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Summary Of Significant Accounting Policies (Policy)

12 Months Ended

May 30, 2020

Summary Of Significant Accounting Policies [Abstract]

Basis Of Presentation And Principles Of Consolidation

Basis of Presentation and Principles of Consolidation

The Consolidated Financial Statements of the Company (“financial statements”) have been prepared in conformity with accounting principles generally accepted in the U.S. (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”). The financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Risks And Uncertainties

Risk and Uncertainties

Since the start of 2020, the COVID-19 pandemic (the “Pandemic”) has spread to many of the countries in which the Company and its customers conduct businesses. Governments throughout the world have implemented, and may continue to implement, stay-at-home orders, proclamations and directives aimed at minimizing the spread of the COVID-19 virus. The impact of the Pandemic and the resulting restrictions have caused disruptions in the U.S. and global economy and may continue to disrupt financial markets and global economic activities. The Company has taken precautions and steps to prevent or reduce infection among its employees, including limiting business travel and mandating working from home in many of the countries in which it operates. While overall productivity remained high through the end of fiscal 2020, these measures may disrupt the Company’s normal business operations and negatively impact its productivity and ability to efficiently serve its clients. As events relating to COVID-19 continue to develop and evolve globally, there is significant uncertainty as to the full likely effects of the Pandemic which may, among other things, reduce demand for or delay client decisions to procure the Company’ services or result in cancellation of existing projects. While the full impact from the Pandemic is not quantifiable, the Company’s results of operations and cash flows were adversely impacted in the latter half of fiscal 2020. Although management does not expect the Pandemic to have a permanent impact on its business operations, the Company cannot estimate the length or the magnitude of the Pandemic and how this might affect its customers’ demand for services and the Company’s ability to continue to operate efficiently. Management believes the Pandemic could continue to have an adverse impact on the Company’s results of operations and financial position in fiscal 2021. Management is uncertain whether future effects of the Pandemic will be similar to what the Company has experienced in fiscal 2020. Management continues to monitor relevant business metrics, such as daily and weekly revenue run rate, pipeline activities, rate of consultant attrition and days sales outstanding, and has implemented modifications to the Company’s normal operations. Management believes the restructuring initiatives that the Company took in the fourth quarter of fiscal 2020 have better prepared the Company to operate with agility and resilience in this challenging economic environment.

The Company’s primary source of liquidity historically has been cash provided by its operations and its $120.0 million secured revolving credit facility (“Facility”) which expires on October 17, 2021. As of May 30, 2020, the Company had cash and cash equivalents of $95.6 million, and additional availability under the Facility of $30.7 million. Given its balance sheet and liquidity position, management believes that the Company has the financial flexibility and resources needed to operate in the current uncertain economic environment. However, if global economic conditions worsen as a result of the Pandemic, it could materially impact the Company’s liquidity position and capital needs.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in the U.S. in response to the Pandemic. The CARES Act includes, among other things, direct financial assistance to Americans in the form of cash payments to individuals, aid to small businesses in the form of loans, and other tax incentives in an effort to stabilize the U.S. economy and keep Americans employed. The Company has not filed, and currently does not intend to file, for funding provided by the CARES Act. The Company has deferred $2.9 million in payroll tax payments as of the end of fiscal 2020 in the U.S. The Company does not believe the income tax provisions such as changes to the net operating loss rules included in the CARES Act will have a material impact on it. The Company has not received, and does not expect to receive significant government-provided relief or stimulus funding in other parts of the world.

Use Of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although management believes these estimates and assumptions are adequate, actual results could differ from the estimates and assumptions used.

Revenue Recognition

Effective May 27, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective method, which allows companies to apply the new revenue standard to reporting periods beginning in the year the standard is first implemented, while prior periods continue to be reported in accordance with previous accounting guidance. The adoption of ASC 606 did not have a significant impact on revenue recognition; therefore, the Company did not have an opening retained earnings adjustment for the fiscal year ended May 25, 2019.

Revenues are recognized when control of the promised service is transferred to the Company’s clients, in an amount that reflects the consideration expected in exchange for the services. Revenue is recorded net of sales or other transaction taxes collected from clients and remitted to taxing authorities. Revenues from contracts are recognized over time, based on hours worked by the Company’s professionals. The performance of the agreed-to service over time is the single performance obligation for revenues. Certain clients may receive discounts (for example, volume discounts or rebates) to the amounts billed. These discounts or rebates are considered variable consideration. Management evaluates the facts and circumstances of each contract and client relationship to estimate the variable consideration assessing the most likely amount to recognize and considering management’s expectation of the volume of services to be provided over the applicable period. Rebates are the largest component of variable consideration and are estimated using the most likely amount method prescribed by ASC 606, contracts terms and estimates of revenue. Revenues are recognized net of variable consideration to the extent that it is probable that a significant reversal of revenues will not occur in subsequent periods.

