What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-02 compared with 2020-08-03 · 187 added, 142 removed, 160 unchanged (67% of the section changed)

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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 and in managing the recently announced leadership transition;

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;

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Executive Overview

The global outbreak of the coronavirus disease 2019 (“COVID-19”) was declared a pandemic by the World Health Organization and a national emergency by the U.S.

Government in March 2020.

The subsequent global stay-at-home orders resulted in significant travel restrictions and business closures.

These actions have led to global economic disruptions.

The Company has prioritized the health and safety of its employees, and virtually all global staffing and Protiviti employees have been working remotely.

As COVID-19 continues to impact the global economy, the Company has prioritized the health and safety of its employees, and a majority of global staffing and Protiviti employees continue working remotely.

The Company has maintained full operations even where physical locations have remained closed.

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government, state and local government officials, and international governments to prevent disease spread, all of which are uncertain and cannot be predicted.

The Company’s financial results for the first half of 2020 were clearly affected by the economic crisis resulting from the COVID-19 pandemic, most acutely in the Company’s staffing business.

During the first half of 2020 net service revenues were $2.62 billion, a decrease of 12% from the prior year.

Net income for the first half of 2020 was $136 million and diluted net income per share was $1.20.

Risk consulting and internal audit services experienced strong revenue growth increasing by 10%, offset by declines in temporary and consultant staffing of 16% and permanent placement staffing of 30% during the first half of 2020, compared to the first half of 2019.

The Company’s staffing clients, most of whom are small and midsize businesses, are feeling the crisis, and the downstream effect is a much tougher business climate for the Company.

The Company’s financial results for the first three quarters of 2020 were affected by the economic crisis resulting from the COVID-19 pandemic, primarily in the Company’s staffing business.

During the first three quarters of 2020 service revenues were $3.80 billion, a decrease of 16% from the prior year.

Net income for the first three quarters of 2020 was $212 million and diluted net income per share was $1.87.

Risk consulting and internal audit services experienced strong revenue growth increasing by 9%, offset by declines in temporary and consultant staffing of 21% and permanent placement staffing of 32% during the first three quarters of 2020, compared to the first three quarters of 2019.

The Company’s staffing clients, most of whom are small and midsize businesses, are feeling the crisis, however, there are im proving trends in the small business com munity.

Demand for Protiviti’s services was broad-based across its diversified service offerings, including internal audit, technology consulting and regulatory compliance consulting.

Protiviti had a strong first half of 2020 and continues to benefit from strong solutions offerings and pipeline.

The United States economic backdrop as we ended the first half of 2020 was one of slowdown and uncertainty as real gross domestic product (“GDP”) decreased 5.0% and 32.9% for the first and second quarter, respectively, while the unemployment rate increased from 3.5% in December 2019 to 11.1% at the end of the second quarter of 2020, respectively.

In one quarter’s time, we have shifted from operating in a candidate-constrained labor market to a labor market with unprecedented unemployment levels.

Protiviti had a strong first three quarters of 2020 and continues to

benefit fro m multiple solutions offerings and pipeline, including particularly robust growth from the blended solutions with the Company’s temporary and consulting staffing operations.

The United States economic backdrop as we ended the first three quarters of 2020 was showing signs of modest recovery as real gross domestic product (“GDP”) decreased 5.0% and 32.9% for the first and second quarter, respectively, and increased 33.1% for the third quarter, while the unemployment rate increased from 3.5% in December 2019 to 4.4%, 11.1%, and 7.9% at the end of the first, second, and third quarter of 2020, respectively.

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.

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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.

As such, during the first half of 2020, we took actions to reduce operating costs including laying off the Company’s less experienced and lower performing staff.

Impacted corporate staff were furloughed with paid benefits, awaiting a return to higher activity levels.

Capital expenditures, including $8 million for cloud computing arrangements, for the six months ended June 30, 2020, totaled $16 million, approximately 71% of which represented investments in software initiatives and technology infrastructure, both of which are important to the Company’s sustainability and future growth opportunities.

Accordingly, we typically assess headcount and oth er investments on at least a quarterly basis.

As such, during the first three quarters of 2020, we took actions to reduce headcount.

We are focused on the productivity levels of tenured staff and believe we have aligned staffing levels to drive profitability.

Capital expenditures, including $26 million for cloud computing arrangements, for the nine months ended September 30, 2020, totaled $55 million, approximately 68% 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.

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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, 2019.

There were no material changes to the Company’s critical accounting policies or estimates for the six months ended June 30, 2020.

There were no material changes to the Company’s critical accounting policies or estimates for the nine months ended September 30, 2020.

Recent Accounting Pronouncements

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We have found innovative ways to maintain connections with candidates and clients in a remote environment and we believe the Company is well positioned to meet the demand of our customers.

The Company’s second-quarter results were clearly affected by the economic crisis resulting from the COVID-19 pandemic, most acutely in our staffing business.

Protiviti had an outstanding quarter and continues to benefit from strong solutions offerings and pipeline.

We are encouraged by recent signs of week-on-week sequential growth in our staffing operations at the end of the second quarter.

Although significant uncertainty continues, we approach the third quarter with optimism.

While uncertainty remains in the overall economic environme nt, we approach the fourth quarter with optimism.

The Company’s temporary and permanent placement staffing business has 326 offices in 42 states, the District of Columbia and 17 foreign countries, while Protiviti has 62 offices in 23 states and 12 foreign countries.

The Company has changed its Condensed Consolidated Statements of Operations to separately present 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 deferred compensation obligation to employees changes accordingly.

However, the value of the related investment trust assets also changes by an equal and offsetting amount, leaving no net cost to the Company.

