UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of
The
Securities Exchange Act of 1934
Date of
Report (Date of earliest event
reported) March 31,
2010
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RESOURCES
CONNECTION, INC.
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Delaware
(State
or other jurisdiction
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0-32113
(Commission
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33-0832424
(IRS
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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17101
Armstrong Avenue, Irvine, California
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92614
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code
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(714)
430-6400
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Not
applicable
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(Former
name or former address, if changed since last
report.)
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
2.02 Results of Operations and Financial Condition.
Within
the attached press release, the Company makes reference to certain non-generally
accepted accounting principles (“non-GAAP”) financial measures, including
consolidated EBITDA and adjusted EBITDA. The Company believes that these
non-GAAP measures are useful to our investors because they are financial
measures used by management to assess the performance of our
Company. Accordingly, where these non-GAAP measures are provided, it
is done so that investors have the same financial data that management uses with
the belief that such information will assist the investment community in
assessing the underlying performance of the Company on a year-over-year and
sequential basis. Whenever such information is presented, the Company
has complied with the provisions of the rules under Regulation G and Item 2.02
of Form 8-K. In addition to the reasons described above, specific
reasons the Company’s management believes that the presentation of certain
non-GAAP financial measures provides useful information to investors regarding
the Company’s financial condition, results of operations and cash flows are as
follows:
The
non-GAAP measures presented in the attached press release are not in accordance
with, or an alternative for, GAAP and may be different from non-GAAP measures
used by other companies. In addition, these non-GAAP measures are not based on
any comprehensive set of accounting rules or principles. The Company believes
that non-GAAP measures have limitations in that they do not reflect all of the
amounts associated with the Company’s results of operations as determined in
accordance with GAAP and that these measures should only be used to evaluate the
Company’s results of operations in conjunction with the corresponding GAAP
measures.
For its
internal budgeting process, the Company’s management uses financial statements
that include consolidated EBITDA and adjusted EBITDA. The Company’s
management also uses the foregoing non-GAAP measures, in addition to other GAAP
measures, in reviewing the financial results of the Company.
The
information in Item 2.02 of this current report on Form 8-K, as well as Exhibit
99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, and shall not be incorporated by
reference into any registration statement or other document pursuant to the
Securities Act of 1933, as amended.
Item
9.01 Financial Statements and Exhibits.
(c)
Exhibits
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Exhibit No.
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Description
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Exhibit
99.1
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Press
Release issued March 31, 2010
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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RESOURCES
CONNECTION, INC.
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Date: March
31, 2010
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By:
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/s/
Donald B. Murray
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Donald
B. Murray
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Chief
Executive Officer
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EXHIBIT
INDEX
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Exhibit No .
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Description
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Exhibit
99.1
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Press
Release issued March 31, 2010
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Immediate
Release
Media
Contact:
Michael
Sitrick
(US+) 1-310-788-2850 or mike_sitrick@sitrick.com
Analyst Contact:
Nate
Franke, Chief Financial Officer
(US+)
1-714-430-6500 or nate.franke@resources-us.com
Resources
Connection, Inc. Reports Third Quarter Results for Fiscal 2010
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·
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Gross
margin improves to 38.6%
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·
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Loss
of $0.11 per share includes $0.10 per share for tax valuation allowance
and contingent consideration
adjustment
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·
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Third
quarter cash flow from operations improves to $6.7
million
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·
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Adjusted
EBITDA improves to $7.4 million
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IRVINE, Calif., March 31, 2010
– Resources Connection, Inc. (NASDAQ: RECN), a multinational professional
services firm that provides to clients – through its operating subsidiary,
Resources Global Professionals (“Resources”) – accomplished professionals in
accounting and finance, risk management and internal audit, corporate advisory
and strategic communications, information management, human capital, supply
chain management and legal services, today announced financial results for its
fiscal third quarter ended February 27, 2010.
Total
revenue for the third quarter of fiscal 2010 was $125.3 million, up 3.1% on a
sequential quarter basis and down 19.7% from the fiscal 2009 third quarter.
