ROBERT HALF INTERNATIONAL, INC 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 ofU.S. or international tax regulations, the global financial and economic situation; the duration and impact of the COVID-19 pandemic and efforts to mitigate its spread; changes in levels of unemployment and other economic conditions inthe United States or foreign countries where the Company does business, or in particular regions or industries; reduction in the supply of candidates for contract 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 engagement professionals, or for events impacting its engagement professionals 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'sSecurities 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 or the Company could experience a cybersecurity breach; 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 The Company's financial results during the first quarter of 2021 reflect continued early-cycle recovery from the economic crisis resulting from the COVID-19 pandemic, with accelerating growth during the quarter in the Company's staffing business. Our investments in advanced AI technologies and retention of our tenured employees has allowed us to adapt quickly to a new marketplace, where remote and hybrid work has become commonplace. During the first quarter of 2021, service revenues were$1.40 billion , a decrease of 7.2% from the prior year. Net income for the quarter was$111 million and diluted net income per share was$.98 . The Company's staffing operations significantly outperformed their historical sequential trends, led by small and medium-size businesses and permanent placement, which grew 22% sequentially. Protiviti's revenues grew 35% year-on-year, reflecting continued momentum across its wide array of service offerings, including very strong demand for managed solutions with staffing. This is Protiviti's 14th consecutive quarter of year-on-year revenue gains. The Company's blended solutions, complementing Protiviti's offerings with contract talent, allow the Company to be extremely nimble and cost effective in response to client needs, and we expect this offering to be an increasing part of our business going forward. Demand for the Company's temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services is largely dependent upon general economic and labor trends both domestically and abroad, which may continue to be impacted by COVID-19.The United States economic backdrop as we ended the first quarter of 2021 showed early signs of economic recovery as real gross domestic product ("GDP") increased 6.4%, while the unemployment rate decreased from 6.7% inDecember 2020 to 6.0% at the end of the first quarter of 2021. Inthe United States , the number of job openings exceeded the number of hires at the end ofFebruary 2021 , creating competition for skilled talent that increases the Company's value to clients. TheU.S. labor market remains robust, with significant demand due to talent shortages across our professional disciplines. 19 -------------------------------------------------------------------------------- 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 and productivity metrics. 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. We continue to focus on the productivity levels of tenured staff and believe we have aligned staffing levels to drive increased profitability. During the first quarter of 2021, headcount remained relatively flat in all three business segments, when compared to prior year-end levels. Capital expenditures, including$8.5 million for cloud computing arrangements, for the three months endedMarch 31, 2021 , totaled$18.2 million , approximately 89% of which represented investments in software initiatives and technology infrastructure, both of which are important to the Company's sustainability and future growth opportunities. Capital expenditures for cloud computing arrangements are included in cash flows from operating activities on the Company's Condensed Consolidated Statements of Cash Flows. Capital expenditures included amounts spent on tenant improvements and furniture and equipment in the Company's leased offices. We currently expect that 2021 capital expenditures will range from$85 million to$95 million , of which$45 million to$55 million relates to 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 endedDecember 31, 2020 . There were no material changes to the Company's critical accounting policies or estimates for the three months endedMarch 31, 2021 . Recent Accounting Pronouncements See Note B-"New Accounting Pronouncements" to the Company's Condensed Consolidated Financial Statements included under Part I-Item 1 of this report. Results of Operations Demand for the Company's temporary and consultant 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. Because of the inherent difficulty in predicting economic