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)
|
July
20, 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
|
|
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)
|
|
Registrant’s
telephone number, including area code
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(714)
430-6400
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Not
applicable
(Former
name or former address, if changed since last report.)
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:
o Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
2.02 Results of Operations and Financial Condition.
On July 20, 2010, Resources Connection,
Inc. (“Resources” or “the Company”) issued a press release announcing its
financial results for the quarterly period and fiscal year ended May 31,
2010. A copy of the press release is attached hereto as Exhibit
99.1.
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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|
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Exhibit
99.1
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Press
Release issued July 20,
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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|
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Date: July
20, 2010
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|
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By: /s/ Donald
B. Murray
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|
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Donald
B. Murray
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|
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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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|
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Exhibit
99.1
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Press
Release issued July20, 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 Fourth Quarter and Year-End Results for
Fiscal 2010
Fiscal 2010
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·
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Company
reports fourth quarter earnings per share of $0.05, including contingent
consideration and tax valuation allowance of $0.03 per
share
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|
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·
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Fourth
quarter gross margin improves to
41.4%
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·
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Board
of Directors announces regular quarterly dividend of $.04 per
share
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|
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·
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Fourth
quarter cash flow from operations and adjusted EBITDA improve to $6.8
million and $14.8 million,
respectively
|
IRVINE, Calif., July 20, 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 fourth quarter and year ended May 29, 2010.
Total
revenue for the fourth quarter of fiscal 2010 was $133.9 million, up 6.9% and
1.4% on a sequential quarter and quarter-over-quarter basis, respectively.
Revenues in the U.S. were up 8.9% and 7.4% sequentially and
quarter-over-quarter, respectively, while international revenues increased 0.7%
sequentially but declined 14.8% quarter-over-quarter (up 4.6% sequentially but
down 19.2% quarter-over-quarter on a constant dollar basis).
Gross
margin was 41.4% in the fourth quarter of fiscal 2010, up 280 basis points from
the third quarter of fiscal 2010 and 320 basis points from 38.2% in the
comparable period of fiscal 2009. The improvement stems in part from
the Sitrick Brincko acquisition. Selling, general and administrative
expenses for the fourth quarter of fiscal 2010 were $43.0 million, down $1.1
million from the third quarter of fiscal 2010 amount of $44.1
million.
Cash flow
from operations and adjusted EBITDA (earnings before interest, income taxes,
depreciation, amortization, stock based compensation and contingent
consideration expense) were $6.8 million and $14.8 million, respectively, for
the fourth quarter of fiscal 2010.
“Our
improvement this quarter across all significant metrics we track, including
revenue, gross margin, adjusted EBITDA and cash flows, is a significant
achievement by our offices around the world given the tough macroeconomic
environment,” said Tony Cherbak, chief operating officer. “These
results demonstrate the leveragability of our business model.”
The
Company’s pre-tax income for the fourth quarter was $8.0 million, including a
non-cash charge of $1.2 million related to the adjustment of the estimated fair
value of contingent consideration and the employee portion of contingent
consideration. For the year ended May 29, 2010, the pre-tax loss was
$1.1 million and the tax provision was $10.6 million.
The
Company’s net income for the fourth quarter ended May 29, 2010, was $2.3
million, or $0.05 per diluted share. Included in the $0.05 net income
per diluted share were non-cash charges of $0.03 per diluted share related to an
increase in the estimated fair value of contingent consideration, the estimated
employee portion of contingent consideration and newly established tax valuation
allowances. This compares with a net loss for the fourth quarter
ended May 30, 2009, of $6.3 million, or $0.14 per diluted share.
The
Company also announced that its board of directors has approved the commencement
of a regular quarterly dividend of $0.04 per share. The first
dividend will be payable to shareholders of record on August 18, 2010 and
payable September 15, 2010. The Company’s board of directors will
assess and approve future dividends quarterly.
