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FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
--------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission File Number 0-15539
RIGHT MANAGEMENT CONSULTANTS, INC.
----------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2153729
--------------------------------------- ------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1818 Market Street, Philadelphia, Pennsylvania 19103
---------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 988-1588
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
--------------- ---------------
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No
--------------- ---------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of May 1, 2003:
Common Stock, $0.01 par value 22,707,281
----------------------------- --------------------
Class Number of Shares
Right Management Consultants, Inc.
Condensed Consolidated Balance Sheets
(Dollars in Thousands Except Share Data)
(Unaudited)
March 31, December 31,
2003 2002
---- ----
Assets
Current Assets:
Cash and cash equivalents $ 23,600 $ 33,886
Accounts receivable, trade, net of allowance for doubtful accounts
of $3,308 and $3,283 in 2003 and 2002, respectively 85,149 86,972
Royalties and fees receivable from Affiliates 5,826 6,523
Prepaid expenses and other current assets 11,425 9,235
Deferred income taxes 1,720 1,692
------------------- --------------------
Total Current Assets 127,720 138,308
Property and equipment, net of accumulated depreciation of $58,774 37,961 38,988
and $55,082 in 2003 and 2002, respectively
Goodwill, net of accumulated amortization of $22,675 and
$22,277 in 2003 and 2002, respectively 229,424 225,401
Amortizable intangibles, net of accumulated amortization of $6,732
and $5,308 in 2003 and 2002, respectively 22,044 21,733
Deferred income taxes 3,014 2,444
Other 17,607 16,796
------------------- --------------------
Total Assets $ 437,770 $ 443,670
=================== ====================
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of long-term debt and other obligations $ 21,556 $ 22,152
Accounts payable 30,886 37,593
Fees payable to Affiliates 3,880 3,649
Accrued incentive compensation and benefits 4,905 33,768
Other accrued expenses 31,737 30,915
Deferred revenue 65,903 72,757
------------------- --------------------
Total Current Liabilities 158,867 200,834
Long-term debt and other obligations 119,538 96,349
Deferred compensation and other long term liabilities 13,427 10,127
Minority interest in subsidiaries 4,231 5,272
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, no par value; 1,000,000 shares authorized; no
shares issued - -
Common stock, $.01 par value; 45,000,000 shares authorized;
27,073,787 and 27,002,858 shares issued and outstanding
in 2003 and 2002, respectively 270 270
Additional paid-in capital 32,231 31,907
Retained earnings 118,347 107,938
Accumulated other comprehensive income 4,764 4,878
------------------- --------------------
155,612 144,993
Less treasury stock, at cost, 4,375,134 shares
in 2003 and 2002 (13,905) (13,905)
------------------- --------------------
Total Shareholders' Equity 141,707 131,088
------------------- --------------------
Total Liabilities and Shareholders' Equity $ 437,770 $ 443,670
=================== ====================
The accompanying notes are an integral part of these consolidated
financial statements.
2
Right Management Consultants, Inc.
Condensed Consolidated Statements of Income
(Dollars and Shares in Thousands Except Earnings per Share Data)
(Unaudited)
Three Months Ended March 31,
2003 2002
----- ----
Revenue:
Company office revenue $ 119,917 $ 95,339
Affiliate royalties 1,547 1,924
------------------ ------------------
Revenue before reimbursed expenses 121,464 97,263
Reimbursed expenses 1,995 1,076
------------------ ------------------
Total revenue 123,459 98,339
------------------ ------------------
Expenses:
Consultants' compensation 47,456 38,058
Office administration 31,546 22,225
Office sales and consulting support 11,223 7,467
Office depreciation 2,537 1,799
General sales and administration 8,435 10,661
Depreciation and amortization 2,560 946
------------------ ------------------
Total expenses 103,757 81,156
------------------ ------------------
Income from operations 19,702 17,183
Net interest expense 1,274 567
------------------ ------------------
Income before income taxes 18,428 16,616
Provision for income taxes 7,923 7,150
Minority interest in net income of subsidiaries, net of tax 96 254
------------------ ------------------
Net income $ 10,409 $ 9,212
================== ==================
Basic earnings per share $ 0.46 $ 0.41
================== ==================
Diluted earnings per share $ 0.43 $ 0.38
================== ==================
Basic weighted average shares outstanding 22,656 22,487
================== ==================
Diluted weighted average shares outstanding 24,196 24,281
================== ==================
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
Right Management Consultants, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
Three Months Ended March 31,
2003 2002
----- ----
Operating Activities:
Net income $ 10,409 $ 9,212
Adjustments to reconcile net income to net cash
utilized in operating activities:
Depreciation and amortization 5,062 2,745
Deferred income taxes (620) 108
Minority interest in net income of subsidiaries 96 254
Provision for doubtful accounts 353 1,030
Stock option compensation - 16
Other non-cash items 258 709
Loss on sale of business 977 -
Changes in operating accounts, net of acquired businesses:
Accounts receivable, trade and from Affiliates 3,166 7,557
Prepaid expenses and other assets 204 1,151
Accounts payable (6,938) 3,869
Accrued incentive compensation, benefits and other expenses (28,537) (30,094)
Fees payable to Affiliates and other liabilities 42 419
Deferred revenue (7,444) (2,749)
----------------- -------------------
Net cash utilized in operating activities (22,972) (5,773)
----------------- -------------------
Investing Activities:
Purchase of property and equipment (3,360) (3,807)
Acquisitions, net of cash acquired (6,197) (105,586)
Proceeds from sale of business 35 -
Increase in cash surrender value of
company-owned life insurance (545) (588)
---------------- ------------------
Net cash utilized in investing activities (10,067) (109,981)
---------------- ------------------
Financing Activities:
Borrowings under credit agreements 28,000 135,432
Payment of long-term debt and other obligations (4,592) (41,170)
Principal payments under capital lease obligations (320) -
Termination value of swap agreements - 358
Debt commitment fees - (2,970)
Cash dividends declared and paid to minority interests (409) -
Proceeds from stock issuances 213 714
---------------- ------------------
Net cash provided by financing activities 22,892 92,364
---------------- ------------------
Effect of exchange rate changes on cash and
cash equivalents (139) (123)
Decrease in cash and cash equivalents (10,286) (23,513)
Cash and cash equivalents, beginning of period 33,886 48,655
----------------- -------------------
Cash and cash equivalents, end of period $ 23,600 $ 25,142
================= ===================
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
- ---------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of
the information and footnote disclosures necessary for a fair presentation of
consolidated financial position, results of operations and cash flows in
conformity with accounting principles generally accepted in the United States.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 2003 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2003. For further information, refer to the financial statements and footnotes
thereto included in Right Management Consultants, Inc.'s Annual Report on Form
10-K for the year ended December 31, 2002.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of Right Management
Consultants, Inc. and its wholly-owned and majority-owned subsidiaries (the
"Company"). All significant intercompany transactions and balances have been
eliminated in consolidation.
