FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number 0-15539
RIGHT MANAGEMENT CONSULTANTS, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2153729
(State of other jurisdiction of (IRS Employer
incorporation of organization) Identification No.)
1818 Market Street, Philadelphia, Pennsylvania 19103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 988-1588
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes __X__ No ____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of October 31, 1995 (See Note D):
Common Stock, $0.01 par value 4,041,992
Class Number of Shares
<PAGE>
Right Management Consultants, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
(Unaudited)
Assets
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 7,870,758 $ 9,155,835
Accounts receivable, trade, net of allowance for
doubtful accounts of $1,099,000 and $651,000 in
1995 and 1994, respectively 18,433,438 14,282,604
Royalties and fees receivable from Affiliates 3,116,972 3,118,796
Current portion of note receivable 233,333 285,635
Prepaid expenses 1,232,049 978,727
Current deferred income taxes 780,000 621,000
------------ ------------
Total current assets 31,666,550 28,442,597
Property and equipment, less accumulated depreciation of
$9,033,022 in 1995 and $6,977,188 in 1994 7,295,933 6,693,861
Other Assets:
Intangible assets, less accumulated amortization of $6,196,995
in 1995 and $4,790,230 in 1994 17,513,316 11,888,139
Non-current deferred income taxes 772,282 394,000
Non-current portion of note receivable 214,035 435,067
Other 1,351,667 1,115,247
------------ ------------
19,851,300 13,832,453
------------ ------------
Total Assets $ 58,813,782 $ 48,968,911
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Current portion of long-term debt and other obligations $ 5,118,845 $ 2,086,357
Accounts payable 3,965,804 3,354,159
Commissions payable 2,982,327 2,327,706
Accrued incentive compensation and benefits 1,832,002 5,521,178
Accrued redundant costs 717,063 976,779
Other accrued expenses 2,439,944 1,962,282
Deferred income 4,334,072 2,331,230
------------ ------------
Total current liabilities 21,390,057 18,559,691
Long-term debt and other obligations 5,360,816 4,707,075
Deferred compensation 1,672,902 1,296,775
Commitments and Contingent Liabilities
Stockholders' Equity:
Preferred stock, no par value; 1,000,000 shares authorized; no
shares issued or outstanding
Common stock, $.01 par value; 20,000,000 shares authorized;
4,411,520 shares issued and 4,032,092 shares outstanding in 1995
(See Note D); 2,891,971 shares issued and 2,639,019 shares
outstanding in 1994; 44,115 28,920
Additional paid-in capital 6,862,766 6,544,547
Retained earnings 24,338,596 18,829,744
Cumulative translation adjustment (338,343) (480,714)
------------ ------------
30,907,134 24,922,497
Less treasury stock, at cost, 379,428 shares (517,127) (517,127)
------------ ------------
30,390,007 24,405,370
------------ ------------
Total Liabilities and Stockholders' Equity $ 58,813,782 $ 48,968,911
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE>
Right Management Consultants, Inc.
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three months ended
September 30,
1995 1994
(Unaudited) (Unaudited)
<S> <C> <C>
Revenue:
Company Office revenue $ 26,596,636 $ 22,067,289
Affiliate royalties 1,029,625 1,142,599
------------ ------------
Total revenue 27,626,261 23,209,888
Costs and expenses:
Consultants' compensation 9,694,930 7,816,027
Company Office sales and consulting support 1,511,850 1,228,957
Company Office administration 9,482,336 8,419,890
General sales, consulting and administration 3,659,055 3,293,054
------------ ------------
24,348,171 20,757,928
------------ ------------
Income from operations 3,278,090 2,451,960
Other income (expense):
Interest income 72,099 86,918
Interest expense (234,016) (96,027)
------------ ------------
(161,917) (9,109)
------------ ------------
Income before income taxes 3,116,173 2,442,851
Provision for income taxes 1,207,000 1,017,000
------------ ------------
Net income $ 1,909,173 $ 1,425,851
============ ============
Earnings per share (See Note D):
Net income $ 0.45 $ 0.35
============ ============
Weighted average number of shares outstanding 4,236,054 4,106,445
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
Right Management Consultants, Inc.
