FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
--------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission File Number 0-15539
RIGHT MANAGEMENT CONSULTANTS, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2153729
---------------------------------- -------------
(State of other jurisdiction of (IRS Employer
incorporation of organization) Identification No.)
1818 Market Street, Philadelphia, Pennsylvania 19103
---------------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 988-1588
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
--------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of April 30, 2000:
Common Stock, $0.01 par value 6,050,125
----------------------------- ---------------
Class Number of Shares
<PAGE>
Right Management Consultants, Inc.
Condensed Consolidated Balance Sheets
(Dollars in Thousands Except Share Data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 5,851 $ 11,187
Accounts receivable, trade, net of allowance for doubtful accounts
of $1,740 and $1,467 in 2000 and 1999, respectively 37,439 34,042
Royalties and fees receivable from Affiliates 3,359 2,831
Other current assets 4,588 4,392
--------- ---------
Total current assets 51,237 52,452
Property and equipment, net of accumulated depreciation of $31,408
and $28,487 in 2000 and 1999, respectively 17,739 18,488
Intangible assets, net of accumulated amortization of $12,552 and
$11,524 in 2000 and 1999, respectively 52,637 43,730
Equity investment in joint venture 2,088 2,130
Other noncurrent assets 3,049 3,792
--------- ---------
Total Assets $ 126,750 $ 120,592
========= =========
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of long-term debt and other obligations $ 5,992 $ 6,008
Accounts and commissions payable 10,116 9,591
Accrued incentive compensation and benefits 4,368 12,341
Other accrued expenses 6,883 7,337
Deferred income 7,488 8,064
--------- ---------
Total current liabilities 34,847 43,341
--------- ---------
Long-term debt and other obligations 29,812 18,279
--------- ---------
Deferred compensation and retirement benefits 4,318 1,991
--------- ---------
Minority interest in subsidiaries -- 999
--------- ---------
Shareholders' Equity:
Preferred stock, no par value; 1,000,000 shares authorized; no
shares issued or outstanding -- --
Common stock, $.01 par value; 20,000,000 shares authorized;
7,526,435 and 7,512,193 shares issued in 2000 and 1999, respectively 75 75
Additional paid-in capital 19,475 19,340
Retained earnings 55,928 53,598
Accumulated other comprehensive income (1,612) (938)
--------- ---------
73,866 72,075
Less treasury stock, at cost, 1,494,552 shares (16,093) (16,093)
--------- ---------
Total shareholders' equity 57,773 55,982
--------- ---------
Total Liabilities and Shareholders' Equity $ 126,750 $ 120,592
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
1
<PAGE>
Right Management Consultants, Inc.
Condensed Consolidated Statements of Income
(Dollars and Shares in Thousands Except Earnings per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
-------- --------
<S> <C> <C>
Revenue:
Company office revenue $ 46,500 $ 48,647
Affiliate royalties 1,032 1,292
-------- --------
Total revenue 47,532 49,939
-------- --------
Expenses:
Consultants' compensation 18,355 19,684
Office sales and consulting support 3,007 3,622
Office depreciation 1,466 1,160
Office administration 14,425 15,011
General sales and administration 3,898 4,814
Depreciation and amortization 1,615 1,122
-------- --------
Total expenses 42,766 45,413
-------- --------
Income from operations 4,766 4,526
Interest expense, net 445 45
-------- --------
Income before income taxes 4,321 4,481
Provision for income taxes 1,850 1,946
Minority interest in net income of subsidiary -- 54
Equity in earnings of
unconsolidated joint venture (141) --
-------- --------
Net income $ 2,330 $ 2,481
======== ========
Basic earnings per share $ 0.39 $ 0.37
======== ========
Diluted earnings per share $ 0.39 $ 0.36
======== ========
Basic weighted average number of shares outstanding 6,028 6,711
======== ========
Diluted weighted average number of shares outstanding 6,038 6,810
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE>
Right Management Consultants, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
-------- --------
<S> <C> <C>
Operating Activities:
Net income $ 2,330 $ 2,481
Adjustments to reconcile net income to net cash
provided by (utilized for) operating activities:
Depreciation and amortization 3,081 2,282
Deferred income taxes (10) --
Minority interest in net income of subsidiary -- 54
Provision for doubtful accounts 241 300
Equity in earnings of unconsolidated joint venture 141 --
Other non-cash items (84) 258
Changes in operating accounts:
(Increase) in operating assets (2,929) (3,451)
(Decrease) in operating liabilities (8,388) (8,225)
-------- --------
Net cash utilized for operating activities (5,618) (6,301)
-------- --------
Investing Activities:
Purchase of property and equipment (1,299) (2,912)
Net cash paid for acquisitions (9,341) (4,684)
Increase in cash surrender value of
company-owned life insurance (467) --
Capital contribution to joint venture (99) --
-------- --------
Net cash utilized for investing activities (11,206) (7,596)
