Resources Connection, Inc. Reports Record Quarterly Revenue, Fiscal 2008 Results
IRVINE, Calif., July 16 /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 fourth quarter and year ended May 31, 2008. Total revenue for the fourth quarter of fiscal 2008 improved 18.1% to $236.7 million from $200.5 million for the fourth quarter in fiscal 2007. Revenues in the U.S. were up 10.4% quarter-over-quarter while international revenues increased 42.5% (29.4% on a constant dollar basis). Revenue for the fourth quarter of fiscal 2008 includes revenue of $5.7 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. The Company's results for the fourth quarter of fiscal 2008 also include an extra week of revenue (a 14-week quarter) and related expenses as compared to the fourth quarter of fiscal 2007 (a 13-week quarter). Total revenue for the year ended May 31, 2008 improved 14.2% to $840.3 million from $735.9 million for fiscal 2007. Revenues in the U.S. were up 9.0% for fiscal 2008 and international revenues were up 31.0% (20.6% on a constant dollar basis). Revenue for fiscal 2008 includes revenue of $9.9 million from Domenica B.V. since December 18, 2007. The Company's results for fiscal 2008 include an extra week of revenue (a 53-week year) and related expenses as compared to fiscal 2007 (a 52-week year). Gross margin was 39.4% in the fourth quarter of fiscal 2008 versus 39.5% in the comparable period of fiscal 2007. Selling, general and administrative expenses, which include stock compensation expense, were 26.1% of revenue for the fourth quarter of fiscal 2008 compared to 25.7% for the same quarter in fiscal 2007. On a sequential quarterly basis, selling, general and administrative expenses improved 230 basis points from 28.4% of revenue in the third quarter of fiscal 2008. Net income determined in accordance with generally accepted accounting principles ("GAAP") for the fourth quarter ended May 31, 2008, was $15.9 million, or $0.35 per diluted share, including non-cash stock-based compensation expense of $4.1 million net of tax. This compares with GAAP net income for the fourth quarter ended May 31, 2007, of $16.1 million, or $0.32 per diluted share, including non-cash stock-based compensation expense of $4.6 million net of tax. Net income determined in accordance with GAAP for the year ended May 31, 2008, was $49.2 million, or $1.03 per diluted share, including non-cash stock-based compensation expense of $17.7 million net of tax. This compares with GAAP net income for the year ended May 31, 2007, of $54.8 million, or $1.08 per diluted share, including non-cash stock-based compensation expense of $16.7 million net of tax. Adjusted earnings before interest, taxes, depreciation, amortization and stock compensation expense or "adjusted EBITDA" for the fourth quarter of fiscal 2008 was $36.5 million or 15.4% of revenue versus $33.3 million or 16.6% of revenue for the same quarter of fiscal 2007. Adjusted EBITDA for the year ended May 31, 2008 was $116.4 million or 13.9% of revenue versus $117.0 million or 15.9% of revenue in fiscal 2007. "We are all very pleased with the improvement of our financial metrics, especially our gross margin and adjusted EBITDA margin during the fourth quarter," said Don Murray, executive chairman of Resources. "These metrics are closer to the levels that we have historically enjoyed." During the three months ended May 31, 2008, the company purchased approximately 1.1 million shares of its common stock for approximately $21.0 million or $18.99 per share. Thomas Christopoul, CEO of Resources, added, "Our results for the most recent quarter and past fiscal year demonstrate the strength and durability of the Resources business model globally. It's especially gratifying to report these results against the backdrop of the considerably challenging business environment experienced over the past 12 months by our clients around the world." ABOUT RE
SOURCES 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 4,300 professionals, from more than 80 practice offices, annually serving 2,400 clients around the world. Headquartered in Irvine, California, Resources Global has served 84 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 16, 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. 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.
SOURCES CONNECTION, INC. INCOME STATEMENT (in thousands, except per share amounts) Quarter Ended Year Ended May 31, May 26, May 31, May 26, 2008 2007 2008 2007 (unaudited) (unaudited) Revenue $236,724 $200,516 $840,285 $735,891 Direct costs of services 143,505 121,354 518,413 447,363 Gross profit 93,219 79,162 321,872 288,528 Selling, general and administrative expenses (1) 61,792 51,557 227,853 191,590 Operating income before amortization and depreciation (1) 31,427 27,605 94,019 96,938 Amortization of intangible assets 565 392 1,114 1,472 Depreciation expense 2,370 1,759 8,452 6,122 Operating income (1) 28,492 25,454 84,453 89,344 Interest income (480) (2,616) (5,603) (8,939) Income before provision for income taxes (1) 28,972 28,070 90,056 98,283 Provision for income taxes (2) 13,070 12,012 40,871 43,518 Net income (1) (2) $15,902 $16,058 $49,185 $54,765 Diluted net income per share $0.35 $0.32 $1.03 $1.08 Diluted shares 46,068 50,882 47,934 50,644 EXPLANATORY NOTES 1. Includes $5,072 and $5,726 of expense for the three months ended May 31, 2008 and May 26, 2007, respectively, and $22,386 and $20,107 of expense for the years ended May 31, 2008 and May 26, 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 41.4% and 38.7% for the three months ended May 31, 2008 and May 26, 2007, respectively and 40.5% and 39.6% for the years ended May 31, 2008 and May 26, 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 45.1% and 42.8% for the three months ended May 31, 2008 and May 26, 2007, respectively and 45.4% and 44.3% for the years ended May 31, 2008 and May 26, 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.
SOURCES CONNECTION, INC. Reconciliation of Net Income to Adjusted EBITDA (in thousands, except per share amounts) Quarter Ended Year Ended May 31, May 26, May 31, May 26, 2008 2007 2008 2007 (unaudited) (unaudited) Consolidated EBITDA and Adjusted EBITDA Net Income $15,902 $16,058 $49,185 $54,765 Adjustments: Amortization of intangible assets 565 392 1,114 1,472 Depreciation expense 2,370 1,759 8,452 6,122 Interest income (480) (2,616) (5,603) (8,939) Provision for income taxes 13,070 12,012 40,871 43,518 EBITDA 31,427 27,605 94,019 96,938 Stock Compensation Expense 5,072 5,726 22,386 20,107 Adjusted EBITDA $36,499 $33,331 $116,405 $117,045 Revenue $236,724 $200,516 $840,285 $735,891 Adjusted EBITDA Margin 15.4% 16.6% 13.9% 15.9% The Company utilizes certain financial measures and key performance indicators that are not defined by or calculated in accordance with 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) excluded 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 income; 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 before amortization of intangible assets, depreciation expense, interest income, income taxes and stock compensation expense. Adjusted EBITDA Margin is calculated by dividing Revenue by Adjusted EBITDA. 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, or a superior measure to, net income, earnings per share, cash flows or other measures of financial performance prepared in accordance with GAAP.
SOURCES CONNECTION, INC. SELECTED BALANCE SHEET INFORMATION (in thousands) May 31, 2008 May 26, 2007 (unaudited) Cash, cash equivalents, short-term investments and long-term marketable securities $106,814 $223,095 Accounts receivable, less allowances $126,669 $105,146 Total assets $410,502 $464,461 Current liabilities $91,424 $87,683 Total stockholders' equity $305,888 $363,299
SOURCE Resources Connection, Inc.
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