Consolidated Statements of Income
<TABLE>
<CAPTION>
Nine months ended
September 30, 1995
1995 1994
(Unaudited) (Unaudited)
<S> <C> <C>
Revenue:
Company Office revenue $ 80,484,811 $ 60,411,729
Affiliate royalties 3,164,443 3,272,632
------------ ------------
Total revenue 83,649,254 63,684,361
Costs and expenses:
Consultants' compensation 29,425,745 21,876,586
Company Office sales and consulting support 5,501,181 3,832,373
Company Office administration 28,565,444 21,721,528
General sales, consulting and administration 10,763,447 8,872,740
------------ ------------
74,255,817 56,303,227
------------ ------------
Income from operations 9,393,437 7,381,134
Other income (expense):
Interest income 245,112 214,141
Interest expense (565,673) (233,338)
------------ ------------
(320,561) (19,197)
------------ ------------
Income before income taxes 9,072,876 7,361,937
Provision for income taxes 3,563,000 3,203,000
------------ ------------
Net income $ 5,509,876 $ 4,158,937
============ ============
Earnings per share (See Note D):
Net income $ 1.32 $ 1.02
============ ============
Weighted average number of shares outstanding 4,169,402 4,082,265
============ ============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE>
Right Management Consultants, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months ended
September 30,
1995 1994
(Unaudited) (Unaudited)
<S> <C> <C>
Operations:
Net income $ 5,509,876 $ 4,158,937
Adjustments to reconcile net income to net cash
utilized by operating activities:
Depreciation and amortization 3,155,966 2,391,279
Deferred taxes (537,000) (125,000)
Other non-cash charges 464,548 567,243
Revenue recognized for assumption of incomplete contracts (171,544) (738,891)
Provision for doubtful accounts 361,000 75,000
Changes in operating accounts:
Accounts receivable, trade and from Affiliates (3,746,730) (2,837,851)
Prepaid expenses and other assets (73,620) (730,110)
Accounts payable and accrued expenses (3,338,681) (198,231)
Commissions payable 611,099 (239,661)
Deferred income 1,681,458 1,801,021
----------- -----------
Net cash provided by operating activities 3,916,372 4,123,736
Investing Activities:
Purchase of property and equipment (1,908,455) (1,848,873)
Net cash paid for acquisitions (2,065,576) (1,599,154)
----------- -----------
Net cash utilized by investing activities (3,974,031) (3,448,027)
Financing Activities:
Payment of long-term debt and other obligations (1,626,521) (1,238,598)
Proceeds from stock issuances 342,250 362,041
----------- -----------
Net cash utilized by financing activities (1,284,271) (876,557)
Effect of exchange rate changes on cash and
cash equivalents 56,853 97,804
----------- -----------
Decrease in cash and cash equivalents (1,285,077) (103,044)
Cash and cash equivalents, beginning of period 9,155,835 8,638,758
=========== ===========
Cash and cash equivalents, end of period $ 7,870,758 $ 8,535,714
=========== ===========
Supplemental Disclosures of Cash Flow Information
Cash paid for:
Interest $ 355,544 $ 101,654
=========== ===========
Income taxes $ 3,931,295 $ 2,910,473
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and footnote disclosures necessary for a fair presentation of consolidated
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the nine
months ended September 30, 1995 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1995. Certain amounts have
been reclassified in the 1994 Consolidated Balance Sheet and Statement of Cash
Flows to conform with the 1995 presentation. For further information, refer to
the financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1994.
Principles of Consolidation
The consolidated financial statements include the accounts of Right
Management Consultants, Inc., and its wholly-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated in consolidation.
Currency Translation
There are no material transaction gains or losses in the accompanying
consolidated financial statements.
NOTE B - ACQUISITIONS AND DEBT AND OTHER OBLIGATIONS
The net cash paid for the acquisitions of the Company's Cupertino,
California Affiliate in January 1995 and LM&P, SA ("LM&P") in April 1995 of
approximately $2,065,000 reflected in the Consolidated Statement of Cash Flows
for the nine months ended September 30, 1995 was comprised of aggregate cash
paid at closing of approximately $3,950,000 for the two transactions reduced by
net borrowings of approximately $1,300,000 and cash acquired from LM&P of
approximately $594,000.
In August 1995, the Company received a commitment, subject to certain
conditions occurring, from its primary bank to amend its existing Amended and
Restated Revolving Credit and Term Loan Agreement to increase the maximum
unsecured revolving line of credit from $6,000,000 to $10,000,000. The Company
utilized approximately $1,500,000 of its revolving credit line during the six
month period to consummate the acquisitions of its Cupertino, California
Affiliate and LM&P. As of September 30, 1995 approximately $1,300,000 of the
$1,500,000 remains outstanding in addition to its existing term loan obligations
under this agreement.