-------- --------
Financing Activities:
Borrowings 12,923 5,529
Payment of long-term debt and other obligations (1,570) (1,300)
Repurchase of Common Stock -- (605)
Proceeds from stock issuances 135 360
-------- --------
Net cash provided by financing activities 11,488 3,984
-------- --------
Decrease in cash and cash equivalents (5,336) (9,913)
Cash and cash equivalents, beginning of period 11,187 20,800
-------- --------
Cash and cash equivalents, end of period $ 5,851 $ 10,887
======== ========
Supplemental Disclosures of Cash Flow Information
Cash paid for:
Interest $ 461 $ 229
======== ========
Income taxes $ 1,014 $ 668
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
- ---------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnote disclosures necessary for a fair presentation of consolidated financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000. For further information, refer
to the financial statements and footnotes thereto included in Right Management
Consultants Inc.'s Annual Report on Form 10-K for the year ended December 31,
1999.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of Right Management
Consultants, Inc. (the "Company") and its wholly-owned subsidiaries. All
significant intercompany transactions and balances have been eliminated in
consolidation. The Company's investment in a minority-owned subsidiary, in which
it owns a 20% interest, is accounted for using the equity method.
Comprehensive Income
- --------------------
Comprehensive income is defined as net income plus revenues, expenses, gains and
losses that, under generally accepted accounting principles, are excluded from
net income. The Company's comprehensive income includes net income and
unrealized gains and losses from foreign currency translation adjustments. 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 has been provided for on these foreign currency translation
adjustments. Total comprehensive income for the three months ended March 31,
2000 and 1999 was $1,656,000 and $2,437,000, respectively.
New Accounting Pronouncement
- ----------------------------
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, 2000. 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
4
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
value of the underlying exposures being hedged. The Company will adopt SFAS No.
133 effective January 1, 2001. Management believes that the adoption of SFAS No.
133 will not have a material impact on the Company's financial position or
results of operations.
Also, in December 1999 the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements". SAB No. 101 expresses the views of the SEC staff in applying
generally accepted accounting principles to revenue recognition for certain
transactions. The Company is in the process of analyzing the impact of SAB No.
101 on its Consolidated Financial Statements and related disclosures.
NOTE B - ACQUISITIONS AND INVESTMENTS
Effective January 1, 2000, the Company acquired the remaining 36% minority
interest in its Austral-Asian joint venture, Davidson & Associates. Also
effective January 1, 2000, the Company acquired the outstanding stock of Career
Development Group, Inc., a career transition firm based in Appleton, Wisconsin,
for a combination of cash and future defined contingent payments. The purchase
price for these acquisitions totaled approximately $6,036,000, which exceeds the
fair value of the assets acquired by $4,992,000. The purchase price allocations
for these acquisitions are based upon information available at this time and are
subject to change. These acquisitions have been accounted for using the purchase
method. In connection with the acquisition of the remaining minority interest in
Davidson & Associates, the Company borrowed $4,900,000 under its Credit
Agreement.
In addition, as of January 1, 2000, the Company purchased the remaining 49%
minority interest in its U.S. joint venture, TEAMS, Inc., a technology-based
assessment firm located in Tempe, Arizona.
On a year-to-date basis through March 31, 2000, the Company paid approximately
$2,995,000 in earnout payments related to acquisitions made in prior years. The
total net cash paid for acquisitions on the cash flow statement includes an
installment payment and miscellaneous adjustments made for prior acquisitions.
The pro-forma impact of these acquisitions on results of operations, if any one
of the acquisitions had been consummated at the beginning of each period
presented, is immaterial to the consolidated financial statements as a whole,
and has been omitted.
5
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE C - DEBT AND OTHER OBLIGATIONS
As of March 31, 2000, total borrowings under the Company's Credit Agreement
amounted to $34,900,000. This includes the $4,900,000 borrowing bearing interest
at a three month LIBOR rate for the acquisition of the remaining minority
interest in Davidson & Associates (See Note B). This also includes a floating
rate borrowing totaling $14,900,000 of which $8,000,000 was borrowed during the
first quarter 2000 to fund incentives and earnout payments. The interest rate on
this floating rate borrowing approximated 7.17% at March 31, 2000.