trends, future demand for the Company's services cannot be forecast with certainty. The Company's technology investments have facilitated remote working models internally and, with the Company's advanced AI-driven capabilities, are providing clients with real-time choices of candidates across broader resource pools. While uncertainty remains in the overall economic environment, we are excited about our current momentum and the Company's prospects for the balance of 2021 and beyond, buoyed by the strengths of the Company's brands, people, technology and professional business model. The Company's temporary and permanent placement staffing business has 322 offices in 43 states, theDistrict of Columbia and 17 foreign countries, while Protiviti has 63 offices in 24 states and 12 foreign countries. 20
-------------------------------------------------------------------------------- Non-GAAP Financial Measures The financial results ofRobert Half International Inc. (the "Company") are prepared in conformity with accounting principles generally accepted inthe United States of America ("GAAP") and the rules of theU.S. Securities and Exchange Commission ("SEC"). To help readers understand the Company's financial performance, the Company supplements its GAAP financial results with the following non-GAAP measures: as adjusted revenue growth rates; adjusted gross margin; adjusted selling, general and administrative expense; segment income and combined segment income. Variations in the Company's financial results include the impact of changes in foreign currency exchange rates, billing days, and certain intercompany adjustments. The Company provides "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 lines of business on both a reported basis and also on an as-adjusted basis for global,U.S. , and international operations. This information is presented for each of the six most recent quarters. The Company has provided this data because it focuses on the Company's revenue growth rates attributable to operating activities 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, constant currency exchange rates, and certain intercompany adjustments. The following measures: adjusted gross margin; adjusted selling, general and administrative expense; and segment income include gains and losses on investments held to fund the Company's obligations under employee deferred compensation plans. The Company provides these measures because they are used by management to review its operational results. Combined segment income is income before income taxes adjusted for interest income and amortization of intangible assets. The Company provides combined segment income because it is how the Company evaluates segment performance. 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 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 non-GAAP financial measures to the most directly comparable GAAP financial measures is provided on the following pages. 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 EndedMarch 31, 2021 and 2020 Revenues. The Company's revenues were$1.40 billion for the three months endedMarch 31, 2021 , decreasing by 7.2% compared to$1.51 billion for the three months endedMarch 31, 2020 . Revenues from foreign operations represented 23% of total revenues for the three months endedMarch 31, 2021 , up from 22% of total revenues for the three months endedMarch 31, 2020 . The Company analyzes its revenues for three reportable segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. Contributing factors for each reportable segment are discussed below in further detail. Temporary and consultant staffing revenues were$889 million for the three months endedMarch 31, 2021 , decreasing by 18.6% compared to revenues of$1.09 billion for the three months endedMarch 31, 2020 . Key drivers of temporary and consultant staffing revenues include average hourly bill rates and the number of hours worked by the Company's engagement professionals on client engagements. On an as adjusted basis, temporary and consultant staffing revenues decreased 18.9% for the first quarter of 2021, compared to the first quarter of 2020, due primarily to fewer hours worked by the Company's engagement professionals on client engagements. In theU.S. , revenues in the first quarter of 2021 decreased 20.3% on an as reported basis and 19.4% on an as adjusted basis, compared to the first quarter of 2020. For the Company's international operations, revenues for the first quarter of 2021 decreased 12.3% on an as reported basis and decreased 17.0% on an as adjusted basis, compared to the first quarter of 2020. 