On a limited basis, the Company may have fixed-price contracts, for which revenues are recognized over time using the input method based on time incurred as a proportion of estimated total time. Time incurred represents work performed, which corresponds with, and therefore best depicts, the transfer of control to the client. Management uses significant judgments when estimating the total hours expected to complete the contract performance obligation. It is possible that updated estimates for consulting engagements may vary from initial estimates with such updates being recognized in the period of determination. Depending on the timing of billings and services rendered, the Company accrues or defers revenue as appropriate.

The Company recognizes revenues on a gross basis as it acts as a principal for primarily all of its revenue transactions. The Company has concluded that gross reporting is appropriate because the Company a) has the risk of identifying and hiring qualified consultants; b) has the discretion to select the consultants and establish the price and responsibilities for services to be provided; and c) bears the risk for services provided that are not fully paid for by clients. The Company recognizes all reimbursements received from clients for “out-of-pocket” expenses as revenue and all such expenses as direct cost of services. Reimbursements received from clients were $9.4 million, $12.3 million and $11.8 million for the years ended May 30, 2020, May 25, 2019 and May 26, 2018, respectively.

The Company’s clients are contractually obligated to pay the Company for all hours billed. We invoice the majority of our clients on a weekly basis or, in certain circumstances, on a monthly basis, in accordance with our typical arrangement of payment due within 30 days. To a much lesser extent, the Company also earns revenue if one of its consultants is hired by, or if the Company places an outside candidate with, its client. Conversion fees or permanent placement fees are recognized when one of the Company’s professionals, or a candidate identified by the Company, accepts an offer of permanent employment from a client and all requisite terms of the agreement have been met. Such conversion fees or permanent placement fees are recognized when the performance obligation is considered complete, which the Company considers a) when the consultant or candidate accepts the position; b) the consultant or candidate has notified either RGP or their current employer of their decision; and c) the start date is within the Company’s current quarter. Conversion fees were 0.4%, 0.5% and 0.4% of revenue for the years ended May 30, 2020, May 25, 2019 and May 26, 2018, respectively. Permanent placement fees were 0.6%, 0.6% and 0.3% of revenue for the years ended May 30, 2020, May 25, 2019 and May 26, 2018, respectively.

The Company’s contracts generally have termination for convenience provisions and do not have termination penalties. While our clients are contractually obligated to pay the Company for all hours billed, the Company does not have long-term agreements with its clients for the provision of services and the Company’s clients may terminate engagements at any time. All costs of compensating the Company’s professionals are the responsibility of the Company and are included in direct cost of services.

Foreign Currency Translation

The financial statements of subsidiaries outside the U.S. are measured using the local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at current exchange rates, income and expense items are translated at average exchange rates prevailing during the period and the related translation adjustments are recorded as a component of comprehensive income or loss within stockholders’ equity. Gains and losses from foreign currency transactions are included in selling, general and administrative expenses in the Consolidated Statements of Operations.

Per Share Information

The Company presents both basic and diluted earnings per share (“EPS”). Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS is based upon the weighted average number of common and common equivalent shares outstanding during the period, calculated using the treasury stock method. Under the treasury stock method, exercise proceeds include the amount the employee must pay for exercising stock options, the amount of compensation cost related to stock awards for future services that the Company has not yet recognized and the amount of tax benefits that would be recorded when the award becomes deductible. Common equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect. Stock options for which the exercise price exceeds the average market price over the period are anti-dilutive and are excluded from the calculation.

The following table summarizes the calculation of net income per share for the years ended May 30, 2020, May 25, 2019 and May 26, 2018 (in thousands, except per share amounts):



	For the Years Ended
	May 30,		May 25,		May 26,
	2020		2019		2018

Net income	$	28,285	$	31,470	$	18,826
Basic:
Weighted average shares		31,989		31,596		30,741
Diluted:
Weighted average shares		31,989		31,596		30,741
Potentially dilutive shares		238		611		469
Total dilutive shares		32,227		32,207		31,210
Net income per common share:
Basic	$	0.88	$	1.00	$	0.61
Dilutive	$	0.88	$	0.98	$	0.60
Anti-dilutive shares not included above		4,731		3,316		4,619

Cash And Cash Equivalents

Cash and Cash Equivalents

The Company considers cash on hand, deposits in banks, and short-term investments purchased with an original maturity date of three months or less to be cash and cash equivalents. The carrying amounts reflected in the consolidated balance sheets for cash and cash equivalents approximate the fair values due to the short maturities of these instruments.