Under the new presentation, changes in the Company’s deferred compensation obligations noted above will continue to be included in selling, general and administrative expenses or, in the case of risk consulting and internal audit services, direct cost.

However, the offsetting changes in the investment trust assets will be presented separately below selling, general and administrative expenses.

This does not change the reported level of pre-tax or after-tax income or cash flow previously provided.

Under the new presentation, we will replace

the discussion of consolidated operating income with the non-GAAP measure of combined segment income.

This will be calculated as consolidated income before income taxes adjusted for net interest income and amortization of intangible assets, and is equal to the sum of segment income.

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.

To help readers understand the Company’s financial performance, the Company supplements its GAAP financial results with the following non-GAAP measures:

combined segment income and as adjusted revenue growth rates.

Combined segment income is defined as income before income taxes adjusted for net interest income and amortization of intangible assets, and is equal to the sum of segment income.

The Company provides combined segment income because it is how the Company evaluates segment performance.

A reconciliation of combined segment income to reported income before income taxes is provided herein.

Variations in the Company’s financial results include the impact of changes in foreign currency exchange rates and billing days.

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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’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.

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“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 June 30, 2020 and 2019

The Company’s revenues were $1.11 billion for the three months ended June 30, 2020, decreasing by 26.9% compared to $1.52 billion for the three months ended June 30, 2019.

Revenues from foreign operations represented 22% of total revenues for both the three months ended June 30, 2020 and 2019.

Three Months Ended September 30, 2020 and 2019

The Company’s revenues were $1.19 billion for the three months ended September 30, 2020, decreasing by 23.3% compared to $1.55 billion for the three months ended September 30, 2019.

Revenues from foreign operations represented 22% of total revenues for both the three months ended September 30, 2020 and 2019.

The Company analyzes its revenues for three reportable segments:

temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services.

For the three months ended June 30, 2020, risk consulting and internal audit services continued to post solid growth rates, compared to the same period in 2019.

The Company’s revenues for the three months ended June 30, 2020 were impacted by the global stay-at-home orders, significant travel restrictions, and business closures which resulted in global economic disruptions.

For the three months ended September 30, 2020, risk consulting and internal audit services continued to post solid growth rates, compared to the same period in 2019.

The Company’s revenues for the three months ended September 30, 2020 continued to be impacted by the global stay-at-home orders, significant travel restrictions, and business closures which resulted in global economic disruptions.

Contributing factors for each reportable segment are discussed below in further detail.

Temporary and consultant staffing revenues were $753 million for the three months ended June 30, 2020, decreasing by 31.7% compared to revenues of $1.10 billion for the three months ended June 30, 2019.

Temporary and consultant staffing revenues were $781 million for the three months ended September 30, 2020, decreasing by 30.1% compared to revenues of $1.12 billion for the three months ended September 30, 2019.

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.

The Company’s temporary and consultant staffing revenue in the second quarter of 2020 reflected the economic circumstances present in the quarter.

On an as adjusted basis, temporary and consultant staffing revenues decreased 31.2% for the second quarter of 2020 compared to the second quarter of 2019.

In the U.S., revenues in the second quarter of 2020 decreased 31.7% on both an as reported basis and on an as adjusted basis, compared to the second quarter of 2019.

For the Company’s international operations, 2020 second quarter revenues decreased 31.8% on an as reported basis and decreased 28.9% on an as adjusted basis, compared to the second quarter of 2019.

The decreases ultimately resulted from fewer hours worked by the Company’s engagement professionals on client engagements.

Permanent placement staffing revenues were $71 million for the three months ended June 30, 2020, decreasing by 49.6% compared to revenues of $141 million for the three months ended June 30, 2019.

The Company’s temporary and consultant staffing revenue in the third quarter

of 2020 reflected the economic circumstances present in the quarter.

On an as adjusted basis, temporary and consultant staffing revenues decreased 30.7% for the third quarter of 2020 compared to the third quarter of 2019, due primarily to fewer hours worked by the Company’s engagement professionals on client engagements.

In the U.S., revenues in the third quarter of 2020 decreased 31.0% on an as reported basis and 31.3% on an as adjusted basis, compared to the third quarter of 2019.

For the Company’s international operations, 2020 third quarter revenues decreased 27.0% on an as reported basis and decreased 28.4% on an as adjusted basis, compared to the third quarter of 2019.

Permanent placement staffing revenues were $87 million for the three months ended September 30, 2020, decreasing by 35.2% compared to revenues of $135 million for the three months ended September 30, 2019.

Key drivers of permanent placement staffing revenues consist of the number of candidate placements and average fees earned per placement.

Permanent placement staffing revenues in the second quarter of 2020, reflected the economic circumstances present in the quarter.

On an as adjusted basis, permanent placement staffing revenues decreased 49.1% for the second quarter of 2020 compared to the second quarter of 2019, driven by a decrease in number of placements, partially offset by an increase in average fees earned per placement.

In the U.S., revenues for the second quarter of 2020 decreased 51.6% on both an as reported basis and on an as adjusted basis, compared to the second quarter of 2019.

For the Company’s international operations, revenues for the second quarter of 2020 decreased 45.0% on an as reported basis and decreased 43.2% on an as adjusted basis, compared to the second quarter of 2019.

Permanent placement staffing revenues in the third quarter of 2020 reflected the economic circumstances present in the quarter.

On an as adjusted basis, permanent placement staffing revenues decreased 35.7% for the third quarter of 2020 compared to the third quarter of 2019, driven by a decrease in number of placements, partially offset by an increase in average fees earned per placement.

