• information management services, such as financial system/enterprise resource planning implementation and post implementation optimization;

• human capital services, such as change management and compensation program design and implementation;

• risk management and internal audit services (provided via our subsidiary Resources Audit Solutions), including compliance reviews, internal audit co-sourcing and assisting clients with their compliance efforts under the Sarbanes-Oxley Act of 2002 ("Sarbanes");

• supply chain management services, such as leading strategic sourcing efforts, contract negotiations and purchasing strategy;

• actuarial services, such as for pension and life insurance companies; and

• legal services such as providing attorneys, paralegals and contract managers to assist clients (including law firms) with project-based or peak period needs.

We were founded in June 1996 as a division of Deloitte & Touche and operated as Resources Connection, LLC, a wholly owned subsidiary of Deloitte & Touche, from January 1997 until April 1999. In November 1998, our management formed RC Transaction Corp., renamed Resources Connection, Inc., to raise capital for an intended management-led buyout. In April 1999, we completed the management-led buyout in partnership with several investors. In December 2000, we completed our initial public offering of common stock and began trading on the NASDAQ. We currently trade on the NASDAQ Global Select Market. In January 2005, we announced the change of our operating entity name to Resources Global Professionals to better reflect the Company's international capabilities.
We operated solely in the United States until fiscal year 2000, when we began to expand geographically to meet the demand for project professional services across the world and opened our first three international offices. Our most significant international transaction was the acquisition of our Netherlands practice in fiscal year 2004. As of November 29, 2008, the Company served clients through 56 offices in the United States and 33 offices abroad. 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 generally accepted accounting principles 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.
The following represents a summary of our critical accounting policies, defined as those policies that 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 difficult, subjective or complex judgments.
Valuation of long-lived assets-We assess the potential impairment of long-lived tangible and intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Under the current accounting standard, our goodwill and certain other intangible assets are not subject to periodic amortization. These assets are now considered to have an indefinite life and their carrying values are required to be assessed by us for impairment at least annually. Depending on future market values of our stock, our operating performance and other factors, these assessments could potentially result in impairment reductions of these intangible assets in the future and this adjustment could materially affect the Company's future financial results. 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, 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 that we will continue to experience the same credit loss rates that 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 the Company's 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 effect the Company's future financial results. If the ultimate tax liability differs from the amount of tax expense we have reflected in the Consolidated Statements of Income, an adjustment of tax expense may need to be recorded and this adjustment could materially affect the Company's future financial results.

Revenue recognition-We primarily charge our clients on an hourly basis for the professional services of our consultants. We recognize revenue once services have been rendered and invoice the majority of our clients in the United States on a weekly basis. Some of our clients served by our international operations are billed on a monthly basis. Our clients are contractually obligated to pay us for all hours billed. To a much lesser extent, we also earn revenue if a client hires one of our consultants. This type of contractually non-refundable revenue is recognized at the time our client completes the hiring process. Stock-based Compensation-Under our 2004 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. Effective May 28, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards ("SFAS") No. 123 (revised), "Share-Based Payment" ("SFAS 123 (R)"). SFAS 123 (R) requires that the Company estimate the value of employee stock options on the date of grant using an option-pricing model. We have elected to use the Black-Scholes option-pricing model 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 and risk-free interest rate over the expected term of our employee stock options. In addition, because stock-based compensation expense recognized in the Statement of Income is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS 123 (R) requires forfeitures to be 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 the application of SFAS 123 (R) in future periods, the compensation expense recorded under SFAS 123 (R) may differ materially from the amount recorded in the current period. The weighted average estimated value per share of employee stock options granted during the three months ended November 29, 2008 was $8.90 using the Black-Scholes model with the following assumptions:

                                              Three months ended
                                              November 29, 2008
                   Expected volatility                   40.6 %
                   Risk-free interest rate                2.9 %
                   Expected dividends                     0.0 %
                   Expected life                  5.1 years

The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of our employee stock options. The dividend yield assumption is based on our previous history of not paying dividends and our expectation that the special dividend paid in August 2007 was an isolated event and not the commencement of a regular dividend. The Company's historical expected life of stock option grants this quarter is approximately 5.1 years. As permitted under Staff Accounting Bulletin No. 107 ("SAB No. 107"), the Company uses its historical volatility over the expected life of the stock option award to estimate the expected volatility of the price of its common stock. 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.
Three Months Ended November 29, 2008 Compared to Three Months Ended November 24, 2007
Computations of percentage change period over period are based upon our results, as rounded and presented herein.