Revenue Recognition
- -------------------
The Company recognizes revenue under the provisions of Staff Accounting Bulletin
("SAB") No. 101, "Revenue Recognition in Financial Statements". SAB No. 101
expresses the views of the Securities and Exchange Commission in applying
accounting principles generally accepted in the United States to revenue
recognition for certain transactions. Under SAB No. 101, the Company recognizes
career transition revenue from individual programs on a straight-line basis over
the average length of time for candidates to find jobs based on statistically
valid data for the specific type of program. If statistically valid data is not
available, then the Company recognizes career transition revenue on a
straight-line basis over the nominal life of the agreements. For group programs
and large projects within the career transition line of business, the Company
will defer and recognize revenue over the period within which the contracts are
completed. The difference between the amount billed for career transition
services and the amount recognized as revenue is carried on the Company's
balance sheet as deferred revenue.
For the Company's organizational consulting line of business, SAB No. 101 has
minimal impact on its revenue recognition policy. The Company generally
recognizes consulting contract revenue upon the performance of its obligations
under consulting service contracts.
5
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock-based Compensation Arrangements
- -------------------------------------
At March 31, 2003, the Company has two active stock based compensation plans:
the 1993 Stock Incentive Plan and the Directors' Stock Option Plan. The Company
accounts for these plans under the recognition and measurement principles of
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued
to Employees" and related interpretations. Under APB No. 25, no compensation
expense is recognized for stock option grants because the exercise price of the
Company's stock options equals the market price of the underlying stock on the
date of the grant. Had compensation cost for these plans been determined in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation", the Company's net income and earnings
per share ("EPS") for 2003 and 2002 would have been reduced to the following
pro-forma amounts:
Three Months Ended March 31,
----------------------------
2003 2002
---- ----
Net income - as reported $10,409,000 $9,212,000
Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of tax ($851,000) ($604,000)
---------- ----------
Net income - pro-forma $9,558,000 $8,608,000
Basic EPS - as reported $0.46 $0.41
Basic EPS - pro-forma $0.42 $0.38
Diluted EPS - as reported $0.43 $0.38
Diluted EPS - pro-forma $0.40 $0.35
The fair value of the options was estimated at the date of grant using a
Black-Scholes option pricing model. Grants in 2003 and 2002 were assumed to have
no dividend yield. The weighted-average assumptions used for grants in 2003 were
a risk-free interest rate of 3.61%, an expected volatility of 64.7%, and an
expected option life of 8 years. The weighted-average assumptions used for
grants in 2002 were a risk-free interest rate of 4.14%, an expected volatility
of 65.0% and an expected option life of 7 years.
New Accounting Pronouncements
- -----------------------------
In November 2002, the FASB issued EITF Issue No. 00-21, "Accounting for Revenue
Arrangements with Multiple Deliverables." This issue addresses how to account
for arrangements that may involve the delivery or performance of multiple
products, services and/or right to use assets. The final consensus of this issue
is applicable to agreements entered into in fiscal periods beginning after June
15, 2003. The Company is currently evaluating the impact that EITF Issue No.
00-21 may have on its financial position, cash flows and results of operations.
6
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reclassifications
- -----------------
Certain amounts have been reclassified in the prior year's Condensed
Consolidated Financial Statements and Notes thereto to conform with the current
year presentation.
NOTE B - ACCUMULATED OTHER COMPREHENSIVE INCOME AND COMPREHENSIVE INCOME
The components of accumulated other comprehensive income (loss) are as follows
(dollars in thousands):
Currency Derivative and
Translation Hedging Instruments
Adjustments Losses Total
----------- ------------- -----
Balance at December 31, 2002 $ 5,935 $(1,057) $ 4,878
Change in fair value of derivatives
and hedging instruments,
net of tax benefit -- (112) (112)
Currency translation adjustment (2) -- (2)
------------ ------------ ----------
Balance at March 31, 2003 $ 5,933 $(1,169) $ 4,764
============ ============ ===========
The earnings associated with the Company's investment in its foreign
subsidiaries are considered to be permanently invested and no provision for U.S.
federal and state income taxes has been made on these foreign currency
translation adjustments. Total comprehensive income, including the components of
accumulated other comprehensive income, for the three months ended March 31,
2003 and 2002 was $10,295,000 and $9,583,000, respectively.
NOTE C - ACQUISITIONS
Effective January 1, 2003, the Company acquired for cash and future defined
contingent payments, the remaining 49% interest in its Spanish subsidiary, Right
Glenoit SL, for a total ownership of 100% of this subsidiary. The purchase
price, including transaction costs, totaled $1,203,000.
