ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

March 31, ~~2018~~2019

leases do not provide an implicit rate, the Company estimates its collateralized incremental borrowing rate, based on information available at the commencement date, in determining the present value of lease payments. The Company applies the portfolio approach in applying discount rates to its classes of leases. The operating lease ROU assets include any payments made before the commencement date and exclude lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company does not currently have subleases. The Company does not currently have residual value guarantees or restrictive covenants in its leases. The Company has contracts with lease and non-lease components, which are accounted for on a combined basis.

Internal-use Software. The Company capitalizes direct costs incurred in the development of internal-use software. Implementation costs incurred in hosting arrangements are capitalized and reported as a component of other current assets. All other internal-use software development costs are capitalized and reported as a component of computer software within property and equipment. Internal-use software development costs capitalized for the three months ended March 31, 2019 and 2018, are reflected in the following table (in thousands):



	Three Months Ended March 31,
	2019		2018
Internal-use software development costs	$	5,036	$	455

Note B—New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

~~Revenue from Contracts with Customers.~~ Lease Accounting. In ~~May 2014,~~February 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The new guidance requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.

The Company adopted the new guidance, using the modified retrospective method applied to all contracts not completed as of January 1, 2018, and since the adoption of the new guidance was not material, no adjustment was made to opening retained earnings. The Company also had no significant changes to systems, processes, or controls. The adoption of the guidance did not have a material impact on the Company's income statement. In accordance with the new guidance, the Company reclassified certain allowances that are now reflected as liabilities. The impact to the Company's balance sheet is as follows (in thousands):

March 31, 2018
As Reported Balances Without Adoption of Revenue Guidance Effect of Change Higher (Lower)
Assets
Accounts receivable, net $ 784,889
$ 774,281
$ 10,608

Liabilities
Accounts payable and accrued expenses $ 146,110
$ 135,502
$ 10,608

~~Classification of Certain Cash Receipts and Cash Payments in Statement of Cash Flows.~~ In August 2016, the FASB issued authoritative guidance designed to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows, including: i) contingent consideration payments made after a business combination; ii) proceeds from the settlement of insurance claims; and iii) proceeds from the settlement of corporate-owned life insurance policies. The Company adopted the new guidance as of January 1, 2018. The adoption of this guidance did not have a material impact on the Company's financial statements.

~~Stock Compensation.~~ In May 2017, the FASB issued authoritative guidance updating which changes in the terms or conditions of a share-based payment award require an entity to apply modification accounting. Under the amended guidance, entities are required to account for the effects of a modification if the fair value, vesting conditions or classification (as an equity instrument or a liability instrument) of the modified award change from that of the original award immediately before the modification. The Company adopted the new guidance as of January 1, 2018. The adoption of this guidance did not have a material impact on the Company's financial statements.

~~Recently Issued Accounting Pronouncements Not Yet Adopted~~

~~Lease Accounting.~~ ~~In February 2016, the FASB~~ issued authoritative guidance which changes financial reporting as it relates to leasing transactions. Under the new guidance, lessees ~~will be~~are required to recognize a lease liability, measured on a discounted basis; and a right-of-use asset, for the lease term. The Company adopted this guidance as of January 1, 2019, using the transition method that allowed it to initially apply the guidance as of January 1, 2019. The Company elected the package of practical expedients available under the new standard, which allowed the Company to forgo a reassessment of (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) the initial direct costs for any existing leases. The adoption of this guidance had a material impact on the Company’s Condensed Consolidated Statement of Financial Position beginning January 1, 2019. Prior periods were not restated. See Note F for further discussion of leases.

Internal-use Software—Cloud Computing. In August 2018, the FASB issued authoritative guidance which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Entities are required to present the expense related to capitalized implementation costs in the same line item in the statement of operations as the fees associated with the hosting elements of the arrangement and classify the payments for the capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element. Entities are also required to present the capitalized implementation costs in the statement of financial position in the same line item that a prepayment of the fees of the associated hosting arrangement would be presented. The new guidance is effective for annual and interim periods beginning after December 15, ~~2018. Early~~2019, although early adoption is permitted. The Company has adopted the new guidance prospectively as of January 1, 2019, and the impact of adoption was not material to its financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

Current Expected Credit Losses Model. In June 2016, the FASB issued authoritative guidance amending how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected losses. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted for ~~all entities upon issuance. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into~~annual reporting periods beginning after December 15, 2018. The Company is currently evaluating the ~~beginning~~impact of the ~~earliest~~new guidance on its consolidated financial statements and related disclosures.

ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

March 31, ~~2018~~2019

comparative period presented in the financial statements. While the impact of the adoption of this guidance will include the recognition of right-of-use assets and lease liabilities on the Company's statement of financial position, the Company is in the process of evaluating the impact of adoption of this guidance on its systems, processes, and controls.

Simplifying the Test for Goodwill Impairment. In January 2017, the FASB issued authoritative guidance to simplify the goodwill impairment testing process. The new standard eliminates Step 2 of the goodwill impairment test. If a company determines in Step 1 of the goodwill impairment test that the carrying value of goodwill is greater than the fair value, an impairment in that amount should be recorded to the income statement, rather than proceeding to Step 2. The new guidance is effective for the Company for fiscal years beginning after December ~~31,~~15, 2019, although early adoption is permitted. The Company believes the adoption of this guidance will not have a material impact on its financial statements.

Note C—Revenue Recognition

Revenues from contracts with customers are generated in three segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. Revenues are recognized when promised goods or services are delivered to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

Net service revenues, as presented onin the unaudited Condensed Consolidated Statements of Operations, represent services rendered to customers less variable consideration, such as sales adjustments and allowances. Reimbursements, including those related to travel and out-of-pocket expenses, are recorded on a gross basis and included in net service revenues, with equivalent amounts of reimbursable expenses included in direct costs of services.

Temporary and consultant staffing revenues. Temporary and consultant staffing revenues from contracts with customers are recognized in the amount to which the Company has a right to invoice, when the services are rendered by the Company’s temporary employees.

The Company records temporary and consultant staffing revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of revenues and expenses. The Company has concluded that gross reporting is appropriate because the Company (i) has the risk of identifying and hiring qualified employees, (ii) has the discretion to select the employees and establish their price and duties and (iii) bears the risk for services that are not fully paid for by customers. Fees paid to Time Management or Vendor Management service providers selected by clients are recorded as a reduction of revenues, as the Company is not the primary obligor with respect to those services. ~~Employees~~The substantial majority of employees placed on temporary assignment by the Company are the Company’s legal employees while they are working on assignments. The Company pays all related costs of employment, including workers’ compensation insurance, state and federal unemployment taxes, social security and certain fringe benefits. The Company assumes the risk of acceptability of its employees to its customers.

