Resources Connection, Inc. Reports Results for Second Quarter of Fiscal 2008
Announces Acquisition of Domenica B.V. Actuarial Consulting Services
* Record quarterly revenue of $206.6 million, up 13% over prior year
* International quarterly revenue up 27% over prior year
* Gross margin up 60 basis points sequentially to 38.5%
* Office opened in Frankfurt, Germany
* 2.8 million share stock repurchase
IRVINE, Calif., Dec. 20 /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 second quarter ended November 30, 2007.
Total revenue for the second quarter of fiscal 2008 improved 13% to $206.6
million from $182.8 million for the same quarter in fiscal 2007. Revenues in the
U.S. were up 9% quarter-over-quarter while international revenues increased 27%
(16% on a constant dollar basis).
Total revenue for the six months ended November 30, 2007 improved 15% to
$400.8 million from $347.9 million for the comparable period of fiscal 2007.
Revenues in the U.S. were up 11% for the first six months of fiscal 2008 and
international revenues were up 29% (19% on a constant dollar basis).
"In light of market conditions, we are pleased with our continued revenue
growth over the first six months of fiscal 2008," said Don Murray, chairman and
chief executive officer of Resources.
Net income determined in accordance with generally accepted accounting
principles ("GAAP") for the second quarter ended November 30, 2007, was $13.0
million, or $0.27 per diluted share, including non-cash stock-based compensation
expense of $4.3 million net of tax. This compares with GAAP net income for the
second quarter ended November 30, 2006, of $14.7 million, or $0.29 per diluted
share, including non-cash stock-based compensation expense of $3.9 million net
of tax.
Non-GAAP net income for the second quarter of fiscal 2008 (which excludes
stock-based compensation expense and the related income tax expense) was $17.3
million, or $0.35 per diluted share, compared to $18.5 million, or $0.36 per
diluted share, in the prior year quarter.
Net income determined in accordance with GAAP for the six months ended
November 30, 2007, was $24.6 million, or $0.49 per diluted share, including
non-cash stock-based compensation expense of $8.9 million net of tax. This
compares with GAAP net income for the six months ended November 30, 2006, of
$25.6 million, or $0.51 per diluted share, including non-cash stock-based
compensation expense of $8.1 million net of tax.
Non-GAAP net income for the first six months of fiscal 2008 (which excludes
stock-based compensation expense and the related income tax expense) was $33.5
million, or $0.66 per diluted share, compared to $33.7 million, or $0.66 per
diluted share, in the prior year's first six months.
During the three months ended November 30, 2007 the company purchased
2,840,433 shares of its common stock for approximately $65 million or $22.94 per
share.
On December 18, 2007, Resources acquired Domenica B.V., a leading
Netherlands-based provider of actuarial services to pension and life insurance
companies. Resources paid 13.5 million Euros in cash for 100% of the outstanding
shares of Domenica and agreed to make additional earn-out payments based upon
the achievement of certain financial metrics for Domenica's calendar years ended
December 31, 2007 and 2008. The acquisition of Domenica is expected to be
accretive to Resources throughout the balance of fiscal 2008. Domenica reported
revenues of 13.5 million Euros for the year ended December 31, 2006.
"Actuarial services are in high demand and Domenica gives us an entree into
that service line," said Tony Cherbak, chief operating officer of Resources. "We
believe this new service offering will allow for increased penetration of our
collective client base."