21 -------------------------------------------------------------------------------- Permanent placement staffing revenues were$112 million for the three months endedMarch 31, 2021 , decreasing by 7.3% compared to revenues of$120 million for the three months endedMarch 31, 2020 . Key drivers of permanent placement staffing revenues consist of the number of candidate placements and average fees earned per placement. On an as adjusted basis, permanent placement staffing revenues decreased 8.1% for the first quarter of 2021, compared to the first quarter of 2020, driven by a decrease in number of placements. In theU.S. , revenues for the first quarter of 2021 decreased 12.4% on an as reported basis and 11.4% on an as adjusted basis, compared to the first quarter of 2020. For the Company's international operations, revenues for the first quarter of 2021 increased 5.2% on an as reported basis and 0.3% on an as adjusted basis, compared to the first quarter of 2020. 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$397 million for the three months endedMarch 31, 2021 , increasing by 35.1% compared to revenues of$294 million for the three months endedMarch 31, 2020 . 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 an as adjusted basis, risk consulting and internal audit services revenues increased 34.7% for the first quarter of 2021, compared to the first quarter of 2020, due primarily to an increase in billable hours. In theU.S. , revenues in the first quarter of 2021 increased 35.5% on an as reported basis and 37.1% on an as adjusted basis, compared to the first quarter of 2020. The Company's risk consulting and internal audit services revenues for the first quarter of 2021 from international operations increased 33.8% on an as reported basis and 26.1% on an as adjusted basis, compared to the first quarter of 2020. 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 endedMarch 31, 2021 , is presented in the following table: GlobalUnited States
International
Temporary and consultant staffing As Reported -18.6 % -20.3 % -12.3 % Billing Days Impact 1.0 % 0.9 % 1.4 % Currency Impact -1.3 % - -6.1 % As Adjusted -18.9 % -19.4 % -17.0 % Permanent placement staffing As Reported -7.3 % -12.4 % 5.2 % Billing Days Impact 1.1 % 1.0 % 1.7 % Currency Impact -1.9 % - -6.6 % As Adjusted -8.1 % -11.4 % 0.3 % Risk consulting and internal audit services As Reported 35.1 % 35.5 % 33.8 % Billing Days Impact 1.6 % 1.6 % 2.1 % Currency Impact -2.0 % - -9.8 % As Adjusted 34.7 % 37.1 % 26.1 % Gross Margin. The Company's gross margin dollars were$562 million for the three months endedMarch 31, 2021 , decreasing by 8.6% compared to$614 million for the three months endedMarch 31, 2020 . Contributing factors for each reportable segment are discussed below in further detail. Gross margin dollars for temporary and consultant staffing represent revenues less costs of services, which consist of payroll, payroll taxes and benefit costs for engagement professionals, and reimbursable expenses. The key drivers of gross margin are: i) pay-bill spreads, which represent the differential between wages paid to engagement professionals and amounts billed to clients; ii) fringe costs, which are primarily composed of payroll taxes and benefit costs for temporary and consultant staffing employees; and iii) conversion revenues, which are earned when a temporary position converts to a permanent position with the Company's client. Gross margin dollars for the Company's temporary and consultant staffing division were$345 million for the three months endedMarch 31, 2021 , decreasing 16.5% compared to$413 million for the three months endedMarch 31, 2020 . As a percentage of revenues, gross margin for temporary and consultant staffing was 38.8% for the three months endedMarch 31, 2021 , up from 37.8% for the three months endedMarch 31, 2020 . 22 -------------------------------------------------------------------------------- Gross margin dollars for permanent placement staffing represent revenues less reimbursable expenses. Gross margin dollars for the Company's permanent placement staffing division were$111 million for the three months endedMarch 31, 2021 , decreasing 7.3% from$120 million for the three months endedMarch 31, 2020 . Because reimbursable expenses for permanent placement staffing are de minimis, gross margin dollars are substantially explained by revenues previously discussed. Gross margin dollars for risk consulting and internal audit services represent revenues less costs of services, which consist primarily of professional staff payroll, payroll taxes, benefit costs and reimbursable expenses. The primary drivers of risk consulting and internal audit services gross margin are: i) the relative composition of and number of professional staff and their respective pay and bill rates; and ii) staff utilization, which is the relationship of time spent on client engagements in proportion to the total time available for the Company's risk consulting and internal audit services staff. Gross margin dollars for the Company's risk consulting and internal audit division were$105 million for the