Financial Instruments

The fair value of the Company’s financial instruments reflects the amounts that the Company estimates it will receive in connection with the sale of an asset in an orderly transaction between market participants at the measurement date (exit price). The fair value hierarchy prioritizes the use of inputs used in valuation techniques into the following three levels:

Level 1 – Quoted prices in active markets for identical assets and liabilities.

Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets.

Level 3 – Unobservable inputs.

The following table shows the Company’s financial instruments that are measured and recorded in the consolidated financial statements at fair value on a recurring basis (in thousands):


	May 30, 2020								May 25, 2019
		Level 1			Level 2			Level 3			Level 1			Level 2			Level 3
Assets:
Short-term investments	$	-	$	-		$	-		$	-		$	5,981		$	-
Total assets	$	-	$	-		$	-		$	-		$	5,981		$	-

Liabilities:
Contingent consideration liability	$	-	$	-		$	7,898		$	-		$	-		$	2,195
Total liabilities	$	-	$	-		$	7,898		$	-		$	-		$	2,195

The Company’s short-term investments had original contractual maturities of between three months and one year and are considered “held-to-maturity” securities. The Company had no investments with a maturity in excess of one year as of the end of either fiscal year 2020 or 2019. The Company’s investments in commercial paper or money market account are measured using quoted prices in markets that are not active (Level 2). There were no unrealized holding gains or losses as of May 30, 2020 and May 25, 2019.

Contingent consideration liability presented in the table above is for estimated future contingent consideration cash payments related to the Company’s acquisitions. Total contingent consideration liabilities were $7.9 million and $2.2 million as of May 30, 2020 and May 25, 2019, respectively. The fair value measurement of the liability is based on significant inputs not observed in the market and thus represents a Level 3 measurement. The significant unobservable inputs used in the fair value measurement of the contingent consideration liability are the Company’s measures of the estimated payouts based on internally generated financial projections and discount rates. The fair value of contingent consideration liability is remeasured on a quarterly basis by the Company using additional information as it becomes available, and any change in the fair value estimates are recorded in selling, general and administrative expenses in the Company’s Consolidated Statements of Operations. See Note 3 – Acquisitions and Dispositions.

The Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and long-term debt are carried at cost, which approximates their fair value because of the short‑term maturity of these instruments or because their stated interest rates are indicative of market interest rates.

Allowance For Doubtful Accounts

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts for estimated losses resulting from its clients’ failure to make required payments for services rendered. Management estimates this allowance based upon knowledge of the financial condition of the Company’s clients (which may not include knowledge of all significant events), review of historical receivable and reserve trends and other pertinent information. If the financial condition of the Company’s clients deteriorates or there is an unfavorable trend in aggregate receivable collections, additional allowances may be required.

The following table summarizes the activity in our allowance for doubtful accounts (in thousands):



					Currency
	Beginning		Charged to		Rate		(Write-offs)/		Ending
	Balance		Operations		Changes		Recoveries		Balance
Years Ended:
May 26, 2018	$	2,517	$	826	$	12	$	(1,715)	$	1,640
May 25, 2019	$	1,640	$	1,540	$	-	$	(660)	$	2,520
May 30, 2020	$	2,520	$	1,840	$	(18)	$	(1,275)	$	3,067

Property And Equipment

Property and Equipment

Property and equipment is stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the following estimated useful lives:


Building	30 years
Furniture	5 to 10 years
Leasehold improvements	Lesser of useful life of asset or term of lease
Computer, equipment and software	3 to 5 years

Costs for normal repairs and maintenance are expensed to operations as incurred, while renewals and major refurbishments are capitalized.

Long-lived Assets

The Company evaluates the recoverability of long‑lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The impairment test comprises two steps. The first step compares the carrying amount of the asset to the sum of expected undiscounted future cash flows. If the sum of expected undiscounted future cash flows exceeds the carrying amount of the asset, no impairment is taken. If the sum of expected undiscounted future cash flows is less than the carrying amount of the asset, a second step is warranted and an impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value calculated using the present value of estimated net future cash flows. The Company recorded $0.6 million right-of-use (“ROU”) assets impairment for the year ended May 30, 2020 associated with exiting certain real estate leases as part of its restructuring and business transformation initiative. The impairment charge is included in selling, general and administrative expense in the Company’s Consolidated Statements of Operations for the year ended May 30, 2020.

