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, 1997
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, 1997:
Common Stock, $0.01 par value 6,651,526
----------------------------- ---------------
Class Number of Shares
<PAGE>
Right Management Consultants, Inc.
Condensed Consolidated Balance Sheets
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited)
Assets
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 8,857 $ 18,055
Accounts receivable, trade, net of allowance for doubtful accounts
of $645 and $552 in 1997 and 1996, respectively 22,086 18,878
Royalties and fees receivable from Affiliates 3,063 3,505
Other current assets 2,203 2,270
-------- --------
Total current assets 36,209 42,708
Property and equipment, net of accumulated depreciation of $15,845
and $12,917 in 1997 and 1996, respectively 13,167 9,666
Other Assets:
Intangible assets, net of accumulated amortization of $10,046 and
$8,525 in 1997 and 1996, respectively 29,219 18,724
Other noncurrent assets 3,034 2,837
-------- --------
Total Assets $ 81,629 $ 73,935
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of long-term debt and other obligations $ 3,749 $ 1,011
Accounts and commissions payable 4,450 5,536
Accrued expenses 5,688 6,951
Deferred income 4,293 3,868
-------- --------
Total current liabilities 18,180 17,366
-------- --------
Long-term debt and other obligations 9,639 6,904
-------- --------
Deferred compensation 1,622 1,864
-------- --------
Minority interest in subsidiary 1,416 --
-------- --------
Shareholders' 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; 7,021,349
and 6,713,573 shares issued in 1997 and 1996, respectively 70 67
Additional paid-in capital 13,956 11,956
Retained earnings 38,856 36,290
Cumulative translation adjustment (214) 5
-------- --------
52,668 48,318
Less treasury stock, at cost, 380,452 shares and 252,952 shares in 1997
and 1996, respectively (1,896) (517)
-------- --------
Total shareholders' equity 50,772 47,801
-------- --------
Total Liabilities and Shareholders' Equity $ 81,629 $ 73,935
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE>
Right Management Consultants, Inc.
Condensed Consolidated Statements of Income
(Dollars and Shares in Thousands Except Earnings per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1997 1996
<S> <C> <C>
Revenue:
Company office revenue $ 32,039 $ 26,741
Affiliate royalties 785 1,323
-------- --------
Total revenue 32,824 28,064
-------- --------
Expenses:
Consultants' compensation 13,609 11,138
Office sales and consulting support 2,051 1,376
Office administration 12,533 9,260
General sales and administration 3,079 2,600
-------- --------
Total expenses 31,272 24,374
-------- --------
Income from operations 1,552 3,690
Other income (expense):
Interest income 144 160
Interest expense (224) (136)
-------- --------
(80) 24
-------- --------
Income before income taxes 1,472 3,714
Provision for income taxes 618 1,545
Minority interest in net income of subsidiary 209 --
-------- --------
Net income $ 645 $ 2,169
======== ========
Earnings per share $ 0.10 $ 0.32
======== ========
Weighted average number of shares outstanding 6,745 6,877
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
<PAGE>
Right Management Consultants, Inc.
