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
26, 2008
|
|
|
|
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)
|
File
Number)
|
Identification
No.)
|
|
|
|
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17101
Armstrong Avenue, Irvine, CA
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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 (714)
430-6400
|
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
March
26, 2008, Resources Connection, Inc. (the “Company”)
issued
a press release announcing its results of operations for the quarter and nine
months ended February 29, 2008 (the
third quarter of the Company’s fiscal 2008). A copy of the
press
release
issued
by the Company
is
attached as Exhibit 99.1 to this report and is incorporated by reference into
this item.
Within
the attached
press
release, the Company makes reference to certain non-generally accepted
accounting principles (“non-GAAP”) financial measures, including “non-GAAP
operating income”, “non-GAAP net income” and “non-GAAP net income per diluted
share” which have directly comparable generally accepted accounting principles
(“GAAP”) financial measures. The Company believes that these
non-GAAP
measures
represent important internal measures of performance. 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
and the Non-GAAP Income Statement 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.
The
Company
believes
that the presentation of non-GAAP operating income, non-GAAP net income,
non-GAAP diluted net income per share and non-GAAP shares used in net income
per
share calculation, when shown in conjunction with the corresponding GAAP
measures, provides useful information to investors and management regarding
financial and business trends relating to its financial condition and results
of
operations.
For
its
internal budgeting process, the Company’s
management uses financial statements that do not include stock-based
compensation expense relating
to employee stock option grants
and employee stock purchases, and
the
income tax effects thereof.
The
Company’s
management also uses the foregoing non-GAAP measures, in addition to the
corresponding GAAP measures, in reviewing the financial results of the
Company.
As
described above, the Company
excludes
the following items from one or more of its non-GAAP measures:
Stock-based
compensation.
These
expenses (which
comprise a portion of the selling, general, and administrative expenses line
item in the Income Statement) consist
of expenses for employee stock options and employee stock purchases under
SFAS 123(R).
The Company
excludes
stock-based compensation expenses from its non-GAAP measures primarily because
they are non-cash expenses that the Company
does not
believe are reflective of ongoing operating results. Further, as the
Company
applies
SFAS 123(R), it believes that it is useful to investors to understand the impact
of the application of SFAS 123(R) to its results of operations.
The
Company will incur stock-based compensation expense related to employee stock
options and employee stock purchases in future periods.
Provision
for income taxes.
Excluding the income tax effect of the non-GAAP pre-tax adjustments from
provision for income taxes assists investors in understanding the tax provision
associated with those adjustments. Further, because the Company
has
historically issued incentive stock options, the impact of implementing SFAS
123(R) can result in a tax provision considerably different than the tax
provision calculated before stock based compensation, and the Company
believes
it is useful for investors to understand this impact.
Selling,
general and administrative expenses before stock-based compensation, operating
income before amortization and depreciation and stock-based
compensation, operating income before stock-based compensation, income before
provision for income taxes and stock-based compensation, provision for incomes
taxes before stock-based compensation and net income before stock-based
compensation and diluted earnings per share (before
stock-based compensation) are
presented as supplemental disclosures in order to provide comparable information
versus prior year and prior quarter measures of operating performance. These
measures are also the primary measures of performance used by management to
evaluate the Company’s financial performance and the compensation committee of
the board of directors to assess portions of management’s
performance.
The
information in this current report on Form 8-K, including 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
|
Exhibit
No.
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Description
|
|
Exhibit
99.1
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Press
Release issued March 26, 2008
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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 26, 2008
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By:
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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.
|
Description
|
|
Exhibit
99.1
|
Press
Release issued March 26, 2008
|
Immediate
Release
Contacts:
Jeff
Bellows, Resources Global Professionals
(US+)
1-617-897-0350 or jeff.bellows@resources-us.com
Sarah
Lazarus, CL-Media
(US+)
1-978-369-4478 or sarah@cl-media.com
Resources
Connection, Inc. Reports Results for Third Quarter of Fiscal 2008
IRVINE,
Calif., March 26, 2008
-
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, information management, human
capital, supply chain management and legal services, today announced financial
results for its fiscal third quarter ended February 29, 2008.
