UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended May 31, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 0-32113
RESOURCES CONNECTION, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 33-0832424 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
695 Town Center Drive, Suite 600, Costa Mesa, California 92626
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (714) 430-6400
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, $0.01 par value
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. ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x No ¨
As of November 28, 2003, the approximate aggregate market value of common stock held by non-affiliates of the Registrant was $571,635,000 (based upon the closing price for shares of the Registrant’s common stock as reported by The Nasdaq National Market). As of August 5, 2004, there were approximately 23,320,698 shares of common stock, $.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant’s definitive Proxy Statement for the 2004 Annual Meeting of Stockholders, is incorporated by reference in Part III of this Form 10-K to the extent stated herein.
TABLE OF CONTENTS
In this Report on Form 10-K, “Resources Connection,” “company,” “we,” “us” and “our” refer to the business of Resources Connection, Inc. and its subsidiaries. References in this Report on Form 10-K to “fiscal,” “year” or “fiscal year” refer to our fiscal years that consist of the 52- or 53-week period ending on the Saturday in May closest to May 31.
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This Report on Form 10-K, including information incorporated herein by reference, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to expectations concerning matters that are not historical facts. Such forward-looking statements may be identified by words such as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology. These statements and all phases of our operations are subject to known and unknown risks, uncertainties and other factors, some of which are identified herein. Readers are cautioned not to place undue reliance on these forward-looking statements. Our actual results, levels of activity, performance or achievements and those of our industry may be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. We undertake no obligation to update the forward-looking statements in this filing.
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Overview
Resources Connection is an international professional services firm that provides experienced accounting and finance, risk management and internal audit, information technology, human resources and supply chain management professionals to clients on a project basis. We assist our clients with discrete projects requiring specialized expertise in accounting and finance, such as mergers and acquisitions due diligence, financial analyses (e.g., product costing and margin analyses), corporate reorganizations and tax-related projects. In addition, we provide human resources management services, such as compensation program design and implementation, information technology services, such as transitions of management information systems, and internal audit services, such as documenting internal controls. We also assist our clients with periodic needs such as budgeting and forecasting, audit preparation, public reporting and with their compliance efforts under the Sarbanes-Oxley Act of 2002 (“Sarbanes”).
We were founded in June 1996 by a team at Deloitte & Touche LLP (“Deloitte & Touche”), led by our current chief executive officer, Donald B. Murray, who was then a senior partner with Deloitte & Touche. Additional founding members include our current chief financial officer, Stephen J. Giusto, then also a Deloitte & Touche partner, and Karen M. Ferguson, the current regional managing director of our Northeast practice offices. Our founders created Resources Connection to capitalize on the increasing demand for high quality outsourced professional services. We operated as a division of Deloitte & Touche from our inception in June 1996 until January 1997. From January 1997 until April 1999, we operated as a subsidiary of Deloitte & Touche. In April 1999, we completed a management-led buyout. Prior to the management-led buyout, we were unable to provide certain accounting services to audit clients of Deloitte & Touche due to regulatory constraints applicable to us as a part of a Big Four accounting firm. Subsequent to the management-led buyout, we were able to expand the scope of services we provide to our clients. The Company is an independent company which is no longer affiliated with Deloitte & Touche.
Our business model combines the client service orientation and commitment to quality of a Big Four accounting firm with the entrepreneurial culture of an innovative, high-growth company. We are positioned to take advantage of what we believe are two converging trends in the outsourced professional services industry: increasing global demand for outsourced professional services by corporate clients and a supply of professionals interested in working in a non-traditional professional services firm. We believe our business model allows us to offer challenging yet flexible career opportunities, attract highly qualified, experienced professionals and, in turn, attract clients with challenging professional needs.
As of May 31, 2004, we employed approximately 2,100 professional service associates on assignment. Our associates have professional experience in a wide range of industries and functional areas. Based upon an internal, annual survey conducted in late calendar year 2003, to which approximately 47% of all then active associates responded, 49% of respondents were CPAs, 37% had advanced professional degrees, and the average years of professional experience was about 18. We offer our associates careers that combine the flexibility of project-based work with many of the advantages of working for a traditional professional services firm.
