Item 5. Market for Registrant’s Common Equity
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES .

Price Range of Common Stock

Effective April 2, 2020, we changed our ticker symbol from “RECN” to “RGP” and began trading on the Nasdaq Capital Market under this new ticker symbol. We changed our ticker symbol when RGP became available , a s it aligns directly with our trade name, Resources Global Professionals or RGP. Prior to this change in ticker symbol, our common stock had traded on the Nasdaq Global Select Market under the symbol “RECN” since December 15, 2000. As of July 8, 2020 , the last reported sales price on Nasdaq of our common stock was $ 11.40 per share and the approximate number of holders of record of our common stock was 4 7 (a holder of record is the name of an individual or entity that an issuer carries in its records as the registered holder (not necessarily the beneficial owner) of the issuer’s securities).

Dividend Policy

Our board of directors has established a quarterly dividend, subject to quarterly board of directors’ approval. Pursuant to declaration and approval by our board of directors, we declared a dividend of $0.14 per share of common stock during each quarter in fiscal 2020, $0.13 per share of common stock during each quarter in fiscal 201 9, and $0.1 2 per share of common stock during each quarter in fiscal 201 8 . On April 1 5 , 20 20 , our board of directors declared a regular quarterly dividend of $0.1 4 per share of our common stock. The dividend was pa id on June 1 0 , 20 20 to stockholders of record at the close of business on May 13 , 20 20 . Continuation of the quarterly dividend will be at the discretion of our board of directors and will depend upon our financial condition, results of operations, capital requirements, general business condition, contractual restrictions contained in our current or future credit agreements and other agreements, and other factors deemed relevant by our board of directors.

Issuances of Unregistered Securities

None.

Issuer Purchases of Equity Securities

In July 2015, our board of directors approved a stock repurchase program (the “July 2015 Program”), authorizing the purchase, at the discretion of our senior executives, of our common stock for an aggregate dollar limit not to exceed $150.0 million. Subject to the aggregate dollar limit, the currently authorized stock repurchase program does not have an expiration date. Repurchases under the program may take place in the open market or in privately negotiated transactions and may be made pursuant to a Rule 10b5-1 plan.

There were no repurchases of our common stock during the fourth quarter of fiscal 2020.


Performance Graph

Set forth below is a line graph comparing the annual percentage change in the cumulative total return to the holders of our common stock with the cumulative total return of the Russell 3000 Index, a customized peer group consisting of eight companies listed below the following table and a combined classification of companies under Standard Industry Codes as 8742-Management Consulting Services for the five years ended May 30, 2020 . The graph assumes $100 was invested at market close on May 29 , 201 5 in our common stock and in each index (based on prices from the close of trading on May 29, 2015), and that all dividends are reinvested. Stockholder returns over the indicated period may not be indicative of future stockholder returns.

The information contained in the performance graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate it by reference into such filing.

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For the Fiscal Years Ended

May 29, 2015
May 28, 2016
May 27, 2017
May 26, 2018
May 25, 2019
May 30, 2020
Resources Connection, Inc.
$
100.00
$
101.40
$
85.13
$
113.72
$
111.76
$
82.30
Russell 3000
$
100.00
$
100.25
$
118.19
$
136.28
$
142.80
$
155.05
SIC Code 8742 - Management Consulting
$
100.00
$
116.93
$
124.98
$
148.25
$
252.99
$
302.85
Peer Group
$
100.00
$
95.52
$
92.62
$
148.43
$
153.60
$
156.23

Our customized peer group includes the following eight professional services companies that we believe reflect the competitive landscape in which we operate and acquire talent: CRA International, Inc.; FTI Consulting, Inc.; Heidrick & Struggles International, Inc.; Hudson Global, Inc.; Huron Consulting Group Inc.; ICF International, Inc.; Kforce, Inc.; and Korn Ferry. Navigant Consulting, Inc. is no longer included in our customized peer group due to its acquisition by Veritas Capital-backed Guidehouse in October 2019. Our compensation committee, a committee of our board of directors comprised of independent directors, reviews the composition of the peer group annually to ensure its alignment with our size, practice areas, business model delivery and geographic reach.

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ITEM 6. SELECTED FINANCIAL DATA.

The following selected historical consolidated financial data should be read in conjunction with our Consolidated Financial Statements and related notes in Item 8 “ Financial Statements and Supplementary Data ” and Item 7 “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” in Part II of this Annual Report on Form 10-K. The Cons olida ted Statements of Operations data for the years ended May 27, 2017 and May 28, 2016 and the Consolidated Balance Sheet data at May 26, 2018, May 27, 2017 and May 28, 2016 were derived from our audited Consolidated Financial Statements that are not included in this Annual Report on Form 10-K. The Consolidated Statements of Operations data for the years ended May 30, 2020 , May 25, 2019 and May 26, 2018 and the Consolidated Balance Sheet data at May 30, 2020 and May 25, 2019 were derived from our audited Consolidated Financial Statements that are included elsewhere in this Annual Report on Form 10-K. Historical results are not necessarily indicative of results that may be expected for any future periods. The fiscal year ended May 30, 2020 consisted of 53 weeks. All other years presented consisted of 52 weeks.




Years Ended

May 30,
May 25,
May 26,
May 27,
May 28,
2020 (1)
2019
2018 (1)
2017
2016

(In thousands, except per common share , number of offices and number of consultants )

Revenue
$
703,353
$
728,999
$
654,129
$
583,411
$
598,521
Income from operations
$
36,652
$
50,159
$
30,624
$
34,402
$
53,803
Net income
$
28,285
$
31,470
$
18,826
$
18,651
$
30,443
Net income per common share:
Basic
$
0.88
$
1.00
$
0.61
$
0.57
$
0.82
Diluted
$
0.88
$
0.98
$
0.60
$
0.56
$
0.81
Weighted average common shares outstanding:
Basic
31,989
31,596
30,741
32,851
37,037
Diluted
32,227
32,207
31,210
33,471
37,608
Cash dividends declared per common share
$
0.56
$
0.52
$
0.48
$
0.44
$
0.40

Other Data:
Number of offices at end of year
63
73
74
67
68
Number of consultants on assignment at end of year
2,495
2,965
3,247
2,569
2,511
Cash dividends paid
$
17,581
$
16,158
$
14,269
$
14,157
$
14,085



May 30,
May 25,
May 26,
May 27,
May 28,

2020
2019
2018
2017
2016

(Amounts in thousands)
Total assets
$
529,181
$
428,370
$
432,674
$
364,128
$
417,255
Long-term debt
$
88,000
$
43,000
$
63,000
$
48,000
$
-
Stockholders' equity
$
303,661
$
282,396
$
268,825
$
238,142
$
342,649

(1)
See Note 3 – Acquisitions and Dispositions in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for discussions on our acquisitions of Expertence and Veracity during fiscal 2020 and taskforce and Accretive during fiscal 2018.



ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes. This discussion and analysis contain s forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors including, but not limited to, those discussed in Part I , Item 1A. “Risk Factors.” and elsewhere in this Annual Report on Form 10-K. See “Forward Looking Statements.”

Overview

RGP is a global consulting firm that enables rapid business outcomes by bringing together the right people to create transformative change. As a human capital partner for our clients, we specialize in solving today’s most pressing business problems across the enterprise in the areas of transactions, regulations and transformations . Our engagements are designed to leverage human connection and collaboration to deliver practical solutions and more impactful results that power our clients ’ , consultants ’ and partners’ success. See Part 1 , Item 1 “Business” for further discussions about our business and operations.

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Key Transformation Initiatives

Starting in fiscal 2017 and continuing through fiscal 2019, we completed a number of transformative enterprise initiatives including cultivating a more robust sales culture, adopting a new operating model for sales, talent and delivery in North America, refreshing the RGP brand and establishing a digital innovation function focusing on building and commercializing our digital engagement platform and product offerings and enhancing our consulting capabilities in the digital transformation space.

To optimize our sales organization, we aligned our sales process using tools such as Salesforce.com and implemented a new incentive compensation program focused on driving growth in our business with the appropriate metrics. In addition, we expanded our Strategic Client Program, which assigns dedicated account teams to certain high-profile clients with global operations.

Under the new operating model in North America, we realigned reporting relationships, largely defined by functional area rather than on an office location basis. We reorganized our Advisory and Project Services function, a team of seller-doer professionals whose primary responsibility is to shepherd sales pursuits and engagement delivery on our more complex projects. We believe this team deepens the scoping conversation, achieves value-oriented pricing and improves delivery management through greater accountability and a more seamless customer experience.

In fiscal 2019, through an extensive brand refresh project led by an outside firm, we adopted a new brand identity focused on our human-centered approach to serving clients and engaging with our consultants. We believe the development of our new brand will support future revenue growth.

Fiscal 2020 Strategic Focus Areas

In fiscal 2020, we continued to strengthen our core by further investing in digital innovation, both organically and through a strategic acquisition, while simultaneously forging ahead in our transformation journey with a deep and global strategic business review.

In July 2019, we acquired Veracity Consulting Group, LLC (“Veracity”), a fast-growing, digital transformation firm based in Richmond, Virginia. This important strategic acquisition allows RGP to offer comprehensive end-to-end digital transformation solutions to clients by combining Veracity’s customer-facing offerings with our depth of experience in back-office solutions. In addition, during fiscal 2020, we continued to invest in our digital engagement platform which is on track to launch in fiscal 2021.
During the first quarter of fiscal 2020, we evaluated certain European markets and determined that we would no longer operate in certain markets based on their client base. As a result, we sold certain assets and liabilities of our foreign subsidiary, Resources Global Professionals Sweden AB (“RGP Sweden”) and exited from the Belgium market, including its wholly own subsidiary in Luxemburg, as well as Norway.

During the third quarter of fiscal 2020, we further performed a deep and strategic review of our global business beginning in North America and Asia Pacific, and committed to a global restructuring and business transformation plan (the “Plan”), centered on strengthening the business for greater agility and resilience in anticipation of macroeconomic volatility. The Plan consists of two key components: an effort to streamline our management structure and eliminate non-essential positions to focus on core solution offerings, improve efficiency and enhance the employee experience; and a strategic rationalization of our physical geographic footprint and real estate spend to focus investment dollars in high growth core markets for greater impact.

Through the remainder of fiscal 2020, we completed a reduction in force (“RIF”) pursuant to the first component of the Plan, eliminating 73 positions in North America and Asia Pacific. In connection with the RIF, we incurred $3.9 million of employee termination costs in the fourth quarter of fiscal 2020, of which $2.0 million was paid at the end of fiscal 2020. An additional $1.7 million is expected to be paid in fiscal 2021.

The real estate component of the Plan, specifically to shrink our real estate footprint by 26% globally through either lease termination or subleasing, has afforded us a head start in managing the impact of the Pandemic. As a result of the work we did in the third quarter of fiscal 2020 preparing for a shift to virtual operations in connection with office closures, we were able to seamlessly pivot to a virtual operating model when the Pandemic hit in March, supported by a robust array of enhanced technical tools which enabled remote work. During the fourth quarter of fiscal 2020, we incurred $1.1 million of non-cash charges relating to lease terminations and other costs associated with exiting the facilities, including $0.6 million in impairment of our operating right-of-use assets and $0.5 million in loss on disposal of fixed assets. We expect to incur additional restructuring charges in fiscal 2021 as we continue to exit certain real estate leases in accordance with the Plan. The exact amount and timing will depend on a number of variables, including market conditions. Given the current macro environment, particularly the current shift away from commercial real estate occupancy, accelerated by the Pandemic, we are seeing challenges in our effort to sublet our real estate facilities. As a result, we believe it could take longer and be more costly to terminate and sublet our leases, therefore taking longer to realize the expected savings.

We expect to realize $10.0 million to $12.0 million of savings in fiscal 2021 as a result of the Plan.
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All of the employee termination costs and the facility exit costs associated with our restructuring initiatives that we incurred in fiscal 2020 are recorded in selling, general, and administrative expenses in our Consolidated Statements of Operations for the year ended May 30, 2020.

During the first quarter of fiscal 2021, we started the strategic business review in Europe, and currently expect to substantially complete the review and restructuring in Europe in fiscal 2021.