Total
revenue for the third quarter of fiscal 2008 improved 8.2% to $202.8 million
from $187.5 million for the same quarter in fiscal 2007. Revenues in the U.S.
were up 3.5% quarter-over-quarter while international revenues increased 22.9%
(13.5% on a constant dollar basis). Revenue for the third quarter of fiscal
2008
includes revenue of $4.2 million from Domenica B.V., a leading Netherlands-based
provider of actuarial services to pension and life insurance companies, acquired
by Resources on December 18, 2007.
Total
revenue for the nine months ended February 29, 2008 improved 12.7% to $603.6
million from $535.4 million for the comparable period of fiscal 2007. Revenues
in the U.S. were up 8.5% for the first nine months of fiscal 2008 and
international revenues were up 26.6% (17.3% on a constant dollar
basis).
Gross
margin for the third quarter of fiscal 2008 was 37.3% of revenue compared to
38.2% for the same quarter in fiscal 2007. Selling, general and administrative
expenses, which include stock compensation expense, were 28.4% of revenue for
the third quarter of fiscal 2008 versus 25.9% for the same quarter in fiscal
2007. The increase in selling, general and administrative expenses primarily
results from our investments in new offices and additional client facing
personnel for our higher growth offices as well as an increase of over $1
million in the calculated cost of stock options (a non-cash
expense).
“In
spite
of the recent extraordinary events affecting the world’s financial markets, we
continue to focus on executing our business strategy, including serving our
clients and growing our revenues,” said Don Murray, chairman and chief executive
officer of Resources.
Net
income determined in accordance with generally accepted accounting principles
(“GAAP”) for the third quarter ended February 29, 2008, was $8.7 million, or
$0.19 per diluted share, including non-cash stock-based compensation expense
of
$4.8 million net of tax. This compares with GAAP net income for the third
quarter ended February 28, 2007, of $13.1 million, or $0.26 per diluted share,
including non-cash stock-based compensation expense of $4.0 million net of
tax.
Non-GAAP
net income for the third quarter of fiscal 2008 (which excludes stock-based
compensation expense and the related income tax expense) was $13.5 million,
or
$0.29 per diluted share, compared to $17.1 million, or $0.33 per diluted share,
in the prior year quarter.
Net
income determined in accordance with GAAP for the nine months ended February
29,
2008, was $33.3 million, or $0.67 per diluted share, including non-cash
stock-based compensation expense of $13.7 million net of tax. This compares
with
GAAP net income for the nine months ended February 28, 2007, of $38.7 million,
or $0.77 per diluted share, including non-cash stock-based compensation expense
of $12.1 million net of tax.
Non-GAAP
net income for the first nine months of fiscal 2008 (which excludes stock-based
compensation expense and the related income tax expense) was $47.0 million,
or
$0.93 per diluted share, compared to $50.8 million, or $0.99 per diluted share,
in the prior year’s first nine months.
During
the three months ended February 29, 2008, the company purchased 743,868 shares
of its common stock for approximately $13.7 million or $18.39 per 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, 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 4,100 professionals, from more than 80
practice offices, annually serving over 2,000 clients around the world.
Headquartered
in Irvine, California, Resources Global has served 81 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 26, 2008. 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. These forward-looking statements include the Company’s
statement that it will continue to focus on executing its business strategy
and
serving its clients and growing its revenue. 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.
The
Non-GAAP Income Statement in this release excludes stock-based compensation
expense from the following non-GAAP line items: non-GAAP selling, general and
administrative expenses, non-GAAP operating income before amortization and
depreciation, non-GAAP operating income, non-GAAP income before provision for
income taxes, non-GAAP provision for income taxes, non-GAAP net income, non-GAAP
net income per diluted share, and non-GAAP diluted shares used in net income
per
share calculation.