6
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE C - GEOGRAPHIC SEGMENTS
Summarized operations of each of the Company's geographic segments in
the aggregate as of September 30, 1995 and 1994 and for the nine month periods
then ended are as follows:
<TABLE>
<CAPTION>
1995 US Canada Europe Total
<S> <C> <C> <C> <C>
Identifiable assets $49,265,000 $ 2,786,000 $ 6,763,000 $58,814,000
=========== =========== =========== ===========
Revenue $72,572,000 $ 4,870,000 $ 6,207,000 $83,649,000
=========== =========== =========== ===========
Operating income (loss) $ 8,424,000 $ 1,256,000 $ (287,000) $ 9,393,000
=========== =========== =========== ===========
Depreciation and
amortization $ 2,815,000 $ 129,000 $ 212,000 $ 3,156,000
=========== =========== =========== ===========
Capital expenditures $ 1,745,000 $ 77,000 $ 86,000 $ 1,908,000
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
1994 US Canada Europe Total
<S> <C> <C> <C> <C>
Identifiable assets $43,089,000 $ 2,172,000 $ 2,833,000 $48,094,000
=========== =========== =========== ===========
Revenue $54,965,000 $ 4,494,000 $ 4,225,000 $63,684,000
=========== =========== =========== ===========
Operating income (loss) $ 6,736,000 $ 1,028,000 $ (383,000) $ 7,381,000
=========== =========== =========== ===========
Depreciation and
amortization $ 2,076,000 $ 135,000 $ 180,000 $ 2,391,000
=========== =========== =========== ===========
Capital expenditures $ 1,668,000 $ 101,000 $ 80,000 $ 1,849,000
=========== =========== =========== ===========
</TABLE>
NOTE D- STOCKHOLDERS' EQUITY
On September 20, 1995, the Board of Directors declared a three-for-two
split of the Company's common stock, effective on November 10, 1995 for
shareholders of record on October 27, 1995. The stated par value per share of
common stock was not changed from its existing amount of $.01 per share. All
share and per share data presented in these financial statements have been
restated to retroactively reflect the stock split.
7
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE D- STOCKHOLDERS' EQUITY (Continued)
Stock options, adjusted for the three-for-two split, for the nine month
period ended September 30, 1995 are summarized as follows:
Outstanding at January 1, 1995 689,051
Granted at $11.67 - $13.00 per share 60,500
Canceled or expired during the period (26,750)
Exercised during the period (43,863)
-------
Outstanding at September 30, 1995 678,938
=======
NOTE E - SUBSEQUENT EVENT
Effective October 1, 1995, the Company acquired the assets of the
Company's former Providence Affiliate. The purchase price of the acquisition
totaled approximately $850,000 and will be accounted for using the purchase
method.
PART I - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Revenue generated by Company Offices increased 21% or $4,529,000 for
the quarter ended September 30, 1995 over the corresponding quarter in 1994 and
33% or $20,073,000 for the nine months ended September 30, 1995 over the same
period in 1994. Revenue on a same office basis increased approximately 6% and
12% during the quarter and nine months ended September 30, 1995, respectively,
over the same periods in 1994. This same office growth can primarily be
attributed to increases in the aggregate U.S. Offices. The remaining increase
was primarily due to revenue generated by the acquisitions of the Cupertino,
California Affiliate, Jannotta, Bray and Associates ("JBA") and LM&P all of
which were acquired during or after the third quarter in 1994.
Affiliate royalties decreased 10% or $113,000, for the quarter ended
September 30, 1995 from the corresponding quarter in 1994 and 3% or $108,000 for
the nine months ended September 30, 1995 from the corresponding period in 1994.
This was primarily due to reduced royalties resulting from the acquisitions of
two former Affiliates in June 1994 and January 1995, respectively. Revenue from
these offices is reflected as Company revenue subsequent to their respective
acquisitions. On a same office basis, Affiliate royalties increased
approximately 5% and 12% during the quarter and nine months ended September 30,
1995, respectively, over corresponding periods in 1994.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Company Office expenses in the aggregate increased 18% or $3,224,000
for the quarter ended September 30, 1995 and 34% or $16,062,000 for the nine
months ended September 30, 1995 over the corresponding periods in 1994. Costs
incurred by the Company's newly acquired Affiliates accounted for approximately
18% and 19% of these increases for the quarter and nine months ended September
30, 1995, respectively. The remaining increases were due to certain duplicate
facilities and administration from the acquisition of JBA as well as general
expense increases from existing Company Offices related to the revenue growth
during the respective periods. Aggregate Company Office margins were 22% and 21%
for the quarter and nine months ended September 30, 1995, respectively versus
21% for each of the corresponding periods in 1994. Margins for the third quarter
and first nine months in 1995 reflect a modest improvement over the margins from
the second and first quarter in 1995 of 21% and 20%, respectively. The Company
is seeking to continue to improve Office margins through further economies of
scale as the recent acquisitions continue to be integrated.
