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Resources Connection, Inc. Reports Third Quarter Results for Fiscal 2013



   Resources Connection, Inc. Reports Third Quarter Results for Fiscal 2013

- Company reports third quarter earnings per share of $0.11, up from $0.10 in
prior year third quarter

- Company returns $8.5 million in capital to shareholders in dividends and
stock buy-backs during third quarter

- Third quarter revenue is $138.0 million compared to prior year third quarter
revenue of $143.3 million

- Company's Adjusted EBITDA* margin for third quarter is 8.3% compared to 8.6%
in prior year third quarter

*Adjusted EBITDA is defined as earnings before interest, income taxes,
depreciation, amortization, stock-based compensation and contingent
consideration adjustments

PR Newswire

IRVINE, Calif., April 2, 2013

IRVINE, Calif., April 2, 2013 /PRNewswire/ -- Resources Connection, Inc.
(NASDAQ: RECN), a multinational professional services firm that provides to
clients – through its operating subsidiary, Resources Global Professionals
("RGP") – accomplished professionals in accounting, finance, risk management
and internal audit, corporate advisory, strategic communications and
restructuring, information management, human capital, supply chain management,
healthcare solutions, and legal and regulatory services, today announced
financial results for its fiscal third quarter ended February 23, 2013.

Revenue for the third quarter of fiscal 2013 was $138.0 million, decreasing
2.3% (2.3% on a constant dollar basis) sequentially and 3.7% (3.8% on a
constant dollar basis) compared to the prior year's third quarter revenue.
Revenues in the U.S. were flat sequentially and improved 1.1%
quarter-over-quarter. International revenues decreased 9.1% sequentially and
16.8% quarter-over-quarter (9.3% sequentially and 17.1% quarter-over-quarter
on a constant dollar basis).

The Company's net income for the third quarter ended February 23, 2013, was
$4.5 million, or $0.11 per diluted share.  This compares to the Company's net
income for the third quarter of fiscal 2012 of $4.3 million, or $0.10 per
diluted share.

"Our third quarter revenues were negatively impacted due primarily to the wind
down of a large mortgage servicing project resulting from our client's
settlement with the U.S. government and a decline in international revenues
following the winter holidays," said Tony Cherbak, President and Chief
Operating Officer of RGP. "Despite the impact of the mortgage servicing
project, I am pleased we grew our U.S. revenue and earnings per share quarter
over quarter."

Gross margin was 37.1% in the third quarter of fiscal 2013, down 30 and 200
basis points from the third quarter of fiscal 2012 and second quarter of
fiscal 2013, respectively.  The decline was primarily driven by increased
healthcare costs during the quarter.  Selling, general and administrative
expenses for the third quarter of fiscal 2013 were $41.6 million, a decrease
of $1.8 million from the comparable quarter a year ago and $700,000 from the
second quarter of fiscal 2013. Current quarter selling, general and
administrative expenses benefited from the resolution of a legal matter and
reduction of incentive compensation expenses.

Cash flow from operations and Adjusted EBITDA were $13.0 million and $11.4
million (8.3% of revenue), respectively, for the third quarter of fiscal 2013
compared to $12.8 million and $12.3 million (8.6% of revenue), respectively,
for the third quarter of fiscal 2012.

"While we believe many of our clients are cautious regarding global economic
conditions, we remain focused on serving our clients," said Don Murray,
Executive Chairman and Chief Executive Officer of RGP.  "Our attention to
client service is evidenced by our continuing to serve all of our top fifty
clients from fiscal 2012 during fiscal 2013."

The Company's revenue for the nine months ended February 23, 2013 was $416.2
million compared with $426.3 million for the first nine months ended February
25, 2012.  The Company's net income for the nine months ended February 23,
2013 was $15.2 million, or $0.37 per diluted share.  This compares to net
income in the prior year's first nine months ended February 25, 2012 of $32.2
million, or $0.73 per diluted share (which includes the after tax impact of
the adjustment of the estimated fair value of contingent consideration expense
of $20.4 million or $0.46 per diluted share).

During the third quarter of fiscal 2013, the Company repurchased 509,000
shares of common stock for $6.0 million.  The Company has approximately $84.8
million remaining under its board authorized stock buyback program.  On March
21, 2013, the Company paid its quarterly dividend of $2.5 million to
shareholders, representing a dividend of $0.06 per share.