We have served a diverse client base of over 1,600 clients during fiscal 2004, ranging from large corporations to mid-sized companies to small entrepreneurial entities, in a broad range of industries. For example, our clients include approximately half of the Fortune 100, which accounted for approximately 11.1% and 15.2% of our revenues in fiscal 2004 and 2003, respectively, and all of the Big Four accounting firms. We have grown revenues from $71.4 million in fiscal 1999 to $328.3 million in fiscal 2004, a five-year compounded annual growth rate, or CAGR, of 35.7% and our income from operations over the same period has increased from
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$9.1 million to $40.5 million, a five-year CAGR of 34.8%. We have been profitable every year since our inception. As of May 31, 2004, we served our clients through 49 offices in the United States and 15 offices abroad. During fiscal 2004, we completed three transactions that increased our ability to serve clients throughout the world. In fiscal 2004, $265.3 million, $43.8 million and $19.2 million of our revenues were generated in the United States, in the Netherlands and in other countries, respectively, compared with fiscal 2003 revenue of $194.0 million and $8.0 million generated in the United States and other countries, respectively.
The three transactions completed in the first quarter of fiscal 2004 enhance our international presence as well as our ability to assist clients with the compliance efforts under Sarbanes. The largest of the three was the all cash acquisition for $29.8 million of the outstanding capital shares of Ernst & Young’s subsidiary, Executive Temporary Management BV (“ETM”) in the Netherlands on July 15, 2003. ETM, renamed Resources Connection.NL BV (“RC.NL”), is considered a market leader in the interim management industry in the Netherlands. We believe this acquisition provides a foundation in continental Europe and allows us to market to our current and prospective multinational clients seeking an alternative to Big Four firms, particularly in light of concerns about auditor independence. RC.NL has seven offices in the Netherlands and contracted with, or employed, over 240 professional service associates as of May 31, 2004.
In addition to the international expansion driven by the acquisition of RC.NL, we also acquired the operations of Deloitte Re:sources Pty Ltd. from Deloitte Touche Tohmatsu Australia in an all cash deal for $1 million on June 1, 2003. We originally launched the subsidiary, now renamed Resources Connection Australia Pty. Ltd., in 1998 on behalf of the Deloitte Touche Tohmatsu Australia firm. The acquisition presented the opportunity to expand our Asia Pacific presence.
Finally, in July 2003, we acquired for $2 million the company that developed policyIQTM, a web-based solution for internal controls documentation and content management. The purchase included upfront cash and provision for contingent payments based on sales volume. policyIQ is a tool that our clients can use to assist in complying with Sarbanes, among other initiatives.
We believe our distinctive culture is a valuable asset and is in large part due to our management team, which has extensive experience in the professional services industry. Most of our senior management and office managing directors have Big Four experience and an equity interest in our company. This team has created a culture of professionalism that we believe fosters in our associates a feeling of personal responsibility for, and pride in, client projects and enables us to deliver high-quality service to our clients.
Industry Background
Demand for Project Professional Services
Resources Connection’s services address a range of professional areas, with a majority of revenues derived from accounting and finance related services. The market for professional services is broad, and independent data on the size of the market is fragmented. For instance, a recent study published by Staffing Industry Analysts, Inc. estimates the size of the professional sector of the U.S. staffing market at $81.8 billion in 2004, but this is just a measure of the staffing component of professional services. Other components include, but are not limited to, CPA services and consulting services, each of which address multibillion dollar markets. Because of the corporate scandals documented in the media over the last few years, we believe the market for professional services is changing rapidly and that companies may be willing to choose alternatives to traditional professional service providers. We believe Resources Connection is a viable alternative to traditional accounting and consulting firms in numerous instances because, by using project professionals, companies can:
| • | strategically access specialized skills and expertise; |
| • | effectively supplement internal resources; |
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| • | increase labor flexibility; and |
| • | reduce their overall hiring and training costs. |
Typically, companies use a variety of alternatives to fill their project professional services needs. Companies outsource entire projects to consulting firms; this provides them access to the expertise of the firm but often entails significant cost and less management control of the project. Companies also supplement their internal resources with employees from the Big Four accounting firms; however, these arrangements are on an ad hoc basis and have been increasingly limited by regulatory concerns focused on external auditor independence. Companies use temporary employees from traditional and Internet-based staffing firms, who may be less experienced or less qualified than employees of professional services firms. Finally, some companies rely solely on their own employees who may lack the requisite time, experience or skills.
