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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the
----- Securities Exchange Act of 1934 for the fiscal year
ended December 31, 1998
OR
Transition Report Pursuant to Section 13 or 15(d) of the
----- Securities Exchange Act of 1934
Commission File No. 0-15539
RIGHT MANAGEMENT CONSULTANTS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2153729
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1818 Market Street, Philadelphia, Pennsylvania 19103
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 988-1588
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value per share
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant using the closing stock price as of March 1, 1999 was $97,908,000.
The number of shares outstanding of the registrant's Common Stock as of March 1,
1999 was 6,714,000.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I & II Portions of the Company's 1998 Annual Report to Shareholders
for the fiscal year ended December 31, 1998.
Part III The Company's definitive proxy statement with respect to its
1999 Annual Meeting of Shareholders to be held on May 6, 1999.
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PART I
Item 1: Business
General
Right Management Consultants, Inc. (the "Company") is an international career
management and human resource consulting firm headquartered in Philadelphia,
Pennsylvania. Founded in 1980, the Company has been publicly owned since 1986.
The Company is the largest worldwide firm in the career management industry with
1998 revenues in excess of $168 million. Worldwide operations are structured
into seven geographic groups that provide management oversight to more than 170
service locations worldwide.
The Company licenses its Affiliates to use its service marks and licenses and
trains them to use its proprietary materials and methods. The Company receives
fees directly from employers for services rendered by Company offices and
royalties and fees from the Affiliates. The Company's fees for its services are
paid exclusively by the employer. The Company does not provide its services to
employees who are not sponsored by employers, since it is not a "retail" career
counseling firm or employment agency.
The Company's operations are divided into two lines of business: career
transition services, and human resources and career management consulting, which
specializes in change management, communication, strategy implementation, merger
integration and executive development.
Career Transition Services
The Company provided career transition services to approximately 5,200 client
companies during 1998, including a majority of the companies that comprise the
Fortune 500. No single customer or client accounted for a material amount of the
Company's business in 1998. Career transition services are divided into two
principal categories - Individual Outplacement Services and Group Outplacement
Services.
Individual Outplacement Services
The Company's individual outplacement services for the employer include advice
on conducting the termination interview, terms of severance pay and other
termination benefits. Services by the Company to terminated employees include
assistance in handling the initial difficulties of termination; identifying
continuing career goals and options and in planning an alternative career;
aiding in developing skills for the search for a new job, such as resume
writing, identifying and researching types of potential employers, preparing and
rehearsing for interviews; continuing consulting and motivation throughout the
job search campaign; assessing new employment offers and methods of accepting
such offers (including consideration of relocation issues) and, where
appropriate, consulting with the employee's spouse regarding the stresses of the
employment search and the positive role the spouse may play in all aspects of
the new job search, as well as assisting with financial planning and health
maintenance.
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Approximately 77% of the career transition revenue generated by Company offices
during 1998 was for individual outplacement services.
Group Outplacement Services
The remaining significant portion of the Company's career transition business
consists of providing consulting in group contexts for companies making group
reductions in their work force due to reorganization, restructuring or other
reasons. The Company's group programs have, as their core, seminars for
generally up to 12 employees per group, in sessions extending over one to five
days. Often, the group seminar is preceded or followed by individual counseling.
These group programs are designed for each employer-client and are generally
competitively priced and bid, based on the number of consulting hours, number of
employees involved and the type of programs to be provided. The group program
may also be used for "voluntary separation" due to reorganizations or other
reasons.
Approximately 23% of the career transition revenue generated by Company offices
during 1998 was for group outplacement services.
The career transition business in total, including individual and group
outplacement services, provided approximately 85% of total Company office
revenue for the year ended December 31, 1998.
Subsequent to December 31, 1998, the Company completed the acquisition of N.V.
Claessens Belgium, S.A., a leading career transition firm with four offices in
Belgium.
See Note M to the Consolidated Financial Statements for more details on this
transaction.
Human Resources and Career Management Consulting
The Company provides career management consulting services that assist employers
and their employees in identifying and improving areas of job performance,
refining communication skills and improving employee productivity. The Company
also provides human resource consulting to corporations on restructuring and
realignment issues, offering customized services to help manage all aspects of
organizational change, including planning, selection, retention strategy and
communication issues. Other services are designed to enhance the abilities of
executives and managers to evaluate employees' performance in making employment
and promotion decisions.
To broaden and diversify its business base, the Company has begun its commitment
to the consulting line of business by acquiring in 1996 the outstanding stock of
People Tech Consulting, Inc. ("PeopleTech"), a Canadian corporation. Since the
addition of People Tech's human resources consulting business to the Company's
previously established career management consulting practice, the Company has
continued to acquire firms with human resources consulting expertise.
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During 1998, the Company made two acquisitions of consulting firms and entered
into an exclusive licensing agreement with another consulting firm. The
acquisitions of Manus Associates, a human resources consulting firm, and the
acquired 51% interest in Teams International, Inc., a technology-based
assessment firm, contributed diverse capabilities to the human resources
consulting practice. Areas of specialty include 360-degree feedback systems, the
development of competency models, leadership development, team-building, and
performance and pay management. The Company further expanded its exposure and
methodologies in the human resources and career management consulting practice
with an exclusive licensing agreement with The Atlanta Consulting Group, an
organizational consulting firm. The Company continues to integrate these
products and methodologies into its consulting business.
The consulting business in total, including career management consulting and
human resources consulting, provided approximately 15% of total Company office
revenue for the year ended December 31, 1998. No single customer or client
accounted for a material amount of business within the human resources and
career management consulting line of business in 1998.
Subsequent to December 31, 1998, the Company completed the acquisition of two
European consulting firms, which will further strengthen its human resources
consulting practice internationally. The transactions include Groupe ARJ, with
offices in Paris and Lyon, France and Jouret Management Center located in
Brussels, Belgium.
See Note M to the Consolidated Financial Statements for more details on these
transactions.
Fees for Services Provided by Company Offices
For individual career transition services provided by Company offices, the
Company normally receives a negotiated fee, depending upon the services
provided, which generally ranges between 10% and 20% of the terminated
employee's annual compensation. Fees for group career transition programs and
consulting projects are individually billed depending upon the type of services
the employer requests, the amount of consulting time required and the number of
employees involved.
Organization and Distribution of Company Offices and Affiliates
The current network of Company offices and Affiliates is outlined in the
Company's 1998 Annual Report to Shareholders, attached as Exhibit 13 hereto,
that portion of which is incorporated herein by reference.
Management of Company Offices and Affiliates
The Company believes that a decentralized approach of organizing its business
into geographic groups and related regions, which may be comprised of more than
one Company office or Affiliate office, allows the Company to be responsive to
individual clients, as well as allowing it to better serve its local and
regional markets. Each region is responsible for the marketing and sales of
career transition and consulting activities in its assigned area. Through the
Company's Affiliate network arrangement, the Company's clients have access to
the entire Company network of Company offices and Affiliates. See "Business -
Affiliate Arrangements."
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Affiliate Arrangements
The Basic Affiliate Relationship
The Company has previously entered into agreements with Affiliates ("Affiliate
Agreements"), which are independent franchisee businesses, to provide the
Company's career transition and consulting services within the geographic area
defined in each Affiliate Agreement (the "Exclusive Territory"). Affiliates
render such services exclusively under the Company's registered service marks,
including "Right Associates(R)". Under the Affiliate Agreements, the Company
assists the Affiliates in various ways in the provision of career transition and
consulting services. The Company has no present intention to enter into any
additional Affiliate Agreements.
Under the Affiliate Agreements, the Company is precluded from establishing or
maintaining Company offices or otherwise soliciting customers, providing
consulting services or licensing other Affiliates to operate in the Exclusive
Territory of a particular Affiliate. In turn, the Affiliate is prohibited from
establishing or maintaining its own offices or "satellites" soliciting customers
or engaging in career transition or consulting services within Exclusive
Territories which the Company currently or in the future grants or assigns to
Company offices.
There is not a formal Affiliate organization; however, a Management Advisory
Committee (the "Advisory Committee") exists which considers matters of general
concern to the Affiliates. The Advisory Committee is comprised of four members
appointed by the Company's management and three members elected by the
Affiliates for a three year term.
Company Training of Affiliates
The Affiliate Agreements require the Company to train the Affiliate and its
employees in marketing and delivering career transition and consulting services.
The Company is responsible for overall guidance and has established Company
standards and policies relating to its services. The Company provides
proprietary sales and consulting materials, administrative forms (including,
among other things, guidelines for consulting client-employers and terminated
employees), materials used in conjunction with marketing the services and
administration of its office and materials relating to the Company's system of
monitoring the progress of terminated employees. The Company provides guidance,
if requested by the Affiliates, with respect to the hiring of the Affiliates'
employees, the use and development of sales programs and general issues of
office operation and sales. The cost of such optional assistance by the Company
is paid by the Affiliate, unless the Company otherwise agrees not to charge for
these services. The Company also provides marketing support, public relations,
advertising and promotional support, consisting of national and international
media efforts directed by an in-house marketing staff.
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Affiliates' Payment of Fees and Royalties to Company
In consideration of the Company providing services, training and licensing the
use of its federally-registered service mark, the Affiliate generally pays to
the Company the following fees (which are not in the order of their contribution
to Company revenue): (1) a one-time non-refundable initial Affiliate (franchise)
fee; (2) a 10% royalty on the Affiliate's total gross receipts; (3) a fee for
services rendered in assisting the Affiliate in selling the Company's programs
to the employer-client; and (4) a fee for services rendered in providing career
transition services to terminated employees on certain contracts and accounts
sold and managed by Affiliates.
Term, Supervision and Termination of Affiliate Agreements
The Company's Affiliate Agreements provide for an initial term of three or five
years and are automatically renewed from year to year unless either party gives
the other notice of non-renewal (which may be without cause) at least 120 days
prior to the expiration of the then current term (unless a longer notice period
is required by local franchise laws).
During the term of the Affiliate Agreement, the Company may terminate the
arrangement, subject to local franchise laws and cure periods specified in the
Affiliate Agreements, for a variety of reasons, including a material breach of
such Agreement by the Affiliate, the failure by the Affiliate to achieve at
least 75% of the minimum volume of business set forth in its Affiliate Agreement
in any year of the Affiliate's operation or the Affiliate's failure to otherwise
conduct normal business operations diligently and regularly or to use its best
efforts to sell and provide career transition consulting services, or the
Affiliate's failure to adhere to the written service standards established by
the Company in consultation with the Advisory Committee. The Company may also
terminate an Affiliate Agreement due to the death, disability or retirement of
key Affiliate personnel or of principal shareholders of an Affiliate.
The Company has offered and implemented with substantially all of its existing
North American Affiliates an addendum to their respective Affiliate Agreements.
Under the terms of the addendum, the Company relinquishes its right to give
notice of non-renewal of the Affiliate's Affiliate Agreement upon the expiration
of its initial or one of its renewal terms. However, the Advisory Committee is
empowered to terminate, upon specified grounds, the Affiliate Agreement of
Affiliates who sign the addendum. In addition, the addendum permits the Company
to terminate the Affiliate Agreement of any Affiliate if certain trends in the
volume of business generated by the Affiliate deviate by more than specified
amounts below the comparably defined trends for all North American offices of
the Company and its Affiliates measured as a group.
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The Company has agreed with substantially all of its existing North American
Affiliates that in the event the Company offers to any other North American
Affiliate any provision in the Affiliate Agreement with such other North
American Affiliate which is more beneficial to such other North American
Affiliate than the terms of the existing Affiliate Agreements with the rest of
the current North American Affiliates, then the new provision will be offered to
all existing North American Affiliates, except for provisions added or deleted
to (a) comply with a particular state or provincial law or regulation; (b)
maintain in force prior agreements with specific Affiliates; or (c) address the
unique nature or character of other businesses or activities engaged in by a
specific Affiliate.
Affiliates' Right of First Refusal
Pursuant to the Affiliate Agreements, the Affiliates may have a right of first
refusal to purchase shares of the Company's Common Stock in case of certain
proposed sales or exchanges of the Company's Common Stock. Under the terms of
the Affiliate Agreements, in the event that 51% or more of the Common Stock of
the Company is proposed to be sold by one or more shareholders of the Company in
a single transaction (exclusive of a corporate merger or consolidation in which
the Company is not the surviving party and transactions in which the common
stock of another company is exchanged for the Common Stock of the Company), the
Affiliates may have a right of first refusal to acquire the Common Stock of the
Company being sold under the same terms as the proposed transaction.
Acquisitions
During 1998, the Company completed two separate consulting acquisitions and
entered into an exclusive licensing agreement with a third consulting firm. See
Note C to the Consolidated Financial Statements for a detailed description of
the acquisitions. The total purchase price for these acquisitions aggregated
approximately $6,285,000, including the costs of acquisitions. The acquisitions
were consummated through combinations of cash and future defined incentives,
including the assumption of incomplete consulting contracts.
During the period 1991 through 1997, the Company completed twenty-six separate
acquisitions of career transition and consulting firms for combinations of cash,
future defined incentives, incomplete career transition contracts and other
considerations. The total purchase price for these transactions aggregated
approximately $39,660,000, including the costs of acquisitions.
During the period 1991 through 1998, the total number of acquisitions completed
by the Company included ten former Affiliates. At December 31,1998, there were
five Affiliate regions remaining in the Company's network of offices.
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Government Regulation
Certain aspects of the on-going relationship between the Company and the
Affiliates are subject to the franchise regulations of the Federal Trade
Commission (the "FTC") and to various franchise laws enacted by certain of the
states in which the Company's Affiliates are located. The provisions and scope
of the state laws vary. In some states, the Company is required to register the
offering of the Affiliate Agreements with regulatory agencies and to license
Company personnel who are directly involved in offering the Affiliate Agreement
to prospective Affiliates. Some states also regulate certain terms of the
Affiliate Agreement, primarily the terms upon which the Company can terminate an
Affiliate Agreement for cause or can decline to renew an Affiliate Agreement
upon expiration. Other states' laws impose on the Company general duties of fair
dealing with the Affiliates and prohibit unfair discrimination among or against
Affiliates. As a result of such laws regulating relationships with the
Affiliates in certain states, the Company has less flexibility than it would
otherwise have in structuring such relationships. As part of the Company's
operating strategy, new Affiliates are not being sought and the Company will
likely acquire the remaining Affiliate territories when and if they become
available.
Financial Information Relating to Foreign Operations
See the Company's Consolidated Financial Statements, Note L, "Segments"
contained in the Company's 1998 Annual Report to Shareholders, the incorporated
portions of which are included as Exhibit 13 to this Form 10-K (the "Report"),
for information regarding the Company's foreign operations. This information is
responsive to Item 101(d) of Regulation S-K and is incorporated by reference
herein.
Employees
At February 28, 1999, the Company and its subsidiaries employed 978 persons
full-time, including 15 in senior management, 68 in other managerial and
professional roles, 562 in field operations as consultants, and 333 in clerical
capacities. In addition, the Company employed 428 persons on a part-time basis
as professional consultants. Consultants are generally required to have prior
executive or management experience and are provided Company training. None of
the Company's employees are subject to collective bargaining agreements. In
general, the Company believes that its employee relations are good.
Risk Factors
In addition to the other matters discussed elsewhere in this Report, the
following risk factors should be taken into account in evaluating the Company
and its business:
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1. Government Regulation: In connection with its arrangement with its
Affiliates, the Company devotes resources to complying with state and
federal franchise laws and regulations. The Company believes that its
practices and procedures are not in violation of the material provisions of
such state and federal laws and it has not received notices of material
claims or assertions from Affiliates regarding non-compliance.
Nevertheless, the Company's past practices may give rise to possible
liability, and given the scope of the Company's business and the nature of
franchise regulation, compliance problems could be encountered in the
future. For a discussion of the Company's past and current compliance with
state and federal franchising laws, other regulatory aspects of the
Company's relations with its Affiliates and possible liability of the
Company for certain of its past activities, see "Business - Government
Regulation."
Although career transition and human resource consulting services are not
currently specifically subject to state or federal regulation, the Company
is aware that such regulation has been considered by the legislatures of
several states. There can be no assurance that such regulation will not be
adopted in the future.
2. Relations with Affiliates: The Company's revenue depends in part on
royalties and fees paid by Affiliates. Under the current Affiliate
Agreements, royalties equal 10% of the Affiliate's total gross receipts.
The fees paid by Affiliates to the Company vary depending on the services
provided by the Company. The Company believes that the 10% royalty is
reasonable and currently has no plans to reduce it, although there can be
no assurance that royalties will continue to be maintained at such level
under all circumstances. The Company believes that its relations with its
Affiliates are good; however, there can be no assurance that such relations
will remain so. A deterioration of these relationships among the Company
and its Affiliates, or among the Affiliates themselves, or an inability to
collect royalties and fees payable to the Company or payable by one
Affiliate to another could materially adversely effect the Company. See
"Business - Affiliate Arrangements."
3. Possible Effects of Change in Company Control and Possible Future Issuance
of Preferred Stock: Under certain circumstances and pursuant to its
Affiliate Agreements, upon certain contemplated sales of 51% or more of the
Company's outstanding Common Stock, or a Company merger, consolidation or
reorganization, the Affiliates may have a right of first refusal to acquire
the Common Stock of the Company being sold or exchanged, on the same terms
as the proposed transaction with a third party. In addition, under the
Affiliate Agreements and under certain circumstances, upon sales of 51% or
more of the Company's assets or capital stock in one or more transactions,
or a Company merger, consolidation or reorganization, then, regardless of
the time remaining on the term of such Affiliate's current Affiliate
Agreement, the term of such Affiliate Agreement is automatically altered to
either (i) one year, with the Affiliate also having an option to renew the
Affiliate Agreement for an additional four year period upon the expiration
of such one year term, or (ii) five years, extending from the date of such
transaction, merger, consolidation or reorganization.
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Also, in the event of such transaction or reorganization, under the
Company's Employment Agreements with its executive officers, such officers
have an option to extend the term of their respective Employment Agreement
for an additional two years.
The Company's Articles of Incorporation authorize the issuance of up to
1,000,000 shares of Preferred Stock, at the discretion of the Board of
Directors. The Board of Directors may also fix from time to time in the
future, the designations, limitations, and preferences for any such series
of Preferred Stock issuance, without any further vote or action by
shareholders.
The Affiliates' right of first refusal and the alteration of the term of
their Affiliate Agreements, or the executive officers' right to extend the
term of their Employment Agreements, or the issuance of Preferred Stock at
the discretion of the Board of Directors may make the Company less
attractive to an entity or group considering acquiring control of the
Company or may make an acquisition materially more difficult, resulting in
a lower acquisition price per share, or may otherwise materially adversely
affect an investment in the Company's Common Stock.
4. Competition: The Company competes against other providers of career
transition services and other human resource consulting services. Based on
consolidated revenues for 1998, the Company has maintained its status as
the world's largest provider of career management services. However, the
Company's primary national and international competitors are divisions of
companies much larger than the Company, and these competitors may have
access to financial and other resources substantially greater than those
available to the Company.
The Company believes that the principal methods of competition in its
industry are quality of service, professional staff and price. On a
regional basis, the Company also competes against local career transition
and other human resources and career management consulting firms that are
well-established in a particular region. The Company believes that the cost
for its services are competitive, based on the quality and value of
services offered. The Company may also face competition from future
expansion by other entities into the career transition and other human
resource and career management consulting businesses.
5. Dependence on Personnel: As with other service businesses, the Company
depends upon the continued services of its executive, sales, and consulting
personnel. The loss of these personnel, or an inability to attract and
retain new qualified personnel or to retain qualified Affiliates, could
have an adverse impact on the Company.