In the U.S., revenues for the third quarter of 2020 decreased 37.1% on an as reported basis and 37.3% on an as adjusted basis, compared to the third quarter of 2019.

For the Company’s international operations, revenues for the third quarter of 2020 decreased 30.9% on an as reported basis and decreased 31.7% on an as adjusted basis, compared to the third quarter of 2019.

Demand for permanent placement staffing is even more sensitive to economic and labor market conditions than demand for temporary and consultant staffing as demonstrated by the results in the current economic environment.

Risk consulting and internal audit services revenues were $284 million for the three months ended June 30, 2020, increasing by 4.1% compared to revenues of $273 million for the three months ended June 30, 2019.

Risk consulting and internal audit services revenues were $321 million for the three months ended September 30, 2020, increasing by 7.4% compared to revenues of $299 million for the three months ended September 30, 2019.

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 4.5% for the second quarter of 2020 compared to the second quarter of 2019, primarily due to an increase in billable hours.

In the U.S., revenues in the second quarter of 2020 increased 6.4% on an as reported basis and 6.3% on an as adjusted basis, compared to the second quarter of 2019.

On an as adjusted basis, risk consulting and internal audit services revenues increased 6.4% for the third quarter of 2020 compared to the third quarter of 2019, primarily due to an increase in billable hours.

In the U.S., revenues in the third quarter of 2020 increased 10.8% on an as reported basis and 10.3% on an as adjusted basis, compared to the third quarter of 2019.

Contributing to the U.S.

increase were services related to business performance improvement, technology consulting, and internal audit and financial advisory practice areas.

The Company’s risk consulting and internal audit services revenues from international operations decreased 3.9% on an as reported basis and 1.5% on an as adjusted basis for the second quarter of 2020 compared to the second quarter of 2019.

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 June 30, 2020, is presented in the following table:

increase were services related to risk and compliance and technology consulting practice areas including blended solutions with the Company's temporary and consulting staffing operations.

The Company’s risk consulting and internal audit services revenues from international operations decreased 5.0% on an as reported basis and 8.0% on an as adjusted basis for the third quarter of 2020 compared to the third quarter of 2019.

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 September 30, 2020, is presented in the following table:

Global United States International

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Gross Margin.

The Company’s gross margin dollars were $423 million for the three months ended June 30, 2020, decreasing by 33.6% compared to $638 million for the three months ended June 30, 2019.

The Company’s gross margin dollars were $467 million for the three months ended September 30, 2020, decreasing by 27.7% compared to $646 million for the three months ended September 30, 2019.

Contributing factors for each reportable segment are discussed below in further detail.

Gross margin dollars for temporary and consultant staffing represent revenues less direct costs of services, which consist of payroll, payroll taxes and benefit costs for engagement professionals, and reimbursable expenses.

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:

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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 $279 million for the three months ended June 30, 2020, decreasing 33.6% compared to $421 million for the three months ended June 30, 2019.

As a percentage of revenues, gross margin for temporary and consultant staffing was 37.1% in the second

quarter of 2020, down from 38.2% in the second quarter of 2019.

Gross margin dollars for the Company’s temporary and consultant staffing division were $293 million for the three months ended September 30, 2020, decreasing 30.8% compared to $424 million for the three months ended September 30, 2019.

As a percentage of revenues, gross margin for temporary and consultant staffing was 37.5% in the third quarter of 2020, down from 37.9% in the third quarter of 2019.

This year-over-year decline in gross margin percentage was primarily attributable to lower conversion revenues.

Gross margin dollars for permanent placement staffing represent revenues less reimbursable expenses.

Gross margin dollars for the Company’s permanent placement staffing division were $71 million for the three months ended June 30, 2020, decreasing 49.6% from $141 million for the three months ended June 30, 2019.

Gross margin dollars for the Company’s permanent placement staffing division were $87 million for the three months ended September 30, 2020, decreasing 35.2% from $134 million for the three months ended September 30, 2019.

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 direct costs of services, which consist primarily of professional staff payroll, payroll taxes, benefit costs and reimbursable expenses.

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:

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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 $73 million for the three months ended June 30, 2020, decreasing 4.2% compared to $76 million for the three months ended June 30, 2019.

As a percentage of revenues, gross margin for risk consulting and internal audit services in the second quarter of 2020 was 25.7%, down from 27.9% in the second quarter of 2019.

Gross margin dollars for the Company’s risk consulting and internal audit division were $87 million for the three months ended September 30, 2020, decreasing 1.1% compared to $88 million for the three months ended September 30, 2019.

Impacting gross margin is deferred compensation expense related to changes in the fair value of participants’ accounts of $3 million and less than a million for the three months ended September 30, 2020 and 2019, respectively.

Equal and offsetting amounts are included in income from investments held in employee deferred compensation trusts.

As a percentage of revenues, gross margin for risk consulting and internal audit services in the third quarter of 2020 was 27.1%, down from 29.4% in the third quarter of 2019.

The year-over-year decline in gross margin percentage was due primarily to lower staff utilization rates.

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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 $365 million for the three months ended June 30, 2020, decreasing 23.7% from $478 million for the three months ended June 30, 2019.

Despite the significant reduction in selling, general and administrative cost during the quarter, as a percentage of revenues, the Company’s selling, general and administrative expenses were 32.9% for the second quarter of 2020, up from 31.5% in the second quarter of 2019.

The increase in selling, general and administrative expenses as a percentage of revenues was significantly impacted by negative leverage as revenues decreased.

The timing of our cost-reduction actions, including compensation-related costs associated with employee terminations, impacted total selling, general and administrative costs for the quarter.