General sales, consulting and administration expense increased 11% or
$366,000 for the quarter and 21% or $1,891,000 for the nine months ended
September 30, 1995 over the corresponding periods in 1994. These increases were
primarily due to investments made in the development of the Company's consulting
services, increases in amortization relating to recent acquisitions and
additional reserves for duplicate Company Office closures primarily related to
the redundant Company Offices inherited in the JBA acquisition. Despite these
increases, the total expenses in this category as a percentage of revenue
remained at or below the respective percentages for the corresponding periods in
1994.
Income before income taxes increased 28% to $3,116,000 for the quarter
ended September 30, 1995 from $2,443,000 for the corresponding quarter in 1994
and 23% to $9,073,000 for the first nine months in 1995 from $7,362,000 for the
same period in 1994. This increase resulted principally from the combination of
greater Company Office revenue and reduced operating losses in the Company's
European operations (on a year to date basis only). The reduced European
operating losses reflect the acquisition of LM&P effective April 1, 1995.
The Company's effective tax rate was approximately 39% for the quarter
and nine months ended September 30, 1995 compared to 42% and 44% for the
corresponding periods in 1994. This reduction resulted from reduced taxes at the
state level and the reduced impact on the effective tax rate of nondeductible
expenses primarily associated with acquisitions made prior to 1992.
Capital Resources and Liquidity
The Company's cash and cash equivalents decreased to $7,871,000 during
the nine months ended September 30, 1995, from $9,156,000 as of December 31,
1994. This decrease resulted principally from purchases of property and
equipment of $1,908,000, net cash paid for the acquisitions of the Company's
former Cupertino, California Affiliate and LM&P aggregating $2,066,000 and
payment of long-term debt and other obligations aggregating $1,627,000 offset by
cash provided by operating activities of $3,916,000 and proceeds from stock
issuances of $342,000. Cash provided by operations was impacted by net income as
well as by non-cash charges such as depreciation and amortization and the
provision for doubtful accounts, exceeding the net change in operating accounts.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Historically, ongoing cash requirements have been provided through
operations. The Company's total borrowing capacity aggregates $10,000,000
through a committed credit line with its primary bank. During the second quarter
in 1995, in connection with the acquisition of LM&P, the Company borrowed
6,500,000 French francs (approximately $1,300,000) under this credit line at the
LIBOR rate plus 1.25%. This amount remains outstanding at September 30, 1995. As
the Company continues its expansion through acquisitions, there may be a need
for additional financing to consummate certain transactions. Should this be
necessary, the Company anticipates cash and working capital will be sufficient
to service the debt and to maintain Company operations.
The key factor in the Company's liquidity is the operating results of
the Company Offices. The operating margin increased during the third quarter in
1995 to 22% from 21% and 20% in the second and first quarters in 1995,
respectively. The Company will continue to seek margin improvement through
further economies of scale from its recent acquisitions and through greater
efficiencies and cost reductions.
The Company will continue to consider expansion opportunities as they
arise, although the economics and other circumstances justifying the expansion
will be key factors in determining the amount of resources the Company will
devote to further expansion.
10
<PAGE>
PART II - OTHER INFORMATION
Items 1, 2, 3, 4 and 5 were not applicable in the period ended September 30,
1995.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
10.56- Fifth Modification Agreement to the June 30, 1994 Amended
and Restated Revolving Credit and Term Loan Agreement between
Right Management Consultants, Inc., et al and PNC Bank, National
Association, dated August 31, 1995
11 - Consolidated Earnings per Share Calculation
b. No reports on Form 8-K were filed during the period for which
this Report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RIGHT MANAGEMENT CONSULTANTS, INC.