These
non-GAAP measures are not in accordance with, or an alternative for, generally
accepted accounting principles and may be different from non-GAAP measures
used
by other companies. In addition, these non-GAAP measures and the Non-GAAP Income
Statement are not based on any comprehensive set of accounting rules or
principles. Resources believes that non-GAAP measures have limitations in that
they do not reflect all of the amounts associated with Resources’ results of
operations as determined in accordance with GAAP and that these measures should
only be used to evaluate Resources’ results of operations in conjunction with
the corresponding GAAP measures.
Resources
believes that the presentation of non-GAAP selling, general and administrative
expenses, non-GAAP operating income before amortization and depreciation,
non-GAAP operating income, non-GAAP income before provision for income taxes,
non-GAAP provision for income taxes, non-GAAP net income, non-GAAP net income
per diluted share and non-GAAP diluted shares used in net income per share
calculation, when presented in conjunction with the corresponding GAAP measures,
provides useful information to investors and management regarding financial
and
business trends relating to its financial condition and results of
operations.
For
its
internal budgeting process, Resources’ management uses financial statements that
do not include stock-based compensation expense related to employee stock
options and employee stock purchases, and the income tax effects thereof.
Resources’ management also uses the foregoing non-GAAP measures, in addition to
the corresponding GAAP measures, in reviewing the financial results of
Resources.
For
additional information on the items excluded by Resources Connection, Inc.
from
one or more of its non-GAAP financial measures, and for additional information
regarding these non-GAAP measures, we refer you to the Form 8-K regarding this
release furnished today to the Securities and Exchange Commission.
###
|
Quarter
Ended
|
Nine
Months Ended
|
|
February
29, 2008
|
February
28, 2007
|
February
29, 2008
|
February
28, 2007
|
|
(unaudited)
|
(unaudited)
|
|
Revenue
|
$
|
202,803
|
$
|
187,464
|
$
|
603,561
|
$
|
535,375
|
|||||
|
Direct
costs of services
|
127,252
|
115,938
|
374,908
|
326,009
|
|||||||||
|
Gross
profit
|
75,551
|
71,526
|
228,653
|
209,366
|
|||||||||
|
Selling,
general and administrative
expenses
(1)
|
57,518
|
48,577
|
166,061
|
140,033
|
|||||||||
|
Operating
income before amortization
and
depreciation (1)
|
18,033
|
22,949
|
62,592
|
69,333
|
|||||||||
|
Amortization
of
intangible
assets
|
211
|
318
|
549
|
1,080
|
|||||||||
|
Depreciation
expense
|
2,200
|
1,563
|
6,082
|
4,363
|
|||||||||
|
Operating
income (1)
|
15,622
|
21,068
|
55,961
|
63,890
|
|||||||||
|
Interest
income
|
(952
|
)
|
(2,401
|
)
|
(5,123
|
)
|
(6,323
|
)
|
|||||
|
Income
before provision for income taxes (1)
|
16,574
|
23,469
|
61,084
|
70,213
|
|||||||||
|
Provision
for income taxes (2)
|
7,909
|
10,370
|
27,801
|
31,506
|
|||||||||
|
Net
income (1) (2)
|
$
|
8,665
|
$
|
13,099
|
$
|
33,283
|
$
|
38,707
|
|||||
|
Diluted
net income per share
|
$
|
0.19
|
$
|
0.26
|
$
|
0.67
|
$
|
0.77
|
|||||
|
Diluted
shares
|
46,547
|
51,087
|
49,952
|
50,565
|
RESOURCES
CONNECTION, INC.
