TO BUSINESS EDITOR:
Resources Connection, Inc. Reports Results for First Quarter of Fiscal 2008
-- Quarterly revenue of $194.1 million, up 18% over prior year fiscal first
quarter
-- GAAP net income of $11.6 million in the fiscal first quarter, 6% ahead
of prior year quarter
IRVINE, Calif., Sept. 25 /PRNewswire-FirstCall/ -- 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 first quarter ended August 31, 2007.
Total revenue for the first quarter of fiscal 2008 improved 18% to $194.1
million from $165.1 million for the same quarter in fiscal 2007.
During the first quarter of fiscal 2008, gross margin was adversely impacted
primarily as a result of increased vacation benefits for a majority of our
associates and a decrease in conversion fees which carry a 100% gross margin.
Net income determined in accordance with generally accepted accounting
principles (GAAP) for the first quarter ended August 31, 2007, was $11.6
million, or $0.23 per diluted share, including non-cash stock-based compensation
expense of $6.0 million on a pre-tax basis, and $1.5 million of tax benefits
related to stock-based compensation. This compares with GAAP net income for the
first quarter ended August 31, 2006, of $11.0 million, or $0.22 per diluted
share, including non-cash stock-based compensation expense of $4.7 million and
$0.5 million of tax benefits related to stock-based compensation.
Non-GAAP net income for the first quarter of fiscal 2008 (which excludes
stock-based compensation expense and the related income tax expense) was $16.1
million, or $0.31 per diluted share, compared to $15.1 million, or $0.30 per
diluted share, in the prior year quarter.
"We were pleased with the 31% increase in international revenues and 18%
revenue growth overall," said Donald B. Murray, Chairman and CEO of Resources.
"While our gross margin was adversely impacted in part due to increased
associate vacation, we felt the additional benefit was important in continuing
to attract and retain the best talent over the long term."
Business Highlights
-- International revenue increased 31% in the first quarter from the
year-earlier period.
-- U.S. revenue rose 14% in the first quarter from the year-earlier period.
-- During the fiscal first quarter (on August 21) Resources paid a special
dividend to shareholders totaling $60.7 million.
-- As of August 31, 2007, the number of associates on assignment rose to
3,206, up 11% from the total at August 31, 2006.
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. Resources was selected #61 on Fortune magazine's list of
100 Fastest-Growing Companies for 2006. Also last year, Resources was chosen #21
on BusinessWeek's list of 100 Hot Growth Companies and the firm has been named
to the Forbes 200 Best Small Companies list for the past five years.
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, September 25, 2007. 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 is important to increase associate benefits to continue to
attract and retain the best talent over the long term. 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 Resources
Connection's Form 10-K for the year ended May 31, 2007 (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.
RESOURCES CONNECTION, INC.
INCOME STATEMENT
(in thousands, except per share amounts)
Quarter Ended August 31,
2007 2006
(unaudited)
Revenue $194,120 $165,107
Direct costs of services 120,631 99,919
Gross profit 73,489 65,188
Selling, general and administrative
expenses (1) 53,029 44,798
Operating income before amortization and
depreciation (1) 20,460 20,390
Amortization of intangible assets 254 418
Depreciation expense 1,875 1,356
Operating income (1) 18,331 18,616
Interest income (2,542) (1,909)
Income before provision for income taxes (1) 20,873 20,525
Provision for income taxes (2) 9,291 9,574
Net income (1) (2) $11,582 $10,951
Diluted net income per share $0.23 $0.22
Diluted shares 50,411 49,775
(1) Includes $6,000 and $4,701 of expense for the three months ended August
31, 2007 and 2006, 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 adoption of
the requirement to recognize compensation expense related to employee
stock option grants and employee stock purchases, was 40.0% for both the
three months ended August 31, 2007 and 2006, respectively. The Company's
effective tax rate, including the impact of the adoption of the
requirement to recognize compensation expense related to employee stock
option grants and employee stock purchases, was 44.5% and 46.6% in the
three months ended August 31, 2007 and 2006, 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.
RESOURCES CONNECTION, INC.
NON-GAAP INCOME STATEMENT
(in thousands, except per share amounts)
Quarter Ended August 31,
2007 2006
(unaudited)
Revenue $194,120 $165,107
Direct costs of services 120,631 99,919
Gross profit 73,489 65,188
Selling, general and administrative
expenses (1) 47,029 40,097
Operating income before amortization and
depreciation (1) 26,460 25,091
Amortization of intangible assets 254 418
Depreciation expense 1,875 1,356
Operating income (1) 24,331 23,317
Interest income (2,542) (1,909)
Income before provision for income taxes (1) 26,873 25,226
Provision for income taxes (2) 10,749 10,090
Net income (1) (2) $16,124 $15,136
Diluted net income per share $0.31 $0.30
Diluted shares (3) 51,204 50,936
(1) Excludes $6,000 and $4,701 of expense for the three months ended August
31, 2007 and 2006, 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 $1,458 and
$516 for the three months ended August 31, 2007 and 2006, respectively.
Please refer to footnote (2) on the GAAP Income Statement for further
detail.
(3) Includes 793 and 1,161 shares presumed to be repurchased in accordance
with the requirements of SFAS 123(R) and SFAS 128 for GAAP computation
of diluted number of shares for the three months ended August 31, 2007
and 2006, respectively.
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
for the three months ended August 31, 2007 and 2006.
(in thousands, except per share amounts)
Three months Three months
ended ended
August 31, August 31,
2007 2006
GAAP net income $11,582 $10,951
Stock-based compensation included in SG&A 6,000 4,701
Effect of stock-based compensation on provision
for income taxes (1,458) (516)
Net effect of stock-based compensation 4,542 4,185
Non-GAAP net income $16,124 $15,136
Following is a reconciliation of shares used in the calculation of GAAP to
non-GAAP diluted net income per share:
Three months Three months
ended ended
August 31, August 31,
2007 2006
Diluted number of shares used - GAAP 50,411 49,775
Impact of SFAS 123R 793 1,161
Diluted number of shares used - non-GAAP 51,204 50,936
Following is a reconciliation of GAAP diluted net income per share to non-
GAAP diluted net income per share:
Three months Three months
ended ended
August 31, August 31,
2007 2006
GAAP diluted net income per share $0.23 $0.22
Net effect of stock-based compensation on
diluted net income per share $0.08 $0.08
Non-GAAP diluted net income per share $0.31 $0.30
RESOURCES CONNECTION, INC.
SELECTED BALANCE SHEET INFORMATION
(in thousands)
August 31, 2007 May 31, 2007
(unaudited)
Cash, cash equivalents, short-term investments
and long-term marketable securities $158,145 $223,095
Accounts receivable, less allowances $109,876 $105,146
Total assets $416,515 $464,461
Current liabilities $66,842 $87,683
Total stockholders' equity $334,834 $363,299