Condensed Consolidated Statements of Income
(Dollars and Shares in Thousands Except Earnings per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
<S> <C> <C>
Revenue:
Company office revenue $ 91,086 $ 89,548
Affiliate royalties 2,610 3,600
-------- --------
Total revenue 93,696 93,148
-------- --------
Expenses:
Consultants' compensation 38,917 35,137
Office sales and consulting support 5,164 3,924
Office administration 34,931 31,352
General sales and administration 9,327 10,587
Restructuring costs (Note B) 630 --
-------- --------
Total expenses 88,969 81,000
-------- --------
Income from operations 4,727 12,148
Other income (expense):
Interest income 452 418
Interest expense (474) (474)
-------- --------
(22) (56)
-------- --------
Income before income taxes 4,705 12,092
Provision for income taxes 1,930 4,917
Minority interest in net income of subsidiary 209 --
-------- --------
Net income $ 2,566 $ 7,175
======== ========
Earnings per share $ 0.38 $ 1.07
======== ========
Weighted average number of shares outstanding 6,731 6,675
======== ========
</TABLE>
4
<PAGE>
Right Management Consultants, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
<S> <C> <C>
Operating Activities:
Net income $ 2,566 $ 7,175
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,591 3,597
Restricted stock compensation (658) 400
Restructuring costs (Note B) 630 --
Tax benefit from the exercise of stock options 400 1,919
Minority interest in net income of subsidiary 209 --
Other non-cash items (461) (169)
Provision for doubtful accounts 225 225
Changes in operating accounts:
(Increase) decrease in operating assets (1,053) 961
Decrease in operating liabilities (5,964) (1,230)
-------- --------
Net cash provided by operating activities 485 12,878
-------- --------
Investing Activities:
Purchase of property and equipment (3,657) (3,243)
Acquisitions, net of cash acquired and borrowings assumed (4,268) (740)
-------- --------
Net cash utilized for investing activities (7,925) (3,983)
-------- --------
Financing Activities:
Payment of long-term debt and other obligations (1,650) (3,786)
Repurchase of common stock (1,379) --
Proceeds from stock issuances 1,271 1,321
-------- --------
Net cash utilized for financing activities (1,758) (2,465)
-------- --------
(Decrease) increase in cash and cash equivalents (9,198) 6,430
Cash and cash equivalents, beginning of period 18,055 8,965
-------- --------
Cash and cash equivalents, end of period $ 8,857 $ 15,395
======== ========
Supplemental Disclosures of Cash Flow Information
Cash paid for:
Interest $ 393 $ 389
======== ========
Income taxes $ 2,097 $ 3,231
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. 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, 1996.
Principles of Consolidation
The consolidated financial statements include the accounts of Right Management
Consultants, Inc. and its majority-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated in consolidation.
Reclassifications
Certain 1996 amounts have been reclassified to conform to the 1997 presentation.
NOTE B - RESTRUCTURING COSTS
During the first quarter 1997, the Company announced a corporate restructuring.
The restructuring charge of $630,000 ($380,000 or $0.06, net of taxes) was
primarily for severance payments related to reductions in employees and lease
termination costs for the closure of several small "satellite" offices with
limited future economic benefit to the Company. The Company anticipates that all
payments for severance and office closures will be completed in early 1998.
6
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE C - ACQUISITIONS
Effective January 1, 1997, the Company acquired the assets and/or the
outstanding stock of six career transition firms and one search firm for a
combination of cash and future defined incentive payments. The six career
transition firms included Nelson, O'Connor & Associates (Phoenix, Arizona),
Corporate Resource Group (San Francisco, California), Cavendish Partners
(London, England) and the former St. Louis, Missouri, Knoxville, Tennessee, and
Richmond, Virginia Affiliates. The search firm acquired was Nelson, O'Connor Cox
(Tucson, Arizona).
Effective April 1, 1997, the Company acquired the outstanding stock of another
career transition firm, Chapel Stowell, Inc. (Portland, Oregon).
Effective July 1, 1997, the Company acquired 51% of the outstanding shares of
the Australia based career management firm, Davidson & Associates, Pty., Ltd
("Davidson & Associates"). Davidson & Associates has operations in eleven
locations throughout Australia, New Zealand, Singapore and Hong Kong. The
purchase price of this acquisition approximated $6,935,000, including costs of
acquisition, 85% of which was paid in cash (approximately $5,946,000) and the
remaining 15% in shares of the Company's common stock (96,577 shares). The
Company borrowed $5,500,000 from its revolving credit facility in order to
complete this transaction. As a part of the purchase agreement, the minority
shareholders of Davidson & Associates have agreed to provide the Company with
options to acquire the remaining 49% of the outstanding shares of Davidson &
Associates beginning on July 1, 2000. Additionally, the minority shareholders of
Davidson & Associates have the right to require the Company to purchase in 10%
increments the remaining 49% of the outstanding shares of Davidson & Associates
beginning on July 1, 2000.