Also effective January 1, 2003, the Company acquired certain assets of Aston
Promentor, an organizational consulting firm in Denmark. The purchase price,
including transaction costs, totaled $2,110,000.
These acquisitions were accounted for using the purchase method. The purchase
price allocations for these acquisitions are based upon information available at
this time and are subject to change.
7
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE C - ACQUISITIONS (Continued)
Also during the first quarter of 2003, the Company acquired certain products and
methodologies, recorded by the Company as amortizable intangible assets, with a
value of $650,000 from The Atlanta Consulting Group ("TACG"). The Company
previously had sold and delivered these products and methodologies under a
license agreement with TACG. The Company paid $250,000 in upfront cash for these
assets and the Company will pay an aggregate of $450,000 in two separate future
purchase price installments.
For the three months ended March 31, 2003, earnout payments and purchase price
adjustments totaling $2,234,000 were recorded to goodwill.
The following table represents the assets acquired and liabilities assumed to
arrive at net cash paid for the acquisitions discussed above, as well as for
earnout payments and other adjustments related to prior acquisitions for the
three months ended March 31, 2003 and 2002.
(Dollars in Thousands)
Three Months Ended March 31,
----------------------------
2003 2002
---- ----
Assets acquired:
- ----------------
Accounts receivable -- $19,550
Prepaid expenses and other assets -- 5,739
Fixed assets 88 3,645
Non-amortizable goodwill 4,758 96,896
Amortizable intangibles 1,138 23,970
Additional equity acquired in Spain (2003) and Japan (2002) 531 1,143
Other non-current assets 28 --
------------- ----------
6,543 150,943
Less liabilities acquired:
- --------------------------
Current portion of long-term debt -- (143)
Accounts payable and accrued expenses (346) (18,094)
Deferred revenue -- (23,436)
Long-term debt -- (192)
Deferred compensation and other long-term liabilities -- (480)
------------- ----------
(346) (42,345)
Less minority shareholder interests in Japan -- (3,012)
------------- ----------
Cash paid for acquisitions, net of cash acquired $6,197 $105,586
============= ==========
As of March 31, 2003, the Company estimates that the aggregate amount of future
contingent earnout payments related to completed acquisitions and payable over
the next three years, will range between $5,000,000 and $7,000,000.
The unaudited pro-forma results of operations for the three months ended March
31, 2003 and 2002, reflecting the combined results of the Company and
acquisitions made subsequent to January 1, 2002, as if the acquisitions had been
consummated at the beginning of each period presented, are as follows:
8
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE C - ACQUISITIONS (Continued)
(Dollars and Shares in Thousands Except Earnings Per Share Data)
Three Months Ended March 31,
2003 2002
---- ----
(Unaudited)
Revenue $ 123,459 $ 127,875
========= =========
Income before income taxes $ 18,428 $ 17,533
========= ========
Net income $ 10,409 $ 9,824
========= ========
Diluted earnings per share $ 0.43 $ 0.40
========= ========
Diluted weighted average
number of shares outstanding 24,196 24,281
========= ========
NOTE D - SALE OF BUSINESS
Effective January 31, 2003, the Company sold its executive search business in
Norway for a purchase price of approximately $50,000. The pre-tax loss on this
sale, included in general sales and administration on the Statement of Income
for the three months ended March 31, 2003, was $663,000 and includes the
write-off of intangible assets recorded at the time the Company acquired the
executive search business and a provision for severance to terminated employees.
The Company does not anticipate making any future material provisions related to
the sale of this business.
For the first quarter of 2003 and 2002, the executive search operations in
Norway generated revenue of $120,000 and $1,022,000, respectively, and a net
loss of $134,000 and $340,000, respectively.
NOTE E - ACCRUED INCENTIVE COMPENSATION AND BENEFITS
The decrease in accrued incentive compensation and benefits on the Condensed
Consolidated Balance Sheet at March 31, 2003 was a result of incentive payments
made during the first quarter of 2003 that related to 2002 and the Company
exceeding its earnings targets in 2002. The Company borrowed $28,000,000 under
its credit agreement to help fund these incentive payments (see Note F).
9
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE F - DEBT AND OTHER OBLIGATIONS
On March 22, 2002, the Company entered into a Credit Agreement with a syndicate
of banks including Wachovia Securities as Administrative Agent (the "Credit
Agreement"). The Credit Agreement provides for a maximum $180,000,000 of total
borrowings, consisting of a revolving loan commitment of $90,000,000 (the
"Revolving Loan"), and a term loan of $90,000,000 (the "Term Loan").
The Revolving Loan and Term Loan are together referred to herein as the "Loans".
The Loans require the Company to meet certain financial and non-financial
covenants as defined in the Credit Agreement which was filed as exhibit 10.26 in
the Company's Form 10-K for the fiscal year ended December 31, 2001.
Initial proceeds from the Loans of $130,000,000 together with Company cash were
used to finance the acquisition of Coutts Consulting Group ("Coutts") in March
2002 and to repay the Company's outstanding indebtedness of $41,038,000 under
its previous credit agreement that was terminated. The Company may borrow, repay
and re-borrow funds during the five-year term of the Revolving Loan, subject to
the financial covenants of the Credit Agreement. During the first quarter of
2003, the Company borrowed $28,000,000 in order to fund incentive payments (See
Note E). As of March 31, 2003, approximately $2,827,000 remained available under
the Revolving Loan. Future borrowings under the Revolving Loan will be used to
finance working capital and other general corporate purposes, including
permitted acquisitions. The Term Loan provides for equal, mandatory principal
repayments made quarterly over its five-year term, and provides for additional
voluntary prepayments during its term as defined in the Credit Agreement. During
the first quarter of 2003, the Company made a mandatory principal payment of
$4,500,000 under the Term Loan. The principal balance outstanding under the
Loans as of March 31, 2003 was $137,000,000, of which $18,000,000 was included
in the current portion of long term debt based on the mandatory principal
payments due within one year.