Goodwill and Intangible Assets

Goodwill is recorded at the time of an acquisition and is calculated as the difference between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired. Goodwill is not subject to amortization but the carrying value is tested for impairment on an annual basis in the fourth quarter of the fiscal year, or more frequently if the Company believes indicators of impairment exist. Impairment evaluations involve management’s assessment of qualitative factors to determine whether it is more likely than not that goodwill is impaired. If management concludes from its assessment of qualitative factors that it is more likely than not that impairment exists, then a quantitative impairment test will be performed. Significant management judgment is required in the forecasts of future operating results that are used in these evaluations. For application of this methodology, the Company determined that it operates as a single reporting unit resulting from the combination of its practice offices. The Company’s annual goodwill impairment analysis indicated that there was no related impairment for the fiscal years ended May 30, 2020, May 25, 2019 and May 26, 2018, respectively.

The Company’s identifiable intangible assets include customer contracts and relationships, tradenames, backlog, consultant list, non-compete agreements and computer software. These assets are amortized on a straight-line basis over lives ranging from 17 months to ten years.

See Note 4 — Intangible Assets and Goodwill for a further description of the Company’s intangible assets.

Stock-Based Compensation

The Company recognizes compensation expense for all share-based payment awards made to employees and directors, including restricted stock awards, employee stock options and employee stock purchases made via the Company’s Employee Stock Purchase Plan (the “ESPP”), based on estimated fair value at the date of grant.

The Company estimates the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods. If the actual number of forfeitures differs from that estimated by management, additional adjustments to compensation expense may be required in future periods. Excess income tax benefits and deficiencies from stock-based compensation are recognized as a discrete item within the provision for income taxes on the Company’s Consolidated Statements of Operations. Stock options vest over four years and restricted stock award vesting is determined on an individual grant basis under the Company’s 2014 Performance Incentive Plan (“2014 Plan”). The Company determines the estimated value of stock options using the Black-Scholes valuation model and the estimated value of restricted stock awards using the closing price of the Company’s common stock on the date of grant. The Company recognizes stock-based compensation expense on a straight-line basis over the service period for awards that are expected to vest and records adjustments to compensation expense at the end of the service period if actual forfeitures differ from original estimates.

See Note 13 — Stock-Based Compensation Plans for further information on the 2014 Plan and stock-based compensation.

Income Taxes

The Company recognizes deferred income taxes for the estimated tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets to the amount expected to be realized when, in management’s opinion, it is more likely than not that some portion of the deferred tax assets will not be realized. The provision for income taxes represents current taxes payable net of the change during the period in deferred tax assets and liabilities. The Company also evaluates its uncertain tax positions and only recognizes the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50 percentage likelihood of being realized upon settlement. The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. Any change in judgment related to the expected ultimate resolution of uncertain tax positions is recognized in earnings in the period in which such change occurs.

Recent Accounting Pronouncements

Accounting Pronouncements Adopted During Fiscal Year 2020

Effective as of the beginning of fiscal year 2020, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases, ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Targeted Improvements to Topic 842, Leases. The guidance is intended to increase transparency and comparability among companies for leasing transactions, including a requirement for companies that lease assets to recognize on their balance sheets the assets and liabilities for the rights and obligations created by those leases. The guidance also provides for disclosures that allow the users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

The Company adopted the guidance on May 26, 2019, the first day of its fiscal 2020, using the modified retrospective approach through a cumulative-effect adjustment, which after completing the implementation analysis, resulted in no adjustment to the Company’s May 26, 2019 beginning retained earnings balance. Periods prior to the date of adoption are presented in accordance with ASC 840, Leases. As part of the adoption, the Company elected the package of practical expedients, which among other things, permits the Company to not reassess whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases, and the initial direct costs for any existing leases. The Company also elected the practical expedient to not assess whether existing land easements that were not previously accounted for as leases are or contain a lease under the new guidance. The Company did not elect the hindsight practice expedient to use hindsight when determining lease term and assessing impairment of ROU lease assets. On May 26, 2019, the Company recognized $43.2 million of ROU assets and $51.0 million of operating lease liabilities, including noncurrent operating lease liabilities of $38.5 million, as a result of the adoption. The difference between the ROU assets and the operating lease liabilities was primarily due to previously accrued rent expense relating to periods prior to May 26, 2019, and the remaining prepaid rent balance as of May 25, 2019. The adoption did not have an impact on the Company’s consolidated results of operations or cash flows. Additional information and disclosures required by the new standard are contained in Note 6—Leases.

In January 2017, the Financial Accounting Standards Board issued ASU No. 2017-04 Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 eliminates step two of the goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with its carrying amount. Additionally, the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets should be disclosed. ASU 2017-04 is effective for annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019; early adoption is permitted. The Company early adopted ASU 2017-04 as of the beginning of fiscal 2020. The adoption of ASU 2017-04 did not have a material impact on the Company’s Consolidated Financial Statements.