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 June 30, 1998
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 (IRS Employer
of 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 July 31, 1998:
Common Stock, $0.01 par value 6,709,051
- ------------------------------ ----------------
Class Number of Shares
<PAGE>
Right Management Consultants, Inc.
Condensed Consolidated Balance Sheets
(Dollars in Thousands Except Share Data)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
(Unaudited)
Assets
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 8,870 $ 7,583
Accounts receivable, trade, net of allowance for doubtful accounts
of $809 and $663 in 1998 and 1997, respectively 28,819 21,888
Royalties and fees receivable from Affiliates 3,389 2,511
Other current assets 3,435 2,755
-------- --------
Total current assets 44,513 34,737
Property and equipment, net of accumulated depreciation of $19,324
and $16,931 in 1998 and 1997, respectively 14,253 13,342
Intangible assets, net of accumulated amortization of $12,796 and
$10,702 in 1998 and 1997, respectively 35,286 30,703
Other noncurrent assets 2,977 2,922
-------- --------
Total Assets $ 97,029 $ 81,704
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of long-term debt and other obligations $ 4,416 $ 3,943
Accounts and commissions payable 7,302 6,082
Accrued expenses 10,881 6,294
Deferred income 5,545 2,927
-------- --------
Total current liabilities 28,144 19,246
-------- --------
Long-term debt and other obligations 11,919 8,775
-------- --------
Deferred compensation 1,691 1,822
-------- --------
Minority interest in subsidiaries 1,560 1,411
-------- --------
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;
7,080,770 and 7,084,104 shares issued in 1998 and 1997, respectively 71 71
Additional paid-in capital 14,776 14,492
Retained earnings 41,502 38,363
Accumulated total comprehensive income (738) (580)
-------- --------
55,611 52,346
Less treasury stock, at cost, 380,452 shares (1,896) (1,896)
-------- --------
Total shareholders' equity 53,715 50,450
-------- --------
Total Liabilities and Shareholders' Equity $ 97,029 $ 81,704
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
1
<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 June 30,
1998 1997
<S> <C> <C>
Revenue:
Company office revenue $39,802 $30,057
Affiliate royalties 1,003 770
-------- --------
Total revenue 40,805 30,827
-------- --------
Expenses:
Consultants' compensation 16,304 12,523
Office sales and consulting support 2,384 1,708
Office administration 13,971 11,329
General sales and administration 4,876 3,202
-------- --------
Total expenses 37,535 28,762
-------- --------
Income from operations 3,270 2,065
Interest income (expense), net (157) (39)
-------- --------
Income before income taxes 3,113 2,026
Provision for income taxes 1,318 830
Minority interest in net income of subsidiaries 119 --
-------- --------
Net income $1,676 $1,196
======== ========
Basic earnings per share $0.25 $0.18
======== ========
Diluted earnings per share $0.25 $0.18
======== ========
Basic weighted average number of shares outstanding 6,698 6,582
======== ========
Diluted weighted average number of shares outstanding 6,793 6,720
======== ========
</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>
Six Months Ended June 30,
1998 1997
<S> <C> <C>
Revenue:
Company office revenue $77,034 $59,047
Affiliate royalties 2,043 1,825
-------- --------
Total revenue 79,077 60,872
-------- --------
Expenses:
Consultants' compensation 32,100 25,308
Office sales and consulting support 4,673 3,287
Office administration 27,133 22,224
General sales and administration 9,055 6,246
Restructuring costs (Note B) -- 630
-------- --------
Total expenses 72,961 57,695
-------- --------
Income from operations 6,116 3,177
Interest income (expense), net (394) 55
-------- --------
Income before income taxes 5,722 3,232
Provision for income taxes 2,434 1,311
Minority interest in net income of subsidiaries 149 --
-------- --------
Net income $3,139 $1,921
======== ========
Basic earnings per share $0.47 $0.29
======== ========
Diluted earnings per share $0.46 $0.28
======== ========
Basic weighted average number of shares outstanding 6,696 6,549
======== ========
Diluted weighted average number of shares outstanding 6,784 6,751
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
Right Management Consultants, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
<S> <C> <C>