6. Risks Related to the Company's Acquisition Strategy: The Company has grown
both internally and through acquisitions, and intends to continue to grow
by both of these methods. Historically, the Company has primarily acquired
outside firms within the highly fragmented career transition services
industry. See "Business - Acquisitions." In future periods, the Company
will continue to consider opportunistic acquisitions of career transition
providers. However, it is more likely that the Company will look to acquire
other consulting service providers, thereby allowing the Company to
continue to diversify its range of services provided.
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Increased competition for acquisition candidates may develop, in which
case there may be fewer acquisition opportunities available to the
Company, as well as higher acquisition prices. There can be no assurance
that the Company will be able to continue to identify, acquire, or
profitably manage additional businesses or successfully integrate acquired
businesses, if any, without substantial costs, delays or other operational
or financial problems. Further, acquisitions involve a number of special
risks, including possible adverse effects on the Company's operating
results, diversion of management's attention, failure to retain key
acquired personnel, risks associated with unanticipated events or
liabilities and amortization of acquired tangible and intangible assets,
some or all of which could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition,
there can be no assurances that the Company's existing business or future
acquisitions will achieve anticipated revenues and earnings.
7. Economic Conditions on a Local, Regional, National, and International
Basis: The demand for the Company's services, primarily career transition
services, is impacted by the overall economic strength on a local,
regional, national and international basis. In general, a stronger economy
can lead to easier and more rapid job change and reentry, which can reduce
the demand for the Company's services or compress the length of the
services provided, thereby negatively impacting prices. Weaker economic
conditions can also lead to reluctance on outside companies' part to incur
the expenditure associated with the Company's services.
Item 2: Properties
All office space for Company offices is leased. The leases typically have three
to five year terms and some have renewal options. The Company leases
approximately 675,000 square feet for all Company offices, including the
corporate headquarters, at an aggregate yearly rental cost of approximately
$16,037,000. Most of these leases are also subject to annual operating expense
escalation clauses. The Company believes its facilities are adequate to provide
services to its clients.
Item 3: Legal Proceedings
The Company is not a party to, nor is its property the subject of, any material
pending legal proceedings.
Item 4: Submission of Matters to a Vote of Security Holders
Not applicable.
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Executive Officers of the Registrant
Each of the following executive officers of the Company has been appointed by
the Board of Directors to their current position set forth opposite his or her
name. All of the executive officers are expected to devote their full business
time to the Company's affairs.
Name Age Position(s)
Richard J. Pinola 53 Chairman of the Board of Directors and
Chief Executive Officer
Frank P. Louchheim 75 Founding Chairman and Director
Joseph T. Smith 63 Vice Chairman of the Board of Directors
John J. Gavin 42 President, Chief Operating Officer and
Director
G. Lee Bohs 39 Executive Vice President, Chief Financial
Officer, Secretary and Treasurer
Larry A. Evans 56 Executive Vice President and Director
Dr. Marti D. Smye 48 Executive Vice President and Director
Frederick R. Davidson 62 Chairman of Davidson & Associates, Pty. Ltd.
and Director
Peter J. Doris 52 Executive Vice President
James E. Greenway 52 Executive Vice President
Erik A. Dithmer 67 EVP - Northeast Group
Terry W. Szwec 48 EVP - Canadian Group
Gilbert A. Wetzel 66 EVP - Southeast Group
Joan Strewler 48 EVP - North Central Group
Timothy D. Dorman 51 EVP - Western Group
Suzanne B. Levasseur 50 EVP - International Group
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Mr. Pinola was elected as a Director by the Board in October 1989. Mr. Pinola is
a Certified Public Accountant and joined Penn Mutual Life Insurance Company in
1969. He was appointed President and Chief Operating Officer of Penn Mutual Life
Insurance Company in 1988, which positions he held until his resignation in
September 1991. Mr. Pinola was a financial consultant to various organizations
from September 1991 until July 1992, at which time he was appointed President
and Chief Executive Officer of the Company. Effective January 1, 1994, Mr.
Pinola was appointed Chairman of the Board of Directors and continues as Chief
Executive Officer. Mr. Pinola also serves as a director of two outside
companies: Epitaxx and K-Tron International, a publicly held company.
Mr. Louchheim was one of the founders of the Company. From November 1980 until
September 1987, he served as President, Chief Executive Officer and Chairman of
the Board of Directors of the Company. He continued to serve as Chief Executive
Officer and Chairman of the Board through December 1991. From January 1992 to
December 1993, he served as the full-time Chairman of the Board of Directors.
Effective January 1, 1994, Mr. Louchheim was appointed Founding Chairman and
continues as a Director.
Mr. Smith joined the Penn Mutual Life Insurance Company in 1963. In 1976, he was
promoted to Vice President of Administration and Human Resources, which position
he held until his resignation in 1980. From 1981 to 1984, Mr. Smith worked as an
independent consultant offering a range of consulting services to businesses. He
joined the Company as a Senior Consultant in Professional Services in August
1984 and, from August 1988 until September 1992 held the position of Regional
Managing Principal of the Company's Philadelphia office. Mr. Smith was elected
as a Director in May 1991. From September 1992 through December 1998, Mr. Smith
served as the Company's Chief Operating Officer. Effective January 1, 1994, Mr.
Smith was appointed President in which capacity he served until December 1998.
Effective January 1, 1999, Mr. Smith was appointed Vice Chairman of the Board of
Directors.
Mr. Gavin was employed at Arthur Andersen LLP in Philadelphia for 18 years,
during which time he served as the partner in charge of the
manufacturing/distribution industries. Mr. Gavin joined the Company in December
1996 as Executive Vice President. In this capacity, Mr. Gavin was responsible
for the overall marketing strategy and business development activities for the
Company's worldwide locations. Effective January 1, 1999, Mr. Gavin was
appointed President and Chief Operating Officer of the Company. Also effective
January 1, 1999, Mr. Gavin was elected a Director by the Board of Directors. Mr.
Gavin is a member of the Board of Advisors for Temple University's Fox School of
Business and he is a member of the Board of Trustees of the Eagle's Fly for
Leukemia Foundation.
Mr. Bohs was employed at the regional Certified Public Accounting firm of Asher
& Company, Ltd., from June 1981 to January 1987, initially as a staff
accountant, and then as an accounting and auditing manager. He joined the
Company as Manager of Financial Reporting in January 1987, and was elected
Treasurer in December 1987 and Vice President, Finance, effective January 1989.
From March 1991 until December 1995, Mr. Bohs served as Senior Vice President
and Chief Financial Officer. He was appointed Secretary by the Board of
Directors in May 1995. Effective January 1996, he was promoted to Executive Vice
President and continues to serve as Chief Financial Officer. Mr. Bohs also
serves as a director of Advantis Inc., a public company which provides short
term office space and comprehensive business support services.
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Mr. Evans was professionally involved in the international finance and venture
capital industries, prior to May 1978. From May 1978 to November 1980, Mr. Evans
was employed as an independent outplacement consultant for Bernard Haldane
Associates, Inc., reporting to Mr. Louchheim. Since November 1980, Mr. Evans has
served as Executive Vice President and a Director of the Company. From January
1990 until May 1995, Mr. Evans served as Regional Managing Principal of several
Company offices. In May 1995, Mr. Evans joined the Company's corporate office
where he works together with the Company's regional offices in marketing to
major national and international accounts. Mr. Evans serves on various boards of
both non-profit organizations and community associations. He also holds
directorships with Data Com International, a silicon chip manufacturing company,
4 Internet, an internet company, and Knite, Inc., an automotive components
manufacturing company.
Dr. Smye was a partner of the industrial psychology firm, Jackson Smith, from
1981 to 1989. In 1989 she founded the change leadership consulting firm, People
Tech Consulting, Inc. ("People Tech"). People Tech was acquired by the Company
in April 1996. In addition, she is the author of three books titled You Don't
Change a Company by Memo: The Simple Truths About Managing Change, Corporate
Abuse: How "Lean and Mean" Robs People and Profits and Is It Too Late to Runaway
and Join the Circus? Dr. Smye also serves on various boards of both private
companies and community associations, including the Harvard Business School Club
of Toronto. In March 1999, Dr. Smye was elected an Executive Vice President of
the Company by the Board of Directors.
Mr. Davidson is the Chairman of Davidson and Associates, Pty. Ltd., an
Asia-Pacific career transition firm of which the Company acquired a fifty-one
percent interest during 1997 (see Note C to the Consolidated Financial
Statements). Mr. Davidson was elected a Director by the Board of Directors in
July 1997. Mr. Davidson has published numerous articles on career planning,
termination practices and managing large scale staff reductions, and he is the
author of The Art of Executive Firing and Handbook of Executive Survival. Mr.
Davidson is the founding president of the Australian Association of Outplacement
Consulting Firms.
Mr. Doris was Senior Vice President of Human Resources for a large New York City
based bank, prior to joining the Company in 1986. From 1986 to 1990, Mr. Doris
was Senior Vice President, Sales and Operations of the Company. Effective
January 1991, he became a Group Executive Vice President for the Southern region
of the United States in which capacity he served until 1996. Since 1997, Mr.
Doris has been working with the Company's regional offices in marketing to major
national and international accounts.
13
<PAGE>
Mr. Greenway was President of Consulting Group, Inc., an organizational and
management development consulting firm. He has held management positions with
Drake Beam Morin, McGraw-Hill and Lucky Stores. From 1989 to 1993, Mr. Greenway
was Executive Vice President of Lee Hecht Harrison, a human resource and
outplacement firm. He also was a member of their Executive Committee and
Advisory Council. In addition, Mr. Greenway served as President of the Workforce
Consulting Group, a global organizational and career management firm. Mr.
Greenway joined the Company in September 1997 as a Senior Vice President.
Effective July 1, 1998, he was promoted to Executive Vice President responsible
for coordinating the sales and marketing activities for the firm, in which
capacity he currently serves.
Mr. Dithmer had a 25-year career at Union Carbide, where he held a number of
senior sales, marketing and general management positions, both domestic and
international. Mr. Dithmer joined the Company in 1982 as a Client Services
Consultant and successfully built a major portfolio of corporate clients. In
1990, he became Senior Vice President responsible for the total sales activities
of the New York office. At the end of 1997, Mr. Dithmer was promoted to Group
Executive Vice President for the Metro New York Group. In 1998 his
responsibilities were expanded to include three more offices, in which Mr.
Dithmer currently serves as the Executive Vice President for the Northeast
Group. Mr. Dithmer has been affiliated with various associations and he is the
Founder and former President of the American Chamber of Commerce, Costa Rica.
Mr. Szwec was employed as Product Manager for Bristol Myers Canada, Ltd. from
1969 until 1970, when he left to become Manager of Training and Development for
de Havilland Aircraft, Ltd. In 1976, Mr. Szwec became Director of Human
Resources for Control Data Canada, Ltd., where he stayed until 1986 when he
began his own consulting practice specializing in executive training and
development, human resources effectiveness and career planning. Mr. Szwec joined
the Right Associates(R) network in 1987 as the Regional Managing Principal of
the Toronto Affiliate office. Mr. Szwec joined the Company in November 1990 as
Regional Managing Principal of the Company's Toronto region. Effective January
1, 1994, Mr. Szwec became Group Executive Vice President for the Canadian
operations of the Company in which capacity he currently serves.
Mr. Wetzel was associated with the Bell System serving as Chairman and Chief
Executive Officer of Bell of Pennsylvania and Diamond State Telephone, prior to
joining the Company in 1994. Effective December 1996, Mr. Wetzel became the
Group Executive Vice President for the Company's Eastern Group. In 1998 his
responsibilities were expanded to include overseeing operations for the entire
Southeastern region of the United States in which capacity he currently serves.
Mr. Wetzel serves as a director of Ace*Comm Corporation, a public company which
develops, markets and services operations support systems products for networks
deployed by telecommunications service providers using intranets and the
Internet.
14
<PAGE>
Ms. Strewler was the President of Career Dynamics, Inc. ("CDI") (see Note C to
the Consolidated Financial Statements), an innovative leader in career
transition services and organizational consulting. Effective with the Company's
acquisition of CDI on August 1, 1997, Ms. Strewler became the Group Executive
Vice President for the North Central Group of the United States in which
capacity she currently serves. Ms. Strewler also serves on various boards of
both private and not-for-profit companies, as well as industry trade
associations, including the Association of Outplacement Consulting Firms - North
America (AOCFNA) and the International Board of Career Management Certification.
Mr. Dorman has held various executive positions in the career management
industry. From 1990 to 1997, Mr. Dorman was a partner with Transitions
Management Group, a regional career transition firm in San Francisco. From 1994
to 1997, he also served as Chairman and Chief Executive Officer of Outplacement
International, a worldwide network of career management companies. Mr. Dorman
joined the Company in early 1997 and in July 1997, he became the Group Executive
Vice President for the West Group in which capacity he currently serves.
Ms. Levasseur served in Japan as a consultant and advisor to various Japanese
and US companies. She has worked for the U.S. Office of Personnel Management, in
charge of European management design, communication and training. She has also
worked as a Training Officer for NATO/SHAPE. In 1988, Ms. Levasseur established
the international operations of the Management Research Group (MRG), a
consulting firm, which included 38 partner locations in Europe, Africa and Asia
Pacific when she left in 1998. Effective April 1, 1998, Ms. Levasseur joined the
Company as Executive Vice President of the International Group. In this role she
is responsible for the European operations of the Company and developing
operations in Latin America.
Each executive officer serves at the pleasure of the Board of Directors and has
been elected for a term expiring with the first Board of Directors' meeting held
after the next annual meeting of shareholders.
PART II
Item 5: Market for Registrant's Common Equity and Related Stockholder Matters
The information required by this Item is incorporated by reference to the
section titled "Common Stock Data" in the Company's 1998 Annual Report to
Shareholders, the incorporated portions of which are included as Exhibit 13 to
this Report.
15
<PAGE>
Item 6: Selected Financial Data
The information required by this Item is incorporated by reference to the
section titled "Selected Financial Data" in the Company's 1998 Annual Report to
Shareholders, the incorporated portions of which are included as Exhibit 13 to
this Report.
Item 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by this Item is incorporated by reference to the
section titled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Company's 1998 Annual Report to Shareholders, the
incorporated portions of which are included as Exhibit 13 to this Report.
Item 7A: Quantitative and Qualitative Disclosures About Market Risks
The information required by this Item is incorporated by reference to the
section titled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Company's 1998 Annual Report to Shareholders, the
incorporated portions of which are included as Exhibit 13 to this Report.
Item 8: Financial Statements and Supplementary Data
The information required by this Item is incorporated by reference to the
sections titled "Consolidated Balance Sheets", "Consolidated Statements of
Income", "Consolidated Statements of Shareholders' Equity", "Consolidated
Statements of Cash Flows" and "Notes to Consolidated Financial Statements" in
the Company's 1998 Annual Report to Shareholders, the incorporated portions of
which are included as Exhibit 13 to this Report.
Item 9: Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
16
<PAGE>
PART III
The information called for by Items 10 through 13 of Form 10-K (except for the
information set forth on pages 11-15 with respect to Executive Officers of the
Registrant) is hereby incorporated by reference to the information set forth
under the captions "Election of Directors", "Executive Compensation", "Voting
Securities, Voting Rights and Security Ownership" and "Ratification of
Appointment of Independent Public Accountants" contained in the Company's
definitive Proxy Statement with respect to its 1999 Annual Meeting of
Shareholders, to be filed with the Securities and Exchange Commission within 120
days following the end of the Company's fiscal year.
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as a part of this Report:
1. Financial statements: The following is a list of
financial statements which have been incorporated by
reference from the Company's 1998 Annual Report to
Shareholders, as set forth in Item 8:
Report of Arthur Andersen LLP, Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Income for each of the three
years in the period ended December 31, 1998
Consolidated Statements of Shareholders' Equity for each of
the three years in the period ended December 31, 1998
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1998
Notes to Consolidated Financial Statements
2. Financial statement schedule: The following financial
statement schedule for the Company is filed as part of this
Report and should be read in conjunction with the
Consolidated Financial Statements of the Company:
Report of Arthur Andersen LLP, Independent Public Accountants
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not
applicable, not required, or because the required
information is contained in the Company's Consolidated
Financial Statements or the notes thereto.
17
<PAGE>
3. Exhibits: The Exhibits listed on the accompanying Index
to Exhibits are filed as part of, or incorporated by
reference into, this Report, under Item 601 of Regulation
S-K:
INDEX TO EXHIBITS
Exhibit No.
- ------------
3.1 Company's Articles of Incorporation, together with all amendments
thereto (incorporated by reference to the Company's Form S-1 (File
No. 33-9034), filed November 12, 1986).
3.2 Company's By-Laws (incorporated by reference to the Company's report
on Form 10-K for the fiscal year ended December 31, 1988, filed
March 30, 1989).
10.01 1986 Shareholders' Agreement (incorporated by reference to the
Company's Form S-1 (File No. 33-9034), filed November 12, 1986).
10.02 401(k) Savings Plan (incorporated by reference to the Company's Form
S-1 (File No. 33-9034), filed September 25, 1986). *
10.03 Amendment to Employment Agreement between Right Management
Consultants, Inc. and Frank P. Louchheim, dated January 1, 1992
(incorporated by reference to the Company's report on Form 10-K for
the fiscal year ended December 31, 1991, filed March 30, 1992). *
10.04 Supplemental Deferred Compensation Plan for Richard J. Pinola, dated
July 1, 1992 (incorporated by reference to the Company's report on
Form 10-K for the fiscal year ended December 31, 1991, filed March
30, 1992). *
10.05 Further Amendment to Amended and Restated Employment Agreement
between Right Management Consultants, Inc. and Frank P. Louchheim
dated February 16, 1993 (incorporated by reference to the Company's
report on Form 10-K for the fiscal year ended December 31, 1992,
filed March 31, 1993). *
10.06 1993 Stock Option Plan (incorporated by reference as Exhibit 4 filed
in the Company's report on Form S-8 (File No. 33-58698), filed
February 23, 1993). *
10.07 Purchase Agreement dated September 1, 1994 by and between Registrant
and Jannotta, Bray and Associates, Inc. (Schedules omitted)
(incorporated by reference to the Company's Form 8-K, dated
September 1, 1994).
10.08 Purchase Agreement dated February 15, 1995 by and between Registrant
and Worth Associates, Inc. and Robert A. Fish (incorporated by
reference to the Company's report on Form 10-Q for the quarter ended
March 15, 1995, filed May 15, 1995).
10.09 1993 Stock Incentive Plan, as amended (incorporated by reference to
the Company's Proxy Statement for Annual Meeting of Shareholders
held on May 4, 1995).*
10.10 Directors' Stock Option Plan of the Company (incorporated by
reference to the Company's Proxy Statement for Annual Meeting of
Shareholders held on May 4, 1995).*
10.11 Employment Agreement dated December 12, 1995 by and between Right
Management Consultants, Inc. and Richard J. Pinola (incorporated by
reference to the Company's Form 10K for the year ended December
31, 1995, filed March 31, 1996). *
* These documents are compensatory plans or agreements required to be filed
as Exhibits.
18
<PAGE>
10.12 Employment Agreement and Supplemental Deferred Compensation Plan
dated December 12, 1995 by and between Right Management Consultants,
Inc. and Joseph T. Smith (incorporated by reference to the Company's
Form 10K for the year ended December 31, 1995, filed March 31,
1996).*
10.13 Purchase Agreement between PTR Right Acquisition Co. Inc. and Marti
Smye, Margaret Smith, Richard Zuliani, Margaret Smith Family Trust,
Richard Zuliani Family Trust and People Tech Consulting, Inc. dated
April 10, 1996 (incorporated by reference to the Company's report on
Form 10-Q for the quarter ended March 31, 1996, filed May 14, 1996)
10.14 Employee Stock Purchase Plan of the Company (incorporated by
reference as Exhibit 4 filed in the Company's report on Form S-8
(File No. 333-06211), filed June 18, 1996).*
10.15 Amendment to the 1993 Stock Incentive Plan (incorporated by
reference to the Company's report on Form S-8 (File No. 333-07975),
filed July 11, 1996).*
10.16 Credit Agreement between Right Management Consultants, Inc. and its
wholly owned subsidiaries and PNC Bank, National Association dated
December 20, 1996 (incorporated by reference to the Company's Form
8-K, dated January 17, 1997)
10.17 Employment Agreement dated April 10, 1996 by and between Right
Management Consultants, Inc. and Marti Smye (incorporated by
reference to the Company's report on Form 10K for the year ended
December 31, 1996, filed March 28, 1997). *
10.18 Purchase Agreement between and among Right Management Consultants,
Inc. and Frederick R. Davidson, Stradis Pty. Ltd., William D.T.
