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 contains "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to expectations concerning matters that are not historical facts. Such forward-looking statements may be identified by words such as "anticipates," "believes," "can," "continue," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "remain," "should," or "will" or the negative of these terms or other comparable terminology. These statements, and all phases of our operations, are subject to known and unknown risks, uncertainties and other factors, some of which are identified in Part II Item 1A Risk Factors below and in our report on Form 10-K for the year ended May 26, 2012 (File No. 0-32113). Readers are cautioned not to place undue reliance on these forward-looking statements. Our actual results, levels of activity, performance or achievements and those of our industry may be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. We undertake no obligation to update the forward-looking statements in this filing. References in this filing to "Resources Connection," "Resources Global Professionals," "Resources Global," the "Company," "we," "us," and "our" refer to Resources Connection, Inc. and its subsidiaries.

Overview

Resources Global is a multinational professional services firm that provides its global client base with experienced professionals specializing in accounting, finance, risk management and internal audit, corporate advisory, strategic communications and restructuring, information management, human capital, supply chain management, healthcare solutions, actuarial, legal and regulatory services in support of client-led projects and consulting initiatives. We assist our clients with discrete projects requiring specialized expertise in numerous areas, including:

• finance and accounting services, such as financial analyses (e.g., product costing and margin analyses), budgeting and forecasting, audit preparation, public-entity reporting, tax-related projects, mergers and acquisitions due diligence, initial public offering assistance and assistance in the preparation or restatement of financial statements;

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

• corporate advisory, strategic communications and restructuring services;

• 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 strategic sourcing efforts, contract negotiations and purchasing strategy;

• actuarial services for pension and life insurance companies;

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

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

• healthcare solutions and consulting services.

We were founded in June 1996 by a team at Deloitte, led by our chief executive officer, Donald B. Murray, who was then a senior partner with Deloitte. Our founders created Resources Connection to capitalize on the increasing demand for high quality outsourced professional services. We operated as a part of Deloitte from our inception in June 1996 until April 1999. In April 1999, we completed a 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 Stock Market. 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 multinational capabilities.

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.

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 periodically or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Our goodwill and certain other intangible assets are not subject to periodic amortization. These assets are 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 may materially affect the Company's future financial results and financial condition.

Contingent consideration - The Company estimates and records the acquisition date fair value of contingent consideration as part of purchase price consideration for acquisitions occurring subsequent to May 30, 2009. In addition, each reporting period, the Company estimates changes in the fair value of contingent consideration and any change in fair value is recognized in the Company's Consolidated Statement of Operations. The estimate of the fair value of contingent consideration requires very subjective assumptions to be made of future operating results, discount rates and probabilities assigned to various potential operating result scenarios. Future revisions to these assumptions could materially change the estimate of the fair value of contingent consideration and therefore materially affect the Company's future financial results and financial condition.

Under the terms of our Acquisition Agreements for Sitrick Brincko Group, the Sellers have the opportunity to receive contingent consideration subsequent to the fourth anniversary of the acquisition, provided that Sitrick Brincko Group's average annual EBITDA over a period of four years following the acquisition date exceeds $11.3 million. The range of undiscounted amounts the Company could be obligated to pay as contingent consideration under the earn-out arrangement is between $0 and an unlimited amount. At the date of acquisition, the Company determined the fair value of the obligation to pay contingent consideration based on probability-weighted projections of the average EBITDA during the four year earn-out measurement period. The resultant probability-weighted average EBITDA amounts were then multiplied by 3.15 (representing the agreed upon multiple to be paid by the Company as specified in the Acquisition Agreements) and then discounted using an original discount rate of 1.9%. Each reporting period, the Company estimates changes in the fair value of contingent consideration and any change in fair value will be recognized as a non-cash charge in the Company's Consolidated Statement of Operations. The Sitrick Brincko Group earn-out liability is based upon an assessment of actual EBITDA of Sitrick Brincko Group through the evaluation date and an updated assessment of various probability weighted projected EBITDA scenarios over the remaining earn-out period. As the ultimate estimated liability is also discounted each period from the November 2013 earn-out date, the contingent consideration liability may fluctuate due to changes in the risk-free interest rate used in determining the appropriate discount factor for time value of money purposes. An increase in the earn-out expected to be paid will result in a charge to operations in the quarter that the anticipated fair value of contingent consideration increases, while a decrease in the earn-out expected to be paid will result in a credit to operations in the quarter that the anticipated fair value of contingent consideration decreases. As of August 25, 2012, the Company believes it is more likely than not that there will not be a contingent consideration payment due in November 2013 and, accordingly, there is no liability recorded at that date or any adjustment amounts recorded in the Company's Consolidated Statement of Operations for the three months ended August 25, 2012.