Permanent placement staffing revenues. Permanent placement staffing revenues from contracts with customers are primarily recognized when employment candidates accept offers of permanent employment. The Company has a substantial history of estimating the financial impact of permanent placement candidates who do not remain with its clients through the 90-day guarantee period. These amounts are established based primarily on historical data and are recorded as liabilities. Fees to clients are generally calculated as a percentage of the new employee’s annual compensation. No fees for permanent placement services are charged to employment candidates.

Risk consulting and internal audit services revenues. Risk consulting and internal audit services generally contain one or more performance obligation(s) which are satisfied over a period of time. Revenues are recognized over time as the performance obligations are satisfied, because the services provided do not have any alternative use to the Company, and contracts generally include language giving the Company an enforceable right to payment for services provided to date. Revenue is measured using cost incurred relative to total estimated cost for the engagement to measure progress towards satisfying the Company's performance obligations. Cost incurred represents work performed and thereby best depicts the transfer of control to the customer.

ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

March 31, ~~2018~~2019

The following table presents the Company's revenues disaggregated by line of business (in thousands):



	Three Months Ended March 31,
	2019			2018
Accountemps		$	483,473		$	471,589
OfficeTeam		252,035			261,152
Robert Half Technology		171,928			160,062
Robert Half Management Resources		177,191			173,485
Temporary and consulting staffing		1,084,627			1,066,288
Permanent placement staffing		131,562			121,400
Risk consulting and internal audit services		252,341			207,645
Net service revenues		$	1,468,530		$	1,395,333

Three Months Ended March 31,
2018 2017
Accountemps $ 471,589
$ 436,539
OfficeTeam 261,152
236,179
Robert Half Technology 160,062
157,439
Robert Half Management Resources 173,485
157,449
Temporary and consulting staffing revenues 1,066,288
987,606
Permanent placement staffing revenues 121,400
103,633
Risk consulting and internal audit revenues 207,645
196,131
Net service revenues $ 1,395,333
$ 1,287,370

Payment terms in ~~our~~the Company's contracts vary by the type and location of ~~our~~the Company's customer and the services offered. The term between invoicing and when payment is due is not significant.

Contracts with multiple performance obligations are recognized as performance obligations are delivered, and contract value is allocated based on relative stand-alone selling values of the services and products in the arrangement. As of ~~the quarter ended~~ March 31, ~~2018,~~2019, aggregate transaction price allocated to the performance obligations that are unsatisfied for contracts with an expected duration of greater than one year was ~~$84.1~~$84.8 million. Of this amount, ~~substantially all~~$80.4 million is expected to be recognized within the next twelve months. ~~There were no revenues recognized in the quarter ended March 31, 2018 related to performance obligations satisfied or partially satisfied in previous periods.~~

~~Contract assets are recorded when services are performed in advance of the Company’s unconditional right to payment. Contract assets as of January 1, 2018 and March 31, 2018 were not material.~~

Contract liabilities are recorded when cash payments are received or due in advance of performance and are reflected in Accounts payable and accrued expenses on the unaudited Condensed Consolidated ~~Balance Sheet.~~Statement of Financial Position. The following table sets forth the activity in contract liabilities from ~~January 1,~~December 31, 2018, through March 31, ~~2018~~2019 (in thousands):



	Contract Liabilities
Balance as of December 31, 2018		$	12,997
Payments in advance of satisfaction of performance obligations		4,604
Revenue recognized		(4,374		)
Other, including translation adjustments		(2,423		)
Balance as of March 31, 2019		$	10,804

March 31,
2018
Balance at beginning of period $ 9,003
    Payments in advance of satisfaction of performance obligations 5,689
    Revenue recognized (3,842 )
    Other, including translation adjustments (1,977 )
Balance at end of period $ 8,873

Note D—Other Current Assets

Other current assets consisted of the following (in thousands):



	March 31, 2019			December 31, 2018
Deposits in trusts for employee deferred compensation plans		$	345,844		$	311,708
Other		90,162			90,877
Other current assets		$	436,006		$	402,585

March 31,
2018 December 31, 2017
Deposits in trusts for employee deferred compensation plans $ 302,964
$ 292,326
Other 88,616
112,385
Other current assets $ 391,580

$ 404,711

ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

March 31, ~~2018~~2019

Note E—Property and Equipment, Net

Property and equipment consisted of the following (in thousands):



	March 31, 2019				December 31, 2018
Computer hardware		$	180,456			$	177,237
Computer software		379,415				378,734
Furniture and equipment		109,060				107,421
Leasehold improvements		161,685				160,521
Other		11,155				10,319
Property and equipment, cost		841,771				834,232
Accumulated depreciation		(716,249		)		(709,056		)
Property and equipment, net		$	125,522			$	125,176

March 31,
2018 December 31, 2017
Computer hardware $ 171,447
$ 171,515
Computer software 377,991
376,761
Furniture and equipment 102,919
102,424
Leasehold improvements 150,181
148,764
Other 10,241
9,907
Property and equipment, cost
812,779
809,371
Accumulated depreciation (675,942 ) (664,484 )
Property and equipment, net
$ 136,837
$ 144,887

Note F—Leases

The Company has operating leases for corporate and field offices, and certain equipment. The Company’s leases have remaining lease terms of 1 year to 10 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year. Operating lease expenses for the 3 months ended March 31, 2019, were $16.6 million.

Supplemental cash flow information related to leases consisted of the following (in thousands):



	Three Months Ended March 31, 2019
Cash paid for operating lease liabilities	$	16,728
Right-of-use assets obtained in exchange for new operating lease liabilities	$	10,517

Supplemental balance sheet information related to leases consisted of the following:



	March 31, 2019
Weighted average remaining lease term for operating leases	3.2 years
Weighted average discount rate for operating leases	3.4	%

Future minimum lease payments under non-cancellable leases as of March 31, 2019, were as follows (in thousands):



2019 (excluding the three months ended March 31, 2019)	$	58,082
2020	71,827
2021	55,609
2022	42,738
2023	35,777
Thereafter	52,794
Less: Imputed interest	(40,149		)
Present value of operating lease liabilities (a)	$	276,678

(a) Includes current portion of $71.1 million for operating leases.

ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

March 31, 2019

Note G—Accrued Payroll and Benefit Costs

Accrued payroll and benefit costs consisted of the following (in thousands):



	March 31, 2019		December 31, 2018
Payroll and benefits	$	261,932	$	263,072
Employee deferred compensation plans	352,161		333,528
Workers’ compensation	18,847		18,251
Payroll taxes	37,405		23,918
Accrued payroll and benefit costs	$	670,345	$	638,769

March 31,
2018
December 31, 2017
Payroll and benefits $ 239,524
$ 256,804
Employee deferred compensation plans 310,164
312,429
Workers’ compensation 17,543
17,092
Payroll taxes 41,186
26,574
Accrued payroll and benefit costs $ 608,417
$ 612,899

Included in employee deferred compensation plans is the following (in thousands):



	March 31, 2019		December 31, 2018
Deferred compensation plan and other benefits related to the Company’s Chief Executive Officer	$	89,434	$	89,212

March 31,
2018
December 31, 2017
Deferred compensation plan and other benefits related to the Company’s
Chief Executive Officer
$ 86,283

$ 86,145

Note G—H—Commitments and Contingencies

On March 13, 2014, Plaintiff Leonor Rodriguez, on her own behalf and on behalf of a putative class of allegedly similarly situated individuals, filed a complaint against the Company in the Superior Court of California, San Diego County. The complaint alleges that a putative class of current and former employees of the Company working in California since March 13, 2011 were denied compensation for the time they spent interviewing with clients of the Company as well as performing activities related to the interview process. Rodriguez seeks recovery on her own behalf and on behalf of the putative class in an unspecified amount for this allegedly unpaid compensation. Rodriguez also seeks recovery of an unspecified amount for the alleged failure of the Company to provide her and the putative class with accurate wage statements. Rodriguez also seeks an unspecified amount of other damages, attorneys’ fees, and statutory penalties, including but not limited to statutory penalties on behalf of herself and other allegedly “aggrieved employees” as defined by California’s Labor Code Private Attorney General Act (“PAGA”). On October 10, 2014, the Court granted a motion by the Company to compel all of Rodriguez’s claims, except the PAGA claim, to individual arbitration. At this stage of the litigation, it is not feasible to predict the outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts have been provided in the Company’s Financial Statements. The Company believes it has meritorious defenses to the allegations and the Company intends to continue to vigorously defend against the litigation.

On March 23, 2015, Plaintiff Jessica Gentry, on her own behalf and on behalf of a putative class of allegedly similarly situated individuals, filed a complaint against the Company in the Superior Court of California, San Francisco County, which

~~ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)~~

~~March 31, 2018~~

was subsequently amended on October 23, 2015. The ~~complaint, which was filed by the same plaintiffs’ law firm that brought the~~ ~~Rodriguez~~ ~~matter described above, alleges claims similar to those alleged in~~ ~~Rodriguez. Specifically, the~~ complaint alleges that a putative class of current and former employees of the Company working in California since March 13, 2010 were denied compensation for the time they spent interviewing “for temporary and permanent employment opportunities” as well as performing activities related to the interview process. Gentry seeks recovery on her own behalf and on behalf of the putative class in an unspecified amount for this allegedly unpaid compensation. Gentry also seeks recovery of an unspecified amount for the alleged failure of the Company to provide her and the putative class with accurate wage statements. Gentry also seeks an unspecified amount of other damages, attorneys’ fees, and statutory penalties, including penalties for allegedly not paying all wages due upon separation to former employees and statutory penalties on behalf of herself and other allegedly “aggrieved employees” as defined by ~~PAGA.~~California’s Labor Code Private Attorney General Act (“PAGA”). On January 4, 2016, the Court denied a motion by the Company to compel all of Gentry’s claims, except the PAGA claim, to individual arbitration. At this stage of the litigation, it is not feasible to predict the outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts have been provided in the Company’s Financial Statements. The Company believes it has meritorious defenses to the allegations and the Company intends to continue to vigorously defend against the litigation.

The Company is involved in a number of other lawsuits arising in the ordinary course of business. While management does not expect any of these other matters to have a material adverse effect on the Company’s results of operations, financial position or cash flows, litigation is subject to certain inherent uncertainties.

~~Legal costs associated with the resolution of claims, lawsuits and other contingencies are expensed as incurred.~~

~~Note H— Stockholders' Equity~~

~~Stock Repurchase Program.~~ As of March 31, 2018, the Company is authorized to repurchase, from time to time, up to 11.3 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions. The number and the cost of common stock shares repurchased during the three months ended March 31, 2018 and 2017, are reflected in the following table (in thousands):

Three Months Ended
March 31,
2018 2017
Common stock repurchased (in shares) 1,065
1,121
Common stock repurchased $ 60,033
$ 53,586

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. The number and the cost of repurchases related to employee stock plans made during the three months ended March 31, 2018 and 2017, are reflected in the following table (in thousands):

Three Months Ended
March 31,
2018 2017
Repurchases related to employee stock plans (in shares) 147
304
Repurchases related to employee stock plans $ 8,456
$ 14,711

The repurchased shares are held in treasury and are presented as if constructively retired. Treasury stock is accounted for using the cost method. Repurchase activity for the three months ended March 31, 2018 and 2017, is presented in the unaudited Condensed Consolidated Statements of Stockholders’ Equity.

~~Repurchases of shares and issuances of cash dividends are applied first to the extent of retained earnings and any remaining amounts are applied to capital surplus.~~

~~ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)~~

~~March 31, 2018~~

~~Note I—Net Income Per Share~~

~~The calculation of net income per share for the three months ended March 31, 2018 and 2017 is reflected in the following table (in thousands, except per share amounts):~~

Three Months Ended
March 31,
2018 2017

Net income $ 96,167
$ 78,521
Basic:
Weighted average shares 121,934
125,537

Diluted:
Weighted average shares 121,934
125,537
Dilutive effect of potential common shares 953
881
Diluted weighted average shares 122,887
126,418

Net income per share:
Basic $ .79
$ .63
Diluted $ .78
$ .62

~~Note J—Business Segments~~

The Company, which aggregates its operating segments based on the nature of services, has three reportable segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. The temporary and consultant staffing segment provides specialized staffing in the accounting and finance, administrative and office, information technology, legal, advertising, marketing and web design fields. The permanent placement staffing segment provides full-time personnel in the accounting, finance, administrative and office, and information technology fields. The risk consulting and internal audit services segment provides business and technology risk consulting and internal audit services.

The accounting policies of the segments are set forth in Note A—"Summary of Significant Accounting Policies" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The Company evaluates performance based on income from operations before net interest income, intangible asset amortization expense, and income taxes.

~~ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)~~

~~March 31, 2018~~

~~The following table provides a reconciliation of revenue and operating income by reportable segment to consolidated results for the three months ended March 31, 2018 and 2017 (in thousands):~~

Three Months Ended
March 31,
2018 2017
Net service revenues
Temporary and consultant staffing $ 1,066,288
$ 987,606
Permanent placement staffing 121,400
103,633
Risk consulting and internal audit services 207,645
196,131
$ 1,395,333
$ 1,287,370
Operating income
Temporary and consultant staffing $ 96,723
$ 90,371
Permanent placement staffing 22,379
18,302
Risk consulting and internal audit services 15,265
16,906
134,367
125,579
Amortization of intangible assets 463
301
Interest income, net (735 ) (223 )
Income before income taxes $ 134,639
$ 125,501

~~Note K—Income Taxes~~

The provision for income taxes was 28.6% and 37.4% for the three months ended March 31, 2018 and 2017, respectively. The lower tax rate is primarily due to the reduction of the U.S. federal corporate income tax rate from 35% to 21% beginning in 2018.

