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Article by DailyStocks_admin    (02-10-09 06:32 AM)

The Daily Magic Formula Stock for 02/10/2009 is Resources Connection Inc. According to the Magic Formula Investing Web Site, the ebit yield is 17% and the EBIT ROIC is 75-100%.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


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BUSINESS OVERVIEW

Overview

Resources Connection is a multi-national professional services firm; its operating entities provide services under the name Resources Global Professionals (“Resources Global” or the “Company”). The Company provides experienced finance, accounting, risk management and internal audit, information management, human resources, supply chain management, actuarial and legal services professionals in support of client-led projects and initiatives. We assist our clients with discrete projects requiring specialized expertise in:


• finance and accounting services, such as mergers and acquisitions due diligence, initial public offering assistance and assistance in the preparation or restatement of financial statements, financial analyses (e.g., product costing and margin analyses), corporate reorganizations, budgeting and forecasting, audit preparation, public-entity reporting and tax-related projects;

• information management services, such as financial system/enterprise resource planning implementation and post implementation optimization;

• human capital services, such as change management and compensation program design and implementation;

• risk management and internal audit services (provided via our subsidiary Resources Audit Solutions or “RAS”), including compliance reviews, internal audit co-sourcing and assisting clients with their compliance efforts under the Sarbanes-Oxley Act of 2002 (“Sarbanes”);

• supply chain management (“SCM”) services, such as strategic sourcing efforts, contracts negotiation and purchasing strategy; and

• actuarial services, such as for pension and life insurance companies;

• legal services, such as providing attorneys, paralegals and contract managers to assist clients (including law firms) with project-based or peak period needs.

We were founded in June 1996 by a team at Deloitte & Touche LLP (“Deloitte & Touche”), led by our executive chairman, Donald B. Murray, who was then a senior partner with Deloitte & Touche and Karen M. Ferguson, president of our North American operations, among others. Our founders created Resources Connection to capitalize on the increasing demand for high quality outsourced professional services. We operated as a part of Deloitte & Touche from our inception in June 1996 until April 1999. In April 1999, we completed a management-led buyout.

Our business model combines the client service orientation and commitment to quality from our legacy as part of a Big Four accounting firm with the entrepreneurial culture of an innovative, high-growth company. We are positioned to take advantage of what we believe are two converging trends in the outsourced professional services industry: the increasing global demand for outsourced professional services by corporate clients and a supply of professionals interested in working in a non-traditional professional services firm. We believe our business model allows us to offer challenging yet flexible career opportunities, attract highly qualified, experienced professionals and, in turn, attract clients with challenging professional needs.

As of May 31, 2008, we employed 3,490 professional service associates on assignment. Our associates have professional experience in a wide range of industries and functional areas. Based upon an internal survey conducted in June 2008, and completed by 64% of our active associates, 46% of our active associates are CPAs (including 45% of our associates in the United States), 41% have advanced professional degrees, and the average years of professional experience is approximately 24. We offer our associates careers that combine the flexibility of project-based work with many of the advantages of working for a traditional professional services firm.

We served a diverse base of more than 2,400 clients during fiscal 2008, ranging from large corporations to mid-sized companies to small entrepreneurial entities, in a broad range of industries. For example, our clients have included more than eighty-four of the companies that have been in the Fortune 100. We have grown revenues from $202.0 million in fiscal 2003 to $840.3 million in fiscal 2008, a five-year compound annual growth rate, or CAGR, of 33.0%, and our income from operations over the same period has increased from $20.2 million to $84.5 million, a five-year CAGR of 33.1%. We have been profitable every year since inception. As of May 31, 2008, we served our clients through 56 offices in the United States and 33 offices abroad.

During our first three years of operations, our offices were located only in the United States. As the Company evolved, we have increased our presence in other regions around the world. During fiscal 2008, we acquired two companies with operations in Europe: Compliance Solutions, a United Kingdom-based provider of regulatory compliance services to investment advisors, hedge funds, private equity and venture capital firms, insurance companies and other financial institutions; and Domenica B.V. (“Domenica”), a Netherlands based provider of actuarial services to pension and life insurance companies. In Germany, we closed our temporary office in Düsseldorf and opened an office in Frankfurt. We also opened offices in the United States in Tulsa, Oklahoma; Raleigh, North Carolina; and Richmond, Virginia, while consolidating our office in Grand Rapids, Michigan into our Detroit, Michigan operation. During fiscal 2007, we opened our first two offices in Mexico (Mexico City and Tijuana); our first office in Germany (Düsseldorf); our first office in Italy (Milan); and additional offices in Japan (Nagoya); Canada (Montreal); United Kingdom (Edinburgh); People’s Republic of China (Shanghai); and the United States (Glenview, Illinois). While much of our growth in countries outside of the United States has resulted from the establishment of new Resources Global offices, we also completed a number of acquisitions prior to fiscal 2008 to build our presence and to serve our multinational clients around the world (including acquisitions prior to fiscal 2008 in the Netherlands, Australia, Sweden and India).

We believe our distinctive culture is a valuable asset and is, in large part, due to our management team, which has extensive experience in the professional services industry. Most of our senior management and office managing directors have Big Four experience and an equity interest in our Company. This team has created a culture of professionalism that we believe fosters in our associates a feeling of personal responsibility for, and pride in, client projects and enables us to deliver high-quality service to our clients.

Industry Background

Demand for Project Professional Services

Resources Global’s services cover a range of professional areas, with over 50% of revenues derived from accounting and finance-related services. The market for professional services is broad and fragmented and independent data on the size of the market is not readily available. Because of the corporate scandals documented in the media over the last several years, we believe the market for professional services is changing rapidly and that companies may be more willing to choose alternatives to traditional professional service providers. We believe Resources Global is a viable alternative to traditional accounting and consulting firms in numerous instances because, by using project professionals, companies can:


•strategically access specialized skills and expertise;

•effectively supplement internal resources;

•increase labor flexibility; and

•reduce their overall hiring, training and termination costs.

Typically, companies use a variety of alternatives to fill their project needs. Companies outsource entire projects to consulting firms; this provides them access to the expertise of the firm but often entails significant cost and less management control of the project. Companies also supplement their internal resources with employees from the Big Four accounting firms or other traditional professional services firms; however, these arrangements are on an ad hoc basis and have been increasingly limited by regulatory concerns focused on external auditor independence. Companies use temporary employees from traditional and Internet-based staffing firms, who may be less experienced or less qualified than employees from professional services firms. Finally, some companies rely solely on their own employees who may lack the requisite time, experience or skills.

The employment alternatives historically available to professionals may fulfill some, but not all, of an individual’s career objectives. A professional working for a Big Four firm or a consulting firm may receive challenging assignments and training, but may encounter a career path with less choice and less flexible hours, extensive travel and limited control over work engagements. Alternatively, a professional who works as an independent contractor faces the ongoing task of sourcing assignments and significant administrative burdens.