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 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 affect 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 Operations, an adjustment of tax expense may need to be recorded and this adjustment may materially affect the Company's future financial results and financial condition.

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 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 ESPP, eligible officers and employees may purchase our common stock in accordance with the terms of the plan.

The Company estimates a value for 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, 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 must 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 future periods, the compensation expense recorded may differ materially from the amount recorded in the current period.

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. 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 (currently $0.06 per share) is also incorporated in determining the estimated value per share of employee stock option grants. The Company's historical expected life of stock options is 5.2 years for non-officers and 7.2 years for officers. 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. The Company reviews the underlying assumptions related to the grant date fair value of stock-based awards at least annually.

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.



                                                     For the Three Months Ended
                                                   August 25,          August 27,
                                                      2012                2011
                                                       (Amounts in thousands)
   Revenue                                        $     136,933        $   138,007
   Direct cost of services                               83,544             85,835

   Gross margin                                          53,389             52,172
   Selling, general and administrative expenses          42,060             42,609
   Amortization of intangible assets                        426              1,208
   Depreciation expense                                   1,191              1,549

   Income from operations                                 9,712              6,806
   Interest income                                          (48 )              (88 )

   Income before provision for income taxes               9,760              6,894
   Provision for income taxes                             4,928              4,298

   Net income                                     $       4,832        $     2,596

We also assess the results of our operations using EBITDA as well as Adjusted EBITDA. EBITDA is defined as our earnings before interest, taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA plus stock-based compensation expense and contingent consideration adjustments ("Adjusted EBITDA"). Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by revenue. These measures assist management in assessing our core operating performance. The following table presents EBITDA and Adjusted EBITDA results for the three months ended August 25, 2012 and August 27, 2011 and includes a reconciliation of such measures to net income, the most directly comparable GAAP financial measure:

                                               For the Three Months Ended
                                             August 25,          August 27,
                                                2012                2011
                                                 (Amounts in thousands)
        Net income                          $       4,832        $     2,596
        Adjustments:
        Amortization of intangible assets             426              1,208
        Depreciation expense                        1,191              1,549
        Interest income                               (48 )              (88 )
        Provision for income taxes                  4,928              4,298

        EBITDA                                     11,329              9,563
        Stock-based compensation expense            1,813              1,932

        Adjusted EBITDA                     $      13,142        $    11,495

        Revenue                             $     136,933        $   138,007

        Adjusted EBITDA Margin                        9.6 %              8.3 %

Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. We believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to our investors because they are financial measures used by management to assess the core performance of the Company. Adjusted EBITDA and Adjusted EBITDA Margin are not measurements of financial performance or liquidity under GAAP and should not be considered in isolation or construed as substitutes for net income or other cash flow data prepared in accordance with GAAP for purposes of analyzing our profitability or liquidity. These measures should be considered in addition to, and not as a substitute for, net income, earnings per share, cash flows or other measures of financial performance prepared in conformity with GAAP.

Further, Adjusted EBITDA and Adjusted EBITDA Margin have the following limitations:

• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements;

• Equity based compensation is an element of our long-term incentive compensation program, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period; and

• Other companies in our industry may calculate Adjusted EBITDA and Adjusted EBITDA Margin differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA and Adjusted EBITDA Margin should not be considered a substitute for performance measures calculated in accordance with GAAP.

Three Months Ended August 25, 2012 Compared to Three Months Ended August 27, 2011

Computations of percentage change period over period are based upon our results, as rounded and presented herein.