ABOUT RGP

RGP, 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 – accounting, finance, risk
management and internal audit, corporate advisory, strategic communications
and restructuring, information management, human capital, supply chain
management, healthcare solutions, and legal and regulatory services.

RGP was founded in 1996 within a Big Four accounting firm. Today, we are a
publicly traded company with over 2,900 professionals, annually serving
approximately 1,900 clients around the world from 75 practice offices.  

Headquartered in Irvine, California, RGP has served 86 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 RGP is available at
http://www.resourcesglobal.com.

RGP will hold a conference call for interested analysts and investors at 5:00
p.m., ET today, April 2, 2013.  This conference call will be available for
listening via a webcast on the Company's website:
http://www.resourcesglobal.com. An audio replay of the conference call will be
available through April 9, 2013 at 855-859-2056.  The password for the replay
is 15567101.  The call will also be archived on the RGP website for 30 days.

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," "remain," "should" or "will" or the negative of these
terms or other comparable terminology.  In this press release, such statements
include our expectations about global economic conditions. 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.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 
                           Three Months Ended        Nine Months Ended
                           February 23, February 25, February 23, February 25,
                           2013         2012         2013         2012
                           (unaudited)               (unaudited)
Revenue                    $138,020     $143,294     $416,150     $426,256
Direct costs of services   86,825       89,667       256,356      265,536
Gross margin               51,195       53,627       159,794      160,720
Selling, general and
administrative expenses    41,591       43,356       125,993      128,945
(1)
Employee portion of
contingent consideration   ---          ---          ---          (500)
(2)
Contingent consideration   ---          ---          ---          (33,440)
adjustment (2)
Operating income before
amortization and           9,604        10,271       33,801       65,715
depreciation (1), (2)
Amortization of intangible 422          487          1,282        2,881
assets
Depreciation expense       1,125        1,412        3,488        4,432
Operating income (1), (2)  8,057        8,372        29,031       58,402
Interest income            (37)         (51)         (135)        (204)
Income before provision    8,094        8,423        29,166       58,606
for income taxes (1), (2)
Provision for income taxes 3,601        4,092        13,977       26,358
(3)
Net income (1), (2), (3)   $4,493       $4,331       $15,189      $32,248
Basic net income per share $0.11        $0.10        $0.37        $0.73
(1), (2), (3)
Diluted net income per     $0.11        $0.10        $0.37        $0.73
share (1), (2), (3)
Basic shares               40,939       42,943       41,317       43,959
Diluted shares             40,978       43,002       41,370       44,008
Cash dividends declared    $0.06        $0.05        $0.18        $0.15
per share

   

RESOURCES CONNECTION, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 
EXPLANATORY NOTES
   Selling, general and administrative expenses include non-cash compensation
   expense for employee stock option grants and employee stock purchases of
1. $1.8 million and $2.0 million for the three months ended February 23, 2013
   and February 25, 2012, respectively, and $5.5 million and $5.8 million for
   the nine months ended February 23, 2013 and February 25, 2012,
   respectively.
   The contingent consideration adjustment is a favorable adjustment of
   approximately $33.4 million for the nine months ended February 25, 2012 in
   recognition of the change in the fair value of the contingent consideration
   liability associated with the acquisition of the Sitrick Brincko Group in
   November 2009. The adjustment results in a reduction in the anticipated
   contingent consideration payable in November 2013.  As required by
   accounting rules for acquisitions under generally accepted accounting
   principles ("GAAP") that include earn-out provisions, the Company
   periodically assesses the likely fair value to be paid at the earn-out
   date.  The Sitrick Brincko Group earn-out is based upon an annual
   assessment of actual EBITDA of the Sitrick Brincko Group and an updated
   assessment of various probability weighted projected EBITDA scenarios over
   the remaining one year of the earn-out period.  This assessment requires
2. very subjective assumptions to be made of various potential operating
   results scenarios.  Based upon the first three and a quarter years of
   actual results and an updated probability weighted assessment of various
   projected EBITDA scenarios of the Sitrick Brincko Group for the three
   quarters of a year remaining in the earn-out period, the Company believes
   it is more likely than not that there will not be a contingent
   consideration payment payable in November 2013 and has reduced the
   estimated liability by $33.9 million.  Although the Company currently
   believes that there will be no earn-out payment due, it will continue to
   periodically review actual EBITDA results of the Sitrick Brincko Group and
   an updated assessment of various probability weighted projected EBITDA
   scenarios; if circumstances change and the Company determines that an
   earn-out payment may be due, it would result in a non-cash charge to
   operations and would materially impact operating results.
   The employee portion of contingent consideration is a $500,000 reduction of
   the estimate of the compensation owed to employees related to the Sitrick
   Brincko Group acquisition (and as compensation, it is treated as an
   operating expense).  Similar to contingent consideration, the estimate of
   the amount of employee portion of contingent consideration payable requires
   very subjective assumptions to be made of future operating results and
   based upon the first three and a quarter years of actual results and an
   updated probability weighted assessment of various projected EBITDA
   scenarios of the Sitrick Brincko Group for the three quarters of a year
   remaining in the earn-out period, the Company currently believes it is more
   likely than not that the employee portion of contingent consideration will
   not be earned.
   The after-tax impact of the adjustments to contingent consideration and the
   employee portion of contingent consideration were $0.46 per diluted share
   for the nine months ended February 25, 2012.
   The Company's effective tax rate was approximately 44% and approximately
   49% for the three months ended February 23, 2013 and February 25, 2012,
   respectively, and approximately 48% and approximately 45% for the nine
   months ended February 23, 2013 and February 25, 2012, respectively. For all
3. periods presented, the Company is unable to benefit from, or has
   limitations on the benefit of, tax losses in certain foreign jurisdictions.
   To a lesser extent, the accounting treatment under GAAP for the cost
   associated with incentive stock options and shares purchased through the
   Employee Stock Purchase Plan have caused volatility in the Company's
   effective tax rate.

