Welcome to the Robert Half International conference call to discuss second quarter 2009 financial results. Our hosts for today's call are Mr. Max Messmer, Chairman and CEO of Robert Half International; and Mr. Keith Waddell, Vice Chairman, President and Chief Financial Officer. Mr. Messmer you may begin.

Thank you and hello everyone. We appreciate you joining Keith and me today. Before we review our second quarter results, I would like to remind everyone on the call that our comments do contain predictions, estimates and other forward looking statements. These statements represent our current judgment of what the future holds, and they include words such as forecast, estimate, project, expect, believe, guidance and similar expressions. We believe these remarks to be reasonable but they are subject to risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Some of these risks and uncertainties are described in the press release we issued today, and in our SEC filings. We assume no obligation to update the statements made in this conference call. Now, let's take a look at our second quarter financial results. Second quarter revenues were $750 million, down 39% from the second quarter of 2008. On a constant currency basis, the decline was 36% year-over-year. Income per share was $0.03, compared to $0.47 one year ago. Cash flow from operations was $77 million during the quarter, and capital expenditures were $10 million. We paid a cash dividend to stockholders of $0.12 per share during the second quarter for a total of $18 million. We also repurchased 1 million shares of RHI common stock during the quarter, at a total cost of $22 million Approximately 8.3 million shares remain available for repurchase under our company's Board approved stock repurchase plan. The labor markets remained weak during the second quarter. The US unemployment rate rose to 9.5% in June, a 26 year high. While we continued to see year-over-year sequential revenue declines, we were encouraged that the sequential declines were significantly less than those reported in the previous quarters. While no one knows how strongly the economy will come back following this recession, we are optimistic about our prospects. Our field offices have continued to do an excellent job of managing costs, and have been opportunistic in capturing new business. We do remain in solid financial condition with essentially no debt, and we enjoy an excellent reputation among our clients and candidates for quality, professionalism and stability in these turbulent times, and so many of our smaller competitors are having financial difficulties. Now, I will turn the call over to Keith for a closer look at our second quarter results.

Thank you, Max. As indicated company-wide revenues during the second quarter were $750 million, down 39% from the prior year second quarter. Sequentially, revenues declined 9% from the first quarter on a constant currency basis, these rates were negative 36% year-over-year, and negative 10% sequentially. There were 63 billing days in this quarter, versus 64 billing days in the second quarter of last year, and versus 62 billing days in the first quarter of 2009. Accountemps, our largest staffing division had second quarter revenues of $311 million, down 32% from the second quarter of 2008, and down 6% sequentially. Accountemps makes up 41% of company-wide revenues. There are 370 Accountemps locations worldwide. OfficeTeam had second quarter revenues of $136 million, a decline of 38% from the second quarter of last year, and a decline of 7% sequentially. OfficeTeam is our high-end administrative staffing division. It has 327 locations worldwide. This division was introduced in 1991 and represents 18% of company revenues. Second quarter revenues for Robert Half Management Resources were $94 million, down 43% from the second quarter of 2008, and down 17% sequentially This division places senior level, accounting and finance professionals on a project basis. It was introduced in 1997 at 147 locations worldwide, and makes up 13% of company-wide revenues. Our information technology staffing division Robert Half Technology had revenues of $75 million during the second quarter, down 33% from the second quarter of last year, and down 10% sequentially. Robert Half Technology was introduced in 1994, and operates in 109 locations worldwide. It accounts for 10% of company revenues. Second quarter revenues for our permanent placement division, Robert Half Finance & Accounting were $44 million, down 66% from the second quarter of 2008, and down 13% sequentially. This business was established in 1948 and operates in…