Cowan, Phillip A. Lovett and David Stratford, and Right D&A Pty.
Ltd. dated July 1,1997 (incorporated by reference to the Company's
report on Form 10K for the year ended December 31, 1997, filed March
30, 1998).
10.19 Option and Escrow Agreement between and among Right Management
Consultants, Inc. and Frederick R. Davidson, Stradis Pty. Ltd.,
William D.T. Cowan, Phillip A. Lovett and David Stratford, and B&McK
Nominees dated July 1,1997 (incorporated by reference to the
Company's report on Form 10K for the year ended December 31, 1997,
filed March 30, 1998).
10.20 Amendment to Employment Agreement dated as of January 1, 1999 by and
between Right Management Consultants, Inc. and Richard J. Pinola. *
10.21 Amendment to Employment Agreement dated as of January 1, 1999 by and
between Right Management Consultants, Inc. and Joseph T. Smith. *
10.22 Employment Agreement and Supplemental Deferred Compensation Plan
dated as of January 1, 1999 by and between Right Management
Consultants, Inc. and John J. Gavin. *
10.23 Amendment to the 1993 Stock Incentive Plan *
10.24 Amendment to the 1996 Employee Stock Purchase Plan *
* These documents are compensatory plans or agreements required to be filed as
Exhibits.
19
<PAGE>
13 Portions of the Company's 1998 Annual Report to Shareholders
expressly incorporated by reference.
21 Subsidiaries of the Company.
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule - 1998 +
+ Filed in electronic form only.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed by the Company during the fiscal
quarter ended December 31, 1998.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
------------------------------------
Richard J. Pinola,
Chairman of the Board and
Chief Executive Officer
Dated: 3/25/99
21
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signatures Title Date
/S/ RICHARD J. PINOLA Chairman of the Board 3/25/99
- -------------------------- and Chief Executive Officer
Richard J. Pinola
/S/ G. LEE BOHS Chief Financial 3/25/99
- -------------------------- Officer and Principal
G. Lee Bohs Accounting Officer
/S/ FRANK P. LOUCHHEIM Director 3/25/99
- --------------------------
Frank P. Louchheim
/S/ JOSEPH T. SMITH Director 3/25/99
- --------------------------
Joseph T. Smith
/S/ JOHN J. GAVIN Director 3/25/99
- --------------------------
John J. Gavin
/S/ DR. MARTI D. SMYE Director 3/25/99
- --------------------------
Dr. Marti D. Smye
/S/ JOHN R. BOURBEAU Director 3/25/99
- --------------------------
John R. Bourbeau
/S/ RAYMOND B. LANGTON Director 3/25/99
- --------------------------
Raymond B. Langton
/S/ CATHERINE Y. SELLECK Director 3/25/99
- --------------------------
Catherine Y. Selleck
/S/ LARRY A. EVANS Director 3/25/99
- --------------------------
Larry A. Evans
22
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Right Management Consultants, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Right Management Consultants, Inc. and
subsidiaries included in this Form 10-K and have issued our report thereon dated
February 2, 1999. Our audit was made for the purpose of forming an opinion on
those financial statements taken as a whole. The financial statement schedule
listed on page 17 is the responsibility of the Company's management and is
presented for the purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/S/ ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
February 2, 1999
<PAGE>
Right Management Consultants, Inc.
Schedule II - Valuation and Qualifying Accounts and Reserves
For the Years 1998, 1997 and 1996
<TABLE>
<CAPTION>
Additions
-----------------------------
Balance at Charged to Charged to Balance at
Beginning of Costs and Other End of
Description Year Expenses Accounts Deductions Year
- ----------- ---- -------- -------- ---------- ----
1998:
- -----
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $ 663,000 $ 576,000 -- $ 173,000 $1,066,000
=========== ==========
Deferred income tax asset valuation
reserve $ -- -- -- -- $ --
=========== ==========
1997:
- -----
Allowance for doubtful accounts $ 552,000 $ 329,000 -- $ 218,000 $ 663,000
=========== ==========
Deferred income tax asset valuation
reserve $ 192,000 -- -- $ 192,000(1) $ --
=========== ==========
1996:
- -----
Allowance for doubtful accounts $ 754,000 $ 28,000 -- $ 230,000 $ 552,000
=========== ==========
Deferred income tax asset valuation
reserve -- $ 192,000 -- -- $ 192,000
=========== ==========
</TABLE>
(1) Reduction due to the utilization and expiration of certain foreign net
operating losses.
<PAGE>
Exhibit Index
Exhibit No. Description
- ----------- -----------
10.20 Amendment to Employment Agreement dated as of January 1, 1999 by and
between Right Management Consultants, Inc. and Richard J. Pinola
10.21 Amendment to Employment Agreement dated as of January 1, 1999 by and
between Right Management Consultants, Inc. and Joseph T. Smith
10.22 Employment Agreement and Supplemental Deferred Compensation Plan
dated as of January 1, 1999 by and between Right Management
Consultants, Inc. and John J. Gavin
10.23 Amendment to the 1993 Stock Incentive Plan
10.24 Amendment to the 1996 Employee Stock Purchase Plan
13 The Company's 1998 Annual Report to Shareholders, portions of which
are incorporated by reference
21 Subsidiaries of the Company
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule - 1998 +
+ Filed in electronic form only.
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is made as of the 1st day of
January, 1999 by and between RIGHT MANAGEMENT CONSULTANTS, INC., a Pennsylvania
corporation and RICHARD J. PINOLA.
WHEREAS, the Company and Employee entered into an employment agreement
as of December 12, 1995 (the "1995 Employment Agreement") which replaced an
earlier employment entered into as of July 1, 1992. Pursuant to these two
earlier agreements, Employee has been continuously employed by the Company since
July 1, 1992. Defined terms used herein, shall have the same meaning as ascribed
to them in the 1995 Employment Agreement, unless the context herein requires a
different interpretation.
WHEREAS, the Company desires to continue the employment of Employee, in
accordance with the terms of the 1995 Employment Agreement, except as modified
herein, and Employee desires to accept such employment.
NOW, THEREFORE, in consideration of the facts, mutual promises and
covenants contained in the 1995 Employment Agreement and herein, and intending
to be legally bound hereby, Company and Employee agree as follows:
1. Term. Term of Employee's employment with Company shall be extended for a
three (3) year period commencing as of January 1, 1999 and continuing up to and
through December 31, 2001.
2. Base Salary. The base salary provided for in Section 4(a) of the 1995
Employment Agreement is amended from Four Hundred and Fifty Thousand Dollars
($450,000) to Five Hundred and Thirty Thousand Dollars ($530,000). The
corresponding references to Four Hundred and Fifty Thousand Dollars ($450,000)
in Sectopm 3(c) (regarding Change of Control) and Section 6(a) regarding
Severance Compensation) are amended from Four Hundred and Fifty Thousand Dollars
($450,000) to Five Hundred and Thirty Thousand Dollars. ($530,000).
3. Deletion of Section 13. Sections 13 of 1995 Employment Agreement relating to
Travel is deleted in its entirety; and Sections 14 (Company Property); 15 (Prior
Agreements); and 16 (Miscellaneous) are changed respectively to be numbered
Sections 13, 14 and 15.
4. Definition of Company's Business Activities. The definition of Company's
Business Activites for purposes of Section 9 of the 1995 Employment Agreement is
hereby amended to read as follows:
For purposes of this Section 9, Company's business activities shall
include, without limitation, the following: corporate outplacement,
human resource consulting, and career consulting for employees,
including spouse placement, career assessment, second career planning,
and career options planning, career development, and consulting on the
subjects of termination, severance policies, and retirement planning,
reporting, evaluation, advisory, and communications services, and other
human resources consulting and personnel services to client
organizations; and any other such products, programs, and services as
Company may hereafter commence marketing in the area of human resource
consulting.
5. Ratification In All Other Respects. The 1995 Employment Agreement is hereby
ratified and affirmed.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
RIGHT MANAGEMENT CONSULTANTS, INC.
By: /S/ JOSEPH T. SMITH
-------------------------------
Joseph T. Smith, Vice Chairman
EMPLOYEE
/S/ RICHARD J. PINOLA
-------------------------------
Richard J. Pinola
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is made as of the 1st day of
January, 1999 by and between RIGHT MANAGEMENT CONSULTANTS, INC., a Pennsylvania
corporation and JOSEPH T. SMITH.
WHEREAS, the Company and Employee entered into an employment agreement
as of December 12, 1995 (the "1995 Employment Agreement"). Defined terms used
herein, shall have the same meaning as ascribed to them in the 1995 Employment
Agreement, unless the context herein requires a different interpretation.
WHEREAS, the Company desires to continue the employment of Employee, in
accordance with the terms of the 1995 Employment Agreement, except as modified
herein, and Employee desires to accept such employment.
NOW, THEREFORE, in consideration of the facts, mutual promises and
covenants contained in the 1995 Employment Agreement and herein, and intending
to be legally bound hereby, Company and Employee agree as follows:
1. Term. Term of Employee's employment with Company shall be extended for a
three (3) year period commencing as of January 1, 1999 and continuing up to and
through December 31, 2001.
2. Base Salary. The base salary provided for in Section 4(a) of the 1995
Employment Agreement is amended from Three Hundred Thousand Dollars ($300,000)
to Three Hundred and Fifty Thousand Dollars ($350,000). The corresponding
references to Three Hundred Thousand Dollars ($300,000) in Section 3(c)
(regarding Change of Control) and Section 6(a) regarding Severance Compensation)
are amended from Three Hundred Thousand Dollars ($300,000) to Three Hundred and
Fifty Thousand Dollars. ($350,000).
3. Deletion of Section 13. Sections 13 of 1995 Employment Agreement relating to
Travel is deleted in its entirety; and Sections 14 (Company Property); 15 (Prior
Agreements); and 16 (Miscellaneous) are changed respectively to be numbered
Sections 13, 14 and 15.
4. Definition of Company's Business Activities. The definition of Company's
Business Activites for purposes of Section 9 of the 1995 Employment Agreement is
hereby amended to read as follows:
For purposes of this Section 9, Company's business activities shall include,
without limitation, the following: corporate outplacement, human resource
consulting, and career consulting for employees, including spouse placement,
career assessment, second career planning, and career options planning, career
development, and consulting on the subjects of termination, severance policies,
and retirement planning, reporting, evaluation, advisory, and communications
services, and other human resources consulting and personnel services to client
organizations; and any other such products, programs, and services as Company
may hereafter commence marketing in the area of human resource consulting.
5. Ratification In All Other Respects. The 1995 Employment Agreement is hereby
ratified and affirmed.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
RIGHT MANAGEMENT CONSULTANTS, INC.
By: /S/ RICHARD J. PINOLA
---------------------------------
Richard J. Pinola, Chairman and
Chief Executive Officer
EMPLOYEE
/S/ JOSEPH T. SMITH
----------------------
Joseph T. Smith
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 1st day of January, 1999 by and between
RIGHT MANAGEMENT CONSULTANTS, INC., a Pennsylvania corporation (hereinafter
called "Company"), and JOHN J. GAVIN, an individual (hereinafter called
"Employee").
WITNESSETH:
Company desires to employ Employee, and employee desires to be employed
by Company, on the terms and conditions hereinafter stated.
NOW THEREFORE, in consideration of the facts, mutual promises and
covenants contained herein and intending to be legally bound hereby, Company and
Employee agree as follows:
1. Employment. Company hereby employs Employee and employee hereby
accepts employment by Company for the period and upon the terms and conditions
contained in this Agreement.
2. Office and Duties.
(a) Employee shall serve Company as its President and Chief
Operating Officer ("COO"), and, subject to continued election thereto by the
Company's shareholders, as a member of Company's Board of Directors (the
"Board"). The powers, authority and duties of the offices of President and COO
of Company shall be those customary to such offices with corporations comparable
to Company.
(b) Throughout the term of this Agreement, Employee shall
devote Employee's entire working time, energy, skill and best efforts to the
performance of Employee's duties hereunder in a manner which will faithfully and
diligently further the business and interests of Company.
3. Term.
(a) The initial term of Employee's employment with Company
under this Agreement shall be as of January 1, 1999 and continuing up to and
through December 31, 2001.
<PAGE>
(b) Unless either party gives written notice of its intention
to terminate Employee's employment under this Agreement at the end of the
initial or any renewal term by giving the other party such notice, at least one
hundred twenty (120) days prior to the expiration of the then current term,
employee's employment under this Agreement shall be deemed to have been renewed
for an additional term of one (1) year commencing on the day after the
expiration of the then current term. Notwithstanding the foregoing, employee's
employment with Company will not be renewed under this Agreement on or after
December 31 of the calendar year in which Employee reaches sixty-five (65) years
of age.
(c) Notwithstanding the provisions of Sections 3(a) and 3(b)
hereof, in the event that: (i) a "controlling interest" in the capital stock of
Company is sold in a single transaction or a group of related transactions to
one or more buyers acting in concert; (ii) Company sells all or substantially
all of its assets; or (iii) Company is a party to any corporate merger or
consolidation in which one or more parties acting in concert who did not
previously hold a "controlling interest" in the capital stock of Company
acquires or acquire such a "controlling interest" in the capital stock of
Company or its successor entity (each such a event to constitute a "Change in
Control"), Employee may, upon written notice to Company within sixty (60) days
of such Change in Control, elect to: (A) continue Employee's employment with
Company for the greater of the then current term or a period that expires two
years from the date of the Change in Control; or (B) voluntarily terminate
Employee's employment with Company and receive severance compensation as if this
were a "Compensated Termination" pursuant to Section 6 hereof for a "Section 6
Period" that expires upon the later of the date the then current term would have
expired but for the earlier termination described herein or two years from the
date of the Change in Control. In the event that Employee elects to remain
employed by Company pursuant to (A) above, the total amounts payable annually to
employee for the period described in (A) shall be not less than the greater of:
(I) the total amount of the Base Salary and Incentive Payments paid under
Sections 4(a) and 4(b) during the 12-month period for the calendar year
immediately preceding the Change in Control; or (II) Three Hundred Fifty
Thousand Dollars ($350,000). For the purposes of this Section 3(c), a
"controlling interest" in the capital stock will constitute that number of
shares which, as a practical matter, permits the holder or holders to elect a
majority of the members of the Board. It is agreed that shares of capital stock
possessing the right to cast a majority or more of the votes entitled to be cast
for the election of directors of Company shall conclusively constitute a
"controlling interest", but that a block of shares possessing the right to cast
less than a majority of the number of votes entitled to be voted may, under the
circumstances then pertaining, constitute a "controlling interest".
4. Compensation and Benefits.
(a) Base Salary. For all of the service rendered by Employee
to Company, Employee shall receive a base salary (the "Base Salary") payable at
an annual rate equal to Three Hundred Fifty Thousand Dollars ($350,000). Such
Base Salary shall be payable in reasonable periodic installments in accordance
with Company's regular payroll practices in effect from time to time. Employee's
Base Salary is subject to annual review and adjustment at the discretion of
Company, but in no event shall Company reduce the Base Salary to less than the
amounts specified above during the periods referred to without the consent of
employee.
<PAGE>
(b) Incentive Payments. In addition to the Base Salary,
throughout the term of Employee's employment with Company hereunder, Company
shall pay to Employee annually, a cash bonus as incentive compensation based
upon Company's financial performance for that year ("Incentive Payments") in
such amounts as are decided upon by the Board or its Compensation Committee. Any
and all bonuses shall be determined based upon target and comparison that are
consistent with those to be used by the Board in determining the amounts payable
under Company's Incentive Compensation Plan for Senior Corporate Staff. In the
event that the employment of Employee terminates otherwise than pursuant to
Section 6 hereof, on a day other than the last day of a fiscal year of Company,
in addition to Base Salary and other payments accrued through the effective date
of the termination, Company shall pay to Employee the "pro rata portion" (as
hereafter defined) of the Incentive Payments which would have been due to
Employee if he had remained in the employ of Company for the full fiscal year in
which Employee's employment terminated. For purposes of the immediately
preceding sentence, the "pro rata portion" shall be obtained by dividing the
number of days (including intervening weekend days and holidays) in the fiscal
year that Employee was employed by Company by the number 365.
(c) Fringe Benefits. Throughout the term of this Agreement and
as long as they are kept in force by Company, employee shall be entitled to
participate in and receive the benefits of any profit sharing or retirement
plans and any health, life, accident or disability insurance plans or programs
made available to other similarly situated employees of Company and shall be
entitled to participate in the Supplemental Deferred Compensation Program
attached hereto as Exhibit "A", but the participation of employee, if any, in
Company's stock option, stock appreciation, "phantom" stock plans or similar
plans, will be wholly within the discretion of the Board. With respect to the
term of Employee's employment with Company under this Agreement, the Board has
not made any determination with regard to Employee's participation in any stock
option, stock appreciation, "phantom" stock plans or similar plans. However, the
Company shall consider each year whether or not Employee shall be awarded any
stock options. Company may, at its sole discretion add, delete or change any
stock option, stock appreciation, or phantom stock plans that Employee may
participate in upon notice to Employee. If this Agreement is not renewed by
Company after the expiration of the then current term, Company shall provide to
Employee outplacement consulting services then generally being made available by
Company to executive candidates.
(d) Vacation. Employee shall be entitled to vacation in
accordance with Company's general policies with respect thereto from time to
time.
(e) Automobile. During the term of Employee's employment with
Company under this Agreement, Company shall furnish Employee with the use of a
luxury automobile, insurance thereon, and the costs of fuel, maintenance and
necessary repairs as incurred. Employee shall be permitted unrestricted use of
such automobile without the obligation to account or reimburse Company for any
personal use thereof. During the same period, Company shall provide Employee, at
no cost to Employee, one private-reserved covered parking space located in or
close to the building in which Employee's office is located.
<PAGE>
(f) Accounting Services. At an appropriate time each year
during the term of Employee's employment with Company under this Agreement,
Company shall make available to Employee, at no cost to Employee, the services
of the certified public accounting firm which audits Company's financial
statements for the purpose of preparing all of Employee's federal, state and
local income tax and estimated income tax returns for such year and counselling
Employee with respect thereto. Employee hereby acknowledges that Company shall
bear no responsibility for the accuracy, quality or completeness of any such tax
returns prepared by such certified public accounting firm.
(g) Financial Planning Services. During the term of Employee's
employment with Company under this Agreement, Company shall furnish Employee, at
no cost to Employee, ten (10) hours per year of financial counselling services.
The services shall be rendered by any national accounting firm or firms with
which Company from time to time has an ongoing relationship for the purpose of
providing financial counselling in conjunction with Company's outplacement
services, providing that such firm has a Philadelphia, Pennsylvania office, or
if and for as long as there is no such firm, by a financial counsellor or
financial counselling firm selected by Employee and approved by Company.
(h) Withholding Taxes. The Base Salary, Incentive Payments and
all other cash and non-cash payments to Employee hereunder shall be subject to,
and paid net of all applicable withholding requirements of federal, state and
local law.
5. Expenses. Company will reimburse Employee for all reasonable
expenses incurred by Employee in connection with the performance of Employee's
duties upon receipt of vouchers therefore and in accordance with Company's
regular reimbursement procedures and practices in effect from time to time.