Supply of Project Professionals
Concurrent with the growth in demand for outsourced professional services, we believe, based on discussions with our associates, that the number of professionals seeking to work on a project basis has increased due to a desire for:
| • | more flexible hours and work arrangements, coupled with competitive wages and benefits and a professional culture; |
| • | challenging engagements that advance their careers, develop their skills and add to their experience base; and |
| • | a work environment that provides a diversity of, and more control over, client engagements. |
The employment alternatives historically available to professionals may fulfill some, but not all, of an individual’s career objectives. A professional working for a Big Four firm or a consulting firm may receive challenging assignments and training, but may encounter a career path with less flexible hours and limited control over work engagements. Alternatively, a professional who works as an independent contractor faces the ongoing task of sourcing assignments and significant administrative burdens.
Resources Connection Solution
We believe that Resources Connection is positioned to capitalize on the confluence of these industry trends. We believe, based on discussions with our clients, that Resources Connection provides clients seeking project professionals with high-quality services because we are able to combine all of the following:
| • | a relationship-oriented approach to assess our clients’ project needs; |
| • | highly qualified professionals with the requisite skills and experience; |
| • | competitive rates on an hourly, instead of a per project, basis; and |
| • | significant client control of their projects. |
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Resources Connection Strategy
Our Business Strategy
We are dedicated to providing highly qualified and experienced accounting and finance, risk management, human resources management, supply chain and information technology professionals to meet our clients’ project and interim professional services needs. Our objective is to be the leading provider of these project-based professional services. We have developed the following business strategies to achieve this objective:
| • | Maintain our distinctive culture. Our corporate culture is central to our business strategy and we believe has been a significant component of our success. Our senior management, virtually all of whom are Big Four alumni, has created a culture that combines the commitment to quality and the client service focus of a Big Four firm with the entrepreneurial energy of an innovative, high-growth company. We seek associates and management with talent, integrity, enthusiasm and loyalty (“TIEL”) to strengthen our team and support our ability to provide clients with high-quality services. We believe that our culture has been instrumental to our success in hiring and retaining highly qualified associates and, in turn, attracting clients. |
| • | Hire and retain highly qualified, experienced associates. We believe our highly qualified, experienced associates provide us with a distinct competitive advantage. Therefore, one of our priorities is to continue to attract and retain high-caliber associates. We believe we have been successful in attracting and retaining qualified professionals by providing challenging work assignments, competitive compensation and benefits, and continuing education and training opportunities, while offering flexible work schedules and more control over choosing client engagements. |
| • | Build consultative relationships with clients. We emphasize a relationship-oriented approach to business rather than a transaction-oriented or assignment-oriented approach. We believe the professional services experience of our management and associates enables us to understand the needs of our clients and to deliver an integrated, relationship-oriented approach to meeting their professional services needs. We regularly meet with our existing and prospective clients to understand their business issues and help them define their project needs. Once a project is defined, we identify associates with the appropriate skills and experience to meet the client’s needs. We believe that by establishing relationships with our clients to solve their professional services needs, we are more likely to generate new opportunities to serve them. The strength of our client relationships is demonstrated by the fact that all of our largest 50 clients in fiscal 2003 remained clients in fiscal 2004. |
| • | Build the Resources Connection brand. Our objective is to build Resources Connection’s reputation as the premier provider of project-based professional services. Our primary means of building our brand is by consistently providing high-quality, value-added services to our clients. We have also focused on building a significant referral network through our approximately 2,100 associates on assignment as of May 31, 2004 and over 450 management employees, most of whom have established relationships with a number of potential clients. In addition, we have ongoing national and local marketing efforts that reinforce the Resources Connection brand. These efforts include continuing our advertising campaign that commenced in the fourth quarter of fiscal 2002 in targeted business publications. |
Our Growth Strategy
Most of our growth since inception has been organic rather than through acquisition. We believe we have significant opportunity for continued strong organic growth in our core business and have completed a few strategic acquisitions. In both our core and acquired businesses, key elements of our growth strategy include:
