What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-02-12 compared with 2020-02-14 · 224 added, 143 removed, 615 unchanged (37% of the section changed)

4 unchanged sentences

Cash and cash equivalents $ 574,426 $ 270,478

Accounts receivable, less allowances of $28,756 and $27,678 832,797 794,446

Accounts receivable, net 714,163 832,797

Employee deferred compensation trust assets 406,634 398,442

Other current assets 147,515 127,132

8 unchanged sentences

Accrued payroll and benefit costs 397,877 322,404

Employee deferred compensation plan obligations 435,121 421,198

Income taxes payable 4,015 1,623

6 unchanged sentences

Total liabilities 1,352,135 1,167,725

Commitments and Contingencies (Note K)

Commitments and Contingencies (Note L)

STOCKHOLDERS’ EQUITY

1 unchanged sentence

authorized 5,000,000 shares;

none issued — —

Common stock, $ 0.001 par value;

11 unchanged sentences

(in thousands, except per share amounts)

Years Ended December 31,

Year Ended December 31,

2020 2019 2018

3 unchanged sentences

Selling, general and administrative expenses 1,666,041 1,958,295 1,810,601

(Income) loss from investments held in employee deferred compensation trusts

(which is completely offset by related costs and expenses - Notes A & I)

( 75,188 ) ( 54,917 ) 11,486

Amortization of intangible assets 1,219 1,361 1,705

14 unchanged sentences

(in thousands)

Years Ended December 31,

Year Ended December 31,

2020 2019 2018

17 unchanged sentences

Dividends declared ($ 1.12 per share)

— — ( 30,365 ) — ( 106,459 ) ( 136,824 )

Net issuances of restricted stock 666 1 ( 1 ) — — —

5 unchanged sentences

Dividends declared ($ 1.24 per share)

— — — — ( 145,726 ) ( 145,726 )

Net issuances of restricted stock 647 1 ( 1 ) — — —

3 unchanged sentences

Net income — — — — 306,276 306,276

Adoption of accounting

pronouncement

( 558 ) ( 558 )

Other comprehensive income (loss) — — — 15,254 — 15,254

Dividends declared ($ 1.36 per share)

— — — — ( 156,045 ) ( 156,045 )

Net issuances of restricted stock 879 1 ( 1 ) — — —

7 unchanged sentences

(in thousands)

Years Ended December 31,

Year Ended December 31,

2020 2019 2018

2 unchanged sentences

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for doubtful accounts 9,868 11,914 8,022

Allowance for credit losses 4,200 9,868 11,914

Depreciation 62,281 64,264 64,244

1 unchanged sentence

Amortization of intangible assets 1,219 1,361 1,705

Realized and unrealized (gains) losses from investments held in employee deferred

compensation trusts

( 66,866 ) ( 44,492 ) 22,343

Stock-based compensation 52,486 48,300 44,953

4 unchanged sentences

Accounts payable and accrued expenses 1,098 ( 9,204 ) 32,428

Accrued payroll and benefit cost 60,883 57,287 46,504

Accrued payroll and benefit costs 119,231 17,705 13,845

Employee deferred compensation plan obligations 13,923 87,670 21,099

Income taxes payable 182 ( 18,798 ) 28,900

3 unchanged sentences

Capital expenditures ( 33,377 ) ( 59,464 ) ( 42,484 )

Payments for employee deferred compensation plans ( 71,432 ) ( 69,716 ) ( 56,924 )

Redemptions from employee deferred compensation plans 28,758 23,691 20,340

Investments in employee deferred compensation trusts ( 64,351 ) ( 71,432 ) ( 69,716 )

Proceeds from employee deferred compensation trust redemptions 123,025 28,758 23,691

Payments for acquisitions, net of cash acquired ( 15,836 ) — —

Net cash flows used in investing activities ( 102,138 ) ( 88,509 ) ( 78,497 )

Net cash flows provided by (used in) investing activities 9,461 ( 102,138 ) ( 88,509 )

CASH FLOWS FROM FINANCING ACTIVITIES:

13 unchanged sentences

Stock repurchases awaiting settlement $ 3,104 $ 6,469 $ 11,359

Fund exchanges within employee deferred compensation trusts $ 208,055 $ 41,648 $ 79,300

The accompanying Notes to Consolidated Financial Statements

5 unchanged sentences

(the “Company”) provides specialized staffing and risk consulting services through such divisions as Accountemps ® , Robert Half ® Finance & Accounting , OfficeTeam ® , Robert Half ® Technology , Robert Half ® Management Resources , Robert Half ® Legal , The Creative Group ® , and Protiviti ® .

The Company, through its Accountemps , Robert Half Finance & Accounting , and Robert Half Management Resources divisions, is a specialized provider of temporary, full-time, and senior-level project professionals in the fields of accounting and finance.

OfficeTeam specializes in highly skilled temporary administrative support professionals.