Thank you, Keith. We were encouraged to see the sequential revenue declines moderate during the quarter. This is not unlike our experience during the 2001-2002 downturn, in which declines also moderated in the fourth sequential quarter of the downturn. Starting with the third quarter of 2008, revenues in this downturn have declined on a cumulative basis about 10% more than during the comparable 2001-2002 period. Labor markets remained weak during the quarter with the unemployment rate in the United States reaching its highest level since 1983. Our company's permanent placement operations continued to be particularly impacted by the extremely cautious hiring climate. Despite the challenging business environment however, I would characterize our business outlook as cautiously optimistic for reasons you have heard us talk about before. The recession has prompted many companies to layoff staff and defer hiring the people they need in an effort to defer costs. We believe it is possible these companies may have cut too deeply, and will need help after a pickup in business. We are well positioned to provide quality staffing assistance on a rapid basis. We feel good about Protiviti's long-term prospects. This business continues to deepen its client relationships and expand its suite of consulting and internal audit services, government regulatory efforts may create demand by companies large and small for compliance assistance. We can provide experienced staff with the talent and skills necessary to help firms meet the requirements of new regulations While no one can predict with certainty how the economy will perform in the future, we believe ours is a good business, well positioned and in a strong financial condition, and we are pleased with the way our field offices have been performing under difficult business conditions. At this time, Keith and I would like to answer your questions. To allow as many people as possible to participate, we ask that you please limit yourself to one question and a single follow-up as needed. If you have additional questions, we will certainly try to return to you later in the call. Thank you.

(Operator Instructions). Our first question comes from Andrew Steinerman with JPMorgan.

I wanted to focus on the losses in Protiviti, Keith. If I take out the severance of $2 million in the quarter, that makes it $11 million loss. I think that is the same loss level in the first quarter when you took out $7 million; it was about $11 million. I know you're going to say, revenues are lower so we were able to maintain the loss, but could you walk us through the pieces of what would it take for us to get to break even, talking about the $11 million benefit you just discussed? Is that $11 million benefit cumulative with the benefit from the first quarter severance or is that separate from what we discussed in the last conference call?

Andrew, the million is new and incremental to everything just reported. Clearly, the revenues declined by another $10 million or $11 million in the second quarter versus the first. We had reduced our cost structure to the revenue levels of the first quarter and therefore the lower revenue amount essentially fell all the way to the bottom line. We reduced our cost structure yet again, and seasonally the third quarter is typically a better quarter for Protiviti than others. In these economic environments, seasonality hasn't trumped cyclicality. But that said, there is a better business backdrop going into the third quarter versus the second. I would say that the losses in the second quarter were disproportionately outside the United States. We certainly made progress relative to what we had done in the first quarter, and we expect to make significant further progress in the third quarter as well, such that we believe, again, at the current revenue levels, we've got our cost structure down, such that we would break even at around the current revenue levels. If revenue levels continue to decline as we said in the past, we will continue to reduce our cost structure. That said, just like we were encouraged that there has been some stabilization in our staffing revenues over the past several weeks, we've also been encouraged in Protiviti particularly in the United States, about the near term trends during the quarter as well as the first half of July. It's clearly been a tough downturn for Protiviti. It's probably been relatively a bigger shock to their system than is the case in staffing, which as Max mentioned, this downturn is only about 10% more impactful than the prior downturn versus at Protiviti versus at the big four accounting firms. I think they'll tell you that this is dramatically worse than anything they've ever seen. So, cost productions have lagged our revenue performance to some degree. However, I will tell you, there is clearly more anecdotal optimism in the Protiviti troops. That would also be the case in staffing, absent a couple of specific areas. So, people are feeling better. People feel like there is some stabilization. We've got a little bit of a seasonal tailwind as you do more internal audit work in preparation for the coming year-end as you do more compliance work in preparation for the coming year end. So, the backdrop is clearly more solid going into the third quarter than it was going into the second quarter.

Just to be clear, if we were flat into the third quarter, would that get us to break even or do we need the fourth quarter benefit to fully make break even at a $90 million revenue level?

You would need those extra few million dollars that there's a deferred benefit into the fourth quarter to break even. So, there would be a small loss, but it would be dramatically smaller than what you had in the second quarter.

That sounds all sensible. Thank you so much.

Our next question comes from the side of Mark Marcon with R. W. Baird. Go ahead please.

Can you talk a little bit about the weekly and monthly revenue trends that you were experiencing? Coming out of the first quarter, it sounded like you were seeing some stability, but then you mentioned it did tick down a little bit on the temp side in April and May and going into June. Was it stable and then it ticked down and then it was stable again?