Operating Activities:
Net income $3,139 $1,921
Adjustments to reconcile net income to net cash
provided by (utilized for) operating activities:
Depreciation and amortization 3,810 2,845
Deferred income taxes 423 --
Restricted stock compensation -- (593)
Tax benefit from the exercise of stock options -- 400
Restructuring costs (Note B) -- 630
Minority interest in net income of subsidiaries 149 --
Provision for doubtful accounts 240 150
Other non-cash items 360 (388)
Changes in operating accounts:
(Increase) in operating assets (9,065) (530)
Increase (decrease) in operating liabilities 8,080 (6,050)
-------- --------
Net cash provided by (utilized for) operating activities 7,136 (1,615)
-------- --------
Investing Activities:
Purchase of property and equipment (3,278) (2,558)
Net cash paid for acquisitions (6,180) (4,472)
-------- --------
Net cash utilized for investing activities (9,458) (7,030)
-------- --------
Financing Activities:
Borrowings under revolving credit facility 5,900 5,500
Payment of long-term debt and other obligations (2,575) (1,250)
Repurchase of common stock -- (228)
Proceeds from stock issuances 284 989
-------- --------
Net cash provided by financing activities 3,609 5,011
-------- --------
Increase (decrease) in cash and cash equivalents 1,287 (3,634)
Cash and cash equivalents, beginning of period 7,583 18,055
-------- --------
Cash and cash equivalents, end of period $8,870 $14,421
======== ========
Supplemental Disclosures of Cash Flow Information
Cash paid for:
Interest $523 $228
======== ========
Income taxes $1,258 $1,746
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<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 six months ended June
30, 1998 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1998. 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, 1997.
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.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income" which is effective for financial statements issued for fiscal years
beginning after December 15, 1997. Comprehensive income is defined as net income
plus revenues, expenses, gains and losses that, under generally accepted
accounting principles, are excluded from net income. The Company's comprehensive
income includes net income and unrealized gains and losses from foreign currency
translation. Total comprehensive income for the three months ended June 30, 1998
and 1997 was $1,535,000 and $1,235,000, respectively. Total comprehensive income
for the six months ended June 30, 1998 and 1997 was $3,048,000 and $1,772,000,
respectively.
Reclassifications
Certain 1997 amounts have been reclassified to conform to the 1998 presentation.
5
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 per share, 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 1998.
NOTE C - ACQUISITIONS AND LICENSING AGREEMENT
Effective January 1, 1998, the Company acquired certain assets and the business
of Manus Associates ("Manus"), a Stamford, Connecticut human resource consulting
firm, for a combination of cash and future defined incentives. The Company
borrowed $3,600,000 from its revolving credit facility in order to complete this
transaction.
Additionally, effective January 1, 1998, the Company entered into an exclusive
licensing agreement with The Atlanta Consulting Group ("TACG"), an
organizational consulting firm located in Atlanta, Georgia. Under this exclusive
licensing agreement, the Company will sell and deliver TACG's full range of
products and methodologies and has hired all TACG former employees.
Effective April 1, 1998, the Company acquired 51 % of the outstanding shares of
Teams International, Inc. ("Teams"), a technology-based assessment firm
specializing in 360-degree feedback instruments to support a wide spectrum of
organizational change initiatives. The purchase price of this acquisition,
including costs of acquisition, approximated $2,308,000. The Company borrowed
$2,300,000 from its revolving credit facility in order to complete this
transaction. As a part of the purchase agreement, the minority shareholders of
Teams have agreed to provide the Company with options to acquire the remaining
49% of the outstanding shares of Teams beginning on April 1, 2001. Additionally,
the minority shareholders of Teams have the right to require the Company to
purchase the remaining 49% of the outstanding shares of Teams over a three year
period beginning on April 1, 2001.