6. Severance Compensation.
(a) In the event of a "Compensated Termination" (as that term
is defined below), Company shall pay Employee as severance compensation, payable
in equal monthly installments (with properly pro rated payments for periods of
less than a full month) during the "Section 6 Period" (as that term is hereafter
as defined), an amount equal to the greater of: (i) the Base Salary plus
Incentive Payments paid to Employee during the 12 month period immediately
preceding such Compensated Termination; or (ii) Three Hundred Fifty Thousand
Dollars ($350,000). As used herein the term "Compensated Termination" shall mean
any one of the following events:
I. Company elects to terminate Employee's employment
under this Agreement pursuant to the provisions of Section 3(b) hereof at the
end of the initial term or any renewal term hereof;
II. Company at any time other than the end of initial
term or any renewal term hereof terminates the employment of Employee under the
Agreement, otherwise than as provided in Section 10 ("Discharge for Cause")
hereof; or
<PAGE>
III. Employee terminates employment with Company
pursuant to Section 11 hereof.
As used herein, the term "Section 6 Period" shall mean the longer of: (i) one
year from the date a Compensated Termination occurs; or (ii) the period
beginning on the date a Compensated Termination occurs and ending on the date
upon which the then current term of Employee's employment with Company, as such
term may have been extended pursuant to Section 3(c) hereof, would have ended
but for the occurrence of the Compensated Termination.
(b) In the event of a Compensated Termination, for the entire
Section 6 Period, Company shall continue to provide, at no cost to Employee,
life, medical and dental insurance to Employee providing coverages equal to the
coverages made available to Employee and his dependents on the date of the
termination of his employment.
(c) In the event that any part of any payment or benefit to
Employee under Sections 6(a) and 6(b) of the Agreement or under this Section
6(c) or any other payment made or benefit conferred by Company to Employee
constitutes an "excess parachute payment" within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code"), and any regulations
or other authorities relating thereto, but excluding payments which are
described in Section 280G(b)(2)(B) of the Code, Company will pay to Employee as
additional compensation (i) the amount of all taxes due from Employee under
Section 4999 of the Code and (ii) the amount equal to all federal, state and
local income taxes and business privilege taxes based upon net income
(collectively, the "Taxes") due from Employee upon all payments made by Company
to Employee under this Section 6(c). It is the intention of the parties that
Employee receive all payments and benefits from Company net of the tax under
Section 4999 of the Code and net of all taxes due upon all payments under this
Section 6(c), and the terms of this Section 6(c) shall be construed and
implemented by the parties to effectuate this intent.
(d) Notwithstanding anything to the contrary contained above
in this Section 6 or any other portion of this Agreement, the Company shall not
be required to make any of the payments or provide any of the other benefits set
forth above in this Section 6 or otherwise on account of any Compensated
Termination unless and until Employee has, if the Company so requests after
Employee's termination, resigned from the Boards of Directors (and/or any
committees thereof) of the Company and any affiliates of the Company, all as
requested by the Company.
7. Disability.
<PAGE>
(a) If Employee becomes unable to perform Employee'ss duties
hereunder due to partial or total disability or incapacity resulting from a
mental or physical illness, injury or any similar cause, Company will continue
the payment of Employee's total compensation at its then current rate for a
period of three (3) months following the date Employee is first unable to
perform the duties due to such disability or incapacity. Thereafter, Company
shall have no obligation for the Base Salary or other compensation payments to
Employee during the continuance of such disability or incapacity, except that
Company shall pay to Employee, based upon the portion of the calendar year that
Employee was able to perform the duties prior to the disability, the pro rata
portion of the Incentive Payments that Employee would have earned if he had
remained in the employ of the Company for the full calendar year (payable at
such time that Employee would have received such Incentive Payment). Employee
shall receive such benefits, if any, as are then provided under Company's
standard disability coverage provided to employees generally, if and only if the
same is then in effect.
(b) If Employee is unable to perform Employee's duties
hereunder due to partial or total disability or incapacity resulting from a
mental or physical illness, injury or any similar cause for a period of six (6)
consecutive months, Company shall have the right to terminate this Agreement at
any time thereafter, in which event Company shall have no further obligations or
liabilities hereunder after the date of such termination.
8. Death. If Employee dies, all payments hereunder shall continue for a
period of three (3) months after the end of the week in which Employee's death
shall occur, at which point such payments shall cease and Company shall have no
further obligations or liabilities' hereunder to Employee's estate or legal
representative or otherwise, except that Company shall pay to Employee's estate
or legal representative, based upon the portion of the calendar year that
Employee was employed by Company prior to Employee's death, the prorated portion
of the Incentive Payments Employee would have earned if he had remained in the
employ of Company for the full calendar year (payable at such time that Employee
would have received such Incentive Payment).
9. Non-Competition, Trade Secrets, etc.
(a) During the term of this Agreement and for a period of two
(2) years after the termination of such Agreement, Employee shall not directly
or indirectly induce or attempt to influence any employee of Company to
terminate employment with Company and shall not engage in (as a principal,
partner, director, officer, agent, employee, consultant or otherwise) or be
financially interested in any business operating within the continental United
States, which business is involved in the business activities which are the same
as, similar to or in competition with business activities carried on by Company,
or being definitely planned by Company, at the time of such termination. For
purposes of this Section 9, Company's business activities shall include, without
limitation, the following: corporate outplacement, human resource consulting,
and career consulting for employees, including spouse placement, career
assessment, second career planning, and career options planning, career
development, and consulting on the subjects of termination, severance policies,
and retirement planning, reporting, evaluation, advisory, and communications
services, and other human resources consulting and personnel services to client
organizations; and any other such products, programs, and services as Company
may hereafter commence marketing in the area of human resource consulting.
<PAGE>
(b) For a similar period of two (2) years after termination of
this Agreement, Employee shall not contact directly or indirectly or cause to be
contacted directly or indirectly any clients or customers of Company for the
purpose of competitively soliciting business in competition with Company.
Without limiting the foregoing, for a period of two (2) years after termination
of this Agreement, Employee shall not competitively solicit business from
clients, customers or competitors of Company within the continental United
States through the means or use of property in which Company has an ownership
interest or a license pursuant to Section 9(d) hereof.
(c) During the term of this Agreement and at all times
thereafter, Employee shall not use for Employee's personal benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit of any
person, firm, association or company other than Company, any information
regarding the business methods, business policies, procedures, techniques,
research or development projects or results, trade secrets, or other knowledge
or processes used or developed by Company or any name or addresses of customers
or clients or any data on or relating to past, present or prospective customers
or clients or any other confidential information relating to or dealing with the
business operations or activities of Company, made known or learned or acquired
by Employee while in the employ of Company.
<PAGE>
(d) Any and all writings, inventions, improvements, computer
programs, processes, procedures or techniques (hereinafter "Inventions") which
Employee may make, discover or develop either solely or jointly with any other
person or persons (hereinafter "Co-Inventor(s)") at any time during the term of
and as part of Employee's employment with Company which relate to any business
being conducted or carried on by Company at the time of invention shall be the
sole and exclusive property of Company, subject to the rights of the
Co-Inventor(s) in the Inventions. Any and all Inventions which Employee may
make, discover or develop either solely or jointly with any Co-Inventor(s) other
than a part of Employee's employment with Company which are useful in connection
with any business being conducted, carried on or definitely planned by Company
at the time of invention shall be subject to a perpetual license to Company,
subject to any rights of Co-Inventor (s). The amount of the royalty shall be
agreed upon by Company and Employee. In the event that they cannot agree, such
royalty shall be determined by arbitration by three arbitrators, one selected by
Company, one selected by Employee and the third selected by the first two
arbitrators. During the term of this Agreement, Employee shall make full
disclosure to Company of all such Inventions. It shall be presumed that any
Inventions which Employee shall make, discover or develop either solely or
jointly with any Co-Inventor(s) during the two-year period after termination of
employment with Company shall have been developed in part during the term of
employment, and Employee shall have the burden of proof in demonstrating that no
such development occurred during such term of employment. With respect to those
Inventions as to which Company is to acquire title hereunder, Employee shall do
everything necessary or desirable to vest such title in Company, and Employee
shall write and prepare all specifications and procedures regarding such
Inventions and otherwise aid and assist Company so that Company can prepare and
present applications for copyrights or patents therefor and can secure such
copyrights or patents wherever possible, as well as reissues, renewals and
extensions thereof, and can obtain record title to such copyright or patents in
all countries in which it may desire to have copyright or patent protection.
Employee shall not be entitled to any additional or special compensation for
rights to Inventions which Company acquires hereunder.
(e) Employee also agrees, during the term of this Agreement
and thereafter, not to disparage or deprecate, directly or indirectly, the
reputation, professionalism, character, competence, integrity or motives of the
Company, any subsidiary or any affiliate thereof, or any of their officers,
trustees, directors, employees, attorneys, agents or family members.
(f) Employee acknowledges that the restrictions contained in
this Section 9, in view of the nature of the business in which Company is
engaged, are reasonable and necessary in order to protect the legitimate
interests of Company, and that any violation thereof would result in irreparable
injuries to Company, and Employee therefore acknowledges that, in the event of
Employee's violation of any of these restrictions, Company shall be entitled to
obtain from any court of competent jurisdiction preliminary and permanent
injunctive relief a well as damages and an equitable accounting of all earnings,
profits and other benefits arising from such violation, which rights will be
cumulative and in addition to any other rights or remedies to which Company may
be entitled.
(g) If the period of time or the area specified in this
Section 9 should be adjudged unreasonable in any proceeding, then the period of
time shall be reduced by such number of months or the area shall be reduced by
the elimination of such portion thereof or both so that such restrictions may be
enforced in such area and for such time as is adjudged to be reasonable. If
Employee violates any of the restrictions contained in the foregoing
subparagraph (a), the restrictive period shall not run in favor of Employee from
the time of the commencement of any such violation until such time as such
violation shall be cured by Employee to the satisfaction of Company.
10. Discharge for Cause. Company may discharge Employee at any time for
criminal conduct (whether or not related to Employee's employment), gross
negligence, any violation of any express direction or any reasonable rule or
regulation established by Company's Board from time to time regarding the
conduct of its business, or any violation by Employee of the terms and
conditions of this Agreement, in which event Company shall have no further
obligations or liabilities hereunder after the date of such discharge.
11. Compensated Termination by Employee. The occurrence of any of the
following events shall give Employee grounds to effect a Compensated Termination
under Section 6 hereof:
(a) Employee is not elected or reelected, as the case may be,
to the executive offices of Company when and as specified in Section 1 hereof or
Employee's responsibilities as an executive officer, employee and Board member
of Company are materially changed by Company without Employee's prior written
consent;
<PAGE>
(b) At any time during the term of Employee's employment with
Company, the removal of Employee from membership on the Board or the failure of
the shareholders of Company to reelect Employee to the Board;
(c) Company, without the consent of Employee, relocates its
corporate headquarters offices outside of the Philadelphia Metropolitan
Statistical Area, as such term is defined by the Office of Management and
Budget, or bases Employee elsewhere than in its corporate headquarters offices;
(d) Any material reduction in the facilities, staff and
support services made available to Employee by Company at any time provided that
such reduction was made without the consent of Employee.
Employee may effect a Compensated Termination only if Employee shall
terminate employment with Company for any of the reasons set forth within thirty
(30) days of the date Employee discovers the existence of the event which gives
rise to a right of termination, by giving notice of termination to Company.
12. Indemnification. At all times during and after Employee's
employment with Company, Company shall indemnify Employee against expenses
(including legal fees), judgments, fines and amounts paid in settlement,
actually and reasonably incurred by Employee, to the extent now or hereafter
permitted by law and Company's By-Laws, in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, brought or threatened to be brought against
Employee, including actions or suits by or in the right of Company, by reason of
the fact that Employee is or was a director, officer, employee or agent of
Company, its parent or any of its subsidiaries, or acted as a director, officer,
employee or agent or in any other capacity on behalf of Company, its parent or
any of its subsidiaries or is or was serving at the request of Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, provided that Employee acted in good faith
and in a manner reasonably believed to be in, or not opposed to, the best
interests of Company and, with respect to any criminal proceeding, Employee had
no reasonable cause to believe Employee's conduct was unlawful. Company shall
pay expenses incurred by Employee in defending such a civil or criminal action,
suit or proceeding in advance of the final disposition of such suit or
proceeding upon receipt of an undertaking by or on behalf of Employee to repay
such amount if it is ultimately determined that he is not entitled to be
indemnified by Company as authorized by Company's By-Laws or by law.
13. Company Property.
<PAGE>
(a) All counseling, advertising, sales, and other materials or
articles of information, including without limitation data processing reports,
customer sales analyses, invoices, price lists or information, samples or any
other materials or data of any kind furnished to Employee by Company or
developed by Employee on,behalf of Company or at Company's direction or for
Company s use or otherwise in connection with Employee's employment hereunder,
are and shall remain the sole and confidential property of Company; if Company
requests the return of such materials at any time during or at or after the
termination of Employee's employment, Employee shall immediately deliver the
same to Company.
(b) Upon the termination of employment for any reason other
than for cause or the death of Employee, Employed shall have the option,
exercisable only by written notice given to Company within twenty (20) days
after termination of employment (i) to acquire any automobile then being used by
Employee and owned by Company for a purchase price equal to the then book value
of such automobile, as determined by Company or (ii) to acquire Company's
leasehold rights to any such automobile leased by Company (if, and only if, the
lessor agrees to such acquisition without requiring any payment or guarantee or
any other concessions by Company) by assuming, and agreeing to hold Company
harmless against, all of Company's obligations with respect thereto accruing
from and after the date that the transfer of title takes place. Employee shall
pay all sales and use taxes relating to any such sale or acquisition. Closing of
any such acquisition by Employee shall take place at such time as shall be
mutually agreeable to the parties, but in no event more than twenty (20) days
after the exercise of this option, at such place as Company shall specify.
14. Prior Agreements. Employee represents to Company (a) that there are
no restrictions, agreements or understandings whatsoever to which Employee is a
party which would prevent or make unlawful Employee's execution of this
Agreement or Employee's employment hereunder, (b) that Employee's execution of
this Agreement and employment hereunder shall not constitute a breach of any
contract, agreement or understanding, oral or written, to which Employee is a
party or by which Employee is bound and (c) that Employee is free and able to
execute this Agreement and to enter into employment by Company.
15. Miscellaneous.
(a) Indulgences, Etc. Neither the failure nor the delay on the
part of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as.a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.
(b) Controlling Law. This Agreement and all questions relating
to its validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of actions), shall be governed by
and construed in accordance with the laws of the Commonwealth of Pennsylvania,
notwithstanding any conflict-of-laws doctrines of such state or other
jurisdiction to the contrary, and without the aid of any canon, custom or rule
of law requiring construction against the draftsman.
<PAGE>
(c) Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received two days
following the day when deposited with an overnight courier service such as
Federal Express, for delivery to the intended addressee or two days following
the day when deposited in the United States mails, registered mail return
receipt requested, addressed as set forth below:
If to Employee: Mr. John J. Gavin
1612 Claudia Way
North Wales, PA 19454
If to Company: Right Management Consultants, Inc.
1818 Market Street, 33rd Floor
Philadelphia, PA 19103
Attention: Chairman of the Board
In addition, notice by mail shall be by air mail if posted
outside of the continental United States.
Any party may alter the address to which communications or
copies are to be sent by giving notice of such change of address in conformity
with the provisions of this paragraph for the giving of notice.
(a) Binding Nature of Agreement. This Agreement shall be
binding and inure to the benefit of Company and its successors and assigns and
shall be binding upon Employee, Employee's heirs and legal representatives.
(b) Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original
as against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories. Any photographic or xerox copy of this Agreement, with all
signatures reproduced on one or more sets of signature pages, shall be
considered for all purposes as if it were an executed counterpart of this
Agreement.
(c) Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
<PAGE>
(d) Entire Agreement. This Agreement constitutes the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or condition, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
(e) Paragraph Headings. The paragraph headings in this
Agreement are for convenience only; they form no part of this Agreement and
shall not affect its interpretation.
(f) Gender, Etc. Words used herein, regardless of the number
of gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context indicates is appropriate.
(g) Number of Days. In computing the number of days for
purposes of this Agreement, all days shall be counted, including Saturdays,
Sundays and holidays; provided, however, that if the final day of any time
period falls on a Saturday, Sunday or holiday on which federal banks are or may
elect to be closed, then the final day shall be deemed to be the next day which
is not a Saturday, Sunday or holiday.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
RIGHT MANAGEMENT CONSULTANTS, INC.
By: /S/ RICHARD J. PINOLA
--------------------------------------
Richard J. Pinola,
Chairman and Chief Executive Officer
/S/ JOHN G. GAVIN (SEAL)
--------------------------------------
John J. Gavin, Employee
<PAGE>
EXHIBIT "A"
SUPPLEMENTAL DEFERRED COMPENSATION PLAN
Supplemental Deferred Compensation Plan ("Plan") for John J. Gavin
("Employee") pursuant to Section 4(c) of the Employment Agreement dated as of
January 1, 1999 (the "Employment Agreement") between Employee and Right
Management Consultants, Inc. ("Company"). Except as otherwise specified herein,
all terms used herein shall have the same meaning as such terms have in the
Employment Agreement.
1. Definitions.
A. "Age" shall mean the age of Employee as of Employee's last
birthdate.
B. Compensation. "Compensation" shall mean Employee's cash
compensation, which includes Base Salary and Incentive Payments only, earned by
Employee in Employee's capacity as an employee of Company with respect to a Plan
Year.
C. Deferred Benefit Account. "Deferred Benefit Account" shall
mean the account maintained on the books of Company for Employee pursuant to
Paragraph 2 hereof.
D. Determination Date. "Determination Date" shall mean the
last day of each Plan Year or such other dates as may be established by the
Committee.
E. Disability. "Disability" shall mean that Employee is unable
to perform Employee's duties hereunder due to partial or total disability or
incapacity resulting from a mental or physical illness, injury or any similar
cause for a period of six (6) consecutive months. If there is any dispute as to
Employee's physical or mental disability, the question shall be settled by the
opinion of a duly licensed medical or osteopathic physician selected by the
mutual consent of Employee and Company or their representatives. Certification
of that physician as to the matter in dispute shall be final and binding upon
the parties.
F. Interest Yield. "Interest Yield" shall mean an effective
annual yield which, with respect to any calendar year, is a rate equal to the
annual interest rate of the two year guaranteed investment contract index as
published in the Wall Street Journal on the November 30 of that calendar year.
Company may, in its discretion and with notice to Employee no later than
November 15 of such calendar year, base the Interest Yield instead on a rate
that is consistent with annual interest rates used by Company in connection with
Company's other non-qualified deferred compensation plans for other senior
executives of Company.
G. Plan Year. "Plan Year" shall mean the calendar year.
H. Normal Retirement Date. "Normal Retirement Date" shall mean
the first date of the month following Employee's sixty-fifth (65th) birthday.
<PAGE>
I. Termination of Service. "Termination of Service" shall mean
Employee's ceasing to be an employee of the Company for any reason other than
death or discharge for cause pursuant to Section 10 of the Employment Agreement.
2. Deferred Benefit Account.
A. Establishment of Account. Company shall establish a
Deferred Benefit Account on its books for Employee. The balance of Employee's
Deferred Benefit Account shall consist of the sum of all amounts credited to the
account pursuant to Paragraph 2B, less the sum of all distributions and benefit
payments made to Employee. Employee's Deferred Benefit Account shall be utilized
solely as a device for the measurement and determination of the amounts to be
paid to Employee pursuant to the plan.
B. Credits to Account. Company shall credit Employee's
Deferred BenefIt Account with the following amounts at the times specified:
(1) Five percent (5%) of Compensation credited as of
the Determination Date, provided, however, that (i) the amount credited may be
reduced, at the discretion of Company, by the amount Company is required to
withhold under any federal, state or local law for taxes or other charges.