COVID-19 Impact and Outlook

Since the start of calendar 2020, the COVID-19 virus has spread to many of the countries in which we and our customers conduct business. Governments throughout the world have implemented, and may continue to implement, stay-at-home orders, proclamations and directives aimed at minimizing the spread of the COVID-19 virus. The impact of the Pandemic and the resulting restrictions have caused disruptions in the U.S. and global economy and may continue to disrupt financial markets and global economic activities. We have taken precautions and steps to prevent or reduce infection among our employees, including limiting business travel and mandating working from home in many of the countries in which we operate. While our overall productivity remained high through the end of fiscal 2020, these measures may disrupt our normal business operations and negatively impact our productivity and our ability to efficiently serve our clients. As events relating to COVID-19 continue to develop and evolve globally, there is significant uncertainty as to the full likely effects of the Pandemic, which may, among other things, reduce demand for or delay client decisions to procure our services or result in cancellation of existing projects. While the exact impact from the Pandemic is not quantifiable, our results of operations and cash flows wer e adversely impacted in the latter half of fiscal 2020. During the last 12 non-holiday weeks in the fourth quarter of fiscal 2020, which started with the week ended March 7, 2020, our average weekly revenue declined 9.1% compared to the first eight non-holiday weeks of the 2020 calendar year. Our number of consultants also decreased from 2,965 as of May 25, 2019 to 2,495 as of May 30, 2020. Due to the disruption of business operations in the U.S. and globally, we have also seen some softening in our pipeline globally . Although we do not expect the Pandemic to have a permanent impact on our business operations, we cannot estimate the length or the magnitude of the Pandemic and how this might affect our customers’ demand for our services and our ability to continue to operate efficiently. We believe the Pandemic could continue to have an adverse impact on our results of operations and financial position in fiscal 2021. We are uncertain whether future effects of the Pandemic will be similar to what we have experienced in fiscal 2020. We continue to monitor relevant business metrics, such as daily and weekly revenue run rate, pipeline activities, rate of consultant attrition and days sales outstanding, and have implemented the appropriate modifications to our normal operations. Until we have further visibility into the full impact of the pandemic on the global economy, we will remain focused on the health of our balance sheet and liquidity. We will make prudent decisions to reinvest in the business to drive key growth initiatives in core markets and the expansion of our digital capabilities. We believe the restructuring initiatives that we took in the fourth quarter of fiscal 2020 have better prepared us to operate with agility and resilience in this challenging economic environment.

Our primary source of liquidity historically has been cash provided by our operations and our $120.0 million secured revolving credit facility (“Facility”) which expires on October 17, 2021. As of May 30, 2020, we had cash and cash equivalents of $95.6 million, and additional availability under our Facility of $30.7 million. During the year ended May 30, 2020, we also continued to generate positive cash flow from operations and we believe the collection and quality of our customer receivables remain strong. Given our balance sheet and liquidity position, we believe we have the financial flexibility and resources needed to operate in the current uncertain economic environment. However, if global economic conditions worsen as a result of the Pandemic, it could materially impact our liquidity position and capital needs, although we believe our variable expense operating model serves to mitigate both operational and liquidity risk. See “ — Liquidity and Capital Resources” below.

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

Critical Accounting Policies

The following discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP in the United States. The preparation of these financial statements requires us to make estimates and judgments 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.

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We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

The following represents a summary of our critical accounting policies, defined as those policies we believe: (a) are the most important to the portrayal of our financial condition and results of operations and (b) involve inherently uncertain issues that require management’s most subjective or complex judgments.

Allowance for doubtful accounts — We maintain an allowance for doubtful accounts for estimated losses resulting from our clients failing to make required payments for services rendered. We estimate this allowance based upon our knowledge of the financial condition of our clients (which may not include knowledge of all significant events), review of historical receivable and reserve trends and other pertinent information. While such losses have historically been within our expectations and the provisions established, we cannot guarantee we will continue to experience the same credit loss rates we have in the past. A significant change in the liquidity or financial position of our clients could cause unfavorable trends in receivable collections and additional allowances may be required. These additional allowances could materially affect our future financial results.

Income taxes — In order to prepare our Consolidated Financial Statements, we are required to make estimates of income taxes, if applicable, in each jurisdiction in which we operate. The process incorporates an assessment of any current tax exposure together with temporary differences resulting from different treatment of transactions for tax and financial statement purposes. These differences result in deferred tax assets and liabilities that are included in our Consolidated Balance Sheets. The recovery of deferred tax assets from future taxable income must be assessed and, to the extent recovery is not likely, we will establish a valuation allowance. An increase in the valuation allowance results in recording additional tax expense and any such adjustment may materially affect our future financial result. If the ultimate tax liability differs from the amount of tax expense we have reflected in the Consolidated Statements of Operations, an adjustment of tax expense may need to be recorded and this adjustment may materially affect our future financial results and financial condition. We also evaluate our uncertain tax positions and only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50 percentage likelihood of being realized upon settlement. We record a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. Any change in judgment related to the expected ultimate resolution of uncertain tax positions is recognized in earnings in the period in which such change occurs.

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

Stock-based compensation — Under our 2014 Performance Incentive Plan, officers, employees, and outside directors have received or may receive grants of restricted stock, stock units, options to purchase common stock or other stock or stock-based awards. Under our Employee Stock Purchase Plan (“ESPP”) , eligible officers and employees may purchase our common stock in accordance with the terms of the plan.

We estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. We determine the estimated value of restricted stock awards using the closing price of our common stock on the date of grant. We have elected to use the Black-Scholes option-pricing model for our stock options and stock-based awards as well as stock issued under our ESPP which takes into account assumptions regarding a number of highly complex and subjective variables. These variables include the expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors. Additional variables to be considered are the expected term, expected dividends and the risk-free interest rate over the expected term of our employee stock options. In addition, because stock-based compensation expense recognized in the Consolidated Statements of Operations is based on awards ultimately expected to vest, it is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based on historical experience. If facts and circumstances change and we employ different assumptions in future periods, the compensation expense recorded may differ materially from the amount recorded in the current period.