“The
board of directors is pleased to announce the inception of a regular $0.04 per
share quarterly dividend,” said Don Murray, chief executive officer of
Resources. “Given our track record of positive cash generation even
in a difficult economic environment, we believe a regular dividend provides a
consistent way to return capital to shareholders, while still maintaining an
adequate capital base to invest, as opportunities present themselves, in
opportunities for growth.”
Total
revenue for the year ended May 29, 2010 was $499.0 million, down 27.2% from
$685.6 million for fiscal 2009. Revenues in the U.S. in fiscal 2010
were down 23.5% from the prior year while international revenues in fiscal 2010
decreased 36.4% from the prior year (37.6% on a constant dollar
basis).
The
Company’s net loss for the year ended May 29, 2010, was $11.7 million, or $0.26
per diluted share. This compares with net income for the year ended
May 30, 2009, of $17.8 million, or $0.39 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, annually serving 1,800
clients around the world from more than 80 practice offices.
Headquartered
in Irvine, California, Resources Global has served 83 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, July 20, 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 beliefs regarding the payment of a regular dividend and
its ability to maintain an adequate capital base to invest in opportunities for
growth. 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.
STATEMENT
OF OPERATIONS
(in
thousands, except per share amounts)
|
Quarter Ended
|
Year Ended
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|||||||||||||||
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May 29, 2010
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May 30, 2009
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May 29, 2010
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May 30, 2009
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|||||||||||||
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(unaudited)
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(unaudited)
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|||||||||||||||
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Revenue
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$ | 133,905 | $ | 132,049 | $ | 498,998 | $ | 685,576 | ||||||||
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Direct
costs of services
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78,523 | 81,595 | 303,768 | 422,171 | ||||||||||||
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Gross
profit
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55,382 | 50,454 | 195,230 | 263,405 | ||||||||||||
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Selling,
general and administrative expenses (1)
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43,004 | 50,984 | 182,985 | 212,680 | ||||||||||||
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Employee
portion of contingent consideration expense (2)
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500 | - | 500 | - | ||||||||||||
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Contingent
consideration expense (2)
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704 | - | 1,492 | - | ||||||||||||
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Operating
income (loss) before amortization and depreciation (1),
(2)
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11,174 | (530 | ) | 10,253 | 50,725 | |||||||||||
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Amortization
of intangible assets
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1,305 | 455 | 3,496 | 1,383 | ||||||||||||
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Depreciation
expense
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2,021 | 2,110 | 8,544 | 8,898 | ||||||||||||
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Operating
income (loss) (1), (2)
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7,848 | (3,095 | ) | (1,787 | ) | 40,444 | ||||||||||
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Interest
income
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(132 | ) | (239 | ) | (656 | ) | (1,593 | ) | ||||||||
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Income
(loss) before provision for income taxes (1), (2)
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7,980 | (2,856 | ) | (1,131 | ) | 42,037 | ||||||||||
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Provision
for income taxes (3)
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5,666 | 3,428 | 10,618 | 24,273 | ||||||||||||
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Net
income (loss) (1), (2), (3)
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$ | 2,314 | $ | (6,284 | ) | $ | (11,749 | ) | $ | 17,764 | ||||||
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Basic
net income (loss) per share
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$ | 0.05 | $ | (0.14 | ) | $ | (0.26 | ) | $ | 0.39 | ||||||
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Diluted
net income (loss) per share
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$ | 0.05 | $ | (0.14 | ) | $ | (0.26 | ) | $ | 0.39 | ||||||
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Basic
shares
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46,340 | 45,066 | 45,894 | 45,018 | ||||||||||||
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Diluted
shares
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46,906 | 45,066 | 45,894 | 45,726 | ||||||||||||
RESOURCES
CONNECTION, INC.
STATEMENT
OF OPERATIONS
(in
thousands, except per share amounts)
EXPLANATORY
NOTES
|
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1.
