-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F+qLiiFiGf2eI3OKXfjWNP2iLQKH2yAO/52S5iHn/1kVIUuBYAZooT49d0NSYsGZ V35GuVjnLmbUXOsqJ/4MkA== 0000950159-00-000126.txt : 20000331 0000950159-00-000126.hdr.sgml : 20000331 ACCESSION NUMBER: 0000950159-00-000126 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RIGHT MANAGEMENT CONSULTANTS INC CENTRAL INDEX KEY: 0000802806 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT CONSULTING SERVICES [8742] IRS NUMBER: 232153729 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-15539 FILM NUMBER: 588836 BUSINESS ADDRESS: STREET 1: 1818 MARKET ST STREET 2: 14TH FL CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2159881588 MAIL ADDRESS: STREET 1: 1818 MARKET STREET STREET 2: 14TH FL CITY: PHILADELPHIA STATE: PA ZIP: 19103 10-K 1 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, 1999 OR __ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 RIGHT MANAGEMENT CONSULTANTS, INC. ---------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 23-2153729 - ------------------------------- ------------------- (State of other jurisdiction of (IRS Employer incorporation of organization) Identification No.) 1818 Market Street, Philadelphia, Pennsylvania 19103 ---------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (215) 988-1588 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, 2000 was $58,709,000. The number of shares outstanding of the registrant's Common Shares as of March 1,2000 was 6,031,883. DOCUMENTS INCORPORATED BY REFERENCE Parts I & II Portions of the Company's 1999 Annual Report to Shareholders for the fiscal year ended December 31, 1999. Part III Portions of the Company's definitive proxy statement with respect to its 2000 Annual Meeting of Shareholders to be held on May 4, 2000. 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 believes it is the largest worldwide firm in the career transition services industry with 1999 revenues of $181 million. Worldwide operations are structured into five geographic groups that provide management oversight to more than 200 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 (including career management) consulting. For detailed financial information regarding the Company's business segments and geographic areas, reference is made to Note L, "Segments", in the Company's Notes to Consolidated Financial Statements contained in the Company's 1999 Annual Report to Shareholders, the incorporated portions of which are included as Exhibit 13 to this Report on Form 10-K (this "Report"). Such financial information is responsive to Item 101 (b) and (d), respectively, of Regulation S-K and is incorporated by reference herein. Career Transition 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, 1999. The Company provided career transition services to approximately 5,000 client companies during 1999, 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 1999. Career transition services are divided into two principal categories - Individual Outplacement Services and Group Outplacement Services. 1 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, effective networking, 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 78% of the career transition revenue generated by Company offices during 1999 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 large 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. In addition, the Company can design, staff, or manage career centers for corporate clients needing to provide career transition services during a large-scale reduction-in-force. Career centers typically serve groups of 100 or more individuals, and are operated for a pre-determined time period, usually ranging anywhere from six to eighteen months. The centers are run like Company offices, staffed with consultants and administrative personnel and providing office support technology and services. Career centers are normally set up in available space on the corporate clients' premises, or in temporary facilities located, rented, and equipped by the Company. Approximately 22% of the career transition revenue generated by Company offices during 1999 was for group outplacement services. 2 Human Resources Consulting The Company provides human resources (including career management) consulting services that assist organizations and their employees in the following five areas: (1) creating organizational change by linking strategy development and people development to close the gaps between where a business is now and where it needs to be to succeed strategically; (2) developing leaders through executive coaching and feedback-rich customized leadership development programs; (3) building competencies by identifying the skills, knowledge, and personal characteristics that determine success in a given company, and using these competencies to align human resource systems with strategy; (4) growing talent which involves attracting, motivating, and retaining the best people in a highly competitive talent marketplace; (5) driving communication by helping people at all levels understand the link between the business' strategies and their daily work, and ensuring that ideas and information are shared openly and clearly. The consulting business in total, including career management consulting and other human resources consulting, provided approximately 15% of total Company office revenue for the year ended December 31, 1999. No single customer or client accounted for a material amount of business within the human resources and career management consulting line of business in 1999. To broaden and diversify its business base, the Company entered the consulting line of business in 1996 by acquiring People Tech Consulting, Inc. ("PeopleTech"), a Canadian corporation. Since then, the Company has continued to acquire firms with human resources consulting expertise. 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, 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 the depth of its 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. During 1999, the Company made three acquisitions of consulting firms: Groupe ARJ, with offices in Paris and Lyon, France; Jouret Management Center located in Brussels, Belgium; and Key Management Strategies located near Philadelphia, Pennsylvania. In addition, as of January 1, 2000, the Company acquired the remaining 49% minority interest in TEAMS, Inc. 3 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 determined 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 1999 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 network arrangement, the Company's clients have access to the Company's entire network of Company and Affiliate offices. See "Business - Affiliate Arrangements." 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. Under the Affiliate Agreements, the Company assists the Affiliates in various ways in the provision of career transition and consulting services. There are five Affiliate Agreements that remain in effect, all of them in the United States. 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 4 prohibited from establishing or maintaining its own offices or "satellites" soliciting customers or engaging in career transition or consulting services outside of their Exclusive Territory. 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. 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. 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, but delivered outside an Affiliate's territory by a Company-owned office. 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). 5 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 the principal shareholders of an Affiliate. The Company has offered and implemented with all of its existing 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. The Company has agreed with substantially all of its existing Affiliates that in the event the Company offers to any other Affiliate any provision in the Affiliate Agreement which is more beneficial than the terms of the existing Affiliate Agreements with the rest of the current Affiliates, then the new provision will be offered to all existing 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 the Company's Common Shares held by certain shareholders who have granted to the Affiliates this right, in case of certain proposed sales or exchanges of the Company's Common Shares. Under the terms of the Affiliate Agreements, in the event that 51% or more of the Common Shares 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 Shares of the Company), the Affiliates may have a right of first refusal to acquire the Common Shares of the Company held by the aforementioned shareholders under the same terms as the proposed transaction. 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. Acquisitions During 1999, the Company completed six separate career transition and consulting acquisitions and purchased an equity interest in a career transition firm located in Japan. As of January 1, 2000 the Company also purchased the remaining interests in its existing two joint ventures. See Note C to the Consolidated Financial Statements for a detailed description of the acquisitions. The total purchase price for the equity interest and acquisitions made in 1999 aggregated approximately $11,338,000, including the costs of acquisitions. The acquisitions were consummated through combinations of cash and future defined incentives, including the assumption of incomplete consulting contracts. Also during 1999, the Company paid approximately $2,388,000 in earnout payments related to acquisitions made in prior years. Over the last five years, the Company completed twenty-six separate acquisitions (including five former Affiliates) of career transition and consulting firms, entered into an exclusive licensing agreement with a consulting firm, and purchased an equity interest in a career transition firm, for combinations of cash, future defined incentives, assumption of incomplete career transition contracts and other consideration. The total purchase price for these transactions, excluding earnouts, aggregated approximately $44,741,000, including the costs of acquisitions. Employees At February 29, 2000, the Company and its subsidiaries employed 1,077 persons, including 15 in senior management, 51 in other managerial and professional roles, 517 in field operations as consultants, and 494 in clerical capacities. 7 In addition, the Company employed 607 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: 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 material violation of the provisions of such state and federal laws. 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 affect the Company. See "Business - Affiliate Arrangements." 3. Possible Effects of Change in Company Control and Possible Future Issuance of Preferred Shares: Under certain circumstances and pursuant to its Affiliate Agreements, upon certain contemplated sales of 51% or more of the Company's outstanding Common Shares, or a Company merger, consolidation or reorganization, the Affiliates may have a right of first refusal to acquire 8 the Common Shares of the Company being sold or exchanged by certain shareholders who have granted to the Affiliates this right, 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. 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 Preferred Shares, 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 issuances of Preferred Shares, without any further vote or action by shareholders. The Affiliates' right of first refusal on shares held by certain shareholders who have granted to the Affiliates this right, 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 Shares 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 Shares. 4. Competition: The Company competes against other providers of career transition services and other human resource consulting services. Based on consolidated revenues for 1999, the Company believes it is the world's largest provider of career transition 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. 9 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. 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 economic conditions 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. The current economic expansion in North America has generated a steady level of merger and acquisition activity in the economy that has, to a degree, enabled the Company to expand during a period of low unemployment. A significant and prolonged decrease in the level of merger and acquisition activity would reduce demand for the Company's career transition services. 10 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 706,000 square feet for all Company offices, including the corporate headquarters, at an aggregate yearly rental cost of approximately $16,695,000. 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. 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 54 Chairman of the Board of Directors and Chief Executive Officer Frank P. Louchheim 76 Founding Chairman and Director Joseph T. Smith 64 Vice Chairman of the Board of Directors John J. Gavin 43 President, Chief Operating Officer and Director Charles J. Mallon 43 Executive Vice President, Chief Financial Officer, Secretary and Treasurer Larry A. Evans 57 Executive Vice President and Director Frederick R. Davidson 63 Chairman of Davidson & Associates, Pty. Ltd. and Director 11 Peter J. Doris 53 Executive Vice President Terry W. Szwec 49 Executive Vice President James E. Greenway 53 Executive Vice President and Chief Marketing Officer Christopher Pierce-Cooke 47 Executive Vice President, Managing Director - Consulting Services Erik A. Dithmer 68 Group Executive Vice President for the Eastern U.S. R. William Holland 56 Group Executive Vice President for the Central U.S. and Canada Timothy D. Dorman 52 Group Executive Vice President for the Western U.S. Suzanne B. Levasseur 51 Group Executive Vice President for Europe and Latin America Edward C. Davies 53 Group Executive Vice President for Asia-Pacific 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: NSG America 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. 12 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. Mallon joined the Company in 1996 to assist in directing and managing the financial operations of the Company. Effective September 1, 1999, Mr. Mallon assumed the role of Chief Financial Officer, and effective January 1, 2000, he was elected as an Executive Vice President by the Board of Directors, in which capacities he now serves. Prior to joining the Company, he was for six years, the Chief Financial Officer of ACS Enterprises, Inc. ("ACS"), a publicly held wireless cable system operator. While at ACS, Mr. Mallon had oversight responsibility for their finance and accounting area, including acquisition financial due diligence, several public stock offerings, and an expanded credit facility. Before ACS, Mr. Mallon was with the Philadelphia office of Ernst & Young for 12 years, ultimately as senior audit manager. Mr. Mallon is a CPA and a graduate of Drexel University in Philadelphia. He is a member of the American and Pennsylvania Institutes of Certified Public Accountants. 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. From May 1995 until December 1999, Mr. Evans worked in the Company's corporate office together with the Company's regional offices in marketing to major national and international accounts. Effective January 1, 2000, Mr. Evans was appointed to oversee one of the Company's largest Key Executive Services practices. Mr. Evans serves on various boards of both non-profit organizations and community associations. He also holds directorships with Knite, Inc., an automotive components manufacturing company, 4 Anything.com 13 and 4 Eschoolmall.com, both internet service companies, and he is on the Advisory Board of Data Com International, a silicon chip manufacturing company. Mr. Davidson is the Chairman of Davidson & Associates, Pty. Ltd., an Asia-Pacific career transition firm of which the Company acquired a fifty-one percent interest during 1997, and which is now owned 100% by the Company. Mr. Davidson was elected a Director by the Board of Directors on July 24, 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. 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 international accounts. 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 office. From 1994 through 1999, Mr. Szwec served as Group Executive Vice President for the Canadian operations of the Company. Mr. Szwec is currently an Executive Vice President of the Company in which he leads the national accounts sales and marketing efforts in the Canadian region. Mr. Greenway was President of Consulting Group, Inc., an organizational and management development consulting firm. He has held management positions with Drake Beam Morin (a human resource and outplacement firm), 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. Pierce-Cooke has extensive experience in human resources, consulting and global markets. Prior to joining the Company, he was Chief Executive Officer of Corporate Vision, a human resource and organizational consulting firm with operations in Melbourne and Sydney, Australia and London, England. At Westpac, one of Australia's largest banking institutions, Mr. Pierce-Cooke held two 14 significant roles: he headed up the human resources function for the retail, corporate and international banking groups; he also spent time directing Westpac's marketing operations. Earlier in his career, he was a director for various divisions of British Aerospace and for two years ran its headquarter operations in London which oversaw over 135,000 employees in 50 countries. Mr. Pierce-Cooke joined the Company as Executive Vice President and Managing Director of Consulting Services in April 1999. He is responsible for driving the firm's continued growth and global expansion in the consulting arena. His education includes a BS in economics degree and qualifications as an attorney in the United Kingdom. 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. Mr. Dithmer currently serves as Group Executive Vice President of the East Group, overseeing all offices across the entire Eastern U.S. Mr. Dithmer has been affiliated with various associations and he is the Founder and former President of the American Chamber of Commerce, Costa Rica. Dr. Holland was with Andersen Consulting from 1996 to June 1999. Dr. Holland was the Associate Partner responsible for global human resource operations for their Information Technology and Business Process Outsourcing business, which has 10,000 employees and over 200 outsourcing units worldwide. Dr. Holland was responsible for establishing a worldwide HR organization focused on delivering greater client value and aligning HR processes, career development models and executive coaching programs. Prior to his position with Andersen Consulting, Dr. Holland held the Senior HR executive position with a large financial institution, a prominent University and a large investment advisory business. Dr. Holland joined the Company in June 1999 in the dual role of Group Executive Vice President of the North Central Group and Managing Principal of the Chicago Office. Effective January 1, 2000, Dr. Holland has expanded his responsibility to include the Canadian region, in addition to the Central U.S. territory. He holds three degrees, a BA, MA and Ph.D all from Michigan State University and he has published several works on conflict resolution and career development. 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 U.S. companies. She has worked for the U.S. Office of Personnel Management, in charge of European management design, communication and training. She has 15 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 Group Executive Vice President of Europe and Latin America. Mr. Davies was the Managing Director at Moore Business Systems in Australia from 1995 until February 1998. Moore Business Systems, which is a division of Moore Corporation located in the U.S., is primarily engaged in printing services and print management. In July 1998, Mr. Davies joined Davidson & Associates, Pty. Ltd. ("Davidson & Associates"), as the State Director for the Melbourne office. At that time, the Company had a 51% interest in Davidson & Associates and as of January 1, 2000 it is 100% owned by the Company. Since September 1999, Mr. Davies has served as Director of Operations for the entire Asia-Pacific network of offices within Davidson & Associates. Effective March 2, 2000, Mr. Davies was elected by the Board of Directors as the Group Executive Vice President of Asia-Pacific. 