Resources Global Professionals’ Strategy

Our Business Strategy

We are dedicated to providing highly qualified and experienced finance, accounting, risk management and internal audit, human capital, supply chain management, information management and legal services professionals to meet our clients’ project and interim professional services needs. Our objective is to be the leading provider of these project-based professional services. We have developed the following business strategies to achieve this objective:


• Maintain our distinctive culture. Our corporate culture is the foundation of our business strategy and we believe it has been a significant component of our success. Our senior management, virtually all of whom are Big Four or other professional services firm alumni, has created a culture that combines the commitment to quality and the client service focus of a Big Four firm with the entrepreneurial energy of an innovative, high-growth company. We seek associates and management with talent, integrity, enthusiasm and loyalty (“TIEL”) to strengthen our team and support our ability to provide clients with high-quality services.

Associates

We believe that an important component of our success has been our highly qualified and experienced associates. As of May 31, 2008, we employed or contracted with 3,490 associates on assignment. Our associates have professional experience in a wide range of industries and functional areas. We provide our associates with challenging work assignments, competitive compensation and benefits, and continuing education and training opportunities, while offering choice concerning work schedules and more control over choosing client engagements.

Almost all of our associates in the United States are employees of Resources Global. We typically pay each associate an hourly rate for each client service hour worked and, in some circumstances, limited administrative time, plus overtime premiums as required by law, and offer benefits, including: paid time off and holidays; referral bonus programs; group medical, dental and vision programs, each with an approximate 30-50% contribution by the associate; a basic term life insurance program; a 401(k) retirement plan with a discretionary company match; and professional development and career training. Typically, an associate must work a threshold number of hours to be eligible for all of these benefits. We also have a long-term incentive plan for our associates that provides the opportunity to earn an annual cash bonus vesting over time. In addition, we offer our associates the ability to participate in the Company’s Employee Stock Purchase Plan, which enables them to purchase shares of the Company’s stock at a discount. We intend to maintain competitive compensation and benefit programs.

Internationally, our associates are a mix between employees and independent contractors. Independent contractor arrangements are more common abroad than in the United States due to the labor laws, tax regulations and customs of the international markets we serve.

Clients

We provide our services to a diverse client base in a broad range of industries. In fiscal 2008, we served more than 2,400 clients. Our revenues are not concentrated with any particular client or clients, or within any particular industry. In fiscal 2008, our largest client accounted for less than 3% of our revenue and our 10 largest clients accounted for approximately 14% of our revenues.

Services and Products

Resources Global was founded with a business model and operating philosophy rooted in the support of client-led projects and initiatives. Partnering with business leaders, we help clients implement internal initiatives. Often, we deliver our services to clients across multiple service lines: Finance and Accounting, Human Capital, Information Management, Legal Services, Internal Audit and Risk Management, Actuarial Services and Supply Chain Management. We also provide content management through our web-based application, policyIQ ® .

Finance and Accounting

Our Finance and Accounting services encompass accounting operations, financial reporting, internal controls, financial analyses and business transactions. Clients utilize our services to bring accomplished talent to bear on change initiatives as well as day-to-day operational issues; we provide specialized skills and then transfer knowledge to clients in order to help them leverage their own personnel. Resources Global helps organizations to manage peak workload periods, add specific skill sets to certain projects, or have access to full project teams for a specific initiative.

Sample Engagement — Transition to IFRS: We are assisting a Canadian public company with a complex legal organizational structure, including international operations, with its transition from US generally accepted accounting principles (“GAAP”) and Canadian GAAP to International Financial Reporting Standards (“IFRS”). In April 2008, the Canadian Accounting Standards Board adopted IFRS in Canada, with a mandatory transition date for public enterprises effective for fiscal years beginning on or after January 1, 2011.

Our project team is assisting the client with a three-phase transition methodology. In phase I (already completed), the diagnostic phase, we developed a timeline for the transition process, identifying major milestones and deliverables required throughout the process, and a preliminary project plan transition overlay. In addition, we performed a diagnostic analysis of high-level issues expected to develop from the transition and prepared mock financial statements (using the Company’s 2007 annual report) adjusted to reflect the application of IFRS.

In future phases, we will develop a comprehensive list of detailed steps necessary to prepare the first complete IFRS financial statements and will document issues and solutions for integrating changes necessary in the Company’s underlying financial systems and processes.

Sample Engagement — Stock Option Accounting: We provided more than 20 professionals to assist a software company with a review of its historical stock option accounting. Two of the four project teams were led by Resources associates, who had responsibility for delivery of our services as well as interfacing with both the client’s external auditors and forensic auditors appointed by the Board of Director’s Special Committee. In addition, subsequent to filing its restated Form 10-K, the client was acquired by a Fortune 50 company and one of our professionals served as the lead on the finance team integration.

Human Capital

Associates in our Human Capital practice apply project management and business analysis skills to help solve the human resource aspects of business problems while working under the client’s direction as members of the project team. The two primary areas of our Human Capital practice are change management and human resources operations and technology.

Sample Engagement- Restructuring Assistance: Subsequent to assisting a global advertising company with their large restatement project, we evaluated the human resource challenges related to the reorganization of its international controllers group and presented our observations and recommendations during the client’s controllers meeting. We helped improve the quality of the client’s international controller organization by addressing the human resource aspects of the restructuring, leading to a stronger, cross divisional controllers’ organization. Specifically,

Sample Engagement — Assistance with Managing Growth: A large education company embarked on a steady acquisition and growth path to maintain its position as the leading provider of educational solutions, services and products for schools, libraries and colleges. As part of its leadership and acquisition strategy, the company needed to develop an internal and external communication plan, create a new enterprise-wide compensation structure, and adopt a leading edge, consumer-driven health care program for all employees. Our Human Capital professionals helped by managing and executing the company’s changes.

Our project managers and technical professionals helped execute a multi-phased implementation plan, assisted with market pricing, helped realign roles and responsibilities, and redesigned the company’s compensation strategy. In addition, we helped the client transition to a consumer-driven healthcare-focused company by providing guidance regarding plan design, internal communications, and a training plan rollout. We worked directly with the CEO on all internal and external corporate communications.

Sample Engagement — Process Improvement: A multi-billion health benefits company was impacted by operational challenges as it progressed through the first year of a Medicare enrollment project. During year two, the company launched an initiative to make operational improvements in enrollment, training, communication, error handling and customer service.

We were engaged to provide project management oversight, document processes for the central and western regions, develop training for customer service representatives, build business continuity plans and quality control processes for enrollment and customer service related processes, and identify root causes for rejected transactions. Our team, consisting of four project managers and nine professionals with process improvement and training backgrounds, partnered with the client and another third party consulting firm in strategy design and execution. Working with the overall client project manager, our team established detailed project plans for each of the eight sub-initiatives, set milestone dates, and developed a project-tracking mechanism.

We helped by co-developing and facilitating training programs for our client’s employees on project management tools and techniques. We also developed training documentation and reference manuals for the customer service representatives’ use when handling calls from Medicare members, ensuring consistent service.