Revenue. Revenue decreased $16.4 million, or 7.9%, to $190.2 million for the three months ended November 29, 2008 from $206.6 million for the three months ended November 24, 2007. Although our average bill rate per hour increased quarter over quarter and we benefited from incremental revenue from the December 2007 acquisition of Domenica B.V., our revenue was adversely affected by a decline in number of hours worked by our consultants in comparison to the prior year comparable quarter and an unfavorable currency translation impact during the quarter. Although we believe we have improved the awareness of our service offerings since our founding in 1996 with clients and prospective clients through our work (including Sarbanes or related internal accounting control services), and that the significant changes taking place in the capital markets may present new opportunities going forward there can be no assurance about the timing of such opportunities or whether we can successfully capitalize on them, especially given the current uncertain economic climate in the United States and certain international markets.
Average bill rates for the three months ended November 29, 2008 improved by 1.3% from the same period in the prior year. However, the number of consultants on assignment at the end of the second quarter of fiscal 2009 of 2,854 was less than the 3,319 at the end of the second quarter of fiscal 2008 and the number of hours worked in the second quarter of fiscal 2009 declined about 9.4% from the prior year's second quarter. On a constant currency basis, international revenues would have been higher by $3.9 million in the second quarter of fiscal 2009 and lower by $4.9 million in the second quarter of fiscal 2008, using the comparable fiscal 2008 and fiscal 2007 conversion rates. The Company operated 89 and 87 offices during the second quarters of fiscal 2009 and fiscal 2008, respectively. Our clients do not sign long-term contracts with us. Therefore, our future revenue or operating results cannot be reliably predicted from previous quarters or from extrapolation of past results.
Revenue for the Company's major practice areas across the globe consisted of the following (in thousands):

                     Revenue for the Three
                          Months Ended                                      % of Total
                November 29,       November 24,         %         November 29,      November 24,
                    2008               2007          Change           2008              2007
North America   $     138,282     $      154,887       (10.7 %)            72.7 %            75.0 %
Europe                 42,231             42,215        0. 0 %             22.2 %            20.4 %
Asia Pacific            9,720              9,536         1.9 %              5.1 %             4.6 %

Total           $     190,233     $      206,638        (7.9 %)           100.0 %           100.0 %

Direct Cost of Services. Direct cost of services decreased $10.9 million, or 8.6%, to $116.1 million for the three months ended November 29, 2008 from $127.0 million for the three months ended November 24, 2007. Although our consultants average pay rates increased 0.6% during the second quarter as compared to the second quarter of the prior year, direct cost of services decreased for similar reasons to revenue: a decrease in hours worked and unfavorable currency rate conversion for our international operations. The direct cost of services as a percentage of revenue (the "direct cost of services percentage") was 61.0% and 61.5% for the three months ended November 29, 2008 and November 24, 2007, respectively. The direct cost of services percentage improved in fiscal 2009 primarily because of an improvement in the ratio of hourly revenue to direct consultant salary expense.
The cost of compensation and related benefits offered to the consultants of our international offices has been greater as a percentage of revenue than our domestic operations. In addition, international offices use independent contractors more extensively. Thus, the direct cost of services percentage of our international offices has usually exceeded our domestic operation's targeted direct cost of services percentage of 60%.
Selling, General and Administrative Expenses. Selling, general and administrative expenses ("S, G & A") as a percentage of revenue was 28.6% and 26.9% for the quarters ended November 29, 2008 and November 24, 2007, respectively. S, G &A decreased $1.1 million, or 2.0%, to $54.4 million for the three months ended November 29, 2008 from $55.5 million for the three months ended November 24, 2007. Management and administrative headcount grew slightly from 884 at the end of the second quarter of fiscal 2008 to 887 at the end of the second quarter of fiscal 2009. S, G & A decreases in the second quarter of fiscal 2009 included: a reduction in marketing and related expenses and in salary, benefit and related costs (partly attributable to the change in currency rate conversion of international operations). These decreases were offset by an increase of $628,000 in the Company's allowance for doubtful accounts after an evaluation of the Company's client base, receivable balances and the current economic environment; and occupancy and related costs from relocated, expanded or new offices.