Revenue . Revenue decreased $1.1 million, or 0.8%, to $136.9 million for the three months ended August 25, 2012 from $138.0 million for the three months ended August 27, 2011. We deliver our services to clients in a similar fashion across the globe. We believe clients engage us to help implement initiatives to improve efficiencies within their organizations and this can lead to improved awareness of our service offerings through completed and on-going engagements. In the first quarter of fiscal 2013, revenue increased in North America over the amount for the first quarter of fiscal 2012 but was down in Europe and Asia Pacific. In the first quarter of fiscal 2013, we believe our international operations were impacted by the continuing global economic uncertainty, particularly in Europe; European results also were impacted by the strengthening dollar during the most recent quarter as compared to the prior year.

The number of hours worked in the first quarter of fiscal 2013 increased about 1.9% compared with the prior year first quarter while average bill rates declined about 2.3%, attributable to the impact of unfavorable currency rate changes between the first quarter of this year and last year. In addition, the revenue decrease in the quarter is partially attributable to client reimbursement revenue which declined approximately 28% compared with the prior year's first quarter. The number of consultants on assignment as of August 25, 2012 was 2,284 compared to 2,297 consultants engaged as of August 27, 2011.

We operated 77 (27 abroad) and 80 (29 abroad) offices as of August 25, 2012 and August 27, 2011, respectively; the decrease quarter-over-quarter is because we consolidated certain offices in contiguous areas. Determining future demand levels for our services is difficult given that our clients do not sign long-term contracts with us. In addition, it is inherently difficult to predict economic trends and their impact on our operations and our future results cannot be reliably predicted by considering past trends.

                                      Revenue for the Three Months
                                                  Ended                                               % of Total
                                     August 25,           August 27,                         August 25,        August 27,
                                        2012                 2011           % Change            2012              2011
North America                      $      107,946       $      104,070            3.7 %             78.8 %            75.4 %
Europe                                     19,031               23,284          (18.3 %)            13.9 %            16.9 %
Asia Pacific                                9,956               10,653           (6.5 %)             7.3 %             7.7 %

Total                              $      136,933       $      138,007           (0.8 %)           100.0 %           100.0 %

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 United States dollars at the monthly average exchange rates in effect during the quarter. Thus, as the value of the United States dollar fluctuates relative to the currencies in our non-U.S. based operations, our revenue can be impacted. Using the comparable fiscal 2012 conversion rates, international revenues would have been higher than reported under GAAP by $2.7 million in the first quarter of fiscal 2013.

Direct Cost of Services . Direct cost of services decreased $2.3 million, or 2.7%, to $83.5 million for the three months ended August 25, 2012 from $85.8 million for the three months ended August 27, 2011. The decrease was primarily attributable to the impact of the strengthening U.S. dollar against currencies in countries in which we operate during the most recent quarter as compared to the prior year (which also contributed to the 3.1% decrease between the two periods in the average pay rate per hour to our consultants). Client reimbursable expenses also declined about 23%. The decrease in rate per hour was offset by an increase in the number of hours worked of 1.9% in the first quarter of fiscal 2013 as compared to the same period of fiscal 2012. The direct cost of services percentage of revenue was 61.0% and 62.2% for the three months ended August 25, 2012 and August 27, 2011, respectively. The improvement in the direct cost of services percentage between the quarters resulted from the current quarter favorable change in the bill rate/pay rate ratio and the decrease in the amount of zero gross margin client reimbursements.

Our target direct cost of services percentage is 60% for all of our offices.

Selling, General and Administrative Expenses . Selling, general and administrative expenses ("S, G & A") as a percentage of revenue was 30.7% and 30.9% for the quarters ended August 25, 2012 and August 27, 2011, respectively. S, G & A decreased $500,000, or 1.2%, to $42.1 million for the three months ended August 25, 2012 from $42.6 million for the three months ended August 27, 2011.

The decrease quarter-over-quarter is primarily related to the impact of currency exchange rates between the two periods. Management and administrative headcount decreased from 720 at the end of the first quarter of fiscal 2012 to 675 at the end of the first quarter of fiscal 2013.

Sequential Operations . On a sequential quarter basis, fiscal 2013 first quarter . . .