The Company, through its Accountemps , Robert Half Finance & Accounting , and Robert Half Management Resources divisions, is a specialized provider of contract, full-time, and senior-level project professionals in the fields of accounting and finance.

OfficeTeam specializes in highly skilled contract administrative support professionals.

Robert Half Technology provides project and full-time technology professionals.

Robert Half Legal provides temporary, project, and full-time staffing of lawyers, paralegals and legal support personnel.

Robert Half Legal provides contract, project, and full-time staffing of lawyers, paralegals and legal support personnel.

The Creative Group provides interactive, design, marketing, advertising and public relations professionals.

5 unchanged sentences

The Consolidated Financial Statements (“Financial Statements”) of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”).

Certain reclassifications have been made to prior years’ consolidated financial statements to conform to the 2019 presentation.

Certain reclassifications have been made to prior years’ consolidated financial statements to conform to the current presentation.

Principles of Consolidation.

5 unchanged sentences

Actual results and outcomes may differ from management’s estimates and assumptions.

We are continuing to monitor the efforts to mitigate the spread of coronavirus (“COVID-19”), including uncertainty

around the duration and extent of the stay-at-home orders and the effect on the Company’s results of operations, financial

condition, and liquidity.

In light of the ongoing economic disruption, we continue to face a greater degree of uncertainty than

normal in making the judgments and estimates needed to apply the Company’s significant accounting policies.

As the situation

continues to develop, we may make changes to these estimates and judgments over time, which could result in meaningful

impacts to the Company’s financial statements in future periods.

Actual results and outcomes may differ from management’s

estimates and assumptions.

Service Revenues.

10 unchanged sentences

Advertising costs were $ 37.2 million, $ 54.3 million, and $ 52.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Comprehensive Income.

Comprehensive income includes net income and certain other items that are recorded directly to stockholders’ equity.

The Company’s only sources of other comprehensive income are foreign currency translation and defined benefit plan adjustments.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Income) loss from investments held in employee deferred compensation trusts .

The Company has changed its Consolidated Statements of Operations to separately present (income) loss 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.

Changes in the Company’s deferred compensation obligations remain in selling, general and administrative expenses or, in the case of risk consulting and internal audit services, costs of services.

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

The Company’s (income) loss from investments held in employee deferred compensation trusts consists primarily of unrealized and realized gains and losses and dividend income from trust investments.

Such amounts were previously presented as a component of selling, general and administrative expenses, or, in the case of risk consulting and internal audit services, costs of services.

Reclassifications have been made to prior year’s consolidated financial statements to conform to the current presentation.

The following table presents the Company’s (income) loss from investments held in employee deferred compensation trusts (in thousands):

Year Ended December 31,

2020 2019 2018

Dividend income $ ( 8,322 ) $ ( 10,425 ) $ ( 10,857 )

Realized and unrealized (gains) losses ( 66,866 ) ( 44,492 ) 22,343

$ ( 75,188 ) $ ( 54,917 ) $ 11,486

Comprehensive Income (Loss).

Comprehensive income (loss) includes net income and certain other items that are recorded directly to stockholders’ equity.

The Company’s only sources of other comprehensive income (loss) are foreign currency translation and foreign defined benefit plan adjustments.

Cash and Cash Equivalents.

The Company considers all highly liquid investments with a maturity at the date of purchase of three months or less as cash equivalents.

This includes money market funds that meet the requirements to be treated as cash equivalents.

However, money market funds held in investment trusts that are being used as investments to satisfy the Company’s obligations under its employee deferred compensation plans are treated as investments and are included in employee deferred compensation trust assets on the Consolidated Statements of Financial Position.

Fair Value of Financial Instruments.

5 unchanged sentences

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximates fair value because of their short-term nature.

The Company holds mutual funds and other securities classified as trading to support its deferred compensation plans, which are carried at fair value based on quoted market prices in active markets for identical assets (level 1).

The Company holds mutual funds and money market funds to

satisfy its obligations under its employee deferred compensation plans, which are carried at fair value based on quoted market prices in active markets for identical assets (level 1).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth the composition of the underlying assets which comprise the Company’s deferred

compensation trust assets (in thousands):

Fair Value Measurements Using

Balance at December 31, 2020

Quoted Prices

in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

Money market funds $ 69,681 $ 69,681 — —

Mutual funds - bond 27,282 27,282 — —

Mutual funds - stock 234,667 234,667 — —

Mutual funds - blend 75,004 75,004 — —

$ 406,634 $ 406,634 — —

Fair Value Measurements Using

Balance at December 31, 2019

Quoted Prices

in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

Money market funds $ 141,295 $ 141,295 — —

Mutual funds - bond 28,451 28,451 — —

Mutual funds - stock 170,469 170,469 — —

Mutual funds - blend 58,227 58,227 — —

$ 398,442 $ 398,442 — —

Certain items such as goodwill and other intangible assets are recognized or disclosed at fair value on a non-recurring basis.