BY:\s\ Richard J. Pinola November 13, 1995
--------------------- -----------------
Richard J. Pinola Date
Chairman and Chief Executive Officer
BY:\s\ G. Lee Bohs November 13, 1995
--------------- -----------------
G. Lee Bohs Date
Chief Financial Officer
11
Exhibit 10.56
FIFTH MODIFICATION AGREEMENT
THIS AGREEMENT is made as of and effective the 31st day of August,
1995, by and among PNC BANK, NATIONAL ASSOCIATION, a national banking
association with offices at 100 South Broad Street, Philadelphia, Pennsylvania
19110 (the "Bank"), and RIGHT MANAGEMENT CONSULTANTS, INC. ("Right Management"),
a Pennsylvania corporation, and its wholly-owned subsidiaries RIGHT ASSOCIATES,
LIMITED, THE THinc CONSULTING GROUP INTERNATIONAL (U.K.), LTD., RIGHT ASSOCIATES
(FRANCE) SNC, RIGHT HUMAN RESOURCES, INC., RIGHT ASSOCIATES, INC., RIGHT
ASSOCIATES GOVERNMENT SERVICES, INC., RIGHT ASSOCIATES & CO., RIGHT ACQUISITION
CO., RIGHT ASSOCIATES (BELGIUM) INC., LIEBAUT, MAUBRAS & PRIEUR S.A., and RIGHT
ASSOCIATES (FRANCE) INC. (collectively, the "Borrowers").
BACKGROUND
Bank agreed to make available to Borrowers a line of credit in the
principal amount of up to $6,000,000 (the "Line of Credit") and certain term
loans in the aggregate original face amount of $6,500,000 (together with the
Line of Credit, the "Loans") pursuant to an amended and restated revolving
credit and term loan agreement dated as of June 30, 1994, as amended as of
August 26, 1994, November 16, 1994, March, 1995 and June, 1995 (the "Loan
Agreement"). The Line of Credit is evidenced by Borrowers' Restated Revolving
Credit Note, restated June 30, 1994, as amended (the "Revolving Note"), and the
term loans are evidenced by certain term notes, as defined in the Loan Agreement
(the "Term Notes").
Bank and Borrowers desire to amend the Loan Agreement to increase the
Line of Credit and to make certain modifications thereto upon the terms and
conditions set forth herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
<PAGE>
AGREEMENT
1. Terms. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Loan Agreement.
2. Restated Note. Concurrently with the execution and delivery of this
Agreement, Borrowers shall execute and deliver to Bank a restated note (the
"Restated Note"), evidencing the Line of Credit in the principal amount of
$10,000,000.00 in the form of Exhibit A attached hereto. Upon receipt by Bank of
the Restated Note, the original Revolving Note shall be cancelled and returned
to the Borrower; the Line of Credit and all accrued and unpaid interest on the
original Revolving Note shall thereafter be evidenced by the Restated Note; and
all references to the "Revolving Note" evidencing the Line of Credit in any
documents relating thereto shall thereafter be deemed to refer to the Restated
Note. Without duplication, the Restated Note shall in no way extinguish the
Borrower's unconditional obligation to repay all indebtedness, including accrued
and unpaid interest, evidenced by the original Revolving Note.
3. Amendments to Loan Agreement. The Loan Agreement is hereby amended
as follows:
(a) Section 1.1 of the Loan Agreement is hereby amended by
changing all references to "$6,000,000" therein to "$10,000,000", to the end
that the Revolving Credit Commitment is hereby increased to $10,000,000.
(b) Section 1.3 of the Loan Agreement is hereby amended to
increase the maximum aggregate face amount of all outstanding Letters of Credit
from $1,000,000 to $2,000,000, and the reference in Section 1.3 to "$1,000,000"
is hereby changed to "$2,000,000".
4. Loan Documents. Except where the context clearly requires otherwise,
all references to the Revolving Note or the Loan Agreement in the Loan
Agreement, the Restated Note, the Term Notes or any other document delivered to
Bank in connection therewith shall be to the Restated Note or the Loan
Agreement, as the case may be, as amended by this Agreement.
<PAGE>
5. Borrowers' Ratification. Borrowers agree that they have no defenses
or set-offs against the Bank, its officers, directors, employees, agents or
attorneys with respect to the Revolving Note, the Term Notes or the Loan
Agreement, all of which are in full force and effect and shall remain in full
force and effect unless and until modified or amended in writing in accordance
with their terms. Borrowers hereby ratify and confirm their obligations under
the Restated Note, the Term Notes and the Loan Agreement and agree that the
execution and the delivery of this Agreement does not in any way diminish or
invalidate any of their obligations thereunder. WITHOUT LIMITING THE GENERALITY
OF THE FOREGOING, BORROWERS HEREBY RATIFY AND CONFIRM THE WARRANT OF ATTORNEY
GIVEN IN THE RESTATED NOTE AND THE TERM NOTES.