I think we were pretty careful on the last call to say we had had the magic five weeks of essentially flat revenues per day, and we were also quick to point out that seasonally it was a post-busy season quarter for Accounting & Finance, such that we expected it to drift downward in May and June and it did. What is different somewhat this quarter is A; we've have eight weeks not five weeks of stability, and B; in the third quarter, there is no underlying seasonal weakness that we would typically see, like we would in the quarter we just ended. Does that mean revenues won't drift down? Clearly that may or may not mean that. In our guidance, we've certainly got a range at the bottom of which says, there is lower sequential revenues. My point is, we've got eight weeks of stability in temp. We've actually got a little better start in perm versus the start we had last quarter, and it is a quarter when there isn't particular seasonal softness like we had last quarter.

Yes. It looks like the temp numbers are actually good relative to our expectations. It certainly sounds like the last eight weeks confirms some of the things that we are seeing outside of your company in terms of things getting slightly better Can you talk a little bit in terms of your guidance on the revenue side? What are you assuming for temp versus perm versus Protiviti in terms of the range?

I guess what we are talking about in terms of revenues at the high end; it is flat with the quarter we just reported. At the low end of the range, sequentially it would be down 6% or 7% rather than 9% or 10%. So, some sequential improvement in that the decline would be less, but not as much as what we just reported. So better revenue quarter relatively speaking; somewhere between, flat at the high end and less sequential decline at the low end.

I'm assuming that if we were looking at the various sub-components that we would basically be looking at potentially up on the temp side, perm down a little bit, Protiviti down a little bit on the high end?

Those are in the ballpark, and we were careful to give overall revenues.

It seems like Accountemps is holding in there relatively well?

It is. It is, but it had post-busy season, seasonal issues to deal with in the quarter just ended, and that was no surprise.

No. It's not.

Like I said, we had eight solid weeks. Clearly, everybody got excited about the famous five weeks last quarter which ended up not meaning a lot. So, these eight weeks may or may not mean something, but it is better than their being down.

Can you talk a little bit about the temp gross margins? Was there any impact in terms of workers comp, accrual reversals or adjustments?

There is no impact from workmen's comp. There was a small adjustment a year ago. There was a small adjustment this quarter. There was no impact. There was a small impact from conversions that were at all-time lows last quarter, and they are at new all-time lows this quarter. However, the bigger impact was pay bill spread compression; our average bill rates for the quarter are down 5.3% year-over-year, 1.6% sequentially. That is pretty dramatically higher than what we experienced last quarter. Two things going on there. Clearly, there is price compression, fee pressure across the board. We experienced more of it at our higher bill rate divisions than we do at our lower bill rate decisions. In addition, the mortgage refinancing demand that's out there carries with it lower margins, and that is an area where there is a lot of demand at the moment

So, that bill rate compression probably is part of the reason why Management Resources fell off a little bit?

That's correct, and because it has higher bill rates. What's happened there is, as projects have ended, clients are reluctant to begin new projects to replace them. In addition to that, you have got more bill rate pressure at Management Resources and Protiviti for that matter, that bill out much more per hour than is the case at Accountemps and OfficeTeam.

Our next question comes from Jeff Silber with BMO Capital Markets.

Just a follow-up on the bill rate issue. Can you remind us the last couple of cycles, how trends in bill rates lagged or followed trends in volume?

I'm looking back here at '01, '02, they track pretty closely Jeff. I would say maybe on the way out of the last downturn, bill rates recovered a little more quickly than volumes did, but it's not dramatic.

If we can switch over to perm, and maybe go back to Andrew's question that he asked on Protiviti. Where do you think we will be at a point where based on current run rates, you would be able to project break even in that division?

A; we are only losing a couple million dollars a quarter. B; we are continuing to reduce our cost structure. We don't want to over reduce our cost structure to the extent we are bumping along the bottom, which we may be doing as we speak. We don't want to cut more people and more capacity on the upside than we need to. While you hate to lose money, the fact that we are losing a couple million dollars a quarter is not the end of the world. We don't want to over cut in front of revenue declines. So, might we lose a few million dollars a quarter for a few more quarters? Yes. We are trying to avoid that, and if we could get some revenue stabilization, we could.