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. 16 PART II Item 5: Market for Registrant's Common Equity and Related Shareholder Matters The information required by this Item is incorporated by reference to the section titled "Common Share Data" in the Company's 1999 Annual Report to Shareholders, the incorporated portions of which are included as Exhibit 13 to this Report. 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 1999 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 1999 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 1999 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 1999 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. 17 PART III The information called for by Items 10 through 13 of Form 10-K (except for the information set forth on pages 11-16 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 2000 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 1999 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, 1999 and 1998 Consolidated Statements of Income for each of the three years in the period ended December 31, 1999 Consolidated Statements of Shareholders' Equity for each of the three years in the period ended December 31, 1999 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1999 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. 18 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 as adopted June 28, 1995, and as amended December 17, 1998 effective January 1, 1999 (incorporated by reference to the Company's report on Form 10-K/A for the fiscal year ended December 31, 1998, filed August 4, 1999). 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 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).* 10.08 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).* 10.09 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). * 10.10 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). * * These documents are compensatory plans or agreements required to be filed as Exhibits. 19 10.11 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).* 10.12 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).* 10.13 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) 10.14 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). 10.15 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). 10.16 Amendment to Employment Agreement dated as of January 1, 1999 by and between Right Management Consultants, Inc. and Richard J. Pinola (incorporated by reference to the Company's report on Form 10K for the year ended December 31, 1998, filed March 31, 1999). * 10.17 Amendment to Employment Agreement dated as of January 1, 1999 by and between Right Management Consultants, Inc. and Joseph T. Smith (incorporated by reference to the Company's report on Form 10K for the year ended December 31, 1998, filed March 31, 1999). * 10.18 Employment Agreement and Supplemental Deferred Compensation Plan dated as of January 1, 1999 by and between Right Management Consultants, Inc. and John J. Gavin (incorporated by reference to the Company's report on Form 10K for the year ended December 31, 1998, filed March 31, 1999). * 10.19 Amendment to the 1993 Stock Incentive Plan (incorporated by reference to the Company's report on Form S-8 (File No. 333-84493), filed August 4, 1999) * 10.20 Amendment to the 1996 Employee Stock Purchase Plan (incorporated by reference to the Company's report on Form S-8 (File No. 333-84495), filed August 4, 1999) * 10.21 Supplemental Early Retirement Plan for certain employees, dated January 1, 2000. * 13 Portions of the Company's 1999 Annual Report to Shareholders expressly incorporated by reference. 21 Subsidiaries of the Company. 23 Consent of Arthur Andersen LLP 27 Financial Data Schedule - 1999 + *These documents are compensatory plans or agreements required to be filed as Exhibits. + Filed in electronic form only. 20 (b) Reports on Form 8-K No Reports on Form 8-K were filed by the Company during the fiscal quarter ended December 31, 1999. 21 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: 3/30/00 ------- 22 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 3/30/00 - --------------------- and Chief Executive Officer ------- Richard J. Pinola /S/ CHARLES J. MALLON Chief Financial 3/30/00 - --------------------- Officer and Principal ------- Charles J. Mallon Accounting Officer /S/ FRANK P. LOUCHHEIM Director 3/30/00 - ---------------------- ------- Frank P. Louchheim /S/ JOSEPH T. SMITH Director 3/30/00 - ------------------- ------- Joseph T. Smith /S/ JOHN J. GAVIN Director 3/30/00 - ------------------ ------- John J. Gavin /S/ LARRY A. EVANS Director 3/30/00 - ------------------ ------- Larry A. Evans /S/ DR. MARTI D. SMYE Director 3/30/00 - --------------------- ------- Dr. Marti D. Smye /S/ JOHN R. BOURBEAU Director 3/30/00 - -------------------- ------- John R. Bourbeau /S/ RAYMOND B. LANGTON Director 3/30/00 - ---------------------- ------- Raymond B. Langton /S/ REBECCA J. MADDOX Director 3/30/00 - --------------------- ------- Rebecca J. Maddox /S/ CATHERINE Y. SELLECK Director 3/30/00 - ------------------------ ------- Catherine Y. Selleck /S/ FREDERICK R. DAVIDSON Director 3/30/00 - ------------------------- ------- Frederick R. Davidson 23 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 January 29, 2000. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The financial statement schedule listed on page 25 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 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 January 29, 2000
Right Management Consultants, Inc. Schedule II - Valuation and Qualifying Accounts and Reserves For the Years Ended December 31, 1999, 1998 and 1997 Additions ------------------------------ Balance at Charged to Charged to Balance at Beginning of Costs and Other End of Description Year Expenses Accounts Deductions Year 1999: Allowance for doubtful accounts $ 1,066,000 $ 614,000 -- $ 213,000 $ 1,467,000 =========== =========== 1998: Allowance for doubtful accounts $ 663,000 $ 576,000 -- $ 173,000 $ 1,066,000 =========== =========== 1997: Allowance for doubtful accounts $ 552,000 $ 329,000 -- $ 218,000 $ 663,000 =========== =========== Deferred income tax asset valuation reserve $ 192,000 -- -- $ 192,000 (1) $ -- =========== =========== (1) Reduction due to the utilization and expiration of certain foreign net operating losses.
Exhibit Index Exhibit No. Description 10.21 Supplemental Executive Retirement Plan for certain employees, dated January 1, 2000 13 The Company's 1999 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 - 1999 + + Filed in electronic form only. EX-10.21 2 Right Management Consultants, Inc. Plan Document and SERP Agreement Right Management Consultants, Inc. Supplemental Executive Retirement Plan ("SERP") Table of Contents Section 1 - Statement of Purpose 2 Section 2 - Definitions 2 Section 3 - Eligibility and Participation 4 Section 4 - Retirement Benefit 5 Section 5 - Survivor Benefit 6 Section 6 - Change in control; Termination of Employment 6 Section 7 - Disability Benefit and Authorized Leave of Absence 7 Section 8 - Restrictive Covenant 7 Section 9 - Administration 8 Section 10 - Company-Owned Life Insurance ("COLI") 9 Section 11 - Miscellaneous 9 Section 12 - Construction 11 Exhibit A - Specimen SERP Agreement 13 Exhibit B - Board of Directors Plan Summary 15 Exhibit C - Board of Directors Adoption Resolution 17 Exhibit D - Participant Beneficiary Designation 18 Exhibit E - U.S. Department of Labor Notification 19 Exhibit F - Proxy Disclosure 20 1 Section 1 - Statement of Purpose This Plan (as herein defined) is designed and implemented for the purpose of providing to a limited group of key management or highly compensated employees of the Company (as herein defined) who are largely responsible for the Company's success the opportunity to receive deferred compensation in the form of supplemental executive retirement benefits, thereby increasing the incentive for such key employees to remain in the employ of the Company and to make the Company more profitable. Special payments shall be made to Participants (as herein defined) upon retirement or death and are intended to provide Participants with additional financial security. Section 2 - Definitions 2.1 "Accrued Benefit" means a Participant's retirement benefit, as described in Section 4 hereof. 2.2 "Actuarial Equivalent" means, with respect to a given benefit, any other benefit provided under the terms of the Plan which has the same present or equivalent value on the date the given benefit payment commences, based on the use of actuarial equivalent factors adopted by the Company and being used to value the Plan liabilities at the time of the calculation. 2.3 "Beneficiary" means any person or persons designated by a Participant in writing on a form satisfactory to the Company. In the absence of any living designated beneficiary, a deceased Participant's Beneficiary shall be the deceased Participant's then living spouse, if any, for his or her life; if none, or from and after such spouse's death, then the living children of the deceased Participant, if any, in equal shares, for their joint and survivor lives; and if none, or after their respective joint and survivor lives, the estate of the deceased Participant. 2.4 "Board" means the Board of Directors of the Company, or any committee of such Board that is authorized to oversee, administer and amend the Plan. 2.5 "Change of Control" means the purchase or other acquisition by any person, entity or group of persons, within the meaning of section 13(d) or 14(d) of the Securities Exchange Act of 1934 (hereinafter called "Act"), or any comparable successor provisions, of beneficial ownership (within the meaning of Rule 13e-3 promulgated under the Act) of 30-percent or more of either the outstanding shares of common stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally, or the approval by the shareholders of the Company of a reorganization, merger, or consolidation, in each case, with respect to which persons who were shareholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50-percent of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated the Company's then outstanding securities, or a liquidation or dissolution of the Company or of the sale of all or substantially all of the Company's assets. 2.6 "Company" means Right Management Consultants, Inc., including any subsidiaries, successors and assigns thereto. The Company is a corporation. 2 2.7 "Disability" means a physical or mental condition of a Participant resulting from bodily injury, disease or mental disorder, which renders him or her incapable of continuing his or her usual and customary employment with the Company. The Disability of a Participant shall be determined by a licensed physician selected by the Company. 2.8 "Early Retirement Date" means a date on which a Participant retires from the Company on or after attaining age fifty-five (55) and at least one (1) year of Participation in the Plan, then having completed at least ten (10) years of employment service with the Company. 2.9 "Effective Date" means December 31, 1999. 2.10 "High Average Recognized Compensation" means the Recognized Compensation (as defined herein) of a Participant for each of the three (3) consecutive calendar years of his or her employment service with the Company which produce the highest annual average. If a Participant has been in the employ of the Company for more than one (1) calendar year but less than three (3) calendar years, then the High Average Recognized Compensation for that Participant shall be based upon that Participant's actual calendar years of service. If a Participant has served with the Company for less than one (1) year, then the High Average Recognized Compensation for that Participant shall be equal to the Participant's Recognized Compensation. 2.11 "Normal Retirement Date" means the date on which a Participant retires from the Company on or after attaining age sixty-five (65) and at least one (1) year of Participation in the Plan. 2.12 "Participant" means an employee of the Company selected by the Board for participation in the Plan in accordance with Section 3 hereof, and who has not for any reason become ineligible to participate further in this Plan. An individual shall be deemed to continue as a Participant until all benefits payable to the Participant under this Plan have been distributed. 2.13 "Plan" means the Right Management Consultants, Inc. Supplemental Executive Retirement Plan ("SERP") as contained in this document, including all amendments thereto. 2.14 "Plan Year" means the twelve month period commencing on January 1 of each year and ending the following December 31. 2.15 "Recognized Compensation" means the annual compensation level to be used for purposes of the Plan in determining the amount of benefits to which a Participant is entitled. Each Participant's Recognized Compensation shall be that amount listed in that Participant's SERP Agreement (as herein defined). 2.16 "SERP Agreement" means a written agreement between a Participant and the Company in substantially the form attached hereto as Exhibit A. 2.17 "Termination for Cause" means the termination of a Participant's employment with the Company for any one or more of the following reasons: (a) embezzlement or theft from the Company, or other acts of dishonesty in dealing with the Company; (b) use by the Participant of alcohol, drugs, narcotics, or other controlled substances to such an extent that the Participant's ability to perform his or her duties as an employee of the Company is materially impaired; (c) conviction of a crime amounting to a felony under the laws of the United States of America or any of the several states; (d) when the seriousness of an initial infraction is of such gravity that termination is warranted; or, (e) when prior attempts through corrective counseling have failed to 3 improve performance, attendance, conduct or any combination thereof. The determination of whether or not there has been a Termination for Cause shall be made by the Board provided that, if the terminated Participant is a member of the Board, he or she shall not participate in the determination. 2.18 "Year of Service" means a period of twelve consecutive months during which a Participant is employed by the Company. Unless otherwise provided in his or her SERP Agreement, in determining a Participant's Years of Service, he or she shall receive credit for service from and after his or her most recent employment commencement date. Section 3 - Eligibility and Participation 3.1 Eligibility. The Board, in its sole discretion, shall select the employees of the Company who are eligible to become Participants. The Board, in its sole discretion, shall designate for each selected Participant, whether he or she shall be a Category 1 or a Category 2 Participant. 3.2 Participation. The Board, or its designee shall notify those employees selected for participation of the Category they have been selected for and of the benefits available under the Plan. An eligible employee becomes a Participant in the Plan upon the execution and delivery by him or her and the Company of a SERP Agreement. Thereafter, a Participant shall remain a Participant as long as he or she is continuously employed by the Company. 3.3 Suicide. Notwithstanding any other term or provision of this Plan or any SERP Agreement, this Plan and the applicable SERP Agreement shall be void and of no force or effect with respect to any Participant who dies by reason of suicide within two (2) years after the date of his or her SERP Agreement, and no benefit of any kind shall be payable under this Plan to such Participant, his or her Beneficiary or any other person claiming under him or her. 4 Section 4 - Retirement Benefit 4.1 Normal Retirement Benefit. If a Participant is continually employed by the Company until his or her Normal Retirement Date, he or she shall be entitled to receive as a normal retirement benefit annual payments equal to that percentage of his or her High Average Recognized Compensation specified in his or her SERP Agreement. This normal retirement benefit shall be payable in equal monthly installments commencing on the first day of the month following the Participant's Normal Retirement Date and continuing for the remainder of the Participant's life. Upon attaining a Participant's Normal Retirement Date, a Participant shall be 100% vested in his or her normal retirement benefit. The percentage of his or her High Average Recognized Compensation shall be determined as follows: 4.1.a. A Category 1 Participant's normal retirement benefit shall be equal to 40% of his or her High Average Recognized Compensation. 4.1.b. A Category 2 Participant's normal retirement benefit shall be equal to 20% of his or her High Average Recognized Compensation, reduced proportionately for total service less than 20 years, and for Plan participation less than 5 years. 4.2 Early Retirement Benefit. If a Participant is employed by the Company until his or her Early Retirement Date, he or she shall be entitled to receive an early retirement benefit equal to the Actuarial Equivalent amount of his or her Accrued Benefit which is vested, in accordance with Section 6.2, at such Early Retirement Date. This early retirement benefit shall be payable in equal monthly installments commencing on the first day of the month following the Participant's actual retirement, continuing for the remainder of the Participant's life. 4.3 Death After Commencement of Retirement Benefit. If a Participant should die prior to the completion of one-hundred-twenty (120) monthly payments, such monthly payments shall be continued to the Participant's Beneficiary until the completion of one-hundred-twenty (120) combined monthly payments. 4.4 Alternate Form of Payment. The Company may, in its sole and absolute discretion, approve a retiring Participant's request of an alternate form of payment of the benefit, in which case such payments shall be in the amount of the Actuarial Equivalent of the normal form of benefit hereunder. 4.5 Forfeiture of Benefits. Notwithstanding the foregoing provisions of this Section 4, a Participant shall forfeit all benefits under the Plan if his or her employment with the Company terminates by reason of a Termination for Cause or if he or she violates the restrictive covenant set forth in Section 8 hereof. 5 Section 5 - Survivor Benefit 5.1 Survivor Benefit. If a Participant dies while employed by the Company, the Company shall pay to the Beneficiary of the Participant the survivor benefit specified in the Participant's SERP Agreement. This survivor benefit shall be equal to that percentage of his or her Recognized Compensation specified in his or her SERP Agreement. . Section 6 -Change in Control; Termination of Employment 6.1 Termination Benefit. If a Participant terminates employment with the Company prior to attaining his or her Early Retirement Date, other than by reason of death or Disability, said Participant shall be entitled to his or her vested percentage of his or her Accrued Benefit as determined in Section 6.2 herein, payable commencing upon the Participant's attaining Normal Retirement Date. 6.2 Vested Percentage. (1) A Participant's vested percentage shall be determined in accordance with the following schedule: (A) Category 1 Participants - The vested percentages shall be 5% for each year of service with the Company plus 10% for each year of Plan participation. For example, if prior to reaching his Early Retirement Date a Category 1 employee terminates employment with 5 years of total service with the Company and 3 years of Plan participation, the employee would be 55% vested (5 times 5% plus 3 times 10%) (B) Category 2 Participants. Completed Years of Plan Participation Participant Vested Percentage 1 20.00 2 40.00 3 60.00 4 80.00 5 or more 100.00% (2) If a Participant terminates employment with the Company prior to attaining his or her Early Retirement Date by reason of a Termination for Cause, he or she shall not be entitled to any benefits under the Plan. 6.3 Change of Control (1) Notwithstanding anything to the contrary herein, upon a Change of Control of the Company, then, for purposes of this Plan, for each of the individuals who was a Participant in the Plan and employed by the Company immediately prior to such change, it shall be deemed that the Participant has remained in the employ of the Company and continued as a participant in the Plan until the earlier to occur of: (a) the Participant's death; or (b) the Participant's attaining his or her Normal Retirement Date. In such case, the Participant, at his or her sole discretion, shall be entitled to commence receipt of the Actuarial Equivalent amount of his or her normal retirement benefit at any time after termination of employment. 