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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
- ---------------------------------- -------------------
(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.
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.
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.
2
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."
3
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.
4
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.
5
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.
6
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:
7
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.
8
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.
9
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.
10
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
11
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.
12
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
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
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
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
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
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
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
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
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
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
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
Right Management Consultants, Inc.
Schedule II - Valuation and Qualifying Accounts and Reserves
For the Years 1998, 1997 and 1996
Additions
-----------------------------
Balance at Charged to Charged to Balance at
Beginning of Costs and Other End of
Description Year Expenses Accounts Deductions Year
- ----------- ---- -------- -------- ---------- ----
1998:
- -----
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
=========== ==========
(1) Reduction due to the utilization and expiration of certain foreign net
operating losses.
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.