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 4,200 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, December 20, 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 expectation
that the Domenica acquisition will be accretive throughout the balance of fiscal
2008, as well as the Company's statements regarding other anticipated benefits
of the Domenica acquisition 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, and Form 10-Q for the quarter ended November
30, 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 Six Months
Ended November 30, Ended November 30,
2007 2006 2007 2006
(unaudited) (unaudited)
Revenue $206,638 $182,804 $400,758 $347,911
Direct costs of services 127,025 110,152 247,656 210,071
Gross profit 79,613 72,652 153,102 137,840
Selling, general and
administrative expenses (1) 55,514 46,658 108,543 91,456
Operating income before
amortization and
depreciation (1) 24,099 25,994 44,559 46,384
Amortization of intangible
assets 84 344 338 762
Depreciation expense 2,007 1,444 3,882 2,800
Operating income (1) 22,008 24,206 40,339 42,822
Interest income (1,629) (2,013) (4,171) (3,922)
Income before provision
for income taxes (1) 23,637 26,219 44,510 46,744
Provision for income
taxes (2) 10,601 11,562 19,892 21,136
Net income (1) (2) $13,036 $14,657 $24,618 $25,608
Diluted net income per
share $0.27 $0.29 $0.49 $0.51
Diluted shares 48,754 50,470 50,226 50,123
(1) Includes $5,262 and $4,662 of expense for the three months ended
November 30, 2007 and 2006, respectively, and $11,262 and $9,363 of
expense for the six months ended November 30, 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 requirement
to recognize compensation expense related to employee stock option
grants and employee stock purchases, was 40.0% for both the three and
six months ended November 30, 2007 and 2006, 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 44.8% and 44.1% in the three
months ended November 30, 2007 and 2006, respectively and 44.7% and
45.2% in the six months ended November 30, 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 Six Months
Ended November 30, Ended November 30,
2007 2006 2007 2006
(unaudited) (unaudited)
Revenue $206,638 $182,804 $400,758 $347,911
Direct costs of services 127,025 110,152 247,656 210,071
Gross profit 79,613 72,652 153,102 137,840
Selling, general and
administrative expenses (1) 50,252 41,996 97,281 82,093
Operating income before
amortization and
depreciation (1) 29,361 30,656 55,821 55,747
Amortization of intangible
assets 84 344 338 762
Depreciation expense 2,007 1,444 3,882 2,800
Operating income (1) 27,270 28,868 51,601 52,185
Interest income (1,629) (2,013) (4,171) (3,922)
Income before provision
for income taxes (1) 28,899 30,881 55,772 56,107
Provision for income
taxes (2) 11,559 12,352 22,308 22,442
Net income (1) (2) $17,340 $18,529 $33,464 $33,665
Diluted net income per
share $0.35 $0.36 $0.66 $0.66
Diluted shares (3) 48,983 51,107 50,738 50,956
(1) Excludes $5,262 and $4,662 of expense for the three months ended
November 30, 2007 and 2006, respectively, and $11,262 and $9,363 of
expense for the six months ended November 30, 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 $958 and
$790 for the three months ended November 30, 2007 and 2006,
respectively and $2,416 and $1,306 for the six months ended November
30, 2007 and 2006, respectively. Please refer to footnote (2) on the
GAAP Income Statement for further detail.
(3) Includes 229 and 637 shares for the three months ended November 30,
2007 and 2006, respectively and 512 and 833 for the six months ended
November 30, 2007 and 2006, 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 for the three and six months ended November 30, 2007 and 2006.
(in thousands, except per share amounts)
Three months Three months Six months Six months
ended ended ended ended
November 30, November 30, November 30, November 30,
2007 2006 2007 2006
GAAP net income $13,036 $14,657 $24,618 $25,608
Stock-based
compensation
included in SG&A 5,262 4,662 11,262 9,363
Effect of stock-based
compensation on
provision for
income taxes (958) (790) (2,416) (1,306)
Net effect of
stock-based
compensation 4,304 3,872 8,846 8,057
Non-GAAP net income $17,340 $18,529 $33,464 $33,665
Following is a reconciliation of shares used in the calculation of GAAP to
non-GAAP diluted net income per share:
Three months Three months Six months Six months
ended ended ended ended
November 30, November 30, November 30, November 30,
2007 2006 2007 2006
Diluted number of
shares used - GAAP 48,754 50,470 50,226 50,123
Impact of SFAS 123R 229 637 512 833
Diluted number of
shares
used - non-GAAP 48,983 51,107 50,738 50,956
RESOURCES CONNECTION, INC.
Following is a reconciliation of GAAP diluted net income per share to
non-GAAP diluted net income per share:
Three months Three months Six months Six months
ended ended ended ended
November 30, November 30, November 30, November 30,
2007 2006 2007 2006
GAAP diluted net
income per share $0.27 $0.29 $0.49 $0.51
Net effect of
stock-based
compensation on
diluted net
income per share $0.08 $0.07 $0.17 $0.15
Non-GAAP diluted
net income per
share $0.35 $0.36 $0.66 $0.66
RESOURCES CONNECTION, INC.
SELECTED BALANCE SHEET INFORMATION
(in thousands)
November 30, 2007 May 31, 2007
(unaudited)
Cash, cash equivalents, short-term
investments and long-term marketable
securities $120,668 $223,095
Accounts receivable, less allowances $116,621 $105,146
Total assets $388,422 $464,461
Current liabilities $79,459 $87,683
Total stockholders' equity $293,242 $363,299