Information Management

Our Information Management practice provides planning and execution support for designing and implementing project management offices, and for implementing and optimizing system initiatives related to: Enterprise Resource Planning (“ERP”) systems; strategic “front-of-the-house systems”; human resource information systems; disaster recovery and business continuity; core accounting and cost systems; financial reporting systems and business analysis.

CEO BACKGROUND

III. REQUIRED INFORMATION

Executive Officers

The following table sets forth information about our executive officers as of July 31, 2008. Each of our executive officers serves at the pleasure of the Board of Directors:


Name
Age
Position

Donald B. Murray
61 Executive Chairman of the Board of Directors and Director
Thomas D. Christopoul
44 Chief Executive Officer, President and Director
Nathan W. Franke
47 Chief Financial Officer and Executive Vice President
Karen M. Ferguson
44 Executive Vice President, President North America and Director
Kate W. Duchene
45 Chief Legal Officer, Executive Vice President of Human Resources and Assistant Secretary
Anthony Cherbak
54 Executive Vice President of Operations


MANAGEMENT DISCUSSION FROM LATEST 10K

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors including, but not limited to, those discussed in Part I Item 1A. “Risk Factors.” and elsewhere in this Report on Form 10-K.

Overview

Resources Global is a multi-national professional services firm that provides experienced finance, accounting, risk management and internal audit, information management, human capital, supply chain management and legal services professionals to clients on a project basis. We assist our clients with discrete projects requiring specialized expertise in:


• finance and accounting services, such as mergers and acquisitions due diligence, initial public offering assistance and assistance in the preparation or restatement of financial statements, financial analyses (e.g., product costing and margin analyses), corporate reorganizations, budgeting and forecasting, audit preparation, public-entity reporting and tax-related projects;

• information management services, such as financial system/enterprise resource planning implementation and post implementation optimization;

• human capital services, such as change management and compensation program design and implementation;

• risk management and internal audit services (provided via our subsidiary Resources Audit Solutions or “RAS”), including governance, risk management, compliance reviews, internal audit co-sourcing and assisting clients with their compliance efforts under Sarbanes or other regulatory guidelines;

• supply chain management (“SCM”) services, such as leading strategic sourcing efforts, contracts negotiation and purchasing strategy;

• actuarial services, such as for pension and life insurance companies; and

• legal services, such as providing attorneys, paralegals and contract managers to assist clients (including law firms) with initiative or project-based or peak period needs.

We were founded in June 1996 by a team at Deloitte & Touche LLP led by our executive chairman, Donald B. Murray, who was then a senior partner with Deloitte & Touche and Karen M. Ferguson, president of our North American operations, among others. Our founders created Resources Connection to capitalize on the increasing demand for high quality outsourced professional services. We operated as a part of Deloitte & Touche from our inception in June 1996 until April 1999. In April 1999, we completed a management-led buyout. In December 2000, we completed our initial public offering of common stock and began trading on the NASDAQ. We currently trade on the NASDAQ Global Select Market. In January 2005, we announced the change of our operating entity name to Resources Global Professionals to better reflect the Company’s multi-national capabilities.

During fiscal 2008, we continued our expansion around the world, acquiring practices in the United Kingdom and the Netherlands. We also opened four additional offices in the United States. At May 31, 2008, we served our clients through 56 offices in the United States and 33 offices abroad.

On June 1, 2007, the Company completed the acquisition of Compliance Solutions (UK) Ltd., a United Kingdom based provider of regulatory compliance services to investment advisors, hedge funds, private equity and venture capital firms, insurance companies and other financial institutions. The Company paid approximately $8.4 million for the acquisition, consisting of $6.2 million in cash and $2.2 million in the Company’s stock.

On December 18, 2007, the Company acquired Domenica B.V. (“Domenica”), a Netherlands based provider of actuarial services to pension and life insurance companies. The Company paid cash of approximately $23.6 million for the acquisition.

We expect to continue opportunistic international expansion while also investing in complementary professional services lines that we believe will augment our service offerings.

We primarily charge our clients on an hourly basis for the professional services of our associates. We recognize revenue once services have been rendered and invoice the majority of our clients on a weekly basis. Our clients are contractually obligated to pay us for all hours billed. To a much lesser extent, we also earn revenue if a client hires one of our associates. This type of contractually non-refundable revenue is recognized at the time our client completes the hiring process and represented 0.5%, 0.6% and 0.6% of our revenue for the years ended May 31, 2008, May 26, 2007 and May 27, 2006, respectively. We periodically review our outstanding accounts receivable balance and determine an estimate of the amount of those receivables we believe may prove uncollectible. Our provision for bad debts is included in our selling, general and administrative expenses.

The costs to pay our professional associates and all related benefit and incentive costs, including provisions for paid time off and other employee benefits, are included in direct cost of services. We pay most of our associates on an hourly basis for all hours worked on client engagements and, therefore, direct cost of services tends to vary directly with the volume of revenue we earn. We expense the benefits we pay to our associates as they are earned. These benefits include paid time off and holidays; a bonus incentive plan; referral bonus programs; subsidized group health, dental, vision and life insurance programs; a matching 401(k) retirement plan; the ability to participate in the Company’s Employee Stock Purchase Plan (“ESPP”); and professional development and career training. In addition, we pay the related costs of employment, including state and federal payroll taxes, workers’ compensation insurance, unemployment insurance and other costs. Typically, an associate must work a threshold number of hours to be eligible for all of the benefits. We recognize direct cost of services when incurred.

Selling, general and administrative expenses include the payroll and related costs of our internal management as well as general and administrative, marketing and recruiting costs. Our sales and marketing efforts are led by our management team who are salaried employees and earn bonuses based on operating results for our Company as a whole and within each individual’s geographic market.

The Company’s fiscal year consists of 52 or 53 weeks, ending on the last Saturday in May. For fiscal years of 53 weeks, such as fiscal 2008, the first three quarters consisted of 13 weeks each and the fourth quarter consisted of 14 weeks. Fiscal 2007 and 2006 consisted of 52 weeks each.

Critical Accounting Policies

The following discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The following represents a summary of our critical accounting policies, defined as those policies that we believe: (a) are the most important to the portrayal of our financial condition and results of operations and (b) involve inherently uncertain issues that require management’s most difficult, subjective or complex judgments.

Valuation of long-lived assets — We assess the potential impairment of long-lived tangible and intangible assets periodically or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Under the current accounting standard, our goodwill and certain other intangible assets are not subject to periodic amortization. These assets are now considered to have an indefinite life and their carrying values are required to be assessed by us for impairment at least annually. Depending on future market values of our stock, our operating performance and other factors, these assessments could potentially result in impairment reductions of these intangible assets in the future and this adjustment may materially affect the Company’s future financial results.

Allowance for doubtful accounts — We maintain an allowance for doubtful accounts for estimated losses resulting from our clients failing to make required payments for services rendered. We estimate this allowance based upon our knowledge of the financial condition of our clients, review of historical receivable and reserve trends and other pertinent information. While such losses have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. A significant change in the liquidity or financial position of our clients could cause unfavorable trends in receivable collections and additional allowances may be required. These additional allowances could materially affect the Company’s future financial results.

