Resources Connection Earnings Call Insights: Asian Challenges and Incentive Compensation

Resources Connection Inc (NASDAQ:RECN) recently reported its third quarter earnings and discussed the following topics in its earnings conference call.

Asian Challenges

Derek Sbrogna – Macquarie: This is actually (Derek Sbrogna) in for Kevin. So just wondering you obviously talked about some of the challenges in Asia specifically and Japan where some projects are coming to end-of-life. Can you maybe talk about if you are seeing any kind of pipeline build there or whether things are really just kind of slowed down?

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Tony Cherbak – President and COO: Yeah, in Japan specifically we’re not really too worried about that because we’ve got a great team there. Just this week they added 10 consultants on a variety of projects. So this I think is just really a timing issue just relative to the roll off of a couple of these projects, not unlike what we’re facing in the rest of the Company, but I think Japan and China will both be just fine.

Derek Sbrogna – Macquarie: And just one more if I can. Obviously there is lot of talk about healthcare reform and I was wondering if you can address whether you’ve seen a pickup in the healthcare business and specifically whether the Healthcare Solutions group has started to gain any traction?

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Nate Franke – EVP and CFO: Yes, what I would say is we’re seeing on the consulting and some new projects around compliance with Medicare, Medicaid rules, we are also in the beginning stages of demoing the new (indiscernible) software tool and I expect as we move throughout the remainder of the calendar year that we’ll see implementations of that tool. So I think we are pleased with the progress. Overall our healthcare business sequentially grew about 8%, so that is an area of growth for us.

Derek Sbrogna – Macquarie: And I would imagine you would expect that can probably accelerate from that 8% next year or so?

Nate Franke – EVP and CFO: We certainly hope so.

Incentive Compensation

Paul Ginocchio – Deutsche Bank: Just on the incentive compensation question. Did you, sounds like you lowered your incentive compensation is that because you decided, you are not going to hit your targets for this year and that’s what’s flowing through into the lower stock comp for next quarter, am I reading that right is something else going on?

Don Murray – Executive Chairman and CEO: What I would tell you is that the incentive stock comp is not related to the stock compensation. The offices we approve the incentive comp based on meeting certain financial metrics. So it was basically, handful of offices that during the third quarter were deemed it was likely by the end of the year they’d meet those metrics we reversed the amount that had been reported in the first couple of quarters.

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Paul Ginocchio – Deutsche Bank: Then just on the healthcare hit it was, it is basically 50 basis points to gross margin for the higher costs.

Don Murray – Executive Chairman and CEO: That’s about right. It was based on where we had anticipated last quarter gross margin, pretty much everything came in where we expected except for costs associated with the self-insured plan.

Paul Ginocchio – Deutsche Bank: The legal sentiment basically is just a little bit less than the hit from the health care so it kind of washes out.

Don Murray – Executive Chairman and CEO: Yes.

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