Revenues in the U.S. were up 8.6% sequentially and down 15.0%
quarter-over-quarter while international revenues decreased 10.9% sequentially
and 31.4% quarter-over-quarter (down 9.1% sequentially and 34.8%
quarter-over-quarter on a constant dollar basis).
“We were
pleased to see revenues and pre-tax income improve for the second consecutive
quarter,” said Tony Cherbak, chief operating officer. “We expect to
see sequential and quarter-over-quarter revenue growth in the fourth quarter as
we close out our fiscal year.”
Gross
margin was 38.6% in the third quarter of fiscal 2010, up 50 basis points from
the second quarter of fiscal 2010 and 140 basis points from 37.2% in the
comparable period of fiscal 2009. The improvement stems in part from
the Sitrick Brincko acquisition. Selling, general and administrative
expenses for the third quarter of fiscal 2010 were $44.1 million, down $100,000
from the second quarter of fiscal 2010 amount of $44.2 million (which included
$600,000 of Sitrick Brincko Group acquisition costs).
The
Company’s pre-tax income for the third quarter was $132,000, which includes a
non-cash charge of $788,000 related to the adjustment of the estimated fair
value of contingent consideration. The Company’s provision for income taxes
during the third quarter was $5.1 million, including a non-cash tax charge of
$3.9 million, to establish a valuation allowance against deferred tax assets in
certain foreign locations. For the nine months ended February 27,
2010, the pre-tax loss was $9.1 million and the tax provision was $5.0
million.
The
Company’s net loss determined in accordance with generally accepted accounting
principles (“GAAP”) for the third quarter ended February 27, 2010, was $5.0
million, or $0.11 per diluted share. Included in the $0.11 loss per
diluted share were non-cash charges totaling $0.09 per share for the tax
valuation allowance and $0.01 per share related to the increase in the estimated
fair value of contingent consideration. This compares with GAAP net
income for the third quarter ended February 28, 2009, of $2.1 million, or $0.05
per diluted share.
“Although
we reported a GAAP loss for the third quarter that was largely comprised of a
non-cash tax valuation charge, we continued to build cash from operations,” said
Don Murray, chief executive officer of Resources. “In a tough
economic environment, we have had positive cash flow in six of our last seven
quarters.”
Cash flow
from operations and adjusted EBITDA (earnings before interest, income taxes,
depreciation, amortization, stock based compensation and contingent
consideration expense) were $6.7 million and $7.4 million, respectively, for the
third quarter of fiscal 2010.
The
Company’s net loss determined in accordance with GAAP for the first nine months
ended February 27, 2010, was $14.1 million, or $0.31 per diluted
share. This compares with GAAP net income for the first nine months
ended February 28, 2009, of $24.0 million, or $0.53 per diluted
share.
ABOUT
RESOURCES GLOBAL PROFESSIONALS
Resources
Global Professionals, the operating subsidiary of Resources Connection, Inc.
(NASDAQ: RECN), is a multinational professional services firm that helps
business leaders execute internal initiatives. Partnering with business leaders,
we drive internal change across all parts of a global enterprise – finance and
accounting, information management, internal audit, corporate advisory and
strategic communications, human capital, legal services and supply chain
management.
Resources
Global was founded in 1996 within a Big Four accounting firm. Today, we are a
publicly traded company with over 2,700 professionals, from more than 80
practice offices, annually serving 2,100 clients around the world.
Headquartered
in Irvine, California, Resources Global has served 84 of the Fortune 100
companies.
The
Company is listed on the NASDAQ Global Select Market, the exchange’s highest
tier by listing standards. More information about Resources Global is available
at http://www.resourcesglobal.com.
Resources
will hold a conference call for interested analysts and investors at 5:00 p.m.,
ET today, March 31, 2010. This conference call will be available for
listening via a webcast on the Company’s website: http://www.resourcesglobal.com.
