Resources Connection (RECN)
Q4 2013 Earnings Call
July 16, 2013 5:00 pm ET
Kate W. Duchene - Chief Legal Officer and Executive Vice President of Human Resources
Anthony Cherbak - Chief Executive Officer, President and Director
Nathan W. Franke - Chief Financial Officer, Principal Accounting Officer and Executive Vice President
Donald B. Murray - Co-Founder and Executive Chairman
Kevin D. McVeigh - Macquarie Research
Sara Gubins - BofA Merrill Lynch, Research Division
Jeffrey M. Silber - BMO Capital Markets U.S.
Andrew C. Steinerman - JP Morgan Chase & Co, Research Division
Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division
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Kate W. Duchene
Thank you, operator. Good afternoon, everyone, and thank you for participating today. Joining me on this call are Don Murray, our Executive Chairman; Tony Cherbak, Chief Executive Officer; and Nate Franke, our Chief Financial Officer.
During this call, we will be providing you with comments on our results for the fourth quarter of fiscal year 2013. By now, you should have a copy of today's press release. If you need a copy and are unable to access via our website, please call Patricia Marquez at (714) 430-6314, and she'll be happy to fax a copy to you.
Before introducing Tony, I'd like to read an important announcement about certain 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 10-K report for the year ended May 26, 2012, for a discussion of some of the risks, uncertainties and other factors, such as seasonal and economic conditions that may cause our business, results 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 Tony Cherbak, Chief Executive Officer.
Thanks, Kate. Good afternoon, and welcome to the Resources Global Fourth Quarter Conference Call. I'm going to begin by giving you a brief overview of our fourth quarter and year-end operating results. Total revenue for the fourth quarter was $140.2 million, up 1.6% from our third quarter revenue of $138 million, but down 3.6% from last year's fourth quarter of $145.5 million. For the year, revenue declined 2.7% to $556.3 million versus $571.8 million in fiscal 2012. Fourth quarter gross margin was 38.9%, representing a 180-basis-point improvement from the third quarter, but a decrease of 130 basis points from the fourth quarter a year ago.
During the fourth quarter, we recorded a charge of approximately 1,150,000 or $0.03 per share to reduce headcount in certain of our European offices. Of the total, approximately 525,000 was recorded in cost of services and 625,000 in SG&A depending on whether the person impacted was an employee consultant or a front office personnel. The 525,000 charge to cost of services reduced our fourth quarter [ph] gross margin by 40 basis points.
During the fourth quarter, our SG&A costs were $42.3 million, which includes the $625,000 of aforementioned severance cost. Excluding this cost, fourth quarter SG&A was $300,000 lower than the comparable quarter a year ago and about the same as our third quarter. Excluding the severance charge, fourth quarter SG&A was slightly better than we anticipated based primarily on lower compensation-related costs. We remain focused on tightly controlling our SG&A spend while investing for the long-term benefit of the company.
During the fourth quarter, we generated cash flow from operations and adjusted EBITDA of $16.9 million and $13.9 million, respectively. For the quarter, our pretax income was $10.7 million. Based upon an effective tax rate of 50.4%, our fourth quarter GAAP net income was $5.3 million or $0.13 per share, which includes a $0.03 per share impact of the severance charge.
Now let's talk about revenue trends. As we reported in early April, weekly revenues during the first 4 weeks of the fourth quarter averaged $11.2 million. For the remaining 9 weeks of the quarter, weekly revenues range from $10.2 million to $11.2 million, averaging $10.6 million per week. The decline in weekly revenues during April and May occurred in the U.S. and Europe. Consistent with past quarters, our Fortune 500 client base remained cautious in their spending and business initiatives as they struggle for revenue growth. In the U.S., our revenue was up 2.3% sequentially but down 0.4% quarter-over-quarter. Europe's fourth quarter revenue declined 5.1% sequentially and 12.5% quarter-over-quarter. In Asia Pacific, revenue increased 12.2% sequentially but decreased 10.7% quarter-over-quarter. On a constant currency basis, Asia-Pacific's sequential increase was 18.3% and the quarter-over-quarter decrease was only 2.9%. The sequential increase in revenues out of Asia Pacific was driven by growth in Japan, China and Singapore.
During the early weeks of our first quarter of fiscal '14, our non-holiday weekly revenue has averaged approximately 10.8 million per week, about even with our non-holiday weekly average of 10.9 million in the fourth quarter. During the fourth quarter, we repurchased approximately 1.1 million shares of our common stock at an aggregate cost of $12.3 million or $11.23 per share. For fiscal 2013, we repurchased approximately 2.9 million shares, representing about 6.9% of our shares outstanding as of the beginning of the year at an aggregate cost of $34.2 million or $11.75 a share. During fiscal 2013, we returned almost $43.7 million to shareholders through our share repurchases and dividends. With that, I will now turn the call over to Nate for a detailed review of our financial results.