Effective August 1, 1997, the Company acquired the business and certain assets
of a Minneapolis, Minnesota career management firm, Career Dynamics, Inc. The
purchase price of the acquisition approximated $2,000,000, including costs of
acquisition, and was funded through borrowings under the Company's revolving
credit facility. The acquisition also included future defined incentives
contingent upon the results of the operations in Minnesota subsequent to the
transaction.
The acquisitions were accounted for under the purchase method. The accompanying
consolidated financial statements reflect the year to date results from the
effective date of acquisition for all of the above acquisitions. The aggregate
purchase price for the acquisitions described above was approximately
$13,608,000, including the costs of acquisitions. The purchase price exceeded
the fair value of the assets acquired by $12,733,000.
The pro-forma impact of these acquisitions on results of operations, if any one
of the acquisitions had been consummated at the beginning of each period
presented, is immaterial to the consolidated financial statements as a whole and
has been omitted.
7
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE D - DEBT
In order to reduce the impact of changes in interest rates on a portion of the
Company's floating rate debt under its revolving credit facility, the Company
has entered into three interest rate swap agreements with an aggregate notional
principal at September 30, 1997 of $10,500,000 and quarterly maturities ranging
from three to five years. The Company's fixed rates under these interest rate
swaps range from 6.7% to 7.1%.
The net cash paid or received on interest rate swap agreements is recognized as
an adjustment to interest expense. The impact of the above interest rate swap
agreements on interest expense has been immaterial to date.
NOTE E - SHAREHOLDERS' EQUITY
In March 1997, the Board of Directors (the "Board") approved a stock repurchase
program under which the Company is authorized to repurchase up to 10% of its
currently outstanding common stock. Any shares repurchased will be held as
treasury shares and be available to the Company for use in various benefit plans
and, when authorized by the Board, for other general corporate purposes. The
Board has authorized Company management to pursue the repurchase program in open
market transactions from time-to-time, depending upon market conditions and
other factors.
As of September 30, 1997, the Company had repurchased 127,500 shares of common
stock at an aggregate purchase price of $1,379,000.
Stock option activity for the nine month period ended September 30, 1997 is
summarized as follows:
Wtd. Avg.
Exercise
Shares Price
Outstanding at January 1, 1997 1,238,295 $10.92
Granted 210,288 18.21
Canceled or expired during the period (25,125) 13.89
Exercised during the period (183,969) 5.31
--------- ------
Outstanding at September 30, 1997 1,239,489 $12.93
========= ======
Exercise prices for options outstanding as of September 30, 1997 ranged from
$4.22 to $24.33. The weighted average remaining contractual life of these
options is approximately 6 years.
8
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE F - EARNINGS PER SHARE
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No. 128
replaces the presentation of primary earnings per share ("EPS") with a
presentation of basic EPS. Additionally, SFAS No. 128 requires a dual
presentation of basic and diluted EPS within the consolidated income statement
and a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS calculation.
SFAS No. 128 is effective for financial statements for periods ending after
December 15, 1997, with earlier adoption not permitted. Accordingly, the Company
will adopt SFAS No. 128 for the year ending December 31, 1997.