The Company recognized the income tax effects of the Tax Cuts and Jobs Act (“TCJA”) in its audited consolidated financial statements included in the Company’s 2017 Annual Report on Form 10-K in accordance with Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of income tax guidance in the reporting period in which the TCJA was signed into law. The guidance also provides for a measurement period of up to one year from the enactment date for the Company to complete the accounting for the U.S. tax law changes. As such, the Company’s 2017 financial results reflected the provisional amounts and an estimate of the income tax effects of the TCJA. During the three months ended March 31, 2018, new guidance was released and as a result the Company recorded a charge of $3 million related to the transition tax on its total post-1986 foreign earnings and profits. The estimate of the impact of TCJA is based on certain assumptions and the Company's current interpretation, which may change, as the Company receives additional clarification and implementation guidance and as the interpretation of the TCJA evolves over time. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis differences inherent in our foreign entities, as the Company is still in the process of evaluating its foreign cash needs, and how much, if any, of the amount of earnings should be considered indefinitely reinvested.

~~Note L—Subsequent Events~~

On April 6, 2018, Plaintiff Shari Dorff, on her own behalf and on behalf of a putative class of allegedly similarly situated individuals, filed a complaint against the Company in the Superior Court of California, County of Los Angeles. In addition to certain claims individual to Plaintiff Dorff, the complaint alleges that salaried recruiters based in California have been misclassified as exempt employees and seeks an unspecified amount for: unpaid wages resulting from such alleged misclassification; alleged failure to provide a reasonable opportunity to take meal periods and rest breaks; alleged failure to pay wages on a timely basis both during employment and upon separation; alleged failure to comply with California requirements regarding wage statements and record-keeping; and alleged improper denial of expense reimbursement. Plaintiff Dorff also seeks an unspecified amount of other damages, attorneys’ fees, and penalties, including but not limited to statutory penalties on

~~ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)~~

~~March 31, 2018~~

behalf of herself and other allegedly “aggrieved employees” as defined by ~~California’s Labor Code Private Attorney General Act (“PAGA”).~~PAGA. At this stage of the litigation, it is not feasible to predict the outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts have been provided in the Company’s Financial Statements. The Company believes it has meritorious defenses to the allegations and the Company intends to continue to vigorously defend against the litigation.

ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

March 31, 2019

Legal costs associated with the resolution of claims, lawsuits and other contingencies are expensed as incurred.

In March 2019, the Company entered into an uncommitted credit facility (the “Credit Agreement”) of up to $100 million. The Company may request borrowings under the Credit Agreement that are denominated in U.S. dollars and each request is subject to approval by the lender. The Company must repay the aggregate principal amount of loans outstanding under the Credit Agreement on the termination date of each borrowing. Borrowings under the Credit Agreement will bear interest in accordance with the terms of the borrowing, which typically will be calculated according to the London Interbank Offered Rate plus an applicable margin. There were no borrowings under the Credit Agreement as of March 31, 2019. The Company intends to renew this facility prior to its March 19, 2020 expiration.

Note I—Stockholders' Equity

Stock Repurchase Program. As of March 31, 2019, the Company is authorized to repurchase, from time to time, up to 5.9 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions. The number and the cost of common stock shares repurchased during the three months ended March 31, 2019 and 2018, are reflected in the following table (in thousands):



	Three Months Ended March 31,
	2019		2018
Common stock repurchased (in shares)	781		1,065
Common stock repurchased	$	51,608	$	60,033

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. The number and the cost of repurchases related to employee stock plans made during the three months ended March 31, 2019 and 2018, are reflected in the following table (in thousands):



	Three Months Ended March 31,
	2019		2018
Repurchases related to employee stock plans (in shares)	257		147
Repurchases related to employee stock plans	$	16,708	$	8,456

The repurchased shares are held in treasury and are presented as if constructively retired. Treasury stock is accounted for using the cost method. Repurchase activity for the three months ended March 31, 2019 and 2018, (consisting of stock option exercises and the purchase of shares for the treasury) is presented in the unaudited Condensed Consolidated Statements of Stockholders’ Equity.

Repurchases of shares and issuances of cash dividends are applied first to the extent of retained earnings and any remaining amounts are applied to capital surplus.

ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

March 31, 2019

Note J—Net Income Per Share

The calculation of net income per share for the three months ended March 31, 2019 and 2018, is reflected in the following table (in thousands, except per share amounts):



	Three Months Ended March 31,
	2019		2018

Net income	$	109,798	$	96,167
Basic:
Weighted average shares	117,068		121,934

Diluted:
Weighted average shares	117,068		121,934
Dilutive effect of potential common shares	898		953
Diluted weighted average shares	117,966		122,887

Net income per share:
Basic	$	.94	$	.79
Diluted	$	.93	$	.78

Note K—Business Segments

The Company has three reportable segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. The temporary and consultant staffing segment provides specialized staffing in the accounting and finance, administrative and office, information technology, legal, advertising, marketing and web design fields. The permanent placement staffing segment provides full-time personnel in the accounting, finance, administrative and office, and information technology fields. The risk consulting and internal audit services segment provides business and technology risk consulting and internal audit services.

The accounting policies of the segments are set forth in Note A—“Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The Company evaluates performance based on income from operations before net interest income, intangible asset amortization expense, and income taxes.