Just one quick follow up. Just on the income statement and I notice you have a difference between net income and net income for common shareholders. What is that difference?

There is a new accounting rule that deals with dividends on restricted stock, and you have to remove those dividends; and then what's left is the earnings remaining for common shareholders. It has a de minimus impact on our results, but there is that new accounting rule. When you cut through the mechanics of it Jeff, before this rule, when you issued restricted stock, you blend it into earnings per share, as the share is vested, which in our case is pro rata over four years. Under the new accounting rules, the net of the mechanics is, those shares are shown as outstanding from day one.

Our next question comes from Kevin McVeigh with Credit Suisse.

Keith, if you looked at the guidance relative to more of stabilization on the Protiviti side from a loss perspective. You lost $13 million in the second quarter, you probably won't lose as much, but the EPS overall looks pretty similar to trends in the second quarter. Is that a function of just more pressure on the temp line or just more conservatism baked in on the perm placement side? Any other dynamics of work that kind of explain the delta there?

We've certainly been more conservative from a revenue mix standpoint, meaning less perm, less Protiviti. We've been conservative in that. We've considered that our temp gross margins could decline yet again sequentially for the reasons we just mentioned. We've been more conservative in that we have assumed our SG&A as a percent of revenue. You continue to get negative leverage on your fixed costs as your revenues decline. We've tried to be conservative frankly at every line item, all of which gives you a lower operating margins, and results in the guidance that we gave. Now, obviously, we hope we do better. If we do flat revenues, you shouldn't have negative leverage on SG&A. So, with a little luck, we will do better, but the thought is, it is time to be conservative and that's how we did it.

That's helpful. Just real quick on the buyback. It seems like you increased the buyback relative to the first quarter. Any sense of the kind of thoughts on that going forward?

We continue to discuss it every quarter with our Board. Our cash flow was again quite strong. This quarter we didn't have the annual incentive bonuses that payout at the end of the year which depressed last quarter's cash flow. So, the cash flow this quarter I think was $77 million from operations. We expect our cash flow to remain strong. Traditionally we've favored dividends and repurchases as the principle use of that cash flow, and I think that will be the expectation going forward. We remain bullish on our long-term prospects. If you look at a stock chart over time, we haven't had the opportunity to buy stock at or around $20 that often in the past, which argues to be more bullish than not.

Our next question comes from Tim McHugh with William Blair & Company. Go ahead please. Tim McHugh - William Blair & Company: Yes. I was wondering if you could comment on the stabilization you described during last eight weeks. Is that across your various service offerings or are you seeing more in Accountemps still, and less so in Management Resources? Or just any commentary there.

What's interesting is if you look at Accountemps, OfficeTeam, Technology, they are all very similar. Management Resources is more volatile. However, the overall trend holds for them as well. It just isn't, week-after-week the same. It is one week down and one week up, one week down and one week up, two weeks up. It is a little more volatile, but for the other divisions, it's remarkable consistent. Tim McHugh - William Blair & Company: Then on Protiviti, the cost savings, can I assume given, you said you are running at low utilization rates, that you took additional heads out or were there any office closings or overhead costs taken out there as well?

We did take additional headcount reductions. There was some attrition. Our cost efforts were focused more outside the US than inside the US. I would hasten to say that in the month of June, we did make money in Protiviti in the US. They've made significant progress over the last few months. Our focus outside the US was later than inside the US from a cost control, cost reduction standpoint. We are optimistic that with the cost reductions we've already made, and others that are on the drawing board that, if we have to, based on revenue performance we'll do. We are optimistic that we will see much better results outside the US as well. Tim McHugh - William Blair & Company: To my first question based on your commentary there, can I also ask, the stability over the last week, your commentary about international versus domestic for Protiviti prompts me to ask if you've seen the same stability in Europe as you have in the US over the last few weeks?