These transactions were accounted for as purchases. The accompanying
consolidated financial statements reflect the year to date results from the
effective dates of acquisition for all of the above transactions. For the six
months ended June 30, 1998, the aggregate purchase price for acquisitions was
approximately $6,180,000, including the costs of acquisitions. The purchase
price exceeded the fair value of the assets acquired by $6,270,000.
6
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE C - ACQUISITIONS AND LICENSING AGREEMENT (Continued)
The pro-forma impact of these acquisitions on results of operations is
immaterial to the consolidated financial statements as a whole, and has been
omitted.
NOTE D - ACCRUED EXPENSES
The increase in accrued expenses existing at June 30, 1998 is attributable to
incentive compensation accruals due to the Company's achievement of certain
internal revenue and earnings targets in 1998. The internal revenue and earnings
targets were not met in 1997.
NOTE E - DEBT
The Company has entered into four interest rate swap agreements with an
aggregate notional principal at June 30, 1998 of $13,350,000 and quarterly
payments scheduled over two to five years. At June 30, 1998, the Company's
interest rates under these interest rate swaps ranged from 6.4% to 6.7%.
The borrowing of $2,300,000 to complete the acquisition of Teams (see Note C to
the Condensed Consolidated Financial Statements) is not subject to an interest
rate swap. The Company pays a floating interest rate on this borrowing which
approximated 6.6% at June 30, 1998.
The Company uses interest rate swaps to reduce exposure to adverse fluctuations
in interest rates. While these hedging instruments are subject to fluctuations
in value, such fluctuations are offset by the change in value of the underlying
exposures being hedged. The Company is not a party to leveraged derivatives and
does not hold or issue financial instruments for speculative purposes. 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.
7
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE F - EARNINGS PER SHARE
In 1997, the Company adopted SFAS No. 128, "Earnings per Share". The
calculations of earnings per share ("EPS") under SFAS No. 128 are detailed
below.
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, 1998 ended June 30, 1998
Income Shares EPS Income Shares EPS
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net income $1,676,000 6,698,000 $0.25 $3,139,000 6,696,000 $0.47
===== =====
Impact of options --- 95,000 --- 88,000
---------- --------- ---------- ---------
Diluted EPS:
Net income $1,676,000 6,793,000 $0.25 $3,139,000 6,784,000 $0.46
========== ========= ===== ========== ========= =====
</TABLE>
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, 1997 ended June 30, 1997
Income Shares EPS Income Shares EPS
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net income $1,196,000 6,582,000 $0.18 $1,921,000 6,549,000 $0.29
===== =====
Impact of options --- 138,000 --- 202,000
---------- --------- ---------- ---------
Diluted EPS:
Net income $1,196,000 6,720,000 $0.18 $1,921,000 6,751,000 $0.28
========== ========= ===== ========== ========= =====
</TABLE>
For the three months and six months ended June 30, 1998, outstanding options to
purchase 798,214 shares of Company Common Stock at prices ranging from $12.75 to
$24.33 per share were excluded from the computation of diluted EPS, as the
options' average exercise price was greater than the market price of the Common
Stock.