1 unchanged sentence

There are inherent limitations when estimating the fair value of financial instruments, and the fair values reported are not necessarily indicative of the amounts that would be realized in current market transactions.

Cash and Cash Equivalents.

The Company considers all highly liquid investments with a maturity at the date of purchase of three months or less as cash equivalents.

Accounts Receivable Allowances.

The Company maintains allowances for estimated losses resulting from the inability of its customers to make required payments.

The Company establishes these allowances based on its review of customers’ credit profiles, historical loss statistics and current trends.

The adequacy of these allowances is reviewed each reporting period.

Historically, the Company’s actual losses have been consistent with these allowances.

Allowance for Credit Losses.

The Company is exposed to credit losses resulting from the inability of its customers to make required payments.

The Company establishes an allowance for these potential credit losses based on its review of customers’ credit profiles, historical loss statistics, prepayments, recoveries, current business conditions and macro-economic trends.

The Company considers risk characteristics of trade receivables based on asset type, size, term, and geographical locations to evaluate trade receivables on a collective basis.

The Company applies credit loss estimates to these pooled receivables to determine expected credit losses.

The following table sets forth the activity in the allowance for credit losses from December 31, 2019, through December 31, 2020 (in thousands):

Allowance for Credit Losses

Balance as of December 31, 2019

Adoption of accounting pronouncement 558

Balance as of January 1, 2020

Charges to expense 4,200

Deductions ( 7,906 )

Other, including translation adjustments ( 120 )

Balance as of December 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Property and Equipment .

Property and equipment are recorded at cost.

Depreciation is computed using the straight-line method over the following useful lives:

Computer hardware 2 to 3 years

Computer software 2 to 3 years

Furniture and equipment 3 to 5 years

Leasehold improvements Term of lease

Internal-use Software.

The Company capitalizes direct costs incurred in the development of internal-use software.

Cloud computing implementation costs incurred in hosting arrangements are capitalized and reported as a component of other assets.

All other internal-use software development costs are capitalized and reported as a component of computer software within property and equipment on the Consolidated Statements of Financial Position.

Capitalized internal-use software development costs were $ 40.6 million, $ 35.6 million, and $ 3.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The Company determines if a contractual arrangement is a lease at inception.

Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and noncurrent operating lease liabilities on the Company’s Condensed Consolidated Statement of Financial Position.

The Company does not currently have finance leases.

11 unchanged sentences

Goodwill and intangible assets primarily consist of the cost of acquired companies in excess of the fair market value of their net tangible assets at the date of acquisition.

Identifiable intangible assets are amortized over their lives, typically ranging from two to five years .

Identifiable intangible assets are amortized over their useful lives, typically ranging from two to five years .

Goodwill is not amortized, but is tested at least annually for impairment.

6 unchanged sentences

Deferred tax assets and liabilities are measured and recorded using current enacted tax rates, which the Company expects will apply to taxable income in the years in which those temporary differences are recovered or settled.

The likelihood of a material change in the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Company’s expected realization of its deferred tax assets is dependent on future taxable income and the effectiveness of its tax planning strategies in the various relevant jurisdictions.

The likelihood of a material change in the Company’s expected realization of its deferred tax assets is dependent on future taxable income and the effectiveness of its tax planning strategies in the various relevant jurisdictions.

The Company also evaluates the need for valuation allowances to reduce the deferred tax assets to realizable amounts.

3 unchanged sentences

The valuation allowances recorded related primarily to net operating losses in certain foreign operations.

If such losses are ultimately utilized to offset future operating income, the Company will recognize a tax benefit up to the full amount of the valuation reserve.

If such losses are ultimately utilized to offset future segment income, the Company will recognize a tax benefit up to the full amount of the valuation reserve.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Workers’ Compensation .

Except for states which require participation in state-operated insurance funds, the Company retains the economic burden for the first $ 0.5 million per occurrence in workers’ compensation claims.

Workers’ compensation includes ongoing healthcare and indemnity coverage for claims and may be paid over numerous years following the date of injury.

Workers’ compensation includes the ongoing medical and indemnity costs for claims filed, which may be paid over numerous years following the date of injury.

Claims in excess of $ 0.5 million are insured.

7 unchanged sentences

The results of operations of the Company’s foreign subsidiaries are translated at the monthly average exchange rates prevailing during the period.

The financial position of the Company’s foreign subsidiaries is translated at the current exchange rates at the end of the period, and the related translation adjustments are recorded as a component of accumulated other comprehensive income within Stockholders’ Equity.

Gains and losses resulting from foreign currency transactions are included as a component of selling, general and administrative expenses in the Consolidated Statements of Operations, and have not been material for all periods presented.

7 unchanged sentences

The Company has not granted any options to purchase common stock since 2006.