Certain
statements in this press release are “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements may
be identified by words such as “anticipates,” “believes,” “can,” “continue,”
“could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,”
“predicts,” “should,” or “will” or the negative of these terms or other
comparable terminology. In this press release, such statements
include the Company’s expectation of
quarter over quarter revenue growth for the fourth quarter of the Company’s 2010
fiscal year. Such statements and all phases of Resources Connection’s operations
are subject to known and unknown risks, uncertainties and other factors,
including seasonality, overall economic conditions and other factors and
uncertainties as are identified in our most recent Annual Report on Form 10-K
and our other public filings made with the Securities and Exchange Commission
(File No. 0-32113). Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date
hereof. Resources Connection’s, and its industry’s, actual results,
levels of activity, performance or achievements may be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements. The Company undertakes
no obligation to update the forward-looking statements in this press
release.
###
RESOURCES
CONNECTION, INC.
INCOME
STATEMENT
(in
thousands, except per share amounts)
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Quarter
Ended
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Nine
Months Ended
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February
27, 2010
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February
28, 2009
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February
27, 2010
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February
28, 2009
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(unaudited)
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(unaudited)
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|||||||||||||||
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Revenue
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$ | 125,304 | $ | 155,989 | $ | 365,093 | $ | 553,527 | ||||||||
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Direct
costs of services
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76,949 | 97,988 | 225,245 | 340,576 | ||||||||||||
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Gross
profit
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48,355 | 58,001 | 139,848 | 212,951 | ||||||||||||
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Selling,
general and administrative expenses (1)
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44,101 | 50,803 | 139,981 | 161,696 | ||||||||||||
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Contingent
consideration expense (2)
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788 | - | 788 | - | ||||||||||||
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Operating
(loss) income before amortization and depreciation (1),
(2)
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3,466 | 7,198 | (921 | ) | 51,255 | |||||||||||
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Amortization
of
intangible
assets
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1,360 | 271 | 2,191 | 928 | ||||||||||||
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Depreciation
expense
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2,152 | 2,185 | 6,523 | 6,788 | ||||||||||||
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Operating
(loss) income (1), (2)
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(46 | ) | 4,742 | (9,635 | ) | 43,539 | ||||||||||
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Interest
income
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(178 | ) | (458 | ) | (524 | ) | (1,354 | ) | ||||||||
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(Loss)
income before provision for income taxes (1), (2)
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132 | 5,200 | (9,111 | ) | 44,893 | |||||||||||
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Provision
for income taxes (3)
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5,097 | 3,120 | 4,952 | 20,845 | ||||||||||||
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Net
(loss) income (1), (2), (3)
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$ | (4,965 | ) | $ | 2,080 | $ | (14,063 | ) | $ | 24,048 | ||||||
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Basic
net (loss) income per share
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$ | (0.11 | ) | $ | 0.05 | $ | (0.31 | ) | $ | 0.53 | ||||||
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Diluted
net (loss) income per share
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$ | (0.11 | ) | $ | 0.05 | $ | (0.31 | ) | $ | 0.53 | ||||||
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Basic
shares
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46,394 | 44,976 | 45,745 | 45,002 | ||||||||||||
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Diluted
shares
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46,394 | 45,390 | 45,745 | 45,760 | ||||||||||||
RESOURCES
CONNECTION, INC.
INCOME
STATEMENT
(in
thousands, except per share amounts)
EXPLANATORY
NOTES
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1.
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Selling,
general and administrative (“SG&A”) expenses for the nine months ended
February 27, 2010 includes $7,000 of expenses related to the resignation
of two senior executives during the first quarter, including the
acceleration of recognition of compensation expense for employee stock
option grants of $2,217. In addition, SG&A expenses include $3,186 and
$4,212 of expense for the three months ended February 27, 2010 and
February 28, 2009, respectively, related to non-cash compensation expense
for all other employee stock option grants and employee stock
purchases.
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2.
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Contingent
consideration expense for the three and nine months ended February 27,
2010 is approximately $788,000, recognizing the change in the fair value
of the contingent consideration liability associated with the acquisition
of the Sitrick Brincko Group.
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3.
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The
Company’s effective tax rate was 3,861% for the three months ended
February 27, 2010 and 60.0% for the three months ended February 28,
2009. For both fiscal periods, the accounting treatment under
GAAP for the cost associated with incentive stock options and shares
purchased through the Employee Stock Purchase Plan has caused volatility
in the Company’s effective tax rate. In addition, during the
third quarter of fiscal 2010, the Company was unable to benefit from, or
had limitations on the benefit of, tax losses in certain foreign
jurisdictions.
