Annual Report (Form 10-K), fiscal year 1994

ITEM 1. BUSINESS
Robert Half International Inc. is the world's largest specialized provider of temporary and permanent personnel in the fields of accounting and finance. Its divisions include ACCOUNTEMPS-Registered Trademark- and ROBERT HALF-Registered Trademark-, providers of temporary and permanent personnel, respectively, in the fields of accounting and finance. The Company, utilizing its experience as a specialized provider of temporary and permanent personnel, has expanded into additional specialty fields. In December 1991, the Company formed OFFICETEAM-Registered Trademark- to provide skilled temporary administrative and office personnel. In 1992, the Company acquired THE AFFILIATES-Registered Trademark-, which focuses on placing temporary and permanent employees in paralegal, legal administrative and other legal support positions. In addition, the Company recently established RHI CONSULTING-SM- to concentrate on providing temporary information technology professionals in positions ranging from PC/LAN technician to system design and application programmer.
The Company's business was originally founded in 1948. Prior to 1986, the Company was primarily a franchisor of ACCOUNTEMPS and ROBERT HALF offices. Beginning in 1986, the Company and its current management embarked on a strategy of acquiring franchised locations and other local or regional independent providers of specialized temporary service personnel. The Company has acquired all but five of the ACCOUNTEMPS and ROBERT HALF franchises in 45 separate transactions, and has acquired 14 other local or regional providers of specialized temporary service personnel. Since 1986, the Company has significantly expanded operations at many of the acquired locations and has opened over 50 new locations. The Company believes that direct ownership of offices allows it to better monitor and protect the image of the ACCOUNTEMPS and ROBERT HALF names, promotes a more consistent and higher level of quality and service throughout its network of offices and improves profitability by centralizing many of its administrative functions. The Company currently has more than 180 offices in 36 states and five foreign countries and placed approximately 85,000 employees on temporary assignment with clients in 1994.
ACCOUNTEMPS
The ACCOUNTEMPS temporary services division offers customers a reliable and economical means of dealing with uneven or peak work loads for accounting, tax and finance personnel caused by such predictable events as vacations, taking inventories, tax work, month-end activities and special projects and such unpredictable events as illness and emergencies. Businesses increasingly view the use of temporary employees as a means of controlling personnel costs and converting such costs from fixed to variable. The cost and inconvenience to clients of hiring and firing permanent employees are eliminated by the use of ACCOUNTEMPS temporaries. The temporary workers are employees of ACCOUNTEMPS and are paid by ACCOUNTEMPS only when working on customer assignments. The customer pays a fixed rate only for hours worked.
ACCOUNTEMPS clients may fill their permanent employment needs by using an ACCOUNTEMPS employee on a trial basis and, if so desired, "converting" the temporary position to a permanent position. The client typically pays a one-time fee for such conversions.
The ACCOUNTEMPS business accounted for 75% of the Company's revenue in 1993 and 66% of the Company's revenue in 1994.
OFFICETEAM
The Company's OFFICETEAM division, which commenced operations in 1991, places temporary and permanent office and administrative personnel, ranging from word processors to office managers, from over 125 locations in the United States. OFFICETEAM operates in much the same fashion as the ACCOUNTEMPS and ROBERT HALF divisions. The OFFICETEAM business accounted for 14% of the Company's revenue in 1993 and 19% of the Company's revenue in 1994.
ROBERT HALF
The Company offers permanent placement services through its office network under the name ROBERT HALF. The Company's ROBERT HALF division specializes in placing accounting, financial, tax and banking personnel. Fees for successful permanent placements are paid only by the employer and are generally a percentage of the new employee's annual compensation. No fee for permanent placement services is charged to employment candidates.
The ROBERT HALF business accounted for 9% of the Company's revenue in 1993 and 1994.
OTHER ACTIVITIES
In 1992, the Company acquired THE AFFILIATES, a small operation involving only a limited number of offices, which places temporary and permanent employees in paralegal, legal administrative and legal secretarial positions. 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.
The Company recently established its RHI CONSULTING division, which specializes in providing information technology professionals ranging from PC/LAN technician to system design and application programmer.