6 Furthermore, if at the time a Change of Control occurs, the Company had established a trust in accordance with Section 9.5 hereof, the Company shall be required to transfer cash and/or other assets to said trust in an amount equal to the discounted present value of all of the future benefits payable hereunder to the Participants or Beneficiaries. The discount rate shall be the 5-Year United States Treasury Note rate as published on the first day of the month immediately preceding the date on which the determination is made, compounded annually. If these rates are no longer published, the discount rate shall be some other similar average selected by the Board in its sole discretion. The provisions of this paragraph 6.3 shall not apply to any transaction where the Executive Officers, as designated by the Company, immediately prior to the Change of Control own 20% or more of the entity after the transaction. Section 7 - Disability Benefit and Authorized Leave of Absence 7.1 Disability Benefit. Notwithstanding anything to the contrary herein, if a Participant's employment with the Company is terminated prior to attaining his or her Early Retirement Date as a result of the Participant's Disability, then, for purposes of this Plan, it shall be deemed that the Participant has remained in the employ of the Company until the earliest to occur of: (a) the Participant's death; (b) the Participant's attaining his or her Early Retirement Date; or (c) the cessation of the Participant's Disability and the failure of the Participant to return to active employment with the Company within a reasonable time after recovery from the Disability. 7.2 Authorized Leave of Absence. A Participant's employment with the Company shall not be deemed to have terminated for purposes of this Plan during any authorized leaves of absence. Section 8 - Restrictive Covenant 8.1 Restrictive Covenant. It shall be a condition to the payment of benefits under this Plan that, during the first one-year period after termination of employment or retirement, the Participant does not own, manage, operate, join, control, be employed by, or participate in the ownership, management, operation, or control of, or be connected in any manner with, any business that is then in competition with the Company. If there is a failure of this condition, the Company may immediately cease all further payments to the Participant under the Plan, and the Participant and his or her Beneficiary shall be deemed to have forfeited all further payments otherwise payable. 7 Section 9 - Administration 9.1 General. The Plan shall be administered by the Board or its designee. The Board shall have the authority, subject to the terms of the Plan, to construe the provisions of the Plan and to adopt rules and regulations and make all determinations necessary or advisable for the administration of the Plan. The Board shall make all determinations as to rights to benefits under the Plan. No member of the Board shall be liable for any action of determination made in good faith with respect to the Plan or any SERP Agreement. Any decision by the Board denying a claim by a Participant or a Beneficiary for benefits under the Plan shall be stated in writing and delivered or mailed to the Participant or Beneficiary at his or her last known address. Such decision shall set forth the specific reasons for the denial of benefits. In addition, the Board shall afford a reasonable opportunity to the Participant or Beneficiary for a full and fair review of the decision denying such claim. 9.2 Participant Statement. The Company shall provide each Participant on an annual basis with a statement showing that Participant's current and projected Survivor Income Benefit (as defined herein) and Retirement Benefit (as defined herein) under the Plan. 9.3 Interpretation. The interpretation and construction of the Plan by the Board, and any action taken hereunder, shall be binding and conclusive upon all parties in interest. No member of the Board shall be liable to any person for any action taken or omitted to be taken in connection with the interpretation, construction or administration of the Plan, so long as such action or omission be made in good faith. 9.4 Authority to appoint a Committee. The Board, within its discretion, shall have the authority to appoint a committee of not less than three (3) of its members which shall have authority over the Plan in lieu of the entire Board. 9.5 Authority to establish a Trust. The Board shall have the right at any time to establish a trust to which the Company may transfer from time to time certain assets to be used by said trustee(s) to satisfy some or all of the Company's obligations and liabilities under the Plan. All assets held by such trust shall be subject to the claims of the Company's creditors in the event of the Company's Insolvency (as defined herein). The Company shall be considered "Insolvent" for purposes of said trust if: (a) the Company is unable to pay its debts as they become due; and (b) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. 9.6 Prepayment. The Board may, in its sole and absolute discretion, prepay all or any part of the monthly installments remaining to be paid to the Participant or the Beneficiary under this Plan. The amount of such prepayment shall equal the Actuarial Equivalent of the remaining monthly installments being prepaid, as determined by the Board in its discretion, and receipt thereof by the Participant or Beneficiary shall be in full satisfaction of all remaining obligations of the Company under the Plan and applicable SERP Agreement. 8 9.7 Amendment and Termination of the Plan. The Company reserves the right, at any time and from time to time, by action of the Board, to amend or terminate the Plan. Notwithstanding the foregoing, no such amendment or termination shall reduce (a) the benefits (including survivor benefits) of a Participant (or Beneficiary) to whom payments under this Plan had then commenced, or (b) the benefits (including survivor benefits) of a Participant who has then attained his or her Early Retirement Date, or (c) the benefits (including survivor benefits) of a Participant whose employment with the Company has been terminated. In addition, each other Participant employed by the Company on the date of such amendment or termination shall be entitled to benefits (including survivor benefits) under this Plan, at such time as such benefits would have been paid absent such amendment or termination, in an amount equal to the amount that would have been paid under the Plan if he or she had terminated employment on the day immediately preceding the date of such amendment or termination of the Plan. Section 10 - Company-Owned Life Insurance ("COLI") 10.1 Company Owns All Rights. In the event that, in its discretion, the Company purchases a life insurance policy or policies insuring the life of any Participant to allow the Company to informally finance and/or recover, in whole or in part, the cost of providing the benefits hereunder, neither the Participant nor any Beneficiary shall have any rights whatsoever therein. The Company shall be the sole owner and beneficiary of any such policy or policies and shall possess and may exercise all incidents of ownership therein, except in the event of the establishment of and transfer of said policy or policies to a trust by the Company as described in Section 9 hereof. 10.2 Participant Cooperation. If the Company decides to purchase a life insurance policy or policies on any Participant, the Company will so notify each Participant. Each Participant shall consent to being insured for the benefit of the Company and shall take whatever actions may be necessary to enable the Company to timely apply for and acquire such life insurance and to fulfill the requirements of the insurance carrier relative to the issuance thereof as a condition of eligibility to participate in the Plan. 10.3 Participant Misrepresentation. If: (a) any Participant is required by this Plan to submit information to any insurance carrier; and (b) the Participant makes a material misrepresentation in any application for such insurance; and (c) as a result of that material misrepresentation the insurance carrier is not required to pay all or any part of the proceeds provided under that insurance, then the Participant's (or the Participant's Beneficiary's) rights to any benefits under this Plan may be, at the sole discretion of the Board, reduced in proportion to the reduction of proceeds that is paid by the insurance carrier because of such material misrepresentation. Section 11 - Miscellaneous 11.1 Nonalienation of Benefits. No right or benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or charge, and any attempt to 9 anticipate, alienate, sell, assign, pledge, encumber, or charge any right or benefit under this Plan or any SERP Agreement shall be void. No such right or benefit shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the person entitled thereto. If a Participant or any Beneficiary hereunder shall become bankrupt, or attempt to anticipate, alienate, sell assign, pledge, encumber, or charge any right hereunder, then such right or benefit shall, in the discretion of the Board, cease and terminate, and in such event, the Board may hold or apply the same or any part thereof for the benefit of the Participant or his or her Beneficiary, spouse, children, or other dependents, or any of them in such manner and in such amounts and proportions as the Board may deem proper. 11.2 Unsecured Company Liability. The obligation of the Company to make payments hereunder to a Participant shall constitute an unsecured liability of the Company. Such payments shall be made from the general funds of the Company, and the Company shall not be required to establish or maintain any special or separate fund, to purchase or acquire life insurance on a Participant's life, or otherwise to segregate assets to assure that such payments shall be made. Neither a Participant nor any other person shall have any interest in any particular asset of the Company by reason of its obligations hereunder, and the right of any of them to receive payments under this Plan shall be no greater than the right of any other unsecured general creditor of the Company. Nothing contained in the Plan shall create or be construed as creating a trust of any kind or any other fiduciary relationship between the Company and a Participant or any other person. 11.3 No Employment Agreement. Neither the execution of this Plan or any SERP Agreement nor any other action taken by the Company pursuant to this Plan shall be held or construed to confer on a Participant any legal right to be continued as an employee of the Company or to restrict the right of the Company to terminate his or her employment. 11.4 Designation of Beneficiary. Each Participant shall file with the Company a notice in writing, in a form acceptable to the Board, designating one or more Beneficiaries to whom payments becoming due by reason of or after his or her death shall be made. Participants shall have the right to change the Beneficiary or Beneficiaries so designated from time to time; provided, however, that no such change shall become effective until received in writing and acknowledged by the Company. 11.5 Payment to Incompetents. The Company shall make the payments provided herein directly to the Participant or Beneficiary entitled thereto or, if such Participant or Beneficiary has been determined by a court of competent jurisdiction to be mentally or physically incompetent, then payment shall be made to the duly appointed guardian, committee or other authorized representative of such Participant or Beneficiary. The Company shall have the right to make payment directly to a Participant or Beneficiary until it has received actual notice of the physical or mental incapacity of such Participant or Beneficiary and actual notice of the appointment of a duly authorized representative of his or her estate. Any payment to or for the benefit of a Participant or Beneficiary shall be a complete discharge of all liability of the Company therefore. 11.6 Claims for Benefits. Each Participant or other person claiming any benefit under this Plan must give written notification thereof to the Company. If a claim is denied, it must be denied within a reasonable period of time, and be contained in a written notice stating the following: (a) the specific reason for the denial; (b) specific reference to the Plan provision on which the denial is based; (c) description of additional information necessary for the claimant to 10 present his or her claim, if any, and an explanation of why such material is necessary; (d) an explanation of the Plan's claims review procedure. The claimant will have 60 days to request a review of any denial by the Board. The request for review must be in writing and delivered to the Board, which will then provide a full and fair review. The claimant may review pertinent documents, and he or she may submit issues and comments in writing. The decision by the Board with respect to the review must be given within 60 days after receipt of the request, unless special circumstances require an extension (such as for a hearing). In no event shall the decision be delayed beyond 120 days after receipt of the request for review. The decision shall be written in a manner calculated to be understood by the claimant, and it shall include specific reasons and refer to specific Plan provisions on which it is based. 11.7 Binding Effect. Obligations incurred by the Company pursuant to this Plan shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the Participant, his or her Beneficiaries, personal representatives, heirs, and legatees. 11.8 Entire Plan. This document and any amendments hereto contain all the terms and provisions of the Plan and shall constitute the entire Plan, any other alleged terms or provisions being of no effect. 11.9 Merger, Consolidation or Acquisition. In the event of a merger or consolidation of the Company with another corporation or entity, or the acquisition of the outstanding stock of the Company by another corporation or entity, then and in such event the obligation and responsibilities of the Company under this Plan shall be assumed by any such successor or acquiring corporation or entity, and all of the rights, privileges and benefits of the Participant hereunder shall continue. 11.10 Enforceability. If any term or condition of this Plan shall be invalid or unenforceable to any extent or in any application, then the remainder of the Plan, and such term or condition except to such extent or in such application, shall not be affected thereby, and each and every term and condition of the Plan shall be valid and enforced to the fullest extent and in the broadest application permitted by law. Section 12 - Construction 12.1 Governing Law. This Plan shall be construed and governed in accordance with the laws of the Commonwealth of Pennsylvania. 12.2 Gender. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender, and the singular may include the plural, unless the context clearly indicates to the contrary. 12.3 Headings, etc. All headings used in this Plan are for convenience of reference only and are not part of the substance of this Plan. IN WITNESS WHEREOF, this Plan, having been duly approved and adopted by the Board of Directors of the Company, is executed by the duly authorized officers of the Company as of the Effective Date. 11 Right Management Consultants, Inc. By: /S/ RICHARD J. PINOLA --------------------- Chairman and Chief Executive Officer {Name and Title} (Corporate Seal) Attest: /S/ CHARLES J. MALLON Secretary EX-13 3
Right Management Consultants, Inc. Selected Financial Data (Dollars and Shares in Thousands Except Earnings Per Share and Stock Prices) Year Ended December 31, ------------------------------------------------------------------------------ 1999 1998 1997 1996 1995 ------------------------------------------------------------------------------ Results of Operations (1) - --------------------------------------------------------------------------------------------------------------------------- Total revenue $ 181,324 $ 168,258 $ 125,786 $ 125,269 $ 114,005 - --------------------------------------------------------------------------------------------------------------------------- Costs and expenses 166,158 155,186 121,366 108,994 101,090 - --------------------------------------------------------------------------------------------------------------------------- Income before income taxes 15,166 13,072 4,420 16,275 12,915 - --------------------------------------------------------------------------------------------------------------------------- Net income 8,628 6,607 2,073 9,675 7,819 - --------------------------------------------------------------------------------------------------------------------------- Diluted earnings per share (2) $ 1.32 $ 0.98 $ 0.31 $ 1.45 $ 1.24 - --------------------------------------------------------------------------------------------------------------------------- Diluted weighted average number of shares outstanding (2) 6,550 6,758 6,725 6,663 6,290 - --------------------------------------------------------------------------------------------------------------------------- Balance Sheet Data - --------------------------------------------------------------------------------------------------------------------------- Working capital $ 9,111 $ 15,281 $ 15,491 $ 25,342 $ 13,134 - --------------------------------------------------------------------------------------------------------------------------- Total assets 120,592 114,595 81,704 73,935 60,231 - --------------------------------------------------------------------------------------------------------------------------- Long-term obligations (3) 20,270 10,850 10,597 8,768 7,360 - --------------------------------------------------------------------------------------------------------------------------- Shareholders' equity 55,982 56,818 50,450 47,801 33,626 - --------------------------------------------------------------------------------------------------------------------------- Total debt-to-equity ratio 43% 25% 25% 17% 28% - --------------------------------------------------------------------------------------------------------------------------- Return on average equity 15% 12% 4% 24% 27% - --------------------------------------------------------------------------------------------------------------------------- Stock Price Ranges - --------------------------------------------------------------------------------------------------------------------------- Low price $ 9.63 $ 11.00 $ 8.75 $ 15.00 $ 6.89 - --------------------------------------------------------------------------------------------------------------------------- High price 19.00 15.75 23.50 27.50 19.50 - --------------------------------------------------------------------------------------------------------------------------- (1) See Note C to the Consolidated Financial Statements for information regarding acquisitions. (2) See Note K to the Consolidated Financial Statements for information regarding earnings per share. (3) Long-term obligations above includes Long-term debt and other obligations and Deferred compensation.
ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of Right Management Consultants, Inc.: We have audited the accompanying consolidated balance sheets of Right Management Consultants, Inc. (a Pennsylvania corporation) and subsidiaries as of December 31, 1999 and 1998 and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Right Management Consultants, Inc. and subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. /S/ ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania January 29, 2000
Right Management Consultants, Inc. Consolidated Balance Sheets (Dollars in Thousands Except Share Data) December 31, 1999 1998 Assets Current Assets: Cash and cash equivalents $ 11,187 $ 20,800 Accounts receivable, trade, net of allowance for doubtful accounts of $1,467 and $1,066 in 1999 and 1998, respectively 34,042 33,271 Royalties and fees receivable from Affiliates 2,831 3,809 Prepaid expenses and other current assets 3,270 2,189 Deferred income taxes 1,122 815 ----------- ------------ Total current assets 52,452 60,884 Property and equipment, net 18,488 15,983 Intangible assets, net 43,730 33,947 Equity investment in joint venture 2,130 - Deferred income taxes 1,792 1,937 Other 2,000 1,844 ----------- ------------ Total Assets $120,592 $114,595 =========== ============ Liabilities and Shareholders' Equity Current Liabilities: Current portion of long-term debt and other obligations $ 6,008 $ 5,124 Accounts payable 7,694 7,514 Commissions payable 1,897 2,572 Accrued incentive compensation and benefits 12,341 15,490 Other accrued expenses 7,337 8,191 Deferred income 8,064 6,712 ----------- ------------ Total current liabilities 43,341 45,603 ----------- ------------ Long-term debt and other obligations 18,279 9,065 ----------- ------------ Deferred compensation 1,991 1,785 ----------- ------------ Minority interests in subsidiaries 999 1,324 ----------- ------------ Commitments and Contingent Liabilities (Notes E, G and I) Shareholders' Equity (Note J): Preferred stock, no par value; 1,000,000 shares authorized; no shares issued - - Common stock, $.01 par value; 20,000,000 shares authorized; 7,512,193 and 7,255,765 shares issued in 1999 and 1998, respectively 75 72 Additional paid-in capital 19,340 16,448 Retained earnings 53,598 44,970 Accumulated other comprehensive income (938) (727) ----------- ------------ 72,075 60,763 Less treasury stock, at cost, 1,494,552 and 547,952 shares in 1999 and 1998, respectively (16,093) (3,945) ----------- ------------ Total shareholders' equity 55,982 56,818 ----------- ------------ Total Liabilities and Shareholders' Equity $120,592 $114,595 =========== ============ The accompanying notes are an integral part of these consolidated financial statements.
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Right Management Consultants, Inc. Consolidated Statements of Income (Dollars and Shares in Thousands Except Earnings per Share Data) Year Ended December 31, 1999 1998 1997 ----- ----- ---- Revenue: Company office revenue $ 176,980 $ 163,847 $ 122,281 Affiliate royalties 4,344 4,411 3,505 -------------- -------------- -------------- Total revenue 181,324 168,258 125,786 -------------- -------------- -------------- Expenses: Consultants' compensation 71,306 68,550 52,085 Office sales and consulting support 12,282 10,854 7,291 Office depreciation 5,169 4,047 3,200 Office administration 56,565 52,007 44,502 General sales and administration 14,911 15,007 10,209 Corporate depreciation and amortization 5,250 3,992 3,294 Restructuring costs (Note B) - - 630 -------------- -------------- -------------- 165,483 154,457 121,211 -------------- -------------- -------------- Income from operations 15,841 13,801 4,575 -------------- -------------- -------------- Other income (expense): Interest income 713 496 663 Interest expense (1,388) (1,225) (818) -------------- -------------- -------------- (675) (729) (155) -------------- -------------- -------------- Income before income taxes 15,166 13,072 4,420 Provision for income taxes 6,485 5,882 2,009 Minority interests in net income of subsidiaries 343 583 338 Equity in earnings of unconsolidated joint venture 290 - - -------------- -------------- -------------- Net income $ 8,628 $ 6,607 $ 2,073 ============== ============== ============== Basic earnings per share $ 1.33 $ 0.99 $ 0.31 ============== ============== ============== Diluted earnings per share $ 1.32 $ 0.98 $ 0.31 ============== ============== ============== Basic weighted average shares outstanding 6,487 6,674 6,596 ============== ============== ============== Diluted weighted average shares outstanding 6,550 6,758 6,725 ============== ============== ============== The accompanying notes are an integral part of these consolidated financial statements.
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Right Management Consultants, Inc. Consolidated Statements of Shareholders' Equity (Dollars in Thousands Except Share Data) Accumulated Other Total Common Stock Additional Retained Comprehensive Treasury Stock Shareholders' Shares Par Value Paid-in Capital Earnings Income Shares Cost Equity Balance, December 31, 1996 6,713,573 $67 $11,956 $36,290 $5 252,952 $(517) $47,801 Stock options exercised 236,095 3 1,198 -- -- -- -- 1,201 Tax benefit from exercise of stock options -- -- 597 -- -- -- -- 597 Davidson & Associates acquisition (Note C) 96,577 1 988 -- -- -- -- 989 Shares issued under the Employee Stock Purchase Plan 37,859 -- 386 -- -- -- -- 386 Restricted stock compensation -- -- (633) -- -- -- -- (633) Repurchase of common stock -- -- -- -- -- 127,500 (1,379) (1,379) Comprehensive Income: Net income -- -- -- 2,073 -- -- -- 2,073 Translation adjustment -- -- -- -- (585) -- -- (585) ---------- Total comprehensive income 1,488 ---------- ---------- ---------- ---------- ------ ---------- ---------- ---------- Balance, December 31, 1997 7,084,104 $71 $14,492 $38,363 $(580) 380,452 $(1,896) $50,450 Stock options exercised 169,500 1 1,208 -- -- -- -- 1,209 Tax benefit from exercise of stock options -- -- 364 -- -- -- -- 364 Shares issued under the Employee Stock Purchase Plan 36,151 -- 384 -- -- -- -- 384 Restricted stock forfeiture/cancellations (33,990) -- -- -- -- -- -- -- Repurchase of common stock -- -- -- -- -- 167,500 (2,049) (2,049) Comprehensive Income: Net income -- -- -- 6,607 -- -- -- 6,607 Translation adjustment -- -- -- -- (147) -- -- (147) ---------- Total comprehensive income 6,460 ---------- ---------- ---------- ---------- ------ ---------- ---------- ---------- Balance, December 31, 1998 7,255,765 $72 $16,448 $44,970 $(727) 547,952 $(3,945) $56,818 Stock options exercised 215,296 3 1,778 -- -- -- -- 1,781 Tax benefit from exercise of stock options -- -- 324 -- -- -- -- 324 Award of common stock 7,000 -- 100 -- -- -- -- 100 Shares issued under the Employee Stock Purchase Plan 55,582 -- 690 -- -- -- -- 690 Restricted stock forfeiture/cancellations (21,450) -- -- -- -- -- -- -- Repurchase of common stock -- -- -- -- -- 946,600 (12,148) (12,148) Comprehensive Income: Net income -- -- -- 8,628 -- -- -- 8,628 Translation adjustment -- -- -- -- (211) -- -- (211) ---------- Total comprehensive income 8,417 ---------- ---------- ---------- ---------- ------ ---------- ---------- ---------- Balance, December 31, 1999 7,512,193 $75 $19,340 $53,598 $(938) 1,494,552 $(16,093) $55,982 ========== ========== ========== ========== ====== ========== ========== ========== The accompanying notes are an integral part of these consolidated financial statements.
4 Right Management Consultants, Inc. Consolidated Statements of Cash Flows (Dollars in Thousands)
Year Ended December 31, 1999 1998 1997 -------- -------- -------- Operating Activities: Net income $8,628 $6,607 $2,073 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,419 8,039 6,494 Deferred income taxes (162) (252) (510) Restricted stock compensation -- -- (633) Restructuring costs (Note B) -- -- 630 Revenue recognized upon completion of incomplete contracts assumed in acquisitions (609) (90) (807) Provision for doubtful accounts 614 576 329 Minority interests in net income of subsidiaries and capital contributions 392 583 338 Equity in earnings of unconsolidated joint venture (290) -- -- Other non-cash items 272 411 (332) Changes in operating accounts: Accounts receivable, trade and from Affiliates 1,837 (13,273) 531 Prepaid expenses and other assets (604) (582) (596) Accounts payable and accrued expenses (7,266) 19,925 (5,620) Commissions payable and other liabilities (694) 1,141 1,414 Deferred income 1,352 3,785 (941) -------- -------- -------- Net cash provided by operating activities 13,889 26,870 2,370 -------- -------- -------- Investing Activities: Purchase of property and equipment (8,876) (7,786) (5,201) Equity investment (1,680) -- -- Net cash paid for acquisitions and earnouts (12,480) (6,285) (13,199) -------- -------- -------- Net cash utilized by investing activities (23,036) (14,071) (18,400) -------- -------- -------- Financing Activities: Borrowings under credit agreements 15,366 6,012 7,500 Payment of long-term debt and other obligations (6,346) (4,770) (2,458) Cash dividends declared and paid to minority interests (Note J) (70) (670) -- Tax benefit from the exercise of stock options 324 364 597 Repurchase of common stock (12,148) (2,049) (1,379) Proceeds from stock issuances 2,571 1,593 1,587 -------- -------- -------- Net cash (utilized by) provided by financing activities (303) 480 5,847 -------- -------- -------- Effect of exchange rate changes on cash and cash equivalents (163) (62) (289) -------- -------- -------- Increase (decrease) in cash and cash equivalents (9,613) 13,217 (10,472) Cash and cash equivalents, beginning of year 20,800 7,583 18,055 -------- -------- -------- Cash and cash equivalents, end of year $11,187 $20,800 $7,583 ======== ======== ======== Supplemental Disclosures of Cash Flow Information Cash paid for: Interest $1,229 $1,019 $687 ======== ======== ======== Income taxes $6,820 $3,031 $3,395 ======== ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
5 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business Right Management Consultants, Inc. (the "Company") operations are segregated into two lines of business: career transition and human resources (including career management) consulting. Through a worldwide network of Company and Affiliate offices, Right Management Consultants, Inc. develops and delivers career transition services and provides human resources and career management consulting services, specializing in helping companies with building competencies, organizational change, leadership development, employee communication and talent management. The Company primarily delivers its services to mid-size and large industrial and service companies, with no concentration in specific companies or industries. Principles of Consolidation The consolidated financial statements include the accounts of Right Management Consultants, Inc. and its wholly-owned and majority-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The Company's investment in a Japanese joint venture, in which it owns a 20% interest, is accounted for using the equity method. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles 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. Actual results could differ from those estimates. Revenue Recognition The Company recognizes contract revenue and the related direct compensation for the services provided by Company offices upon the performance of its obligations under consulting service contracts. Revenue, recorded at the start of performance of services, is deferred and recognized over the estimated average period within which the contracts are essentially completed. All direct and indirect costs are charged to expense in the period in which the obligations are incurred. Franchise Revenue Royalties from the members of the Company's network arise from agreements made with Affiliates, which generally operate exclusively in designated regional locations. The terms of these agreements require the Affiliates to provide services under the Company's service marks in accordance with programs and standards developed by the Company. Affiliate royalties are typically 10% of each Affiliate's gross billings and are recorded when the Affiliate bills its customers for services. 6 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Property and Equipment Property and equipment is carried at cost, or allocated cost for companies acquired in a purchase transaction. Depreciation is provided on the straight-line method over the estimated useful lives of the assets, which are generally three to seven years for furniture, fixtures and computer equipment. Leasehold improvements are depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the remaining term of the lease. Intangible Assets Amortization (Dollars in Thousands) Period 1999 1998 (Years) ---- ---- ------- Goodwill $53,728 $40,782 15 to 40 Other 1,526 1,279 5 ------- ------- 55,254 42,061 Less accumulated amortization 11,524 8,114 ------- ------- $43,730 $33,947 ======= ======= Amortization of these intangible assets was $3,433,000, $2,761,000 and $2,311,000 in 1999, 1998 and 1997, respectively. Impairment of Long-Lived Assets Pursuant to Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed Of", the Company is required to evaluate the potential impairment of long-lived assets and certain intangible assets on a periodic basis. The Company reviews the realizability of its long-lived assets and certain intangible assets by analyzing the projected cash flows and profitability of the acquired entities and adjusts the net book value of recorded assets when necessary. No material adjustments have been recorded during the three-year period ended December 31, 1999. 7 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Accounting for Interest Rate Swaps In June 1998, SFAS No. 133, " Accounting for Derivative Instruments and Hedging Activities, " was issued and is effective for fiscal years beginning after June 15, 2000. SFAS No. 133, as it applies to the Company, requires the impact of fluctuations in interest rates on hedging instruments to be reported in other comprehensive income. The Company uses interest rate swaps to reduce exposure to adverse fluctuations in interest rates. While these hedging instruments are subject to fluctuations in value, such fluctuations are offset by the change in value of the underlying exposures being hedged. The Company will adopt SFAS No. 133 effective January 1, 2001. Management believes that the adoption of SFAS No. 133 will not have a material impact on the Company's financial position or results of operations. Earnings Per Share The Company utilizes SFAS No. 128, "Earnings Per Share," to compute earnings per share. SFAS No. 128 requires dual presentation of basic and diluted earnings per share ("EPS") for complex capital structures on the Statements of Income. Basic EPS is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution from the exercise or conversion of securities into common stock. See Note K for further disclosure. Currency Translation The accounts of international subsidiaries are translated in accordance with SFAS No. 52, "Foreign Currency Translation", which requires that assets and liabilities of international operations be translated using the exchange rate in effect at the balance sheet date, and that the results of operations be translated at average exchange rates during the year. The effects of exchange rate fluctuations in translating assets and liabilities of international operations into U.S. dollars are accumulated and reflected as the cumulative translation adjustment in shareholders' equity. The effects of exchange rate fluctuations in translating the foreign currency transactions are included in general sales and administration expense for 1999, 1998 and 1997. There were no material transaction gains or losses in the accompanying Consolidated Financial Statements during the three-year period ended December 31, 1999. Accumulated Other Comprehensive Income In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive Income" which is effective for financial statements issued for fiscal years beginning after December 15, 1997. Comprehensive income is defined as net income plus revenues, expenses, gains and losses that, under generally accepted accounting principles, are excluded from net income. These items, which are excluded from net income, represent accumulated other comprehensive income. The Company's accumulated other comprehensive income is comprised of unrealized gains and losses from foreign currency translation adjustments and is presented in the Consolidated Statements of Shareholders' Equity. 