8
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE G - SEGMENTS
Summarized operations of each of the Company's geographic segments in the
aggregate as of June 30, 1998 and 1997 and for the six month periods then ended
are as follows:
<TABLE>
<CAPTION>
Asia-
1998 U.S. Canada Europe Pacific Consolidated
<S> <C> <C> <C> <C> <C>
Identifiable assets $77,613,000 $ 6,365,000 $ 7,697,000 $ 5,354,000 $97,029,000
=========== =========== =========== =========== ===========
Total revenue $60,522,000 $ 5,136,000 $ 7,020,000 $ 6,399,000 $79,077,000
=========== =========== =========== =========== ===========
Income from
operations (1) $ 3,771,000 $ 813,000 $ 1,076,000 $ 456,000 $ 6,116,000
=========== =========== =========== =========== ===========
Depreciation and
amortization $ 3,005,000 $ 264,000 $ 235,000 $ 306,000 $ 3,810,000
=========== =========== =========== =========== ===========
Capital expenditures $ 2,630,000 $ 143,000 $ 153,000 $ 352,000 $ 3,278,000
=========== =========== =========== =========== ===========
1997
Identifiable assets $62,435,000 $ 7,209,000 $ 6,065,000 $ -- $75,709,000
=========== =========== =========== =========== ===========
Revenue $48,901,000 $ 5,689,000 $ 6,282,000 $ -- $60,872,000
=========== =========== =========== =========== ===========
Income from
operations (1) $ 1,433,000 $ 1,135,000 $ 609,000 $ -- $ 3,177,000
=========== =========== =========== =========== ===========
Depreciation and
amortization $ 2,499,000 $ 132,000 $ 214,000 $ -- $ 2,845,000
=========== =========== =========== =========== ===========
Capital expenditures $ 1,838,000 $ 76,000 $ 644,000 $ -- $ 2,558,000
=========== =========== =========== =========== ===========
<FN>
(1) The income from operations for the United States segment includes total
general sales and administration expense reported on the Condensed
Consolidated Statements of Income.
</FN>
</TABLE>
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which is effective for financial statements
issued for fiscal years beginning after December 15, 1997. SFAS No. 131
establishes standards for reporting financial and descriptive information about
an enterprise's operating segments in its financial statements. Although this
statement need not be applied to interim financial statements in the initial
year of application, expanded comparative information will be required for
interim periods subsequent to the fiscal year ending December 31, 1998.
9
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE G - SEGMENTS (Continued)
The Company has elected not to comply early with SFAS No. 131.
NOTE H - SUBSEQUENT EVENT
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 any 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.
During 1997, the Company repurchased 127,000 shares of Common Stock at an
aggregate purchase price of $1,379,000.
In early August 1998, the Company repurchased 90,000 shares of Common Stock at
an aggregate purchase price of $1,051,000.
10
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISSCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
For the three months ended June 30, 1998, revenue generated by Company offices
increased by 32% or $9,745,000 from the corresponding quarter in 1997. This
increase is due to same office revenue growth of approximately 10%, in addition
to $6,687,000 in incremental revenues from acquisitions consummated subsequent
to the second quarter 1997. The same office revenue growth was derived primarily
from the U.S. and European operations and was evident in both the outplacement
and human resource consulting lines of business.
For the three months ended June 30, 1998, revenue generated by Company offices
within the outplacement line of business increased by 20% or $5,457,000. This
outplacement revenue increase is largely due to $3,808,000 in incremental
revenues from acquisitions consummated subsequent to the second quarter 1997. In
addition, the Company experienced greater activity from existing major
international and national accounts across all geographic regions.
For the three months ended June 30, 1998, revenue generated by Company offices
within the human resource consulting line of business increased by 130% or
$4,288,000. This significant increase in consulting revenues is due to same
office consulting revenue growth of approximately 43%, in addition to $2,879,000
in incremental consulting revenues from the acquisitions consummated subsequent
to the second quarter 1997 (see Note C to the Condensed Consolidated Financial
Statements).
For the six months ended June 30, 1998, revenue generated by Company offices
increased 30% or $17,987,000 from the corresponding period in 1997. This
increase is due to same office revenue growth within both the outplacement and
human resource consulting lines of business, in addition to $12,736,000 in
incremental revenues from acquisitions consummated subsequent to the second
quarter 1997. For the six months ended June 30, 1998, same office revenues in
total increased by 9%.
For the three months ended June 30, 1998, Affiliate royalties increased 30% or
$233,000 from the corresponding quarter in 1997. For the six months ended June
30, 1998, Affiliate royalties increased 12% or $218,000 from the corresponding
quarter in 1997.