| • | Expanding work from existing clients. A principal component of our strategy is to secure additional project work from the clients we have served. We believe, based on discussions with our clients, that the amount of revenue we currently receive from most of our clients represents a relatively small percentage |
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| of the amount they spend on professional services, and that, consistent with industry trends, they may continue to increase the amount they spend on these services. We believe that by continuing to deliver high-quality services and by further developing our relationships with our clients, we will capture a significantly larger share of our clients’ expenditures for professional services. |
| • | Growing our client base. We will continue to focus on attracting new clients. We plan to develop new client relationships primarily by leveraging the significant contact networks of our management and associates and through referrals from existing clients. In addition, we believe we will attract new clients by building our brand name and reputation and through our national and local marketing efforts. During this past year, we have seen more revenue growth within larger, existing clients, though we also experienced the addition of new middle market clients. The total number of clients served in 2004 was over 1,600 versus 1,200 in 2003. We anticipate that our growth efforts this year will continue to focus on identifying strategic target accounts that tend to be large companies. |
| • | Expanding geographically. We plan to expand geographically to meet the demand for project professional services. We believe that there are significant opportunities to grow our business internationally and, consequently, we intend to continue to expand our international presence on a strategic and opportunistic basis. We also expect to add to our existing domestic office network with a few new offices strategically located to meet the needs of our existing clients and to create additional new client opportunities. |
| • | Providing additional professional services lines. We will continue to explore, and consider entry into, new professional services lines. Since fiscal 1999, we have diversified our professional services lines by entering into the areas of human resources management, information technology, internal audit and supply chain management. Our considerations when evaluating new professional services lines include growth potential, profitability, cross-marketing opportunities and competition. |
Associates
We believe that an important component of our success has been our highly qualified and experienced associates. As of May 31, 2004, we employed approximately 2,100 associates on assignment. Our associates have professional experience in a wide range of industries and functional areas. We provide our associates with challenging work assignments, competitive compensation and benefits, and continuing education and training opportunities, while offering flexible work schedules and more control over choosing client engagements.
Our associates in the United States are primarily employees of Resources Connection. We typically pay each associate an hourly rate, overtime premiums as required by law, and offer benefits, including paid vacation and holidays; referral bonus programs; group medical, dental and vision programs, each with an approximate 50% contribution by the associate; a basic term life insurance program; a matching 401(k) retirement plan; and professional development and career training. Typically, an associate must work a threshold number of hours to be eligible for all of the benefits. We also have a long-term incentive plan for our associates, that provides the opportunity to earn an annual cash bonus vesting over time. In addition, we offer our associates the ability to participate in the Company’s Employee Stock Purchase Plan. We intend to maintain competitive compensation and benefit programs.
Internationally, our associates are a mix between employees and independent contractors. Such arrangements are more common due to the laws and customs of the international markets we serve.
Clients
We provide our services to a diverse client base in a broad range of industries. In fiscal 2004, we served over 1,600 clients. Our revenues are not concentrated with any particular client or clients, or within any particular industry. In fiscal 2004, no single client accounted for more than 6% of our revenue and our 10 largest clients accounted for approximately 25% of our revenues.
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The clients listed below represent the geographic and industry diversity of our client base in fiscal 2004.
| American Honda Financial Corporation |
El Paso Corporation | |
| Blue Shield of California |
Exelon Corporation | |
| C&H Sugar |
Great West Life and Annuity Life Insurance Company | |
| CB Richard Ellis |
PepsiCo Inc. | |
| Conoco Phillips |
Siemens Corporation | |
| Credit Suisse First Boston Corporation |
Southwest Airlines | |
| Dolby Laboratories, Inc |
Toshiba America Electronic Components, Inc. |
Services
Our current professional services capabilities include accounting and finance, risk management and internal audit, information technology, human resources and supply chain management. In fiscal 2004, our revenue from providing accounting and finance services accounted for a majority of our revenue. Our engagements are project-based and often last three months or longer.