Property and Equipment .

Property and equipment are recorded at cost.

Depreciation is computed using the straight-line method over the following useful lives:

Computer hardware 2 to 3 years

Computer software 2 to 5 years

Furniture and equipment 3 to 5 years

Leasehold improvements Term of lease

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Internal-use Software.

The Company capitalizes direct costs incurred in the development of internal-use software.

Cloud computing implementation costs incurred in hosting arrangements are capitalized and reported as a component of other assets.

All other internal-use software development costs are capitalized and reported as a component of computer software within property and equipment on the Condensed Consolidated Statements of Financial Position.

Capitalized internal-use software development costs were $ 35.6 million, $ 3.3 million, and $ 9.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Note B— New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Lease Accounting .

In February 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance which changes financial reporting as it relates to leasing transactions.

Under the new guidance, lessees are required to recognize a lease liability, measured on a discounted basis;

and a right-of-use asset, for the lease term.

The Company adopted this guidance as of January 1, 2019, using the transition method that allowed it to initially apply the guidance as of the adoption date.

The Company elected the package of practical expedients available under the new standard, which allowed the Company to forgo a reassessment of (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) the initial direct costs for any existing leases.

The adoption of this guidance had a material impact on the Company’s Condensed Consolidated Statement of Financial Position beginning January 1, 2019.

Prior periods were not restated.

See Note F for further discussion of leases.

Internal-use Software — Cloud Computing.

In August 2018, the FASB issued authoritative guidance which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

Entities are required to present the expense related to capitalized implementation costs in the same line item in the statement of operations as the fees associated with the hosting elements of the arrangement and classify the payments for the capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element.

Entities are also required to present the capitalized implementation costs in the statement of financial position in the same line item that a prepayment of the fees of the associated hosting arrangement would be presented.

The new guidance is effective for annual and interim periods beginning after December 15, 2019, although early adoption is permitted.

The Company adopted the new guidance prospectively as of January 1, 2019.

Recently Issued Accounting Pronouncements Not Yet Adopted

Current Expected Credit Losses Model.

In June 2016, the FASB issued authoritative guidance amending how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance amending how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected losses.

The new guidance is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted.

The Company believes the adoption of this guidance will not have a material impact on its financial statements.

The new guidance was effective for interim and annual reporting periods beginning after December 15, 2019.

The Company adopted the new guidance prospectively as of January 1, 2020, and the impact of adoption was not material to its financial statements.

Simplifying the Test for Goodwill Impairment.

2 unchanged sentences

If a company determines in Step 1 of the goodwill impairment test that the carrying value of goodwill is greater than the fair value, an impairment in that amount should be recorded to the income statement, rather than proceeding to Step 2.

The new guidance is effective for the Company for fiscal years beginning after December 15, 2019, although early adoption is permitted.

The Company believes the adoption of this guidance will not have a material impact on its financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The new guidance was effective for the Company for fiscal years beginning after December 15, 2019, although early adoption was permitted.

The Company adopted the new guidance prospectively as of January 1, 2020, and the impact of adoption was not material to its financial statements.

Reference Rate Reform.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform.

The new guidance provides optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to contracts and hedging relationships that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform.

These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022.

The application of this guidance did not have a material impact on the Company's financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

Note C— Revenue Recognition

12 unchanged sentences

Fees paid to Time Management or Vendor Management service providers selected by clients are recorded as a reduction of revenues, as the Company is not the primary obligor with respect to those services.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Permanent placement staffing revenues.

12 unchanged sentences

The Company periodically evaluates the need to provide for any losses on these projects, and losses are recognized when it is probable that a loss will be incurred.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Years Ended December 31,

Year Ended December 31,

2020 2019 2018

3 unchanged sentences

Robert Half Management Resources 698,942 792,757 738,810

Temporary and consulting staffing 4,412,125 4,330,566 4,011,042

Elimination of intersegment revenues (a) ( 239,996 ) ( 172,439 ) ( 132,381 )

Temporary and consultant staffing 3,477,335 4,412,125 4,330,566

Permanent placement staffing 370,109 533,432 511,989

1 unchanged sentence

Service revenues $ 5,109,000 $ 6,074,432 $ 5,800,271

Payment terms in our contracts vary by the type and location of our customer and the services offered.

(a) Service revenues for Accountemps, OfficeTeam, Robert Half Technology and Robert Half Management Resources include intersegment revenues, which represent revenues from services provided to the Company’s risk consulting and internal audit services segment in connection with the Company’s blended business solutions.

Intersegment revenues for each line of business are aggregated and then eliminated as a single line.

Payment terms in the Company’s contracts vary by the type and location of the Company’s customer and the services offered.

The term between invoicing and when payment is due is not significant.