I guess we would say, outside the US, in the UK and Canada, the pace of the declines has improved. Continental Europe and Asia, the pace of the declines is either the same or worse. When you put them all together, the sequential decline outside the US for this past quarter was about the same as it was the prior quarter, although the components were different. So, clearly Continental Europe and Asia were later to the game. But that being said; they've clearly caught the same cold that the US had, and are later in the results they are reporting and their impact of the downturn. So, the stabilization trends, may frankly when we talk about eight weeks of stable, that is consolidated and US has actually improved a little bit to offset the decline outside the US.

Our next question comes from Vance Edelson with Morgan Stanley. Your line is open.

Back on the pricing environment and the pay bill spread compression, is there acceleration in customer demands for more attractive pricing, almost like a delayed reaction to their own pressures or is that leveling off along with the signs of leveling off in overall demand, and is it getting easier for you to keep up with customer demands at lower rates?

It is certainly not getting worse. So, I wouldn't say there is a delayed reaction. It got acute last quarter, and that continued into this past quarter. There were just more months of it. So, I wouldn't say it's getting worse I think companies are breathing that the worst of this thing is at least mostly not if totally behind us. It's nice to be able to define your downside, and when you define your downside, you can then start looking forward. So, I think many companies believe that they are close to being able to define their downside.

That's helpful. As a follow-up, when you think of the overall cost structure, you hinted that at some point, it's going to be time to stop cutting costs as aggressively, because the turnaround may be around the corner. Do you feel that time has at all arrived? And if not, what are the signs that you are going to be looking for to know that, it's time to just go with the current cost structure and take the risk that it might get worse?

As we've said, in the quarter just ended, the sequential declines moderated dramatically. If we are near the top end of our range for the quarter we are currently in, that says we have flattened out. History would say we would have a few quarters of flatness of bumping along the bottom before we would grow again. So, if that's the environment we were in, that we would stop with the cost reductions, but instead try to keep as much powder as we can when things get better and bump along the bottom for a while.

Keith, I would just add the following. The unemployment rate obviously is high and couldn't go higher, but at the end of the day, employers have cut back severely as I said earlier, when we start seeing the temp business move up somewhat, we would consider that a very good sign, because that's pretty much what happened in the last recession. So, we'll be paying close attention to everything, but we'll be particularly looking at the temp business across the board for a pick up in activity

Our next question comes from Jim Janesky with Stifel Nicolaus. Your line is open.

Yes. Hi Max and Keith. First question is, last quarter you talked about a range of about $730 million to $780 million in revenues, and you came in the middle of that. What were you assuming for the upper end of the range that didn't come through, because there was a lot of talk about stability and what stability meant in terms of revenue declines or sequential stability?

I think the big wildcard was seasonality, and although we traditionally have always had seasonality that negatively impacted second quarters, the question was how much would cyclical circumstances trump that, and that, maybe there wouldn't be the traditional seasonality because cyclically we are so low anyway. However, the facts are we did experience the seasonality we had in the past. So, the numbers were in the middle of our range, not at the top of our range. But given economic conditions, I think we have done okay as far as the ranges we have given people.

Can you give us an idea of what you're hearing or what your thoughts are on this cycle versus past cycle? I mean the one in '01 timeframe was technology driven. Obviously this downturn is much more broad-based. What you are hearing in the field as to why there is stability and what could change that either in a positive or negative direction?

As Max commented earlier, I think some people are surprised to hear that this downturn versus '01-'02 is only about 10% worse for us. If you look at our temp divisions, last time, for the first four quarters of declines, we were down 32%. This time we are down 36%. In the perm side last time we were down 60%. This time we are down 66%. It is tracking more closely than many believe, and while the origin is different, last time technology, this time financial institutions, the impact while a little bit worse isn't that much worse. If you just look at headline unemployment numbers, you would think we would be much worse than 10% worse which we are not. So, I guess we've certainly taken encouragement that this is tracking much more closely to the last downturn than certainly a couple of quarters ago that was feared.