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We use our historical volatility over the expected life of the stock option award and ESPP to estimate the expected volatility of the price of our common stock. The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of our employee stock options. The impact of expected dividends ( $0.14 per share for each quarter during fiscal 2020, $0.13 per share for each quarter during fiscal 2019 , and $0.12 per share for each quarter during fiscal 2018) is also incorporated in determining the estimated value per share of employee stock option grants and purchases under our ESPP. Such dividends are subject to quarterly board of director approval. Our expected life of stock option grants is 5. 6 years for non-officers and 8. 1 years for officers , and the expected life of grants under our ESPP is 6 months. We review the underlying assumptions related to stock-based compensation at least annually or more frequently if we believe triggering events exist.

Valuation of long-lived assets — We assess the potential impairment of long-lived tangible and intangible assets periodically or whenever events or changes in circumstances indicate the carrying value may not be recoverable from the estimated undiscounted expected future cash flows expected to result from their use and eventual disposition. In cases where the estimated undiscounted expected future cash flows are less than net book value, an impairment loss is recognized equal to the amount by which the net book value exceeds the estimated fair value of assets. Estimating future cash flows requires significant judgment, and our projections may vary from the cash flows eventually realized. Future events and unanticipated changes to assumptions could result in an impairment in the future. Although the impairment is a non-cash expense, it could materially affect our future financial results and financial condition. Identifiable intangible assets are amortized over their lives, typically ranging from 17 months to ten years.

Valuation of goodwill – Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. We evaluate goodwill for impairment annually on the last day of the fiscal year, and whenever events indicate that it is more likely than not that the fair value of a reporting unit could be less than its carrying amount. We operate under one reporting unit resulting from the combination of our practice offices. We early adopted Accounting Standards Update (“ ASU”) No. 2017-04 Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ( “ASU 2017-04” ) on May 26, 2019, the first day of fiscal 2020. ASU 2017-04 eliminates step two of the goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with its carrying amount. Under ASU 2017-04, we compare the fair value and the carrying value of our reporting unit to assess and measure goodwill impairment. There was no goodwill impairment for fiscal 2020. Depending on future market values of our stock, our operating performance and other factors, the assessment could potentially result in an impairment in the future . Although the impairment is a non-cash expense, it could materially affect our future financial results and financial condition.

Business c ombinations — We allocate the fair value of the purchase consideration of our acquisitions to the tangible assets, liabilities, and intangible assets acquired based on their estimated fair values. Purchase price allocations for business acquisitions require significant judgments, particularly with regards to the determination of value of identifiable assets, liabilities, and goodwill. Often third-party specialists are used to assist in valuations requiring complex estimation. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.

Purchase agreements related to certain business acquisitions may include provisions for the payment of additional cash consideration if certain future performance conditions are met. These contingent consideration arrangements are recognized at their acquisition date fair value and included as part of the purchase price at the acquisition date. T hese contingent consideration arrangements are classified as accrued liabilities or other long-term liabilities in our Consolidated Balance Sheets and are remeasured to fair value at each reporting period, with any change in fair value being recognized in the applicable period’s results of operations. Measuring the fair value of contingent consideration at the acquisition date, and for all subsequent remeasurement periods, requires a careful examination of the facts and circumstances to determine the probable resolution of the contingency(ies). The estimated fair value of the contingent consideration is based primarily on our estimates of meeting the applicable contingency conditions as per the terms of the applicable agreements. These include estimates of various operating performance and other measures and our assessment of the probability of meeting such results, with the probability-weighted earn-out then discounted to estimate fair value.

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Results of Operations

The following tables set forth, for the periods indicated, our Consolidated Statements of Operations data. These historical results are not necessarily indicative of future results.

Our operating results for the periods indicated are expressed as a percentage of revenue below. The fiscal year ended May 30, 2020 consisted of 53 weeks. All other fiscal years presented consisted of 52 weeks.





For the Years Ended

May 30,
May 25,
May 26,

2020
2019
2018

(Amounts in thousands, except percentages)
Revenue
$
703,353
100.0
%
$
728,999
100.0
%
$
654,129
100.0
%
Direct cost of services
427,870
60.8
446,560
61.3
408,074
62.4
Gross margin
275,483
39.2
282,439
38.7
246,055
37.6
Selling, general and administrative expenses
228,067
32.4
223,802
30.7
209,042
32.0
Amortization of intangible assets
5,745
0.8
3,799
0.5
2,298
0.4
Depreciation expense
5,019
0.8
4,679
0.6
4,091
0.6
Income from operations
36,652
5.2
50,159
6.9
30,624
4.6
Interest expense, net
2,061
0.3
2,190
0.3
1,735
0.3
Other income
(637)
(0.1)
-
-
-
-
Income before provision for income taxes
35,228
5.0
47,969
6.6
28,889
4.3
Provision for income taxes
6,943
1.0
16,499
2.3
10,063
1.5
Net income
$
28,285
4.0
%
$
31,470
4.3
%
$
18,826
2.8
%

Non-GAAP Financial Measures

We use certain non-GAAP financial measures to assess our financial and operating performance that are not defined by, or calculated in accordance with GAAP. A non-GAAP financial measure is defined as a numerical measure of a company’s financial performance that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with GAAP in the Consolidated Statements of Operations; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable measure so calculated and presented.

Our primary non-GAAP financial measures are listed below and reflect how we evaluate our operating results.

·
Constant currency applied to both GAAP revenue and Non-GAAP revenue, as defined herein, represents the outcome that would have resulted had exchange rates in the reported period been the same as those in effect in the comparable prior period.
·
Organic revenue is calculated as GAAP revenue less revenues from acquired businesses and revenues related to businesses that the Company disposed of either through sale or abandonment.
·
Same day organic revenue is calculated as organic revenue, divided by the number of business days in the current period, multiplied by the number of business days in the comparable prior period. For example, North America organic revenue for fiscal 2020 on the same day basis as fiscal 2019 is calculated as North America organic revenue for fiscal 2020 of $561.4 million divided by the 258 business days in North America in the current year, multiplied by the 254 business days in North America in fiscal 2019. The number of days in each respective year is provided in “Year Ended May 30, 2020 Compared to Year Ended May 29, 2019” below.
·
Adjusted EBITDA is calculated as net income before amortization of intangible assets, depreciation expense, interest and income taxes plus stock-based compensation expense, restructuring costs, and plus or minus contingent consideration adjustments.
·
Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenue.