three months endedMarch 31, 2021 , increasing 29.8% compared to$81 million for the three months endedMarch 31, 2020 . As a percentage of revenues, reported gross margin for risk consulting and internal audit services in the first quarter of 2021 was 26.5%, down from 27.6% in the first quarter of 2020. As a percentage of revenues, adjusted gross margin dollars for risk consulting and internal audit services were 26.9% the first quarter of 2021, up from 26.3% in the first quarter of 2020. The year-over-year increase in adjusted gross margin percentage was due primarily to higher staff utilization rates. Selling, General and Administrative Expenses. The Company's selling, general and administrative expenses consist primarily of staff compensation, advertising, variable overhead, depreciation, and occupancy costs. The Company's selling, general and administrative expenses were$423 million for the three months endedMarch 31, 2021 , decreasing 4.5% from$443 million for the three months endedMarch 31, 2020 . As a percentage of revenues, the Company's reported selling, general and administrative expenses were 30.3% for the first quarter of 2021, up from 29.4% the first quarter of 2020. As a percentage of revenues, the Company's adjusted selling, general and administrative expenses were 29.5% in the first quarter of 2021 compared to 31.8% in the first quarter of 2020. Contributing factors for each reportable segment are discussed below in further detail. Selling, general and administrative expenses for the Company's temporary and consultant staffing division were$279 million for the three months endedMarch 31, 2021 , decreasing 2.7% from$286 million for the three months endedMarch 31, 2020 . As a percentage of revenues, reported selling, general and administrative expenses for temporary and consultant staffing were 31.3% in the first quarter of 2021, up from 26.2% in the first quarter of 2020. As a percentage of revenues, adjusted selling, general and administrative expenses for temporary and consultant staffing were 30.3% in the first quarter of 2021, up from 29.2% in the first quarter of 2020 due primarily to negative leverage as revenues decreased in response to the COVID-19 pandemic. Selling, general and administrative expenses for the Company's permanent placement staffing division were$95 million for the three months endedMarch 31, 2021 , decreasing by 10.3% compared to$106 million for the three months endedMarch 31, 2020 . As a percentage of revenues, reported selling, general and administrative expenses for permanent placement staffing were 84.9% in the first quarter of 2021, down from 87.7% in the first quarter of 2020. As a percentage of revenues, adjusted selling, general and administrative expenses for permanent placement staffing was 83.9% in the first quarter of 2021, down from 90.8% in the first quarter of 2020 due primarily to positive leverage as the decrease in expenses exceeded the decrease in revenues as a result of cost curtailing initiatives implemented during 2020. Selling, general and administrative expenses for the Company's risk consulting and internal audit services division were$50 million for the three months endedMarch 31, 2021 , decreasing by 2.6% compared to$51 million for the three months endedMarch 31, 2020 . As a percentage of revenues, selling, general and administrative expenses for risk consulting and internal audit services were 12.5% in the first quarter of 2021, down from 17.3% in the first quarter of 2020 due primarily to positive leverage from an increase in revenues. 23 -------------------------------------------------------------------------------- A reconciliation of the non-GAAP adjusted summary of operations to the reported summary of operations, for the three months endedMarch 31, 2021 and 2020 is presented in the following table (in thousands): Quarter EndedMarch 31 , Relationships 2021 2020 2021 2020 2021 2020 Reported Adjustments Adjusted (1) Reported Adjustments Adjusted (1) Reported Adjusted SERVICE REVENUES:Accountemps $ 417,116 $ 417,116 $ 489,884 $ 489,884 29.8 % 32.5 % 29.8 % 32.5 % OfficeTeam 220,467 220,467 239,979 239,979 15.8 % 15.9 % 15.8 % 15.9 % Robert Half Technology 172,239 172,239 196,652 196,652 12.3 % 13.1 % 12.3 % 13.1 % Robert Half Management Resources 183,271 183,271 211,878 211,878 13.1 % 14.1 % 13.1 % 14.1 % Elimination of intersegment revenues (103,818) (103,818) (46,273) (46,273) (7.4 %) (3.1 %) (7.4 %) (3.1 %) Temporary and consultant staffing 889,275 889,275 1,092,120 1,092,120 63.6 % 72.5 % 63.6 % 72.5 % Permanent placement staffing 111,703 111,703 120,489 120,489 8.0 % 8.0 % 8.0 % 8.0 % Protiviti 397,402 397,402 294,082 294,082 28.4 % 19.5 % 28.4 % 19.5 % Total$ 1,398,380 $ 1,398,380 $ 1,506,691 $ 1,506,691 100.0 % 100.0 % 100.0 % 100.0 % GROSS MARGIN: Temporary and consultant staffing$ 344,931 $ 344,931 $ 412,996 $ 412,996 38.8 % 37.8 % 38.8 % 37.8 % Permanent placement staffing 111,498 111,498 120,280 120,280 99.8 % 99.8 % 99.8 % 99.8 % Protiviti 105,282 1,688 106,970 81,112 (3,671) 77,441 26.5 % 27.6 % 26.9 % 26.3 % Total$ 561,711 $ 1,688 $ 563,399 $ 614,388 $ (3,671) $ 610,717 40.2 % 40.8 % 40.3 % 40.5 % SELLING GENERAL AND ADMINISTRATIVE EXPENSE: Temporary and consultant staffing$ 278,547 $ (9,151)
