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Resources Connection, Inc. Reports Results for Third Quarter of Fiscal 2008
IRVINE, Calif., March 26 /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 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 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 4,100 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.
RE
SOURCES CONNECTION, INC.
INCOME STATEMENT
(in thousands, except per share amounts)
Quarter Ended Nine Months Ended
February 29, February 28, February 29, February 28,
2008 2007 2008 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
(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.
RE
SOURCES CONNECTION, INC.
NON-GAAP INCOME STATEMENT
(in thousands, except per share amounts)
Quarter Ended Nine Months Ended
February 29, February 28, February 29, February 28,
2008 2007 2008 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
(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.
RE
SOURCES CONNECTION, INC.
Following is a reconciliation of net income under GAAP to non-GAAP net
income:
(in thousands, except per share amounts)
Three months Three months Nine months Nine months
ended ended ended ended
February February February February
29, 2008 28, 2007 29, 2008 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 Three months Nine months Nine months
ended ended ended ended
February February February February
29, 2008 28, 2007 29, 2008 28, 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
Following is a reconciliation of GAAP diluted net income per share to non-
GAAP diluted net income per share:
Three months Three months Nine months Nine months
ended ended ended ended
February February February February
29, 2008 28, 2007 29, 2008 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
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
SOURCE Resources Connection, Inc.
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