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Selling,
general and administrative expenses include $2,882 and $3,979 for the
three months ended May 29, 2010 and May 30, 2009, respectively, and
$15,493 and $17,790 for the years ended May 29, 2010 and May 30, 2009,
respectively, related to non-cash compensation expense for all employee
stock option grants and employee stock purchases. In addition,
the year ended May 29, 2010 includes $7,000 of expenses related to the
resignation of two senior executives, including the acceleration of
recognition of compensation expense for employee stock option grants of
$2,217. The year ended May 30, 2009 includes a restructuring
charge of $3.6 million related to severance payments and the consolidation
of seven offices during the
quarter.
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|
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2.
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Contingent
consideration expense for the three months and year ended May 29, 2010 is
approximately $704,000 and $1.5 million, respectively, recognizing the
change in the fair value of the contingent consideration liability
associated with the acquisition of the Sitrick Brincko Group. The Company
also recognized $500,000 for the three months ended May 29, 2010, as an
estimate of the amount of contingent consideration owed to employees
related to the Sitrick Brincko Group
acquisition.
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3.
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The
Company’s effective tax rate was 71.0% and (120.0%) for the three months
ended May 29, 2010 and May 30, 2009, respectively and (938.8%) and 57.7%
for the years ended May 29, 2010 and May 30, 2009,
respectively. For all fiscal periods presented, 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. For the three
months ended May 29, 2010, the Company established valuation allowances
against deferred tax assets in certain foreign locations of
$778,000. For the years ended May 29, 2010 and May 30, 2009,
the Company established valuation allowances against deferred tax assets
in certain foreign locations of $4.7 million and $3.5 million,
respectively. In addition, the Company is 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 (Loss) to Adjusted EBITDA
(in
thousands, except Adjusted EBITDA Margin)
|
Quarter
Ended
|
Year
Ended
|
|||||||||||||||
|
May 29, 2010
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May 30, 2009
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May 29, 2010
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May 30, 2009
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|||||||||||||
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(unaudited)
|
(unaudited)
|
|||||||||||||||
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Consolidated
EBITDA and Adjusted EBITDA
|
||||||||||||||||
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Net
income (loss)
|
$ | 2,314 | $ | (6,284 | ) | $ | (11,749 | ) | $ | 17,764 | ||||||
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Adjustments:
|
||||||||||||||||
|
Amortization
of intangible assets
|
1,305 | 455 | 3,496 | 1,383 | ||||||||||||
|
Depreciation
expense
|
2,021 | 2,110 | 8,544 | 8,898 | ||||||||||||
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Interest
income
|
(132 | ) | (239 | ) | (656 | ) | (1,593 | ) | ||||||||
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Provision
for income taxes
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5,666 | 3,428 | 10,618 | 24,273 | ||||||||||||
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EBITDA
|
11,174 | (530 | ) | 10,253 | 50,725 | |||||||||||
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Stock-based
compensation expense
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2,882 | 3,979 | 15,493 | 17,790 | ||||||||||||
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Contingent
consideration expense
|
704 | — | 1,492 | — | ||||||||||||
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Adjusted
EBITDA
|
$ | 14,760 | $ | 3,449 | $ | 27,238 | $ | 68,515 | ||||||||
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Revenue
|
$ | 133,905 | $ | 132,049 | $ | 498,998 | $ | 685,576 | ||||||||
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Adjusted
EBITDA Margin
|
11.0 | % | 2.6 | % | 5.5 | % | 10.0 | % | ||||||||
RESOURCES
CONNECTION, INC.
Reconciliation
of Net Income (Loss) 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 generally accepted
accounting principles (“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 operations; 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 Adjusted
EBITDA by Revenue. 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 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)
|
May 29, 2010
|
May 30, 2009
|
|||||||
|
(unaudited)
|
||||||||
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Cash,
cash equivalents and short-term investments
|
$ | 140,905 | $ | 163,741 | ||||
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Accounts
receivable, less allowances
|
$ | 73,936 | $ | 68,157 | ||||
|
Total
assets
|
$ | 473,200 | $ | 412,019 | ||||
|
Current
liabilities
|
$ | 57,749 | $ | 68,451 | ||||
|
Total
stockholders’ equity
|
$ | 353,241 | $ | 337,917 | ||||