As of March 31, 2000, the Company had entered into five fixed interest rate swap
agreements ("Swap Agreements") with an aggregate notional principal of
$15,100,000 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 7.10% at March 31, 2000. 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 6.83% and its lenders are paying the Company
interest at a weighted average variable rate of 6.78% at March 31, 2000. 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 March 31, 2000, 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.
NOTE D - EARNINGS PER SHARE
The Company utilizes SFAS No. 128, "Earnings per Share" to calculate its
earnings per share ("EPS"). The calculation of EPS under SFAS No. 128 for March
31, 2000 and 1999 are detailed below.
For the three months
ended March 31, 2000
--------------------
Income Shares EPS
------ ------ ---
Basic EPS:
Net income $2,330,000 6,028,000 $ 0.39
========
Impact of options --- 10,000
---------- ----------
Diluted EPS:
Net income $2,330,000 6,038,000 $ 0.39
========== ========== ========
6
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE D - EARNINGS PER SHARE (Continued)
For the three months
ended March 31, 1999
--------------------
Income Shares EPS
------ ------ ---
Basic EPS:
Net income $2,481,000 6,711,000 $ 0.37
========
Impact of options -- 99,000
---------- ----------
Diluted EPS:
Net income $2,481,000 6,810,000 $ 0.36
========== ========== ========
For the three months ended March 31, 2000, outstanding options to purchase
1,089,812 shares of Company Common Shares at option exercise prices ranging from
$12.00 to $24.33 per share were excluded from the computation of diluted EPS, as
the options' exercise price was greater than the average market price of the
Common Shares.
NOTE E - SEGMENTS
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," provides 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 (including career management) consulting
("consulting"). The Company operates these lines of business across the
geographic areas of the United States, Canada, Europe and Austral-Asia. These
operations offer different services and require different marketing strategies.
Career transition offers support for organizations separating employees,
including assistance in handling the initial difficulties of termination,
identifying continuing career goals and options, and aiding in developing skills
for the search for a new job. Consulting offers help to companies with building
competencies, organizational change, leadership development, employee
communications and talent management. With more than 200 service locations
worldwide, the Company manages operations by geographic segments to enhance
global growth and establish major accounts with global clients. The Company
primarily delivers its services to mid-size and large companies, with no
concentration in specific companies or industries.
7
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE E - SEGMENTS (Continued)
Summarized operations of each of the Company's geographic segments in the
aggregate as of March 31, 2000 and 1999 and for the three months then ended are
as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
March 31, 2000 United States Canada Europe Austral-Asia Consolidated
- -------------- ------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Identifiable assets $ 92,817 $ 12,350 $ 15,009 $ 6,574 $126,750
======== ======== ======== ======== ========
March 31, 1999
- --------------
Identifiable assets 85,850 6,563 16,977 5,780 115,170
======== ======== ======== ======== ========
For the three months ended
March 31, 2000
- --------------
Revenue 34,717 4,349 4,612 3,854 47,532
======== ======== ======== ======== ========
Operating income (1) 2,506 1,278 168 814 4,766
======== ======== ======== ======== ========
Depreciation and amortization 2,663 95 111 212 3,081
======== ======== ======== ======== ========
Capital expenditures 963 77 224 35 1,299
======== ======== ======== ======== ========
For the three months ended
March 31, 1999
- --------------
Revenue 38,162 2,592 5,725 3,460 49,939
======== ======== ======== ======== ========
Operating income (1) 3,401 268 635 222 4,526
======== ======== ======== ======== ========
Depreciation and amortization 1,860 144 129 149 2,282
======== ======== ======== ======== ========
Capital expenditures 2,274 67 78 493 2,912
======== ======== ======== ======== ========
<FN>
(1) The operating income reported for the United States segment includes total
general sales and administration and depreciation and amortization expenses
("G & A expenses") reported on the Condensed Consolidated Statements of
Income.
</FN>
</TABLE>
Revenues and expenses of the Company's lines of business for the Company
offices, excluding the total general sales and administration and depreciation
and amortization expenses ("G & A 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 the three months ended March 31, 2000 and 1999 are as
follows:
8
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE E - SEGMENTS (Continued)
For the three months
ended March 31,
---------------
Career
Transition Consulting Consolidated
---------- ---------- ------------
2000
- ----
Company office
revenue $39,905 $ 6,595 $46,500
======= ======= =======
Company office
operating income $ 8,894 $ 353 $ 9,247
======= ======= =======
1999
- ----
Company office
revenue $41,712 $ 6,935 $48,647
======= ======= =======
Company office
operating income $ 8,691 $ 479 $ 9,170
======= ======= =======
NOTE F - SUBSEQUENT EVENTS
Effective April 1, 2000, the Company acquired certain assets of Career
Directions, Inc. ("Career Directions"), a firm specializing in career and talent
management consulting services, for a combination of cash and future defined
contingent payments. Based in Chicago, Illinois, Career Directions operates both
nationally and internationally. The cash paid for this acquisition approximated
$400,000 and will be accounted for using the purchase method.