RESOURCES CONNECTION, INC.

Reconciliation of Net Income to Adjusted EBITDA

(in thousands, except Adjusted EBITDA Margin)

 
                           Three Months Ended        Nine Months Ended
                           February 23, February 25, February 23, February 25,
                           2013         2012         2013         2012
                           (unaudited)               (unaudited)
Net income                 $4,493       $4,331       $15,189      $32,248
Adjustments:
Amortization of intangible 422          487          1,282        2,881
assets
Depreciation expense       1,125        1,412        3,488        4,432
Interest income            (37)         (51)         (135)        (204)
Provision for income taxes 3,601        4,092        13,977       26,358
EBITDA                     9,604        10,271       33,801       65,715
Stock-based compensation   1,822        2,029        5,460        5,837
expense
Contingent consideration   ---          ---          ---          (33,440)
adjustment
Adjusted EBITDA            $11,426      $12,300      $39,261      $38,112
Revenue                    $138,020     $143,294     $416,150     $426,256
Adjusted EBITDA Margin     8.3%         8.6%         9.4%         8.9%

 

RESOURCES CONNECTION, INC.
Reconciliation of Net Income to Adjusted EBITDA
(in thousands, except Adjusted EBITDA Margin)

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) 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 operations; 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, stock-based compensation expense and contingent
consideration expense.  Adjusted EBITDA Margin is calculated by dividing
Adjusted EBITDA by Revenue.  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 core 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 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, CASH FLOW AND OTHER INFORMATION

(in thousands, except consultant headcount)
                                           February 23, 2013 May 26, 2012
                                           (unaudited)
Cash, cash equivalents and short-term      $118,876          $128,115
investments
Accounts receivable, less allowances       $  90,164         $  84,192
Total assets                               $427,632          $430,719
Current liabilities                        $  61,458         $  61,651
Total stockholders' equity                 $362,112          $365,868
Consultant headcount, end of period        2,254             2,317
Shares outstanding, end of period          40,792            41,973
                                           Nine Months Ended
                                           February 23, 2013 February 25, 2012
                                           (unaudited)
Cash flow from operating activities        $   18,043        $   19,800
Cash flow from investing activities        ($  12,460)       ($  22,072)
Cash flow from financing activities        ($ 23,431)        ($ 40,307)

(Logo: http://photos.prnewswire.com/prnh/20121008/MM88659LOGO)

SOURCE Resources Connection, Inc.

Website: http://www.resourcesglobal.com
Contact: Media, Michael Sitrick, (US+) 1-310-788-2850,
mike_sitrick@sitrick.com; or Analyst Contact, Nate Franke, Chief Financial
Officer, (US+) 1-714-430-6500, nate.franke@resources-us.com
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