MARKETING AND RECRUITING
The Company markets its services to clients as well as employment candidates. Local marketing and recruiting are generally conducted by each office or related group of offices. Advertising directed to clients and employment candidates consists primarily of yellow pages advertisements, classified advertisements and radio. Direct marketing through mail and telephone solicitation also constitutes a significant portion of the Company's total advertising. National advertising conducted by the Company consists primarily of print advertisements in national newspapers, magazines and certain trade journals. Joint marketing arrangements have been entered into with Lotus Development Corporation, WordPerfect Corporation, Peachtree Software, Inc., and Computer Associates International, Inc. and typically provide for cooperative advertising, joint mailings and similar promotional activities. The Company also actively seeks endorsements and affiliations with professional organizations in the business management, office administration and professional secretarial fields. The Company also conducts public relations activities designed to enhance public recognition of the Company and its services. Local employees are encouraged to be active in civic organizations and industry trade groups.
The Company owns many trademarks, service marks and tradenames, including the ROBERT HALF-Registered Trademark-, ACCOUNTEMPS-Registered Trademark-, OFFICETEAM-Registered Trademark-, THE AFFILIATES-Registered Trademark- and RHI CONSULTING-SM- marks, which are registered in the United States and in a number of foreign countries.
ORGANIZATION
Management of the Company's operations is coordinated from its headquarters in Menlo Park, California. The Company's headquarters provides support and centralized services to its offices in the administrative, marketing, accounting, training and legal areas, particularly as it relates to the standardization of the operating procedures of its offices. The Company has more than 180 offices in 36 states and five foreign countries. Office managers are responsible for most activities of their offices, including sales, local advertising and marketing and recruitment.
COMPETITION
The Company faces competition in its efforts to attract clients as well as high-quality specialized employment candidates. The temporary and permanent placement businesses are highly competitive, with a number of firms offering services similar to those provided by the Company on a national, regional or local basis. In many areas the local companies are the strongest competitors. The most significant competitive factors in the temporary and permanent placement businesses are price and the reliability of service, both of which are often a function of the availability and quality of personnel.
The Company believes it derives a competitive advantage from its long experience with and commitment to the specialized employment market, its national presence, and its various marketing activities.
EMPLOYEES
The Company has approximately 1,600 full-time staff employees. The Company's offices placed approximately 85,000 employees on temporary assignments with clients during 1994. Temporary employees placed by the Company are the Company's employees for all purposes while they are working on assignments. The Company pays the related costs of employment, such as workers' compensation insurance, state and federal unemployment taxes, social security and certain fringe benefits. The Company provides voluntary health insurance coverage to interested temporary employees.
OTHER INFORMATION
The Company's current business constitutes a single business segment. (See Item 8. Financial Statements and Supplementary Data for financial information about the Company.)
The Company is not dependent upon a single customer or a limited number of customers. The Company's operations are generally more active in the first and fourth quarters of a calendar year. Order backlog is not a material aspect of the Company's business and no material portion of the Company's business is subject to government contracts. The Company does not have any material expenditures for research and development. Compliance with federal, state or local environmental protection laws has no material effect on the capital expenditures, earnings or competitive position of the Company.
Information about foreign operations is contained in Note N of Notes to Consolidated Financial Statements in Item 8. The Company does not have export sales.
ITEM 2.



ITEM 2. PROPERTIES
The Company's headquarters is located in Menlo Park, California. Placement activities are conducted through more than 180 offices located in the United States, Canada, the United Kingdom, Belgium, France and the Netherlands. All of the offices are leased.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings other than routine litigation incidental to its business.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's security holders during the fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed for trading on the New York Stock Exchange under the symbol "RHI". On February 28, 1995, there were approximately 1,400 holders of record of the Common Stock.
Following is a list by fiscal quarters of the sales prices of the stock as quoted on the New York Stock Exchange, adjusted, as appropriate, to reflect the two-for-one stock split effected in the form of a stock dividend in August 1994:
No cash dividends were paid in 1994 or 1993. The Company, as it deems appropriate, may continue to retain all earnings for use in its business or may consider paying a dividend in the future.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
Following is a table of selected financial data of the Company of the last five years:
All shares and per share amounts have been restated to retroactively reflect the two-for-one stock split effected in the form of a stock dividend in August 1994.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1994
Temporary services revenues increased 46% during 1994 and 40% during 1993, including the revenues generated from the Company's OfficeTeam division, which was started in 1991 to provide highly-skilled office and administrative personnel. Permanent placement revenues increased 47% during the year ended December 31, 1994 and 30% during the year ended December 31, 1993. The revenue comparisons reflect continued improvement in the demand for the Company's services.