ROBERT HALF INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

March 31, 2019

The following table provides a reconciliation of revenue and operating income by reportable segment to consolidated results for the three months ended March 31, 2019 and 2018 (in thousands):



	Three Months Ended March 31,
	2019			2018
Net service revenues
Temporary and consultant staffing	$	1,084,627		$	1,066,288
Permanent placement staffing	131,562			121,400
Risk consulting and internal audit services	252,341			207,645
	$	1,468,530		$	1,395,333
Operating income
Temporary and consultant staffing	$	106,018		$	96,723
Permanent placement staffing	21,557			22,379
Risk consulting and internal audit services	18,654			15,265
	146,229			134,367
Amortization of intangible assets	342			463
Interest income, net	(1,496		)	(735		)
Income before income taxes	$	147,383		$	134,639

Note L—Subsequent Events

On May ~~1, 2018,~~2, 2019, the Company announced the following:



Quarterly dividend per share	$~~.28~~.31
Declaration date	May ~~1, 2018~~2, 2019
Record date	May ~~25, 2018~~24, 2019
Payment date	June ~~15, 2018~~14, 2019

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain information contained in Management’s Discussion and Analysis and in other parts of this report may be deemed forward-looking statements regarding events and financial trends that may affect the Company’s future operating results or financial positions. These statements may be identified by words such as “estimate”, “forecast”, “project”, “plan”, “intend”, “believe”, “expect”, “anticipate”, or variations or negatives thereof or by similar or comparable words or phrases. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements. These risks and uncertainties include, but are not limited to, the following: changes to or new interpretations of U.S. or international tax regulations, the global financial and economic situation; changes in levels of unemployment and other economic conditions in the United States or foreign countries where the Company does business, or in particular regions or industries; reduction in the supply of candidates for temporary employment or the Company’s ability to attract candidates; the entry of new competitors into the marketplace or expansion by existing competitors; the ability of the Company to maintain existing client relationships and attract new clients in the context of changing economic or competitive conditions; the impact of competitive pressures, including any change in the demand for the Company’s services, on the Company’s ability to maintain its margins; the possibility of the Company incurring liability for its activities, including the activities of its temporary employees, or for events impacting its temporary employees on clients’ premises; the possibility that adverse publicity could impact the Company’s ability to attract and retain clients and candidates; the success of the Company in attracting, training, and retaining qualified management personnel and other staff employees; the Company’s ability to comply with governmental regulations affecting personnel services businesses in particular or employer/employee relationships in general; whether there will be ongoing demand for Sarbanes-Oxley or other regulatory compliance services; the Company’s reliance on short-term contracts for a significant percentage of its business; litigation relating to prior or current transactions or activities, including litigation that may be disclosed from time to time in the Company’s Securities and Exchange Commission (“SEC”) filings; the ability of the Company to manage its international operations and comply with foreign laws and regulations; the impact of fluctuations in foreign currency exchange rates; the possibility that the additional costs the Company will incur as a result of health care reform legislation may adversely affect the Company’s profit margins or the demand for the Company’s services; the possibility that the Company’s computer and communications hardware and software systems could be damaged or their service interrupted; and the possibility that the Company may fail to maintain adequate financial and management controls and as a result suffer errors in its financial reporting. Additionally, with respect to Protiviti, other risks and uncertainties include the fact that future success will depend on its ability to retain employees and attract clients; there can be no assurance that there will be ongoing demand for Sarbanes-Oxley or other regulatory compliance services; failure to produce projected revenues could adversely affect financial results; and there is the possibility of involvement in litigation relating to prior or current transactions or activities. Because long-term contracts are not a significant part of the Company’s business, future results cannot be reliably predicted by considering past trends or extrapolating past results.

Executive Overview

Demand for the Company’s temporary and consulting staffing, permanent placement staffing, and risk consulting and internal audit services is largely dependent upon general economic and labor trends both domestically and abroad. Correspondingly, financial results for the ~~three months ended March 31, 2018~~first quarter of 2019 were positively impacted by ~~a growing~~an improving global economy. During the first quarter of ~~2018,~~2019, net service revenues were ~~$1.40~~$1.47 billion, an increase of 8%5% from the prior year. Net income increased ~~22%~~14% to ~~$96~~$110 million and diluted net income per share increased ~~26%~~19% to ~~$.78. The year over year net income and net income per share growth benefited significantly from the reduction~~$.93. Persistent tight labor markets globally continue to result in ~~the U.S. federal corporate income tax rate from 35% to 21% beginning in 2018.~~heightened demand for our professional staffing services. All three of the Company's reportable segments experienced solid revenue growth, led by ~~permanent placement staffing~~risk consulting and internal audit services which increased ~~17%~~22% for the first quarter of ~~2018~~2019 compared to the first quarter of ~~2017.~~2018.

We believe that the Company is well positioned in the current macroeconomic environment. The United States economic backdrop throughout the first quarter of ~~2018~~2019 was ~~improved~~conducive to growth for the Company as real gross domestic product ~~(GDP)~~(“GDP”) grew ~~2.3%~~3.2%, while the unemployment rate ~~remained unchanged at 4.1%~~declined from 3.9% in December ~~2017 and March 2018.~~2018 to 3.8% at the end of the first quarter of 2019. In the United States, the number of job openings has exceeded the number of hires since February 2015, creating competition for skilled talent that increases the Company's value to clients. The ~~secular~~U.S. labor market remains robust, with significant demand ~~for temporary staffing is also ongoing.~~due to talent shortages across our professional disciplines. The number of temporary workers as a percentage of the overall U.S. workforce remains near an all-time high, a sign employers are building flexible staffing options into their human resource plans with increasing frequency.

Protiviti continues to see ~~solid growth in~~strong demand for its ~~business performance improvement practice area.~~consulting and internal audit solutions. Protiviti ~~also is expanding~~has expanded its ~~solutions in areas such as data~~service offerings and ~~analytics,~~continues to nurture and ~~cybersecurity.~~grow a loyal client base.

We monitor various economic indicators and business trends in all of the countries in which we operate to anticipate demand for the Company’s services. We evaluate these trends to determine the appropriate level of investment, including

personnel, which will best position the Company for success in the current and future global macroeconomic environment. The

Company’s investments in headcount are typically structured to proactively support and align with expected revenue growth trends. As such, during the first quarter of ~~2018,~~2019, we added headcount in our temporary and consultant staffing, ~~and~~ permanent placement staffing, ~~services, while~~and risk consulting and internal audit ~~headcount remained essentially flat~~services compared to prior year-end levels.

We have limited visibility into future revenues not only due to the dependence on macroeconomic conditions noted above, but also because of the relatively short duration of the Company’s client engagements. Accordingly, we typically assess headcount and other investments on at least a quarterly basis. That said, based on current trends and conditions, we expect headcount levels for our full-time staff to be modestly higher for each of our reporting segments through the second quarter of ~~2018.~~2019.

Capital expenditures, including $4 million for cloud computing arrangements, for the three months ended March 31, ~~2018~~2019, totaled $8$17 million, approximately ~~27%~~57% of which represented investments in software initiatives and technology infrastructure, both of which are important to the Company’s future growth opportunities. ~~While upgrades to enterprise resource planning and project management applications were completed~~Capital expenditures for cloud computing arrangements are included in ~~2017, we continue to invest in digital technology initiatives designed to enhance our service offerings to both clients and candidates.~~cash flows from operating activities on the Company’s Condensed Consolidated Statements of Cash Flows. Capital expenditures also included amounts spent on tenant improvements and furniture and equipment in the ~~Company's~~Company’s leased offices. We currently expect that ~~2018~~2019 capital expenditures will range from $60 million to $70 million, of which $35 million to $45 million relates to ~~$55 million.~~software initiatives and technology infrastructure, including capitalized costs related to implementation of cloud computing arrangements.