Income taxes — In order to prepare our consolidated financial statements, we are required to make estimates of income taxes, if applicable, in each jurisdiction in which we operate. The process incorporates an assessment of any current tax exposure together with temporary differences resulting from different treatment of transactions for tax and financial statement purposes. These differences result in deferred tax assets and liabilities that are included in our Consolidated Balance Sheets. The recovery of deferred tax assets from future taxable income must be assessed and, to the extent recovery is not likely, we will establish a valuation allowance. An increase in the valuation allowance results in recording additional tax expense and any such adjustment may materially effect the Company’s future financial result. If the ultimate tax liability differs from the amount of tax expense we have reflected in the Consolidated Statements of Income, an adjustment of tax expense may need to be recorded and this adjustment may materially affect the Company’s future financial results.

Revenue recognition — We primarily charge our clients on an hourly basis for the professional services of our associates. We recognize revenue once services have been rendered and invoice the majority of our clients in the United States on a weekly basis. Some of our clients served by our international operations are billed on a monthly basis. Our clients are contractually obligated to pay us for all hours billed. To a much lesser extent, we also earn revenue if a client hires one of our associates. This type of contractually non-refundable revenue is recognized at the time our client completes the hiring process.

Stock-based compensation — Under our 2004 Performance Incentive Plan, officers, employees, and outside directors have received or may receive grants of restricted stock, stock units, options to purchase common stock or other stock or stock-based awards. Under our ESPP, eligible officers and employees may purchase our common stock in accordance with the terms of the plan. Effective May 28, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised), “Share-Based Payment” (“SFAS 123 (R)”), using the modified prospective transition method; accordingly, prior periods have not been restated. Stock-based compensation expense recognized in the Company’s Financial Statements for the year ended May 26, 2007 included compensation expense for stock options granted prior to, but not yet vested as of, May 27, 2006. Under the previously accepted accounting standards, there was no stock-based compensation expense related to employee stock options and employee stock purchases recognized during prior periods.

The adoption of SFAS 123 (R) requires that the Company estimate a value for employee stock options on the date of grant using an option-pricing model. We have elected to use the Black-Scholes option-pricing model which takes into account assumptions regarding a number of highly complex and subjective variables. These variables include the expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors. Additional variables to be considered are the expected term and risk-free interest rate over the expected term of our employee stock options. In addition, because stock-based compensation expense recognized in the Statement of Income is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS 123 (R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based on historical experience. If facts and circumstances change and we employ different assumptions in the application of SFAS 123 (R) in future periods, the compensation expense recorded under SFAS 123 (R) may differ materially from the amount recorded in the current period.

The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of our employee stock options. The dividend yield assumption is based on our previous history of not paying dividends and our expectation that the special dividend paid in August 2007 is an isolated event and not the commencement of a regular dividend policy. The Company’s historical expected life of stock option grants is 5.23 years. As permitted under Staff Accounting Bulletin No. 107 (“SAB No. 107”), the Company uses its historical volatility over the expected life of the stock option award to estimate the expected volatility of the price of its common stock.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying Year Ended May 31, 2008 Compared to Year Ended May 26, 2007

Computations of percentage change period over period are based upon our results, as rounded and presented herein.

Revenue. Revenue increased $104.4 million, or 14.2%, to $840.3 million for the year ended May 31, 2008 from $735.9 million for the year ended May 26, 2007. An improvement in our average bill rate per hour and an increase in the number of hours billed were the primary causes of the increase in revenue. In addition, fiscal 2008 consisted of 53 weeks while fiscal 2007 consisted of 52 weeks. Revenues during the fifty-third week of fiscal 2008, which included the Memorial Day holiday in the United States, were $15.1 million. All service lines experienced growth in fiscal 2008 compared to fiscal 2007, with the exception of the RAS service line. Although we believe we have improved the awareness of our service offerings with clients and prospective clients because of assistance we have provided during the initial years of compliance with Sarbanes, there can be no assurance that there will be continuing demand for Sarbanes or related internal accounting control services or that our provision of such services will increase demand from our existing clients for our other service lines.

Average bill rates improved by 7.5% compared to the prior year average bill rate. The increase in revenue was also driven by an increase in the number of associates on assignment from 3,276 at the end of fiscal 2007 to 3,490 at the end of fiscal 2008. We operated 89 and 84 offices as of May 31, 2008 and May 26, 2007, respectively. Our clients do not sign long-term contracts with us. Therefore, our future revenue or operating results cannot be reliably predicted from previous quarters or from extrapolation of past results.

On a constant currency basis, international revenues would have been lower by $17.8 million and $9.5 million in fiscal 2008 and 2007, respectively, using the comparable fiscal 2007 and fiscal 2006 conversion rates, respectively.

Direct Cost of Services. Direct cost of services increased $71.0 million, or 15.9%, to $518.4 million for the year ended May 31, 2008 from $447.4 million for the year ended May 26, 2007. The increase in direct cost of services was attributable to the increase in our associates average pay rates as well as the previously described increase in number of hours billed; overall, the average pay rate per hour increased by 7.4% year-over-year. The direct cost of services as a percentage of revenue (the “direct cost of services percentage”) was 61.7% and 60.8% for the years ended May 31, 2008 and May 26, 2007, respectively. This increase was caused primarily by costs associated with the grant of an extra week of vacation for U.S. associates who met certain eligibility requirements commencing in the first quarter of fiscal 2008.

The cost of compensation and related benefits offered to the associates of our international offices has been greater as a percentage of revenue than our domestic operations. In addition, international offices use independent contractors more extensively. Thus, the direct cost of services percentage of our international offices has usually exceeded our domestic operation’s targeted direct cost of services percentage of 60%.

Selling, General and Administrative Expenses. Selling, general and administrative expenses (“S,G & A”) increased as a percentage of revenue from 26.0% for the year ended May 26, 2007 to 27.1% for the year ended May 31, 2008. S,G &A increased $36.3 million, or 18.9%, to $227.9 million for the year ended May 31, 2008 from $191.6 million for the year ended May 26, 2007. The increase in S,G &A primarily stems from increased personnel and related benefit costs, in both our U.S. and international markets. Management and administrative headcount grew from 825 at the end of fiscal 2007 to 876 at the end of fiscal 2008. In addition to the increase in salaries and benefit costs, other significant increases in fiscal 2008 included: an increase in spending for advertising, as the Company continued a branding campaign in various United States and international business periodicals; occupancy and related costs from relocated, expanded or new offices; and certain bonuses that are determined based upon revenue, which was higher in fiscal 2008 than in fiscal 2007.