Gross margin dollars increased 47% during the year ended December 31, 1994 compared to 33% for the year ended December 31, 1993. Gross margin amounts equaled 39% of revenue in 1994 and 1993. In 1992, gross margin equaled 40% of revenue. The percentage decline relative to 1992 related primarily to the lower mix of the higher permanent placement gross margins and higher unemployment insurance costs associated with the temporary services divisions.
Selling, general and administrative expenses were approximately $122 million during 1994 compared to $88 million in 1993 and $72 million in 1992. Selling, general and administrative expenses as a percentage of revenues were 27% in 1994, compared to 29% in 1993 and 33% in 1992. The percentage declines were attributable to revenue growth coupled with the Company's continued cost containment.
Amortization of intangible assets increased from 1992 to 1994 due to the acquisitions in each of those years of additional personnel services operations.
Interest expense for the years ended December 31, 1994 and 1993 decreased 61% and 7%, respectively, over the comparable prior periods due primarily to the conversion of the Convertible Subordinated Debentures in the fourth quarter of 1993 and the reduction in outstanding indebtedness.
The provision for income taxes was 42% in 1994, as compared to 46% in 1993 and 45% in 1992. The decrease in 1994 is the result of a smaller percentage of non-deductible intangible expenses relative to income. The 1993 increase reflects the effect of the 1% increase in the federal corporate income tax rate as a result of the 1993 Tax Act. Because of the increase in pre-tax book income, the effect of the non-deductible intangible amortization on the effective tax rate was reduced in 1993 as compared to 1992. The Financial Accounting Standards Board issued a new standard on accounting for income taxes, which the Company adopted, as required, on January 1, 1993. The cumulative effect of the adoption of the accounting method prescribed by the new standard was not material.
LIQUIDITY AND CAPITAL RESOURCES
The change in the Company's liquidity during the past three years is the net effect of funds generated by operations and the funds used for the personnel services acquisitions, principal payments on outstanding notes payable, and the securities repurchase program.
In November 1994, the Company issued 633,555 shares of its common stock. The net proceeds from the sale of shares were approximately $12.6 million. The Company used the proceeds for repayment of the borrowings under the Company's revolving credit agreement.
On December 10, 1993, substantially all of its outstanding convertible subordinated debentures were converted into common stock of the Company. See Note E to the Consolidated Financial Statements.
The Company's working capital requirements consist primarily of the financing of accounts receivable. While there can be no assurances in this regard, the Company expects that internally generated cash plus the bank revolving line of credit will be sufficient to support the working capital needs of the Company's offices, the Company's fixed payments and other long-term obligations.
ITEM 8.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
All share and per share amounts have been restated to retroactively reflect the two-for-one stock split effected in the form of a stock dividend in August 1994.
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
All share and per share amounts have been restated to retroactively reflect the two-for-one stock split effected in the form of a stock dividend in August 1994.
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
All share and per share amounts have been restated to retroactively reflect the two-for-one stock split effected in the form of a stock dividend in August 1994.
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The Consolidated Financial Statements include the accounts of Robert Half International Inc. (the "Company") and its subsidiaries, all of which are wholly-owned. The Company is a Delaware corporation. All significant intercompany balances have been eliminated. Certain reclassifications have been made to the 1993 and 1992 financial statements to conform to the 1994 presentation.
REVENUE RECOGNITION. Temporary services revenues are recognized when the services are rendered by the Company's temporary employees. Permanent placement revenues are recognized when employment candidates accept offers of permanent employment. Allowances are established to estimate losses due to placed candidates not remaining in employment for the Company's guarantee period, typically 90 days.
FOREIGN CURRENCY TRANSLATION. Foreign income statement items are translated at the monthly average exchange rates prevailing during the period. Foreign balance sheets are translated at the current exchange rates at the end of the period, and the related translation adjustments are recorded as part of Stockholders' Equity. Gains and losses resulting from foreign currency transactions are included in the Consolidated Statements of Income.
CASH AND CASH EQUIVALENTS. For purposes of the Consolidated Statements of Cash Flows, the Company classifies all highly liquid investments with an original maturity of three months or less as cash equivalents.
INTANGIBLE ASSETS. Intangible assets represent the cost of acquired companies in excess of the fair market value of their net tangible assets at acquisition date, and are being amortized on a straight-line basis over a period of 40 years. The carrying value of intangible assets is periodically reviewed by the Company and impairments are recognized when the expected future operating cash flows derived from such intangible assets is less than their carrying value. Based upon its most recent analysis, the Company believes that no material impairment of intangible assets exists at December 31, 1994.
INCOME TAXES. Effective January 1, 1993, the Company adopted Financial Accounting Standards No. 109, Accounting for Income Taxes (FAS 109). Under FAS 109, deferred taxes are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. As permitted under the provisions of FAS 109, the Company elected not to restate prior years and has determined that the cumulative effect of implementation was immaterial.
NOTE B -- ACQUISITIONS In July 1986, the Company acquired all of the outstanding stock of Robert Half Incorporated, the franchisor of the Accountemps and Robert Half operations. Subsequently, in 59 separate transactions the Company acquired all of the outstanding stock of certain corporations operating Accountemps and Robert Half franchised offices in the United States, the United Kingdom and Canada as well as other personnel services businesses. The Company has paid approximately $192 million in cash, stock, notes and other indebtedness in these acquisitions, excluding transaction costs and cash acquired.
These acquisitions were accounted for as purchases, and the excess of cost over the fair market value of the net tangible assets acquired is being amortized over 40 years using the straight-line method. Results of operations of the acquired companies are included in the Consolidated Statements of Income from the dates of acquisition. The acquisitions made during 1994 and 1993 had no material pro forma impact on the results of operations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE C -- NOTES PAYABLE AND OTHER INDEBTEDNESS The Company issued promissory notes as well as other forms of indebtedness in connection with certain acquisitions. These are due in varying installments, carry varying interest rates and in aggregate amounted to $4,214,000 at December 31, 1994, and $2,440,000 at December 31, 1993. At December 31, 1994, $1.8 million of the notes was secured by a standby letter of credit (see Note D). The following table shows the schedule of maturities for notes payable and other indebtedness at December 31, 1994 (in thousands):
At December 31, 1994, all of the notes carried fixed rates of interest ranging from 4.1% to 13.3%. The weighted average interest rate for the above was approximately 8.2%, 11.1% and 8.5% for the years ended December 31, 1994, 1993 and 1992, respectively.
As part of a Restructuring in 1987, a newly formed corporation, BF Enterprises, Inc., assumed the obligation for certain subordinated debentures issued by a predecessor of the Company. At December 31, 1994, the Company remains contingently liable for $3.6 million of these subordinated debentures, payment of $3.4 million of which has been provided for by the issuance of letters of credit to the trustee for the debentures by BF Enterprises, Inc. Additionally, pursuant to a pledge and security agreement entered into at the time of Restructuring, BF Enterprises, Inc., has agreed to pledge to the Company collateral (consisting of real estate, marketable securities and bank letters of credit) if the net worth of BF Enterprises, Inc., falls below certain minimum levels.
NOTE D -- BANK LOAN (REVOLVING CREDIT) The bank loan is an unsecured credit facility which provides a line of credit of up to $80,000,000, which is available to fund the Company's general business and working capital needs, including acquisitions and the purchase of the Company's common stock, and to cover the issuance of debt support standby letters of credit up to $15,000,000.
As of December 31, 1994, the Company had no borrowings on the line of credit outstanding and had used $3,358,000 in debt support standby letters of credit. There is a commitment fee on the unused portion of the entire credit facility of .25%. The loan is subject to certain financial covenants which also affect the interest rates charged.
The credit facility has the following scheduled reduction in availability (in thousands):
The final maturity date for the credit facility is August 31, 2000.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE D -- BANK LOAN (REVOLVING CREDIT) (CONTINUED) As of December 31, 1993, the Company had borrowed $30,300,000 on the line of credit and had used $2,780,000 in debt support standby letters of credit. Of the $30,300,000 outstanding loan balance at December 31, 1993, $29,000,000 carried an interest rate tied to Eurodollar rates plus 1.25% and the remaining balance of $1,300,000 carried an interest rate at prime.
NOTE E -- CONVERTIBLE SUBORDINATED DEBENTURES On August 6, 1987, the Company issued $74,750,000 of 7.25% Convertible Subordinated Debentures (the "Convertible Debentures"). Prior to 1993, all but $22,745,000 of the Convertible Debentures were repurchased by the Company pursuant to its repurchase program (see Note F). The Convertible Debentures were unsecured obligations of the Company with an original maturity date of August 1, 2012. Interest was payable semi-annually as of February 1 and August 1 of each year to the registered holders as of the preceding January 15 and July 15, respectively. The Convertible Debentures were redeemable at the Company's option at any time on or after August 1, 1990, at declining redemption prices.
In December 1993, the Company called for redemption all of its then outstanding Convertible Debentures. Holders of $22,440,000 in principal amount elected to convert their debentures into 2.04 million shares of common stock at the conversion price of $11.00 per share. The remaining $305,000 in principal amount of Convertible Debentures was redeemed at 102.9% of the principal amount plus accrued interest.
NOTE F -- STOCKHOLDERS' EQUITY On June 27, 1994, the stockholders of the Company voted to amend the certificate of incorporation to increase the number of authorized shares of the Company's common stock from 30,000,000 to 100,000,000 shares and the number of authorized shares of the Company's preferred stock from 500,000 to 5,000,000. The stockholders of the Company also authorized a reduction in par value from $1 per share to $.001 per share on both classes of shares.
In August 1994, the Company effected a two-for-one stock split in the form of a stock dividend. All share and per share amounts have been restated to retroactively reflect the two-for-one stock split.
In November 1994, the Company issued 633,555 shares of its common stock at a price of $21.25 per share. The net proceeds from the sale of shares (after deducting issuance costs of approximately $355,000 and a 4% underwriter's discount) were approximately $12.6 million.
NOTE G -- INCOME TAXES The provisions for income taxes for the three years ended December 31, 1994, consisted of the following (in thousands):
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE G -- INCOME TAXES (CONTINUED) The income taxes shown above varied from the statutory federal income tax rates for these periods as follows:
The deferred portion of the tax provisions consisted of the following (in thousands):
During the fourth quarter of 1992, the Company recorded a one-time benefit of $400,000 for the resolution of certain tax accounting issues related to previous acquisitions.
The deferred income tax liability shown on the balance sheet is comprised of the following (in thousands):
No valuation allowances against deferred tax assets were required for the years ended December 31, 1994 and 1993.
The components of the net deferred income tax liability at December 31, 1994 and 1993, were as follows (in thousands):
NOTE H -- EMPLOYEE BENEFIT PLANS Under a retirement plan covering one current and one former executive officer of the Company, monthly benefits are payable equal to 25% of the participant's base compensation as defined, increased by an inflation formula. The plan was amended effective May 31, 1992, to provide a fixed supplemental benefit for the current employee during the first 15 years after retirement. The current employee forfeited long-term incentive awards of equal value in exchange for this amendment. The plan was also amended effective May 21, 1991, for the current employee to increase the percentage of
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE H -- EMPLOYEE BENEFIT PLANS (CONTINUED) base compensation to 30% increasing thereafter by 3% for each year of service beyond the age of 50, up to a maximum of 66%. During 1993, the Company changed its discount rate assumption from 8% to 6%. The effect of both plan amendments and the discount rate change are being amortized over the employee's expected future service period (initially 15 years) and will increase after-tax expense by approximately $76,000 per year. The employee can require the Company to discharge its liability at defined intervals by purchasing annuities. At December 31, 1992, a liability of $1,124,000 was established to cover the estimated unfunded cost of these benefits. This amount was increased to $1,721,000 at December 31, 1993, and at December 31, 1994, is $1,827,000. Pre-tax pension costs for these plans were $232,000, $188,000, and $131,000 for the years ended December 31, 1994, 1993 and 1992, respectively. These charges were computed using certain assumptions regarding salary increases, retirement age and life expectancy.
NOTE I -- COMMITMENTS Rental expense, primarily for office premises, amounted to $9,183,000, $8,457,000 and $8,042,000 for the years ended December 31, 1994, 1993 and 1992, respectively. The approximate minimum rental commitments for 1995 and thereafter under non-cancelable leases in effect at December 31, 1994, are as follows (in thousands):
NOTE J -- STOCK PLANS Under various stock plans, officers, employees and outside directors may receive grants of restricted stock or options to purchase common stock. Grants are made at the discretion of the Compensation Committee of the Board of Directors. Grants usually vest over four years.
Options granted under the plans have exercise prices ranging from 85% to 100% of the fair market value of the Company's common stock at the date of grant, consist of both incentive stock options and nonstatutory stock options under the Internal Revenue Code, and generally have a term of ten years.
Recipients of restricted stock do not pay any cash consideration to the Company for the shares, have the right to vote all shares subject to such grant, and receive all dividends with respect to such shares, whether or not the shares have vested.