Jim, just a couple of footnotes. In the last recession, there were literally, according to the Industry Association, thousands of small and regional firms that failed in the temporary staffing business. We don't have data for this recession, but our guess is, it's not likely to be a prettier picture this time around. We'd like to think that we're well positioned. We haven't had to have mass office closings and so forth. As you know, we have no debt, and I've talked about our financial condition. So, our goal is to certainly remain well positioned and ready to serve in the market. I do think personally that many CEOs and CFOs have cut too deeply into their staffs, because after all, we had a full fledged panic toward the end of the year, and in the beginning of the year. It won't take much of an uptick in demand to generate an uptick we believe in temp hiring. So, what I would say in answer to your question is, I've been struck personally how similar our business is on the staffing side this time around to the last recession. It's so far uncanny. I guess a key question is, are we going to bounce back as fast as the last time, and your guess would be probably better than mine. I don't think anybody knows that for sure. We're certainly struggling to be well positioned and to take advantage of the industry turmoil. As I said in the opening statements, we think we are well established, have a good reputation and so forth. We have our key players in place, and we hope to take advantage of whatever the economy offers us as an opportunity

On the upside, just a couple of facts here. As we have talked before, in the last downturn peak-to-peak, we grew 50%. From the last trough-to-peak, we grew 100%. This is at the revenue line and staffing, and that took five years. There's a lot of discussion about US unemployment rates are so high, and it's going to take longer to come back. Maybe it will. But, I think you ought to go back and look at, we achieved similar revenue levels at higher levels of unemployment in the past, which mitigates that argument to some degree. For example, in the second quarter of 2001, we had $648 million of revenues, and the unemployment rate was 4.5%. We got back to that level of revenues when the unemployment rate was 5.3%. It was roughly a full percentage point higher. The point being, we don't have to get back to the same unemployment rates to produce the same level of revenues. Therefore, there is not this major correlation between overall unemployment rates and how we do revenue wise.

Our next question comes from Sara Gubins with Bank of America. Go ahead please.

I wanted to ask about the bill pay rate spread. I'm wondering if there is a lag between when you can pass on the lower bill rates or if you are now at a point where you can't pass it on. Within that, I'm wondering if we should expect continued compression in gross margins in temporary staffing in the third quarter or if that could flatten out?

There is a little lag between when you offer your client a lower bill rate, and then when you get a lower pay rate to your temporaries. In our guidance as I mentioned earlier, we have assumed some further compression into the third quarter, but it's nothing dramatic.

Okay. So, you would expect to be able to continue to pass that on?

For the most part. Again with a little further compression, which we built into our modeling. There is no question that in this downturn, pricing has been more impacted than in prior downturns, notwithstanding what we just said about revenues overall.

Our next question comes from Andrew Fones with UBS. Go ahead please.

Thanks. I wanted to ask just a couple of little questions about the cost cutting to start with. It sounded as though you are only aiming to take actions in Protiviti. I just wanted to make sure that's correct. Then also, does the assumed cost savings exclude any severance expense you might incur?

The cost cutting is not just Protiviti, it's staffing as well. We had another $2 million in severance and staffing to bring the total to $4 million for the quarter. Staffing has normal attrition. They've also had some forced attrition in addition to that, which gave rise to some of that severance. So, the cost reductions are across the board. The cost savings we projected for Protiviti did not bake in additional severance of any significant degree.

So, the projected cost cutting is for Protiviti alone?

That's correct. That's correct.

Does that include or assume any additional office closings?

It assumes no office closings. The cost reductions are either when you renew less space at lower rate or fewer people.

Thanks. Then just one other if I could. Looking at what your margins could look like when revenues start to recover, if I look at kind of coming out of the past downturn, the point you reach the prior peak revenue level earnings are about 15% higher than they were going into the prior downturn. If I look at Q2 '08 as being the point of peak earnings for this cycle, approximately $1,225 million of revenue, if you were to get back to that revenue level, could you give us any kind of rough assessment as to what your earning levels could be?

There is no reason structurally why they shouldn't be as high and to the extent reduced your operating cost in the downturn that you lever in the up cycle they might be higher. Further to the extent you've bought shares during the interim period you're spreading those earnings over fewer shares, but structurally there's no reason why we shouldn't do as well. We like to think if we do better that's gravy.

Our next question comes from Paul Ginocchio with Deutsche Bank.