The Company’s selling, general and administrative expenses were $391 million for the three months ended September 30, 2020, decreasing 19.4% from $485 million for the three months ended September 30, 2019.

As a percentage of revenues, the Company’s selling, general and administrative expenses were 32.8% for the third quarter of 2020, up from 31.2% in the third quarter of 2019.

The increase in selling, general and administrative expenses as a percentage of revenues was primarily impacted by negative leverage as revenues decreased.

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 $251 million for the three months ended June 30, 2020, decreasing 20.5% from $316 million for the three months ended June 30, 2019.

As a percentage of revenues, selling, general and administrative expenses for temporary and consultant staffing were 33.3% in the second quarter of 2020, up from 28.6% in the second quarter of 2019 due primarily to negative leverage as revenues decreased as a result of financial conditions during the quarter.

Selling, general and administrative expenses for the Company’s permanent placement staffing division were $71 million for the three months ended June 30, 2020, decreasing by 38.3% compared to $115 million for the three months ended June 30, 2019.

As a percentage of revenues, selling, general and administrative expenses for permanent placement staffing were 100.2% in the second quarter of 2020, up from 81.8% in the second quarter of 2019 due primarily to negative leverage as revenues decreased in response to the COVID-19 pandemic.

Selling, general and administrative expenses for the Company’s risk consulting and internal audit services division were $43 million for the three months ended June 30, 2020, decreasing by 9.5% compared to $47 million for the three months ended June 30, 2019.

As a percentage of revenues, selling, general and administrative expenses for risk consulting and internal audit services were 15.1% in the second quarter of 2020, down from 17.3% in the second quarter of 2019 due primarily to a decrease in variable overhead costs.

Operating Income.

The Company’s total operating income was $58 million, or 5.3% of revenues, for the three months ended June 30, 2020, down from $159 million, or 10.5% of revenues, for the three months ended June 30, 2019.

For the Company’s temporary and consultant staffing division, operating income was $28 million, or 3.8% of applicable revenues, down from $105 million, or 9.5% of applicable revenues, in the second quarter of 2019.

For the Company’s permanent placement staffing division, operating loss was less than a million, or (0.3)% of applicable revenues, compared to an operating income of $25 million, or 18.0% of applicable revenues, in the second quarter of 2019.

For the Company’s risk consulting and internal audit services division, operating income was $30 million, or 10.6% of applicable revenues, compared to an operating income of $29 million, or 10.6% of applicable revenues, in the second quarter of 2019.

Selling, general and administrative expenses for the Company’s temporary and consultant staffing division were $270 million for the three months ended September 30, 2020, decreasing 16.6% from $324 million for the three months ended September 30, 2019.

This includes deferred compensation expense related to changes in the fair value of participants’ accounts of $20 million and $1 million for the three months ended September 30, 2020 and 2019, respectively.

Equal and offsetting amounts are included in income from investments held in employee deferred compensation trusts.

As a percentage of revenues, selling, general and administrative expenses for temporary and consultant staffing were 34.5% in the third quarter of 2020, up from 28.9% in the third quarter of 2019 due primarily to negative leverage as revenues decreased as a result of financial conditions during the quarter and an increase in deferred compensation expense related to changes in the fair value of

participants’ accounts.

Selling, general and administrative expenses for the Company’s permanent placement staffing division were $79 million for the three months ended September 30, 2020, decreasing by 29.7% compared to $113 million for the three months ended September 30, 2019.

This includes deferred compensation expense related to changes in the fair value of participants’ accounts of $2 million and less than a million for the three months ended September 30, 2020 and 2019, respectively.

Equal and offsetting amounts are included in income from investments held in employee deferred compensation trusts.

As a percentage of revenues, selling, general and administrative expenses for permanent placement staffing were 90.8% in the third quarter of 2020, up from 83.7% in the third quarter of 2019 due primarily to an increase in deferred compensation expense related to changes in the fair value of participants’ accounts and negative leverage as revenues decreased as a result of financial conditions during the quarter.

Selling, general and administrative expenses for the Company’s risk consulting and internal audit services division were $42 million for the three months ended September 30, 2020, decreasing by 14.2% compared to $48 million for the three months ended September 30, 2019.

As a percentage of revenues, selling, general and administrative expenses for risk consulting and internal audit services were 13.0% in the third quarter of 2020, down from 16.2% in the third quarter of 2019 due primarily to a decrease in variable overhead costs and positive leverage on revenues.

Income from Investments Held in Employee Deferred Compensation Trusts .

As realized and unrealized investment gains and losses occur, the Company’s deferred compensation obligation to employees changes accordingly.

Changes in the Company’s deferred compensation obligations noted above are included in selling, general and administrative or in the case of the Company’s risk consulting and internal audit services division, direct cost.

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 from investments held in employee deferred compensation trusts was $26 million for the three months ended September 30, 2020, and $1 million for the three months ended September 30, 2019.

The increase in income from trust investments was due to positive market returns in 2020.

Incom e before income taxe s and Segment Income.

The Company’s total income before income taxes was $103 million, or 8.6% of revenues, for the three months ended September 30, 2020, down from $164 million, or 10.6% of revenues, for the three months ended September 30, 2019.

Combined segment income was $103 million, or 8.6% of revenues, for the three months ended September 30, 2020, down from $163 million, or 10.5% of revenues, for the three months ended September 30, 2019.