The Loans are secured by a pledge of substantially all of the tangible and
intangible assets of the Company, including the pledge of 100% of the capital
stock of each of the Company's domestic subsidiaries and generally 65% of the
voting equity of the Company's significant foreign subsidiaries. Under the
Credit Agreement, future acquisitions are subject to certain limits; any
acquisition in excess of these limits requires the banks' advance approval. As
of March 31, 2003, the remaining annual limit through the end of 2003 for
permitted acquisitions was approximately $27,900,000.
10
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE F - DEBT AND OTHER OBLIGATIONS (Continued)
Interest on the Loans is variable and will be determined by London interbank
offered rates (LIBOR) plus a margin ranging from 1.50% to 2.25% based on the
relationship of funded debt to the Company's earnings before interest, taxes,
depreciation and amortization ("EBITDA"), as defined in the Credit Agreement.
Alternatively, the interest on the Loans will be determined by the greater of
prime or the Federal Funds Effective Rate plus one half of 1% plus a margin of
up to 0.75% based on the relationship of funded debt to the Company's EBITDA, as
defined in the Credit Agreement. The weighted average interest rate on the Loans
for the first quarter of 2003 was 3.45%.
As of March 31, 2003, $2,717,000 in loan notes to certain sellers of Coutts was
included in the current portion of long-term debt on the Company's Condensed
Consolidated Balance Sheet. The notes are payable in seven years and bear
interest at the rate of 4% per annum. Provisions of these loan notes allow the
note-holders to redeem the notes after six months of the issuance date of the
notes. During the first quarter of 2003, Andrew McRae, Executive Vice President
for the European Group, called on a portion of his loan note and the Company
paid Mr. McRae approximately $77,000, including interest and taxes. In order to
secure these loan notes, letters of credit were issued to each of the
note-holders. As of March 31, 2003, the notional amount on these letters of
credit total $2,953,000 and expire in March 2004.
In addition, as of March 31, 2003, the Company had a letter of credit with the
Bank of Scotland in the amount of $2,000,000 in connection with the Company's
use of routine bank accounts at the bank, and to secure the bank against
potential overdrafts in these accounts. This letter of credit expired in April
2003.
The Company has two fixed interest rate swap agreements, each designated as a
cash flow derivative, for purposes of hedging against interest rate fluctuations
on the outstanding amount under its Term Loan. The Company accounts for these
swap agreements under SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," and SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities - an amendment of FASB Statement No.
133." The Company recognizes derivatives on the balance sheet at fair value.
Each swap agreement has a notional principal amount at March 31, 2003 of
$36,000,000, and scheduled reductions in notional principal of $2,250,000 each
quarter over the life of the swap. These agreements terminate on March 22, 2007.
Under the terms of the swap agreements, the Company pays interest at a fixed
rate of 2.815% on one swap and 2.57% on the other swap, and its lenders pay the
Company interest at 90-day LIBOR, that was 1.29% as of March 31, 2003.
11
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE G - EARNINGS PER SHARE
The Company utilizes SFAS No. 128, "Earnings per Share" to calculate its
earnings per share ("EPS"). The calculation of EPS under SFAS No. 128 for March
31, 2003 and 2002 is as follows:
For the three months For the three months
ended March 31, 2003 ended March 31, 2002
-------------------- --------------------
Income Shares EPS Income Shares EPS
------ ------ --- ------ ------ ---
Basic EPS:
Net income $10,409,000 22,656,000 $0.46 $9,212,000 22,487,000 $0.41
===== =====
Impact of options --- 1,540,000 --- 1,794,000
----------- --------- ---------- ---------
Diluted EPS:
Net income $10,409,000 24,196,000 $0.43 $9,212,000 24,281,000 $0.38
=========== ========== ===== ========== ========== =====
For the three months ended March 31, 2003, outstanding options to purchase
1,158,130 of Company Common Shares at option exercise prices ranging from $12.94
of $17.60 per share were excluded from the computation of diluted EPS, as the
exercise price of these options was greater than the average market price of the
Common Shares. For the three months ended March 31, 2002, outstanding options to
purchase 505,604 of Company Common Shares at option exercise prices ranging from
$14.63 of $14.65 per share were excluded from the computation of diluted EPS, as
the exercise price of these options was greater than the average market price of
the Common Shares.
As of March 31, 2003 and 2002, the Company's majority-owned Japanese subsidiary
has stock options and warrants outstanding with certain minority shareholders
and employees that are convertible into shares of this subsidiary's company
stock. The dilutive impact of these stock options and warrants is immaterial to
earnings per share for the three months ended March 31, 2003 and 2002.
NOTE H- SEGMENTS
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," provides standards for reporting information about operating
segments and related disclosures about products and services, geographic areas
and major customers. Operating segments are defined as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance.
The Company's operations are segregated into two lines of business: career
transition and organizational consulting. The Company operates these lines of
business across the geographic areas of the United States, Canada, Europe,
Asia-Pacific, Japan and Brazil. These
12
operations offer different services and require different marketing strategies.
Career transition offers support for organizations separating employees,
including assistance in handling the initial difficulties of termination,
identifying continuing career goals and options, and aiding in developing skills
for
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE H - SEGMENTS (Continued)
the search for a new job. Consulting specializes in helping companies with
organizational performance, leadership development and talent management. With
more than 300 service locations worldwide, the Company manages operations by
geographic areas to enhance global growth and establish major accounts with
global clients. The Company primarily delivers its services to mid-size and
large companies, with no concentration in specific companies or industries.