Amortization and Depreciation Expense. Amortization of intangible assets decreased to $1.1 million in fiscal 2008 from $1.5 million in fiscal 2007. The decrease in fiscal 2008 is attributable to the completion of amortization of intangible assets related to previous acquisitions. However, this decrease was partially offset by the Company’s completion of its valuation studies during fiscal 2008 of its June 2007 purchase of Compliance Solutions (UK) Ltd. and its December 2007 purchase of Domenica. The Company considered a number of factors in performing these studies, including the valuation of identifiable intangible assets. The total intangible assets acquired included: for Compliance Solutions, approximately $7.4 million of goodwill, $16,000 for a non-compete agreement (amortized over one year) and $763,000 for customer relationships (amortized over five years); and for Domenica, approximately $15.6 million for goodwill, $6.2 million for customer relationships (amortized over seven years) and $556,000 for a database of potential associates (amortized over five years). Based upon identified intangible assets recorded at May 31, 2008, the Company anticipates amortization expense related to identified intangible assets to approximate $1.3 million during the fiscal year ending May 30, 2009.

Depreciation expense increased from $6.1 million for the year ended May 26, 2007 to $8.5 million for the year ended May 31, 2008. The increase in depreciation was related to a higher asset base due to the investments made in offices relocated or expanded since May 2007, and investments in the Company’s operating system and other information technology. As the Company continues to invest in new offices or expanded or new office space for existing offices and capital equipment, the Company expects that depreciation expense in future periods will increase.

Interest Income. Interest income was $5.6 million in fiscal 2008 compared to $8.9 million in fiscal 2007. The decrease in interest income is the result of a lower average cash balance available for investment during fiscal 2008 and declining interest rates as compared to fiscal 2007. During fiscal 2008, the Company used approximately $102.1 million to purchase its common stock; paid a special dividend of approximately $60.7 million in the first quarter of fiscal 2008; and used approximately $29.8 million to acquire Domenica (December 2007) and Compliance Solutions (June 2007).

The Company has invested available cash in money market and government-agency bonds that have been classified as cash equivalents due to the short maturities of these investments. As of May 31, 2008, the Company has $26.0 million of investments in commercial paper and government-agency bonds with remaining maturity dates between three months and one year from the balance sheet date classified as short-term investments and considered “held-to-maturity” securities.

Income Taxes. The provision for income taxes decreased from $43.5 million for the year ended May 26, 2007 to $40.9 million for the year ended May 31, 2008. The provision declined primarily because of a reduction in the Company’s pretax income in fiscal 2008 as compared to fiscal 2007, offset in part by an increase in the Company’s effective tax rate between the two years. The effective tax rate was 45.4% for fiscal 2008 and 44.3% for fiscal 2007. The primary reason for the increase in the effective tax rate was primarily due to increases in state taxes, lower benefit from international tax rates and an increase in the rate attributable to permanent differences because of lower pretax income in fiscal 2008 as compared to fiscal 2007.

In some circumstances, the Company cannot recognize a larger tax benefit relative to the amount of stock-based compensation expense. Under SFAS 123 (R), the Company cannot recognize a tax benefit for certain incentive stock option (“ISO”) grants unless and until the holder exercises his or her option and then sells the shares within a certain period of time. In addition, the Company can only recognize a tax benefit for employees’ acquisition and subsequent sale of shares purchased through the ESPP if the sale occurs within a certain defined period. As a result, the Company’s provision for income taxes is likely to fluctuate from historical rates for the foreseeable future. Further, under SFAS 123 (R), those tax benefits associated with ISO grants fully vested at the date of adoption of SFAS 123 (R) will be recognized as additions to paid-in capital when and if those options are exercised and not as a reduction to the Company’s tax provision. The Company recognized a benefit of approximately $4.7 million and $3.4 million related to stock-based compensation for nonqualified stock options expensed and for eligible disqualifying ISO exercises during fiscal 2008 and 2007, respectively. The timing and amount of eligible disqualifying ISO exercises cannot be predicted. The Company predominantly grants nonqualified stock options to employees in the United States.

Periodically, the Company reviews the components of both book and taxable income to analyze the adequacy of the tax provision. There can be no assurance that the Company’s effective tax rate will not increase in the future.

Year Ended May 26, 2007 Compared to Year Ended May 27, 2006

Computations of percentage change period over period are based upon our results, as rounded and presented herein.

Revenue. Revenue increased $102.1 million, or 16.1%, to $735.9 million for the year ended May 26, 2007 from $633.8 million for the year ended May 27, 2006. The continued expansion of our scope of services and improved overall demand for our services triggered the increase in revenue, resulting in more billable hours for our associates and an improvement in rate per hour. We believe our business expanded due in part to increasing market awareness of our ability to provide services. In particular, finance and accounting services increased significantly in the current year compared to the prior year. We believe one of the reasons for the increase in these types of engagements is new projects from existing clients who had engaged us to provide services during their initial phase of compliance with Sarbanes. All of our other service offerings (except for RAS) experienced growth in fiscal 2007 compared to fiscal 2006.

Average bill rates improved by 7.3% compared to the prior year average bill rate. The increase in revenue was also driven by the increase in the number of associates on assignment from 2,857 at the end of fiscal 2006 to 3,276 at the end of fiscal 2007. We operated 84 and 78 offices during the final quarters of fiscal 2007 and fiscal 2006, respectively.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

11. Supplemental Cash Flow Information
The Consoldated Statements of Cash Flows for the six months ended November 24, 2007 does not include under the caption “cash flows from investing activities” the non-cash issuance of 66,715 shares of the Company’s common stock held in treasury, representing $2.2 million of the $8.2 million purchase price for Compliance Solutions.
The Consolidated Statements of Cash Flows for the six months ended November 24, 2007 does not include under the caption “cash flows from financing activities” the non-cash cancellation of 10,000 shares of the Company’s common stock that had been classified as treasury stock. In accordance with the amendment to the Company’s 2004 Performance Incentive Plan, the Company is unable to reissue these shares at a future date.
12. Subsequent Events
On December 1, 2008, the Company acquired Kompetensslussen, a human resource consulting business located in Sweden. The Company paid approximately $1.3 million, with additional consideration payable upon the achievement of certain future operating results.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes. This discussion and analysis contains “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to expectations concerning matters that are not historical facts. 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. These statements, and all phases of our operations, are subject to known and unknown risks, uncertainties and other factors, some of which are identified in Part II Item 1A Risk Factors below and in our report on Form 10-K for the year ended May 31, 2008 (File No. 0-32113). Readers are cautioned not to place undue reliance on these forward-looking statements. Our actual results, levels of activity, performance or achievements and those of our industry may be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. We undertake no obligation to update the forward-looking statements in this filing. References in this filing to “Resources Connection,” “Resources Global Professionals,” “Resources Global,” the “Company,” “we,” “us,” and “our” refer to Resources Connection, Inc. and its subsidiaries.
Overview
Resources Global is an international professional services firm that provides experienced finance, accounting, risk management and internal audit, information management, human capital, supply chain management, actuarial and legal services professionals in support of client-led projects and initiatives. We assist our clients with discrete projects requiring specialized expertise in:
• finance and accounting services, such as mergers and acquisitions due diligence, initial public offering assistance and assistance in the preparation or restatement of financial statements, financial analyses (e.g., product costing and margin analyses), corporate reorganizations, budgeting and forecasting, audit preparation, public entity reporting and tax-related projects;

•information management services, such as financial system/enterprise resource planning implementation and post implementation optimization;