6. Representations and Warranties. Borrowers hereby certify that:
(a) except as otherwise previously disclosed to Bank, the
representations and warranties made in the Loan Agreement are true and correct
as of the date hereof.
(b) no Event of Default under the Loan Agreement and no event
which with the passage of time or the giving of notice or both could become an
Event of Default, exists on the date hereof; and
(c) this Agreement has been duly authorized, executed and
delivered so as to constitute the legal, valid and binding obligation of
Borrowers, enforceable in accordance with their terms.
All of the above representations and warranties shall survive the
making of this Agreement.
7. Conditions to Effectiveness of Agreement. Bank's willingness to
agree to the increase in the Line of Credit and the modifications contained
herein are subject to the prior satisfaction of the following conditions:
(a) Borrowers shall execute and deliver to Bank this Agreement and
the Restated Note; and
<PAGE>
(b) Borrowers shall deliver to Bank certified resolutions
authorizing the execution and delivery of this Agreement and the Restated Note.
8. No Waiver. This Agreement does not and shall not be deemed to
constitute a waiver by Bank of any Event of Default under the Restated Note, the
Term Notes or Loan Agreement, or of any event which with the passage of time or
the giving of notice or both would constitute an Event of Default, nor does it
obligate Bank to agree to any further modifications of the terms of the Loan
Agreement or constitute a waiver of any of Bank's other rights or remedies.
9. Miscellaneous.
(a) All terms, conditions, provisions and covenants in the Term
Notes, the Loan Agreement and all other documents delivered to Bank in
connection therewith shall remain unaltered and in full force and effect except
as modified or amended hereby. To the extent that any term or provision of this
Agreement is or may be deemed expressly inconsistent with any term or provision
in the Loan Agreement, the Term Notes or any other document executed in
connection therewith, the terms and provisions hereof shall control.
(b) This Agreement shall be governed by and construed according to
the laws of the Commonwealth of Pennsylvania.
(c) This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their respective successors and assigns and may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BORROWERS
[CORPORATE SEAL] RIGHT MANAGEMENT CONSULTANTS, INC.
RIGHT ASSOCIATES, LIMITED
THE THinc CONSULTING GROUP
INTERNATIONAL (U.K.), LTD.
RIGHT ASSOCIATES (FRANCE) SNC
RIGHT HUMAN RESOURCES, INC.
RIGHT ASSOCIATES, INC.
RIGHT ASSOCIATES GOVERNMENT
SERVICES, INC.
RIGHT ASSOCIATES & CO.
RIGHT ACQUISITION CO.
RIGHT ASSOCIATES (BELGIUM) INC.
RIGHT ASSOCIATES (FRANCE) INC.
LIEBAUT, MAUBRAS & PRIEUR S.A.
Attest: /s/ Mark Turgyan By: /s/ G. Lee Bohs
---------------- -----------------
Title: Financial Analyst Title: CFO:Treasurer
BANK
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Kevin Wheatley
--------------------------------
Title: Assistant Vice President
<PAGE>
EXHIBIT A
RESTATED REVOLVING CREDIT NOTE
$10,000,000 Philadelphia, Pennsylvania
Originally Issued: July 16, 1991
Restated: September 30, 1992
Restated: June 30, 1994
Restated: August 31, 1995
For value received and intending to be legally bound, RIGHT MANAGEMENT
CONSULTANTS, INC., RIGHT ASSOCIATES, LIMITED, THE THinc CONSULTING GROUP
INTERNATIONAL (U.K.), LTD., RIGHT ASSOCIATES (FRANCE) SNC, RIGHT HUMAN
RESOURCES, INC., RIGHT ASSOCIATES, INC., RIGHT ASSOCIATES GOVERNMENT SERVICES,
INC., RIGHT ASSOCIATES & CO., RIGHT ACQUISITION CO., RIGHT ASSOCIATES (BELGIUM)
INC., LIEBAUT, MAUBRAS & PRIEUR S.A., and RIGHT ASSOCIATES (FRANCE) INC.