3 unchanged sentences

As of December 31, 2019, aggregate transaction price allocated to the performance obligations that were unsatisfied for contracts with an expected duration of greater than one year was $ 81.7 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contract liabilities are recorded when cash payments are received or due in advance of performance and are reflected in accounts payable and accrued expenses on the Consolidated Statements of Financial Position.

9 unchanged sentences

Balance as of December 31, 2019 $ 12,948

Payments in advance of satisfaction of performance obligations 25,614

Revenue recognized ( 20,687 )

Other, including translation adjustments 377

Balance as of December 31, 2020 $ 18,252

Note D— Other Current Assets

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

Deferred compensation plans $ 398,442 $ 311,708

Prepaid expenses $ 97,674 $ 84,364

1 unchanged sentence

Other current assets $ 147,515 $ 127,132

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note E— Property and Equipment, Net

7 unchanged sentences

Property and equipment, net $ 109,817 $ 128,385

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note F— Leases

The Company has operating leases for corporate and field offices, and certain equipment.

The Company’s leases have remaining lease terms of 1 year to 10 years, some of which include options to extend the leases for up to 7 years, and some of which include options to terminate the leases within 1 year.

Operating lease expense for the year ended December 31, 2019, was $ 77.7 million.

Rental expense, primarily for offices premises, was $ 89.4 million and $ 87.5 million for the years ended December 31, 2018 and 2017, respectively.

The Company’s leases have remaining lease terms of 1 month to 9 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year.

Operating lease expense was $ 81.5 million and $ 77.7 million for the years ended December 31, 2020, and 2019, respectively.

Rental expense, primarily for offices premises, was $ 89.4 million for the year ended December 31, 2018.

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

3 unchanged sentences

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

December 31, 2019

Weighted average remaining lease term for operating leases 4.8 years

Weighted average remaining lease term for operating leases 4.5 years 4.8 years

Weighted average discount rate for operating leases 2.6 % 3.0 %

5 unchanged sentences

(a) Includes current portion of $ 78.6 million for operating leases.

As of December 31, 2020, the Company had no material future minimum lease obligations that had not yet commenced.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2019, the Company had additional future minimum lease obligations totaling $ 45.5 million under executed operating lease contracts that had not yet commenced.

These operating leases include agreements for corporate and field office facilities with lease terms of 1 to 8 years.

Note G— Goodwill

4 unchanged sentences

Balance as of December 31, 2019 $ 134,210 $ 26,097 $ 50,057 $ 210,364

Acquisitions (a) — — 12,199 12,199

Foreign currency translation adjustments 301 83 108 492

Balance as of December 31, 2020 $ 134,511 $ 26,180 $ 62,364 $ 223,055

(a) In December 2020 the Company, through its wholly owned subsidiary Protiviti, acquired Identropy, Inc., an independent security consulting firm specializing in advisory, implementation and managed services for identity, access management and access governance solutions.

As part of the acquisition, the Company recorded goodwill of $ 12.2 million within its risk consulting and internal audit services segment.

Note H— Accrued Payroll and Benefit Costs

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

Employee deferred compensation plans $ 421,198 $ 333,528

Payroll and benefits 311,169 280,918

2 unchanged sentences

Accrued payroll and benefit costs $ 397,877 $ 322,404

The Company, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, deferred paying $ 102.2 million of applicable payroll taxes as of December 31, 2020, of which $ 51.1 million is expected to be paid during the next 12 months and is included in accrued payroll and benefit costs and the remaining $ 51.1 million is included in other liabilities on the Consolidated Statements of Financial Position.

Note I— Employee Deferred Compensation Plan Obligations

The Company provides various qualified defined contribution 401(k) plans covering eligible employees.

3 unchanged sentences

These plans include provisions for salary deferrals and Company matching and discretionary contributions.

The asset value of the nonqualified plans was $ 398.4 million and $ 311.7 million as of December 31, 2019 and 2018, respectively, and is included in other current assets in the Consolidated Statements of Financial Position.

The liability value for the nonqualified plans was $ 421.2 million and $ 333.5 million as of December 31, 2019 and 2018, respectively, and is included in current accrued payroll and benefit costs in the Consolidated Statements of Financial Position.

Deferred compensation plan and other benefits related to the Company’s executive chairman were $ 91.8 million and $ 89.2 million as of December 31, 2019 and 2018, respectively, and are included in the liability value for the nonqualified plans.

Net unrealized gains and (losses) on these nonqualified plan assets and liabilities were $ 44.2 million, ($ 26.6 ) million, and $ 19.4 million for the years ended December 31, 2019, 2018 and 2017, respectively.

The Company’s contribution expense for its qualified defined contribution plans and nonqualified benefits plans totaled $ 26.1 million, $ 24.2 million, and $ 21.1 million for the years ended December 31, 2019, 2018 and 2017, respectively.

The Company has statutory defined contribution plans and defined benefit plans outside the U.S., which are not material.