Summarized operations of each of the Company's geographic areas as of March 31,
2003 and 2002 and for the three months then ended are presented below.
(Dollars in Thousands)
Asia-
March 31, 2003 U.S. Canada Europe Pacific Japan Brazil Consolidated
- -------------- ---- ------ ------ ------- ----- ------ ------------
Identifiable assets $ 114,961 $ 23,884 $241,296 $16,173 $39,263 $ 2,193 $437,770
--------- -------- -------- ------- ------- ------- --------
March 31, 2002
- --------------
Identifiable assets 127,995 17,313 190,081 13,419 33,384 2,376 384,568
--------- -------- -------- ------- ------- ------- --------
For the three
months ended
March 31, 2003
- --------------
Revenue 53,154 6,601 44,934 4,631 13,554 585 123,459
--------- -------- -------- ------- ------- ------- --------
Operating
income (loss) (1) 5,460 2,117 8,787 934 2,544 (140) 19,702
--------- -------- -------- ------- ------- ------- --------
Depreciation 1,974 270 800 106 289 20 3,459
--------- -------- -------- ------- ------- ------- --------
Amortization (2) 378 15 1,125 -- 110 10 1,638
--------- -------- -------- ------- ------- ------- --------
Capital expenditures (3) 1,133 433 1,638 107 31 18 3,360
--------- -------- -------- ------- ------- ------- --------
(1) The operating income reported for the U.S. segment includes Affiliate
royalties and general sales and administration expenses and corporate
depreciation and amortization expenses ("G&A Expenses") reported on the
Condensed Consolidated Statements of Income. The Affiliate royalties total
$1,547,000 and $1,924,000 for the three months ended March 31, 2003 and
2002, respectively, and G&A Expenses aggregate $10,995,000 and $11,607,000
for the three months ended March 31, 2003 and 2002, respectively. Affiliate
royalties relate exclusively to U.S. franchises. G&A Expenses are not
specific to one geographic location, but relate to the consolidated
operations of the Company.
13
(2) Total amortization on a Consolidated basis is included in the U.S. segment
only for the Operating income (loss) reported above.
(3) The capital expenditures reported exclude fixed assets acquired from
acquisitions.
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE H - SEGMENTS (Continued)
For the three
months ended Asia-
March 31, 2002 U.S. Canada Europe Pacific Japan Brazil Consolidated
- -------------- ---- ------ ------ ------- ----- ------ ------------
Revenue $64,656 $ 6,183 $15,863 $ 4,769 $ 5,810 $ 1,058 $98,339
------- ------- ------- ------- ------- ------- -------
Operating
income (1) 11,116 2,382 1,565 1,214 476 430 17,183
------- ------- ------- ------- ------- ------- -------
Depreciation 1,813 78 289 184 137 8 2,509
------- ------- ------- ------- ------- ------- -------
Amortization (2) 110 2 51 -- 63 10 236
------- ------- ------- ------- ------- ------- -------
Capital expenditures (3) 2,045 183 1,209 148 104 118 3,807
------- ------- ------- ------- ------- ------- -------
(1) The operating income reported for the U.S. segment includes Affiliate
royalties and general sales and administration expenses and corporate
depreciation and amortization expenses ("G&A Expenses") reported on the
Condensed Consolidated Statements of Income. The Affiliate royalties total
$1,547,000 and $1,924,000 for the three months ended March 31, 2003 and
2002, respectively, and G&A Expenses aggregate $10,995,000 and $11,607,000
for the three months ended March 31, 2003 and 2002, respectively. Affiliate
royalties relate exclusively to U.S. franchises. G&A Expenses are not
specific to one geographic location, but relate to the consolidated
operations of the Company.
(2) Total amortization on a Consolidated basis is included in the U.S. segment
only for the Operating income (loss) reported above.
(3) The capital expenditures reported exclude fixed assets acquired from
acquisitions.
Revenues and expenses of the Company's lines of business for Company offices,
excluding Affiliate royalties, reimbursed expenses, total general sales and
administration expenses and depreciation and amortization expenses ("G & A
Expenses"), are evaluated by management. The Company does not measure assets by
lines of business as assets are generally not distinctive to a particular line
of business and they are not fundamental in assessing segment performance.
Company office revenue and operating income for each of the Company's lines of
business in the aggregate for the three months ended March 31, 2003 and 2002 are
as follows:
(Dollars in Thousands)
For the three months ended March 31,
------------------------------------
Career Organizational
Transition Consulting Consolidated
---------- ---------- ------------
2003
----
Company office
revenue $99,800 $20,117 $119,917
------- ------- --------
Company office
operating income $28,036 $1,114 $29,150
------- ------- --------
2002
----
14
Company office
revenue $81,874 $13,465 $95,339
------- ------- -------
Company office
operating income (loss) $27,060 $(194) $26,866
------- ------ -------
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE H - SEGMENTS (Continued)
A reconciliation of Company office operating income for the three months ended
March 31, 2003 and 2002 is as follows:
(Dollars in Thousands)
Three Months Ended March 31,
2003 2002
----- ----
Company office revenue $ 119,917 $ 95,339
Less: Consultants' compensation (47,456) (38,058)
Office administration (31,546) (22,225)
Office sales and consulting support (11,223) (7,467)
Office depreciation (2,537) (1,799)
Add: Reimbursed expenses 1,995 1,076
--------- -------
Company office operating income $ 29,150 $ 26,866
========= =======
NOTE I - SUBSEQUENT EVENTS
Effective April 1, 2003, the Company acquired an additional 46% interest in its
Brazilian subsidiary bringing its total ownership in this subsidiary to 97%. The
purchase price was a combination of cash and future defined contingent payments.