("Borrower") hereby jointly and severally promise to pay to the order of PNC
BANK, NATIONAL ASSOCIATION ("Bank") on the Termination Date (as defined in the
Amended and Restated Revolving Credit and Term Loan Agreement between Borrower
and Bank dated as of June 30, 1994, as amended (the "Loan Agreement")) the
principal sum of Ten Million Dollars ($10,000,000) or the aggregate unpaid
principal amount of all Domestic Loans and Alternate Currency Loans, as defined
in the Loan Agreement, made by Bank to Borrower, or such lesser amount as may be
advanced to or for the benefit of Borrower pursuant to Section 1.1 of the Loan
Agreement and shown on and evidenced by the books and records of Bank (after
accounting for all disbursements hereunder and repayments hereon), whichever is
less, and to pay interest from the date hereof on the unpaid principal amount of
each Loan made thereunder monthly in arrears, commencing on August 31, 1995, and
on the last day of each month thereafter and at maturity, at either (i) for
advances in U.S. dollars only, the overnight rate per annum as shall be quoted
by Bank each day (but which rate shall in no event exceed one-quarter of one
percent (1/4%) below the prime rate in effect at Bank from time to time), or
(ii) a rate per annum as shall be quoted by Bank and accepted by Borrower for
such Loan in the applicable currency upon Borrower's request for a Loan for a
period of 30, 60 or 90 days. For the purposes of this Note, the
<PAGE>
term "prime rate" shall mean the rate of interest which from time to
time is publicly announced by Bank to be its prime rate of interest. The term
"prime rate" is used merely as a pricing index and is not and should not be
considered to represent the lowest or best rate available to a borrower. A
change in the prime rate shall be effective on the same day as Bank announces a
change in its prime rate.
All interest shall be calculated on the basis of the actual number of
days that principal is outstanding over a year of 360 days. All payments of
principal and interest shall be made prior to 1:00 P.M., local time in lawful
money of the United States in immediately available funds at the office of Bank,
100 South Broad Street, Philadelphia, Pennsylvania 19110, or at such other
location designated by Bank. In the event that an advance is made by the Bank in
an Alternate Currency, the Borrower shall pay interest and shall repay principal
in such Alternate Currency. Borrower hereby authorizes and directs Bank to
charge from time to time against Borrower's demand deposit account with Bank,
and to the extent that sufficient funds are not on deposit with Bank to pay
interest hereon, at Bank's option to advance funds hereunder in an amount equal
to, any amount so due.
This Note evidences indebtedness incurred under, and is entitled to the
benefits of, the Loan Agreement, as the same may be amended from time to time,
which, among other things, contains provisions for acceleration of the maturity
hereof and for a higher rate of interest hereunder upon the happening of an
Event of Default (as defined therein), and for prepayments on account of
principal hereof prior to the maturity thereof upon the terms and conditions
therein specified. All of the terms and provisions of the Loan Agreement are
incorporated herein by reference.
This Note amends and restates, and is in substitution for, a Note in
the principal amount of $6,000,000 payable to Bank dated July 16, 1991 and
restated September 30, 1992 and June 30, 1994 (the "Original Note"). However,
without duplication, this Restated Note shall in no way extinguish Borrower's
unconditional obligation to repay all indebtedness evidenced by the Original
Note.
<PAGE>
BORROWER HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF
RECORD WITHIN THE UNITED STATES OF AMERICA OR ELSEWHERE, TO APPEAR FOR BORROWER
AND, WITH OR WITHOUT COMPLAINT FILED, TO CONFESS JUDGMENT, OR A SERIES OF
JUDGMENTS, AGAINST BORROWER IN FAVOR OF ANY HOLDER, AS OF ANY TERM, PRESENT OR
FUTURE, FOR THE THEN UNPAID BALANCE OF THE PRINCIPAL DEBT, ADDITIONAL LOANS OR
ADVANCES AND ALL OTHER SUMS PAID BY THE HOLDER HEREOF TO OR ON BEHALF OF
BORROWER PURSUANT TO THE TERMS OF THIS NOTE OR THE LOAN AGREEMENT, TOGETHER WITH
UNPAID INTEREST THEREON, COSTS OF SUIT AND AN ATTORNEY'S COMMISSION FOR
COLLECTION OF FIVE PERCENT (5%) OF THE TOTAL OF THE FOREGOING SUMS, BUT IN NO
EVENT LESS THAN FIVE THOUSAND DOLLARS ($5,000.00), ON WHICH JUDGMENT OR
JUDGMENTS ONE OR MORE EXECUTIONS MAY ISSUE FORTHWITH; AND FOR SO DOING, THIS
NOTE OR A COPY HEREOF, VERIFIED BY AFFIDAVIT, SHALL BE A SUFFICIENT WARRANT; AND
THE SAID JUDGMENT, FROM AND AFTER ENTRY THEREOF, SHALL BEAR INTEREST AT THE RATE
SET FORTH IN THIS NOTE, OR IF LOWER, AT THE HIGHEST RATE OF INTEREST A JUDGMENT
MAY BEAR UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. BORROWER KNOWINGLY
WAIVES ITS RIGHTS TO BE HEARD PRIOR TO THE ENTRY OF SUCH JUDGMENT AND
UNDERSTANDS THAT UPON ENTRY SUCH JUDGMENT SHALL BECOME A LIEN ON ALL REAL
PROPERTY OF BORROWER IN THE COUNTY IN WHICH SUCH JUDGMENT IS EXECUTED.