In addition, subsequent to March 31, 2000, the Company's Board of Directors (the
"Board") expanded the stock repurchase program, authorizing the Company to
repurchase an additional 10% of its then outstanding Common Shares, or 605,013
shares. Under the stock repurchase program, which was initiated in March 1997,
Company management is authorized to pursue the repurchase program in open market
transactions from time-to-time, depending upon market conditions and other
factors. Shares repurchased are held as treasury shares and are available to the
Company for any use in various benefit plans and, when authorized by the Board,
for other general corporate purposes.
As of April 30, 2000, the Company has repurchased a total of 1,241,600 Common
Shares at an aggregate purchase price of approximately $15,576,000, or $12.55
per share, under this stock repurchase program, in addition to the Company's
repurchase of 252,952 shares prior to the institution of this program.
9
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
For the three months ended March 31, 2000, revenue generated by Company offices
decreased by 4% or $2,147,000 from the corresponding quarter in 1999. This
decrease is due to a same office revenue decrease of 9% or $4,185,000, in
comparison to record revenues in the same period last year, partly offset by
$2,038,000 in incremental revenues from acquisitions consummated after April 1,
1999.
For the three months ended March 31, 2000, revenue generated by Company offices
within the career transition line of business decreased by 4% or $1,807,000.
This career transition revenue decrease is due to a same office revenue decrease
of 8% or $3,426,000, partly offset by $1,619,000 in incremental revenues from
acquisitions. The same office revenue decrease within the career transition line
of business was primarily experienced in the United States and in Europe.
For the three months ended March 31, 2000, revenue generated by Company offices
within the consulting line of business decreased by 5% or $340,000. This
decrease in consulting revenue is due to a same office decrease of 11% or
$759,000, partly offset by $419,000 in incremental revenues from acquisitions.
The same office revenue decrease within the consulting line of business was
primarily attributable to TEAMS, Inc. and operations in Europe.
For the three months ended March 31, 2000, Affiliate royalties decreased 20% or
$260,000 from the corresponding period in 1999, reflecting a lower volume of
business experienced by the Company's Affiliates during the first quarter 2000.
For the three months ended March 31, 2000, total Company office expenses
decreased 6% or $2,224,000 from the corresponding quarter in 1999. This decrease
is due to a decrease in incentives, salaries for delivery personnel, career
center staffing, and rent, partly offset by $1,794,000 in incremental costs from
acquisitions consummated subsequent to the first quarter 1999.
Year-to-date aggregate Company office margins were 20% and 19% for the first
quarter 2000 and 1999, respectively. This increase in margin is attributable to
the previously mentioned decrease in incentive compensation expense and a
decrease of $2,168,000 in other same office field costs.
For the three months ended March 31, 2000, G & A expenses decreased by 7% or
$423,000 from the first quarter 1999. This decrease is due primarily to a
decrease in incentives, currency translation expense and administrative salaries
and payroll taxes, offset by an increase in charges for amortization and
consulting services. G & A expenses as a percentage of total revenue was
approximately 12% for both the three-month periods ended March 31, 2000 and
1999.
10
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONTINUED
The recorded loss from the equity in earnings from Way Station, Inc., the
Company's joint venture in Japan of which it owns a 20% interest, is primarily
due to office expansion costs resulting from Way Station's strategic position to
take advantage of the growing demand for its services.
The Company's effective tax rates for the three-month periods ended March 31,
2000 and 1999 were both approximately 43%.
Capital Resources and Liquidity
- -------------------------------
At March 31, 2000 and December 31, 1999, the Company had cash and cash
equivalents of $5,851,000 and $11,187,000, respectively. At March 31, 2000 and
December 31, 1999, the Company had working capital of $16,390,000 and
$9,111,000, respectively.
Net cash utilized for operating activities amounted to $5,618,000 and $6,301,000
for the three months ended March 31, 2000 and 1999, respectively. The cash
outflow during the first quarter in both 2000 and 1999 is primarily a result of
incentive compensation payments related to the Company exceeding revenue and
operating income targets for 1999 and 1998, respectively.