The upfront cash paid totaled $1,680,000. In April 2003, the Company borrowed
$2,000,000 under its Revolving Loan, the minimum borrowing amount per the terms
of the Credit Agreement, to fund this acquisition and for working capital
purposes.
15
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth results of operations for the three months ended
March 31, 2003 and 2002. This discussion and analysis should be read together
with the condensed consolidated financial statements and accompanying notes
thereto.
(Dollars in Thousands)
Three Months Ended March 31,
2003 2002
---- ----
Company office revenue $119,917 $95,339
Company office expenses before reimbursed expenses 90,767 68,473
------ ------
Company office operating income 29,150 26,866
Affiliate royalties 1,547 1,924
General sales and administration 8,435 10,661
Depreciation and amortization 2,560 946
Interest expense, net 1,274 567
------ ------
Income before income taxes 18,428 16,616
Provision for income taxes 7,923 7,150
Minority interest in net income of subsidiaries 96 254
------ ------
Net income $ 10,409 $ 9,212
========= =========
For the three months ended March 31, 2003, revenue generated by Company offices
increased by 25.8%, or $24,578,000, from the corresponding quarter in 2002. This
increase is primarily attributable to incremental revenue from the acquisition
of Coutts. Coutts is included in the Company's results as of April 1, 2002.
However, as of March 31, 2003, the Coutts acquisition has been fully integrated
with the Company's network. Therefore, management reviews same office revenue
for the Company on a pro-forma basis including the revenue of Coutts in the
period of January 1 to March 31, 2002, adjusted for revenue recognition under
SAB No. 101 (see Note A in the Notes to the Condensed Consolidated Financial
Statements), and adjusted for the revenue from the executive search business in
Norway that was sold during the first quarter of 2003 (See Note D in the Notes
to the Condensed Consolidated Financial Statements.) Management determines same
office revenue in the current year by excluding revenue from acquisitions
consumated subsequent to the first quarter of 2002. These pro-forma same office
revenue statistics are discussed in the following paragraphs and represent
non-GAAP measurements.
The following table sets forth a reconciliation of the first quarter 2002
reported Company office revenue to pro-forma Company office revenue that
includes the revenue of Coutts for the period of January 1 to March 31, 2002 and
excludes the revenue from the executive search business in Norway from February
and March 2002.
16
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONTINUED
(Dollars in Thousands)
Three Months Ended March 31, 2002
---------------------------------
Career Total
Transition Consulting Business
---------- ---------- --------
Company office revenue as reported $81,874 $13,465 $95,339
Add Coutts revenue adjusted for revenue recognition
under SAB No. 101 22,061 3,651 25,712
Less executive search revenue in Norway -- (858) (858)
-------- -------- --------
Pro-forma Company office revenue $103,935 $16,258 $120,193
======== ======= ========
The Company's career transition line of business reported Company office revenue
of $99,800,000, which represents a 21.9% or $17,926,000 increase from 2002. This
increase is primarily due to incremental revenues from Coutts and from the
impact of foreign currency exchange. The pro-forma same office revenue within
the career transition line of business decreased by approximately 4.7%,
attributable to lower sales volume in North America in the first quarter of
2003, partly offset by same office growth in Europe and Japan.
For the three months ended, March 31, 2003, the Company's consulting line of
business reported revenue of $20,117,000, which represents a 49.4% or $6,652,000
increase from 2002. This increase includes incremental revenues from
acquisitions, including Coutts, Aston Promentor and Assessment and Development
Consult Holding BV, as well as pro-forma same office revenue growth of 7.5%.
For the three months ended March 31, 2003, Affiliate royalties, all generated in
the United States, decreased 19.6% or $377,000 from 2002. The decrease in
Affiliate royalties reflects a general decline in the demand for career
transition services within these Affiliate territories.
For the three months ended March 31, 2003, total Company office expenses before
reimbursed expenses increased 32.6% or $22,294,000 from 2002. This increase is
due primarily to incremental costs from the Coutts acquisition, as well as
increases in salaries and related payroll taxes of $15,554,000, rent expense of
$3,295,000, travel costs of $1,365,000 and outside staffing costs to deliver
services of $1,245,000, which were partly offset by a decrease in incentive
costs of $4,078,000.
Company office operating income for the three months ended March 31, 2003 was
$29,150,000 with a Company office margin of 24.3%, compared to operating income
of $26,866,000 and a margin of 28.2% for the same period in the prior year. The
decrease in Company office operating margin is due to a decrease in career
transition margin in the North America and Asia-Pacific regions in the first
quarter of 2003 resulting from lower sales volume in those regions as
17
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONTINUED
compared to the same period in the prior year. Additionally, the geographic mix
of the Company has changed to a greater proportion of revenue and operating
results being reported from international operations that historically have had
lower operating margins. However, the consulting line of business experienced an
increase in operating margin resulting from improved operating results.
For the three months ended March 31, 2003, general sales and administration
expenses and depreciation and amortization expenses, ("G & A expenses")
decreased 5.3% or $612,000 from the same period in the prior year. This decrease
in 2003 is due to a decrease in incentive costs, consulting services and bad
debt expense, all of which is offset by an increase in amortization expense
mostly due to the amortization of intangible assets associated with the Coutts
client lists, and the $663,000 pre-tax loss on the sale of the executive search
business in Norway (see Note D in the Notes to the Condensed Consolidated
Financial Statements). G & A expenses as a percentage of total revenue were 8.9%
and 11.8% for the three months ended March 31, 2003 and 2002, respectively.
Net interest expense for the three months ended March 31, 2003 increased
$707,000 as compared to the same period in the prior year. The increase is due
to a higher outstanding indebtedness resulting from borrowings to fund the
acquisition of Coutts, partially offset by lower effective interest rates in the
current year.