31.3 % 26.2 % 30.3 % 29.2 %
Permanent placement staffing 94,867 (1,149) 93,718 105,722 3,647 109,369 84.9 % 87.7 % 83.9 % 90.8 %
Protiviti 49,648 - 49,648 50,972 - 50,972 12.5 % 17.3 % 12.5 % 17.3 %
Total $ 423,062 $ (10,300) $ 412,762 $ 442,868 $ 36,705 $ 479,573 30.3 % 29.4 % 29.5 % 31.8 %
OPERATING/SEGMENT INCOME:
Temporary and consultant staffing $ 66,384 $ 9,151
7.5 % 11.6 % 8.5 % 8.6 %
Permanent placement staffing 16,631 1,149 17,780 14,558 (3,647) 10,911 14.9 % 12.1 % 15.9 % 9.1 %
Protiviti 55,634 1,688 57,322 30,140 (3,671) 26,469 14.0 % 10.2 % 14.4 % 9.0 %
Total $ 138,649 $ 11,988 $ 150,637 $ 171,520 $ (40,376) $ 131,144 9.9 % 11.4 % 10.8 % 8.7 %
Amortization of intangible assets 576 - 576 338 - 338 0.1 % 0.1 % 0.1 % 0.1 %
(Income) loss from investments held
in
employee deferred compensation
trusts (11,988) 11,988 - 40,376 (40,376) - 0.9 % (2.7 %) 0.0 % 0.0 %
Interest income, net (45) - (45) (957) - (957) 0.0 % 0.1 % 0.0 % 0.1 %
Income before income taxes $ 150,106 $ - $ 150,106 $ 131,763 $ - $ 131,763 10.7 % 8.7 % 10.7 % 8.7 %
(1) Changes in the Company's deferred compensation obligations are included in
selling, general and administrative expense or, in the case of Protiviti, costs
of services, while the related investment income is presented separately. The
non-GAAP financial measures shown in the table above are adjusted to reclassify
investment income from investments held in employee deferred compensation trusts
to the same line item which includes the corresponding change in obligation.
These adjustments have no impact to income before income taxes.
24
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Income from Investments Held in Employee Deferred Compensation Trusts. Under the
Company's employee deferred compensation plans, employees direct the investment
of their account balances, and the Company invests amounts held in the
associated investment trusts consistent with these directions. As realized and
unrealized investment gains and losses occur, the Company's employee deferred
compensation obligation to employees changes accordingly. Changes in the
Company's deferred compensation obligations noted above remain in selling,
general and administrative or in the case of the Company's risk consulting and
internal audit services division, costs of services. The value of the related
investment trust assets also changes by the equal and offsetting amount, leaving
no net costs to the Company. The Company's income from investments held in
employee deferred compensation trusts consists primarily of unrealized and
realized gains and losses and dividend income from trust investments. The
Company's income/loss from investments held in employee deferred compensation
trusts was an income of $12 million for the three months ended March 31, 2021
whereas it had a loss of $40 million for the three months ended March 31, 2020 .
The increase in income from trust investments was due to positive market returns
in 2021.
Income Before Income Taxes and Segment Income. The Company's total income before
income taxes was $150 million , or 10.7% of revenues, for the three months ended
March 31, 2021 , up from $132 million or 8.7% of revenues, for the three months
ended March 31, 2020 . Combined segment income was $151 million , or 10.8% of
revenues, for the three months ended March 31, 2021 , up from $131 million or
8.7% of revenues, for the three months ended March 31, 2020 .
The following table provides a reconciliation of the non-GAAP combined segment
income to reported income before income taxes for the three months ended
March 31, 2021 and 2020 (in thousands):
Three Months Ended
March 31,
2021 2020
Income before income taxes $ 150,106 $ 131,763
Interest income, net (45) (957)
Amortization of intangible assets 576 338
Combined segment income $ 150,637 $ 131,144
For the Company's temporary and consultant staffing division, segment income was
$76 million , or 8.5% of applicable revenues, down from $94 million , or 8.6% of
applicable revenues, in the first quarter of 2020. For the Company's permanent
placement staffing division, segment income was $18 million , or 15.9% of
applicable revenues, up from segment income of $11 million , or 9.1% of
applicable revenues, in the first quarter of 2020. For the Company's risk
consulting and internal audit services division, segment income was $57 million ,
or 14.4% of applicable revenues, compared to segment income of $26 million or
9.0% of applicable revenues, in the first quarter of 2020.