The asset value of the nonqualified plans was $ 406.6 million and $ 398.4 million as of December 31, 2020 and 2019, respectively.

The Company holds these assets to satisfy the Company’s liabilities under its employee deferred compensation plans.

The liability value for the nonqualified plans was $ 435.1 million and $ 421.2 million as of December 31, 2020 and 2019, respectively.

Deferred compensation plan and other benefits related to the Company’s executive chairman was $ 91.8 million as of December 31, 2019, and was included in the liability value for the nonqualified plans.

The Company paid out the full balance of this plan during the year ended December 31, 2020.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note I— Notes Payable

The Company issued promissory notes in connection with certain acquisitions and other payment obligations.

These notes are due in varying installments and, in aggregate, amounted to $ 0.5 million at December 31, 2019, and $ 0.7 million at December 31, 2018.

At December 31, 2019, $ 0.5 million of the notes were collateralized by a standby letter of credit.

The following table shows the schedule of maturities for notes payable at December 31, 2019 (in thousands):

At December 31, 2019, the notes carried fixed rates and the weighted average interest rate for the above was 9.0 % for each of the years ended December 31, 2019, 2018 and 2017.

The following table presents the Company’s compensation expense related to its qualified defined contribution plans and nonqualified plans (in thousands):

Year Ended December 31,

2020 2019 2018

Contribution expense $ 42,092 $ 26,122 $ 24,184

Employee deferred compensation expense (income) related to changes in the fair

value of trust assets

75,188 54,917 ( 11,486 )

$ 117,280 $ 81,039 $ 12,698

The Company has statutory defined contribution plans and defined benefit plans outside the U.S., which are not material.

Note J— Notes Payable

The Company has a promissory note payable with a balance of $ 0.2 million at December 31, 2020, and $ 0.5 million at December 31, 2019, which bears interest at a fixed interest rate of 9.0 % per annum and will mature in October 2021.

The Company has an uncommitted letter of credit facility (the “facility”) of up to $ 35.0 million, which is available to cover the issuance of debt support standby letters of credit.

5 unchanged sentences

The Company intends to renew this facility prior to its August 31, 2021 expiration.

In March 2019, the Company entered into an uncommitted credit facility (the “Credit Agreement”) of up to $ 100 million.

The Company may request borrowings under the Credit Agreement that are denominated in U.S.

dollars and each request is subject to approval by the lender.

The Company must repay the aggregate principal amount of loans outstanding under the Credit Agreement on the termination date of each borrowing.

Borrowings under the Credit Agreement will bear interest in accordance with the terms of the borrowing, which typically will be calculated according to the London Interbank Offered Rate plus an applicable margin.

There were no borrowings under the Credit Agreement as of December 31, 2019.

The Company intends to renew this facility prior to its March 19, 2020, expiration.

Note J— Income Taxes

The provision (benefit) for income taxes for the years ended December 31, 2019, 2018 and 2017, consisted of the following (in thousands):

Years Ended December 31,

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 December 31, 2020.

There were no borrowings under the 364 -Day Credit Agreement as of December 31, 2020.

Note K— Income Taxes

The provision for income taxes for the years ended December 31, 2020, 2019 and 2018, consisted of the following (in thousands):

Year Ended December 31,

2020 2019 2018

6 unchanged sentences

Income before the provision for income taxes for the years ended December 31, 2020, 2019 and 2018, consisted of the following (in thousands):

Years Ended December 31,

Year Ended December 31,

2020 2019 2018

4 unchanged sentences

The income taxes shown above varied from the statutory federal income tax rates for these periods as follows:

Years Ended December 31,

Year Ended December 31,

2020 2019 2018

2 unchanged sentences

Permanent book/tax differences 0.3 0.5 0.2

Compensation book/tax differences 1.3 0.6 0.4

income taxed at different rates, net of foreign tax credits 1.7 2.1 2.0

5 unchanged sentences

The deferred portion of the tax (benefit) provision consisted of the following (in thousands):

Years Ended December 31,

Year Ended December 31,

2020 2019 2018

2 unchanged sentences

Depreciation 6,732 3,526 10,071

Tax effects of TCJA — — 34,633

Other, net ( 1,260 ) 2,153 766

3 unchanged sentences

Deferred Income Tax Assets

Deferred compensation and other benefit obligations $ 105,096 $ 87,513

Employee deferred compensation and other benefit obligations $ 102,478 $ 105,096

Deferred Payroll Taxes (CARES Act) 27,086 —

Credits and net operating loss carryforwards 30,651 25,130

Stock-based compensation 3,637 7,805

Provision for bad debts 7,944 7,891

Allowance for credit losses 5,272 7,944

Workers’ compensation 3,774 3,929

10 unchanged sentences

Total deferred income tax assets, net $ 112,903 $ 99,758

Credits and net operating loss carryforwards primarily include net operating losses in foreign countries of $ 21.7 million that expire in 2020 and later;

Credits and net operating loss carryforwards primarily include tax-effected net operating losses in foreign countries of $ 27.6 million that expire in 2021 and later;

and California enterprise zone tax credits of $ 2.2 million that expire in 2023.