Your SG&A organically is down 32% year-on-year, but your branch account is only down 1%. Just wondering what sort of consultant or employees per branch looks like and if there is any more cushion there or if you do need to cut costs to closing branches?

Closing branches hasn't been a large part of our cost reductions and aren't part of our intended or contingency cost reductions as we move forward. We believe that if we are forced to or if believe it is appropriate we can continue to take our payroll costs down through normal attrition, through the variable portion of their compensation plans and through forced attrition. We can continue to reduce costs in that way if revenues dictate that we need to but it won't be through a significant reduction of our footprint.

Just a quick one. Working days in the third quarter, is it 64?

It is one more day.

Our next question comes from Gary Bisbee with Barclays Capital.

Going back to the pay versus bill spread, given how unemployment is rising and everything why don't you just cut the pay rate more aggressively or more quickly? Is it feared that you will alienate these people and when demand comes back they will go to another provider? Or is it merely just a timing issue that you've got them on a contract and you can't do it as quickly as the customer?

There are a lot of factors. What will the competing firms pay them is a consideration. They have been your best temporary employee for two years and it is just emotionally tough for some people to take the pay rates down as dramatically as they need to. There are a lot of factors. We haven't seen bill rate compression that we have seen this time in the past and therefore there needs to be more pay rate compression to keep pace with that which is tougher to do. We have done a solid job reducing pay rates but it is something we continue to focus on.

And then do you expect any additional severance in the third quarter? Is there anything baked into the guidance in any of the businesses?

Nothing of significance.

And then I will sneak one more in. I know you focused on gaining share in a tough environment, any update on how that is going? Is there any data points you can point us to?

Well, there aren't hard data points. Clearly you read all the time about staffing firms, local staffing firms either shutting down totally, regional firms, closing branches, national firms closing branches. We've talked about those things before. That is easily verified. I can assure you, our people are in the marketplace as actively as ever. They're calling on clients, they're calling on prospects. They're on the phone. They're making their outbound calls, they're makings their connects. Don't think that all we are doing is controlling our costs. I would say to the contrary, if you are in a Protiviti office, if you are in a staffing office, there is a major focus about being externally focused, being in the marketplace. We are not going to get out of this thing studying our navels.

Our next question comes from Tobey Sommer with SunTrust Robinson Humphrey.

I was wondering if you could give us some color on technology and IT bill rates as well as areas of notable strength and weakness?

IT bill rates aren't that different than overall, remember that a majority of that is what we call tech support which are PC Techs, helpdesks, network admins. It is not programmers. It is the more operational side of IT. It is focused as our client base is principally on middle market size firms, which don't have the large ERP type systems that the big companies do. So it doesn't look that different than the rest of our business because the client base is essentially the same. Maybe it is a little bit larger than the rest of our business.

Because of that composition of emphasis, would you expect the IT business to stabilize coincidently with the other businesses or what kind of timing would you expect?

I wouldn't expect it to be that different. Clearly, we do what we call tech development, which are contract programmings at development people. We would observe that that piece of the business is actually doing better than is the tech support side of the business because the tech development side is more project driven and a lot of IT projects remain.

Our next question comes from Mark Marcon with R. W. Baird.

I wondered if you could talk a little bit more about Protiviti in terms of the morale within the offices and the ones that you're actually seeing some growth in if you are actually starting to see some real signs of improvement in morale and outward focus? And then conversely, what is it like in some of the offices that are smaller and that continue to decline? It sounds like those are the ones that are losing money and you got to make some more reductions in terms of head count and that probably doesn't help morale. So how do you balance that?

We don't live in a vacuum and clearly everybody understands that the big four are just as impacted as Protiviti. Some of the other F&A staffing firms are just as impacted as Protiviti. So everybody acknowledges this isn't a Protiviti specific issue. That said, it is the toughest downturn the big four and Protiviti, those people, former Andersen, have ever had to deal with. It is not easy but I would say that they are very resolved to do what they have to do to first get this to break even and then to be profitable thereafter. They are very anxious and committed to pull their weight for the RHI enterprise. In the United States where we focused first and hardest on cost reduction efforts, they have made tremendous progress. As I said earlier, they made money in the month of June, which we were very pleased about. Places like the U.K. internationally, we improved dramatically during the quarter which had been a focus and the rest of our non-U.S. locations have been a focus for the last couple three quarters, and we expect to make significant progress there. It is hard to say morale is great because the environment is tough. Nobody is saying it isn't tough, but they also understand it is not unique to us and it's something we all have to get through.