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Organic Revenue and Same Day Organic Revenue

Organic revenue and same day organic revenue assist management in evaluating revenue trends on a more comparable and consistent basis. We believe these measures also provide more clarity to our investors in evaluating our core operating performance and facilitate a comparison of such performance from period to period. The following table presents the organic revenue for the periods indicated and includes a reconciliation of the organic revenue to revenue, the most directly comparable GAAP financial measure. Amounts are stated in thousands:





For the Years Ended
Organic Revenue
May 30,
May 25,

2020
2019
Revenue (GAAP)
(Unaudited)
North America
$
580,185
$
593,799
Asia Pacific
48,622
48,845
Europe
74,546
86,355
Total revenue
$
703,353
$
728,999

Less: Impact of Acquisitions and Dispositions
North America (1)
$
18,817
$
-
Asia Pacific
-
-
Europe (2)
2,712
12,136
Total revenue
$
21,529
$
12,136

Organic Revenue
North America
$
561,368
$
593,799
Asia Pacific
48,622
48,845
Europe
71,834
74,219
Total revenue
$
681,824
$
716,863

(1) Related to Veracity
(2) Related to Nordics and Belgium
Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA and Adjusted EBITDA Margin assist management in assessing our core operating performance. We also believe these measures provide investors with useful perspective on underlying business results and trends and facilitate a comparison of our performance from period to period. The following table presents Adjusted EBITDA and Adjusted EBITDA Margin for the periods indicated and includes a reconciliation of such measures to net income, the most directly comparable GAAP financial measure:





For the Years Ended

May 30,
May 25,
May 26,

2020
2019
2018

(Amounts in thousands, except percentages)
Net income
$
28,285
$
31,470
$
18,826
Adjustments:
Amortization of intangible assets
5,745
3,799
2,298
Depreciation expense
5,019
4,679
4,091
Interest expense, net
2,061
2,190
1,735
Provision for income taxes
6,943
16,499
10,063
Stock-based compensation expense
6,057
6,570
6,033
Restructuring costs
4,982
-
-
Contingent consideration adjustment
794
(590)
-
Adjusted EBITDA
$
59,886
$
64,617
$
43,046
Revenue
$
703,353
$
728,999
$
654,129
Adjusted EBITDA Margin
8.5
%
8.9
%
6.6
%

Our non-GAAP financial measures are not measurements of financial performance or liquidity under GAAP and should not be considered in isolation or construed as substitutes for revenue, net income or other cash flow data prepared in accordance with GAAP
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for purposes of analyzing our revenue, profitability or liquidity. These measures should be considered in addition to, and not as a substitute for, revenue, net income, earnings per share, cash flows or other measures of financial performance prepared in conformity with GAAP.
Further, a limitation of our non-GAAP financial measures is they exclude items detailed above that have an impact on our GAAP reported results. Other companies in our industry may calculate these non-GAAP financial measures differently than we do, limiting their usefulness as a comparative measure.

Because of these limitations, these non-GAAP financial measures should not be considered a substitute for performance measures calculated in accordance with GAAP.

Year Ended May 30, 2020 Compared to Year Ended May 25, 2019

Amounts are in millions unless otherwise stated. Percentage change computations are based upon amounts in thousands.

Revenue. Revenue decreased $25.6 million, or 3.5%, to $703.4 million for the year ended May 30, 2020 from $729.0 million for the year ended May 25, 2019 . Billable hours decreased by 3.3% in fiscal 2020 as compared to fiscal 2019, while average bill rate remained relatively consistent between the two periods . R esults in fiscal 2020 consisted of 53 weeks while fiscal 2019 consisted of 52 weeks.

The following table represents r evenue , organic revenue, and same day organic revenue for our major geographies across the globe , and the number of business days in each geography :





Revenue For the Years Ended

May 30,
May 25,
%

2020
2019
Change
GAAP
(Amounts in thousands, except percentages)
North America
$
580,185
82.5
%
$
593,799
81.5
%
(2.3)
%
Europe
74,546
10.6
86,355
11.8
(13.7)
%
Asia Pacific
48,622
6.9
48,845
6.7
(0.5)
%
Total
$
703,353
100.0
%
$
728,999
100.0
%
(3.5)
%

Organic Revenue
North America
$
561,368
82.3
%
$
593,799
82.8
%
(5.5)
%
Asia Pacific
48,622
7.2
48,845
6.8
(0.5)
%
Europe
71,834
10.5
74,219
10.4
(3.2)
%
Total revenue
$
681,824
100.0
%
$
716,863
100.0
%
(4.9)
%

Same Day Organic Revenue
North America
552,665
82.4
%
$
593,799
82.8
%
(6.9)
%
Asia Pacific
47,850
7.1
48,845
6.8
(2.0)
%
Europe
70,442
10.5
74,219
10.4
(5.1)
%
Total revenue
670,957
100.0
%
$
716,863
100.0
%
(6.4)
%

Number of Business Days
North America (1)
258
254
Asia Pacific (2)
252
248
Europe (2)
258
253

(1) This represents the number of business days in the United States.
(2) This represents the number of business days in country or countries in which the revenues are most concentrated within the geography.

North America same day organic revenue decreased $ 41.1 million , or 6.9%, in fiscal 2020 compared to fiscal 2019. The average bill rate in North America improved by 1.0% compared to the prior fiscal year. Europe same day organic revenue decreased $3.8 million, or 5.1%, in fiscal 2020 compared to fiscal 2019. Asia Pacific same day organic revenue declined by $1.0 million, or 2.0%, in fiscal 2020. The decline of revenue in all geographies in fiscal 2020 reflected the adverse impact of the Pandemic and particularly in North America, the wind-down of project revenue related to lease accounting implementation and other large projects.

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Our financial results are subject to fluctuations in the exchange rates of foreign currencies in relation to the United States dollar. Revenues denominated in foreign currencies are translated into U.S. dollars at the monthly average exchange rates in effect during each period. Thus, as the value of the United States dollar strengthens relative to the currencies of our non-United States based operations, our translated revenue (and expenses) will be lower; conversely, if the value of the U.S. dollar weakens relative to the currencies of our non-United States operations, our translated revenue (and expenses) will be higher. Using the comparable fiscal 201 9 conversion rates, which we believe provides a more comprehensive view of trends in our business, our same day organic revenue decreased by 6.0% on an overall global basis during fiscal 2020. By geography, using comparable fiscal 2019 conversion rates, our same day organic revenue decreased by 6.9%, 2.1% and 1.3% in North America, Europe and Asia Pacific, respectively. Overall average bill rates increased 0.4% on a constant currency basis in fiscal 2020.