The following table provides a reconciliation of the non-GAAP combined segment income to reported income before income taxes for the three months ended September 30, 2020 and 2019 (in thousands):

Quarter Ended

September 30,

Income before income taxes $ 102,510 $ 163,782

Interest income, net (202) (1,230)

Amortization of intangible assets 334 339

Combined segment income $ 102,642 $ 162,891

For the Company’s temporary and consultant staffing division, segment income was $44 million, or 5.6% of applicable revenues, down from $101 million, or 9.1% of applicable revenues, in the third quarter of 2019.

For the Company’s permanent placement staffing division, segment income was $10 million, or 11.6% of applicable revenues, compared to segment income of $22 million, or 16.2% of applicable revenues, in the third quarter of 2019.

For the Company’s risk consulting and internal audit services division, segment income was $49 million, or 15.2% of applicable revenues, compared to an segment income of $40 million, or 13.3% of applicable revenues, in the third quarter of 2019.

Provision for income taxes .

The provision for income taxes was 20.4% and 28.4% for the three months ended June 30, 2020 and 2019, respectively.

The relatively low second quarter tax rate in 2020 is a consequence of a lower anticipated full-year tax rate compared to the full-year estimate in the first quarter.

Six Months Ended June 30, 2020 and 2019

The Company’s revenues were $2.62 billion for the six months ended June 30, 2020, decreasing by 12.4% compared to $2.98 billion for the six months ended June 30, 2019.

Revenues from foreign operations represented 22% of total revenues for the six months ended June 30, 2020, down from 23% of total revenues for the six months ended June 30, 2019.

The provision for income taxes was 26.1% and 28.5% for the three months ended September 30, 2020 and 2019, respectively.

The lower third-quarter tax rate is primarily due to actual non-deductible expenses and other items in our federal tax return coming in more favorably than originally estimated.

Nine Months Ended September 30, 2020 and 2019

The Company’s revenues were $3.80 billion for the nine months ended September 30, 2020, decreasing by 16.1% compared to $4.54 billion for the nine months ended September 30, 2019.

Revenues from foreign operations represented 22% of total revenues for the nine months ended September 30, 2020, down from 23% of total revenues for the nine months ended September 30, 2019.

The Company analyzes its revenues for three reportable segments:

temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services.

Risk consulting and internal audit services increased, offset by decreases in temporary and consulting staffing and permanent placement staffing Contributing factors for each reportable segment are discussed below in further detail.

Temporary and consultant staffing revenues were $1.85 billion for the six months ended June 30, 2020, decreasing by 15.6% compared to revenues of $2.19 billion for the six months ended June 30, 2019.

Risk consulting and internal audit services increased, offset by decreases in temporary and consulting staffing and permanent placement staffing.

Contributing factors for each reportable segment are discussed below in further detail.

Temporary and consultant staffing revenues were $2.63 billion for the nine months ended September 30, 2020, decreasing by 20.5% compared to revenues of $3.31 billion for the nine months ended September 30, 2019.

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 15.6% for the first half of 2020 compared to the first half of 2019.

In the U.S., revenues in the first half of 2020 decreased 15.1% on an as reported basis and 15.7% on an as adjusted basis, compared to the first half of 2019.

For the Company’s international operations, revenues for the first half of 2020 decreased 17.6% on an as reported basis and decreased 15.1% on an as adjusted basis, compared to the first half of 2019.

The decreases ultimately resulted from fewer hours worked by the Company’s engagement professionals on client engagements.

Permanent placement staffing revenues were $192 million for the six months ended June 30, 2020, decreasing by 29.7% compared to revenues of $272 million for the six months ended June 30, 2019.

On an as adjusted basis, temporary and consultant staffing revenues decreased 20.7% for the first three quarters of 2020 compared to the first three quarters of 2019, due primarily to fewer hours worked by the Company’s engagement professionals on client engagements.

In the U.S., revenues in the first three quarters of 2020 decreased 20.5% on an as reported basis and 21.0% on an as adjusted basis, compared to the first three quarters of 2019.

For the Company’s international operations, revenues for the first three quarters of 2020 decreased 20.7% on an as reported basis and decreased 19.6% on an as adjusted basis, compared to the first three quarters of 2019.

Permanent placement staffing revenues were $279 million for the nine months ended September 30, 2020, decreasing by 31.5% compared to revenues of $407 million for the nine months ended September 30, 2019.

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 29.6% for the first half of 2020 compared to the first half of 2019, driven by a decrease in number of placements, partially offset by an increase in average fees earned per placement.

In the U.S., revenues for the first half of 2020 decreased 29.3% on an as reported basis and 29.8% on an as adjusted basis, compared to the first half of 2019.

For the Company’s international operations, revenues for the first half of 2020 decreased 30.6% on an as reported basis and 29.0% on an as adjusted basis, compared to the first half of 2019.

On an as adjusted basis, permanent placement staffing revenues decreased 31.6% for the first three quarters of 2020 compared to the first three quarters of 2019, driven by a decrease in number of placements, partially offset by an increase in average fees earned per placement.

In the U.S., revenues for the first three quarters of 2020 decreased 31.9% on an as reported basis and 32.3% on an as adjusted basis, compared to the first three quarters of 2019.

For the Company’s international operations, revenues for the first three quarters of 2020 decreased 30.7% on an as reported basis and 29.9% on an as adjusted basis, compared to the first three quarters of 2019.

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 $578 million for the six months ended June 30, 2020, increasing by 10.1% compared to revenues of $525 million for the six months ended June 30, 2019.

Risk consulting and internal audit services revenues were $899 million for the nine months ended September 30, 2020, increasing by 9.1% compared to revenues of $824 million for the nine months ended September 30, 2019.

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.

For the six months ended June 30, 2020, risk consulting and internal audit services continued to post strong growth rates, compared to the same period in 2019.