For the three months ended June 30, 1998, total Company office expenses
increased 28% or $7,099,000 over the corresponding quarter in 1997. This
increase is due to $5,915,000 in incremental costs from acquisitions consummated
subsequent to the second quarter 1997, as well as an increase in office level
employee incentives. The Company's achievement of certain revenue and operating
income targets for the second quarter 1998 has triggered this increase in office
level incentives.
11
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISSCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONTINUED
For the six months ended June 30, 1998, total Company office expenses increased
26% or $13,087,000 over the corresponding period in 1997, excluding the 1997
restructuring charge of $630,000 (see Note B to the Condensed Consolidated
Financial Statements). This increase is due to $11,479,000 in incremental costs
from acquisitions, as well as an increase in office level employee incentives.
Aggregate Company office margins were 18% and 15% for the second quarter 1998
and 1997, respectively. Year to date aggregate Company office margins, exclusive
of the 1997 restructuring charge (see Note B to the Condensed Consolidated
Financial Statements), were 17% and 14% for 1998 and 1997, respectively. The
increase in margin is attributable primarily to the previously mentioned revenue
growth, particularly in the consulting line of business, and improved European
results, partly offset by break-even results in the Asia-Pacific segment and
increased funding for office level incentives. The first quarter results within
the Asia-Pacific segment were negatively impacted by the summer holiday period
in that geographic region.
For the three months ended June 30, 1998, general sales and administration
expenses increased by 52% or $1,674,000 over the corresponding quarter in 1997.
This increase is due primarily to incentive compensation expense and increased
amortization charges related to the Company's significant acquisition activity
during 1997 and early 1998, as well as the forfeiture of restricted stock awards
in 1997 which reduced the general sales and administrative expenses in that
year. General sales and administrative expenses as a percentage of total
revenues were approximately 12% for the second quarter 1998 versus 10% for the
second quarter 1997.
For the six months ended June 30, 1998, general sales and administration
expenses increased 45% or $2,809,000 over the corresponding period in 1997. This
increase is due to the previously mentioned increases in incentive compensation
expense and amortization charges, as well as the forfeiture of restricted stock
awards in 1997. General sales and administrative expenses as a percentage of
total revenues were approximately 11% for year to date 1998 versus 10% for year
to date 1997.
12
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISSCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONTINUED
The Company's effective tax rates for the three months ended June 30, 1998 and
1997 were approximately 42% and 41%, respectively. The Company's effective tax
rates for the six months ended June 30, 1998 and 1997 were approximately 43% and
41%, respectively. The increase in the effective tax rate is due to a shift in
the Company's taxable income to foreign jurisdictions with higher tax rates, as
well as an increase in the non-deductible portion of goodwill amortization and
the effect of other non-deductible expenses related to the Company's significant
acquisition activity during 1997. Throughout the remainder of 1998, the Company
anticipates that the effective tax rate will approximate 43%.
Capital Resources and Liquidity
At June 30, 1998 and December 31, 1997, the Company had cash and cash
equivalents of $8,870,000 and $7,583,000, respectively. At June 30, 1998 and
December 31, 1997, the Company had working capital of $16,369,000 and
$15,491,000, respectively.
Net cash provided by operating activities amounted to $7,136,000 for the six
months ended June 30, 1998 versus cash utilized for operating activities of
$1,615,000 for 1997. The improvement is primarily the result of increased
earnings.
Net cash utilized for investing activities amounted to $9,458,000 and $7,030,000
for the six months ended June 30, 1998 and 1997, 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
six months of 1998, the Company acquired two consulting firms and entered into a
licensing agreement with an outside firm for a combination of cash and future
defined incentive payments (see Note C to the Condensed Consolidated Financial
Statements).