Our clients do not sign long-term contracts with us. As such, there can be no assurance as to future demand levels for the services that we provide or that future results can be reliably predicted by considering past trends. The number of consultants on assignment at the end of fiscal 2020 was 2,495 compared to 2,965 at the end of fiscal 2019.

Direct Cost of Services. Direct cost of services decreased $18.7 million, or 4.2%, to $427.9 million for the year ended May 30, 2020 from $446.6 million for the year ended May 25, 2019. The decrease is primarily due to a 3.3% decrease in billable hours between the two periods and a 0.2% decrease in the average consultant pay rates from fiscal 2019 to fiscal 2020.

Direct cost of services as a percentage of revenue was 60.8% and 61.3% during fiscal 2020 and fiscal 2019, respectively. Direct cost of services as a percentage of revenue improved in the current period primarily attributable to lower passthrough revenue from client reimbursement and a slight improvement in the bill/pay ratio . Our target direct cost of services percentage is 60% for all of our markets.

Selling , General and Administrative Expenses (“SG&A”) . SG&A increased $4. 3 million, or 1.9 %, to $228. 1 million for the year ended May 30, 2020 from $223.8 million for the year ended May 25, 2019 . SG&A in fiscal 2020 reflected one extra week of activities as compared to fiscal 2019. SG&A a s a percentage of revenue increased from 30.7% in fiscal 2019 to 32. 4 % in fiscal 2020. The increase in SG&A is primarily due to the following: (1) $5.0 million of restructuring costs incurred in fiscal 2020, including $3.9 million in personnel-related costs, and $1.1 million in real estate exit related costs ; (2) a $2.9 million increase in management compensation and bonuses and commissions partially driven by the one extra week in fiscal 2020 ; and (3) a change in contingent consideration related expense/benefit over the two periods, which was an expense of $0.8 million in fiscal 2020 as compared to a benefit of $0.6 million in fiscal 2019. The increase in SG&A was partially offset by the following: (1) $ 2 . 5 million of savings in general business expenses, primarily attributable to cost containment measures and reduced business travel during the Pandemic; (2) a $1.7 million decrease in internal consultants costs as we continue to leverage our existing resources more efficiently on various projects and initiatives; and (3) a $0.5 million decrease in stock-based compensation expense .

Amortization and Depreciation Expense . Amortization of intangible assets was $5.7 million in fiscal 2020 compared to $3.8 million in fiscal 2019. The increase is primarily due to the amortization related to identifiable intangible assets acquired through Veracity. Depreciation expense was $5.0 million and $4.7 million in fiscal 2020 and 2019, respectively.

Interest Expense, net. Net interest expense for fiscal 2020, including commitment fees, was approximately $2.1 million in fiscal 2020 compared to $2.2 million in fiscal 2019. The decrease was due to a lower average interest rate in fiscal 2020 as compared to the prior fiscal year. Interest income was $0.1 million and $0.3 million in fiscal 2020 and 2019, respectively.

Income Taxes. The provision for income taxes was $6.9 million and $16.5 million in fiscal 2020 and 2019, respectively. The effective tax rate decreased from 34.4% in fiscal 2019 to 19.7% in fiscal 2020. The decrease in the provision for income taxes from the prior year was primarily due to a fiscal 2020 deduction related to a worthless stock loss in our investment in our wholly owned subsidiaries. During fiscal 2020, after analyzing the facts and circumstances, we determined to no longer invest in the Belgium, Luxembourg and the Nordics markets which includes Sweden and Norway. We have maintained a permanent investment position and, therefore, have not previously recorded a deferred tax asset for the basis differences of these entities. The financial results of these entities created an excess of tax basis over the book basis in which the worthless stock that was deducted for income tax purposes equal to approximately $25.8 million, resulting in an estimated net tax benefit of $6.6 million. We analyzed these transactions and determined that these worthless stock deductions qualify as ordinary losses . In addition, we took a deduction relating to worthless loans of approximately $4.4 million, which is also treated as an ordinary loss, resulting in a net tax benefit of $0.8 million after the offset of the estimated global intangible low-taxed income (“GILTI”) tax. While we believe this is a valid income tax deduction, due to the controversial nature of worthless loan deductions, we have determined this tax benefit to be an uncertain tax position. Accordingly, we fully reserved for the tax benefit associated with the worthless loan deduction. The reserve includes offsetting the federal and state benefits, by the estimated GILTI tax increase. The deductions for worthless stock and worthless loans decreased the effective tax rate for fiscal 2020 by 17.4%. These reductions were partially offset by new valuation allowances set up on some of our foreign deferred tax assets based on a review of earnings trends in connection with the adverse impact from the Pandemic.

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The provision for taxes in both fiscal 2020 and 2019 resulted from taxes on income from operations in the United States and certain other foreign jurisdictions, a lower benefit for losses in certain foreign jurisdictions with tax rates lower than the United States statutory rates, and no benefit for losses in jurisdictions in which a valuation allowance on operating loss carryforwards had previously been established. Based upon current economic circumstances, management will continue to monitor the need to record additional or release existing valuation allowances in the future, primarily related to certain foreign jurisdictions. Realization of the currently reserved foreign deferred tax assets is dependent upon generating sufficient future taxable income in those foreign territories.

Periodically, we review the components of both book and taxable income to analyze the adequacy of the tax provision. There can be no assurance that our effective tax rate will remain constant in the future because of the lower benefit from the United States statutory rate for losses in certain foreign jurisdictions, the limitation on the benefit for losses in jurisdictions in which a valuation allowance for operating loss carryforwards has previously been established, and the unpredictability of timing and the amount of eligible disqualifying incentive stock options (“ISO”) exercises.

We have maintained a position of being indefinitely reinvested in our foreign subsidiaries’ earnings by not expecting to remit foreign earnings in the foreseeable future. Being indefinitely reinvested does not require a deferred tax liability to be recognized on the foreign earnings. Management’s indefinite reinvestment position is supported by:

·
RGP in the United States has generated more than enough cash to fund operations and expansion, including acquisitions. RGP uses its excess cash to, at its discretion, return cash to shareholders through dividend payments and stock repurchases.