Amortization and Depreciation Expense. Amortization of intangible assets increased to $275,000 in the second quarter of fiscal 2009 compared to $84,000 in the prior year's second quarter as a result of two acquisitions made in fiscal 2008. During fiscal 2008, the Company completed its valuation study of its June 2007 purchase of Compliance Solutions (UK) Ltd. and its December 2007 purchase of Domenica. Based upon identified intangible assets recorded at November 29, 2008 (including those that will be fully amortized during fiscal 2009), the Company anticipates amortization expense related to identified intangible assets to be approximately $1.1 million during the fiscal year ending May 30, 2009.
Depreciation expense increased from $2.0 million for the three months ended November 24, 2007 to $2.3 million for the three months ended November 29, 2008. The increase in depreciation was related to a higher asset base due to the investments made in offices relocated or expanded since November 2007 and investments in the Company's operating systems and other information technology. As the Company continues to invest in new offices, expanded or new office space for existing offices and capital equipment, the Company expects that depreciation expense will increase moderately during the fiscal year ending May 30, 2009.
Interest Income. Interest income was $380,000 in the second quarter of fiscal 2009 compared to $1.6 million in the second quarter of fiscal 2008. The decrease in interest income in the second quarter of fiscal 2009 is primarily the result of declining interest rates as compared to the prior year's second quarter.
Currently, the Company has invested available cash primarily in short-term United States government-bonds, certificates of deposit and, to a lesser extent, A1+ rated commercial paper that has been classified as cash equivalents due to the short maturities of these investments. As of November 29, 2008, the Company had $15.0 million of investments in commercial paper with original maturity dates between three months and one year from the purchase date, which are classified as short-term investments and considered "held-to-maturity" securities.
Income Taxes. The provision for income taxes decreased from $10.6 million for the three months ended November 24, 2007 to $8.1 million for the three months ended November 29, 2008. The provision decreased primarily because of a decrease in the Company's pretax income in the second quarter of 2009 compared to the second quarter of fiscal 2008. The effective tax rate was 46.1% for the second quarter of fiscal 2009 and 44.8% for the second quarter of fiscal 2008. The primary reason for the increase in the effective tax rate was the Company's lower tax benefit relative to the amount of stock-based compensation expense in the second quarter of fiscal 2009. The proportion of expense related to non-qualified stock option grants (for which the Company may recognize a tax benefit in the same quarter as the related compensation expense in most instances) increased during the second quarter of fiscal 2009 as compared to expense related to incentive stock options ("ISOs").
Under SFAS 123 (R), the Company cannot recognize a tax benefit for certain ISOs unless and until the holder exercises his or her option and then sells the shares within a certain period of time. In addition, the Company can only recognize a potential tax benefit for employees' acquisition and subsequent sale of shares purchased through the ESPP if the sale occurs within a certain defined period. As a result, the Company's provision for income taxes is likely to fluctuate from historical rates for the foreseeable future. Further, under SFAS
123 (R), those tax benefits associated with ISO grants fully vested at the date of adoption of SFAS 123 (R) will be recognized as additions to paid-in capital when and if those options are exercised and not as a reduction to the Company's tax provision. The Company recognized a benefit of approximately $898,000 and $958,000 related to stock-based compensation for nonqualified stock options expensed and for eligible disqualifying ISO exercises during the second quarter of fiscal 2009 and 2008, respectively. The timing and amount of eligible disqualifying ISO exercises cannot be predicted. The Company predominantly grants nonqualified stock options to employees in the United States.