On an as adjusted basis, risk consulting and internal audit services revenues increased 9.8% for the first half of 2020 compared to the first half of 2019, due primarily to an increase in billable hours.

In the U.S., revenues in the first half of 2020 increased 13.5% on an as reported basis and 12.6% on an as adjusted basis, compared to the first half of 2019.

The Company’s risk consulting and internal audit services revenues for the first half of 2020 from international operations decreased 1.3% on an as reported basis and increased 0.4% on an as adjusted basis, compared to the first half of 2019.

A reconciliation of the non-GAAP year-over-year revenue growth rates to the as reported year-over-year revenue growth rates for the six months ended June 30, 2020, is presented in the following table:

For the nine months ended September 30, 2020, risk consulting and internal audit services continued to post strong growth rates, compared to the same period in 2019.

On an as adjusted basis, risk consulting and internal audit services revenues increased 8.6% for the first three quarters of 2020 compared to the first three quarters of 2019, due primarily to an increase in billable hours.

In the U.S., revenues in the first three quarters of 2020 increased 12.5% on an as reported basis and 11.8% on an as adjusted basis, compared to the first three quarters of 2019.

The Company’s risk consulting and internal audit services revenues for the first three quarters of 2020 from international operations decreased 2.6% on an as reported basis and 2.5% on an as adjusted basis, compared to the first three quarters of 2019.

A reconciliation of the non-GAAP year-over-year revenue growth rates to the as reported year-over-year revenue growth rates for the nine months ended September 30, 2020, is presented in the following table:

Global United States International

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Gross Margin.

The Company’s gross margin dollars were $1.03 billion for the six months ended June 30, 2020, decreasing by 17% compared to $1.25 billion for the six months ended June 30, 2019.

The Company’s gross margin dollars were $1.50 billion for the nine months ended September 30, 2020, decreasing by 20.7% compared to $1.89 billion for the nine months ended September 30, 2019.

Contributing factors for each reportable segment are discussed below in further detail.

The key drivers of gross margin are:

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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 $692 million for the six months ended June 30, 2020, decreasing 16.9% compared to $833 million for the six months ended June 30, 2019.

As a percentage of revenues, gross margin for temporary and consultant staffing was 37.5% for the six months ended June 30, 2020, down from 38.1% for the six months ended June 30, 2019.

Gross margin dollars for the Company’s temporary and consultant staffing division were $986 million for the nine months ended September 30, 2020, decreasing 21.6% compared to $1.26 billion for the nine months ended September 30, 2019.

As a percentage of revenues, gross margin for temporary and consultant staffing was 37.5% for the nine months ended September 30, 2020, down from 38.0% for the nine months ended September 30, 2019.

This year-over-year decline in gross margin percentage was primarily attributable to lower conversion revenues.

Gross margin dollars for permanent placement staffing represent revenues less reimbursable expenses.

Gross margin dollars for the Company’s permanent placement staffing division were $191 million for the six months ended June 30, 2020, decreasing 29.7% from $272 million for the six months ended June 30, 2019.

Gross margin dollars for the Company’s permanent placement staffing division were $278 million for the nine months ended September 30, 2020, decreasing 31.5% from $406 million for the nine months ended September 30, 2019.

Because reimbursable expenses for permanent placement staffing are de minimis, gross margin dollars are substantially explained by revenues previously discussed.

The primary drivers of risk consulting and internal audit services gross margin are:

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Gross margin dollars for the Company’s risk consulting and internal audit division were $150 million for the six months ended June 30, 2020, increasing 7.5% compared to $140 million for the six months ended June 30, 2019.

As a percentage of revenues, gross margin for risk consulting and internal audit services in the first half of 2020 was 26.0%, down from 26.6% in the first half of 2019.

The year-over-year decline in gross margin percentage was due primarily to slightly lower staff utilization rates.

Gross margin dollars for the Company’s risk consulting and internal audit division were $234 million for the nine months ended September 30, 2020, increasing 4.3% compared to $225 million for the nine months ended September 30, 2019.

Impacting gross margin is deferred compensation expense related to changes in the fair value of participants’ accounts of $6 million and $3 million for the nine months ended September 30, 2020 and 2019, respectively.

As a percentage of revenues, gross margin for risk consulting and internal audit services in the first three quarters of 2020 was 26.1%, down from 27.3% in the first three quarters of 2019.

The year-over-year decline in gross margin percentage was due primarily to lower 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 $844 million for the six months ended June 30, 2020, decreasing 10.1% from $939 million for the six months ended June 30, 2019.

As a percentage of revenues, the Company’s selling, general and administrative

expenses were 32.3% for the first half of 2020, up from 31.5% the first half of 2019.

The Company’s selling, general and administrative expenses were $1.24 billion for the nine months ended September 30, 2020, decreasing 14.7% from $1.45 billion for the nine months ended September 30, 2019.

As a percentage of revenues, the Company’s selling, general and administrative expenses were 32.6% for the first three quarters of 2020, up from 32.1% the first three quarters of 2019.

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 $570 million for the six months ended June 30, 2020, decreasing 8.3% from $622 million for the six months ended June 30, 2019.

As a percentage of revenues, selling, general and administrative expenses for temporary and consultant staffing were 30.9% in the first half of 2020, up from 28.4% in the first half of 2019 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 $180 million for the six months ended June 30, 2020, decreasing by 19.8% compared to $225 million for the six months ended June 30, 2019.

As a percentage of revenues, selling, general and administrative expenses for permanent placement staffing were 94.3% in the first half of 2020, up from 82.6% in the first half of 2019 due primarily to negative leverage as revenues decreased in response to the COVID-19 pandemic.