As of December 31, 1994 the total number of available grants under the plans (consisting of either restricted stock or options) was 340,227.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE J -- STOCK PLANS (CONTINUED) The following table reflects activity under all stock plans from January 1, 1992 through December 31, 1994 and the exercise prices:
As of December 31, 1994, an aggregate of 1,235,574 options to purchase common stock were vested.
NOTE K -- PREFERRED SHARE PURCHASE RIGHTS Pursuant to the Company's stockholder rights agreement, each share of common stock carries one right to purchase one two-hundredth of a share of preferred stock. The rights become exercisable in certain limited circumstances involving a potential business combination transaction or an acquisition of shares of the Company and are exercisable at a price of $32.50 per right, subject to adjustment. Following certain other events after the rights become exercisable, each right entitles its holder to purchase for $32.50 an amount of common stock of the Company, or, in certain circumstances, securities of the acquiror, having a then-current market value of twice the exercise price of the right. The rights are redeemable and may be amended at the Company's option before they become exercisable. Until a right is exercised, the holder of a right has no rights as a stockholder of the Company. The rights expire on July 23, 2000.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE L -- INCOME PER SHARE Income per fully diluted share has been computed using the weighted average number of shares of fully diluted common stock and common stock equivalents outstanding during each period (28,484,000, 25,260,000 and 24,007,000 shares for the years ending December 31, 1994, 1993 and 1992, respectively). An assumed conversion of the Convertible Debentures was not dilutive to income per share in 1993 (see Note E) or 1992.
NOTE M -- QUARTERLY FINANCIAL DATA (UNAUDITED) The following tabulation shows certain quarterly financial data for 1994 and 1993 (in thousands, except per share amounts):
NOTE N -- SEGMENT REPORTING Information about the Company's operations in different geographic locations for each of the three years in the period ended December 31, 1994, is shown below. The Company's areas of operations outside of the United States include Canada, the United Kingdom, Belgium, France and the Netherlands. Revenues represent total net revenues from the respective geographic areas. Operating income is net revenues less operating costs and expenses pertaining to specific geographic areas. Foreign operating income reflects charges for U.S. management fees and amortization of intangibles of $956,000, $917,000 and $854,000 for the years ended December 31, 1994, 1993 and 1992, respectively. Domestic operating income reflects charges for amortization of intangibles of $4,137,000,
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE N -- SEGMENT REPORTING (CONTINUED) $3,841,000 and $3,606,000 for the years ended December 31, 1994, 1993 and 1992, respectively. Identifiable assets are those assets used in the geographic areas and are after elimination of intercompany balances.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND THE BOARD OF DIRECTORS OF ROBERT HALF INTERNATIONAL INC.:
We have audited the accompanying consolidated statements of financial position of Robert Half International Inc. (a Delaware corporation) and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Robert Half International Inc. and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California January 24, 1995
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
The information required by Items 10 through 13 of Part III is incorporated by reference from the registrant's Proxy Statement, under the captions "NOMINATION AND ELECTION OF DIRECTORS," "BENEFICIAL STOCK OWNERSHIP," "COMPENSATION OF DIRECTORS," "COMPENSATION OF EXECUTIVE OFFICERS" AND "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION AND CERTAIN TRANSACTIONS," which Proxy Statement will be mailed to stockholders in connection with the registrant's annual meeting of stockholders which is scheduled to be held in May 1995.
PART IV
ITEM 14.







ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company and its subsidiaries are included in Item 8 of this report:
Consolidated statements of financial position at December 31, 1994 and 1993.
Consolidated statements of income for the years ended December 31, 1994, 1993 and 1992.
Consolidated statements of stockholders' equity for the years ended December 31, 1994, 1993 and 1992.
Consolidated statements of cash flows for the years ended December 31, 1994, 1993 and 1992.
Notes to consolidated financial statements.
Report of independent public accountants.
Selected quarterly financial data for the years ended December 31, 1994 and 1993 are set forth in Note M - Quarterly Financial Data (Unaudited) included in Item 8 of this report.
2. FINANCIAL STATEMENT SCHEDULES
Schedules I through V have been omitted as they are not applicable.
3. EXHIBITS
(b) Reports on Form 8-K
The Registrant filed the following report on Form 8-K during the fiscal quarter ending December 31, 1994:
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ROBERT HALF INTERNATIONAL INC. (Registrant)
Date: March 8, 1995 By: /S/ M. KEITH WADDELL
----------------------------------- M. Keith Waddell Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.