Provision for income taxes. The provision for income taxes was 26.3% and 31.8%
for the three months ended March 31, 2021 and 2020, respectively. The 2020 rate
was elevated based on the estimated lower coverage of non-deductible tax items
due to lower pandemic-impacted revenues.
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Liquidity and Capital Resources
The change in the Company's liquidity during the three months ended March 31,
2021 and 2020, is primarily the net effect of funds generated by operations and
the funds used for capital expenditures, investment in employee deferred
compensation trusts, net of redemptions from employee deferred compensation
trusts, repurchases of common stock, and payment of dividends.
Cash and cash equivalents were $498 million and $250 million at March 31, 2021
and 2020, respectively. Operating activities provided $68 million during the
three months ended March 31, 2021 , offset by $15 million and $124 million of net
cash used in investing activities and financing activities, respectively.
Operating activities provided $125 million during the three months ended
March 31, 2020 , offset by $28 million and $110 million of net cash used in
investing activities and financing activities, respectively.
Operating activities-Net cash provided by operating activities for the three
months ended March 31, 2021 , was composed of net income of $111 million adjusted
upward for non-cash items of $33 million , offset by net cash used in changes in
working capital of $76 million . Net cash provided by operating activities for
the three months ended March 31, 2020 , was composed of net income of $90 million
adjusted upward for non-cash items of $91 million , offset by net cash used in
changes in working capital of $56 million .
Investing activities-Cash used in investing activities for the three months
ended March 31, 2021 , was $15 million . This was composed of capital expenditures
of $10 million and investment in employee deferred compensation trusts of $28
million , offset by proceeds from employee deferred compensation trusts
redemptions of $23 million . Cash used in investing activities for the three
months ended March 31, 2020 , was $28 million . This was composed of capital
expenditures of $14 million and investment in employee deferred compensation
trusts of $37 million , offset by proceeds from employee deferred compensation
trusts redemptions of $23 million .
Financing activities-Cash used in financing activities for the three months
ended March 31, 2021 , was $124 million . This included repurchases of $80 million
in common stock and $44 million in dividends paid to stockholders. Cash used in
financing activities for the three months ended March 31, 2020 , was $110
million . This included repurchases of $70 million in common stock and $40
million in dividends paid to stockholders.
As of March 31, 2021 , the Company is authorized to repurchase, from time to
time, up to 9.2 million additional shares of the Company's common stock on the
open market or in privately negotiated transactions, depending on market
conditions. During the three months ended March 31, 2021 and 2020, the Company
repurchased 0.8 million shares, at a cost of $61 million , and 1.0 million
shares, at a cost of $51 million , on the open market, respectively. Additional
stock repurchases were made in connection with employee stock plans, whereby
Company shares were tendered by employees for the payment of exercise price and
applicable statutory withholding taxes. During the three months ended March 31,
2021 and 2020, such repurchases totaled 0.3 million shares, at a cost of $19
million , and 0.3 million shares, at a cost of $12 million , respectively.
Repurchases of shares have been funded with cash generated from operations.
The Company's working capital at March 31, 2021 , included $498 million in cash
and cash equivalents and $800 million in accounts receivable, both of which will
be a significant source of ongoing liquidity and financial resilience. The
Company expects that internally generated cash will be sufficient to support the
working capital needs of the Company, the Company's fixed payments, dividends,
and other obligations on both a short-term and long-term basis.
We have limited visibility into future cash flows as the Company's revenues are
dependent on macroeconomic conditions. The Company's variable direct costs
related to its temporary and consultant staffing business will largely fluctuate
in relation to its revenues.
In May 2020 , the Company entered into a new $100 million unsecured revolving
credit facility (the "364-Day Credit Agreement"). Borrowings under the 364-Day
Credit Agreement will bear interest in accordance with the terms of the
borrowing, which typically will be calculated according to the LIBOR plus an
applicable margin. The 364-Day Credit Agreement is subject to certain financial
covenants and the Company was in compliance with these covenants as of March 31,
2021 . There were no borrowings under the 364-Day Credit Agreement as of
March 31, 2021 .
On April 29, 2021 , the Company announced a quarterly dividend of $.38 per share
to be paid to all shareholders of record as of May 25, 2021 . The dividend will
be paid on June 15, 2021 .
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