Robert Half International Inc. — 2011 Form 10-K
Reporting period: Fiscal year ended December 31, 2011. The filing is an annual report; fourth-quarter figures below are unaudited quarterly data. The company provides specialized staffing and Protiviti risk consulting and internal audit services.
Financial performance and liquidity
Amounts are in millions of dollars except per-share data and percentages.
| Metric | FY 2011 | FY 2010 | Change |
|---|---|---|---|
| Net service revenues | $3,777.0 | $3,175.1 | +19% |
| Gross margin | $1,489.6 | $1,194.0 | +25% |
| SG&A | $1,240.2 | $1,079.0 | +15% |
| Operating income | $249.4 | $115.0 | +117% |
| Income before taxes | $250.2 | $115.2 | +117% |
| Net income | $149.9 | $66.1 | +127% |
| Diluted EPS | $1.04 | $0.44 | +$0.60 |
| Cash from operations | $256.3 | $175.9 | +$80.4 |
- Gross margin was 39.4% of revenue, up from 37.6%; operating margin was 6.6%, up from 3.6%; net margin was approximately 4.0%, up from 2.1%.
- FY 2011 segment revenue: temporary and consultant staffing $3,051.0 million (+19%); permanent placement $302.2 million (+37%); risk consulting and internal audit $423.8 million (+10%). Segment operating income was $209.1 million, $35.3 million and $5.0 million, respectively. Protiviti’s segment returned to operating profit from a 2010 loss.
- Fourth quarter: revenue was $973.5 million versus $851.6 million in Q4 2010; gross margin was $387.3 million versus $326.9 million; net income was $42.6 million versus $24.8 million; diluted EPS was $0.30 versus $0.17.
- Cash and cash equivalents were $279.3 million at year-end, down from $315.1 million. Operating cash flow was $256.3 million; investing activities used $63.4 million, including $56.5 million of capital expenditures; financing activities used $226.0 million, including $168.1 million of share repurchases and $80.3 million of dividends.
- Current assets were $1,006.7 million and current liabilities $473.0 million (current ratio about 2.1). Total debt was approximately $1.7 million. Long-term operating lease commitments totaled $426.5 million; total disclosed contractual obligations were $472.7 million.
- 2011 declared dividends were $0.56 per share. A quarterly dividend of $0.15 was announced in February 2012. The company repurchased about 5.3 million shares on the open market for $141.6 million during 2011 and had authorization for approximately 6.1 million additional shares at year-end.
Changes, outlook and risks
- Management attributed stronger 2011 results to improving economic conditions and increased demand across all three segments. Staffing growth reflected clients’ demand for flexible labor and renewed permanent hiring; Protiviti’s margin improvement was attributed primarily to higher utilization.
- Management said general macroeconomic conditions would continue to affect 2012 results, but provided no numerical revenue or earnings guidance. It expected internally generated cash to support working capital, fixed payments, dividends and other obligations.
- Risks include economic downturn and unemployment, competition and candidate availability, international and foreign-exchange exposure, employee retention, regulation and health-care reform costs, service or workplace liability, and technology or control failures. About 30% of 2011 revenue came from foreign operations.
- Several wage-and-hour class or representative cases remain unresolved, including California employee-classification and meal/rest-period matters. The company could not estimate outcomes or loss ranges and recorded no amounts for these cases. A U.S. staffing-manager case was ordered to arbitration. Management warns an adverse outcome could result in substantial liability.
- Goodwill was $189.4 million; the 2011 annual impairment test identified no impairment. Management noted future impairment remains possible if revenue or profitability assumptions are not met. Deferred-tax valuation allowances were $36.3 million, primarily related to foreign losses; gross unrecognized tax benefits were $11.7 million.
- The independent auditor gave unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective.
Important facts for investors to verify
- Whether revenue and operating-margin growth persisted after 2011, particularly across staffing segments and Protiviti.
- Progress and potential exposure from wage-and-hour litigation and related California court decisions; no loss range was disclosed.
- Cash generation and working-capital needs as staffing revenue expands, alongside repurchases, dividends and lease commitments.
- Foreign revenue and currency effects, including the impact of any strengthening U.S. dollar.
- Assumptions supporting goodwill recoverability, foreign tax asset realization and workers’ compensation reserves.
- The renewal of the $35 million uncommitted letter-of-credit facility, which was due to expire August 31, 2012.