(2) As of the Determination Date, an amount equal to
the interest earned since the last preceding Determination Date. For purposes of
the foregoing, interest earned shall be calculated by applying the Interest
Yield, reduced to a nominal monthly rate, to the average daily balance of the
Deferred Benefit Account since the last preceding Determination Date.
3. Vesting of Deferred Benefit Account Balance.
Employee shall be vested in the Deferred Benefit Account
balance according to the following schedule.
Age % Vested
61 20%
62 40%
63 60%
64 80%
65 100%
Notwithstanding the above schedule, Employee shall become fully-vested
upon Employee's Death, Disability or Termination of Service. The Board may elect
to accelerate the Age or time in which Employee can become fully vested in the
Deferred Benefit Account balance.
<PAGE>
4. Benefits.
A. Retirement Benefits. Upon Employee's Termination of Service
on or after his Normal Retirement Date, provided that Employee continuously
served Company as an employee to that time, Employee shall receive, as deferred
compensation for services rendered prior to such date, a benefit equal to the
amount of Employee's Deferred Benefit Account balance (determined in accordance
with Paragraph 2B(2)), payable as a life annuity in equal monthly installments
with interest on the unpaid balance at a rate equal to the Interest Yield. Such
annuity payments shall be based upon the 1983 Group Annuity Mortality tables.
B. Benefits Upon Early Termination of Service. Upon Employee's
Termination of Service prior to Employee's Normal Retirement Date, Employee
shall receive, as deferred compensation for services rendered prior to such
date, a benefit equal to the amount of Employee's Deferred Benefit Account
balance (determined in accordance with Paragraph 2B(2)), payable in a lump sum
within one (1) month of such Termination of Service; provided however, that
Company may, at Company's sole option, elect to retain in the Deferred Benefit
Account that amount of the Deferred Benefit Account Balance in excess of
$100,000 to be payable to Employee as a life annuity in equal monthly
installments with interest on the unpaid balance at a rate equal to the Interest
Yield , beginning on the first day of the month after the date that would have
been Employee's Normal Retirement Date had such Termination of Service not
earlier occurred. Company shall notify Employee of such an election prior to the
date the lump sum payment is due. The annuity payments shall be based upon the
1983 Group Annuity Mortality tables.
C. Disability.
If Employee suffers a Disability prior to Termination
of Service and before receiving any benefits under Paragraph 4A, Employee's
beneficiary shall receive payment equal to the amount of Employee's Deferred
Benefit Account balance (determined in accordance with Paragraph 2B(2)), in a
lump sum within one (1) month of the date of Employee's Disability. Payment of
such benefit shall relieve Company of the obligation to pay any other benefit
which Employee would have otherwise received under this plan.
D. Survivorship Benefits.
(1) Prior to Commencement of Retirement Benefits. If
Employee dies prior to Termination of Service and before receiving any benefits
under Paragraph 4A, Employee's beneficiary shall receive payment equal to the
amount of Employee's Deferred Benefit Account balance (determined in accordance
with Paragraph 2B(2)), in a lump sum within one (1) month of the date of
Employee's death. Payment of such benefit shall relieve Company of the
obligation to pay any other benefit which Employee would have otherwise received
under this plan.
<PAGE>
(2) After Commencement of Benefits. If Employee dies
after benefit payments under Paragraphs 4A or 4B have commenced, Company shall
continue to pay the remaining payments to Employee's beneficiary in accordance
with the payment terms and schedule in effect at the time of death until the
full balance of the Deferred Benefit Account are paid.
E. Commencement of Payments. Benefit payments required under
Paragraphs 4A, 4B, 4C or 4D shall commence on the first day of the month
following the Employee's Termination of Service, Disability or death, as the
case may be.
F. Special Distributions. The foregoing provisions of this
Paragraph 4 notwithstanding, Company may, in its sole discretion, make
distributions to Employee or beneficiaries in a lump sum or in such other
payment forms not provided for in Paragraphs 4A, 4B, 4C or 4D. Any such
distribution shall reduce the Deferred Benefit Account balance of Employee or
beneficiary by the amount of the distribution.
5. Beneficiaries.
A. Designation. Employee shall designate a beneficiary or
beneficiaries to receive any benefits payable on Employee's behalf after
Employee's death by delivering a written notice of such designation to Company
in such form as Company shall prescribe. Employee may revoke or modify the
designation at any time by a further written designation. Employee's beneficiary
designation shall be deemed automatically revoked in the event the designated
beneficiary predeceases Employee. If no designation shall be in effect at the
time when any benefits payable to a beneficiary under this plan shall become
due, the beneficiary shall be the spouse of Employee, or if no spouse is then
living, the beneficiaries shall be the Employee's children, per stirpes, or, if
none, all payments under this plan shall be made to Employee's estate.
B. Payments to Minors and Incompetents. In the event Employee
is an incompetent, or a benefit is payable to a beneficiary who is a minor or
person declared incompetent, or who is a person incapable of handling the
disposition of Employee's property, Company may pay such benefit to the guardian
or legal representative, or if none, to any other person having the care or
custody of the Employee or beneficiary. Company may require such proof of
incompetency, minority, legal custody, guardianship, etc. as it deems
appropriate prior to distribution of the benefit. Such distribution shall
completely discharge Company and its officers and directors from all liability
with respect to such benefit.
6. Benefits Subject to Company's Creditors. Any amounts subject to this
plan, shall be subject to claims of general creditors of Company. The right of
Employee or Employee's beneficiary to receive payment of plan benefits from
Company assets shall be solely that of a general, unsecured creditor of Company.
<PAGE>
7. Change of Control. Notwithstanding the provisions of Paragraph 6, in
the event that: (i) a "controlling interest" in the capital stock of Company is
sold in a single transaction or a group of related transactions to one or more
buyers acting in concert, (ii) Company sells all or substantially all of its
assets, or (iii) Company is a party to any corporate merger or consolidation in
which one or more parties acting in concert who did not previously hold a
"controlling interest" in the capital stock of Company acquires or acquire such
a "controlling interest" in the capital stock of Company or its successor entity
(individually and collectively a "Change in Control"), Company shall establish a
trust agreement and shall from time to time transfer into the trust sufficient
assets to meet Company's obligation to pay Plan benefits to Employee and
Employee's beneficiaries. The Agreement under which the trust is created shall
provide that the trustee shall hold the trust assets separate and apart from the
other assets of Company; the trust shall not terminate until all benefits
payable under this Plan are actually paid to trust beneficiaries or Company is
no longer obligated to pay benefits to Employee under this Plan pursuant to
Section 9 hereof; and that the trust shall be structured so that Employee shall
not be charged with income, for Federal and state income tax purposes, at the
time the trust is funded or upon the lapse of the noncompetition forfeiture
provision of Section 9 hereof (so as to be structured as what is commonly
referred to as a "Rabbi Trust"). At the termination of the trust, trust assets
not needed to pay benefits under the Plan shall be returned to Company. In
addition, if there shall be a Termination of Service within two (2) years of a
Change in Control, Employee shall be entitled to begin receiving retirement
benefits under this Plan as if Employee had reached the Normal Retirement Date
at or prior to such termination. For the purposes of this Paragraph 7, a
"controlling interest" in the capital stock will constitute that number of
shares which, as a practical matter, permits the holder or holders to elect a
majority of the members of the Board. It is agreed that shares of capital stock
possessing the right to cast a majority or more of the votes entitled to be cast
for the election of directors of Company shall conclusively constitute a
"controlling interest", but that a block of shares possessing the right to cast
less than a majority of the number of votes entitled to be voted may, under the
circumstances then pertaining, constitute a "controlling interest".
8 Amendment and Termination.
A0 The Company may at any time amend or terminate the Plan;
provided, however, that the Deferred Benefit Account balance may not be reduced
or terminated thereby.
B0 Notwithstanding any other provision of this Plan to the
contrary, upon the termination of this Plan for any reason, the Deferred Benefit
Account Balance at the time of such termination shall be determined in
accordance with Paragraph 2B(2) hereof.
9 Non-Competition, Trade Secrets, etc.
If Employee shall act in such a manner as to, in Company's
judgment; violate the provisions of Section 9 of the Employment Agreement
("Non-Competition, Trade Secrets, etc."), Employee shall forfeit all benefits
accrued under this Plan and Company shall have no further obligations to
Employee hereunder.
<PAGE>
10 Miscellaneous.
A0 Assignment of Benefits. Neither Employee nor any
beneficiary under this plan shall have any right to assign, transfer, pledge or
otherwise encumber the right to receive any benefits hereunder, and any
attempted assignment, transfer, pledge or other encumbrance shall be void and
have no effect.
B0 Employment Not Guaranteed by Plan. Neither this plan nor
any action taken hereunder shall be construed as giving Employee the right to
remain as an employee of Company for any period.
C0 Tax Deduction. Company shall deduct from all benefit
payments all applicable federal, state or local taxes required by law to be
withheld from such payments.
D0 Construction. This Plan shall be construed according
to the laws of the Commonwealth of Pennsylvania.
E0 Form of Communication. Any election, claim, notice or other
communication required or permitted to be made by a Employee or beneficiary
under this plan shall be made in writing and in such form as shall be prescribed
by Company. Such communication shall be effective upon mailing if sent first
class mail, postage pre-paid, return receipt requested.
F0 Captions. The captions at the head of a paragraph of this
plan are designed for convenience of reference only and are not to be resorted
to for the purpose of interpreting any provision of this Plan.
G0 Entire Agreement. This plan constitutes the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings inducements or conditions, express or implied, oral or written,
except as herein contained.
ADOPTED as of this 1st day of January, 1999, pursuant to authority
vested in the undersigned officer.
RIGHT MANAGEMENT CONSULTANTS, INC.
By: /S/ RICHARD J. PINOLA
--------------------------------------
Richard J. Pinola,
Chairman and Chief Executive Officer
<PAGE>
AMENDMENT TO
RIGHT MANAGEMENT CONSULTANTS, INC.
1993 STOCK INCENTIVE PLAN
The 1993 Stock Incentive Plan of Right Management Consultants, Inc. is
hereby amended as follows:
1. Shares Subject to Plan. The aggregate maximum number of Shares for which
Options may be granted pursuant to the Plan is increased by the addition of
Seven Hundred and Fifty Thousand (750,000) Shares, subject to adjustment as
provided in Section 11 of the Plan.
2. Term of the Plan. The provision of Section 7 of the Plan which provides
that no Option may be granted under the Plan after October 27, 2002 is
hereby amended to provide that no Option may be granted under the Plan
after December 31, 2003.
In all other respects, the 1993 Stock Incentive Plan is ratified and
affirmed.
This Amendment to the Plan has been adopted by the Board of Directors
of Right Management Consultants, Inc. on March 25, 1999, subject to approval by
the shareholders. If the Amendment is not so approved on or before March 24,
2000, all Options granted under the Amendment shall be null and void; provided,
however that options granted under the 1993 Stock Incentive Plan up to an
aggregate maximum number of Shares for which Options may be granted without the
Amendment will not be effected if the Amendment not be approved by the
shareholders.
<PAGE>
AMENDMENT TO
RIGHT MANAGEMENT CONSULTANTS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The 1996 Employee Stock Purchase Plan of Right Management Consultants,
Inc. is hereby amended as follows:
1. Shares Available for Purchase. The number of Shares available for purchase
under the Plan is hereby increased by One Hundred and Fifty Thousand
(150,000) Shares, subject to adjustment as provided in the Plan.
2. Eligibility. Section 2 of the Plan is hereby amended in its entirety to
read as follows:
Except as provided below, all employees of the Company or its
subsidiaries shall be eligible to participate in the Plan in accordance with
such rules as may be prescribed by the Committee from time to time, which rules,
however, shall neither permit nor deny participation in the Plan contrary to the
requirements of the Internal Revenue Code of 1986, as amended (the "Code")
(including, but not limited to, Section 423(b)(3),(4),(5), and (8) thereof) and
the regulations promulgated thereunder. No employee may be granted the right to
acquire stock under the Plan if such employee, immediately after such right is
granted, owns 5% or more of the total combined voting power or value of the
stock of the Company or any subsidiary. Eligibility to the Plan begins on each
January 1, April 1, July 1, and October 1 for those employees who have completed
one-half year of service. A one-half year of service is earned at the end of any
six month period, beginning with the date of hire, in which the employee has 500
or more hours of service.
3. Termination of the Plan. Section 16 of the Plan is hereby amended to
provide that no offering under the Plan shall be made which shall extend
beyond December 31, 2003.
In all other respects, the 1996 Employee Stock Purchase Plan is
ratified and affirmed.
This Amendment to the Plan has been adopted by the Board of Directors
of Right Management Consultants, Inc. on March 25, 1999, subject to approval by
the shareholders. If the Amendment is not so approved on or before March 24,
2000, the Amendment shall be null and void.
<PAGE>
Right Management Consultants, Inc.
Selected Financial Data
(Dollars and Shares in Thousands Except Earnings Per Share and Stock Prices)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
----------------------------------------------------------------
Results of Operations (1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenue $168,258 $125,786 $125,269 $114,005 $89,134
- ---------------------------------------------------------------------------------------------------------------------------------
Costs and expenses 155,186 121,366 108,994 101,090 79,345
- ---------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 13,072 4,420 16,275 12,915 9,789
- ---------------------------------------------------------------------------------------------------------------------------------
Net income 6,607 2,073 9,675 7,819 5,714
- ---------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share (2) (3) $ 0.98 $ 0.31 $ 1.45 $ 1.24 $ 0.93
- ---------------------------------------------------------------------------------------------------------------------------------
Diluted weighted average number of
shares outstanding (2) (3) 6,758 6,725 6,663 6,290 6,125
- ---------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data
- ---------------------------------------------------------------------------------------------------------------------------------
Working capital $15,281 $15,491 $25,342 $13,134 $9,883
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets 114,595 81,704 73,935 60,231 48,969
- ---------------------------------------------------------------------------------------------------------------------------------
Long-term obligations 10,850 10,597 8,768 7,360 6,004
- ---------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity 56,818 50,450 47,801 33,626 24,405
- ---------------------------------------------------------------------------------------------------------------------------------
Total debt-to-equity ratio 25% 25% 17% 28% 28%
- ---------------------------------------------------------------------------------------------------------------------------------
Return on average equity 12% 4% 24% 27% 27%
- ---------------------------------------------------------------------------------------------------------------------------------
Stock Price Ranges
- ---------------------------------------------------------------------------------------------------------------------------------
Low price (3) $ 11.00 $ 8.75 $ 15.00 $ 6.89 $ 6.55
- ---------------------------------------------------------------------------------------------------------------------------------
High price (3) 15.75 23.50 27.50 19.50 11.11
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) See Note C to the Consolidated Financial Statements for information
regarding acquisitions.
(2) See Note K to the Consolidated Financial Statements for information
regarding earnings per share.
(3) Amounts presented have been restated for both the November 1995 and July
1996 three-for-two stock splits (see Note J to the Consolidated Financial
Statements).
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Right Management Consultants, Inc.
We have audited the accompanying consolidated balance sheets of Right
Management Consultants, Inc. (a Pennsylvania corporation) and subsidiaries as of
December 31, 1998 and 1997, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Right Management
Consultants, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
February 2, 1999
<PAGE>
Right Management Consultants, Inc.
Consolidated Balance Sheets
(Dollars in Thousands Except Share Data)
<TABLE>
<CAPTION>
December 31,
1998 1997
------------------- --------------------
Assets
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 20,800 $ 7,583
Accounts receivable, trade, net of allowance for doubtful accounts
of $1,066 and $663 in 1998 and 1997, respectively 33,271 21,888
Royalties and fees receivable from Affiliates 3,809 2,511
Prepaid expenses and other current assets 2,189 1,681
Deferred income taxes 815 1,074
------------------- --------------------
Total current assets 60,884 34,737
Property and equipment, net 15,983 13,342
Intangible assets, net 33,947 30,703
Deferred income taxes 1,937 1,426
Other 1,844 1,496
------------------- --------------------
Total Assets $ 114,595 $ 81,704
=================== ====================
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of long-term debt and other obligations $ 5,124 $ 3,943
Accounts payable 7,514 4,651
Commissions payable 2,572 1,431
Accrued incentive compensation and benefits 15,490 2,022
Other accrued expenses 8,191 4,272
Deferred income 6,712 2,927
------------------- --------------------
Total current liabilities 45,603 19,246
------------------- --------------------
Long-term debt and other obligations 9,065 8,775
------------------- --------------------
Deferred compensation 1,785 1,822
------------------- --------------------
Minority interests in subsidiaries 1,324 1,411
------------------- --------------------
Commitments and Contingent Liabilities (Notes E, G and I)
Shareholders' Equity (Note J):
Preferred stock, no par value; 1,000,000 shares authorized; no
shares issued - -
Common stock, $.01 par value; 20,000,000 shares authorized;
7,255,765 and 7,084,104 shares issued in 1998 and 1997, respectively 72 71
Additional paid-in capital 16,448 14,492
Retained earnings 44,970 38,363
Accumulated other comprehensive income (727) (580)
------------------- --------------------
60,763 52,346
Less treasury stock, at cost, 547,952 and 380,452 shares in 1998
and 1997, respectively (3,945) (1,896)
------------------- --------------------
Total shareholders' equity 56,818 50,450
------------------- --------------------
Total Liabilities and Shareholders' Equity $ 114,595 $ 81,704
=================== ====================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE>
Right Management Consultants, Inc.
Consolidated Statements of Income
(Dollars and Shares in Thousands Except Earnings per Share Data)
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
----- ----- ----
Revenue:
<S> <C> <C> <C>
Company office revenue $ 163,847 $ 122,281 $ 120,679
Affiliate royalties 4,411 3,505 4,590
----------------- ------------------ -----------------
Total revenue 168,258 125,786 125,269
----------------- ------------------ -----------------
Expenses:
Consultants' compensation 68,550 52,085 47,402
Office sales and consulting support 10,854 7,291 6,367
Office administration 56,675 47,767 41,617
General sales and administration 18,378 13,438 13,644
Restructuring costs (Note B) - 630 -
----------------- ------------------ -----------------
154,457 121,211 109,030
----------------- ------------------ -----------------
Income from operations 13,801 4,575 16,239
----------------- ------------------ -----------------
Other income (expense):
Interest income 496 663 606
Interest expense (1,225) (818) (570)
----------------- ------------------ -----------------
(729) (155) 36
----------------- ------------------ -----------------
Income before income taxes 13,072 4,420 16,275
Provision for income taxes 5,882 2,009 6,600
Minority interests in net income of subsidiaries 583 338 -
----------------- ------------------ -----------------
Net income $ 6,607 $ 2,073 $ 9,675
================= ================== =================
Basic earnings per share $ 0.99 $ 0.31 $ 1.55
================= ================== =================
Diluted earnings per share $ 0.98 $ 0.31 $ 1.45
================= ================== =================
Basic weighted average shares outstanding 6,674 6,596 6,252
================= ================== =================
Diluted weighted average shares outstanding 6,758 6,725 6,663
================= ================== =================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
Right Management Consultants, Inc.