• human capital services, such as change management and compensation program design and implementation;

• risk management and internal audit services (provided via our subsidiary Resources Audit Solutions), including compliance reviews, internal audit co-sourcing and assisting clients with their compliance efforts under the Sarbanes-Oxley Act of 2002 (“Sarbanes”);

• supply chain management services, such as leading strategic sourcing efforts, contract negotiations and purchasing strategy;

• actuarial services, such as for pension and life insurance companies; and

• legal services such as providing attorneys, paralegals and contract managers to assist clients (including law firms) with project-based or peak period needs.
We were founded in June 1996 as a division of Deloitte & Touche and operated as Resources Connection, LLC, a wholly owned subsidiary of Deloitte & Touche, from January 1997 until April 1999. In November 1998, our management formed RC Transaction Corp., renamed Resources Connection, Inc., to raise capital for an intended management-led buyout. In April 1999, we completed the management-led buyout in partnership with several investors. In December 2000, we completed our initial public offering of common stock and began trading on the NASDAQ. We currently trade on the NASDAQ Global Select Market. In January 2005, we announced the change of our operating entity name to Resources Global Professionals to better reflect the Company’s international capabilities.
We operated solely in the United States until fiscal year 2000, when we began to expand geographically to meet the demand for project professional services across the world and opened our first three international offices. Our most significant international transaction was the acquisition of our Netherlands practice in fiscal year 2004. As of November 29, 2008, the Company served clients through 56 offices in the United States and 33 offices abroad.
Critical Accounting Policies
The following discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
The following represents a summary of our critical accounting policies, defined as those policies that we believe: (a) are the most important to the portrayal of our financial condition and results of operations and (b) involve inherently uncertain issues that require management’s most difficult, subjective or complex judgments.
Valuation of long-lived assets —We assess the potential impairment of long-lived tangible and intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Under the current accounting standard, our goodwill and certain other intangible assets are not subject to periodic amortization. These assets are now considered to have an indefinite life and their carrying values are required to be assessed by us for impairment at least annually. Depending on future market values of our stock, our operating performance and other factors, these assessments could potentially result in impairment reductions of these intangible assets in the future and this adjustment could materially affect the Company’s future financial results.
Allowance for doubtful accounts —We maintain an allowance for doubtful accounts for estimated losses resulting from our clients failing to make required payments for services rendered. We estimate this allowance based upon our knowledge of the financial condition of our clients, review of historical receivable and reserve trends and other pertinent information. While such losses have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. A significant change in the liquidity or financial position of our clients could cause unfavorable trends in receivable collections and additional allowances may be required. These additional allowances could materially affect the Company’s future financial results.
Income taxes —In order to prepare our consolidated financial statements, we are required to make estimates of income taxes, if applicable, in each jurisdiction in which we operate. The process incorporates an assessment of any current tax exposure together with temporary differences resulting from different treatment of transactions for tax and financial statement purposes. These differences result in deferred tax assets and liabilities that are included in our Consolidated Balance Sheets. The recovery of deferred tax assets from future taxable income must be assessed and, to the extent recovery is not likely, we will establish a valuation allowance. An increase in the valuation allowance results in recording additional tax expense and any such adjustment may materially effect the Company’s future financial results. If the ultimate tax liability differs from the amount of tax expense we have reflected in the Consolidated Statements of Income, an adjustment of tax expense may need to be recorded and this adjustment could materially affect the Company’s future financial results.

Revenue recognition — We primarily charge our clients on an hourly basis for the professional services of our consultants. We recognize revenue once services have been rendered and invoice the majority of our clients in the United States on a weekly basis. Some of our clients served by our international operations are billed on a monthly basis. Our clients are contractually obligated to pay us for all hours billed. To a much lesser extent, we also earn revenue if a client hires one of our consultants. This type of contractually non-refundable revenue is recognized at the time our client completes the hiring process.
Stock - based Compensation — Under our 2004 Performance Incentive Plan, officers, employees and outside directors have received or may receive grants of restricted stock, stock units, options to purchase common stock or other stock or stock-based awards. Under our Employee Stock Purchase Plan (“ESPP”), eligible officers and employees may purchase our common stock in accordance with the terms of the plan. Effective May 28, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised), “Share-Based Payment” (“SFAS 123 (R)”). SFAS 123 (R) requires that the Company estimate the value of employee stock options on the date of grant using an option-pricing model. We have elected to use the Black-Scholes option-pricing model which takes into account assumptions regarding a number of highly complex and subjective variables. These variables include the expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors. Additional variables to be considered are the expected term and risk-free interest rate over the expected term of our employee stock options. In addition, because stock-based compensation expense recognized in the Statement of Income is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS 123 (R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based on historical experience. If facts and circumstances change and we employ different assumptions in the application of SFAS 123 (R) in future periods, the compensation expense recorded under SFAS 123 (R) may differ materially from the amount recorded in the current period.

The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of our employee stock options. The dividend yield assumption is based on our previous history of not paying dividends and our expectation that the special dividend paid in August 2007 was an isolated event and not the commencement of a regular dividend. The Company’s historical expected life of stock option grants this quarter is approximately 5.1 years. As permitted under Staff Accounting Bulletin No. 107 (“SAB No. 107”), the Company uses its historical volatility over the expected life of the stock option award to estimate the expected volatility of the price of its common stock.
We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

Revenue . Revenue decreased $16.4 million, or 7.9%, to $190.2 million for the three months ended November 29, 2008 from $206.6 million for the three months ended November 24, 2007. Although our average bill rate per hour increased quarter over quarter and we benefited from incremental revenue from the December 2007 acquisition of Domenica B.V., our revenue was adversely affected by a decline in number of hours worked by our consultants in comparison to the prior year comparable quarter and an unfavorable currency translation impact during the quarter. Although we believe we have improved the awareness of our service offerings since our founding in 1996 with clients and prospective clients through our work (including Sarbanes or related internal accounting control services), and that the significant changes taking place in the capital markets may present new opportunities going forward there can be no assurance about the timing of such opportunities or whether we can successfully capitalize on them, especially given the current uncertain economic climate in the United States and certain international markets.
Average bill rates for the three months ended November 29, 2008 improved by 1.3% from the same period in the prior year. However, the number of consultants on assignment at the end of the second quarter of fiscal 2009 of 2,854 was less than the 3,319 at the end of the second quarter of fiscal 2008 and the number of hours worked in the second quarter of fiscal 2009 declined about 9.4% from the prior year’s second quarter. On a constant currency basis, international revenues would have been higher by $3.9 million in the second quarter of fiscal 2009 and lower by $4.9 million in the second quarter of fiscal 2008, using the comparable fiscal 2008 and fiscal 2007 conversion rates. The Company operated 89 and 87 offices during the second quarters of fiscal 2009 and fiscal 2008, respectively. Our clients do not sign long-term contracts with us. Therefore, our future revenue or operating results cannot be reliably predicted from previous quarters or from extrapolation of past results.