·
RGP in the United States has no debt or any other current or known obligations that require cash to be remitted from foreign subsidiaries.

·
Management’s growth objectives include allowing cash to accumulate in RGP’s profitable foreign subsidiaries with the expectation of finding strategic expansion plans to further penetrate RGP’s most successful locations.

·
The consequences of distributing foreign earnings have historically been deemed to be tax inefficient for RGP or not materially beneficial.

Year Ended May 25, 2019 Compared to Year Ended May 26, 2018

For a comparison of our results of operations for the fiscal years ended May 25, 2019 and May 26, 2018, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended May 25, 2019, filed with the SEC on July 19, 2019 (File No. 0-32113).

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Quarterly Results

The following table sets forth our unaudited quarterly Consolidated Statements of Operations data for each of the eight quarters in the two-year period ended May 30, 2020. In the opinion of management, this data has been prepared on a basis substantially consistent with our audited Consolidated Financial Statements appearing elsewhere in this document, and includes all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the data. The quarterly data should be read together with our Consolidated Financial Statements and related notes appearing elsewhere in this document. The operating results are not necessarily indicative of the results to be expected in any future period.




Quarters Ended

May 30,
Feb. 22,
Nov. 23,
Aug. 24,
May 25,
Feb. 23,
Nov. 24,
Aug. 25,
2020 (1)
2020
2019
2019
2019
2019
2018
2018

(In thousands, except net income per common share)

Revenue
$
178,569
$
168,052
$
184,507
$
172,225
$
182,144
$
179,498
$
188,799
$
178,558
Direct cost of services, primarily
payroll and related taxes for
professional services employees
106,386
106,632
110,130
104,722
109,188
111,587
115,378
110,407
Gross margin
72,183
61,420
74,377
67,503
72,956
67,911
73,421
68,151
Selling, general and
administrative expenses
62,035
55,299
53,755
56,978
56,890
55,587
54,959
56,366
Amortization of intangible assets
1,592
1,549
1,510
1,094
944
948
952
955
Depreciation expense
1,106
1,120
1,424
1,369
1,250
1,163
1,197
1,069
Income from operations
7,450
3,452
17,688
8,062
13,872
10,213
16,313
9,761
Interest expense, net
535
493
551
482
461
595
608
526
Other income
(100)
-
(537)
-
-
-
-
-
Income before income tax
expense (benefit)
7,015
2,959
17,674
7,580
13,411
9,618
15,705
9,235
Income tax expense (benefit)
2,948
(3,983)
5,337
2,641
4,042
3,822
5,141
3,494
Net income
$
4,067
$
6,942
$
12,337
$
4,939
$
9,369
$
5,796
$
10,564
$
5,741
Net income per common share (2):
Basic
$
0.13
$
0.22
$
0.39
$
0.16
$
0.30
$
0.18
$
0.33
$
0.18
Diluted
$
0.13
$
0.21
$
0.38
$
0.15
$
0.29
$
0.18
$
0.33
$
0.18

(1) Fiscal quarter ended May 30, 2020 consisted of 14 weeks. All other quarters presented consisted of 13 weeks.
(2) Net income per common share calculations for each of the quarters were based upon the weighted average number of shares outstanding for each period, and the sum of the quarters may not necessarily be equal to the full year net income per common share amount.

Our quarterly results have fluctuated in the past and we believe they will continue to do so in the future. Certain factors that could affect our quarterly operating results are described in Part I, Item 1A “Risk Factors.” Due to these and other factors, we believe that quarter-to-quarter comparisons of our results of operations are not meaningful indicators of future performance.

Liquidity and Capital Resources

Our primary source of liquidity is cash provided by our operations, o ur $120 .0 million secured revolving credit facility with Bank of America (the “Facility”) and, historically to a lesser extent, stock option exercises and ESPP purchases . On an annual basis, we have generated positive cash flows from operations since inception, and we continued to do so for the year ended May 30, 2020 . Our ability to generate positive cash flow from operations in the future will be, at least in part, dependent on continued stable global economic conditions and our ability to remain resilient during economic downturns, such as the one we are currently in caused by the COVID-19 Pandemic. As of May 30, 2020 , we had $ 95.6 million of cash and cash equivalents including $ 31.7 million held in international operations.

We entered into the Facility in October 2016, which is available for working capital and general corporate purposes, including potential acquisitions and stock repurchases. The Facility allows us to choose the interest rate applicable to advances. Borrowings under the Facility bear interest at a rate per annum of either, at our option, (i) LIBOR plus a margin of 1.25% or 1.50% or (ii) an alternate base rate, plus margin of 0.25% or 0.50% with the applicable margin depending on our consolidated leverage ratio. The alternate base rate is the highest of (i) Bank of America’s prime rate, (ii) the federal funds rate plus 0.50% and (iii) the Eurodollar rate plus 1.0%. We pay an unused commitment fee on the average daily unused portion of the Facility at a rate of 0.15% to 0.25% depending upon on our consolidated leverage ratio. The Facility expires on October 17, 2021. The Facility contains both affirmative and negative covenants. We were in compliance with all financial covenants under the Facility as of May 30, 2020 and do not expect material uncertainties in our continued ability to be in compliance with all financial covenants through the remaining term of the Facility. As of May 30, 2020,
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our borrowings on the Facility were $ 88.0 million, and we had $ 1. 3 million of outstanding letters of credit issued under the Facility. Additional information regarding the Facility is included in Note 7 — Long-Term Debt in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Our ongoing operations and anticipated growth in the geographic markets we currently serve will require us to continue to make investments in critical markets and in systems and technology. In addition, we may consider making strategic acquisitions or take on restructuring initiatives, which could require significant liquidity . While we have not seen a significant adverse impact on our overall cash collections as a result of the Pandemic, in an abundance of caution, we borrowed $39.0 million on the Facility in the fourth quarter, to provide substantial additional liquidity to manage our business as the Pandemic continued to develop globally and impact the capital markets. We currently believe that our current cash, ongoing cash flows from our operations and funding available under our Facility will be adequate to meet our working capital and capital expenditure needs and to satisfy our cash requirement in executing our restructuring initiatives for at least the next 12 months. If we require additional capital resources to grow our business, either internally or through acquisition, we may seek to sell additional equity securities or to increase our use of our Facility. In addition, if we decide to make additional share repurchases, we may fund these through existing cash balances or use of our Facility. The sale of additional equity securities or certain forms of debt financing could result in additional dilution to our stockholders. We may not be able to obtain financing arrangements in amounts or on terms acceptable to us in the future. In the event we are unable to obtain additional financing when needed, we may be compelled to delay or curtail our plans to develop our business or to pay dividends on our capital stock, which could have a material adverse effect on our operations, market position and competitiveness.

