Exhibit 99.1
FOR IMMEDIATE RELEASE
- ---------------------
RESOURCES CONNECTION, INC. REPORTS SECOND QUARTER RESULTS
Second Quarter Revenue Reaches an All-Time High
Costa Mesa, Calif., December 21, 2006 -- Resources Connection, Inc. (NASDAQ:
RECN), an international professional services firm that provides, through its
operating subsidiary, Resources Global Professionals, experienced accounting and
finance, risk management and internal audit, information management, human
capital, supply chain management and legal professionals to clients on a project
basis, today announced financial results for its second quarter ended November
30, 2006.
Total revenue for the second quarter of fiscal 2007 improved 15.6% to $182.8
million from $158.1 million for the same quarter in fiscal 2006.
For the six months ended November 30, 2006, revenue grew 13.1% to $347.9 million
compared to $307.7 million for the comparable six months of the prior year.
The Company adopted SFAS 123(R), the accounting pronouncement requiring the
recognition of compensation expense relating to employee stock option grants and
employee stock purchases, effective with the Company's first quarter of fiscal
2007. Because SFAS 123(R) has been adopted prospectively, net income for the
three months and six months ended November 30, 2006 is not comparable to net
income for the three months and six months ended November 30, 2005.
Net income on a generally accepted accounting principles (GAAP) basis for the
quarter ended November 30, 2006, was $14.7 million, or $0.29 per diluted share,
which includes non-cash stock-based compensation expense of $4.7 million on a
pre-tax basis and $790,000 of tax benefits related to stock-based compensation.
Non-GAAP net income for the second quarter of fiscal 2007, excluding stock-based
compensation expense and the related income tax effect, was $18.5 million, or
$0.36 per diluted share. Net income (on a GAAP basis) for the quarter ended
November 30, 2005, was $16.0 million, or $0.31 per diluted share.
For the six months ended November 30, 2006, net income on a GAAP basis was $25.6
million, or $0.51 per diluted share, which includes non-cash stock-based
compensation expense of $9.4 million on a pre-tax basis and $1.3 million of tax
benefits related to stock-based compensation. Non-GAAP net income for the first
six months of fiscal 2007, excluding stock-based compensation expense and the
related income tax effect, was $33.7 million, or $0.66 per diluted share. Net
income (on a GAAP basis) for the six months ended November 30, 2005, was $31.1
million, or $0.60 per diluted share.
"Resources continues to perform well in fiscal 2007," said Chairman and CEO of
Resources Global Professionals Donald Murray. "Our established client base, the
high-quality service our associates provide, and the strength of our business
model help us grow as we continue to deliver on our global growth strategy. On a
sequential basis, revenues grew in each of our six services during the second
quarter. In addition, our international practices continue to perform well and
our major markets in the U.S. have strong demand. We look forward to our ongoing
expansion in Europe and Asia and to partnering with our multi-national clients
around the world."
ABOUT RESOURCES GLOBAL PROFESSIONALS
Resources Global Professionals is an international professional services firm
that helps business leaders execute internal initiatives. The Company provides
accounting and finance, human capital, information management, supply chain
management, internal audit/risk management, and legal services on a project
basis. In addition to its project professional services, Resources Global
Professionals has established itself as a leading business services provider for
companies seeking independent and cost effective assistance for meeting or
complying with many of the complex business and regulatory issues in today's
marketplace.
Resources was founded in 1996 within a Big Four firm. Today, Resources is a
publicly traded company (NASDAQ: RECN) with more than 75 practice offices and
3,900 professionals. Headquartered in Costa Mesa, California, Resources serves
more than half of the Fortune Global 100.
The company was recently honored as one of America's 200 Best Small Companies by
Forbes magazine. Selected for the fifth consecutive year, Resources placed #66
on the Forbes list. In September, 2006, Resources was named #61 on Fortune
magazine's list of 100 Fastest-Growing Companies and in June, Resources placed
#21 on BusinessWeek's list of 100 Hot Growth Companies to watch in 2006. The
Company is listed on NASDAQ's new Global Select Market, the exchange's highest
listing tier. More information about Resources is available at
http://www.resourcesglobal.com.
Resources will hold a conference call for interested analysts and investors at
5:00 p.m., EST today, December 21, 2006. 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. 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, 2006 and Form 10-Q for the quarter ended August 31, 2006
(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.
Press Contact:
Sarah Lazarus
(978) 369-4478
Sarah@CL-Media.com
Company Contact:
Steve Giusto, Chief Financial Officer
(714) 430-6500
Steve.Giusto@resources-us.com
RESOURCES CONNECTION, INC.