Accounting and Finance
Our accounting and finance services include:
Special Projects: Our accounting and finance associates work on a variety of special projects including:
| • | financial analyses, such as product costing and margin analyses; |
| • | tax-related projects, such as tax compliance and analysis of tax liabilities resulting from acquisitions; and |
| • | resolving complex accounting problems, such as large out-of-balance accounts and unreconciled balances. |
Sample Engagement: We provided five associates over a 12-month period to assist a large non-profit health plan in creating a uniform chart of accounts in preparation for an ERP financial system implementation. Our associates were responsible for:
| • | acting as a liaison between functional and technical user groups; |
| • | managing project plans for the respective areas affected by the chart of accounts changes including all financial systems, human resources groups and supply chain departments; and |
| • | developing the change management plan. |
MD&A - Divestitures and Carve Outs: Our accounting and finance associates assist with the following functions for clients involved in divestitures and carve outs:
| • | preparation of public filings related to the transactions; |
| • | preparation for carve out audits; and |
| • | providing subject matter experts to perform technical research of complex accounting transactions, implementations and interpretations of pronouncements of the Financial Accounting Standards Board (“FASB”). |
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Sample Engagement: We have provided more than 20 associates to assist a large energy client with the divestiture of a business unit and the sale of other significant assets. The project included three project teams each led by a seasoned project manager assigned to oversee the delivery of our services and provide subject matter expertise. Our associates were responsible for:
| • | preparing financial statements in accordance with generally accepted accounting principles (“GAAP”) and related footnotes for carve out businesses; |
| • | performing net book value calculations for assets sold and subsequent reconciliation and retirement of sold assets; |
| • | preparing Securities and Exchange Commission (“SEC”) and other regulatory filings associated with the transactions; |
| • | performing research of technical GAAP accounting issues related to the transaction; |
| • | project management of the Sarbanes implementation for the divested business unit; and |
| • | pre and post divestiture integration balance sheet cleanup. |
ERP Implementations and Conversions: Our accounting and finance associates work on a variety of projects that arise when a company implements or converts to a new system including:
| • | project management; |
| • | assisting with technical support; |
| • | performing ERP implementations; |
| • | developing and executing training programs; |
| • | change management; and |
| • | maintaining daily operations during the implementation. |
Sample Engagement: We provided 11 associates over a two-year period to assist a leading producer, marketer and distributor of refined sugar products in the western United States in a SAP implementation. The system conversion impacted accounting and finance, human resources, customer service, planning, warehouse management, production and operations. Our associates were responsible for:
| • | developing, documenting and evaluating business requirements; |
| • | leading the vendor selection process, including vendor negotiations and management; |
| • | project management of the ERP implementation; |
| • | providing technical support and guidance to the implementation team; |
| • | assisting with change management, leadership and communication; |
| • | performing pre and post conversion tests; |
| • | designing training programs and managing the training function; |
| • | management of system optimization; and |
| • | maintaining daily accounting and finance operations during the implementation and conversion process in order to minimize disruption to the organization. |
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Human Resources Management
Our human resources management professional services group was formed in June 1999. Our human resources management services include:
| • | supporting day-to-day human resources (“HR”) operations; |
| • | selecting, implementing and optimizing HR Technology; |
| • | assisting with optimizing a company’s workforce; and |
| • | providing interim human resources management. |
Sample Engagement: A client that needed to restate its financials identified that it was necessary to reorganize and optimize its financial and accounting team. Our HR associates assisted by:
| • | helping to create a new, centralized organizational chart; |
| • | writing job descriptions; |
| • | integrating the new jobs with the company’s compensation structure; |
| • | mapping the employees to the new roles; and |
| • | designing and implementing programs to train the employees or to help them exit the company. |
Sample Engagement: As a client neared the end of an update of its internal control documentation, it identified the need to communicate the changes to the diverse workforce. Our HR associates assisted by:
| • | creating a change management and communication plan; |
| • | facilitating seminars; and |
| • | developing a feedback mechanism to collect responses to the training. |
As that company began to implement its shared services organization, we provided a training expert to help with team development and change management.