Critical Accounting Policies and Estimates

The Company’s most critical accounting policies and estimates are those that involve subjective decisions or assessments and are included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. There were no ~~material~~ changes to the Company's critical accounting policies or estimates for the three months ended March 31, ~~2018.~~2019.

Recent Accounting Pronouncements

See Note B—“New Accounting Pronouncements” to the Company’s ~~unaudited~~ Condensed Consolidated Financial Statements included under Part I—Item 1 of ~~the~~this report.

Results of Operations

Demand for the Company’s temporary and consulting staffing, permanent placement staffing, and risk consulting and internal audit services is largely dependent upon general economic and labor market conditions both domestically and abroad. Correspondingly, all three of the Company’s reportable segments for the quarter ended March 31, ~~2018,~~2019, were positively impacted by ~~a growing~~an improving global economy. Because of the inherent difficulty in predicting economic trends and the absence of material long-term contracts in any of the Company's business units, future demand for the Company’s services cannot be forecast with certainty. We believe the Company is well positioned in the current global macroeconomic environment.

The Company’s temporary and permanent placement staffing business has ~~326~~325 offices in 42 states, the District of Columbia and 17 foreign countries, while Protiviti has 5662 offices in 23 states and 11 foreign countries.

Non-GAAP Financial Measures

The financial results of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the SEC. To help readers understand the Company’s financial performance, the Company supplements its GAAP financial results with revenue growth rates derived from non-GAAP revenue amounts.

Variations in the Company’s financial results include the impact of changes in foreign currency exchange rates, billing days, and ~~billing days.~~certain intercompany adjustments. The Company provides ~~“same billing days and constant currency”~~“as adjusted” revenue growth calculations to remove the impact of these items. These calculations show the year-over-year revenue growth rates for the Company’s reportable segments on both a reported basis and also on ~~a same day, constant-currency~~an as adjusted basis for global, U.S. and international operations. The Company has provided this data because management believes it better reflects the Company’s actual revenue growth rates and aids in evaluating revenue trends over time. The Company expresses year-over-year revenue changes as calculated percentages using the same number of billing days, ~~and~~ constant currency exchange ~~rates.~~rates, and certain intercompany adjustments.

In order to calculate constant currency revenue growth rates, as reported amounts are retranslated using foreign currency exchange rates from the prior year’s comparable period. Management then calculates a global, weighted-average number of billing days for each reporting period based upon input from all countries and all lines of business. In order to remove the fluctuations caused by comparable periods having different billing days, the Company calculates same billing day revenue

growth rates by dividing each comparative period’s reported revenues by the calculated number of billing days for that period to arrive at a per billing day amount. Same billing day growth rates are then calculated based upon the per billing day amounts. In order to remove the fluctuations caused by the impact of certain intercompany adjustments, applicable comparative period revenues are reclassified to conform with the current period presentation. The term ~~“same billing days and constant currency”~~“as adjusted” means that the impact of different billing days, ~~has been~~constant currency fluctuations, and certain intercompany adjustments are removed from the ~~constant currency~~revenue growth rate calculation.

The non-GAAP financial measures provided herein may not provide information that is directly comparable to that provided by other companies in the Company’s industry, as other companies may calculate such financial results differently. The Company’s non-GAAP financial measures are not measurements of financial performance under GAAP, and should not be considered as alternatives to actual revenue growth derived from revenue amounts presented in accordance with GAAP. The Company does not consider these non-GAAP financial measures to be a substitute for, or superior to, the information provided by GAAP financial results. A reconciliation of the ~~same-day, constant-currency~~as adjusted revenue growth rates to the reported revenue growth rates is provided herein.

Refer to Item 3. “Quantitative and Qualitative Disclosures About Market Risk” for further discussion of the impact of foreign currency exchange rates on the Company’s results of operations and financial condition.

Three Months Ended March 31, ~~2018~~2019 and ~~2017~~2018

Revenues. The Company’s revenues were $1.47 billion for the three months ended March 31, 2019, increasing by 5.2% compared to $1.40 billion for the three months ended March 31, ~~2018, increasing by 8.4% compared to $1.29 billion for the three months ended March 31, 2017.~~2018. Revenues from foreign operations represented 24% of total revenues for both the three months ended March 31, ~~2018, up from 20% of total revenues for the three months ended March 31, 2017.~~2019 and 2018. The Company analyzes its revenues for three reportable segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. Revenue growth was strongest ~~internationally.~~domestically. For the three months ended March 31, ~~2018, revenue~~2019, revenues for ~~temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services~~all three of the Company's reportable segments were up, compared to the same period in ~~2017.~~2018. Contributing factors for each reportable segment are discussed below in further detail.

Temporary and consultant staffing revenues were $1.08 billion for the three months ended March 31, 2019, increasing by 1.7% compared to revenues of $1.07 billion for the three months ended March 31, ~~2018, increasing by 8.0% compared to revenues of $988 million for the three months ended March 31, 2017.~~2018. Key drivers of temporary and consultant staffing revenues include average hourly bill rates and the number of hours worked by the Company’s temporary employees on client engagements. On ~~a same-day, constant-currency~~an as adjusted basis, temporary and consultant staffing revenues increased 6.2% for the first quarter of ~~2018~~2019 compared to the first quarter of ~~2017,~~2018, due primarily to a ~~2.5%~~5.7% increase in average bill ~~rates and an increase in the number of hours worked by the Company’s temporary employees.~~rates. In the U.S., revenues in the first quarter of ~~2018~~2019 increased 3.4% on an as reported basis and ~~3.9%~~5.1% on ~~a same-day~~an as adjusted basis, compared to the first quarter of ~~2017.~~2018. For the Company’s international operations, ~~2018~~2019 first quarter revenues ~~increased 26.0%~~decreased 3.7% on an as reported basis and ~~15.5%~~increased 10.2% on ~~a same-day, constant-currency~~an as adjusted basis, compared to the first quarter of ~~2017.~~2018.

Permanent placement staffing revenues were $132 million for the three months ended March 31, 2019, increasing by 8.4% compared to revenues of $121 million for the three months ended March 31, ~~2018, increasing by 17.1% compared to revenues of $104 million for the three months ended March 31, 2017.~~2018. Key drivers of permanent placement staffing revenues consist of the number of candidate placements and average fees earned per placement. ~~Both~~On an as adjusted basis, permanent placement staffing revenues increased 12.3% for the first quarter of 2019 compared to the first quarter of 2018, driven by increases in number of placements and average fees earned per ~~placement were up for the first quarter of 2018 compared to the first quarter of 2017.~~placement. In the U.S., revenues for the first quarter of ~~2018~~2019 increased ~~14.2%~~10.0% on an as reported basis and ~~14.8%~~11.8% on ~~a same-day~~an as adjusted basis, compared to the first quarter of ~~2017.~~2018. For the Company’s international operations, revenues for the first quarter of ~~2018~~2019 increased ~~23.6%~~4.9% on an as reported basis and ~~16.0%~~12.8% on ~~a same-day, constant-currency~~an as adjusted basis, compared to the first quarter of ~~2017.~~2018. Historically, demand for permanent placement staffing is even more sensitive to economic and labor market conditions than demand for temporary and consultant staffing and this is expected to continue.