INCOME STATEMENT
(in thousands, except per share amounts)
Quarter Six Months
Ended November 30, Ended November 30,
------------------------ ------------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
(unaudited) (unaudited)
Revenue $ 182,804 $ 158,138 $ 347,911 $ 307,726
Direct costs of services 110,152 95,171 210,071 185,821
---------- ---------- ---------- ----------
Gross profit 72,652 62,967 137,840 121,905
Selling, general and administrative
expenses (1) 46,658 36,826 91,456 70,918
---------- ---------- ---------- ----------
Operating income before amortization and
depreciation (1) 25,994 26,141 46,384 50,987
Amortization of
intangible assets 344 435 762 870
Depreciation expense 1,444 545 2,800 1,037
---------- ---------- ---------- ----------
Operating income (1) 24,206 25,161 42,822 49,080
Interest income (2,013) (1,114) (3,922) (2,086)
---------- ---------- ---------- ----------
Income before provision for income taxes (1) 26,219 26,275 46,744 51,166
Provision for income taxes (2) 11,562 10,250 21,136 20,082
---------- ---------- ---------- ----------
Net income (1) (2) $ 14,657 $ 16,025 $ 25,608 $ 31,084
========== ========== ========== ==========
Diluted net income per share $ 0.29 $ 0.31 $ 0.51 $ 0.60
========== ========== ========== ==========
Diluted shares 50,470 52,034 50,123 51,722
========== ========== ========== ==========
(1) Includes $4,662 and $9,363 of expense for the three and six months ended
November 30, 2006, respectively, related to the mandatory requirement to
recognize compensation expense related to employee stock option grants and
employee stock purchases, effective in the Company's fiscal year 2007.
There was no corresponding expense in the three and six months ended
November 30, 2005.
(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% in both the three and
six months ended November 30, 2006, compared to 39.0% and 39.2% for the
three and six months ended November 30, 2005, 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 44.1% and 45.2% in the three and six
months ended November 30, 2006. 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,
------------------------ ------------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
(unaudited) (unaudited)
Revenue $ 182,804 $ 158,138 $ 347,911 $ 307,726
Direct costs of services 110,152 95,171 210,071 185,821
---------- ---------- ---------- ----------
Gross profit 72,652 62,967 137,840 121,905
Selling, general and administrative
expenses (1) 41,996 36,826 82,093 70,918
---------- ---------- ---------- ----------
Operating income before amortization and
depreciation (1) 30,656 26,141 55,747 50,987
Amortization of
intangible assets 344 435 762 870
Depreciation expense 1,444 545 2,800 1,037
---------- ---------- ---------- ----------
Operating income (1) 28,868 25,161 52,185 49,080
Interest income (2,013) (1,114) (3,922) (2,086)
---------- ---------- ---------- ----------
Income before provision for income taxes (1) 30,881 26,275 56,107 51,166
Provision for income taxes (2) 12,352 10,250 22,442 20,082
---------- ---------- ---------- ----------
Net income (1) (2) $ 18,529 $ 16,025 $ 33,665 $ 31,084
========== ========== ========== ==========
Diluted net income per share $ 0.36 $ 0.31 $ 0.66 $ 0.60
========== ========== ========== ==========
Diluted shares (3) 51,107 52,034 50,956 51,722
========== ========== ========== ==========
(1) Excludes $4,662 and $9,363 of expense for the three and six months ended
November 30, 2006, respectively, related to the mandatory requirement to
recognize compensation expense related to employee stock option grants and
employee stock purchases, effective with the Company's first quarter of
fiscal 2007. There was no corresponding expense for the three and six
months ended November 30, 2005.
(2) Excludes tax benefits related to stock based compensation of $790 and
$1,306 for the three and six months ended November 30, 2006, respectively.
Please refer to footnote (2) on the GAAP Income Statement for further
detail.
(3) Includes 637 and 833 of 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 quarter and six months ended November 30,
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 and six months ended November 30, 2006. There was no corresponding
reconciliation necessary for the three and six months ended November 30, 2005,
as the Company had not adopted the accounting required under SFAS 123(R).
(in thousands, except
per share amounts)
----------------------------
Three months Six months
ended ended
November 30, November 30,
2006 2006
------------ ------------
GAAP net income $ 14,657 $ 25,608
Stock based compensation included in SG&A 4,662 9,363
Effect of stock based compensation
on provision for income taxes (790) (1,306)
------------ ------------
Net effect of stock based compensation 3,872 8,057
------------ ------------
Non-GAAP net income $ 18,529 $ 33,665
============ ============
Following is a reconciliation of shares used in the calculation of GAAP to
non-GAAP diluted net income per share:
Three months Six months
ended ended
November 30, November 30,
2006 2006
------------ ------------
Diluted number of shares used - GAAP 50,470 50,123
Impact of SFAS 123R 637 833
------------ ------------
Diluted number of shares used -non-GAAP 51,107 50,956
============ ============
Following is a reconciliation of GAAP diluted net income per share to non-GAAP
diluted net income per share:
Three months Six months
ended ended
November 30, November 30,
2006 2006
------------ ------------
GAAP diluted net income per share $ 0.29 $ 0.51
Net effect of stock based compensation
on diluted net income per share $ 0.07 $ 0.15
------------ ------------
Non-GAAP diluted net income per share $ 0.36 $ 0.66
============ ============
RESOURCES CONNECTION, INC.
SELECTED BALANCE SHEET INFORMATION
(in thousands)
NOVEMBER 30, MAY 31,
2006 2006
------------ ------------
(unaudited)
Cash, cash equivalents, short-term
investments and long-term marketable
securities $ 199,213 $ 185,439
Accounts receivable, less allowances $ 105,391 $ 90,720
Total assets $ 432,834 $ 398,611
Current liabilities $ 68,865 $ 66,614
Total stockholders' equity $ 350,413 $ 317,436