Tuesday, professional services company Resources Connection Inc. (RECN) reported a steep decline in the third-quarter profit hurt by revenues that plunged more than 23%.
The Irvine, California-based company reported a third-quarter net income of $2.08 million or $0.05 per share, down from $8.67 million or $0.19 per share in the corresponding quarter last year. On average, nine analysts polled by Thomson Reuters estimated earnings of $0.07 per share for the quarter. Analysts' estimates typically exclude special items.
The reported net income includes stock compensation expense of $3.2 million and $4.8 million, net of tax, for the quarters ended February 28, 2009 and February 23, 2008, respectively.
Revenue for the third-quarter of fiscal 2009 decreased 23.1% to $155.99 million from $202.80 million in the prior-year similar period. Analysts estimated revenue of $165.64 million for the quarter. Region wise, revenues in the U.S. declined 24.0% quarter-over-quarter while international revenues declined 20.6% or 9.6% on a constant dollar basis.
Resources Global Professionals, the operating subsidiary of Resources Connection, Inc. is a multinational professional services firm that helps business leaders execute internal initiatives. The company provides finance, accounting, risk management and internal audit, information management, human resources, supply chain management, actuarial and legal service professionals in support of client-led projects and initiatives. Additionally, the company offers policyIQ, a Web-based content management product for documenting, managing, and communicating various types of business information.
Thomas Christopoul, President and CEO of Resources said, Our current business, like many other professional services companies, continues to be challenged by the negative macroeconomic environment around the world. While our clients are approaching their business initiatives much more cautiously, we believe that our value proposition to our clients remains compelling despite the obvious uncertainty in the global economy.
The company reported an amortization of intangible assets of $0.27 million compared to $0.21 million in the third-quarter of fiscal 2008.
Depreciation expense for the quarter declined to $2.19 million from $2.20 million in the comparable period last year.
Provision for income taxes for the quarter declined to $3.12 million from $7.91 million in the similar period last year.
As of February 28, 2009, the company had $146 million in cash and short-term investments.
The multinational service provider's second quarter net income declined to $9.48 million or $0.21 per share from $13.04 million or $0.27 per share in the corresponding quarter last year. Revenue for the quarter decreased to $190.23 million from $206.64 million in the comparable period last year.
Among others in the industry, Menlo Park, California-based Robert Half International Inc. (RHI) reported a fourth quarter net income of $39.0 million or $0.26 per share from $78.8 million or $0.50 per share a year ago. Revenue for the quarter declined to $989.8 million from $1.22 billion reported in the same period last year.
For the nine-month period, net income declined to $24.05 million or $0.53 per share from $33.28 million or $0.67 per share in the corresponding period last year. Reported net income includes stock compensation expense of $10.6 million and $13.7 million, net of tax for the nine months ended February 28, 2009 and February 23, 2008, respectively.
Revenue for the nine-month period decreased 8.3% to $553.53 million from $603.56 million in the nine-month period of fiscal 2008. Revenues in the U.S. declined 11.6% from prior year period while international revenues improved 1.0% or 4.5% on a constant dollar basis.
Christopoul is of the view that current economic climate would continue to challenge Resources. He believes flexible business model combined with the strength of balance sheet gives us the company a distinct competitive advantage.
The company said that its primary focus would always be on growing revenue. Since infrastructure costs cannot be ignored in this environment, the company said it has executed a plan to consolidate certain offices over the next few months.
Earlier in March 2009, the Resources Connection commenced a plan to consolidate seven offices into existing, larger market practices. In conjunction with this activity and other personnel actions, the company indicated that it will record a charge during the fourth quarter of approximately $3.4 million related to the estimated lease abandonment costs, including leasehold improvements, and severance.
The company estimates that on an annualized basis, these actions, when combined with other cost reduction activities, should produce cost savings of approximately $12 million.
Don Murray, Executive Chairman of Resources said, We expect Resources to continue to provide superior value to our clients balanced rewards to our employees and a solid return on investment to our shareholders.
Resources Connection closed Tuesday's regular trading at $15.59, down $0.39 or 2.44%, on a volume of 696,530 shares on the Nasdaq.
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