Risk consulting and internal audit services revenues were $252 million for the three months ended March 31, 2019, increasing by 21.5% compared to revenues of $208 million for the three months ended March 31, ~~2018, increasing by 5.9% compared to revenues of $196 million for the three months ended March 31, 2017.~~2018. Key drivers of risk consulting and internal audit services revenues are the billable hours worked by consultants on client engagements and average hourly bill rates. On ~~a same-day, constant-currency~~an as adjusted basis, risk consulting and internal audit services revenues increased ~~4.7%~~17.3% for the first quarter of ~~2018~~2019 compared to the first quarter of ~~2017,~~2018, due primarily to an increase in billable ~~hours, partially offset by a decrease in billing rates.~~hours. In the U.S., revenues in the first quarter of ~~2018~~2019 increased ~~1.0%~~14.9% on an as reported basis and ~~1.5%~~16.8% on ~~a same-day~~an as adjusted basis, compared to the first quarter of ~~2017.~~

2018. Contributing to the U.S. increase were services related to business performance ~~improvement.~~improvement, technology consulting, and internal audit and financial advisory practice areas. The Company’s risk consulting and internal audit services revenues from international operations increased ~~32.2%~~48.8% on an as reported basis and ~~22.0%~~18.9% on ~~a same-day, constant-currency~~an as adjusted basis for the first quarter of ~~2018~~2019 compared to the first quarter of ~~2017.~~

2018.

A reconciliation of the non-GAAP year-over-year revenue growth rates to the as reported year-over-year revenue growth rates for the three months ended March 31, ~~2018,~~2019, is presented in the following table:


	Global		United States		International		Global		United States		International
Temporary and consultant staffing
As Reported	8.0	%	3.4	%	26.0	%	1.7	%	3.4	%	-3.7	%
Billing Days Impact	0.8	%	0.5	%	2.3	%	1.4	%	1.7	%	0.4	%
Currency Impact	-2.6	%	—		-12.8	%	1.8	%	—		8.1	%
Same Billing Days and Constant Currency	6.2	%	3.9	%	15.5	%
Intercompany Adjustments							1.3	%	—		5.4	%
As Adjusted							6.2	%	5.1	%	10.2	%
Permanent placement staffing
As Reported	17.1	%	14.2	%	23.6	%	8.4	%	10.0	%	4.9	%
Billing Days Impact	0.9	%	0.6	%	2.2	%	1.4	%	1.8	%	0.3	%
Currency Impact	-3.0	%	—		-9.8	%	2.5	%	—		7.6	%
Same Billing Days and Constant Currency	15.0	%	14.8	%	16.0	%
As Adjusted							12.3	%	11.8	%	12.8	%
Risk consulting and internal audit services
As Reported	5.9	%	1.0	%	32.2	%	21.5	%	14.9	%	48.8	%
Billing Days Impact	0.7	%	0.5	%	2.3	%	1.5	%	1.9	%	0.3	%
Currency Impact	-1.9	%	—		-12.5	%	1.7	%	—		7.1	%
Same Billing Days and Constant Currency	4.7	%	1.5	%	22.0	%
Intercompany Adjustments							-7.4	%	—		-37.3	%
As Adjusted							17.3	%	16.8	%	18.9	%



Delaware		94-1648752
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2884 Sand Hill Road Suite 200 Menlo Park, California		94025
(Address of principal executive offices)		(zip-code)



Large accelerated filer	x		Accelerated filer	¨

Non-accelerated filer	¨	(Do not check if a smaller reporting company)

Smaller reporting company	¨		Emerging growth company	¨


ASSETS
Cash and cash equivalents	$	291,987	$	294,753	$	269,645		$	276,579
Accounts receivable, less allowances of $22,375 and $33,181	784,889		732,405
Accounts receivable, less allowances of $26,501 and $27,678					826,366			794,446
Other current assets	391,580		404,711		436,006			402,585
Total current assets	1,468,456		1,431,869		1,532,017			1,473,610
Goodwill	210,832		210,885		210,127			209,958
Other intangible assets, net	4,553		4,946		2,773			3,149
Property and equipment, net	136,837		144,887		125,522			125,176
Deferred income taxes	73,182		74,867
Right-of-use assets					248,691			—
Noncurrent deferred income taxes					85,477			91,204
Total assets	$	1,893,860	$	1,867,454	$	2,204,607		$	1,903,097
LIABILITIES
Accounts payable and accrued expenses	$	146,110	$	126,937	$	131,722		$	168,031
Accrued payroll and benefit costs	608,417		612,899		670,345			638,769
Income taxes payable	9,726		7,877		27,394			12,536
Current portion of notes payable and other indebtedness	187		183		204			200
Current operating lease liabilities					71,065			—
Total current liabilities	764,440		747,896		900,730			819,536
Notes payable and other indebtedness, less current portion	608		657		404			457
Noncurrent operating lease liabilities					205,613			—
Other liabilities	14,015		13,636		20,831			19,906
Total liabilities	779,063		762,189		1,127,578			839,899
Commitments and Contingencies (Note G)
Commitments and Contingencies (Note H)
STOCKHOLDERS’ EQUITY
Preferred stock, $.001 par value authorized 5,000,000 shares; issued and outstanding zero shares	—		—		—			—
Common stock, $.001 par value authorized 260,000,000 shares; issued and outstanding 123,562,571 shares and 124,261,458 shares	124		124
Common stock, $.001 par value authorized 260,000,000 shares; issued and outstanding 118,320,896 shares and 119,078,491 shares					118			119
Capital surplus	1,075,156		1,064,601		1,090,432			1,079,188
Accumulated other comprehensive income	9,015		3,507
Accumulated other comprehensive loss					(18,006		)	(16,109		)
Retained earnings	30,502		37,033		4,485			—
Total stockholders’ equity	1,114,797		1,105,265		1,077,029			1,063,198
Total liabilities and stockholders’ equity	$	1,893,860	$	1,867,454	$	2,204,607		$	1,903,097