8 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes." In accordance with SFAS No. 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the difference is reversed. New Accounting Pronouncement In December 1999, the Securities and Exchanges Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements". SAB No. 101 expresses the views of the SEC staff in applying generally accepted accounting principles to certain transactions. The Company is in the process of analyzing the impact of SAB No. 101 on its Consolidated Financial Statements and related disclosure. Reclassifications Certain amounts have been reclassified in the prior years' Consolidated Financial Statements and Notes to Consolidated Financial Statements to conform with the 1999 presentation. NOTE B - RESTRUCTURING COSTS During the first quarter 1997, the Company announced a corporate restructuring. The restructuring charge of $630,000 ($380,000 or $0.06, net of taxes) was primarily for severance payments related to reductions in employees and lease termination costs for the closure of several small "satellite" offices with limited future economic benefit to the Company. The Company completed all payments for severance and office closures during 1998. NOTE C - ACQUISITIONS AND LICENSING AGREEMENT 1999 Transactions Effective January 1, 1999, the Company acquired the outstanding stock of two European consulting firms and one European career transition firm for a combination of cash and future defined contingent payments. The firms included Groupe ARJ, with offices in Lyon and Paris France, Jouret Management Center, based in Brussels, Belgium, and N.V. Claessens Belgium, S.A., with four offices in Belgium. Effective August 1, 1999 the Company acquired the assets of Transition Management, Inc., a career transition firm with offices in Salt Lake City and Ogden, Utah, for a combination of cash and future defined contingent payments. Also effective August 1, 1999, the Company acquired the outstanding stock of the 9 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE C - ACQUISITIONS AND LICENSING AGREEMENT (Continued) consulting firm Key Management Strategies, located near Philadelphia, Pennsylvania, for a combination of cash and future defined contingent payments. Effective September 1, 1999, the Company acquired the outstanding stock of Mainstream Access Corporation, a career transition firm with offices in eleven cities throughout Canada, for a combination of cash and future defined contingent payments. Effective September 30, 1999, the Company acquired an additional interest in Davidson & Associates, a career transition firm with offices throughout Australia, New Zealand, Singapore and Hong Kong, increasing its then total ownership from 51% to 64%. As of January 1, 2000, the Company acquired the remaining 36% minority interest in Davidson & Associates (See Note M). As of January 1, 2000, the Company purchased the remaining minority-interest in its U.S. joint venture, TEAMS, Inc., a technology-based assessment firm located in Tempe, Arizona. The aggregate purchase price for the acquisitions made during 1999 totaled approximately $11,338,000, including costs of acquisitions and have been accounted for using the purchase method. The purchase price exceeded the fair value of the assets acquired by $13,226,000. The purchase price allocations for the 1999 acquisitions are based upon information available at this time and are subject to change. The Company has funded $8,400,000 of these acquisitions through borrowings under the Credit Agreement (See Note E). The Company acquired $1,246,000 in cash from these acquisitions resulting in net cash paid of approximately $10,092,000, including costs of acquisitions. In addition, during 1999, the Company paid approximately $2,388,000 in earnout payments related to acquisitions made in prior years. The net cash paid for these acquisitions and earnouts amounted to $12,480,000. Effective April 1, 1999, the Company acquired a 20% equity interest in Way Station, Inc., a leading career transition consulting firm in Japan, with offices in eight cities throughout Japan. The purchase price of this interest approximated $1,680,000, which was paid in cash, and has been accounted for using the equity method. At December 31, 1999 the total equity investment in Way Station was $2,130,000, including the excess of the cost of the investment over the underlying equity acquired. The excess amount will be amortized over a period of 15 years. There were no intercompany transactions made with Way Station during 1999. The equity in earnings of Way Station was recorded net of tax, and is reflected in the accompanying Consolidated Statements of Income. 1998 Transactions Effective January 1, 1998, the Company acquired certain assets and the business of Manus Associates ("Manus"), a Stamford, Connecticut human resource consulting firm, for a combination of cash and future defined incentives. The Company borrowed the full purchase price of $3,600,000 from its revolving credit facility in order to complete this transaction. Effective April 1, 1998, the Company acquired 51% of the outstanding shares of TEAMS, Inc. ("TEAMS"), a technology-based assessment firm specializing in 360-degree feedback instruments to support a wide spectrum of organizational 10 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE C - ACQUISITIONS AND LICENSING AGREEMENT (Continued) change initiatives. The purchase price of this acquisition, including costs of acquisition, approximated $2,308,000. The Company borrowed $2,300,000 from its revolving credit facility in order to complete this transaction. For the year ended December 31, 1998, the aggregate purchase price for acquisitions was approximately $6,285,000, including the costs of acquisitions and adjustments for prior acquisitions. The purchase price exceeded the fair value of the assets acquired by $6,375,000. Additionally, effective January 1, 1998, the Company entered into an exclusive licensing agreement with The Atlanta Consulting Group ("TACG"), an organizational consulting firm located in Atlanta, Georgia. Under this exclusive licensing agreement, the Company sells and delivers TACG's full range of products and methodologies and hired all former TACG employees. The following represents the assets acquired and liabilities assumed to arrive at net cash paid for acquisitions discussed above for each of the two years in the period ended December 31, 1999:
(Dollars in Thousands) Year Ended December 31, 1999 1998 ------ ----- Assets acquired: Accounts receivable $2,244 $ 12 Prepaid expenses and other assets 538 121 Fixed assets 695 245 Intangible assets 13,226 6,375 ------ ----- 16,703 6,753 ------ ----- Liabilities acquired: Current portion of long-term debt 1,114 -- Accounts payable and accrued expenses 3,044 104 Assumption of incomplete contracts 609 90 Long-term debt 103 274 ------ ----- 4,870 468 Additional equity acquired in Davidson & Associates 647 -- ------ ----- Cash paid for acquisitions, net of cash acquired $12,480 $6,285 ======= ======
Each acquisition has been accounted for as a purchase and the operating results of each entity have been consolidated with the Company's results since the effective date of the respective acquisition. The purchase price of each acquisition has been allocated to the assets acquired based upon their estimated fair value at the date of acquisition. 11 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE C - ACQUISITIONS AND LICENSING AGREEMENT (Continued) The unaudited pro forma results of operations for each of the two years in the period ended December 31, 1999, reflecting the combined results of the Company and the acquisitions detailed above as if the acquisitions had occurred at January 1, 1998, are presented as follows: (Dollars in Thousands) Year Ended December 31, 1999 1998 Revenues $185,865 $182,443 ======== ======== Income before income taxes $ 15,898 $ 13,678 ======== ======== Net income $ 9,150 $ 7,481 ======== ======== Diluted earnings per share $ 1.40 $ 1.11 ======== ======== NOTE D - PROPERTY AND EQUIPMENT (Dollars in Thousands) December 31, 1999 1998 ---- ---- Furniture and computer equipment $39,783 $32,125 Leasehold improvements 7,192 5,944 ------- ------- 46,975 38,069 Less accumulated depreciation 28,487 22,086 ------- ------- $18,488 $15,983 ======= ======= Depreciation expense was $6,986,000, $5,278,000, and $4,183,000 in 1999, 1998, and 1997, respectively. NOTE E - DEBT AND OTHER OBLIGATIONS Credit Agreement The Company has a Credit Agreement (the "Credit Agreement") with its two primary lenders (the "Lenders") that includes an unsecured revolving line of credit up to $40,000,000. The Credit Agreement has a three-year maturity. Subsequent to the first anniversary, and annually thereafter, the Company has the ability to extend the Credit Agreement for an additional year upon Lenders' approval. The Company has extended the Credit Agreement, with the most recent extension to the Credit Agreement having a maturity date of December 31, 2001. The Company may borrow, repay and re-borrow during the term of the Credit Agreement, with any balance due at maturity. Interest rates are tiered at LIBOR plus a margin contingent upon certain financial ratios of the Company. The Company also has the option to borrow at a base rate equal to the lesser of the Lenders' Prime Rate less 1/4% or the Federal Funds Effective Rate plus 1%. 12 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE E - DEBT AND OTHER OBLIGATIONS (Continued) Long-term debt and other obligations consist of the following:
(Dollars in Thousands) December 31, 1999 1998 ------- ------- Floating rate borrowings under the Credit Agreement, with monthly interest payments bearing interest at 4.99% at December 31, 1999 $ 6,500 $ -- Borrowings under the Credit Agreement, bearing interest at a weighted average variable rate of 6.92% and 6.06% for 1999 and 1998, respectively 16,883 13,516 Other 904 673 ------- ------- 24,287 14,189 Less current portion 6,008 5,124 ------- ------- $18,279 $ 9,065 ======= =======
Under the Credit Agreement, the major covenants require the maintenance of certain minimum financial ratios and restrict the level of indebtedness with other banks, as defined. At December 31, 1999, the Company is in compliance with all such covenants. For the years subsequent to December 31, 1999, aggregate maturities on long-term debt and other obligations, are as follows: (Dollars in Thousands) Year Ending December 31, Amount ------------------------- ------- 2000 $ 6,008 2001 17,894 2002 193 2003 132 2004 60 -------- $24,287 ======== The Company intends to make scheduled quarterly payments during 2000 to reduce the outstanding balance under the Credit Agreement to agree with the notional principal balance under its fixed interest rate swap agreements. Therefore, the scheduled 2000 payments are presented in the current portion of the long term debt. The remaining amounts due under the Credit Agreement is shown as maturing as of December 31, 2001. Interest Rate Swaps At December 31, 1999, the Company had entered into six fixed interest rate swap agreements ("Swap Agreements"), respectively, with an aggregate notional principal of $16,883,000 with scheduled quarterly reductions of notional principal over three to five years. The fixed interest rates under these Swap Agreements range from 5.79% to 7.10% at December 31, 1999. The purpose of these Swap Agreements is to fix interest rates on variable rate debt and reduce exposure to interest rate fluctuations. Under these 13 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE E - DEBT AND OTHER OBLIGATIONS (Continued) Swap Agreements, the Company pays its Lenders interest at a weighted average fixed rate of 6.83% and its Lenders are paying the Company interest at a weighted average variable rate of 6.92% at December 31, 1999. The notional amounts do not represent amounts exchanged by the parties and thus are not a measure of exposure of the Company. The amounts exchanged are normally based on the notional amounts and other terms of the swaps. The weighted average variable rates are subject to change over time as LIBOR fluctuates. At December 31, 1999, the Company has no exposure to credit loss on these interest rate swaps. The Company is not a party to leveraged derivatives and does not hold or issue financial instruments for speculative purposes. The Company has made adjustments to interest expense for the net cash paid or received on interest rate swap agreements. The impact of the above interest rate swap agreements on interest expense has been immaterial to date. NOTE F - INCOME TAXES The provision for income taxes consists of the following:
(Dollars in Thousands) Year Ended December 31, 1999 1998 1997 ------ ------ ------ Current: Federal $4,971 $3,499 $1,388 State 662 662 561 Foreign 1,014 1,973 570 ------ ------ ------ 6,647 6,134 2,519 ------ ------ ------ Deferred: Federal (194) (295) (226) State (44) (58) 60 Foreign 76 101 51 ------ ------ ------ (162) (252) (115) ------ ------ ------ Utilization and benefit of foreign operating loss carryforwards --- --- (203) ------ ------ ------ 6,485 5,882 2,201 Provision for valuation allowance --- --- (192) ------ ------ ------ $6,485 $5,882 $2,009 ====== ====== ======
14 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE F - INCOME TAXES (Continued) The total tax provision for each year differs from the amount that would have been provided by applying the statutory U.S. Federal income tax rate to income before income taxes. The reconciliation of these differences is as follows:
Year Ended December 31, 1999 1998 1997 ---- ---- ---- U.S. Federal income tax rate 34% 34% 34% State income taxes, net of federal tax benefit 3 3 4 Nondeductible expenses 4 2 4 Foreign earnings not subject to U.S. Federal income tax, net of foreign taxes 1 2 1 Deferred tax valuation allowance - - (4) Other 1 4 6 -- -- -- 43% 45% 45% === === ===
Income before income taxes is comprised of domestic and foreign components, respectively, as follows: 1999 -- $12,781,000 and $2,385,000, 1998 -- $7,488,000 and $5,584,000, and 1997 -- $1,565,000 and $2,855,000. Deferred income taxes arise primarily as a result of utilizing depreciation lives for income tax reporting that are in excess of those used for financial reporting purposes, as well as recognizing deferred compensation expense, the provision for doubtful accounts and certain accrued expenses for financial reporting purposes, which are not currently deductible for income tax purposes. Taxes on income of international subsidiaries are provided at the tax rates applicable to their respective tax jurisdictions. The Company's share of the cumulative undistributed earnings of such subsidiaries was approximately $9,668,000 and $8,093,000 at December 31, 1999 and 1998, respectively. No provision has been made for additional income taxes on the undistributed earnings of the international subsidiaries because earnings are expected to be reinvested indefinitely in the subsidiaries' operations or because under existing law, international tax credits would be available to substantially reduce U.S. taxes payable in the event of distribution. The deferred tax asset as of December 31, 1999 and 1998 is comprised of the following:
(Dollars in Thousands) December 31, 1999 1998 ---- ---- Allowance for doubtful accounts $ 492 $ 409 Accruals not currently deductible for income taxes 631 406 Deferred compensation 740 687 Depreciation and amortization 1,051 1,175 Tax benefit of foreign net operating losses -- 75 ------- ------- Net deferred tax asset $ 2,914 $ 2,752 ======= =======