INCOME
STATEMENT
(in
thousands, except per share amounts)
|
(1)
|
Includes $6,052 and $5,018 of expense for the three months ended February 29, 2008 and February 27, 2007, respectively, and $17,314 and $14,381 of expense for the nine months ended February 29, 2008 and February 28, 2007, respectively, related to the mandatory requirement to recognize compensation expense for employee stock option grants and employee stock purchases. |
|
(2)
|
The
Company’s effective tax rate, absent the impact of the requirement to
recognize compensation expense related to employee stock option grants
and
employee stock purchases, was 40.4% and 40.0% for the three months
ended
February 29, 2008 and February 28, 2007, respectively and 40.1% and
40.0%
for the nine months ended February 29, 2008 and February 28, 2007,
respectively. The Company’s effective tax rate, including the impact of
the requirement to recognize compensation expense related to employee
stock option grants and employee stock purchases, was 47.7% and 44.2%
for
the three months ended February 29, 2008 and February 28, 2007,
respectively and 45.5% and 44.9% for the nine months ended February
29,
2008 and February 28, 2007, respectively. The Company cannot recognize
a
potential tax benefit for certain stock option grants until and unless
the
holder exercises his or her option and sells the shares. In addition,
the
Company can only recognize a potential tax benefit for employees’
acquisition and subsequent sale of shares purchased through the Company’s
Employee Stock Purchase Plan if the sale occurs within a certain
defined
period. Further, under SFAS 123(R), certain potential tax benefits
associated with incentive stock options fully vested at the time
of
adoption of SFAS 123(R) will be recognized as additional paid in
capital
when and if those options are
exercised.
|
|
Quarter
Ended
|
Nine
Months Ended
|
|
February
29, 2008
|
February
28, 2007
|
February
29, 2008
|
February
28, 2007
|
|
(unaudited)
|
(unaudited)
|
|
Revenue
|
$
|
202,803
|
$
|
187,464
|
$
|
603,561
|
$
|
535,375
|
|||||
|
Direct
costs of services
|
127,252
|
115,938
|
374,908
|
326,009
|
|||||||||
|
Gross
profit
|
75,551
|
71,526
|
228,653
|
209,366
|
|||||||||
|
Selling,
general and
administrative
expenses (1)
|
51,466
|
43,559
|
148,747
|
125,652
|
|||||||||
|
Operating
income before
amortization
and depreciation (1)
|
24,085
|
27,967
|
79,906
|
83,714
|
|||||||||
|
Amortization
of
intangible
assets
|
211
|
318
|
549
|
1,080
|
|||||||||
|
Depreciation
expense
|
2,200
|
1,563
|
6,082
|
4,363
|
|||||||||
|
Operating
income (1)
|
21,674
|
26,086
|
73,275
|
78,271
|
|||||||||
|
Interest
income
|
(952
|
)
|
(2,401
|
)
|
(5,123
|
)
|
(6,323
|
)
|
|||||
|
Income
before provision for income
taxes
(1)
|
22,626
|
28,487
|
78,398
|
84,594
|
|||||||||
|
Provision
for income taxes (2)
|
9,138
|
11,395
|
31,446
|
33,837
|
|||||||||
|
Net
income (1) (2)
|
$
|
13,488
|
$
|
17,092
|
$
|
46,952
|
$
|
50,757
|
|||||
|
Diluted
net income per share
|
$
|
0.29
|
$
|
0.33
|
$
|
0.93
|
$
|
0.99
|
|||||
|
Diluted
shares (3)
|
46,663
|
51,996
|
50,331
|
51,306
|
RESOURCES
CONNECTION, INC.
NON-GAAP
INCOME STATEMENT
(in
thousands, except per share amounts)
(1)
Excludes $6,052 and $5,018 of expense for the three months ended February 29,
2008 and February 28, 2007,
respectively, and $17,314 and $14,381 of expense for the nine months ended
February 29, 2008 and February 28, 2007, respectively, related to the mandatory
requirement to recognize compensation expense related to employee stock option
grants and employee stock purchases.
(2)
Excludes tax benefits related to stock-based compensation of $1,229 and $1,025
for the three months ended February 29, 2008 and February 28, 2007, respectively
and $3,645 and $2,331 for the nine months ended February 29, 2008 and February
28, 2007, respectively. Please refer to footnote (2) on the GAAP Income
Statement for further detail.