BORROWER ACKNOWLEDGES THAT IT HAS HAD THE ASSISTANCE OF COUNSEL IN THE
REVIEW AND EXECUTION OF THIS NOTE AND FURTHER ACKNOWLEDGES THAT THE MEANING AND
EFFECT OF THE CONFESSION OF JUDGMENT HAVE BEEN FULLY EXPLAINED TO BORROWER BY
SUCH COUNSEL.
[CORPORATE SEAL] RIGHT MANAGEMENT CONSULTANTS, INC.
RIGHT ASSOCIATES, LIMITED
THE THinc CONSULTING GROUP
INTERNATIONAL (U.K.), LTD.
RIGHT ASSOCIATES (FRANCE) SNC
RIGHT HUMAN RESOURCES, INC.
RIGHT ASSOCIATES, INC.
RIGHT ASSOCIATES GOVERNMENT
SERVICES, INC.
RIGHT ASSOCIATES & CO.
RIGHT ACQUISITION CO.
RIGHT ASSOCIATES (BELGIUM) INC.
RIGHT ASSOCIATES (FRANCE) INC.
LIEBAUT, MAUBRAS & PRIEUR S.A.
<PAGE>
Attest:/s/ Mark Turgyan By: /s/ G. Lee Bohs
---------------- -----------------
Title: Financial Analyst Title: CFO:Treasurer
Right Management Consultants, Inc.
Exhibit 11 - Consolidated Earnings Per Share Calculation
For the Three and Nine Month Periods Ended September 30,
<TABLE>
<CAPTION>
Three Months Ended, Nine Months Ended,
September 30, September 30,
1995 1994 1995 1994
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Earnings per common share
Primary and Fully Diluted EPS:
Primary EPS
Net income $1,909,000 $1,426,000 $5,510,000 $4,159,000
========== ========== ========== ==========
Weighted average number of shares
issued and outstanding 3,994,000 3,955,000 3,977,000 3,943,000
Dilutive effect (excess of number of
shares issuable over number of shares
assumed to be using the average market
price during the period) of outstanding
options and restricted stock 242,000 151,000 192,000 139,000
---------- ---------- ---------- ----------
Adjusted weighted average number
of shares outstanding 4,236,000 4,106,000 4,169,000 4,082,000
========== ========== ========== ==========
Earnings per common share $ 0.45 $ 0.35 $ 1.32 $ 1.02
========== ========== ========== ==========
Fully Diluted EPS
Net income $1,909,000 $1,426,000 $5,510,000 $4,159,000
========== ========== ========== ==========
Weighted average number of shares
issued and outstanding 3,994,000 3,955,000 3,977,000 3,943,000
Dilutive effect (excess of number of shares
issuable over number of shares assumed to be
using the average market price during the
period) of outstanding options 277,000 151,000 277,000 160,000
---------- ---------- ---------- ----------
Adjusted weighted average number
of shares outstanding 4,271,000 4,106,000 4,254,000 4,103,000
========== ========== ========== ==========
Earnings per common share $ 0.45 $ 0.35 $ 1.30 $ 1.01
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000802806
<NAME> RIGHT MANAGEMENT CONSULTANTS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 7,871
<SECURITIES> 0
<RECEIVABLES> 22,649
<ALLOWANCES> 1,099
<INVENTORY> 0
<CURRENT-ASSETS> 31,667
<PP&E> 16,329
<DEPRECIATION> 9,033
<TOTAL-ASSETS> 58,814
<CURRENT-LIABILITIES> 21,390
<BONDS> 0
<COMMON> 44
0
0
<OTHER-SE> 30,346
<TOTAL-LIABILITY-AND-EQUITY> 58,814
<SALES> 83,649
<TOTAL-REVENUES> 83,649
<CGS> 29,426
<TOTAL-COSTS> 63,492
<OTHER-EXPENSES> 10,763
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 321
<INCOME-PRETAX> 9,073
<INCOME-TAX> 3,563
<INCOME-CONTINUING> 5,510
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,510
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.30
</TABLE>