	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2019			2018
COMMON STOCK—SHARES:
Balance at beginning of period	124,261			127,797			119,078			124,261
Net issuances of restricted stock	514			807			281			514
Repurchases of common stock	(1,212		)	(1,425		)	(1,038		)	(1,212		)
Balance at end of period	123,563			127,179			118,321			123,563
COMMON STOCK—PAR VALUE:
Balance at beginning of period	$	124		$	128		$	119		$	124
Net issuances of restricted stock	1			1			—			1
Repurchases of common stock	(1		)	(2		)	(1		)	(1		)
Balance at end of period	$	124		$	127		$	118		$	124
CAPITAL SURPLUS:
Balance at beginning of period	$	1,064,601		$	1,022,411		$	1,079,188		$	1,064,601
Net issuances of restricted stock at par value	(1		)	(1		)	—			(1		)
Stock-based compensation expense	10,556			9,857			11,244			10,556
Balance at end of period	$	1,075,156		$	1,032,267		$	1,090,432		$	1,075,156
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME:
Balance at beginning of period	$	3,507		$	(20,502	)	$	(16,109	)	$	3,507
Foreign currency translation adjustments, net of tax	5,508			4,864			(1,897		)	5,508
Balance at end of period	$	9,015		$	(15,638	)	$	(18,006	)	$	9,015
RETAINED EARNINGS:
Balance at beginning of period	$	37,033		$	84,562		$	—		$	37,033
Net income	96,167			78,521			109,798			96,167
Repurchases of common stock—excess over par value	(68,488		)	(68,295		)	(68,315		)	(68,488		)
Cash dividends ($.28 per share and $.24 per share)	(34,210		)	(30,601		)
Cash dividends ($.31 per share and $.28 per share)							(36,998		)	(34,210		)
Balance at end of period	$	30,502		$	64,187		$	4,485		$	30,502


	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	96,167		$	78,521		$	109,798		$	96,167
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible assets	463			301			342			463
Depreciation expense	16,253			15,899			15,652			16,253
Stock-based compensation expense—restricted stock and stock units	10,556			9,857			11,244			10,556
Deferred income taxes	1,695			10,556			5,736			1,695
Provision for doubtful accounts	1,778			1,697			2,325			1,778
Changes in assets and liabilities:
(Increase) decrease in accounts receivable	(49,794		)	4,296
Increase (decrease) in accounts payable, accrued expenses, accrued payroll and benefit costs	13,527			(7,498		)
Increase in accounts receivable							(35,294		)	(49,794		)
Increase in accounts payable, accrued expenses, accrued payroll and benefit costs							1,398			13,527
Increase in income taxes payable	27,068			27,860			17,470			27,068
Change in other assets, net of change in other liabilities	(1,495		)	(17,989		)	(1,592		)	(1,495		)
Net cash flows provided by operating activities	116,218			123,500			127,079			116,218
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(7,965		)	(10,335		)	(12,670		)	(7,965		)
Payments to trusts for employee deferred compensation plans	(10,585		)	(4,939		)	(10,410		)	(10,585		)
Net cash flows used in investing activities	(18,550		)	(15,274		)	(23,080		)	(18,550		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchases of common stock	(68,489		)	(80,687		)	(72,343		)	(68,489		)
Cash dividends paid	(34,919		)	(30,597		)	(37,887		)	(34,919		)
Payments for notes payable and other indebtedness	(44		)	(41		)	(49		)	(44		)
Net cash flows used in financing activities	(103,452		)	(111,325		)	(110,279		)	(103,452		)
Effect of exchange rate changes on cash and cash equivalents	3,018			3,041			(654		)	3,018
Net decrease in cash and cash equivalents	(2,766		)	(58		)	(6,934		)	(2,766		)
Cash and cash equivalents at beginning of period	294,753			260,201			276,579			294,753
Cash and cash equivalents at end of period	$	291,987		$	260,143		$	269,645		$	291,987

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Non-cash items:
Stock repurchases awaiting settlement	$	—		$	2,298		$	7,332		$	—



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	March 31, 2018
	As Reported		Balances Without Adoption of Revenue Guidance		Effect of Change Higher (Lower)
Assets
Accounts receivable, net	$	784,889	$	774,281	$	10,608

Liabilities
Accounts payable and accrued expenses	$	146,110	$	135,502	$	10,608



	Three Months Ended March 31,
	2018			2017
Accountemps		$	471,589		$	436,539
OfficeTeam		261,152			236,179
Robert Half Technology		160,062			157,439
Robert Half Management Resources		173,485			157,449
Temporary and consulting staffing revenues		1,066,288			987,606
Permanent placement staffing revenues		121,400			103,633
Risk consulting and internal audit revenues		207,645			196,131
Net service revenues		$	1,395,333		$	1,287,370



	March 31, 2018
Balance at beginning of period		$	9,003
Payments in advance of satisfaction of performance obligations		5,689
Revenue recognized		(3,842		)
Other, including translation adjustments		(1,977		)
Balance at end of period		$	8,873



	March 31, 2018			December 31, 2017
Deposits in trusts for employee deferred compensation plans		$	302,964		$	292,326
Other		88,616			112,385
Other current assets		$	391,580		$	404,711



	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Number of Shares that May Yet Be Purchased Under Publicly Announced Plans (d)
January 1, 2018 to January 31, 2018	31,185	(a)	$	57.89	—	12,320,879
February 1, 2018 to February 28, 2018	797,388	(b)	$	55.60	749,674	11,571,205
March 1, 2018 to March 31, 2018	383,632	(c)	$	58.26	315,792	11,255,413
Total January 1, 2018 to March 31, 2018	1,212,205				1,065,466


(a)	Represents shares repurchased in connection with employee stock plans, whereby Company shares were tendered by employees for the payment of applicable withholding taxes and/or exercise price.


(b)	Includes ~~47,714~~66,221 shares repurchased in connection with employee stock plans, whereby Company shares were tendered by employees for the payment of applicable withholding taxes and/or exercise price.


(c)	Includes ~~67,840~~176,884 shares repurchased in connection with employee stock plans, whereby Company shares were tendered by employees for the payment of applicable withholding taxes and/or exercise price.



3.1	Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009.

3.2	Amended and Restated By-Laws, incorporated by reference to Exhibit 3.2 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

31.1	Rule 13a-14(a) Certification of Chief Executive ~~Officer~~Officer..

31.2	Rule 13a-14(a) Certification of Chief Financial Officer.

32.1	Section 1350 Certification of Chief Executive Officer.

32.2	Section 1350 Certification of Chief Financial Officer.

101.1	Part I, Item 1 of this Form 10-Q formatted in XBRL.



	ROBERT HALF INTERNATIONAL INC. (Registrant)

	/S/ M. KEITH WADDELL
	M. Keith Waddell Vice Chairman, President and Chief Financial Officer (Principal Financial Officer and duly authorized signatory)