2014

Resources Connection, Inc. Reports Second Quarter Fiscal 2009 Results

IRVINE, Calif., Jan. 6 /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 29, 2008.

Total revenue for the second quarter of fiscal 2009 was $190.2 million versus $206.6 million for the second quarter in fiscal 2008. Revenues in the U.S. declined 11.0% quarter-over-quarter while international revenues improved 0.5% (7.4% on a constant dollar basis).

"While the global economic events occurring during our second quarter are without precedent, our average weekly client service hours, excluding the holiday weeks, were relatively consistent throughout the quarter. However, foreign exchange rate changes from early in the second quarter through the end of the quarter accounted for an approximate $3.3 million reduction in revenues," said Thomas D. Christopoul, President and CEO of Resources.

Total revenue for the six months ended November 29, 2008 was $397.5 million, a decrease of 0.8% from $400.8 million for the comparable period of fiscal 2008. Revenues in the U.S. declined 5.5% versus the comparable prior year period while international revenues improved 12.6% (12.1% on a constant dollar basis).

Gross margin improved 50 basis points to 39.0% in the second quarter of fiscal 2009 compared with 38.5% in the comparable period of fiscal 2008. Selling, general and administrative expenses, which include stock compensation expense, were $54.4 million for the second quarter of fiscal 2009, down from $55.5 million in the second quarter of fiscal 2008.

Net income was $9.5 million for the second quarter ended November 29, 2008 compared with $13.0 million for the quarter ended November 24, 2007; earnings per diluted share were $0.21 per diluted share for the second quarter of fiscal 2009 versus $0.27 per diluted share for the second quarter of the prior year. Net income includes stock compensation expense of $3.7 million and $4.3 million, net of tax, for the quarters ended November 29, 2008 and November 24, 2007, respectively.

Adjusted earnings before interest, taxes, depreciation, amortization and stock compensation expense or "Adjusted EBITDA" for the second quarter of fiscal 2009 was $24.4 million or 12.8% of revenue versus $29.4 million or 14.2% of revenue for the same quarter of fiscal 2008.

Net income was $22.0 million for the six months ended November 29, 2008 compared with $24.6 million for the six months ended November 24, 2007; earnings per diluted share were $0.48 per diluted share for the first six months of fiscal 2009 versus $0.49 per diluted share for the first six months of the prior year. Net income includes stock compensation expense of $7.4 million and $8.8 million, net of tax for the six months ended November 29, 2008 and November 24, 2007, respectively.

Adjusted earnings before interest, taxes, depreciation, amortization and stock compensation expense or "Adjusted EBITDA" for the first six months of fiscal 2009 was $53.7 million or 13.5% of revenue versus $55.8 million or 13.9% of revenue for the same period of fiscal 2008.

"Given the external environment, we are pleased to have been able to maintain our gross margin trends," said Don Murray, Executive Chairman of Resources. "The flexibility of our business model, in which approximately 70% of our cash costs are variable, has allowed Resources to remain profitable and continue to generate cash flows from operations."

"The current financial crisis is a test of the resolve of our people," said Christopoul. "Everyone at Resources is working harder today to develop business and help our clients through this difficult economic environment, while at the same time remaining conservative with respect to discretionary costs. We continue to believe that the enormous change taking place in the global markets will present significant opportunities for us in the future; however, the timing of those opportunities will vary as companies work through their strategies to offset what will likely be a period of sustained economic contraction."

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 3,700 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, January 6, 2009. 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. In this press release, such statements include our belief that the change taking place in the global markets will present significant opportunities for us in the future but that the timing of these opportunities will vary. 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.



                          RESOURCES CONNECTION, INC.
                               INCOME STATEMENT
                   (in thousands, except per share amounts)

                             Quarter Ended             Six Months Ended

                         November 29, November 24, November 29,  November 24,
                             2008         2007         2008          2007
                               (unaudited)                 (unaudited)

    Revenue               $190,233     $206,638       $397,538     $400,758
    Direct costs of
     services              116,122      127,025        242,588      247,656

    Gross profit            74,111       79,613        154,950      153,102
    Selling, general and
     administrative
     expenses (1)           54,380       55,514        110,893      108,543

    Operating income before
     amortization and
     depreciation (1)       19,731       24,099         44,057       44,559
    Amortization of
     intangible assets         275           84            657          338

    Depreciation expense     2,263        2,007          4,603        3,882

    Operating income (1)    17,193       22,008         38,797       40,339

    Interest income           (380)      (1,629)          (896)      (4,171)

    Income before provision
     for income taxes (1)   17,573       23,637         39,693       44,510

    Provision for income
     taxes (2)               8,097       10,601         17,725       19,892

    Net income (1) (2)      $9,476      $13,036        $21,968      $24,618

    Diluted net income per
     share                   $0.21        $0.27          $0.48        $0.49

    Diluted shares          45,859       48,754         45,945       50,226

    EXPLANATORY NOTES

    1. Includes $4,635 and $5,262 of stock compensation expense for the three
       months ended November 29, 2008 and November 24, 2007, respectively, and
       $9,599 and $11,262 of stock compensation expense for the six months
       ended November 29, 2008 and November 24, 2007, respectively.
    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 40.5% and 40.0% for both the
       three and six months ended November 29, 2008 and November 24, 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 46.1%
       and 44.8% for the three months ended November 29, 2008 and November 24,
       2007, respectively, and 44.7% for both the six months ended November
       29, 2008 and November 24, 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 Statement of Financial
       Accounting Standards 123 ( R ), "Share-Based Payment" ("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.
               Reconciliation of Net Income to Adjusted EBITDA
                (in thousands, except Adjusted EBITDA Margin)

                             Quarter Ended             Six Months Ended

                          November 29, November 24, November 29,  November 24,
                             2008         2007          2008         2007
                                (unaudited)                 (unaudited)

    Consolidated EBITDA and
     Adjusted EBITDA

    Net income              $9,476      $13,036        $21,968      $24,618

    Adjustments:

    Amortization of
     intangible assets         275           84            657          338

    Depreciation expense     2,263        2,007          4,603        3,882

    Interest income           (380)      (1,629)          (896)      (4,171)

    Provision for income
     taxes                   8,097       10,601         17,725       19,892

    EBITDA                  19,731       24,099         44,057       44,559

    Stock compensation
     expense                 4,635        5,262          9,599       11,262

    Adjusted EBITDA        $24,366      $29,361        $53,656      $55,821

    Revenue               $190,233     $206,638       $397,538     $400,758

    Adjusted EBITDA Margin    12.8%        14.2%          13.5%        13.9%

The Company utilizes certain financial measures and key performance indicators that are not defined by or calculated in accordance with generally accepted accounting principles ("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) excludes 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.

EBITDA, a non-GAAP financial measure, is calculated as net income before amortization of intangible assets, depreciation expense, interest income and income taxes. Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA before 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.



                          RESOURCES CONNECTION, INC.
                      SELECTED BALANCE SHEET INFORMATION
                                (in thousands)

                                                   November 29,     May 31,
                                                      2008           2008
                                                         (unaudited)
    Cash, cash equivalents and short-term
     investments                                    $133,657       $106,814

    Accounts receivable, less allowances            $102,810      $ 126,669

    Total assets                                    $406,729       $410,502

    Current liabilities                             $ 75,005        $91,424

    Total stockholders' equity                      $326,482       $305,888

SOURCE Resources Connection, Inc.



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