15 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE G - BENEFIT AND COMPENSATION AGREEMENTS The Company has a non-qualified supplemental executive retirement plan (the "Plan") for its Founding Chairman. The Plan is designed to provide retirement income based on past compensation, reduced by other retirement sources. Effective January 1, 1997, the Founding Chairman began collecting benefits in accordance with the Plan. The Company accounts for this Plan in accordance with the provisions of SFAS No. 87, "Employer's Accounting for Pensions." SFAS No. 87 requires the Company to recognize a liability equal to the amount by which the actuarial present value of the accumulated benefit obligation exceeds the fair value of the Plan's assets. This liability was approximately $1,166,000 and $1,116,000 for 1999 and 1998, respectively, using a discount rate of 7.25%. Since the Plan is not funded by the Company, the recorded liability equals the present value of the accumulated benefit obligation. The Company has non-qualified supplemental executive retirement plans for its Chief Executive Officer, Vice Chairman and President/Chief Operating Officer to which a percentage of compensation, including base salary and incentive bonuses, is credited annually. Deferred amounts earn annual interest equal to the two-year Guaranteed Investment Contract Index on November 30 of the current plan year, or 6%, whichever is higher (6% at both November 30, 1999 and 1998). The account balance is payable as a life annuity in equal monthly installments with interest on the unpaid balance upon termination of service with the Company. The Chief Executive Officer and Vice Chairman's interest in the plans vest at the rate of 10% and 20% per year, respectively, which began in 1993 and 1996, respectively. The President's interest in the plan vests at 20% per year which begins at the age of 61. Since these plans are not funded by the Company, the recorded liabilities equal the present value of the accumulated benefit obligation. The Company also maintains life insurance policies (with face amounts totaling $6,750,000) on the lives of key executives, naming the Company as the beneficiary. The cash surrender value of these policies (totaling $1,191,000 as of December 31, 1999) is included in the Other non-current assets section of the Consolidated Balance Sheets. The Company also maintains employment agreements and incentive compensation agreements with certain key management employees. The agreements typically result from the Company's acquisitions of outside firms. The agreements provide for additional compensation over and above the individual's annual salary, based upon the achievement of certain levels of overall Company, group or region performance. Certain of these agreements include provisions for continuation of salaries upon a change in control or termination without cause, as defined in the agreements. These agreements provide for aggregate minimum annual compensation for these employees of approximately $2,959,000 in 2000, $1,938,000 in 2001 and $295,000 in 2002. Effective January 1, 2000 the Company has established a non-qualified supplemental executive retirement plan for its executive officers and other key employees for the purpose of providing supplemental income benefits to plan participants or their survivors upon participants' retirement or death. Benefits payable under this plan are based on a defined percentage of an average of a participants three highest consecutive annual salaries. The plan expense expected for fiscal 2000 will be approximately $500,000. 16 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE H - EMPLOYEE BENEFIT PLANS The Company maintains a defined contribution savings plan, available to substantially all employees, under Section 401(k) of the Internal Revenue Code. Under this plan, the Company will contribute 25% of the participating employee's annual contribution. In 1999 and 1998, in connection with achieving a certain level of targeted Company profits, the Company contributed an additional 12.5% of the participating employee's contribution for a total of 37.5%. The Company made no additional contribution for 1997 based on the Company's failure to meet internal targets. Employee contributions are generally limited to 10% of their compensation subject to Internal Revenue Code limitations. Company contributions were approximately $838,000, $764,000, and $469,000 for 1999, 1998 and 1997, respectively. In addition, the Company maintains a non-qualified deferred compensation plan for certain employees. Under the plan, participants may defer payment of up to 10% of their annual cash compensation reduced by amounts contributed to the Company's 401(k) plan. Deferred amounts earn annual interest equal to the two-year Guaranteed Investment Contract Index on November 30 preceding each plan year or 6%, whichever is higher (6% at both November 30, 1999 and 1998). The deferred amounts will be paid from the general assets of the Company and are included in deferred compensation as of December 31, 1999 and 1998. NOTE I - LEASE OBLIGATIONS The Company leases office space and equipment at various locations and accounts for these obligations as operating leases. Rentals relating to these leases are recorded on a straight-line basis. Rental expense approximated $16,695,000, $16,037,000 and $14,350,000 in 1999, 1998, and 1997, respectively. Contingent rentals may be due each year under the terms of the various office space leases as the result of certain increases in building operating expenses over the base year amounts. The following is a schedule, by year, of future minimum rental payments required under operating leases with remaining non-cancelable lease terms in excess of one year as of December 31, 1999: (Dollars in Thousands) Year Ending December 31, Amount - ------------------------- ------ 2000 $15,371 2001 12,699 2002 8,338 2003 4,967 2004 2,973 2005 and subsequent years 1,203 NOTE J - SHAREHOLDERS' EQUITY Stock Option Plans The Company has a 1986 Stock Option Plan (the "1986 Plan") under which 968,000 shares of Common Shares are reserved for issuance upon the exercise of incentive stock options, stock appreciation rights or non-qualified stock options that may be granted to employees. Outstanding options granted under this plan 17 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE J - SHAREHOLDERS' EQUITY (Continued) are exercisable, cumulatively, in three or four equal annual installments beginning one year from the date of grant. Effective September 8, 1996, no further stock options can be granted under the 1986 Plan. The Company also has a 1993 Stock Incentive Plan, as amended in 1999, with 3,225,000 shares of Common Shares reserved for issuance upon the exercise of incentive stock options or non-qualified stock options that may be granted to employees. Outstanding options granted under this plan have ten-year terms and are exercisable, cumulatively, in three equal annual installments, beginning one year from the date of grant. At December 31, 1999, 1,239,999 shares were available for issuance under this plan. In addition, in January 1995, the Company Shareholders adopted amendments to the 1993 Stock Incentive Plan permitting awards of restricted stock under such plan. The amendments to the 1993 Stock Incentive Plan permit awards of up to an aggregate of 675,000 shares of the Company's Common Shares to certain officers and key employees. Restrictions generally limit the sale or transfer of the shares during a restricted period of approximately three years. Thereafter, the restricted stock will either vest, in whole or in part, with the participant or be forfeited, in whole or in part, back to the Company based on its earnings performance for this three year period. During 1996 and 1995, 29,250 and 44,550 shares of restricted stock were awarded, respectively. Also during 1996 and 1995, approximately $658,000 and $230,000, respectively, was charged to general sales and administration expenses for compensation expense related to these shares. Due to the Company's decreasing stock price during 1997 and the forfeiture of certain awards, total compensation expense related to restricted stock grants included within general sales and administration expenses was reduced by approximately $633,000 in 1997 and no compensation expense related to restricted stock grants was charged in 1998. Due to employment terminations, 4,200 and 21,750 shares of restricted stock awards were canceled in 1999 and 1998, respectively. Pursuant to the Restricted Stock Award Agreements dated January 1, 1996 and 1995, under the 1993 Stock Incentive Plan, 17,250 and 12,240 restricted shares were forfeited in 1999 and 1998, respectively, due to the Company's failure to achieve certain earnings per share targets. The Company also has a Directors' Stock Option Plan, under which 225,000 shares of Common Shares are reserved for issuance upon the exercise of incentive stock options or non-qualified stock options that may be granted to non-employee Directors of the Board of Directors. Outstanding options granted under this plan have five-year terms and are exercisable, cumulatively, in three equal annual installments, beginning one year from the date of grant. At December 31, 1999, 135,000 option shares were available for issuance under this plan. The Company has elected to follow APB No. 25, "Accounting for Stock Issued to Employees" in accounting for its stock options. Under APB No. 25, no compensation expense is recognized 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 SFAS No. 123, "Accounting for Stock-Based Compensation", the Company's net income and earnings per share for 1999, 1998 and 1997 would have been reduced to the following pro forma amounts: 18 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE J - SHAREHOLDERS' EQUITY (Continued)
Year Ended December 31, 1999 1998 1997 ---- ---- ---- Net income - as reported $8,628,000 $6,607,000 $2,073,000 Net income - pro forma $7,006,000 $4,788,000 $ 108,000 Basic EPS - as reported $1.33 $0.99 $0.31 Basic EPS - pro forma $1.08 $0.72 $0.02 Diluted EPS - as reported $1.32 $0.98 $0.31 Diluted EPS - pro forma $1.07 $0.71 $0.02
The fair value of the options was estimated at the date of grant using a Black-Scholes option pricing model. Grants in 1999, 1998 and 1997 were assumed to have no dividend yield. The weighted-average assumptions used for grants in 1999 were a risk-free interest rate of 5.6%, an expected volatility of 57%, and an expected option life of 8 years. The weighted-average assumptions used for grants in 1998 and 1997 were a risk-free interest rate of 5.3% and 6.4%, respectively, an expected volatility of 75% and 70%, respectively, and an expected option life of 7 years. Under SFAS No. 123, total stock-based compensation expense, net of tax benefit, approximated $1,622,000, $1,819,000, and $1,965,000 in 1999, 1998, and 1997, respectively. A summary of the status of the Company's stock options under its stock option plans at December 31, 1999, 1998 and 1997 and changes during the years then ended is presented in the table and narrative below:
Year Ended December 31, 1999 1998 1997 ---- ---- ---- Weighted Weighted Weighted Average Average Average Stock Exercise Stock Exercise Stock Exercise Options Price Options Price Options Price ------- ----- ------- ----- ------- ----- Outstanding at beginning of year 1,138,913 $14.14 1,200,238 $13.26 1,238,295 $10.92 Granted 520,074 13.24 154,250 13.42 241,788 17.31 Exercised (215,296) 8.28 (169,500) 7.14 (236,095) 5.08 Canceled (100,255) 16.15 (46,075) 14.51 (43,750) 13.08 --------- ------ --------- ------ --------- ------ Outstanding at end of year 1,343,436 $14.61 1,138,913 $14.14 1,200,238 $13.26 Exercisable at end of year 696,473 $15.54 764,348 $13.39 672,492 $10.93 Weighted average fair value $8.94 $9.87 $12.10 of options granted
Exercise prices for options outstanding as of December 31, 1999 ranged from $8.67 to $24.33. The weighted average remaining contractual life of these options is approximately 7 years. 19 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE J - SHAREHOLDERS' EQUITY (Continued) A summary of the status of the Company's stock options outstanding under its stock option plans at December 31, 1999 is presented in the table below:
Stock Options Outstanding Stock Options Exercisable Weighted Weighted Weighted Stock Options Average Average Remaining Stock Options Average Range of Outstanding at Exercise Contractual Exercisable at Exercise Exercise Prices December 31, 1999 Price Life in Years December 31, 1999 Price --------------- ----------------- ----- ------------- ----------------- ----- $8.67 to $12.75 266,624 $11.09 9 25,502 $11.09 $13.25 to $18.50 1,027,937 15.17 7 622,096 15.20 $22.00 to $24.33 48,875 22.24 5 48,875 22.24
Employee Stock Purchase Plan The Company has a 1996 Employee Stock Purchase Plan (the "ESPP"), as amended in 1999, with 300,000 shares reserved for issuance under the ESPP. The ESPP permits employees to purchase Company Common Shares at 85% of the average market price on the last day of the applicable quarterly period. As amended in 1999, all Company employees are eligible to participate in the ESPP, once they have met the employment requirements as specified in the ESPP. During 1999, 1998, and 1997, 55,582, 36,151, and 37,859 shares, respectively, were purchased through the ESPP. Repurchase of Common Shares In March 1997, the Board of Directors (the "Board") approved a stock repurchase program under which the Company was authorized to repurchase up to 10% of its then outstanding Common Shares, or 658,628 shares. Shares repurchased are held as treasury shares and are available to the Company for any use in various benefit plans and, when authorized by the Board, for other general corporate purposes. The Board authorized Company management to pursue the repurchase program in open market transactions from time-to-time, depending upon market conditions and other factors. In September 1999, the Board expanded the stock repurchase program, authorizing the Company to repurchase an additional 10% of its then outstanding Common Shares, or 642,990 shares. During 1999 the Company repurchased a total of 946,600 Common Shares at an aggregate purchase price of approximately $12,148,000, or $12.83 per share. The Company funded $6,500,000 of this repurchase of shares through borrowings under its Credit Agreement. During 1998 and 1997, the Company repurchased a total of 295,000 Common Shares at an aggregate purchase price of approximately $3,428,000, or $11.62 per share. As of December 31, 1999, the Company has repurchased a total of 1,241,600 Common Shares at an aggregate purchase price of approximately $15,576,000, or $12.55 per share, under this stock repurchase program, in addition to the Company's repurchase of 252,952 shares prior to the institution of this program. 20 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE J - SHAREHOLDERS' EQUITY (Continued) Dividends The Company has never paid any dividends on its Common Shares and currently expects that all of its earnings will be retained and reinvested in the Company's business. During 1999 and 1998, Davidson & Associates paid cash dividends to its shareholders. The Company recognized no dividend income for its majority-ownership of Davidson & Associates as this is an intercompany transaction which eliminates in consolidation. However, the Company recorded the remaining dividends declared and paid to minority shareholders as a reduction in minority interest in both 1999 and 1998. NOTE K - EARNINGS PER SHARE The calculations of earnings per share ("EPS") under SFAS No. 128 are detailed as follows:
Year ended December 31, 1999 Income Shares EPS Basic EPS: Net income $8,628,000 6,487,000 $1.33 ===== Impact of options --- 63,000 ---------- --------- Diluted EPS: Net income $8,628,000 6,550,000 $1.32 ========== ========= ===== Year ended December 31, 1998 Income Shares EPS Basic EPS: Net income $6,607,000 6,674,000 $0.99 ===== Impact of options --- 84,000 ---------- --------- Diluted EPS: Net income $6,607,000 6,758,000 $0.98 ========== ========= ===== Year ended December 31, 1997 Income Shares EPS Basic EPS: Net income $2,073,000 6,596,000 $0.31 ===== Impact of options --- 129,000 ---------- --------- Diluted EPS: Net income $2,073,000 6,725,000 $0.31 ========== ========= =====