Selling, general and administrative expenses for the Company’s risk consulting and internal audit services division were $94 million for the six months ended June 30, 2020, increasing by 1.4% compared to $92 million for the six months ended June 30, 2019.

As a percentage of revenues, selling, general and administrative expenses for risk consulting and internal audit services were 16.2% in the first half of 2020, down from 17.6% in the first half of 2019 due primarily to a decrease in variable overhead costs.

Operating Income.

The Company’s total operating income was $189 million, or 7.2% of revenues, for the six months ended June 30, 2020, down from $306 million or 10.2% of revenues, for the six months ended June 30, 2019.

For the Company’s temporary and consultant staffing division, operating income was $122 million, or 6.6% of applicable revenues, down from $211 million, or 9.7% of applicable revenues, in the first half of 2019.

For the Company’s permanent placement staffing division, operating income was $11 million, or 5.6% of applicable revenues, down from an operating income of $47 million, or 17.2% of applicable revenues, in the first half of 2019.

For the Company’s risk consulting and internal audit services division, operating income was $57 million, or 9.8% of applicable revenues, compared to an operating income of $48 million or 9.0% of applicable revenues, in the first half of 2019.

Selling, general and administrative expenses for the Company’s temporary and consultant staffing division were $845 million for the nine months ended September 30, 2020, decreasing 13.1% from $972 million for the nine months ended September 30, 2019.

This includes deferred compensation expense related to changes in the fair value of participants’ accounts of $26 million and $28 million for the nine months ended September 30, 2020 and 2019, respectively.

Equal and offsetting amounts are included in income from investments held in employee deferred compensation trusts.

As a percentage of revenues, selling, general and administrative expenses for temporary and consultant staffing were 32.2% in the first three quarters of 2020, up from 29.4% in the first three quarters of 2019 due primarily to negative leverage as revenues decreased in response to financial conditions during the first three quarters of 2020.

Selling, general and administrative expenses for the Company’s permanent placement staffing division were $260 million for the nine months ended September 30, 2020, decreasing by 23.7% compared to $341 million for the nine months ended September 30, 2019.

This includes deferred compensation expense related to changes in the fair value of participants’ accounts of $3 million for both the nine months ended September 30, 2020 and 2019.

Equal and offsetting amounts are included in income from investments held in employee deferred compensation trusts.

As a percentage of revenues, selling, general and administrative expenses for permanent placement staffing were 93.3% in the first three quarters of 2020, up from 83.8% in the first three quarters of 2019 due primarily to negative leverage as revenues decreased in response to financial conditions during the first three quarters of 2020.

Selling, general and administrative expenses for the Company’s risk consulting and internal audit services division were $135 million for the nine months ended September 30, 2020, decreasing by 3.9% compared to $141 million for the nine months ended September 30, 2019.

As a percentage of revenues, selling, general and administrative expenses for risk consulting and internal audit services were 15.1% in the first three quarters of 2020, down from 17.1% in the first three quarters of 2019 due primarily to a decrease in variable overhead costs.

Income from Investments Held in Employee Deferred Compensation Trusts .

As realized and unrealized investment gains and losses occur, the Company’s deferred compensation obligation to employees changes accordingly.

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 from investments held in employee deferred compensation trusts was $35 million for both nine months ended September 30, 2020 and September 30, 2019.

Income Before Income Taxes and Segment Income.

The Company’s total income before income taxes was $292 million, or 7.7% of revenues, for the nine months ended September 30, 2020, down from $471 million or 10.4% of revenues, for the nine months ended September 30, 2019.

Combined segment income was $292 million, or 7.7% of revenues, for the nine months ended September 30, 2020, down from $469 million or 10.3% of revenues, for the nine months ended September 30, 2019.

The following table provides a reconciliation of the non-GAAP combined segment income to reported income before income taxes for the nine months ended September 30, 2020 and 2019 (in thousands):

Nine Months Ended

September 30,

Income before income taxes $ 292,297 $ 471,268

Interest income, net (1,264) (3,768)

Amortization of intangible assets 1,002 1,022

Combined segment income $ 292,035 $ 468,522

For the Company’s temporary and consultant staffing division, segment income was $166 million, or 6.3% of applicable revenues, down from $313 million, or 9.5% of applicable revenues, in the first three quarters of 2019.

For the Company’s permanent placement staffing division, segment income was $21 million, or 7.5% of applicable revenues, down from segment income of $69 million, or 16.9% of applicable revenues, in the first three quarters of 2019.

For the Company’s risk consulting and internal audit services division, segment income was $105 million, or 11.7% of applicable revenues, compared to segment income of $87 million or 10.6% of applicable revenues, in the first three quarters of 2019.

Provision for income taxes .

The provision for income taxes was 28.3% and 27.0% for the six months ended June 30, 2020 and 2019, respectively.

The higher tax rate in 2020 is primarily due to the relatively greater impact of disallowed expenses on the full-year estimated rate and less tax benefits related to year-to-date restricted stock vesting at a lower price compared to the first half of 2019.

The provision for income taxes was 27.5% for both the nine months ended September 30, 2020 and 2019, respectively.

Liquidity and Capital Resources

The change in the Company’s liquidity during the six months ended June 30, 2020 and 2019, is primarily the net effect of funds generated by operations and the funds used for capital expenditures, payment to trusts for employee deferred compensation plans, repurchases of common stock, and payment of dividends.

Cash and cash equivalents were $501 million and $269 million at June 30, 2020 and 2019, respectively.

Operating activities provided $426 million during the six months ended June 30, 2020, offset by $43 million and $149 million of net cash used in investing activities and financing activities, respectively.