Information Technology
Our information technology professional services group was formed in June 1998. Our information management services include:
| • | financial system/enterprise resource planning implementation and post implementation optimization; |
| • | human resource information system (“HRIS”) implementation and integration; and |
| • | supporting analytical systems such as consolidation and budgeting and planning tools. |
Sample Engagement: We provided four associates over a six-month period to redesign the reporting process and re-implement an enterprise-wide software application for a diversified international manufacturing corporation. The challenge included managing the complexities of balancing United States financial accounting reporting, international financial accounting reporting and internal operational reporting while creating as little disruption as possible to the users. Our team included a project manager, a technical expert and report writing specialists. Our associates were responsible for:
| • | creating new reports to satisfy statutory and operational requirements and streamlining and rationalizing 400 existing reports; |
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| • | re-implementing a chart of accounts to support reporting requirements of diverse operational segments; |
| • | executing a communication plan to educate and create buy-in with the users; and |
| • | completing other special projects such as legal entity rationalization. |
Sample Engagement: A highly decentralized banking client was challenged to shorten its close process and improve the accuracy of its financial reporting and needed assistance in selecting a system to meet these objectives. Resources’ associates:
| • | assisted with creating system selection criteria which would encompass Sarbanes section 404 and 409 requirements; |
| • | managed the system selection process; |
| • | provided project management through the implementation phase; and |
| • | assisted with follow up documentation to ensure ongoing compliance with federal regulations. |
Resources Audit Solutions (RAS): Internal Audit, Internal Controls and Sarbanes-Oxley Services
Our RAS subsidiary was formed in June 2002 to assist our clients with a variety of governance-related projects, including:
| • | assisting internal audit departments with the execution of audit plans, assessing risk management practices and special projects; |
| • | assisting clients with the development of a process designed to more effectively and efficiently distribute, monitor and manage financial reporting–related policies utilizing policyIQ, our proprietary web-based solution for enterprise-wide policy development and management. policyIQ is a tool that clients can use to assist with policy management and compliance programs, including regulations associated with Sarbanes; and |
| • | assisting clients around the world with compliance efforts related to Sarbanes, including: project management support; documenting existing business processes, practices, workflows and identifying internal controls; testing internal controls; remediation of deficiencies, including changes to policies and procedures; and planning and implementation of an ongoing Sarbanes compliance process for subsequent years. |
Sample Engagement: We provided 42 associates, covering eight countries over a two-month period, to assist a global conglomerate with the execution of its global internal audit plan. Our associates were responsible for:
| • | working under the direction of the corporate internal audit function; and |
| • | executing audit testing of selected business units around the world. |
Sample Engagement: We are supporting an initiative to automate the financial reporting policy distribution and management process for a Fortune 500 conglomerate, implementing policyIQ.
Sample Engagement: Serving as one of two external service providers (the other is a Big Four firm), we provided 30 associates to assist a Fortune 500 financial services company with their Sarbanes compliance efforts. Our associates worked with eight business units in ten global locations to assist client teams with various elements of Sarbanes compliance, including:
| • | documenting existing business processes, practices, and workflows; |
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| • | testing selected internal controls within those processes; |
| • | performing selected elements of project management within the client’s project management office; |
| • | executing remediation efforts; and |
| • | planning for the following year compliance documentation and testing. |
Supply Chain Management
We purchased The Procurement Centre in October 2002. The practice was renamed Resources Connection Supply Chain Management in fiscal year 2004. Our supply chain management services include:
| • | providing qualified supply chain professionals with a variety of skill-sets and backgrounds including: working as sourcing team members, leading strategic sourcing efforts, negotiating contracts, serving as commodity/category experts, developing strategies and performing tactical purchasing; |
| • | performing evaluation and execution of processes, procedures, policies and organizational design in the supply chain management and procurement functions of large corporations; |
| • | offering a variety of supply chain management solutions, including strategic sourcing, inventory rationalization, supplier diversity assistance, ERP implementations and procurement card programs; and |
| • | presenting a variety of onsite training and education seminars to keep customers updated on the latest trends in purchasing and supply chain management. |
Sample Engagement: For a global chemical manufacturer, our associate reviewed the current organization, supply chain processes, tools and methods utilized by each of six chemical plants located in North America. Our associate produced the following:
| • | plant comparison matrix; |
| • | listing of major issues and risks; |
| • | “as-is” process maps by plant; |
| • | proposed high-level “to-be” process maps; and |
| • | proposed organization structure, metrics, reports and transition plan. |
Sample Engagement: Over the past year, we have provided associates who have assisted a Fortune 500 transportation company by:
| • | serving as subject matter experts for strategic sourcing initiatives in the freight and print spend areas; and |
| • | leading strategic sourcing initiatives for information technology and other critical spend areas. |
Sample Engagement: Over a six-month period, we provided an entire curriculum of supply chain management training and education courses for a Fortune 500 retailer, training approximately 70 client professionals. Courses included:
| • | contract writing; |
| • | strategic planning; |
| • | analytical methods and strategic sourcing; |
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| • | advanced purchasing and supply chain management techniques; and |
| • | negotiation skills. |
Operations
We generally provide our professional services to clients at a local level, with the oversight and consultation of our corporate management team, located in our corporate service center, and our regional managing directors. The managing director, client service director(s) and recruiting director(s) in each office are responsible for initiating client relationships, identifying associates specifically skilled to perform client projects, ensuring client and associate satisfaction throughout engagements and maintaining client relationships post-engagement. Throughout this process, the corporate management team and regional managing directors are available to consult with the managing director with respect to client services.