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RESOURCES
CONNECTION, INC.
Reconciliation
of Net Income to Adjusted EBITDA
(in
thousands, except Adjusted EBITDA Margin)
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Quarter
Ended
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Nine
Months Ended
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|||||||||||||||
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February
27, 2010
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February
28, 2009
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February
27, 2010
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February
28, 2009
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|||||||||||||
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(unaudited)
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(unaudited)
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|||||||||||||||
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Consolidated
EBITDA and Adjusted EBITDA
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Net
(loss) income
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$ | (4,965 | ) | $ | 2,080 | $ | (14,063 | ) | $ | 24,048 | ||||||
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Adjustments:
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Amortization
of intangible assets
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1,360 | 271 | 2,191 | 928 | ||||||||||||
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Depreciation
expense
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2,152 | 2,185 | 6,523 | 6,788 | ||||||||||||
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Interest
income
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(178 | ) | (458 | ) | (524 | ) | (1,354 | ) | ||||||||
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Provision
for income taxes
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5,097 | 3,120 | 4,952 | 20,845 | ||||||||||||
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EBITDA
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3,466 | 7,198 | (921 | ) | 51,255 | |||||||||||
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Stock-based
compensation expense
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3,186 | 4,212 | 12,611 | 13,811 | ||||||||||||
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Contingent
consideration expense
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788 | -- | 788 | -- | ||||||||||||
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Adjusted
EBITDA
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$ | 7,440 | $ | 11,410 | $ | 12,478 | $ | 65,066 | ||||||||
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Revenue
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$ | 125,304 | $ | 155,989 | $ | 365,093 | $ | 553,527 | ||||||||
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Adjusted
EBITDA Margin
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5.9 | % | 7.3 | % | 3. 4 | % | 11.8 | % | ||||||||
RESOURCES
CONNECTION, INC.
Reconciliation
of Net Income to Adjusted EBITDA
(in
thousands, except Adjusted EBITDA Margin)
The
Company utilizes certain financial measures and key performance indicators that
are not defined by, or calculated in accordance, with GAAP to assess our
financial and operating performance. A non-GAAP financial measure is
defined as a numerical measure of a company’s financial performance that (i)
excludes amounts, or is subject to adjustments that have the effect of excluding
amounts, that are included in the comparable measure calculated and presented in
accordance with GAAP in the statement of income; or (ii) includes amounts, or is
subject to adjustments that have the effect of including amounts, that are
excluded from the comparable measure so calculated and presented.
Adjusted
EBITDA, a non-GAAP financial measure, is calculated as net income (loss) before
amortization of intangible assets, depreciation expense, interest income, income
taxes, stock-based compensation expense and contingent consideration
expense. Adjusted EBITDA Margin is calculated by dividing Revenue by
Adjusted EBITDA. We believe that Adjusted EBITDA and Adjusted EBITDA
Margin provide useful measures to our investors because they are financial
measures used by management to assess the performance of our
Company. Adjusted EBITDA and Adjusted EBITDA Margin are not
measurements of financial performance or liquidity under GAAP and should not be
considered in isolation or construed as substitutes for net income or other cash
flow data prepared in accordance with GAAP for purposes of analyzing our
profitability or liquidity. These measures should be considered in
addition to, and not as a substitute, or a superior measure to, net income,
earnings per share, cash flows or other measures of financial performance
prepared in accordance with GAAP.
RESOURCES
CONNECTION, INC.
SELECTED
BALANCE SHEET INFORMATION
(in
thousands)
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February 27, 2010
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May 30, 2009
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|||||||
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(unaudited)
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Cash,
cash equivalents and short-term investments
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$ | 138,015 | $ | 163,741 | ||||
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Accounts
receivable, less allowances
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$ | 72,750 | $ | 68,157 | ||||
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Total
assets
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$ | 474,580 | $ | 412,019 | ||||
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Current
liabilities
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$ | 60,282 | $ | 68,451 | ||||
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Total
stockholders’ equity
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$ | 353,679 | $ | 337,917 | ||||