Consolidated Statements of Shareholders' Equity
(Dollars in Thousands Except Share Data)
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Stock Additional Retained Comprehensive Treasury Stock Shareholders
Shares Par Value Paid-in Capital Earnings Income Shares Cost Equity
------- --------- --------------- -------- ------ ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 4,313,816 $ 43 $ 7,655 $ 26,636 $ (191) 252,952 $ (517) $ 33,626
Stock options exercised 316,039 3 1,332 - - - - 1,335
Tax benefit from exercise
of stock options - - 2,223 - - - - 2,223
Shares issued under restricted
stock awards 29,250 - 658 - - - - 658
Three-for-two stock split 2,050,100 21 - (21) - - - -
Shares issued under the Employee
Stock Purchase Plan 4,368 - 88 - - - - 88
Comprehensive Income:
Net income - - - 9,675 - - - 9,675
Translation adjustment - - - - 196 - - 196
--------
Total comprehensive income 9,871
--------- ---- -------- -------- ---- ------- ------ --------
Balance, December 31, 1996 6,713,573 $ 67 $ 11,956 $ 36,290 $ 5 252,952 $ (517) $ 47,801
Stock options exercised 236,095 3 1,198 - - - - 1,201
Tax benefit from exercise
of stock options - - 597 - - - - 597
Davidson & Associates
acquisition (Note C) 96,577 1 988 - - - - 989
Shares issued under the Employee
Stock Purchase Plan 37,859 - 386 - - - - 386
Restricted stock compensation - - (633) - - - - (633)
Repurchase of common stock - - - - - 127,500 (1,379) (1,379)
Comprehensive Income:
Net income - - - 2,073 - - - 2,073
Translation adjustment - - - - (585) - - (585)
--------
Total comprehensive income 1,488
--------- ---- -------- -------- ---- ------- ------- --------
Balance, December 31, 1997 7,084,104 $ 71 $ 14,492 $ 38,363 $ (580) 380,452 $(1,896) $ 50,450
Stock options exercised 169,500 1 1,208 - - - - 1,209
Tax benefit from exercise
of stock options - - 364 - - - - 364
Shares issued under the Employee
Stock Purchase Plan 36,151 - 384 - - - - 384
Restricted stock forfeiture/
cancellations (33,990) - - - - - - -
Repurchase of common stock - - - - - 167,500 (2,049) (2,049)
Comprehensive Income:
Net income - - - 6,607 - - - 6,607
Translation adjustment - - - - (147) - - (147)
--------
Total comprehensive income 6,460
--------- ---- -------- -------- ---- ------- ------- --------
Balance, December 31, 1998 7,255,765 $ 72 $ 16,448 $ 44,970 $ (727) 547,952 $ (3,945) $ 56,818
========== ===== ========= ========= ======= ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
Right Management Consultants, Inc.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
----- ----- ----
Operating Activities:
<S> <C> <C> <C>
Net income $6,607 $2,073 $9,675
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 8,039 6,494 4,923
Deferred income taxes (252) (510) (169)
Restricted stock compensation - (633) 658
Restructuring costs (Note B) - 630 -
Revenue recognized upon completion of incomplete
contracts assumed in acquisitions (90) (807) (512)
Provision for doubtful accounts 576 329 28
Minority interests in net income of subsidiaries 583 338 -
Other non-cash items 411 (332) 444
Changes in operating accounts:
Accounts receivable, trade and from Affiliates (13,273) 531 (460)
Prepaid expenses and other assets (582) (596) 499
Accounts payable and accrued expenses 19,925 (5,620) 640
Commissions payable and other liabilities 1,141 1,414 (1,782)
Deferred income 3,785 (941) 459
-------------- --------------- --------------
Net cash provided by operating activities 26,870 2,370 14,403
-------------- --------------- --------------
Investing Activities:
Purchase of property and equipment (7,786) (5,201) (4,873)
Acquisitions, net of cash acquired (6,285) (13,199) (3,401)
-------------- --------------- --------------
Net cash utilized by investing activities (14,071) (18,400) (8,274)
-------------- --------------- --------------
Financing Activities:
Borrowings under credit agreements 6,012 7,500 2,935
Payment of long-term debt and other obligations (4,770) (2,458) (3,660)
Cash dividends paid to minority interests (Note J) (670) - -
Tax benefit from the exercise of stock options 364 597 2,223
Repurchase of common stock (2,049) (1,379) -
Proceeds from stock issuances 1,593 1,587 1,420
-------------- --------------- --------------
Net cash provided by financing activities 480 5,847 2,918
-------------- --------------- --------------
Effect of exchange rate changes on cash and
cash equivalents (62) (289) 43
-------------- --------------- --------------
Increase (decrease) in cash and cash equivalents 13,217 (10,472) 9,090
Cash and cash equivalents, beginning of year 7,583 18,055 8,965
-------------- --------------- --------------
Cash and cash equivalents, end of year $20,800 $7,583 $18,055
============== =============== ==============
Supplemental Disclosures of Cash Flow Information
Cash paid for:
Interest $1,019 $ 687 $ 351
============== =============== ==============
Income taxes $3,031 $3,395 $5,252
============== =============== ==============
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
5
<PAGE>
31
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Description of business
Right Management Consultants, Inc. (the "Company") operations are segregated
into two lines of business: career transition and human resources and career
management consulting. Through a worldwide network of Company and Affiliate
offices, Right Management Consultants, Inc. develops and delivers career
transition services and provides human resources and career management
consulting services, specializing in change management, communication, strategy
implementation, merger integration and executive development. The Company
primarily delivers its services to mid-size and large industrial and service
companies, with no concentration in specific companies or industries.
Principles of consolidation
The consolidated financial statements include the accounts of Right Management
Consultants, Inc. and its wholly-owned and majority-owned subsidiaries. All
significant intercompany transactions and balances have been eliminated in
consolidation.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue recognition
The Company recognizes contract revenue and the related direct compensation for
the services provided by Company offices upon the performance of its obligations
under consulting service contracts. Revenue, recorded at the start of
performance of services, is deferred and recognized over the estimated average
period within which the contracts are essentially completed. All direct and
indirect costs are charged to expense in the period in which the obligations are
incurred.
Franchise revenue
Royalties from the members of the Company's network arise from agreements made
with Affiliates, which generally operate exclusively in designated regional
locations. The terms of these agreements require the Affiliates to provide
services under the Company's service marks in accordance with programs and
standards developed by the Company. Affiliate royalties are typically 10% of
each Affiliate's gross billings and are recorded when the Affiliate bills its
customers for services.
6
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Cash equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Property and equipment
Property and equipment is carried at cost, or allocated cost for companies
acquired in a purchase transaction. Depreciation is provided on the
straight-line method over the estimated useful lives of the assets, which are
generally three to seven years for furniture, fixtures and computer equipment.
Leasehold improvements are depreciated using the straight-line method over the
shorter of the estimated useful life of the asset or the remaining term of the
lease.
Intangible assets
<TABLE>
<CAPTION>
Amortization
(Dollars in Thousands) Period
1998 1997 (Years)
---- ---- -------
<S> <C> <C> <C>
Trademarks $ 1,150 $ 1,644 5
Contact lists and Affiliate agreements 129 538 5
Covenants not to compete -- 1,118 5 to 10
Goodwill 40,782 38,239 15 to 40
------ ------
42,061 41,539
Less accumulated amortization 8,114 10,836
------- -------
$33,947 $30,703
======= =======
</TABLE>
Amortization of these intangible assets was $2,761,000, $2,311,000, and
$1,868,000 in 1998, 1997 and 1996, respectively.
Impairment of Long-Lived Assets
Pursuant to Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
Be Disposed Of", the Company is required to evaluate the potential impairment
of long-lived assets and certain intangible assets on a periodic basis. The
Company reviews the realizability of its long-lived assets and certain
intangible assets by analyzing the projected cash flows and profitability of the
acquired entities and adjusts the net book value of recorded assets when
necessary. No material adjustments have been recorded for each of the three
years in the period ended December 31, 1998.
7
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Accounting for Interest Rate Swaps
In June 1998, SFAS No. 133, " Accounting for Derivative Instruments and Hedging
Activities, " was issued and is effective for fiscal years beginning after June
15, 1999. SFAS No. 133, as it applies to the Company, requires the impact of
fluctuations in interest rates on hedging instruments to be reported in other
comprehensive income. 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 will adopt SFAS No.
133 effective January 1, 2000.
Earnings per Share
The Company utilizes SFAS No. 128, "Earnings per Share," to compute earnings per
share. SFAS No. 128 requires dual presentation of basic and diluted earnings per
share ("EPS") for complex capital structures on the Statements of Income. Basic
EPS is computed by dividing net income by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
from the exercise or conversion of securities into common stock. See Note K for
further disclosure.
Currency translation
The accounts of the international subsidiaries are translated in accordance with
SFAS No. 52, "Foreign Currency Translation", which requires that assets and
liabilities of international operations be translated using the exchange rate in
effect at the balance sheet date, and that the results of operations be
translated at average exchange rates during the year. The effects of exchange
rate fluctuations in translating assets and liabilities of international
operations into U.S. dollars are accumulated and reflected as the cumulative
translation adjustment in shareholders' equity. The effects of exchange rate
fluctuations in translating the foreign currency transactions are included in
general sales and administration expense for 1998, 1997 and 1996. There are no
material transaction gains or losses in the accompanying Consolidated Financial
Statements for each of the three years in the period ended December 31, 1998.
Accumulated Other Comprehensive Income
In June 1997, the Financial Accounting Standards Board ("FASB") issued 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. These items, which are excluded from net income, represent
accumulated other comprehensive income. The Company's accumulated other
comprehensive income is comprised of unrealized gains and losses from foreign
currency translation adjustments and is presented in the Consolidated Statements
of Shareholders' Equity. Prior year financial statements have been reclassified
to conform to the SFAS No. 130 requirements. The earnings associated with the
Company's investment in its foreign subsidiaries are considered to be
permanently invested and no provision for U.S. federal and state income taxes on
those earnings or translation adjustments has been provided.
8
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Income taxes
The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for
Income Taxes." In accordance with SFAS No. 109, the liability method is used in
accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on differences between the financial reporting
and tax basis of assets and liabilities and are measured using enacted tax rates
and laws that are expected to be in effect when the difference is reversed.
Euro Conversion
On January 1, 1999, eleven of the fifteen member countries of the European Union
established fixed conversion rates between their existing sovereign currencies
and the euro. The participating countries have agreed to adopt the euro as the
common legal currency. The Company has European operations in the United
Kingdom, France, and Belgium. France is a participating country in this euro
conversion. The Company does not anticipate any material impact to its business
or financial condition resulting from the conversion to the euro currency.
Reclassifications
Certain amounts have been reclassified in the prior years' Consolidated
Financial Statements and Notes to the Consolidated Financial Statements to
conform with the 1998 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 has completed all
payments for severance and office closures during 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 the full purchase price of $3,600,000 from its revolving credit
facility in order to complete this transaction.
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 provided the Company with an option to acquire the remaining 49% of
9
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - ACQUISITIONS AND LICENSING AGREEMENT (Continued)
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. If either of these options is exercised, the
purchase price will be based on a multiple of gross revenues.
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 year ended December 31, 1998, the aggregate purchase price for
acquisitions was approximately $6,285,000, including the costs of acquisitions
and adjustments for prior acquisitions. The purchase price exceeded the fair
value of the assets acquired by $6,375,000.
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 sells and delivers TACG's full range of
products and methodologies and hired all former TACG employees.
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 provided the Company with an
option to acquire the remaining 49% of the outstanding shares of Davidson &
Associates, at fair value as defined, beginning on July 1, 2000. Additionally,
the minority shareholders of Davidson & Associates have the right to require the
Company to purchase in 10% annual increments, the remaining 49% of the
outstanding shares of Davidson & Associates, at fair value as defined, 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 was funded through a borrowing of $2,000,000 under the Company's
revolving credit facility. The acquisition included future defined incentives
contingent upon the results of the operations in Minnesota subsequent to the
transaction.
10
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - ACQUISITIONS AND LICENSING AGREEMENT (Continued)
Effective December 1, 1997, the Company acquired the business and certain assets
of a Houston, Texas career transition firm, Michael D. McKee & Associates. The
acquisition included future defined incentives contingent upon the results of
the operations in the Company's southwest region subsequent to the transaction.
The aggregate purchase price of these eleven acquisitions was approximately
$15,556,000, including costs of acquisitions. The purchase price exceeded the
fair value of the net tangible assets acquired by approximately $14,847,000,
which will be amortized over a period of fifteen years.
The following represents the assets acquired and liabilities assumed to arrive
at net cash paid for acquisitions discussed above for each of the two years in
the period ended December 31, 1998:
(Dollars in Thousands)
1998 1997
---- ----
Assets acquired:
Accounts receivable $ 12 $2,875
Prepaid expenses and other assets 149 423
Fixed assets 245 2,983
Intangible assets 6,375 14,847
----- ------
6,781 21,128
Liabilities acquired:
Accounts payable and accrued expenses 104 4,765
Assumption of incomplete contracts 90 807
Long term debt 274 --
----- ------
468 5,572
Cash acquired 28 1,368
Equity issued -- 989
----- ------
Net cash paid for acquisitions $6,285 $13,199
====== =======
Each acquisition has been accounted as a purchase and the operating results of
each entity have been consolidated with the Company's results since the
effective date of the respective acquisition. The purchase price of each
acquisition has been allocated to the assets acquired based upon their estimated
fair value at the date of acquisition.
The pro forma effect of the acquisitions detailed above on the Company's results
of operations as if the acquisitions had occurred at January 1, 1997, is
immaterial and has been omitted.
11
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE D - PROPERTY AND EQUIPMENT
(Dollars in Thousands)
1998 1997
---- ----
Furniture and computer equipment $32,125 $25,577
Leasehold improvements 5,944 4,696
------- -------
38,069 30,273
Less accumulated depreciation 22,086 16,931
------- -------
$15,983 $13,342
======= =======
Depreciation expense was $5,278,000, $4,183,000, and $3,055,000 in 1998, 1997,
and 1996, respectively.
NOTE E - DEBT AND OTHER OBLIGATIONS
Credit Agreement
On December 20, 1996, the Company signed a new Credit Agreement (the "Credit
Agreement") with its two primary lenders (the "Lenders") to increase its maximum
unsecured revolving line of credit to $40,000,000. The Credit Agreement became
effective December 23, 1996.
The Credit Agreement has a three year maturity. Subsequent to the first
anniversary, and annually thereafter, the Company has the ability to extend the
Credit Agreement for an additional year upon Lenders' approval. In September
1998, the Company extended the Credit Agreement from December 31, 1999 to
December 31, 2000. The Company may borrow, repay and re-borrow during the term
of the Credit Agreement, with any balance due at maturity. Interest rates are
tiered at LIBOR plus a margin contingent upon certain financial ratios of the
Company. The Company also has the option to borrow at a base rate equal to the
lesser of the Lenders' Prime Rate less 1/4% or the Federal Funds Effective Rate
plus 1%.
Long-term debt and other obligations consist of the following:
<TABLE>
<CAPTION>
(Dollars in Thousands)
December 31,
1998 1997
---- ----
<S> <C> <C>
Floating rate borrowings under the Credit Agreement repaid in 1998 $ -- $1,900
Borrowings under the Credit Agreement, bearing interest at
a weighted average variable rate of 6.06% 13,516 9,708
Other 673 1,110
------- -------
14,189 12,718
Less current portion 5,124 3,943
------- -------
$ 9,065 $ 8,775
======= =======
</TABLE>
12
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E - DEBT AND OTHER OBLIGATIONS (Continued)
Under the Credit Agreement, the major covenants require the maintenance of
certain minimum financial ratios and restrict the level of indebtedness with
other banks, as defined. At December 31, 1998, the Company is in compliance with
all such covenants.
For the years subsequent to December 31, 1998, aggregate maturities on long-term
debt and other obligations, are as follows:
(Dollars in Thousands)
Year Ending December 31, Amount
------------------------- ------
1999 $ 5,124
2000 8,653
2001 301
2002 108
2003 3
-------
$14,189
=======
The Company intends to make scheduled quarterly payments during 1999 to reduce
the outstanding balance under the Credit Agreement to agree with the notional
principal balance under its fixed interest rate swap agreements. Therefore, the
scheduled 1999 payments are presented in the current portion of the long term
debt. The remaining amounts due under the Credit Agreement is shown as maturing
as of December 31, 2000.
Interest Rate Swaps
During 1998 and 1997, the Company entered into two and three fixed interest rate
swap agreements ("Swap Agreements"), respectively, with an aggregate notional
principal at December 31, 1998 of $13,516,000 with scheduled quarterly
reductions of notional principal over three to five years. The fixed interest
rates under these Swap Agreements range from 5.79% to 7.08% at December 31,
1998. The purpose of these Swap Agreements is to fix interest rates on variable
rate debt and reduce exposure to interest rate fluctuations. Under these Swap
Agreements, the Company pays its Lenders interest at a weighted average fixed
rate of 6.61% and its Lenders are paying the Company interest at a weighted
average variable rate of 6.06% at December 31, 1998. The notional amounts do not
represent amounts exchanged by the parties and thus are not a measure of
exposure of the Company. The amounts exchanged are normally based on the
notional amounts and other terms of the swaps. The weighted average variable
rates are subject to change over time as LIBOR fluctuates.
At December 31, 1998, the Company has no exposure to credit loss on these
interest rate swaps. The Company is not a party to leveraged derivatives and
does not hold or issue financial instruments for speculative purposes. The
Company has made adjustments to interest expense for the net cash paid or
received on interest rate swap agreements. The impact of the above interest rate
swap agreements on interest expense has been immaterial to date.
13
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE F - INCOME TAXES
The provision for income taxes consists of the following:
(Dollars in Thousands)
Year Ended December 31,
1998 1997 1996
------- ------- -------
Current:
Federal $ 3,499 $ 1,388 $ 5,429
State 662 561 861
Foreign 1,973 570 479
------- ------- -------
6,134 2,519 6,769
------- ------- -------
Deferred:
Federal (295) (226) (290)
State (58) 60 (59)
Foreign 101 51 (12)
------- ------- -------
(252) (115) (361)
------- ------- -------
Utilization and benefit of foreign operating
loss carryforwards -- (203) --
------- ------- -------
5,882 2,201 6,408
Provision for valuation allowance -- (192) 192
------- ------- -------
$ 5,882 $ 2,009 $ 6,600
======= ======= =======
The total tax provision for each year differs from the amount that would have
been provided by applying the statutory U.S. Federal income tax rate to income
before income taxes. The reconciliation of these differences is as follows:
1998 1997 1996
---- ---- ----
U.S. Federal income tax rate 34% 34% 34%
Provision for tax contingencies 4 4 --
State income taxes, net of federal tax benefit 3 4 4
Nondeductible expenses 2 4 1
Foreign earnings not subject to U.S. Federal 2 1 1
income tax, net of foreign taxes
Deferred tax valuation allowance -- (4) 1
Other -- 2 --
------ ------ -----
45% 45% 41%
====== ====== =====
Income before income taxes is comprised of domestic and foreign components,
respectively, as follows: 1998 -- $7,488,000 and $5,584,000, 1997 -- $1,565,000
and $2,855,000, and 1996 -- $14,184,000 and $2,091,000.
14
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE F - INCOME TAXES (Continued)
Deferred income taxes arise primarily as a result of utilizing depreciation
lives for income tax reporting that are in excess of those used for financial
reporting purposes, as well as recognizing deferred compensation expense, the
provision for doubtful accounts and certain accrued expenses for financial
reporting purposes, which are not currently deductible for income tax purposes.
Taxes on income of international subsidiaries are provided at the tax rates
applicable to their respective tax jurisdictions. The Company's share of the
cumulative undistributed earnings of such subsidiaries was approximately
$8,093,000 and $4,167,000 at December 31, 1998 and 1997, respectively. No
provision has been made for additional income taxes on the undistributed
earnings of the international subsidiaries because earnings are expected to be
reinvested indefinitely in the subsidiaries' operations or because under
existing law, international tax credits would be available to substantially
reduce U.S. taxes payable in the event of distribution.
The deferred tax asset as of December 31, 1998 and 1997 is comprised of the
following:
(Dollars in Thousands)
1998 1997
---- ----
Allowance for doubtful accounts $ 409 $ 254
Accruals not currently deductible for income taxes 406 134
Deferred compensation 687 641
Depreciation and amortization 1,175 1,295
Tax benefit of foreign net operating losses 75 176
------- ------
Net deferred tax asset $ 2,752 $ 2,500
======= =======
NOTE G - BENEFIT AND COMPENSATION AGREEMENTS
The Company has a non-qualified supplemental executive retirement plan (the
"Plan") for its Founding Chairman. The Plan is designed to provide retirement
income based on past compensation, reduced by other retirement sources.