(3)
Includes 116 and 909 shares for the three months ended February 29, 2008 and
February 28, 2007, respectively and 379 and 741 for the nine months ended
February 29, 2008 and February 28, 2007, respectively, presumed to be
repurchased in accordance with the requirements of SFAS 123(R) and SFAS 128
for
GAAP computation of diluted number of shares.
See
table
below for reconciliation of net income on a GAAP basis to non-GAAP net income,
and diluted net income per share on a GAAP basis to non-GAAP diluted net income
per share.
RESOURCES
CONNECTION,
INC.
|
Following
is a reconciliation of net income under GAAP to non-GAAP net income:
|
|||||||||||||
|
|
|
||||||||||||
|
|
|
(in
thousands, except per share amounts)
|
|
||||||||||
|
|
|
|
|
||||||||||
|
|
|
Three
months ended February 29, 2008
|
|
Three
months ended February 28, 2007
|
|
Nine
months ended February 29, 2008
|
|
Nine
months ended February 28, 2007
|
|||||
|
GAAP
net income
|
$
|
8,665
|
$
|
13,099
|
$
|
33,283
|
$
|
38,707
|
|||||
|
Stock-based
compensation included in SG&A
|
6,052
|
5,018
|
17,314
|
14,381
|
|||||||||
|
Effect
of stock-based compensation on provision for income taxes
|
(1,229
|
)
|
(1,025
|
)
|
(3,645
|
)
|
(2,331
|
)
|
|||||
|
Net
effect of stock-based compensation
|
4,823
|
3,993
|
13,669
|
12,050
|
|||||||||
|
Non-GAAP
net income
|
$
|
13,488
|
$
|
17,092
|
$
|
46,952
|
$
|
50,757
|
|||||
|
Following
is a reconciliation of shares used in the calculation of
GAAP
to non-GAAP diluted net income per share:
|
|||||||||||||
|
|
Three
months ended February 29, 2008
|
|
|
Three
months ended February 28, 2007
|
|
|
Nine
months ended February 29, 2008
|
|
|
Nine
months ended February 29, 2007
|
|||
|
Diluted
number of shares used - GAAP
|
46,547
|
51,087
|
49,952
|
50,
565
|
|||||||||
|
Impact
of SFAS 123R
|
116
|
909
|
379
|
741
|
|||||||||
|
Diluted
number of shares used -non-GAAP
|
46,663
|
51,996
|
50,331
|
51,306
|
|||||||||
RESOURCES
CONNECTION, INC.
|
Following
is a reconciliation of GAAP diluted net income
per
share to non-GAAP diluted net income per share:
|
|||||||||||||
|
Three
months ended February 29, 2008
|
|
Three
months ended February 28, 2007
|
|
Nine
months ended February 29, 2008
|
|
Nine
months ended February 28, 2007
|
|||||||
|
GAAP
diluted net income per share
|
$
|
0.19
|
$
|
0.26
|
$
|
0.67
|
$
|
0.77
|
|||||
|
Net
effect of stock-based compensation
on
diluted net income per share
|
$
|
0.10
|
$
|
0.07
|
$
|
0.26
|
$
|
0.22
|
|||||
|
Non-GAAP
diluted net income per share
|
$
|
0.29
|
$
|
0.33
|
$
|
0.93
|
$
|
0.99
|
|||||
RESOURCES
CONNECTION, INC.
NON-GAAP
INCOME STATEMENT
(in
thousands, except per share
amounts)
|
February
29, 2008
|
|
May
31, 2007
|
|
||||
|
|
|
(unaudited)
|
|||||
|
Cash,
cash equivalents, short-term investments
and
long-term marketable securities
|
$
|
99,626
|
$
|
223,095
|
|||
|
Accounts
receivable, less allowances
|
$
|
120,140
|
$
|
105,146
|
|||
|
Total
assets
|
$
|
389,898
|
$
|
464,461
|
|||
|
Current
liabilities
|
$
|
78,961
|
$
|
87,683
|
|||
|
Total
stockholders’ equity
|
$
|
300,056
|
$
|
363,299
|
|||