Resources Connection, Inc. (RECN)

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Resources Connection, Inc. (RECN)

F4Q09 Earnings Call

July 15, 2009 5:00 pm ET


Kate W. Duchene – Chief Legal Officer, Executive Vice President Human Relations & Assistant Secretary

Thomas D. Christopoul – President, Chief Executive Officer & Director

Donald B. Murray – Executive Chairman of the Board

Nathan W. Franke – Chief Financial Officer & Executive Vice President

Anthony Cherbak – Executive Vice President Operations

Karen M. Ferguson – Executive Vice President, President North American Operations & Director


Jim Janesky – Stifel Nicolaus & Company, Inc.

Sara Gubins – Bank of America

Scott Schneeberger – Oppenheimer

Andrew Steinerman – JP Morgan Securities

Kevin McVeigh – Credit Suisse

Paul Ginocchio – Deutsche Bank Securities

Gary Bisbee – Barclays Capital

Mark Marcon – Robert W. Baird & Co.

Timothy McHugh – William Blair & Company



Welcome everyone to the Resources Global Professional’s fourth quarter fiscal year 2009 earnings result conference call. Today’s call is being recorded. At this time for opening remarks and introductions I would like to turn the conference over to the Chief Legal Officer Ms. Kate Duchene.

Kate W. Duchene

During this call we will be providing you with comments on our results for the fourth quarter of fiscal year 2009. By now you should have a copy of today’s press release. If you need a copy and are unable to access one via our website please call Patricia Marquez at 714-430-6314 and she’ll be happy to fax a copy to you.

Before introducing Tom I would like to read an important announcement about statements that we may make during this call. Specifically, we may make forward-looking statements, in other words statements regarding future events or future financial performance of the company. We wish to caution you that such statements are just predictions and actual events or results may differ materially.

We refer you to our 10K report for the year ended May 31, 2008 for a discussion of some of the risks, uncertainties and other factors such as seasonal and economic conditions which may cause our business result of operations and financial condition to differ materially from results of operations and financial conditions expressed or implied by forward-looking statements made during this call.

I’ll now turn the call over to Tom Christopoul, President and Chief Executive Officer.

Thomas D. Christopoul

Welcome to the Resources Global fourth quarter conference call. Joining me today on the call are Don Murray and members of our senior leadership team Nate Franke; Kate who you just heard from; Tony; and Karen Ferguson. Let me begin by giving you a brief overview of our fourth quarter operating results.

Total revenues for the fourth quarter of fiscal 2009 were $132 million, a sequential decline of $24 million from our third quarter revenues of $156 million or 15.4%. For the quarter we recorded a GAAP net loss of $6.3 million or $0.14 per share which includes a pretax charge of $3.6 million for office consolidation and severance costs which we discussed with you on our last call and a non-cash charge of $3.5 million related to deferred tax assets of certain of our foreign subsidiaries. In aggregate, these charges totaled $5.6 million on an after tax basis or $0.13 per share. Without these charges, we were essentially breakeven for the quarter with income from operations totaling $539,000.

Fourth quarter gross margin was 38.2% compared to 39.4% a year ago. The 120 basis point decrease in gross margins is primarily due to the deleveraging of certain consultant benefit costs over a lower revenue base. Excluding the $3.6 million charge for office consolidation and severance costs, our SG&A costs declined $3.5 million or 6.9% sequentially to $47.3 million for the quarter. Nate will provide more details on each of these areas later in the call.

I’d like to take a moment now to discuss recent revenues trends. The significant rate of weekly revenue deceleration experienced in our third quarter where we saw revenues go from $14.4 million at the beginning of the third quarter to $11.2 million at the end moderated during the fourth quarter. As we previously discussed, revenue during the first five weeks of the fourth quarter averaged around $11 million. For the remainder of the quarter non-holiday weekly revenue averaged approximately $10 million falling in a tighter band of $9.6 to $10.4 million per week.

Revenue trends for the first five weeks of the first fiscal quarter of this fiscal year 2010, continued to stabilize as weekly revenues have ranged from $9.6 to $9.8 million per week excluding the holiday week of July 4th. Based on recent discussions with our clients, we believe the continued thawing of the credits market and stabilization of global equity markets are beginning to allow corporate executives to focus on business initiatives other than maintaining liquidity or pursuing cost reduction efforts.

Additionally, while many analyst describe recent economic data such as unemployment as less bad, other forward-looking economic data such as certain manufacturing indices and purchasing managers index correlate to the improving tone of the discussions we are having with our clients. While these discussions are encouraging, they have not yet resulted in improved weekly revenue. However, we believe that over time our clients will begin to execute against these internal initiatives currently being deferred as the business climate becomes more certain. Until then, we will continue to focus virtually all of our efforts on business development.

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