13 unchanged sentences

Balance at end of period $ 9,785 $ 9,354 $ 8,418

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $ 9.3 million, $ 8.3 million and $ 2.8 million for 2019, 2018 and 2017, respectively.

The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax expense.

The total amount of interest and penalties accrued as of December 31, 2019 is $ 0.5 million, including a $ 0.2 million increase recorded in income tax expense during the year.

The total amount of interest and penalties accrued as of December 31,

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $ 9.8 million, $ 9.3 million and $ 8.3 million or the years ended December 31, 2020, 2019 and 2018, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2018 was $ 0.3 million, including a $ 0.2 million increase recorded in income tax expense during the year.

The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax expense.

The total amount of interest and penalties accrued as of December 31, 2020 was $ 0.5 million, including less than $ 0.1 million increase recorded in income tax expense during the year.

The total amount of interest and penalties accrued as of December 31, 2019 was $ 0.5 million, including a $ 0.2 million increase recorded in income tax expense during the year.

The total amount of interest and penalties accrued as of December 31, 2018, was $ 0.3 million.

5 unchanged sentences

Generally, for foreign countries, the Company remains subject to examination for 2013 and subsequent years.

Note K— Commitments and Contingencies

Note L— Commitments and Contingencies

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

20 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note L— Stockholders’ Equity

Note M— Stockholders’ Equity

Stock Repurchase Program.

1 unchanged sentence

The number and the cost of common stock shares repurchased during the years ended December 31, 2020, 2019 and 2018, are reflected in the following table (in thousands):

Years Ended December 31,

Year Ended December 31,

2020 2019 2018

3 unchanged sentences

The number and the cost of employee stock plan repurchases made during the years ended December 31, 2020, 2019 and 2018, are reflected in the following table (in thousands):

Years Ended December 31,

Year Ended December 31,

2020 2019 2018

7 unchanged sentences

Repurchases of shares and issuances of dividends are applied first to the extent of retained earnings and any remaining amounts are applied to additional paid-in capital.

Note M— Stock Plans

Note N— Stock Plans

Under various stock plans, officers, employees, and outside directors have received or may receive grants of restricted stock, stock units, stock appreciation rights or options to purchase common stock.

16 unchanged sentences

a historical volatility of 26.44 %, a 0 % dividend yield, and a risk-free interest rate of 1.42 %.

The historical volatility was based on the most recent 2.71 -year period for the

The historical volatility was based on the most recent 2.88-year period for the Company and the components of the peer group.

The stock price movements have been modeled such that the dividends are

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Company and the components of the peer group.

The stock price movements have been modeled such that the dividends are incorporated in the returns of each company’s stock, therefore the Monte Carlo simulation reflects a 0 % dividend yield for each stock.

incorporated in the returns of each company’s stock, therefore the Monte Carlo simulation reflects a 0 % dividend yield for each stock.

The use of a 0 % dividend yield is mathematically equivalent to including the dividends in the calculation of TSR.

4 unchanged sentences

The following table reflects activity under all stock plans from December 31, 2017 through December 31, 2020, and the weighted average exercise prices (in thousands, except per share amounts):

Time Based Awards Performance Based Awards with Market Conditions Performance Based Awards without Market Conditions Total Awards with Performance Condition

Non-Executive Officer

Time Based Awards

Performance Based Awards with Market Conditions Performance Based Awards without Market Conditions Total Awards with Performance Condition

Units Weighted

21 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note N— Net Income Per Share

Note O— Net Income Per Share

The calculation of net income per share for the three years ended December 31, 2020, 2019 and 2018, are reflected in the following table (in thousands, except per share amounts):

Years Ended December 31,

Year Ended December 31,

2020 2019 2018

8 unchanged sentences

Potential common shares include the dilutive effect of unvested performance-based restricted stock, restricted stock which contains forfeitable rights to dividends, and stock units.

Note O— Business Segments

Note P— Business Segments

The Company has three reportable segments:

7 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides a reconciliation of revenue and operating income by reportable segment to consolidated results (in thousands):

Years Ended December 31,

The following table provides a reconciliation of service revenues and segment income by reportable segment to consolidated results (in thousands):

Year Ended December 31,

2020 2019 2018

4 unchanged sentences

$ 5,109,000 $ 6,074,432 $ 5,800,271

Operating income

Segment income

Temporary and consultant staffing $ 237,279 $ 410,153 $ 404,800

1 unchanged sentence

Risk consulting and internal audit services 155,680 127,713 93,324

621,751 588,925 517,280

Combined segment income 421,758 621,751 588,925

Amortization of intangible assets 1,219 1,361 1,705

1 unchanged sentence

Income before income taxes $ 421,882 $ 625,515 $ 591,602

Service revenues presented above are shown net of eliminations of intersegment revenues.