CONF CALL

Kate Duchene

Good afternoon everyone and thank you for participating today. During this call we will be providing you with comments on our results for the second 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 a copy via our website, please call Patricia Marquez at 714-430-6314 and she will be happy to fax a copy to you.

Before introducing Tom Christopoul, our CEO, I would 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 31, 2008, 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 Tom Christopoul, our Chief Executive Officer.

Thomas D. Christopoul

Good afternoon everyone and welcome to the Resources Global second quarter conference call. Joining me today here in Irvine are Don Murray, our Executive Chairman, and our senior leadership team of Nate Franke, Kate Duchene, Tony Cherbak, and Karen Ferguson.

Let me begin by giving you a brief snapshot of our second quarter operating results. Total revenues for the second quarter of fiscal 2009 were $190.2 million, down 7.9% over the second quarter a year ago.

Net earnings were $9.5 million, or $0.32 per share, compared to $0.27 per share that we reported a year ago this quarter.

Our second quarter revenues came in approximately 3.5% below what our computed run rate was for the first four weeks of the quarter. But despite the high level of turmoil and uncertainty in the global economy, our average weekly client service hours, excluding the holiday weeks, were relatively consistent throughout the quarter.

However, within the quarter we experienced significant movements in foreign currency exchange rates which caused us to lose approximately $3.3 million in revenue from early in the second quarter through the end of the quarter as the U.S. dollar strengthened dramatically against a host of foreign currencies, most notably for us, the Euro and the pound.

Second quarter gross margin increased 50 basis points to 39% and that compares to 38.5% a year ago, which was flat sequentially with last quarter.

Aggregate SG&A dollars decreased 3.7%, primarily the result of exchange rate differences from the first quarter. Nate will provide more detail on our second quarter financial results later in the call.

As many companies struggle to find financing in a difficult credit market, Resources continues to generate cash based on the strength of our business model. Our business model, as you know, suggests that 70% of our cash costs are variable and that is self-regulatory and as our cost of revenue decreases our revenue levels become less volatile.

The variable nature of our business model dramatically decreases our risk profile. Through the first half of fiscal 2009 we have generated approximately $31.0 million in cash from operations and ended our second quarter with approximately $134.0 million in cash and investments and no debt.

Our ability to generate cash allows us to be opportunistic in returning cash to shareholders or taking advantage of attractive investment opportunities as they present themselves in the global market.

Business today for Resources is definitely more difficult than it was 12 to 18 months ago and it is obviously testing the strength of our business model as well as the resolve of our people. We are quite confident that we will pass these tests successfully.

As I have communicated to our people all over the world, extraordinary times require extraordinary effort. Everyone at Resources is working harder today to develop business and take advantage of every revenue opportunity that presents itself while at the same time working efficiently to control discretionary costs.

These efforts are reflected in our current operating results and will also serve to make us a much stronger company as we emerge from this phase of the current economic cycle. We will continue to stay focused on what we can control and not be distracted by extraordinary events in the capital markets.

And I would also like to take this opportunity to discuss with you some very recent organizational changes within Resources. These changes to our senior leadership team are not revolutionary by any means, but rather are designed to support the evolution of our enterprise in accordance with our long-term growth strategies and the execution of our unique value proposition, which is the foundation of our competitive advantage in the market place.

Given the high levels of uncertainty in the markets these days, I will mention that these changes all involve very straight-forward modifications to the accountabilities of the existing senior leadership of the company and in no way signals any significant restructuring or discontinuity of leadership at Resources.

First, Karen Ferguson will take on a new challenge as Executive Vice President and Chief Strategy Officer for Resources, reporting to me. In this role Karen will be focusing most of her time leading growth initiatives and assessing market opportunities for the company globally.

In connection with Karen moving to this new role, I will take direct accountability for operations in North America and accordingly the North American Regional Managing Directors will report to me.

Separately, as my recent travels visiting our operations around the world have reinforced, we are very well positioned to take advantage of growth opportunities in markets outside of North America. In order to provide appropriate management focus on these reasons, I have asked Tony Cherbak to accept the role of President, International Operations. In this capacity Tony will shift a significant amount of his focus to leading our international practices on a day-to-day basis.

And finally, consistent with our ongoing strategy to serve large, multi-national companies as growing clients of Resources, we have formed a strategic accounts team that will advance this important growth element of our strategy, led by Tom Schember.

I believe these changes will provide the right leadership support of our growth agenda globally and maintain focus and results in three important areas of our company’s activities, which are core to our success.

One, continued flawless execution of Resources practice fundamentals of our clients around the world; two, proactive and comprehensive account management of new and existing multi-national companies to support their global initiatives; and three, continued development of strategic initiatives including acquisitions and internal capabilities to deliver incremental growth.

With that I will turn it over to Nate for a detailed review of our financial results.

Nathan W. Franke

As mentioned, revenues for the quarter were $190.2 million, a 7.9% decrease from $206.6 million in the comparable quarter a year ago.

On a sequential basis, second quarter revenue declined 8.2% from $207.3 million in the first quarter of fiscal 2009. Approximately 40% of the sequential percentage decrease relates to foreign currency exchange rate changes.

While Tony will discuss our international operations in greater depth, let me discuss some highlights of our revenues geographically.

For the second quarter, revenues in the U.S. were $134.4 million, a decrease of 11% quarter-over-quarter. On a sequential basis, U.S. revenue decreased 8%.

For the second quarter, total revenues internationally of $55.9 million were approximately even with $55.6 million in the quarter a year ago and on a sequential basis international revenues decreased 8.6%. International revenue accounted for 29% of total revenues for the quarter versus 30% last quarter.

Europe’s second quarter revenues were flat quarter-over-quarter while the Asia Pacific region saw second quarter revenues up 2% quarter-over-quarter.

As you are aware, during the second quarter of 2009 the U.S. dollar strengthened against several foreign currencies. As Tom mentioned, based upon exchange rates from the first few weeks of second quarter, our second quarter revenues were reduced by $3.3 million.

Additionally, on a quarter-over-quarter basis the U.S. dollar strengthened against most of the currencies of our foreign locations and as a result, international revenues would have been higher by about $4.0 million in the second quarter using comparable fiscal 2008 conversion rates.

On a constant currency basis, and excluding acquired business revenue in the quarter, international revenue was essentially flat quarter-over-quarter, a gratifying result in the current environment which should not be overlooked.

Let me now discuss revenue trends for the third quarter of fiscal 2009. Weekly revenues for the first four weeks of the third quarter were $14.4 million, $14.1 million, $13.8 million, and $6.3 million, the latter of which includes the Christmas holiday period. While we are still compiling revenue data from last week, using the average of the most recent non-holiday weekly run rates over the remaining weeks of the first quarter, and adjusting for New Year’s and certain other holidays, we would achiever third quarter revenues of approximately $167.0 million.

Consistent with our historical practice and the operating philosophy of Resources, this computation is purely mathematical and does not consider increases or decreases and weekly run rates over the balance of the quarter, exchange rate changes, or other factors. As you also know, it is in no way reflective of any formalized budget or forecast.