The minority interest in net income of subsidiaries for the three months ended
March 31, 2003 was $96,000 for the minority interests related to the Company's
subsidiaries in Japan and Brazil. The minority interest in net income of
subsidiaries for the three months ended March 31, 2002 was $254,000 for the
minority interests related to the Company's subsidiaries in Japan, Brazil and
Spain. The decrease is attributable to an operating loss in Brazil for the first
quarter 2003 and the Company's larger share of ownership of these subsidiaries
in the current year, including 100% ownership of its Spanish subsidiary.
The Company's effective tax rates for the three months ended March 31, 2003 and
2002 were consistent at 43%.
Capital Resources and Liquidity
- -------------------------------
As of March 31, 2003 and December 31, 2002, the Company had cash and cash
equivalents of $23,600,000 and $33,886,000, respectively. The decrease in cash
is primarily a result of paying bonuses to employees in the first quarter 2003
that related to 2002 performance and the funding of acquisitions and tax
payments out of operating cash, offset by a $28,000,000 borrowing under the
Credit Agreement (See Note F in the Notes to the Condensed Consolidated
Financial Statements). As of March 31, 2003 and December 31, 2002, the Company
had a working capital deficit of $31,147,000 and $62,526,000, respectively. The
decrease in the working capital deficit is attributable to a decrease in accrued
incentives, accounts payable and deferred revenue. Deferred revenue is
eventually recognized into income over time, with no cash utilization.
18
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONTINUED
Net cash utilized in operating activities amounted to $22,972,000 and $5,773,000
for the three months ended March 31, 2003 and 2002, respectively. The increase
in cash utilized in operating activities is primarily a result of a decrease in
accounts payable and deferred revenue.
Net cash utilized in investing activities amounted to $10,067,000 and
$109,981,000 for the three months ended March 31, 2003 and 2002, respectively.
The investing activities for the three months ended March 31, 2002 reflects the
acquisition of Coutts. Acquisitions made by the Company in the current period,
including the additional 49% interest in its Spanish subsidiary and the
acquisition of certain assets of Aston Promentor in Denmark, involved less cash
utilization by the Company (See Note C in the Notes to the Condensed
Consolidated Financial Statements).
Net cash provided by financing activities amounted to $22,892,000 and
$92,364,000 for the three months ended March 31, 2003 and 2002, respectively.
The financing activity for the three months ended 2002 reflects the $130,000,000
borrowing under the Credit Agreement to finance the Coutts acquisition and to
repay outstanding indebtedness of $41,038,000 under the Company's prior credit
agreement that has been terminated. In connection with the Coutts acquisition,
the Company also issued loan notes to four individual sellers of Coutts for an
aggregate of $5,432,000 at the time of the acquisition. During the three months
ended March 31, 2003, the Company borrowed $28,000,000 under its Credit
Agreement in order to fund incentive payments made in the first quarter of 2003
that related to 2002, and the Company made a mandatory $4,500,000 principal
payment against its Term Loan under the Credit Agreement (See Note F in the
Notes to the Condensed Consolidated Financial Statements).
As of March 31, 2003, the Company had approximately $2,827,000 available under
the Revolving Loan of the Credit Agreement. Subsequent to March 31, 2003, the
Company borrowed $2,000,000 in order to fund the acquisition of the additional
46% interest in its Brazilian subsidiary and for other working capital purposes.
Management expects the borrowing capacity to increase due to anticipated
voluntary principal prepayments as working capital needs and cash flow is
expected to improve over the remainder of the year. Future borrowings under the
Revolving Loan will be used to finance working capital and other general
corporate purposes, including permitted acquisitions.
The Company anticipates that its cash generation and borrowing capacity will be
sufficient to service its existing debt, outstanding commitments and to maintain
Company operations at current levels for the foreseeable future. However,
operating cash flows could be impacted by a prolonged decrease in the demand for
the Company's services. The Company will continue to consider acquisitions and
other expansion opportunities as they arise, subject to ongoing operating
results and access to capital on terms acceptable to the Company. The economics
of a proposed acquisition, the provisions of permitted acquisitions under the
Credit Agreement, strategic implications and other circumstances justifying the
expansion will be key factors in determining the amount and type of resources
the Company will commit to future acquisitions.
19
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONTINUED
As of March 31, 2003, the Company's obligations and commitments include bank
debt commitments, loan notes to the sellers of Coutts, office leases and
equipment leases. For the periods subsequent to March 31, 2003, the aggregate
maturities on these obligations are as follows:
(Dollars in Thousands)
Less than After
Total 1 Year 1-3 Years 4-5 Years 5 Years
----- ----------- --------- --------- ---------
Bank debts &
loan notes $139,924 $ 20,755 $ 35,962 $ 83,207 $ --
Capital leases $ 1,170 $ 639 $ 404 $ 127 $ --
Office &
equipment leases $114,769 $ 30,675 $ 42,357 $ 23,574 $ 18,163
As of March 31, 2003, the Company estimates that the aggregate amount of future
contingent earnout payments related to completed acquisitions and payable over
the next three years, will range between $5,000,000 and $7,000,000.
Forward Looking Statements
- --------------------------
Statements included in this Report on Form 10-Q, including within this
Management's Discussion and Analysis of Financial Condition and Results of
Operations which are not historical in nature, are intended to be, and are
hereby identified as "forward looking statements" for purposes of the safe
harbor provided by the Private Securities Litigation Reform Act of 1995.
The Company cautions readers that forward looking statements including, without
limitation, those relating to the Company's future business prospects, revenues,
cash flow, working capital, goodwill impairment, future earnout payments,
liquidity, capital needs, interest costs and income, are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those indicated in the forward looking statements due to several important
factors identified from time to time in the Company's reports filed with the
SEC. The Company hereby incorporates by reference the discussion concerning
forward looking statements set forth in the Management's Discussion and Analysis
of Financial Condition and Results of Operations section of the Company's Annual
Report on Form 10-K for the year ended December 31, 2002 filed with the SEC, as
well as the risk factors identified within the same Annual Report on Form 10-K.
Readers of this Report are cautioned not to place undue reliance upon these
forward looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release any revisions to these forward
looking statements or reflect events or circumstances after the date hereof.
20
PART I - ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISKS
The Company has two fixed interest rate swap agreements for purposes of hedging
against interest rate fluctuations on the Term Loan under its Credit Agreement.
Each swap agreement has a notional principal amount at March 31, 2003 of
$36,000,000, and scheduled reductions in notional principal of $2,250,000 each
quarter over the life of the swap. These agreements terminate on March 22, 2007.
Under the terms of the swap agreements, the Company pays interest at a fixed
rate of 2.815% on one swap and 2.57% on the other swap, and its lenders pay the
Company interest at 90-day LIBOR, that was 1.29% as of March 31, 2003.
As of March 31, 2003, the Company had letters of credit totaling $4,953,000, of
which $2,953,000 guarantees the fixed rate loan notes to the sellers of Coutts,
and an aggregate notional principal of $137,000,000 outstanding under its Credit
Agreement, that bears interest at variable rates. Based upon the variable rate
debt under the Credit Agreement and the fixed interest rate swap agreements, a
100 basis point (1.0%) increase in interest rates on variable rate debt would
increase interest expense for the three months ended March 31, 2003 by $96,000.
The Company's earnings and cash flow are subject to fluctuations due to changes
in foreign currency exchange rates. Generally, if the U.S. dollar weakens
against the foreign currencies that will result in a favorable impact to
earnings and if the U.S. dollar strengthens against the foreign currencies, that
will result in an unfavorable impact on earnings. From time to time, the Company
enters into forward foreign exchange contracts to minimize the risk associated
with currency movement relating to certain intercompany transactions. The gains
and losses from these forward contracts were not material at March 31, 2003 and
2002.
PART I - ITEM 4
CONTROLS AND PROCEDURES
As of March 31, 2003, an evaluation was performed under the supervision and with
the participation of the Company's management, including the Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based on that
evaluation, the Company's management, including the Chief Executive Officer and
Chief Financial Officer, concluded that the Company's disclosure controls and
procedures were effective as of March 31, 2003. There have been no significant
changes in the Company's internal controls or in other factors that could
significantly affect internal controls subsequent to March 31, 2003.
21
PART II - OTHER INFORMATION
Items 1, 2, 3, 4 and 5 were not applicable in the three months ended March 31,
2003.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits:
10.27 - First amendment, dated March 7, 2003, to the Credit
Agreement dated March 22, 2003, between Right Management
Consultants, Inc. and its United States wholly owned subsidiaries
and UBS Warburg LLC, Fleet National Bank, Suntrust Bank, Bank of
America, N.A., and First Union National Bank (doing business as
Wachovia Securities).
10.28 - Amendment to the Articles of Incorporation of the Company
to increase the amount of authorized shares of Common Stock by
55,000,000 to a total of 100,000,000 authorized Common Shares,
that was approved by shareholders at the 2003 Annual Shareholders
meeting held on May 1, 2003.
10.29 - 2003 Employee Stock Purchase Plan of the Company,
approved by shareholders at the 2003 Annual Shareholders meeting
held on May 1, 2003.
99 - Management certifications required by Section 906 of the
Sarbanes - Oxley Act of 2002.
b. No reports on Form 8-K were filed during the period for which this
Report is filed.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RIGHT MANAGEMENT CONSULTANTS, INC.
BY:/S/ RICHARD J. PINOLA May 15, 2003
------------------------ ------------
Richard J. Pinola Date
Chairman and Chief Executive Officer
BY :/S/ CHARLES J. MALLON May 15, 2003
------------------------ ------------
Charles J. Mallon Date
Chief Financial Officer and
Principal Accounting Officer
22
CERTIFICATION
I, Richard J. Pinola, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Right Management
Consultants, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects our financial condition, results of operations and cash flows as of and
for the periods presented in this quarterly report;
4. Our other certifying officers and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) and have:
a. designed such disclosure controls and procedures to ensure that
material information, including our consolidated subsidiaries, is made
known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of our disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. Our other certifying officers and I have disclosed, based on our most recent
evaluation, to our auditors and the audit committee of our board of directors
(or persons performing the equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect our ability to record, process,
summarize and report financial data and have identified for our
auditors any material weakness in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in our internal controls;
and
6. Our other certifying officers and I have indicated in this quarterly report
whether there were significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 15, 2003 BY:/S/ RICHARD J. PINOLA
------------------------
Name: Richard J. Pinola
Title: Chairman and Chief Executive Officer
23
CERTIFICATION
-------------
I, Charles J. Mallon, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Right Management
Consultants, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects our financial condition, results of operations and cash flows as of and
for the periods presented in this quarterly report;
4. Our other certifying officers and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) and have:
a. designed such disclosure controls and procedures to ensure that
material information, including our consolidated subsidiaries, is made
known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of our disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. Our other certifying officers and I have disclosed, based on our most recent
evaluation, to our auditors and the audit committee of our board of directors
(or persons performing the equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect our ability to record, process,
summarize and report financial data and have identified for our
auditors any material weakness in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in our internal controls;
and
6. Our other certifying officers and I have indicated in this quarterly report
whether there were significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 15, 2003 BY :/S/ CHARLES J. MALLON
---------------------------
Name: Charles J. Mallon
Title: Chief Financial Officer and
Principal Accounting Officer
24