Intersegment revenues between temporary and consultant staffing segment and risk consulting and internal audit services segment were $ 240.0 million $ 172.4 million and $ 132.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Assets by reportable segment are not presented as the Company does not allocate assets to its reportable segments, nor is such information used by management for purposes of assessing performance or allocating resources.

1 unchanged sentence

The following tables represent revenues and long-lived assets by geographic location (in thousands):

Years Ended December 31,

Year Ended December 31,

2020 2019 2018

11 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note P— Quarterly Financial Data (Unaudited)

Note Q— Quarterly Financial Data (Unaudited)

The following tabulation shows certain quarterly financial data for 2020 and 2019 (in thousands, except per share amounts):

2020 One Two Three Four

Service revenues $ 1,506,691 $ 1,108,326 $ 1,189,897 $ 1,304,086

4 unchanged sentences

Diluted net income per share $ .79 $ .41 $ .67 $ .84

2019 One Two Three Four

Service revenues $ 1,468,530 $ 1,516,385 $ 1,552,132 $ 1,537,385

4 unchanged sentences

Diluted net income per share $ .93 $ .98 $ 1.01 $ .98

Note Q— Subsequent Events

Note R— Subsequent Events

On February 11, 2021, the Company announced the following:

27 unchanged sentences

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit

preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

4 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

As described in Notes A and J to the consolidated financial statements, the Company’s operations are subject to U.S.

As described in Notes A and K to the consolidated financial statements, the Company’s operations are subject to U.S.

federal, state and local, and foreign income taxes.

1 unchanged sentence

Deferred tax assets and liabilities are measured and recorded using current enacted tax rates, which management expects will apply to taxable income in the years in which those temporary differences are recovered or settled.

Management also evaluates the need for valuation allowances to reduce deferred tax assets to realizable amounts.

Management also evaluates the need for valuation allowances to reduce the deferred tax assets to realizable amounts.

In determining the realizability of its deferred tax assets, management evaluates all positive and negative evidence and uses judgment regarding past and future events, including operating results, to help determine when it is more likely than not that all or some portion of the deferred tax assets may not be realized.

1 unchanged sentence

The Company recorded a provision for income taxes of $115.6 million for the year ended December 31, 2020 and net deferred income tax assets of $112.9 million including a valuation allowance of $24.1 million as of December 31, 2020.

The principal considerations for our determination that performing procedures relating to income taxes is a critical audit matter are there was significant judgment and estimation by management when assessing current enacted tax laws and published tax guidance as it relates to determining the provision for income taxes as well as in assessing the realizability of its deferred income tax assets, specifically related to evaluating positive and negative evidence regarding past and future events, including operating results.

The principal considerations for our determination that performing procedures relating to income taxes is a critical audit matter are the significant judgment and estimation by management when assessing current enacted tax laws and published tax guidance as it relates to determining the provision for income taxes as well as in assessing the realizability of its deferred income tax assets, specifically related to evaluating positive and negative evidence regarding past and future events, including operating results.

This resulted in significant audit effort, judgment, and subjectivity in performing procedures and evaluating audit evidence over income taxes.

2 unchanged sentences

These procedures included testing the effectiveness of controls relating to income taxes, including management’s controls over the application of current enacted tax laws and published tax guidance and their impact to the current year provision, the establishment of deferred tax assets and liabilities, and the evaluation of the realizability of deferred tax assets.

These procedures also included, among others, (i) testing the provision for income taxes and the application of current enacted tax laws and published tax guidance, including the effective tax rate reconciliation, return to provision adjustments, and permanent and temporary differences, (ii) testing the underlying data used in establishing and measuring deferred tax assets and liabilities, and (iii) evaluating management’s assessment of the realizability of deferred tax assets by evaluating factors used in management’s assessment of positive and negative evidence regarding past and future events, including operating results and the related expected utilization of deferred tax assets.

Professionals with specialized skill

and knowledge were used to assist in the evaluation of the calculations, including application of relevant tax laws and published tax guidance.

These procedures included (i) testing the provision for income taxes and the application of current enacted tax laws and published tax guidance, including the effective tax rate reconciliation, return to provision adjustments, and permanent and temporary differences, (ii) testing the underlying data used in establishing and measuring deferred tax assets and liabilities, and (iii) evaluating management’s assessment of the realizability of deferred tax assets by evaluating factors used in management’s assessment of positive and negative evidence regarding past and future events, including operating results and the related expected utilization of deferred tax assets.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the calculations, including application of relevant tax laws and published tax guidance.

/s/ PricewaterhouseCoopers LLP

4 unchanged sentences

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-K

Item 8. Financial Statements and Supplementary Data