Net cash provided by financing activities amounted to $3,609,000 and $5,011,000
for the six months ended June 30, 1998 and 1997, respectively. The net cash
inflow for 1998 was the result of the $5,900,000 borrowing made to complete the
Manus and Teams acquisitions (see Note C to the Condensed Consolidated Financial
Statements), partly offset by repayments on the Company's borrowings and defined
incentives for acquisitions made in previous years.
Under its revolving credit facility with its two primary lenders, the Company
has a $40,000,000 borrowing capacity. The Company had approximately $24,350,000
available under the revolving credit facility at June 30, 1998. The Company
plans to utilize the revolving credit facility to assist in the financing of
future acquisitions as they arise and for other general corporate purposes.
13
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISSCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONTINUED
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.
Year 2000
The Company has completed an evaluation of the potential impact of the year
2000. The Company clearly expects costs to be incurred addressing the year 2000
issue, but does not expect these costs to have a material impact on its
business, operations, or its financial condition.
Forward Looking Statements
Statements included in this Report on Form 10-Q, including within this
Management's Discussion and Analysis of Financial Condition and Results of
Operations which are not historical in nature, are intended to be, and hereby
are identified as "forward looking statements" for purposes of the safe harbor
provided by the Private Securities Litigation Reform Act of 1995. The Company
cautions readers that forward looking statements including without limitation
those relating to the Company's future business prospects, revenues, working
capital, liquidity, capital needs, interest costs and income are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those indicated in the forward looking statements due to several
important factors identified from time to time in the Company's reports filed
with the Securities and Exchange Commission (the "SEC"). The Company hereby
incorporates by reference the discussion concerning forward looking statements
set forth in the Management's Discussion and Analysis of Financial Condition and
Results of Operations section of the Company's Annual Report on Form 10-K for
the year ended December 31, 1997 filed with the SEC, as well as the risk factors
identified within the same Annual Report on Form 10-K. Readers of this Report
are cautioned not to place undue reliance upon these forward looking statements,
which speak only as of the date hereof. The Company undertakes no obligation to
publicly release any revisions to these forward looking statements or reflect
events or circumstances after the date hereof.
14
<PAGE>
PART II - OTHER INFORMATION
Items 1, 2, 3 and 5 were not applicable in the six months ended June 30, 1998.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on May 7,
1998. At the meeting, ten of the nominees for the election of
directors, being Frank P. Louchheim, Richard J. Pinola, Joseph T.
Smith, Larry A. Evans, John R. Bourbeau, Raymond B. Langton,
Rebecca J. Maddox, Catherine Y. Selleck, Marti D. Smye and
Frederick R. Davidson were elected as directors. The selection by
the Board of Directors of Arthur Andersen LLP as the Company's
independent public accountants for the current fiscal year was
also ratified.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
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.
15
<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/ RICHARD J. PINOLA August 13, 1998
Richard J. Pinola Date
Chairman of the Board and Chief Executive Officer
BY:/S/ G. LEE BOHS August 10, 1998
G. Lee Bohs Date
Chief Financial Officer and
Principal Accounting Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 8,870
<SECURITIES> 0
<RECEIVABLES> 29,628
<ALLOWANCES> 809
<INVENTORY> 0
<CURRENT-ASSETS> 44,513
<PP&E> 33,577
<DEPRECIATION> 19,324
<TOTAL-ASSETS> 97,029
<CURRENT-LIABILITIES> 28,144
<BONDS> 0
0
0
<COMMON> 71
<OTHER-SE> 53,644
<TOTAL-LIABILITY-AND-EQUITY> 97,029
<SALES> 79,077
<TOTAL-REVENUES> 79,077
<CGS> 32,100
<TOTAL-COSTS> 63,906
<OTHER-EXPENSES> 9,055
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 394
<INCOME-PRETAX> 5,722
<INCOME-TAX> 2,434
<INCOME-CONTINUING> 3,139
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,139
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.46
</TABLE>