Now, let me discuss gross margins. Gross margin for the second quarter was 39%, compared to 38.5% a year ago, a 50 basis point improvement. Excluding reimbursable expenses, our second quarter gross margin was 39.9%, which compares to 39.3% in the second quarter a year ago. The quarter-over-quarter improvement stems primarily from continued improvement and bill versus pay ratio.

The average billing rate for the second quarter was approximately $131 and represents a 1.3% increase from approximately $129 a year ago. The average pay rate for the second quarter was approximately $67, which represents a 1% increase from $66 a year ago.

On a sequential basis our second quarter gross margin was flat with the 39% experienced in the first quarter of fiscal 2009. Gross margin in the United States was 40.1% and our international gross margin was 36.2%.

In thinking about the third quarter of fiscal 2009, it is important to remember that we have historically experienced an approximate 150 basis point decrease in gross margin as a result of the winter holidays and the resetting of certain statutory payroll taxes at the beginning of the calendar year.

Now to headcount, for the second quarter average consultant FTE count was 2,938. This compares to 3,087 in the previous quarter and 3,234 in the year-ago quarter. Quarter end consultant headcount was 2,854 versus 3,319 a year ago. The total headcount of the company was 3,041 at quarter end.

Now to the other components of our second quarter financial results, total selling, general, and administrative expenses, including stock compensation for the second quarter were $54.4 million, or 28.6% of revenue compared to $55.5 million, or 26.9% in the second quarter of fiscal 2008. SG&A was $56.5 million, or 27.3% of revenue in the first quarter of fiscal 2009. The sequential improvement in SG&A primarily stems from foreign exchange rate changes.

As a percentage of revenue our SG&A expense leverage was less than that achieved during the first quarter of fiscal 2009, primarily due to the lower revenue base in the second quarter.

Stock compensation expense was $4.6 million, or 2.4% of total revenue versus $5.3 million, or 2.6% of total revenue in the second quarter of fiscal 2008.

While we continue to focus on our SG&A spending, excluding the impact of exchange rate changes, we would anticipate SG&A expenses to be relatively consistent with our second quarter of fiscal 2009 in the upcoming third quarter.

At the end of the second quarter our office count remains at 89, 56 domestic and 33 international.

Depreciation and amortization was $2.5 million for the quarter, up about $450,000 over last year’s second quarter, as the result of our increased asset base. Based upon our current asset base, we would expect similar levels of depreciation and amortization expense in the upcoming quarters.

Interest income decreased by about $1.2 million to $380,000 in the second quarter versus $1.6 million a year ago. Interest income decreased due to lower average interest rates earned on our invested cash in the second quarter of fiscal 2009.

Our adjusted EBITDA, or cash flow margin, which we define as EBITDA before stock comp expense, was 12.8% in the second quarter compared to 14.2% a year ago and to 14.1% in the first quarter of fiscal 2009.

Earnings for the quarter, including stock compensation expense, was $9.5 million, or $0.21 on a diluted per share basis versus $13.0 million, or $0.27 per share a year ago.

In the second quarter the non-cash pre-tax charge for stock compensation was $0.08 per share versus $0.09 per share in the comparable quarter a year ago.

As we have discussed previously, the cash treatment of our incentive stock options under FASB 123(R) will likely cause continued volatility in our GAAP tax expense. During our second quarter we experienced a decrease in the number of ISOs exercised, thereby decreasing the tax benefit related to ISOs for which we reported compensation expense of $1.9 million. As a result, our GAAP tax rate was 46.1% for the quarter versus 44.8% in the comparable quarter a year ago.

On a cash basis we will get a real tax deduction for all ISOs when they are exercised and ultimately sold. Our tax rate before the impact of stock comp expense was approximately 40.5% for the second quarter.

Now let me turn to our balance sheet. Cash and investments at the end of the second quarter were about $134.0 million, a $27.0 million increase from the end of fiscal 2008. During the first six months of fiscal 2009 we have generated approximately $31.0 million in cash flow from operations.

We purchased 392,000 shares of our stock for approximately $6.3 million at an average price of $16.04. Our current Board authorization for our stock buy-back program has approximately $41.6 million remaining. Throughout the balance of fiscal 2009 we will continue to assess additional share repurchases in connection with the other capital requirements of growing our business.

Our shares outstanding at the end of the second quarter were approximately 44.9 million.

Receivables at quarter end were $103.0 million, down by about $14.0 million from the previous quarter. Days of revenue outstanding were approximately 48 days, down three days from the prior year’s comparable quarter and one day lower than the first quarter of fiscal 2009.

Now let me turn the call over to Tony for some additional commentary.

Anthony Cherbak

I would like to take a moment to provide a bit more detail on our international operations. Total revenues for the Netherlands practice in Q2, excluding Dominica, were $16.9 million, down 13% quarter-over-quarter. U.K. revenues were down 31% quarter-over-quarter. Approximately one half of these percentage decreases were attributable to foreign currency changes as the dollar strengthened against the pound and the Euro. Dominica’s revenues during the second quarter were $4.7 million.

Despite the economic issues impacting some of our practices in Europe, we continue to see encouraging signs from our north regions as well as our offices in France, Italy, and Germany.

In November we acquired [Copen and Smusen], a small human resource consulting business located in Sweden. This acquisition adds a much expanded portfolio of human capital services towards Swedish practice and presents cross-selling opportunities for all practice areas within our collective Swedish client base. We paid approximately $1.3 million for this company, with additional consideration payable upon the achievement of certain future operating results. [Copen and Smusen] currently has annual revenues of approximately $3.0 million.

In Asia we continue to be encouraged by the progress we are making in Japan through our offices in Tokyo and Nagoya. We are also committed to growing our newer practices in China through our offices in Hong Kong, Beijing, and Shanghai, where we see significant opportunities with both our multi-national clients as well as domestic enterprises.

Let me talk for a moment now about our clients. In fiscal 2008 we had 340 clients for whom we provided services exceeding $500,000 in fees. Through the end of our second quarter, on a run rate basis, we served the same number of clients at this level as of the end of the second quarter a year ago.

Revenues from our top 50 clients represented 36% of total revenues, while 50% of our revenues came from 113 clients. This is consistent with our past experience and validates our strategy to target large companies with whom we can develop sustainable and repeatable client relationships.

Our business with financial services companies decreased 13.5% quarter-over-quarter. While demand from these clients has decreased from a year ago, we continue to enjoy significant client relationships in the financial services sectors, ten of which exceeded $1.0 million in revenue for the quarter. Our largest client for the quarter was approximately 3% of revenues.

Client continuity continues to be solid. Through our second quarter we served all our top 50 clients from fiscal year 2008 and fiscal year 2007. Our loyal client following is reflective of our client service approach and our basic principle of always doing the right thing for our clients.

Through the second quarter 48 of our top 50 clients have used more than one service line and 80% of those top 50 clients have used three or more service lines. This service line penetration reflects the diversity of relationships we have within our clients’ organizations.

I would like to turn the call back to Tom for some closing remarks.

Thomas D. Christopoul

That concludes our remarks that are prepared and we are happy to answer your questions at this time.

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