Effective January 1, 1997, the Founding Chairman began collecting benefits in
accordance with the Plan.
The Company accounts for this Plan in accordance with the provisions of SFAS No.
87, "Employer's Accounting for Pensions." SFAS No. 87 requires the Company to
recognize a liability equal to the amount by which the actuarial present value
of the accumulated benefit obligation exceeds the fair value of the Plan's
assets. This liability was approximately $1,116,000 and $1,151,000 for 1998 and
1997, respectively, using a discount rate of 7.25%. Since the Plan is not funded
by the Company, the recorded liability equals the present value of the
accumulated benefit obligation.
The Company has non-qualified supplemental executive retirement plans for its
Chief Executive Officer, Vice Chairman and President/Chief Operating Officer to
which a percentage of compensation, including base salary and incentive bonuses,
is credited annually. Deferred amounts earn annual interest equal to the
two-year Guaranteed Investment Contract Index on November 30 of the current plan
year, or 6%, whichever is higher (6% at both November 30, 1998 and 1997). The
account balance is payable as a life annuity in equal monthly installments with
15
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE G - BENEFIT AND COMPENSATION AGREEMENTS (Continued)
interest on the unpaid balance upon termination of service with the Company. The
Chief Executive Officer and Vice Chairman's interest in the plans vest at the
rate of 10% and 20% per year, respectively, which began in 1993 and 1996,
respectively. The President's interest in the plan vests at 20% per year which
begins at the age of 61.
The Company also maintains life insurance policies on the lives of key
executives, naming the Company as the beneficiary. The cash surrender value of
these policies is included in the Other non-current assets section of the
Consolidated Balance Sheets.
The Company also maintains employment agreements and incentive compensation
agreements with certain key management employees. The agreements typically
result from the Company's acquisitions of outside firms. The agreements provide
for additional compensation over and above the individual's annual salary, based
upon the achievement of certain levels of overall Company, individual group or
region performance. These agreements provide for aggregate minimum annual
compensation for these employees of approximately $3,023,000 in 1999, $1,533,000
in 2000, $195,000 in 2001, and $35,000 in 2002.
NOTE H - EMPLOYEE BENEFIT PLANS
The Company maintains a defined contribution savings plan, available to
substantially all employees, under Section 401(k) of the Internal Revenue Code.
Under this plan, the Company will contribute 25% of the participating employee's
annual contribution. In 1998 and 1996, in connection with achieving a certain
level of targeted Company profits, the Company contributed an additional 12.5%
of the participating employee's contribution for a total of 37.5%. The Company
made no additional contribution for 1997 based on the Company's failure to meet
internal targets. Employee contributions are generally limited to 10% of their
compensation subject to Internal Revenue Code limitations. Company contributions
were approximately $764,000, $469,000, and $704,000 for 1998, 1997 and 1996,
respectively.
In addition, the Company maintains a non-qualified deferred compensation plan
for certain employees. Under the plan, participants may defer payment of up to
10% of their annual cash compensation reduced by amounts contributed to the
Company's 401(k) plan. Deferred amounts earn annual interest equal to the
two-year Guaranteed Investment Contract Index on November 30 preceding each plan
year or 6%, whichever is higher (6% at both November 30, 1998 and 1997). The
deferred amounts will be paid from the general assets of the Company and are
included in deferred compensation as of December 31, 1998 and 1997.
16
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I - LEASE OBLIGATIONS
The Company leases office space and equipment at various locations and accounts
for these obligations as operating leases. Rentals relating to these leases are
recorded on a straight-line basis. Rental expense approximated $16,037,000,
$14,350,000 and $13,000,000 in 1998, 1997, and 1996, respectively. Contingent
rentals may be due each year under the terms of the various office space leases
as the result of certain increases in building operating expenses over the base
year amounts. The following is a schedule, by year, of future minimum rental
payments required under operating leases with remaining non-cancelable lease
terms in excess of one year as of December 31, 1998:
(Dollars in Thousands)
Year Ending December 31, Amount
------------------------- ------
1999 $12,889
2000 11,164
2001 8,808
2002 4,993
2003 2,925
2004 and subsequent years 2,060
NOTE J - SHAREHOLDERS' EQUITY
Stock Splits
Effective November 10, 1995, the Company's Common Stock split into three shares
for each two shares outstanding. Additionally, effective July 26, 1996, the
Company's Common Stock split a second time into three shares for each two shares
outstanding. The stated par value per share of Common Stock was not changed for
both stock splits from its existing amount of $0.01 per share. All share and per
share amounts referred to in the financial statements and notes thereto have
been restated to reflect both stock splits, including rounding up for fractional
shares, where appropriate.
Stock Option Plans
The Company has a 1986 Stock Option Plan (the "1986 Plan") under which 968,000
shares of Common Stock are reserved for issuance upon the exercise of incentive
stock options, stock appreciation rights or non-qualified stock options that may
be granted to employees. Outstanding options granted under this plan are
exercisable, cumulatively, in three or four equal annual installments beginning
one year from the date of grant. Effective September 8, 1996, no further stock
options can be granted under the 1986 Plan.
The Company also has a 1993 Stock Incentive Plan, as amended in 1996, with
2,475,000 shares of Common Stock reserved for issuance upon the exercise of
incentive stock options or non-qualified stock options that may be granted to
employees. Outstanding options granted under this plan have ten year terms and
are exercisable, cumulatively, in three equal annual installments, beginning one
year from the date of grant. At December 31, 1998, 870,368 shares were available
for issuance under this plan.
In addition, in January 1995, the Company Shareholders adopted amendments to the
1993 Stock Incentive Plan permitting awards of restricted stock under such plan.
The amendments to the 1993 Stock Incentive Plan permit awards of up to an
aggregate of 675,000 shares of the Company's Common Stock to certain
17
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE J - SHAREHOLDERS' EQUITY (Continued)
officers and key employees. Restrictions generally limit the sale or transfer of
the shares during a restricted period of approximately three years. Thereafter,
the restricted stock will either vest, in whole or in part, with the participant
or be forfeited, in whole or in part, back to the Company based on its earnings
performance for this three year period. During 1996 and 1995, 29,250 and 44,550
shares of restricted stock were awarded, respectively. Also during 1996 and
1995, approximately $658,000 and $230,000, respectively, was charged to general
sales and administration expenses for compensation expense related to these
shares. Due to the Company's decreasing stock price during 1997 and the
forfeiture of certain awards, total compensation expense related to restricted
stock grants included within general sales and administration expenses was
reduced by approximately $633,000 in 1997 and no compensation expense related to
restricted stock grants was charged in 1998. During 1998, 21,750 shares of
restricted stock awards were cancelled due to employment terminations. Pursuant
to the Restricted Stock Award Agreement dated January 1, 1995, under the 1993
Stock Incentive Plan, 12,240 shares of the remaining restricted shares awarded
during 1995 were forfeited due to the Company's failure to achieve certain
earnings per share targets.
The Company also has a Directors' Stock Option Plan, under which 225,000 shares
of Common Stock are reserved for issuance upon the exercise of incentive stock
options or non-qualified stock options that may be granted to non-employee
Directors of the Board of Directors. Outstanding options granted under this plan
have five year terms and are exercisable, cumulatively, in three equal annual
installments, beginning one year from the date of grant. At December 31, 1998,
153,000 option shares were available for issuance under this plan.
The Company has elected to follow APB No. 25, "Accounting for Stock Issued to
Employees" in accounting for its stock options. Under APB No. 25, no
compensation expense is recognized because the exercise price of the Company's
stock options equals the market price of the underlying stock on the date of the
grant. Had compensation cost for these plans been determined with SFAS No. 123,
"Accounting for Stock-Based Compensation", the Company's net income and earnings
per share for 1998, 1997 and 1996 would have been reduced to the following pro
forma amounts:
1998 1997 1996
---- ---- ----
Net income - as reported $6,607,000 $2,073,000 $9,675,000
Net income - pro forma $4,788,000 $ 108,000 $8,389,000
Basic EPS - as reported $0.99 $0.31 $1.55
Basic EPS - pro forma $0.72 $0.02 $1.34
Diluted EPS - as reported $0.98 $0.31 $1.45
Diluted EPS - pro forma $0.71 $0.02 $1.26
The fair value of the options was estimated at the date of grant using a
Black-Scholes option pricing model. The following weighted-average assumptions
used for grants in 1998 were a risk-free interest rate of 5.3%, no dividend
yield, expected volatility of 75%, and a weighted-average expected life of the
option of 7 years. The same weighted-average assumptions were used for grants in
1997 and 1996, except for the risk-free interest rate which was 6.4% for both
1997 and 1996 and the expected volatility of 70% for both 1997 and 1996. Under
SFAS No. 123, total compensation expense, net of tax benefit, approximated
$1,819,000, $1,965,000, and $1,286,000 in 1998, 1997, and 1996, respectively.
18
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE J - SHAREHOLDERS' EQUITY (Continued)
A summary of the status of the Company's stock option plans at December 31,
1998, 1997 and 1996 and changes during the years then ended is presented in the
table and narrative below:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 1,200,238 $13.26 1,238,295 $10.92 1,274,534 $7.89
Granted 154,250 13.42 241,788 17.31 311,300 16.77
Exercised (169,500) 7.14 (236,095) 5.08 (316,039) 4.23
Canceled (46,075) 14.51 (43,750) 13.08 (31,500) 15.29
--------- ------ --------- ------ -------- ------
Outstanding at end of year 1,138,913 $14.14 1,200,238 $13.26 1,238,295 $10.92
Exercisable at end of year 764,348 $13.39 672,492 $10.93 610,247 $7.63
Weighted average fair value $9.87 $12.10 $11.21
of options granted
</TABLE>
Exercise prices for options outstanding as of December 31, 1998 ranged from
$7.78 to $24.33. The weighted average remaining contractual life of these
options is approximately 6 years.
Employee Stock Purchase Plan
On May 9, 1996, the Company Shareholders approved the creation of the Company's
1996 Employee Stock Purchase Plan (the "ESPP"). Effective July 1, 1996, 150,000
shares were reserved for issuance under the ESPP. The ESPP permits employees to
purchase Company Common Stock at 85% of the average market price on the last day
of the applicable quarterly period. All Company employees, except executive
employees, are eligible to participate in the ESPP. During 1998, 1997, and 1996,
36,151, 37,859, and 4,368 shares, respectively, were purchased through the ESPP.
Repurchase of Common Stock
In March 1997, the Board of Directors 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 of
Directors 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 1998 and 1997, the Company repurchased 167,500 and 127,500 shares of
Common Stock at an aggregate purchase price of $2,049,000 and $1,379,000,
respectively.
Subsequent to December 31, 1998, the Company repurchased 40,000 shares of Common
Stock at an aggregate purchase price of $605,000.
19
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE J - SHAREHOLDERS' EQUITY (Continued)
Dividends
The Company has never paid any dividends on its Common Stock and currently
expects that all of its earnings will be retained and reinvested in the
Company's business.
During 1998, Davidson & Associates paid cash dividends to its shareholders. The
Company recognized no dividend income for its 51% ownership of Davidson &
Associates as this is an intercompany transaction which eliminates in
consolidation. However, the Company recorded the remaining 49% of the dividends
paid and declared in 1998 as a reduction in minority interest.
NOTE K - 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.
For the year ended 12/31/98
Income Shares EPS
------ ------ ---
Basic EPS:
Net income $6,607,000 6,674,000 $0.99
=====
Impact of options --- 84,000
---------- ---------
Diluted EPS:
Net income $6,607,000 6,758,000 $0.98
========== ========= =====
For the year ended 12/31/97
Income Shares EPS
------ ------ ---
Basic EPS:
Net income $2,073,000 6,596,000 $0.31
=====
Impact of options --- 129,000
---------- ---------
Diluted EPS:
Net income $2,073,000 6,725,000 $0.31
========== ========= =====
For the year ended 12/31/96
Income Shares EPS
------ ------ ---
Basic EPS:
Net income $9,675,000 6,252,000 $1.55
=====
Impact of options --- 411,000
---------- ---------
Diluted EPS:
Net income $9,675,000 6,663,000 $1.45
========== ========= =====
For the year ended December 31, 1998, outstanding options to purchase 861,514
shares of Company Common Stock at $13.25 to $24.33 were excluded from the
computation of diluted EPS, as the options' exercise price was greater than the
average market price of the Common Stock.
20
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE K - EARNINGS PER SHARE (Continued)
As a result of the Company's adoption of SFAS No. 128, the Company's reported
EPS for 1996 was restated. The effect of this accounting change on previously
reported EPS data was as follows:
Per Share Amounts: 1996
----
Primary EPS as reported $1.45
Effect of SFAS No. 128 0.10
-----
Basic EPS as restated $1.55
=====
Fully diluted EPS as reported $1.44
Effect of SFAS No. 128 0.01
----
Diluted EPS as restated $1.45
=====
NOTE L - SEGMENTS
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," was issued effective for fiscal years ending after
December 15, 1998. SFAS No. 131 establishes standards for reporting information
about operating segments and related disclosures about products and services,
geographic areas, and major customers. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
The Company's operations are segregated into two lines of business: career
transition and human resources and career management consulting ("consulting").
The Company operates these lines of business across the geographic areas of the
United States, Canada, Europe and Asia-Pacific. These operations offer different
services and require different marketing strategies. Career transition offers
support for organizational realignment and redeployment, as well as career
development and restructuring planning. Consulting offers organizational and
individual assessment, interventions in change management, leadership and
executive development, transformation planning and cultural integration in
mergers and acquisitions. With more than 170 service locations worldwide, the
Company manages operations by geographic area to enhance global growth and
establish major accounts with global clients. The Company primarily delivers its
services to mid-size and large industrial and service companies, with no
concentration in specific companies or industries.
21
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE L - SEGMENTS (Continued)
Summarized operations of each of the Company's geographic segments in the
aggregate for each of the three years in the period ended December 31, 1998, are
as follows (See Note A for discussion relating to currency translation and Note
F for discussion relating to income taxes):
<TABLE>
<CAPTION>
(Dollars in Thousands)
1998 United States Canada Europe Asia-Pacific Consolidated
- ---- ------------- ------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Identifiable assets $91,588 $7,562 $9,668 $5,777 $114,595
======= ====== ====== ====== =======
Revenue 127,353 10,884 15,836 14,185 168,258
======= ====== ====== ====== =======
Operating income (1) 7,536 1,784 2,394 2,087 13,801
======= ====== ====== ====== =======
Depreciation and amortization 6,379 523 501 636 8,039
======= ====== ====== ====== =======
Capital expenditures 6,250 435 298 803 7,786
======= ====== ====== ====== =======
1997 United States Canada Europe Asia-Pacific Consolidated
- ---- ------------- ------ ------ ------------ ------------
Identifiable assets $63,881 $7,006 $5,600 $5,217 $81,704
======= ====== ====== ====== =======
Revenue 97,358 9,784 11,475 7,169 125,786
======= ====== ====== ====== =======
Operating income (1) 1,720 1,138 598 1,119 4,575
======= ====== ====== ====== =======
Depreciation and amortization 5,500 245 444 305 6,494
======= ====== ====== ====== =======
Capital expenditures 3,893 126 755 427 5,201
======= ====== ====== ====== =======
1996 United States Canada Europe Asia-Pacific Consolidated
- ---- ------------- ------ ------ ------------ ------------
Identifiable assets $ 60,414 $ 7,155 $ 6,366 $ --- $ 73,935
======== ====== ====== ====== =======
Revenue 105,028 9,167 11,074 --- 125,269
======== ====== ====== ====== =======
Operating income (1) 14,115 1,142 982 --- 16,239
======== ====== ====== ====== =======
Depreciation and amortization 4,038 475 410 --- 4,923
======== ====== ====== ====== =======
Capital expenditures 4,707 80 86 --- 4,873
======== ====== ====== ====== =======
</TABLE>
(1) The operating income reported for the United States segment includes total
general sales and administration expense reported on the Consolidated
Statements of Income.
22
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE L - SEGMENTS (Continued)
Revenues and expenses of the Company's lines of business for the Company
offices, excluding the total general sales and administration expenses and
Affiliate royalties, are evaluated by management. The Company does not measure
assets by lines of business as assets are generally not distinctive to a
particular line of business and they are not fundamental in assessing segment
performance. Revenue and Company office operating income for each of the
Company's lines of business in the aggregate for each of the three years for the
period ended December 31, 1998, excluding the $630,000 restructuring charge (see
Note B) in 1997, are as follows:
<TABLE>
<CAPTION>
Career
1998 Transition Consulting Consolidated
- ---- ---------- ---------- ------------
<S> <C> <C> <C>
Company office revenue $139,903 $23,944 $163,847
======== ======= ========
Company office operating 25,440 2,328 27,768
income ====== ===== ======
Career
1997 Transition Consulting Consolidated
- ---- ---------- ---------- ------------
Company office revenue $111,181 $11,100 $122,281
======== ======= ========
Company office operating 13,510 1,628 15,138
income ====== ===== ======
Career
1996 Transition Consulting Consolidated
- ---- ---------- ---------- ------------
Company office revenue $111,110 $9,569 $120,679
======== ====== ========
Company office operating 24,990 303 25,293
income ====== === ======
</TABLE>
NOTE M - SUBSEQUENT EVENTS
Subsequent to December 31, 1998, the Company acquired the outstanding stock of
two European consulting firms and one European career transition firm for a
combination of cash and future defined incentive payments. The firms included
Groupe ARJ, with offices in Lyon and Paris France, Jouret Management Center,
based in Brussels, Belgium, and N.V. Claessens Belgium S.A., with four offices
in Belgium. All of these transactions were effective January 1, 1999. The
aggregate purchase price for these acquisitions totaled approximately $5,337,000
and will be accounted for using the purchase method. The Company has funded
$5,100,000 of these acquisitions through borrowings under the Credit Agreement
with the remainder being funded through working capital.
23
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth results of operations before income taxes for the
years indicated. Certain amounts have been reclassified in the 1997 and 1996
Consolidated Statements of Income to conform with the 1998 presentation. This
discussion and analysis is to be read in conjunction with the consolidated
financial statements and accompanying notes thereto.
<TABLE>
<CAPTION>
(Dollars in Thousands)
Year Ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Company office revenue $163,847 $122,281 $120,679
Company office expenses 136,079 107,143 95,386
-------- -------- --------
Company office margin 27,768 15,138 25,293
Affiliate royalties 4,411 3,505 4,590
General sales and administration (18,378) (13,438) (13,644)
Restructuring costs (Note B) -- (630) --
Interest income (expense), net (729) (155) 36
-------- -------- --------
Income before income taxes $ 13,072 $ 4,420 $ 16,275
======== ======= ========
</TABLE>
1998 Compared to 1997
For the year ended December 31, 1998, revenue generated by Company offices
increased by 34% or $41,566,000 over 1997. This increase is attributable to the
combination of $18,092,000 in incremental revenues from acquisitions, and a 19%
same office revenue increase. The significant same office revenue increase is
due primarily to the strong career transition environment throughout the
network, and the growth in the consulting line of business discussed below. The
revenue increase is also attributable to the new and continued high unit volume
of programs from clients with national or international operations. In contrast
with the compression in the length of the programs, which negatively impacted
the average fees by program in 1997, the Company experienced more stable average
program fees during 1998.
The Company's consulting line of business reported total revenues of
$23,944,000, which represents a 116% increase over 1997. The increase is due to
$9,242,000 in incremental revenues primarily from the two consulting
acquisitions and the licensing agreement made during 1998 and a 33% same office
increase. As reflected by the acquisitions consummated and the favorable results
achieved in the consulting line of business in 1998, the Company is committed to
further growth in this line of business.
For the year ended December 31, 1998, Affiliate royalties increased 26%, or
$906,000 from 1997. The increase is attributable to the previously mentioned
strong career transition market throughout the network.