For the year ended December 31, 1999, outstanding options to purchase 681,812 shares of Company Common Shares at $14.25 to $24.33 were excluded from the computation of diluted EPS, as the options' exercise price was greater than the average market price of the Common Shares. 21 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE L - SEGMENTS SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," establishes standards for reporting information about operating segments and related disclosures about products and services, geographic areas, and major customers. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company's operations are segregated into two lines of business: career transition and human resources (including career management) consulting ("consulting"). The Company operates these lines of business across the geographic areas of the United States, Canada, Europe and Asia-Pacific. These operations offer different services and require different marketing strategies. Career transition offers support for organizations separating employees, including assistance in handling the initial difficulties of termination, identifying continuing career goals and options, and aiding in developing skills for the search for a new job. Consulting offers help to companies with building competencies, organizational change, leadership development, employee communications and talent management. With more than 200 service locations worldwide, the Company manages operations by geographic segments to enhance global growth and establish major accounts with global clients. The Company primarily delivers its services to mid-size and large industrial and service companies, with no concentration in specific companies or industries. Summarized operations of each of the Company's geographic segments in the aggregate for each of the three years in the period ended December 31, 1999, are as follows (See Note A for discussion relating to currency translation and Note F for discussion relating to income taxes):
(Dollars in Thousands) 1999 United States Canada Europe Asia-Pacific Consolidated Identifiable assets $86,674 $11,550 $16,267 $6,101 $120,592 ======== ======== ======== ======== ======== Revenue 134,766 11,703 20,348 14,507 181,324 ======== ======== ======== ======== ======== Operating income (1) 11,243 2,021 1,047 1,530 15,841 ======== ======== ======== ======== ======== Depreciation and amortization 8,973 295 439 712 10,419 ======== ======== ======== ======== ======== Capital expenditures 7,343 225 466 842 8,876 ======== ======== ======== ======== ======== (1) The operating income reported for the United States segment includes total general sales and administration and corporate depreciation and amortization expenses reported on the Consolidated Statements of Income. 22 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE L - SEGMENTS (Continued) (Dollars in Thousands) 1998 United States Canada Europe Asia-Pacific Consolidated Identifiable assets $91,588 $7,562 $9,668 $5,777 $114,595 ======== ======== ======== ======== ======== Revenue 127,353 10,884 15,836 14,185 168,258 ======== ======== ======== ======== ======== Operating income (1) 7,536 1,784 2,394 2,087 13,801 ======== ======== ======== ======== ======== Depreciation and amortization 6,379 523 501 636 8,039 ======== ======== ======== ======== ======== Capital expenditures 6,250 435 298 803 7,786 ======== ======== ======== ======== ======== 1997 United States Canada Europe Asia-Pacific Consolidated Identifiable assets $63,881 $7,006 $5,600 $5,217 $81,704 ======== ======== ======== ======== ======== Revenue 97,358 9,784 11,475 7,169 125,786 ======== ======== ======== ======== ======== Operating income (1) 1,720 1,138 598 1,119 4,575 ======== ======== ======== ======== ======== Depreciation and amortization 5,500 245 444 305 6,494 ======== ======== ======== ======== ======== Capital expenditures 3,893 126 755 427 5,201 ======== ======== ======== ======== ========
(1) The operating income reported for the United States segment includes total general sales and administration and corporate depreciation and amortization expenses reported on the Consolidated Statements of Income. Revenues and expenses of the Company's lines of business for the Company offices, excluding the total general sales and administration and depreciation and amortization expenses and Affiliate royalties, are evaluated by management. The Company does not measure assets by lines of business as assets are generally not distinctive to a particular line of business and they are not fundamental in assessing segment performance. Revenue and Company office operating income for each of the Company's lines of business in the aggregate for each of the three years for the period ended December 31, 1999, excluding the $630,000 restructuring charge (see Note B) in 1997, are as follows: (Dollars in Thousands) 1999 Career Transition Consulting Consolidated Company office revenue $150,296 $26,684 $176,980 ======== ======== ======== Company office operating income 29,236 2,422 31,658 ======== ======== ======== 23 RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE L - SEGMENTS (Continued) (Dollars in Thousands) 1998 Career Transition Consulting Consolidated Company office revenue $139,903 $23,944 $163,847 ======== ======== ======== Company office operating income 26,061 2,328 28,389 ======== ======== ======== 1997 Career Transition Consulting Consolidated Company office revenue $111,181 $11,100 $122,281 ======== ======== ======== Company office operating income 13,575 1,628 15,203 ======== ======== ======== NOTE M - SUBSEQUENT EVENTS (Unaudited) Subsequent to December 31, 1999, the Company acquired the remaining 36% minority-interest in Davidson & Associates. In addition, the Company acquired the outstanding stock of Career Development Group, Inc., a career transition firm based in Appleton, Wisconsin. Both transactions were effective January 1, 2000. The purchase price for these acquisitions totaled approximately $6,036,000 and will be accounted for using the purchase method. In early 2000, the Company made borrowings of $8,000,000 under its Credit Agreement to fund earnout and bonus payments related to 1999. In connection with the acquisition of the remaining minority interest in Davidson & Associates, the Company also borrowed $4,900,000 under its Credit Agreement. As of the end of March 2000, the Company had approximately $5,500,000 available under its Credit Agreement. 24 RIGHT MANAGEMENT CONSULTANTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The following table sets forth results of operations before income taxes for the years indicated. Certain amounts have been reclassified in the 1998 and 1997 Consolidated Statements of Income to conform with the 1999 presentation. This discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes thereto.
(Dollars in Thousands) Year Ended December 31, 1999 1998 1997 --------- --------- --------- Company office revenue $176,980 $163,847 $122,281 Company office expenses (145,322) (135,458) (107,078) --------- --------- --------- Company office margin 31,658 28,389 15,203 Affiliate royalties 4,344 4,411 3,505 General sales and administration (14,911) (15,007) (10,209) Corporate depreciation and amortization (5,250) (3,992) (3,294) Restructuring costs (Note B) -- -- (630) Interest expense, net (675) (729) (155) --------- --------- --------- Income before income taxes $15,166 $13,072 $4,420 ========= ========= =========
1999 Compared to 1998 For the year ended December 31, 1999, revenue generated by Company offices increased by 8% or $13,133,000 over 1998. This increase is primarily attributable to incremental revenues from acquisitions of $10,917,000. The same office revenue on a consolidated basis was flat due to a comparison against very strong 1998 revenue contributions from these offices overall. The Company's career transition line of business reported total revenues of $150,296,000, which represents a 7% increase over 1998. The increase is due to $3,888,000 in incremental revenues from acquisitions and an increase in same office revenue of 5%. The same office revenue, however, in the European career transition market decreased due to several key projects from the prior year not recurring. The Company's consulting line of business reported total revenues of $26,684,000, which represents an 11% increase over 1998. The increase is due to $7,029,000 in incremental revenues primarily from the two European consulting acquisitions made during 1999. This increase in revenues was offset by a same office revenue decrease of 18%. During the second half of 1999, the Company began restructuring and repositioning its consulting line of business to achieve improved results in same office revenue growth and in operating margin. For the year ended December 31, 1999, Affiliate royalties were at a similar level as in 1998. 25 RIGHT MANAGEMENT CONSULTANTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) For the year ended December 31, 1999, total Company office expenses increased 7% or $9,864,000 over 1998. This increase is due to approximately $9,761,000 in incremental costs from acquisitions. The Company's same office expenses for 1999 were flat in comparison to 1998, illustrating costs savings and better efficiencies during 1999. The Company did experience an increase in the charges for depreciation, equipment rental and maintenance, communication and rent, all of which were offset by a decrease in sales incentives and salaries for delivery personnel. Aggregate Company office margins were 18% and 17% for 1999 and 1998, respectively. The increase in margins is attributable primarily to the previously mentioned increase in career transition and consulting revenues, and a decrease in incentive compensation expense. For the year ended December 31, 1999, general sales and administration and corporate depreciation and amortization expenses increased by 6% or $1,162,000 over 1998. This increase was attributable to increased charges for depreciation and amortization, consulting services and salaries for administrative staff. Despite these increases, for the year ended December 31, 1999, general sales and administration and corporate depreciation and amortization expenses as a percentage of total revenues remained consistent with 1998 at approximately 11%. The Company's effective tax rate was approximately 43% and 45% for the year ended December 31, 1999 and 1998, respectively. An additional provision of $200,000 was made for the expected results of pending tax audits during the fourth quarter of 1998. The results of this tax audit are still pending. See Note F to the Consolidated Financial Statements for the composition of the Company's effective tax rate. 1998 Compared to 1997 For the year ended December 31, 1998, revenue generated by Company offices increased by 34% or $41,566,000 over 1997. This increase is attributable to the combination of $18,092,000 in incremental revenues from acquisitions, and a 19% same office revenue increase. The significant same office revenue increase is due primarily to the strong career transition environment throughout the network compared against a weak 1997, and the growth in the consulting line of business discussed below. The revenue increase is also attributable to the new and continued high unit volume of programs from clients with national or international operations. In contrast with the compression in the length of the programs, which negatively impacted the average fees by program in 1997, the Company experienced more stable average program fees during 1998. The Company's consulting line of business reported total revenues of $23,944,000, which represents a 116% increase over 1997. The increase is due to $9,242,000 in incremental revenues primarily from the two consulting acquisitions and the licensing agreement made during 1998 and a 33% same office increase. For the year ended December 31, 1998, Affiliate royalties increased 26%, or $906,000 from 1997. The increase is attributable to the previously mentioned strong career transition market experienced throughout the network in 1998. 26 RIGHT MANAGEMENT CONSULTANTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) For the year ended December 31, 1998, total Company office expenses increased 27% or $28,380,000 over 1997. This increase is due to approximately $17,137,000 in incremental costs from acquisitions. The Company's same office expenses increased by approximately $11,799,000 from 1997 due primarily to incentive compensation funding for operating results significantly above target performance, compared against minimal incentives earned in 1997 for operating results significantly below target. Aggregate Company office margins were 17% and 12% for 1998 and 1997, respectively. The increase in margins is attributable primarily to the previously mentioned increase in career transition and consulting revenues, partly offset by the incremental incentive funding for operating performance significantly above target. For the year ended December 31, 1998, general sales and administration and corporate depreciation and amortization expenses increased by 41% or $5,496,000 over 1997. This increase was largely attributable to incentive compensation, increased charges for consulting services, and an increase in depreciation and amortization expense. Despite these increases, for the year ended December 31, 1998, general sales and administration and corporate depreciation and amortization expenses as a percentage of total revenues remained at 11%, as in 1997. For the year ended December 31, 1998, the Company's effective tax rate was approximately 45%, consistent with that of 1997. An additional provision of $200,000 was made for the expected results of pending tax audits during the fourth quarter of 1998. See Note F to the Consolidated Financial Statements for the composition of the Company's effective tax rate. Capital Resources and Liquidity At December 31, 1999 and 1998, the Company had cash and cash equivalents of $11,187,000 and $20,800,000, respectively. The significant decrease in cash and cash equivalents is the result of cash payments made for acquisitions and the repurchase of Common Shares during 1999, partially offset by borrowings made under the Company's Credit Agreement. At December 31, 1999, the Company's working capital decreased to $9,111,000 from $15,281,000 at December 31, 1998. Net cash provided by operating activities amounted to $13,889,000 and $26,870,000 in 1999 and 1998, respectively. The reduction in cash provided by operating activities is primarily attributed to incremental incentive compensation payments made in the first quarter 1999 due to the Company significantly exceeding revenue and operating income targets in 1998, as compared to significantly less compensation payments made in the same period in the prior year. Net cash utilized by investing activities amounted to $23,036,000 and $14,071,000 for 1999 and 1998, respectively. The Company continues to purchase equipment and technology to meet the needs of its expanding operations and to enhance its operating efficiency. During 1999, the Company acquired six separate career transition and consulting firms, purchased additional interest in its two existing joint ventures and entered into another joint venture with a career transition firm located in Japan (see Note C to the Consolidated Financial Statements). 