Operating activities provided $248 million during the six months ended June 30, 2019, offset by $48 million and $208 million of net cash used in investing activities and financing activities, respectively.

Operating activities—Net cash provided by operating activities for the six months ended June 30, 2020, was composed of net income of $136 million adjusted upward for non-cash items of $69 million and net cash provided by changes in working capital of $221 million.

Net cash provided by operating activities for the six months ended June 30, 2019, was composed of net income of $224 million adjusted upward for non-cash items of $57 million, offset by net cash used in changes in working capital of $33 million.

Investing activities—Cash used in investing activities for the six months ended June 30, 2020, was $43 million.

This was composed of capital expenditures of $22 million and net payments for employee deferred compensation plans of $21 million.

Cash used in investing activities for the six months ended June 30, 2019, was $48 million.

This was composed of capital expenditures of $29 million and net payments for employee deferred compensation plans of $19 million.

Financing activities—Cash used in financing activities for the six months ended June 30, 2020, was $149 million.

The change in the Company’s liquidity during the nine months ended September 30, 2020 and 2019, 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 $587 million and $313 million at September 30, 2020 and 2019, respectively.

Operating activities provided $565 million during the nine months ended September 30, 2020, offset by $43 million and $208 million of net cash used in investing activities and financing activities, respectively.

Operating activities provided $439 million during the nine months ended September 30, 2019, offset by $73 million and $324 million of net cash used in investing activities and financing activities, respectively.

Operating activities—Net cash provided by operating activities for the nine months ended September 30, 2020, was composed of net income of $212 million adjusted upward for non-cash items of $52 million and net cash provided by changes in working capital of $301 million.

Net cash provided by operating activities for the nine months ended September 30, 2019, was composed of net income of $342 million adjusted upward for non-cash items of $52 million and net cash provided by changes in working capital of $45 million.

Investing activities—Cash used in investing activities for the nine months ended September 30, 2020, was $43 million.

This was composed of capital expenditures of $29 million and investment in employee deferred compensation trusts of $48 million, offset by proceeds from employee deferred compensation trusts redemptions of $34 million.

Cash used in investing activities for the nine months ended September 30, 2019, was $73 million.

This was composed of capital expenditures of $45 million and investment in employee deferred compensation trusts of $52 million, offset by proceeds from employee deferred compensation trusts redemptions of $24 million.

Financing activities—Cash used in financing activities for the nine months ended September 30, 2020, was $208 million.

This included repurchases of $91 million in common stock and $117 million in dividends paid to stockholders.

Cash used in financing activities for the six months ended June 30, 2019, was $208 million.

Cash used in financing activities for the nine months ended September 30, 2019, was $324 million.

This included repurchases of $214 million in common stock and $110 million in dividends paid to stockholders.

As of June 30, 2020, the Company is authorized to repurchase, from time to time, up to 1.5 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions.

During the six months ended June 30, 2020 and 2019, the Company repurchased 1.0 million shares, at a cost of $51 million, and 1.8 million shares, at a cost of $111 million, on the open market, respectively.

As of September 30, 2020, the Company is authorized to repurchase, from time to time, up to 1.0 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market

On October 29, 2020, the Company authorized the repurchase, from time to time, of up to an additional 10 million shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions.

During the nine months ended September 30, 2020 and 2019, the Company repurchased 1.4 million shares, at a cost of $75 million, and 3.3 million shares, at a cost of $191 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 six months ended June 30, 2020 and 2019, such repurchases totaled 0.3 million shares, at a cost of $12 million, and 0.3 million shares, at a cost of $17 million, respectively.

During the nine months ended September 30, 2020 and 2019, such repurchases totaled 0.3 million shares, at a cost of $12 million, and 0.3 million shares, at a cost of $17 million, respectively.

Repurchases of shares have been funded with cash generated from operations.

There were no open market share repurchases during the second quarter of 2020.

We anticipate repurchase activity to commence again in the third quarter of 2020, at a reduced rate.

The Company’s working capital at June 30, 2020, included $501 million in cash and cash equivalents and $665 million in accounts receivable, both of which will be a significant source of ongoing liquidity and financial resilience.

The Company’s working capital at September 30, 2020, included $587 million in cash and cash equivalents and $690 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.

In order to mitigate expected declines in revenue, we aggressively cut costs in the quarter.

These actions have been focused on eliminating all non-essential costs such as travel and events, as well as laying off the Company’s less experienced and lower performing staff.

These aggressive cost reductions, coupled with a talented and driven team that is backed by our industry-leading technology, position us to fully participate in any economic recovery.

As a result of continued economic disruptions, we have continued cost cutting actions during the quarte r.

These actions have been focused on maintaining low travel and events costs, as well as managing headcount.

This cost management, coupled with a talented and driven team that is backed by our industry-leading technology, positions us to fully participate in the economic recovery.

In addition, the Company’s variable direct costs related to its temporary and consultant staffing business will largely fluctuate in relation to its revenues.

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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 June 30, 2020.

There were no borrowings under the 364-Day Credit Agreement as of June 30, 2020.

On July 30, 2020, the Company announced a quarterly dividend of $.34 per share to be paid to all shareholders of record as of August 25, 2020.

The dividend will be paid on September 15, 2020.

The 364-Day Credit Agreement is subject to certain financial covenants and the Company was in compliance with these covenants as of September 30, 2020.

There were no borrowings under the 364-Day Credit Agreement as of September 30, 2020.

On October 29, 2020, the Company announced a quarterly dividend of $.34 per share to be paid to all shareholders of record as of November 25, 2020.

The dividend will be paid on December 15, 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis