 million and $1.3 million, respectively.

The provision for income taxes was 39% of income before taxes for both the three and nine months ended September 30, 2007 and 2006.

Liquidity and Capital Resources

The change in the Company’s liquidity during the nine months ended September 30, 2007 and 2006 is primarily the net effect of funds generated by operations and the funds used for capital expenditures, repurchases of common stock, payment of dividends and principal payments on outstanding notes payable.

Cash, and cash equivalents were $329 million and $432 million at September 30, 2007 and 2006, 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 provided $297 million during the nine months ended September 30, 2006, offset by $72 million and $259 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, 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. Net cash provided by operating activities for the nine months ended September 30, 2006 was composed of net income of $208 million adjusted for non-cash items of $57 million, and net cash provided by changes in working capital of $32 million.

Investing activities—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. Cash used in investing activities for the nine months ended September 30, 2006 was $72 million. This was primarily composed of capital expenditures of $64 million, purchases of goodwill and other intangible assets of $6 million, and deposits to trusts for employee benefits and retirement plans of $2 million.

Financing activities—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. Cash used in financing activities for the nine months ended September 30, 2006 was $259 million. This included repurchases of $321 million in common stock and $41 million in cash dividends to stockholders, partially offset by proceeds of $70 million from exercises of stock options and the excess tax benefits from stock-based compensation of $33 million.

On October 31, 2007, the Company authorized the repurchase, from time to time, of up to 10 million shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions. This authorization is in addition to the 2.2 million shares remaining under the existing repurchase program. During the nine months ended September 30, 2007 and 2006, the Company repurchased approximately 9.2 million and 7.1 million shares of common stock on the open market for a total cost of $315 million and $242 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 the nine months ended September 30, 2007 and 2006, such repurchases totaled approximately 1.5 million and 2.1 million shares at a cost of $55 million and $79 million, respectively. Repurchases of securities have been funded with cash generated from operations.

The Company’s working capital at September 30, 2007 included $329 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.

On October 31, 2007, the Company announced a quarterly dividend of $.10 per share to be paid to all shareholders of record on November 26, 2007. The dividend will be paid on December 14, 2007.

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