The following table details the pro forma amounts that would have been reported
by the Company in both the current and prior year periods had SFAS No. 128 been
adopted.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Primary EPS as reported $ 0.10 $ 0.32 $ 0.38 $ 1.07
Effect of SFAS No. 128 -- 0.02 0.01 0.09
------ ------ ------ ------
Basic EPS as restated $ 0.10 $ 0.34 $ 0.39 $ 1.16
====== ====== ====== ======
Fully diluted EPS as reported $ 0.10 $ 0.31 $ 0.38 $ 1.07
Effect of SFAS No. 128 -- 0.01 -- --
------ ------ ------ ------
Diluted EPS as reported $ 0.10 $ 0.32 $ 0.38 $ 1.07
====== ====== ====== ======
</TABLE>
9
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE G - GEOGRAPHIC SEGMENTS
Summarized operations of each of the Company's geographic segments in the
aggregate as of September 30, 1997 and 1996 and for the nine month periods then
ended are as follows:
<TABLE>
<CAPTION>
(U.S. Dollars in Thousands)
1997 U.S. Canada Europe Asia-Pacific Consolidated
<S> <C> <C> <C> <C> <C>
Identifiable assets $63,391 $ 6,708 $ 5,889 $ 5,641 $81,629
======= ======= ======= ========= =======
Revenue $73,361 $ 7,703 $ 8,882 $ 3,750 $93,696
======= ======= ======= ========= =======
Income from operations $ 2,187 $ 1,080 $ 738 $ 722 $ 4,727
======= ======= ======= ========= =======
Depreciation and amortization $ 3,914 $ 185 $ 333 $ 159 $ 4,591
======= ======= ======= ========= =======
Capital expenditures $ 2,683 $ 94 $ 678 $ 202 $ 3,657
======= ======= ======= ========= =======
1996
Identifiable assets $57,855 $ 6,260 $ 6,002 $ -- $70,117
======= ======= ======= ========= =======
Revenue $78,638 $ 6,361 $ 8,149 $ -- $93,148
======= ======= ======= ========= =======
Income from operations $11,568 $ 78 $ 502 $ -- $12,148
======= ======= ======= ========= =======
Depreciation and amortization $ 2,901 $ 359 $ 337 $ -- $ 3,597
======= ======= ======= ========= =======
Capital expenditures $ 3,099 $ 59 $ 85 $ -- $ 3,243
======= ======= ======= ========= =======
</TABLE>
10
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
For the three months ended September 30, 1997, revenue generated by Company
offices increased by 20% or $5,298,000 from the corresponding quarter in 1996.
This increase is due to $6,122,000 in incremental revenues from the acquisitions
detailed in Note C to the Condensed Consolidated Financial Statements, partly
offset by a same office revenue decrease of approximately 3% or $824,000. The
Company's recent acquisition of Davidson & Associates contributed $3,750,000 of
the incremental acquisition revenues. The same office revenue decrease was due
to a seasonal slow down in both the North American and European career
transition markets, as well as the continued strength of the U.S. economy.
Total European revenues for the third quarter 1997 decreased by 4% or $100,000
versus the corresponding quarter in 1996 due to a same office revenue decrease
of 15% or $393,000, partly offset by incremental revenues from one acquisition.
The strong U.S. dollar also contributed to the revenue decline for the quarter.
On a constant dollar basis, total European revenues increased by 4%.
On a sequential basis, the third quarter 1997 versus 1996 same office revenue
decrease of 3% is an improvement from the 11% decrease reported in the second
quarter 1997 versus 1996.
For the nine months ended September 30, 1997, revenue generated by Company
offices increased 2% or $1,538,000 from the corresponding period in 1996. This
increase is due primarily to $10,035,000 in incremental revenues from the
acquisitions detailed in Note C to the Condensed Consolidated Financial
Statements, as well as revenue growth within the consulting line of business.
Offsetting the incremental revenues from acquisitions and revenue growth within
the consulting line of business was an approximate 10% same office revenue
decrease. The previously mentioned slow down in the North American career
transition market was the primary factor behind the year to date same office
revenue decrease.
For the nine months ended September 30, 1997, total European revenues increased
by 9% or $736,000 versus the same period in 1996. This increase was due to
incremental revenues from one acquisition, partly offset by a modest same office
revenue decrease. As noted for the quarter's results, the strong U.S. dollar
contributed to the revenue decline for the year to date. On a constant dollar
basis, total European revenues increased by 15%.
11
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONTINUED
For the three months ended September 30, 1997, Affiliate royalties decreased 41%
or $538,000 from the corresponding quarter in 1996. For the nine months ended
September 30, 1997, Affiliate royalties decreased 28% or $990,000 from the
corresponding period in 1996. The decreases for the quarter and year-to-date
1997 are attributable to the aforementioned decline in the North American career
transition market, as well as the acquisitions of three former Affiliates in the
first quarter 1997 (see Note C to the Condensed Consolidated Financial
Statements). Affiliate royalties, on a same office basis, decreased 38% and 24%,
respectively, from the corresponding periods in 1996.