24
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
For the year ended December 31, 1998, total Company office expenses increased
27% or $28,936,000 over 1997. This increase is due to approximately $17,137,000
in incremental costs from acquisitions. The Company's same office expenses
increased by approximately $11,799,000 from 1997 due primarily to incentive
compensation funding for operating results significantly above target
performance.
Aggregate Company office margins were 17% and 12% for 1998 and 1997,
respectively. The increase in margins is attributable primarily to the
previously mentioned increase in career transition and consulting revenues,
partly offset by the incremental incentive funding for operating performance
significantly above target.
For the year ended December 31, 1998, general sales and administration expenses
increased by 37% or $4,940,000 over 1997. This increase was largely attributable
to incentive compensation, increased charges for consulting services, and an
increase in depreciation and amortization expense. Despite these increases, for
the year ended December 31, 1998, general sales and administration expenses as a
percentage of total revenues remained at 11%, as in 1997.
For the year ended December 31, 1998, the Company's effective tax rate was
approximately 45%, consistent with that of 1997. An additional provision of
$200,000 was made for the expected results of pending tax audits during the
fourth quarter of 1998. See Note F to the Consolidated Financial Statements for
the composition of the Company's effective tax rate.
1997 Compared to 1996
For the year ended December 31, 1997, revenue generated by Company offices
increased by 1%, or $1,602,000 over 1996. This increase is due to $15,662,000 in
incremental revenues from acquisitions, offset by a 12% same office revenue
decrease. The year to date 1997 incremental revenues from acquisitions include
the results of the entities detailed in Note C to the Consolidated Financial
Statements, as well as two additional months' revenue from the People Tech
acquisition consummated effective March 1, 1996. The same office revenue
decrease is due to a general slow down in both the North American and European
career transition markets associated with the continued strength of each
economy. Additionally, the Company experienced compression in the length of
career transition programs provided which negatively impacted office revenues by
lowering average fees by program.
The Company's consulting line of business reported total revenues of
$11,100,000, which represents a 16% increase over 1996. The Company is committed
to the growth of this line of business as evident in the two acquisitions and
the licensing agreement announced subsequent to December 31, 1997.
For the year ended December 31, 1997, Affiliate royalties decreased 24%, or
$1,085,000 from 1996. The decrease is 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
Consolidated Financial Statements). Revenue from the acquisition of the three
former Affiliates is reflected as Company office revenue subsequent to the
acquisition. On a same office basis, Affiliate royalties decreased 19% or
$816,000 from 1996.
25
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
For the year ended December 31, 1997, total Company office expenses, exclusive
of formal restructuring costs (see Note B to the Consolidated Financial
Statements), increased 12% or $11,757,000 over 1996. This increase is due to
approximately $12,959,000 in incremental costs from acquisitions, as well as
approximately $1,150,000 in additional office level charges for severance, lease
reductions and strategic planning during the fourth quarter of 1997. Exclusive
of costs from acquisitions, formal restructuring costs and the one time charges
during the fourth quarter, the Company's same office expenses decreased by
approximately $2,352,000 from 1996 due to general cost containment measures
implemented by the Company necessary to align the cost infrastructure with the
decreased same office revenues.
Aggregate Company office margins, exclusive of formal restructuring costs, were
12% and 21% for 1997 and 1996, respectively. The decrease in margins is
attributable primarily to the previously mentioned decline in career transition
revenues and program compression, partly offset by improved margins in the
consulting line of business and favorable results for the Company's Davidson &
Associates acquisition (see Note C to the Consolidated Financial Statements).
For the year ended December 31, 1997, general sales and administration expenses
decreased by 2% or $206,000 over 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 $633,000 for
1997. This decrease is offset by the fourth quarter 1997 costs associated with
the Company's updated strategic plan, amortization costs associated with the
Company's eleven acquisitions during 1997 (see Note C to the Consolidated
Financial Statements), and the additions of key management personnel during the
latter half of 1996 and throughout 1997. For the years ended December 31, 1997
and 1996, general sales and administration expenses as a percentage of total
revenues were both approximately 11%.
For the year ended December 31, 1997, the Company's effective tax rate was
approximately 45% versus 41% for 1996. The increase in the effective tax rate is
due primarily to the impact of an income tax charge of approximately $190,000
related to the expected results of pending tax audits (see Note F to the
Consolidated Financial Statements).
Capital Resources and Liquidity
At December 31, 1998 and 1997, the Company had cash and cash equivalents of
$20,800,000 and $7,583,000, respectively. The significant increase in cash and
cash equivalents is the result of higher net income, improved collection results
on accounts receivable and significantly lower cash payments made for
acquisitions and 1997 incentive compensation.
At December 31, 1998, with the increase in account receivable balance offset by
the increase in accrued incentive compensation resulting from a record revenue
year, the Company's working capital was $15,281,000, approximately the same
level as that of December 31, 1997.
26
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Net cash utilized by investing activities amounted to $14,071,000 and
$18,400,000 for 1998 and 1997, respectively. The Company continues to purchase
equipment and technology to meet the needs of its expanding operations and to
enhance its operating efficiency. During 1998, in addition to the completed
license agreement, the Company acquired two consulting firms for a combination
of cash and future defined incentive payments (see Note C to the Consolidated
Financial Statements).
During 1997, the $13,199,000 net cash paid for acquisitions on the Consolidated
Statement of Cash Flows is net of $1,368,000 of cash acquired from acquisitions.
Additionally, in connection with the Davidson & Associates acquisition (see Note
C to the Consolidated Financial Statements), the net cash paid for acquisitions
on the 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 provided by financing activities amounted to $480,000 and $5,847,000 in
1998 and 1997, respectively. The net cash provided by financing activities for
1998 was mostly the result of $5,900,000 in borrowings from the Company's
revolving credit facility in order to complete two acquisitions (see Note C to
the Consolidated Financial Statements) and proceeds from the issuance of stock.
Net cash provided by financing activities are partly offset by repayments on the
Company's borrowings, defined incentives for acquisitions made in previous years
and dividend payments made by Davidson & Associates, as well as the repurchase
of Common Stock (see Note J to the Consolidated Financial Statements).
In addition to cash flow provided by operations, the Company has borrowing
facilities to provide for increased working capital needs as well as to provide
for future acquisition opportunities. During 1996, the Company increased its
borrowing capacity to $40,000,000 from the previous $15,000,000 level through
the execution of its Credit Agreement with its two primary lenders (See Note E
to the Consolidated Financial Statements). The Company had approximately
$26,484,000 and $28,392,000 available under the Credit Agreement at December 31,
1998 and 1997, respectively. Subsequent to December 31, 1998, the Company
announced the acquisition of two European consulting firms and one European
career transition firm for a combination of cash and future defined incentive
payments (see Note M to the Consolidated Financial Statements). The Company
funded these acquisitions through borrowings under the Credit Agreement. The
Company plans to utilize the Credit Agreement in future periods 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 and maintain Company operations at current levels for
the foreseeable future. The Company will continue to consider 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 devote to further expansion.
27
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Year 2000
In 1998, the Company completed its evaluation of the potential impact of the
year 2000 and developed a project plan ("the Y2K Plan") to ensure the compliance
of its major operating systems by the year of 2000. As a service company, the
Company's operating systems principally include financial, operational and
communication applications. As part of its year 2000 project plan, the Company
is developing a replacement billing system which is progressing on schedule and
is expected to be completed prior to the middle of 1999. The Y2K Plan also
details the timetable to upgrade or replace non-compliant systems in the above
areas as well as to confirm year 2000 compliance with the Company's key vendors.
At this time, the Company is progressing in accordance with the timetable set
forth with respect to all aspects of the Y2K Plan and believes that the
potential risks to its business operations are not material. The Company
estimates that the total capital expenditures to be incurred under the Y2K Plan
will be in the range of $1,400,000 to $1,600,000 during 1999, of which
approximately $800,000 is attributable to normal costs for systems upgrades or
replacements that the Company normally would undertake in its ongoing
operations. Capitalized items will be depreciated over the useful life of the
asset. Non-capitalizable costs related to year 2000 issues are estimated to be
$300,000, which will be expensed as incurred. The Company 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-K, 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 hereafter identified, among others, as well as other risks and
uncertainties identified from time to time in the Company's reports filed with
the Securities and Exchange Commission. 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.
Among the factors that create risk and uncertainty are (i) government regulation
of the Company's Affiliates; (ii) the Company's ability to maintain good
relationships with its remaining Affiliates; (iii) competition within the highly
fragmented career transition and human resource consulting services industries;
(iv) the dependence on key management or operating personnel within the Company
or an Affiliate; (v) economic conditions on a local, regional, national and
international basis, which affect the demand for the Company's services; for
example, a stronger economy can lead to easier and more rapid job change and
reentry, which can reduce the demand for the Company's services or compress the
length of the services provided, thereby negatively impacting prices. Weaker
economic conditions can also lead to reluctance on outside companies' part to
incur the expenditure associated with the Company's services.
28
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
As discussed in Note E, the Company believes that its interest risk associated
with the Swap Agreements would have an immaterial impact on the financial
position, the results of operations and cashflow of the Company. Furthermore, as
discussed in Note A, the Company has international operations and does not
anticipate any material currency risk to its business or financial condition
resulting from currency fluctuations.
RIGHT MANAGEMENT CONSULTANTS, INC.
STATEMENT OF MANAGEMENT'S FINANCIAL RESPONSIBILITY
Management has prepared and is responsible for the integrity and objectivity of
the financial statements and related financial information contained in this
Annual Report. The financial statements are in conformity with generally
accepted accounting principles consistently applied and reflect management's
informed judgment and estimation as to the effect of events and transactions
that are accounted for or disclosed.
Management maintains a system of internal control. This system, which undergoes
periodic evaluation, is designed to provide reasonable assurance that assets are
safeguarded and records are adequate for the preparation of reliable financial
data. In determining the extent of the system of internal control, management
recognizes that the cost should not exceed the benefits derived. The evaluation
of these factors requires estimates and judgment by management.
Arthur Andersen LLP is engaged to render an opinion as to whether management's
financial statements present fairly Right Management Consultants, Inc.'s
financial position, results of operations and cash flows. The scope of their
engagement included a review of the internal control system to the extent deemed
necessary to render an opinion on these financial statements. The Report of
Independent Public Accountants is presented in the enclosed document.
The Audit Committee of the Board of Directors meets directly with the
Independent Public Accountants and management to ascertain whether they are
properly discharging their responsibilities.
Right Management Consultants, Inc.
/s/ G. Lee Bohs
------------------------------------------------
G. Lee Bohs
Executive Vice President,
Chief Financial Officer, Treasurer and Secretary
29
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
<S> <C>
Richard J. Pinola Chairman of the Board of Directors and Chief Executive
Officer
Frank P. Louchheim Founding Chairman and Director
Joseph T. Smith Vice Chairman of the Board of Directors
John J. Gavin President, Chief Operating Officer and Director
Larry A. Evans Executive Vice President and Director
Dr. Marti D. Smye Executive Vice President and Director
Frederick Davidson Chairman of Davidson & Associates and Director
DIRECTORS
John R. Bourbeau President of Right Associates(R) of the Great Lakes
Region, an Affiliate of the Company
Raymond B. Langton President and Chief Executive Officer of SKM Applied
Technology Partners
Rebecca J. Maddox President of Capital Rose, Inc.
Catherine Y. Selleck Business Consultant
OTHER EXECUTIVE OFFICERS
G. Lee Bohs Executive Vice President, Chief Financial Officer,
Treasurer and Secretary
Peter J. Doris Executive Vice President
James E. Greenway Executive Vice President
Erik A. Dithmer Executive Vice President - Northeast Group
Terry W. Szwec Executive Vice President - Canadian Group
Gilbert A. Wetzel Executive Vice President - Southeastern Group
Joan Strewler Executive Vice President - North Central Group
Timothy D. Dorman Executive Vice President - Western Group
Suzanne B. Levasseur Executive Vice President - International Group
Corporate Headquarters Independent Public Accountants
Right Management Consultants, Inc. Arthur Andersen LLP
1818 Market Street Philadelphia, Pennsylvania
33rd Floor
Philadelphia, Pennsylvania 19103
General Counsel
Fox, Rothschild, O'Brien & Frankel, LLP
Philadelphia, Pennsylvania
</TABLE>
30
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
<TABLE>
<CAPTION>
<S> <C>
Subsidiaries Right Associates Government Services, Inc.
Conviction Right France, SA
Right Human Resources, Inc.
Right Associates License, Inc.
Right License Holding, Inc.
Right D&A Pty. Ltd. (51% ownership)
Teams International, LLC (51% ownership)
Right Associates, Ltd.
Right Associates (Belgium), Inc.
Right Associates (France), Inc.
Right Associates & Co., SNC
R.M.C. & Co., SNC
Service Marks and Right Associates, THinc, Partners in Managing
Trade Marks Change, The Right Fit, Key Executive Service,
Zeroing-in-Process (Z.I.P.), Right Match, Zenith, People
Tech, Matrix, Compass, and the Globe Design are
registered Service Marks of Right Management
Consultants, Inc. and its wholly owned subsidiaries.
The Right Report is a registered Trademark of Right
Management Consultants, Inc.
Right Management Consultants is a Service Mark of
Right Management Consultants, Inc.
</TABLE>
31
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
Right Management Consultants, Inc.'s Common Stock trades on The NASDAQ Stock
Market under the symbol RMCI.
Common Stock Data
1998 High Low
---- ---- ---
First Quarter 13 1/8 11 1/4
Second Quarter 15 11 3/8
Third Quarter 15 11
Fourth Quarter 15 3/4 11 1/8
1997 High Low
---- ---- ---
First Quarter 23 1/2 8 3/4
Second Quarter 11 3/4 9 5/8
Third Quarter 11 1/2 9 1/4
Fourth Quarter 13 1/2 9 1/8
The above prices reflect interdealer prices, without retail markup, markdown or
commission and may not necessarily represent actual transactions.
As of March 18, 1999, there were 142 record holders and approximately 2,125
beneficial owners of the Company's Common Stock.
The Company has never paid any dividends on its Common Stock and currently
expects that all of its earnings will be retained and reinvested in the
Company's business.
Registrar and StockTrans, Inc.
Transfer Agent Ardmore, Pennsylvania
Availability of A copy of the Company's Annual Report
10-K Annual Report to the Securities and Exchange
Commission on Form 10-K may be obtained by
writing to:
Cindy Ng
Vice President and Controller
Right Management Consultants, Inc.
1818 Market Street
Thirty-third Floor
Philadelphia, PA 19103
32
<PAGE>
[LOGO]
RIGHT MANAGEMENT CONSULTANTS, INC.
----------------------------------
The Company's global operations are structured into seven geographic groups that
provide management, leadership and resources to more than 170 service locations
around the world.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
UNITED STATES Illinois New York Utah
Chicago Buffalo Salt Lake City
WORLD Northbrook Melville
HEADQUARTERS Oak Brook New York City Virginia
Philadelphia, PA Fairfax
Indiana North Carolina Richmond
Alabama Fort Wayne Charlotte Vienna
Birmingham Indianapolis Greensboro
Raleigh Washington
Alaska Iowa Seattle
Anchorage Des Moines Ohio
Cincinnati West Virginia
Arizona Kansas Cleveland Charleston
Phoenix Wichita Columbus
Tucson Dayton Wisconsin
Kentucky Toledo Madison
California Lexington Milwaukee
Cupertino Louisville Oklahoma
Irvine Oklahoma City PUERTO RICO
Los Angeles Louisiana Tulsa San Juan
Pasadena New Orleans
Sacramento Oregon CANADA
San Bernardino Maryland Portland Alberta
San Diego Hunt Valley Calgary
San Francisco Pennsylvania Edmonton
San Ramon Massachusetts Allentown
Woodland Hills Boston Erie British Columbia
Burlington Lancaster Vancouver
Colorado Malvern
Colorado Springs Michigan Philadelphia Manitoba
Denver Detroit Pittsburgh Winnipeg
Grand Rapids
Connecticut Kalamazoo Rhode Island New Brunswick
Hartford Lansing Providence Moncton
Stamford Midland St. John
South Carolina
Delaware Minnesota Greenville Nova Scotia
Wilmington Minneapolis Halifax
Tennessee
District of Columbia Missouri Knoxville Ontario
Washington Kansas City Memphis Kingston
Saint Louis Nashville London
Florida Mississauga
Boca Raton Nebraska Texas Ottawa
Fort Lauderdale Omaha Austin Richmond Hill
Jacksonville Dallas Toronto
Miami Nevada Fort Worth
Orlando Las Vegas Houston Quebec
Palm Beach San Antonio Montreal
Saint Petersburg New Jersey Quebec City
Tampa Parsippany
Princeton
Georgia Upper Saddle River
Atlanta
New Mexico
Albuquerque
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
AFRICA The Netherlands LATIN AMERICA
South Africa Amersfoort Argentina
Cape Town Amsterdam Buenos Aires
Durban Breda
East London Rotterdam Brazil
Johannesburg Rio de Janeiro
Port Elizabeth Norway Sao Paulo
Oslo
EUROPE Chile
Austria ASIA/PACIFIC REGION Santiago
Vienna Australia
Adelaide Colombia
Belgium Brisbane Bogota
Antwerp Canberra Cali
Brussels Melbourne Medellin
Perth
Denmark Sydney Mexico
Copenhagen Mexico City
China
England Hong Kong THE MIDDLE EAST
London Israel
Swindon Japan Tel Aviv
Fukuoka
Finland Nagoya
Helsinki Osaka
Tokyo
France
Paris Malaysia
Lyon Kuala Lumpur
Germany New Zealand
Berlin Auckland
Bonn Wellington
Dusseldorf
Frankfurt Singapore
Hamburg
Munich
Stuttgart
Ireland
Cork
Dublin
Galway
Limerick
Waterford
Italy
Bologna
Genoa
Milan
Rome
Teramo
Turin
</TABLE>
34
<PAGE>
SUBSIDIARIES OF THE COMPANY
1. Right Associates Government Services, Inc., a Virginia corporation
2. Conviction Right France, SA, a French corporation
3. Right Human Resources, Inc., a Canadian corporation
4. Right Associates License, Inc., a Delaware corporation
5. Right License Holding, Inc., a Delaware corporation
6. Right D&A Pty. Ltd. (51% ownership), an Australian corporation
7. Teams International, LLC (51% ownership), an Arizona limited liability
corporation
8. Right Associates, Ltd., a U.K. corporation
9. Right Associates (Belgium), Inc., a Delaware corporation
10. Right Associates (France), Inc., a Delaware corporation
11. Right Associates & Co., SNC, a Belgium corporation
12. R.M.C. & Co., SNC, a Belgium corporation
<PAGE>
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Right Management Consultants, Inc.:
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K into the Company's previously
filed Registration Statements No. 333-06211, File No. 333-07975, File No.
33-58698, File No. 33-62997, and File No. 33-62999.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
March 30, 1999
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 20,800
<SECURITIES> 0
<RECEIVABLES> 38,146
<ALLOWANCES> 1,066
<INVENTORY> 0
<CURRENT-ASSETS> 60,884
<PP&E> 38,069
<DEPRECIATION> 22,086
<TOTAL-ASSETS> 114,595
<CURRENT-LIABILITIES> 45,603
<BONDS> 0
0
0
<COMMON> 72
<OTHER-SE> 56,746
<TOTAL-LIABILITY-AND-EQUITY> 114,595
<SALES> 168,258
<TOTAL-REVENUES> 168,258
<CGS> 68,550
<TOTAL-COSTS> 136,079
<OTHER-EXPENSES> 18,378
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 729
<INCOME-PRETAX> 13,072
<INCOME-TAX> 5,882
<INCOME-CONTINUING> 6,607
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,607
<EPS-PRIMARY> 0.99
<EPS-DILUTED> 0.98
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