Net cash utilized for investing activities amounted to $11,206,000 and
$7,596,000 for the three months ended March 31, 2000 and 1999, respectively.
This change in cash is primarily the result of the Company acquiring the
remaining equity interest in Davidson & Associates, as well as payments for
earnouts related to acquisitions made in prior years (See Note B to the
Condensed Consolidated Financial Statements). Additionally, the Company
continues to purchase equipment and technology to meet the needs of its
expanding operations and to enhance its operating efficiency.
Net cash provided by financing activities amounted to $11,488,000 and $3,984,000
for the three months ended March 31, 2000 and 1999, respectively. The net cash
inflow for 2000 was primarily the result of the $12,900,000 borrowing made to
complete the acquisition of the remaining equity interest in Davidson &
Associates and to fund the payments of incentives and earnouts (See Note B to
the Condensed Consolidated Financial Statements), partly offset by repayments on
the Company's borrowings.
Under its revolving credit facility, the Company has a $40,000,000 borrowing
capacity. The Company had approximately $6,125,000 available under the revolving
credit facility at April 30, 2000. The Company anticipates expanding this credit
facility in the second quarter 2000 by an additional $20,000,000 to an aggregate
of $60,000,000 borrowing capacity. The Company plans to utilize the credit
facility in the financing of future acquisitions as they arise and for other
general corporate purposes.
The Company anticipates that its cash and working capital will be sufficient to
service its existing debt, outstanding commitments and to maintain Company
operations at current levels for the foreseeable future. The Company will
continue to consider acquisitions and other
11
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONTINUED
expansion opportunities as they arise, although the economics, strategic
implications and other circumstances justifying the expansion will be key
factors in determining the amount and type of resources the Company will commit.
Impact of Recently Issued Accounting Standards
- ----------------------------------------------
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, 2000. 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, 2001. Management believes that the adoption of SFAS No.
133 will not have a material impact on the Company's financial position or
results of operations.
Also, in December 1999 the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements". SAB No. 101 expresses the views
of the SEC staff in applying generally accepted accounting principles to revenue
recognition for certain transactions. The Company is in the process of analyzing
the impact of SAB No. 101 on its Consolidated Financial Statements and related
disclosures.
Forward Looking Statements
- --------------------------
Statements included in this Report on Form 10-Q, including within this
Management's Discussion and Analysis of Financial Condition and Results of
Operations which are not historical in nature, are intended to be, and hereby
are identified as "forward looking statements" for purposes of the safe harbor
provided by the Private Securities Litigation Reform Act of 1995. The Company
cautions readers that forward looking statements including without limitation
those relating to the Company's future business prospects, revenues, working
capital, liquidity, capital needs, interest costs and income, and discussions
concerning the planned increase in the Company's borrowing capacity are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those indicated in the forward looking statements due to several
important factors identified from time to time in the Company's reports filed
with the SEC. The Company hereby incorporates by reference the discussion
concerning forward looking statements set forth in the Management's Discussion
and Analysis of Financial Condition and Results of Operations section of the
Company's Annual Report on Form 10-K for the year ended December 31, 1999 filed
with the SEC, as well as the risk factors identified within the same Annual
Report on Form 10-K. Readers of this Report are cautioned not to place undue
reliance upon these forward looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to publicly release any revisions
to these forward looking statements or reflect events or circumstances after the
date hereof.
12
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONTINUED
Quantitative and Qualitative Disclosures About Market Risks
- -----------------------------------------------------------
The Company believes that its interest risk associated with the Swap Agreements
(See Note C to the Condensed Consolidated Financial Statements) would not have a
material impact on the financial position, the results of operations and cash
flows of the Company. Furthermore, the Company has international operations and
does not anticipate any material currency risk to its business or financial
condition resulting from currency fluctuations.
13
<PAGE>
PART II - OTHER INFORMATION
Items 1, 2, 3, 4 and 5 were not applicable in the three months ended March 31,
2000.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits:
27 - Financial Data Schedule *
b. No reports on Form 8-K were filed during the period for which
this Report is filed.
* - Filed in electronic form only.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RIGHT MANAGEMENT CONSULTANTS, INC.
BY:/S/ RICHARD J. PINOLA May 15, 2000
------------------------ ------------
Richard J. Pinola Date
Chairman of the Board and Chief Executive Officer
BY :/S/ CHARLES J. MALLON May 15, 2000
------------------------ ------------
Charles J. Mallon Date
Chief Financial Officer and
Principal Accounting Officer
14
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
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0
0
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