For the three months ended September 30, 1997, total Company office expenses
increased 29% or $6,419,000 over the corresponding quarter in 1996. This
increase is due primarily to approximately $5,914,000 in incremental costs from
acquisitions. The remaining increase is due to a significant reduction of
incentive compensation costs in the third quarter of 1996 resulting from a
sequential drop off in the Company's revenues and operating results to levels
below targets.
On a sequential basis, same office costs for the third quarter 1997 decreased by
approximately $685,000 from the second quarter 1997.
For the nine months ended September 30, 1997, total Company office expenses,
exclusive of restructuring costs (see Note B to the Condensed Consolidated
Financial Statements), increased 12% or $8,599,000 over the corresponding period
in 1996. This dollar increase is due to approximately $8,981,000 in incremental
costs from acquisitions, offset by a reduction of costs in existing Company
office locations.
Aggregate Company office margins, exclusive of restructuring costs, were 12% and
13% for the quarter and year-to-date 1997, respectively, versus 19% and 21% for
both of the same respective periods in 1996. The decrease in margins is
attributable primarily to the decline in career transition revenues, partly
offset by improved margins in the consulting line of business, favorable results
for Davidson & Associates and improved year-to-date results in the European
operations. For the nine months ended September 30, 1997, European office
margins approximated 8% versus 6% for the corresponding period in 1996.
For the three months ended September 30, 1997, general sales and administration
expenses increased by 18% or $479,000 over the corresponding period in 1996.
This increase is due to a significant reduction of incentive compensation costs
in the third quarter of 1996 as the Company did not meet internal operating
targets. Despite the increase, general sales and administration expenses as a
percentage of total revenues were approximately 9% for the third quarter of both
years.
12
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONTINUED
For the nine months ended September 30, 1997, general sales and administration
expenses decreased by 12% or $1,260,000 from the corresponding period in 1996.
Due to the Company's decreasing stock price during 1997 and the forfeiture of
certain awards of common stock, total compensation expense related to restricted
stock grants included within general sales and administration expenses was
reduced by approximately $658,000 for the year-to-date 1997. The remaining
decrease is generally a result of reduced incentive compensation costs as the
Company's internal targets were not achieved.
The Company's effective tax rate for the three months ended September 30, 1997
and 1996 was approximately 42%. The Company's effective tax rate for the nine
months ended September 30, 1997 and 1996 was approximately 41%.
Capital Resources and Liquidity
At September 30, 1997 and December 31, 1996, the Company had cash and cash
equivalents of $8,857,000 and $18,055,000, respectively. The significant
decrease in cash and cash equivalents is the result of lower net income, as well
as payments made for acquisitions and 1996 incentive compensation (see Note C to
the Condensed Consolidated Financial Statements).
Net cash utilized for investing activities amounted to $7,925,000 and $3,983,000
for the nine months ended September 30, 1997 and 1996, respectively. The Company
continues to invest in equipment and technology to meet the needs of its
operations and enhance operating efficiencies. Additionally, during the first
nine months of 1997 the Company acquired ten career management firms for a
combination of cash and future defined incentive payments (see Note C to the
Condensed Consolidated Financial Statements). The $4,268,000 net cash paid for
acquisitions on the Condensed Consolidated Statement of Cash Flows is net of
$7,500,000 in borrowings from the Company's revolving credit facility, as well
as $850,000 of cash acquired from acquisitions. Additionally, in connection with
the Davidson & Associates acquisition (see Note C to the Condensed Consolidated
Financial Statements), the net cash paid for acquisitions on the Condensed
Consolidated Statement of Cash Flows excludes the value of the issuance of
96,577 shares which is considered a non-cash investing activity.
Net cash utilized for financing activities amounted to $1,758,000 and $2,465,000
for the nine months ended September 30, 1997 and 1996, respectively. The net
cash outlay for 1997 was the result of repayments on the Company's borrowings
and defined incentives for acquisitions made in previous years, as well as the
repurchase of common stock (see Note E to the Condensed Consolidated Financial
Statements), in excess of proceeds from the issuance of stock.