Our offices are operated in a decentralized, entrepreneurial manner. The managing directors of our offices are given significant autonomy in the daily operations of their respective offices, and with respect to such offices, are responsible for overall guidance and supervision, budgeting and forecasting, sales and marketing, pricing and hiring. We believe that a substantial portion of the buying decisions made by our clients are made on a local or regional basis and that our offices most often compete with other professional services providers on a local or regional basis. Because our managing directors are in the best position to understand the local and regional outsourced professional services market and because clients often prefer local relationships, we believe that a decentralized operating environment maximizes operating performance and contributes to employee and client satisfaction.
We believe that our ability to successfully deliver professional services to clients is dependent on our managing directors working together as a collegial and collaborative team, at times working jointly on client projects. To build a sense of team effort and increase camaraderie among our managing directors, we have an incentive program for our office management that awards annual bonuses based on both the performance of the company and the performance of the director’s particular office. In addition, most members of our office management own equity in our company. We also have a managing director program whereby new managing directors attend a regularly scheduled series of seminars led by experienced managing directors. This program allows the veteran managing directors to share their success stories, foster the culture of the Company with the new managing directors and review specific client and associate development programs. We believe these team-based practices enable us to better serve clients who prefer a centrally organized service approach.
From our corporate headquarters in Costa Mesa, California, we provide our domestic and some international offices with centralized administrative, human resources, marketing, finance and legal support. Our corporate service center handles billing, accounts payable and accounts receivable, and administers human resources including employee compensation and benefits. In addition, we have a corporate networked information technology platform with centralized financial reporting capabilities and a front office client management system. These centralized functions minimize the administrative burdens on our office management and allow them to spend more time focused on client and associate development. Our practice in the Netherlands provides its own administrative, marketing, finance and legal support and some of our other international practices subcontract these services.
Business Development
Our business development initiatives are composed of:
| • | local sales initiatives focused on existing clients and target companies; |
| • | brand marketing activities; and |
| • | national and local direct mail programs. |
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Our business development efforts are driven by the networking and sales efforts of our management. The managing directors and client service directors in our offices develop a list of potential clients and key existing clients. In addition, the directors are assisted by management professionals focused on business development efforts on a national basis. These business development professionals, teamed with the managing directors and client service group, are responsible for initiating and fostering relationships with the senior management of our targeted client companies. These local efforts are supplemented with national marketing assistance. We believe that these efforts have been effective in generating incremental revenues from existing clients and developing new client relationships.
Our brand marketing initiatives help develop Resources Connection’s image in the markets we serve. Our brand is reinforced by our professionally designed website, brochures and pamphlets, direct mail, public relations efforts and advertising materials. We believe that our branding initiatives coupled with our high-quality client service differentiate us from our competitors and establish Resources Connection as a credible and reputable professional services firm.
Our national marketing group develops our direct mail campaigns to focus on our targeted client and associate populations. These campaigns are intended to support our branding, sales and marketing, and associate hiring initiatives.
Competition
We operate in a competitive, fragmented market and compete for clients and associates with a variety of organizations that offer similar services. Our principal competitors include:
| • | consulting firms; |