27 RIGHT MANAGEMENT CONSULTANTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Net cash utilized by financing activities amounted to $303,000 in 1999 and net cash provided by financing activities amounted to $480,000 in 1998. The net cash utilized by financing activities for 1999 was primarily the result of repurchases of the Company's Common Shares (see Note J to the Consolidated Financial Statements) and repayments of the Company's borrowings. The net cash utilized by financing activities was offset by $15,366,000 in borrowings from the Company's revolving credit facility for certain acquisitions made during 1999 and for the repurchase of Common Shares (see Notes C and J to the Consolidated Financial Statements). In addition to cash flow provided by operations, the Company has borrowing facilities to provide for increased working capital needs as well as to provide for future acquisition opportunities. The Company has existing borrowing capacity up to $40,000,000 under its Credit Agreement with its two primary lenders (See Note E to the Consolidated Financial Statements). The Company had approximately $16,617,000 available under the Credit Agreement at December 31, 1999. Subsequent to December 31, 1999, the Company funded $4,900,000 of its purchase of the remaining minority interest in Davidson & Associates (see Note M to the Consolidated Financial Statements). Also subsequent to December 31, 1999, the Company borrowed $8,000,000 under its Credit Agreement to fund earnout and bonus payments related to 1999. As of the end of March 2000, the Company had approximately $5,500,000 available under its Credit Agreement. The Company plans to utilize the Credit Agreement in future periods to assist in the financing of acquisitions as they arise, and for other general corporate purposes. The Company anticipates that its cash and working capital will be sufficient to service its existing debt and maintain Company operations at current levels for the foreseeable future. The Company will continue to consider expansion opportunities as they arise, although the economics, strategic implications and other circumstances justifying the expansion will be key factors in determining the amount and type of resources the Company will devote to further expansion. Also, significant acquisition opportunities, or share repurchases, could cause the Company to seek an expansion in its existing borrowing agreement, which the Company believes would be available on substantially the same terms and conditions as those that apply to the existing Credit Agreement. However, there can be no assurance such an expanded credit agreement would be available or that the terms of such an agreement would be acceptable to the Company. Year 2000 During 1998, the Company completed its evaluation of the potential impact of the year 2000 and developed a project plan (the "Y2K Plan") to ensure the compliance of its major operating systems by the year 2000. As a service company, the Company's operating systems principally include financial and communication applications. As part of its Y2K Plan, the Company had developed a replacement billing system which began operating in April 1999. The Y2K Plan also detailed the timetable to upgrade or replace non- compliant systems as well as to confirm year 2000 compliance with the Company's key vendors. At January 1, 2000 the Company was completely ready for the year 2000 and has experienced no interruptions in its business operations as a result of year 2000 issues. During 1999, the total actual capital expenditures incurred under the Y2K Plan were approximately $1,500,000 of which approximately $800,000 were attributable to systems upgrades or replacements that the Company normally would undertake in its ongoing operations. Capitalized items are being depreciated over the useful 28 RIGHT MANAGEMENT CONSULTANTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) life of the asset. Non-capitalizable costs related to year 2000 issues were approximately $300,000, which were expensed as incurred. Impact of Recently Issued Accounting Standards In June 1998, SFAS No. 133, " Accounting for Derivative Instruments and Hedging Activities, " was issued and is effective for fiscal years beginning after June 15, 2000. SFAS No. 133, as it applies to the Company, requires the impact of fluctuations in interest rates on hedging instruments to be reported in other comprehensive income. The Company uses interest rate swaps to reduce exposure to adverse fluctuations in interest rates. While these hedging instruments are subject to fluctuations in value, such fluctuations are offset by the change in value of the underlying exposures being hedged. The Company will adopt SFAS No. 133 effective January 1, 2001. Management believes that the adoption of SFAS No. 133 will not have a material impact on the Company's financial position or results of operations. Also, in December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements". SAB No. 101 expresses the views of the SEC staff in applying generally accepted accounting principles to certain transactions. The Company is in the process of analyzing the impact of SAB No. 101 on its Consolidated Financial Statements and related disclosures. Forward-Looking Statements Statements included in this Report on Form 10-K, including within this Management's Discussion and Analysis of Financial Condition and Results of Operations which are not historical in nature, are intended to be, and hereby are identified as "forward looking statements" for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. The Company cautions readers that forward looking statements, including without limitation those relating to the Company's future business prospects, revenues, working capital, liquidity, capital needs, interest costs and income, 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 hereafter identified, among others, as well as other risks and uncertainties identified from time to time in the Company's reports filed with the Securities and Exchange Commission. 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. Among the factors that create risk and uncertainty are (i) government regulation of the Company's Affiliates; (ii) the Company's ability to maintain good relationships with its remaining Affiliates; (iii) competition within the highly fragmented career transition and human resource consulting services industries; (iv) the dependence on key management or operating personnel within the Company or an Affiliate; (v) economic conditions on a local, regional, national and international basis, which affect the demand for the Company's services; and (vi) the risk and uncertainty as to the Company's ability to continue its strategy of accretive acquisitions. 29 RIGHT MANAGEMENT CONSULTANTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Quantitative and Qualitative Disclosures About Market Risks As discussed in Note E, the Company believes that its interest risk associated with the Swap Agreements would have an immaterial impact on the financial position, the results of operations or cash flows of the Company. Furthermore, as discussed in Note A, the Company has international operations and does not anticipate any material currency risk to its business or financial condition resulting from currency fluctuations. 30 RIGHT MANAGEMENT CONSULTANTS, INC. STATEMENT OF MANAGEMENT'S FINANCIAL RESPONSIBILITY Management has prepared and is responsible for the integrity and objectivity of the financial statements and related financial information contained in this Annual Report. The financial statements are in conformity with generally accepted accounting principles consistently applied and reflect management's informed judgment and estimation as to the effect of events and transactions that are accounted for or disclosed. Management maintains a system of internal controls. This system, which undergoes periodic evaluation, is designed to provide reasonable assurance that assets are safeguarded and records are adequate for the preparation of reliable financial data. In determining the extent of the system of internal controls, management recognizes that the cost should not exceed the benefits derived. The evaluation of these factors requires estimates and judgment by management. Arthur Andersen LLP is engaged to render an opinion as to whether management's financial statements present fairly Right Management Consultants, Inc.'s financial position, results of operations and cash flows. The scope of their engagement included a review of the internal control system to the extent deemed necessary to render an opinion on these financial statements. The Report of Independent Public Accountants is presented in the enclosed document. The Audit Committee of the Board of Directors meets directly with the Independent Public Accountants and management to ascertain whether they are properly discharging their responsibilities. Right Management Consultants, Inc. /s/ Charles J. Mallon ------------------------------- Charles J. Mallon Executive Vice President, Chief Financial Officer, Secretary and Treasurer 31 RIGHT MANAGEMENT CONSULTANTS, INC. DIRECTORS AND EXECUTIVE OFFICERS Richard J. Pinola Chairman of the Board of Directors and Chief Executive Officer Frank P. Louchheim Founding Chairman and Director Joseph T. Smith Vice Chairman of the Board of Directors John J. Gavin President, Chief Operating Officer and Director Larry A. Evans Executive Vice President and Director Frederick Davidson Chairman of Davidson & Associates, Pty. Ltd and Director DIRECTORS John R. Bourbeau President of Midwest Reemployment Associates, Inc., an Affiliate of the Company Raymond B. Langton President and Chief Executive Officer of SKM Applied Technology Partners Rebecca J. Maddox President of Rebecca J. Maddox Co. LLC Catherine Y. Selleck Business Consultant Dr. Marti D. Smye Business Consultant OTHER EXECUTIVE OFFICERS Charles J. Mallon Executive Vice President, Chief Financial Officer, Secretary and Treasurer Peter J. Doris Executive Vice President Terry W. Szwec Executive Vice President James E. Greenway Executive Vice President and Chief Marketing Officer Christopher Pierce-Cooke Executive Vice President and Managing Director - Consulting Services Erik A. Dithmer Group Executive Vice President for the Eastern U.S. R. William Holland Group Executive Vice President for the Central U.S. and Canada Timothy D. Dorman Group Executive Vice President for the Western U.S. Suzanne B. Levasseur Group Executive Vice President for Europe and Latin America Edward C. Davies Group Executive Vice President for Asia-Pacific Corporate Headquarters Independent Public Accountants Right Management Consultants, Inc. Arthur Andersen LLP 1818 Market Street Philadelphia, Pennsylvania 33rd Floor Philadelphia, Pennsylvania 19103 General Counsel Fox, Rothschild, O'Brien & Frankel, LLP Philadelphia, Pennsylvania 32 RIGHT MANAGEMENT CONSULTANTS, INC. Subsidiaries Right Associates Government Services, Inc. Right Associates License, Inc. Right License Holding, Inc. Right Management of Pennsylvania, LLC RMC of Illinois, Inc. Key Management Strategies, Inc. Teams International, LLC Right Human Resources, Inc. Right Associates, Ltd. Right Management Consultants, SA Right ARJ Management Consultants, SA Right Associates (Belgium), Inc. Right Associates (France), Inc. Right Associates & Co., SNC R.M.C. & Co., SNC Right Management Consultants (Belgium), SA Right D&A Pty. Ltd. Service Marks and Right Management Consultants, Right Associates, Trade Marks Partners in Managing Change, The Right Fit, Key Executive Service, Zeroing-in-Process (Z.I.P.), Right Match, Zenith, People Tech, Matrix, Compass, and the Globe Design are registered Service Marks of Right Management Consultants, Inc. and its wholly owned subsidiaries. The Right Report is a registered Trademark of Right Management Consultants, Inc. Right Connection, Right-from-Home, and Managing the Human Side of Change are Service Marks of Right Management Consultants, Inc. TEAMS, Insight Profiles, Intelligent Consensus, Upward Review, 360(degree) Feedback, Brain Trust, 360 Degree Feedback are registered Trademarks of TEAMS, Inc. D&A is a registered Trademark of Davidson & Associates. 33 RIGHT MANAGEMENT CONSULTANTS, INC. Right Management Consultants, Inc.'s Common Shares trade on The NASDAQ Stock Market under the symbol RMCI. Common Share Data 1999 High Low ---- ---- --- First Quarter $19 $13 7/8 Second Quarter 18 1/2 13 5/8 Third Quarter 15 7/8 9 5/8 Fourth Quarter 13 1/8 9 3/4 1998 High Low ---- ---- --- First Quarter $13 1/8 $11 1/4 Second Quarter 15 11 3/8 Third Quarter 15 11 Fourth Quarter 15 3/4 11 1/8 The above prices reflect interdealer prices, without retail markup, markdown or commission and may not necessarily represent actual transactions. As of March 17, 2000, there were 124 record holders and approximately 1,700 beneficial owners of the Company's Common Shares. The Company has never paid any dividends on its Common Shares and currently expects that all of its earnings will be retained and reinvested in the Company's business. Registrar and StockTrans, Inc. Transfer Agent Ardmore, Pennsylvania Availability of A copy of the Company's Annual Report 10-K Annual Report to the Securities and Exchange Commission on Form 10-K may be obtained by writing to: Cindy Ng Vice President and Corporate Controller Right Management Consultants, Inc. 1818 Market Street 33rd Floor Philadelphia, PA 19103 34 The Company's global operations are structured into seven geographic groups that provide management, leadership and resources to more than 200 service locations around the world.
UNITED STATES Illinois New York Utah Chicago Buffalo Ogden WORLD Northbrook Melville Salt Lake City HEADQUARTERS Oak Brook New York City Philadelphia, PA Virginia Indiana North Carolina Fairfax Alabama Fort Wayne Charlotte Richmond Birmingham Indianapolis Greensboro Vienna Raleigh Virginia Beach Alaska Iowa Anchorage Des Moines Ohio Washington Cincinnati Seattle Arizona Kansas Cleveland Spokane Phoenix Wichita Columbus Tucson Dayton West Virginia Kentucky Toledo Charleston California Lexington Cupertino Louisville Oklahoma Wisconsin Irvine Oklahoma City Appleton Los Angeles Louisiana Tulsa Green Bay Pasadena Baton Rouge Madison Sacramento New Orleans Oregon Milwaukee San Bernardino Portland Mosinee San Diego Maryland Oshkosh San Francisco Baltimore Pennsylvania San Ramon Allentown PUERTO RICO Woodland Hills Massachusetts Erie San Juan Boston Glenside Colorado Burlington Lancaster CANADA Colorado Springs Malvern Alberta Denver Michigan Philadelphia Calgary Detroit Pittsburgh Edmonton Connecticut Grand Rapids Reading Hartford Kalamazoo British Columbia Stamford Lansing Rhode Island Vancouver Midland Providence Delaware Manitoba Wilmington Minnesota South Carolina Winnipeg Minneapolis Greenville District of Columbia New Brunswick Washington Missouri Tennessee Moncton Kansas City Kingsport St. John Florida Saint Louis Knoxville Boca Raton Memphis Nova Scotia Fort Lauderdale Nebraska Nashville Halifax Jacksonville Omaha Miami Texas Ontario Orlando Nevada Austin Kingston Palm Beach Las Vegas Dallas London Saint Petersburg Fort Worth Mississauga Tampa New Jersey Houston Ottawa Parsippany San Antonio Richmond Hill Georgia Princeton Sarnia Atlanta Upper Saddle River Toronto Windsor Hawaii New Mexico Honolulu Albuquerque Quebec Montreal Quebec City 35 AFRICA The Netherlands LATIN AMERICA South Africa Amsterdam Argentina Cape Town Arnhem Buenos Aires Johannesburg Breda Cordoba Eindhoven Rosario EUROPE Groningen Austria Hengelo Brazil Vienna Maastricht Curitiba Rotterdam Rio de Janeiro Belgium Sao Paulo Antwerp Norway Brussels Oslo Chile Gent Stavanger Santiago Liege Spain Colombia Denmark Barcelona Bogota Aarhus Madrid Cali Copenhagen Medellin Odense Sweden Gothenburg Ecuador England Malmo Quito London Stockholm Swindon Mexico Switzerland Guadalajara Finland Basel Mexico City Helsinki Zurich Monterrey France ASIA/PACIFIC REGION Venezuela Lyon Australia Caracas Paris Adelaide Brisbane THE MIDDLE EAST Canberra Israel Germany Melbourne Tel Aviv Berlin Perth Dusseldorf Sydney Frankfurt Hamburg China Munich Hong Kong Stuttgart Japan Ireland Fukuoka Cork Nagoya Dublin Okayama Galway Osaka Limerick Sapporo Sendai Italy Tokyo Bari Yokohoma Bologna Genoa Malaysia Milan Kuala Lumpur Pescara Rome New Zealand Treviso Auckland Turin Wellington Singapore
36 EX-21 4 SUBSIDIARIES OF THE COMPANY 1. Right Associates Government Services, Inc., a Virginia corporation 2. Right Associates License, Inc., a Delaware corporation 3. Right License Holding, Inc., a Delaware corporation 4. Right Management of Pennsylvania, LLC, a Pennsylvania limited liability corporation 5. RMC of Illinois, Inc., an Illinois corporation 6. Key Management Strategies, Inc., a Pennsylvania corporation 7. Teams International, LLC, an Arizona limited liability corporation 8. Right Human Resources, Inc., a Canadian corporation 9. Right Associates, Ltd., a U.K. corporation 10. Right Management Consultants, SA, a French corporation 11. Right ARJ Management Consultants, SA, a French corporation 12. Right Associates (Belgium), Inc., a Delaware corporation 13. Right Associates (France), Inc., a Delaware corporation 14. Right Associates & Co., SNC, a Belgium corporation 15. R.M.C. & Co., SNC, a Belgium corporation 16. Right Management Consultants (Belgium), SA, a Belgium corporation 17. Right D&A Pty. Ltd., an Australian corporation EX-23 5 ARTHUR ANDERSEN LLP CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of Right Management Consultants, Inc.: As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K into the Company's previously filed Registration Statements No. 333-06211, File No. 333-07975, File No. 33-58698, File No. 33-62997, File No. 33-62999, File No. 333-84493 and File No. 333-84495. /S/ ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania March 29, 2000 EX-27 6 ART. 5 FDS FOR YEAR ENDED 12/31/99 FORM 10-K
5 1,000 YEAR DEC-31-1999 DEC-31-1999 11,187 0 38,340 1,467 0 52,452 46,975 28,487 120,592 43,341 0 0 0 75 55,907 120,592 181,324 181,324 71,306 145,322 20,161 0 675 15,166 6,485 8,628 0 0 0 8,628 1.33 1.32
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