13
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONTINUED
During 1996, the Company increased its borrowing capacity to $40,000,000 from
the previous $15,000,000 level through the execution of its revolving credit
facility with its two primary lenders. The Company had approximately $27,600,000
available under the revolving credit facility at September 30, 1997. The Company
plans to utilize the revolving credit facility to assist in the financing of
acquisitions as they arise and for other general corporate purposes.
The Company anticipates that its cash and working capital will be sufficient to
service its existing debt, outstanding commitments and to maintain Company
operations at current levels for the foreseeable future. The Company will
continue to consider acquisitions and other expansion opportunities as they
arise, although the economics, strategic implications and other circumstances
justifying the expansion will be key factors in determining the amount and type
of resources the Company will commit.
Forward Looking Statements
This report includes certain forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from the
results discussed herein. Recipients of this report are cautioned to consider
these risks and uncertainties and to not place undue reliance on these
forward-looking statements.
PART II - OTHER INFORMATION
Items 1, 2, 3, 4 and 5 were not applicable in the period ended September 30,
1997.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
11 - Consolidated Earnings per Share Calculation
27 - Financial Data Schedule *
b. No reports on Form 8-K were filed during the period for which
this Report is filed.
* - Filed in electronic form only.
14
<PAGE>
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/ G. Lee Bohs November 13, 1997
---------------------------- -------------------
G. Lee Bohs Date
Chief Financial Officer and
Principal Accounting Officer (Dual
signature as duly authorized officer and
and principal financial officer)
15
Right Management Consultants, Inc.
Exhibit 11 - Consolidated Earnings Per Share Calculation
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
Primary EPS
<S> <C> <C> <C> <C>
Net income $ 645,000 $2,169,000 $2,566,000 $7,175,000
========== ========== ========== ==========
Weighted average number of shares
issued and outstanding 6,627,000 6,400,000 6,572,000 6,201,000
Dilutive effect (excess of number
of shares issuable over number
of shares assumed to be issued
using the average market price
during the period) of
outstanding options 118,000 477,000 159,000 474,000
---------- ---------- ---------- ----------
Adjusted weighted average number
of shares outstanding 6,745,000 6,877,000 6,731,000 6,675,000
========== ========== ========== ==========
Earnings per common share $ 0.10 $ 0.32 $ 0.38 $ 1.07
========== ========== ========== ==========
Fully Diluted EPS
Net income $ 645,000 $2,169,000 $2,566,000 $7,175,000
========== ========== ========== ==========
Weighted average number of shares
issued and outstanding 6,627,000 6,400,000 6,572,000 6,201,000
Dilutive effect (excess of number
of shares issuable over number of
shares assumed to be issued using the
greater of the market price at the end
of the period or the average market price
during the period) of outstanding options 118,000 497,000 159,000 530,000
---------- ---------- ---------- ----------
Adjusted weighted average number
of shares outstanding 6,745,000 6,897,000 6,731,000 6,731,000
========== ========== ========== ==========
Earnings per common share $ 0.10 $ 0.31 $ 0.38 $ 1.07
========== ========== ========== ==========
</TABLE>
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 8,857
<SECURITIES> 0
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<ALLOWANCES> 645
<INVENTORY> 0
<CURRENT-ASSETS> 36,209
<PP&E> 31,337
<DEPRECIATION> 15,845
<TOTAL-ASSETS> 81,629
<CURRENT-LIABILITIES> 18,180
<BONDS> 0
0
0
<COMMON> 70
<OTHER-SE> 50,702
<TOTAL-LIABILITY-AND-EQUITY> 81,629
<SALES> 93,696
<TOTAL-REVENUES> 93,696
<CGS> 38,917
<TOTAL-COSTS> 79,642
<OTHER-EXPENSES> 9,327
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22
<INCOME-PRETAX> 4,705
<INCOME-TAX> 1,930
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<NET-INCOME> 2,566
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
</TABLE>