Mark, all I would say in addition to Keith's comments is that these are very sophisticated people. They are well aware of the big four and regional accounting firms and their problems. They're also well aware of the major law firms. You have Wall Street and other prominent service firms for the first time may be in their history laying off large amounts of people because they have no choice. So they understand that. I would say that overall I think morale is fine. We talk to our people a lot. They understand the situation. We try to communicate regularly and we are in the middle of a battle and that's just the way it is. We'll get to the finish line but people understand that, as Keith put it, we are not operating in a vacuum.

I would also say they are very mindful and very aware and very appreciative that they are tethered to a damn strong ship. We have got a great balance sheet. We have got a 60 plus year history of weathering down turns and they are very comforted by that.

Are you seeing any emerging signs of opportunity? Last quarter we talked a little bit about Sarb-Ox for smaller companies. Any of that coming to light?

The small SOX work, nothing significant to report there. I think most smaller companies are trying to drag their feet as long as they absolutely can. IFRS is still small, if anything, that's out in the distance. I think short-term it's more about for this calendar year. Companies are now starting to focus on, they have got to get their annual internal audit plan done, they have got to get their annual SOX compliance work done and that typically starts happening this quarter. That's why I said seasonally you have got a little better back drop in the third quarter than we had in the second.

Our final question comes from Brian Delaney with EnTrust.

Thank you for taking the call. Just had a quick question for you regarding capital allocation; as I listened to the call you are saying 50% revenue declines I guess is normal for the economic cycle given your business and with that 100% type drops in operating profitability. So how do you go about thinking about share repurchases? I mean I look at the peak in the business, we earned $1.81, very cyclical. At $22 a share, what is the thought process of where are buyers in the market?

Well, A, if you looked at our cash flow it is not near as impacted as our earnings and your receivables convert to cash in a significant way, which fund repurchases and dividends even when your earnings are de minimus, and if you look at a stock chart over 10 years the times when you could buy stock at or around $20 are relatively small and in relatively short periods of time. If you look at the prior peak as you suggest as a proxy for earnings power and if you look at our multiples, our stock multiples today versus that peak and you compare that to downturns past, you could convince yourself that 20ish, low 20s, in and around 20 is typically where it bottoms out and therefore it is an opportunity.

But in the prior cycle, stock has bottomed out lower. And I think last call when people asked where we are in the recession you said we were in the early 90 time frame, which means we have a ways to go in this. So I just look at 12 times peak in a very cyclical business and say what are the parameters -- and I appreciate that you have working capital come out as we go through the downturn but 12 times peak is that really where we are in terms of a frame point in terms of finding value of the stock?

I guess I would take some issue with where we said, we are in the early part of this downturn, we just talked about, we just completed the fourth consecutive quarter of revenue declines in this downturn that aren't that different than the last downturn. And after those four quarters of decline it flattened out. So if anything, the evidence would say we are entering a period where we are going to be flattish. And that's not the early part of a downturn, and at the end of the day you don't know what the stock price is going to be to the extent you dollar cost average.

That's fair. I just didn't know. When I think about where the prior peak was and we talked about structurally whether or not we could get above the prior peak you know at $22. I'm just trying to get into your heads in terms of cap allocations and share repurchases for other purposes.

Remember, last time we grew 50% beyond the prior peak once we got into the last up cycle.

That's all the time we have today. We want to thank everyone for joining us. We appreciate your interest.

This concludes today's teleconference. A taped recording of this call will be available for replay later this evening through 8 pm Eastern on July 28. The dial-in number for the replay is 800-839-5244 or for outside the United States 1-402-220-2699. Once again the number is 800-839-5244 or for outside the U.S. +1-402-220-2699. This conference will also be archived in audio format in the Investor Center at www.rhi.com.