Periodically, the Company reviews the components of both book and taxable income to analyze the adequacy of the tax provision. There can be no assurance, particularly because of the unpredictability of timing and amount of eligible disqualifying ISO exercises, that the Company's effective tax rate will not increase in the future.
Six Months Ended November 29, 2008 Compared to Six Months Ended November 24, 2007
Computations of percentage change period over period are based upon our results, as rounded and presented herein.
Revenue. Revenue decreased $3.3 million, or 0.8%, to $397.5 million for the six months ended November 29, 2008 from $400.8 million for the six months ended November 24, 2007. Although our average bill rate per hour increased year over year and we benefited from incremental revenue from the December 2007 acquisition of Domenica B.V., our revenue was adversely affected by a decline in number of hours worked by our consultants in comparison to the prior year comparable six month period and an unfavorable currency translation impact during the quarter. On a constant currency basis, international revenues would have been lower by approximately $500,000 and $7.8 million in the first half of fiscal 2009 and fiscal 2008, respectively, using the comparable fiscal 2008 and fiscal 2007 conversion rates.
Average bill rates for the six months ended November 29, 2008 improved by 4.1% from the same period in the prior year. However, the number of consultants on assignment at the end of the second quarter of fiscal 2009 of 2,854 was less than the 3,319 at the end of the second quarter of fiscal 2008 and the number of hours worked in the first half of fiscal 2009 declined about 5.2% from the prior year's first half.
Revenue for the Company's major practice areas across the globe consisted of the following (in thousands):

                                             Revenue for the Six
                                                 Months Ended                                                % of Total
                                      November 29,          November 24,            %            November 29,         November 24,
                                          2008                  2007             Change              2008                 2007
North America                        $      288,121        $      304,112           (5.3 %)               72.5 %               75.9 %
Europe                                       87,780                77,998           12.5 %                22.1 %               19.5 %
Asia Pacific                                 21,637                18,648           16.0 %                 5.4 %                4.6 %

Total                                $      397,538        $      400,758           (0.8 %)              100.0 %              100.0 %

Direct Cost of Services. Direct cost of services decreased $5.1 million, or 2.1%, to $242.6 million for the six months ended November 29, 2008 from $247.7 million for the six months ended November 24, 2007. Although our consultants average pay rates increased 3.2% during the first half of fiscal 2009 as compared to the first half of the prior year, direct cost of services decreased for similar reasons to revenue: a decrease in hours worked and unfavorable currency rate conversion for our international operations. The direct cost of services as a percentage of revenue (the "direct cost of services percentage") was 61.0% and 61.8% for the six months ended November 29, 2008 and November 24, 2007, respectively. The direct cost of services percentage improved in fiscal 2009 primarily because of an improvement in the ratio of hourly revenue to direct consultant salary expense.
Selling, General and Administrative Expenses. Selling, general and administrative expenses ("S, G & A") as a percentage of revenue was 27.9% and 27.1% for the six months ended November 29, 2008 and November 24, 2007, respectively. S, G &A increased $2.4 million, or 2.2%, to $110.9 million for the six months ended November 29, 2008 from $108.5 million for the six months ended November 24, 2007. The change in S, G & A primarily stems from increased personnel and related benefit costs in both our U.S. and international markets. Management and administrative headcount grew slightly from 884 at the end of the second quarter of fiscal 2008 to 887 at the end of the second quarter of fiscal 2009. In addition to the increase in salaries and benefit costs, other significant S, G & A increases in the first half of fiscal 2009 included: an increase of $1.3 million in the Company's allowance for doubtful accounts after an evaluation of the Company's client base receivable balances and the current economic environment; and occupancy and related costs from relocated, expanded or new offices.
Amortization and Depreciation Expense. Amortization of intangible assets increased to $657,000 in the first six months of fiscal 2009 compared to $338,000 in the prior year's first six months as a result of two acquisitions made in fiscal 2008. The Company completed its valuation study during fiscal 2008 of its June 2007 purchase of Compliance Solutions (UK) Ltd. and its December 2007 purchase of Domenica.

. . .