Operating Activities , fiscal 2020 and 2019

Operating activities provided $ 49.5 million and $ 43.6 million in cash in fiscal 20 20 and fiscal 201 9 , respectively. Cash provided by operations in fiscal 2020 resulted from net income of $ 28. 3 million and net favorable non-cash reconciling adjustments of $ 21. 5 million. These amounts were partially offset by a net unfavorable change in operating assets and liabilities of $ 0. 3 million primarily due to a $7.9 million decrease in accounts payable, a $6.8 million decrease in accrued salaries and related obligations and a $2.5 million increase in prepaid income taxes, partially offset by a $10.0 million decrease in trade accounts receivable and a $7.3 million increase in other liabilities . In fiscal 201 9, ca sh provided by operations resulted from net income of $31.5 million and net favorable non-cash reconciling adjustments of $22.6 million , partially offset by a net unfavorable change in operating assets and liabilities of $ 10.4 million primarily related to de crease s in accounts receivable and income taxes payable .

Investi ng Activities , fiscal 2020 and 2019

Net cash used in investing activities was $26. 8 million for fiscal 2020, compared to $12.9 million in fiscal 2019. We used $30.3 million of cash (net of cash acquired) to acquire Veracity in fiscal 2020. There were no acquisitions in fiscal 2019 . Purchases of property and equipment decreased approximately $4.6 million between the two periods, as we relocated or refurbished certain offices during fiscal 2019. We also redeemed $6.0 million of short-term investments in fiscal 2020, which we purchased in fiscal 2019.

Financi ng Activities , fiscal 2020 and 2019

The primary sources of cash in financing activities are borrowings under our Facility, cash proceeds from the exercise of employee stock options and proceeds from the issuance of shares purchased under our ESPP. The primary uses of cash in financing activities are repayments under the Facility, repurchases of our common stock and cash dividend payments to our shareholders.

Net cash provided by financing activities totaled $30.9 million in fiscal 2020 compared to net cash used in financing activities of $43.6 million in fiscal 2019. F inancing activities during fiscal 2020 primarily consisted of $ 74.0 million of proceeds borrowed from the Facility and $10.3 million from the issuance of shares under ESPP and the exercise of employee stock option s, partially offset by principal repayments of $ 29.0 million under the Facility , $17.6 million of cash dividend payments and $ 5.0 millio n for share repurchases . Additional information regarding dividends is included in Note 1 1 — Stockholders’ Equity in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. The increase in dividends paid in fiscal 2020 compared to fiscal 2019 was due to an increase in quarterly dividends declared from $0.13 per share in fiscal 2019 to $0.14 per share beginning in fiscal 2020. Net cash used by financing activities of $43.6 million in fiscal 2019 consisted of $16.2 million in cash dividends paid, $29.9 million in share repurchases and $20.0 million repaid under our Facility, partially offset by proceeds of $24.3 million from the exercise of employee stock options and the issuance of shares under ESPP.

As described in Note 3 — Acquisitions and Dispositions, in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, the purchase agreements for Veracity and Expertence require cash earn-out payments to be made when certain performance conditions are met. We estimated the fair value of the obligation to pay contingent consideration based on a number of different projections of the estimated EBITDA and estimated revenue. The estimated fair value of the contingent consideration as of May 30, 2020 was $7.9 million, of which $5.0 million is due before the end of calendar 2020 if the terms of the contingent consideration arrangement are met.

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For a comparison of our cash flow activities for the fiscal years ended May 25, 2019 and May 26, 2018, see Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended May 25, 2019, filed with the SEC on July 19, 2019 (File No. 0-32113) .

While the Pandemic has created significant uncertainty in the global economy and capital markets, which is expected to continue into the remainder of 2020 and beyond, we currently believe our existing balance of cash, cash flow expected to be generated from our future operations, and the additional availability under our Facility will provide sufficient cash needs for working capital and capital expenditures for at least the next 12 months. However, we could be required, or could elect to seek additional funding prior to that time. Our future capital requirements will depend on many factors, including our ability to continue to adapt and efficiently serve our client, our clients’ project needs during this uncertain time, and our clients’ financial health and ability to make timely payments on our receivables. A material adverse impact from the Pandemic could result in a need for us to raise additional capital or incur additional indebtedness to fund strategic initiatives or operating activities.

Contractual Obligations

At May 30, 2020 , we had operating leases , primarily for office premises, and purchase obligations include payments due under various types of licenses , expiring at various dates through March 202 8 . At May 30, 2020 , we had no finance leases. The following table summarizes our future minimum rental commitments under operating leases and our other known contractual obligations as of May 30, 202 0:






Payments Due by Period

Fiscal
Fiscal

Total
Fiscal 2021
2022-2023
2024-2025
Thereafter

(Amounts in thousands)
Operating lease obligations
$
45,762
$
12,610
$
19,526
$
10,458
$
3,168
Purchase obligations
$
4,855
$
2,797
$
2,058
$
-
$
-
Long-term debt
$
88,000
$
-
$
88,000
$
-
$
-

Long-term debt above reflects our outstanding borrowings under the Facility as of May 30, 2020, assumes no future borrowings under the Facility and does not include any estimated future interest payments.

The contractual obligations and commitments table above does not reflect the Company’s total liability for unrecognized gross tax benefits, which was $848,000 as of May 30, 2020, because we are unable to reasonably estimate the period during which this obligation may be incurred, if at all.


Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements is contained in Note 2 — Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K .

Inflation

Inflation was not a material factor in either revenue or operating expenses during the fiscal years ended May 30, 2020 , May 25, 2019 or May 26, 2018 .