P R E S S R E L E A S E
RCM TECHNOLOGIES, INC. ANNOUNCES RESULTS FOR THIRTY-NINE WEEKS
AND THIRTEEN WEEKS ENDED OCTOBER 1, 2005
November 9, 2005 -- RCM Technologies, Inc. (NNM: RCMT) today announced
financial results for the thirty-nine weeks and thirteen weeks ended
October 1, 2005.
The Company announced revenues of $133.8 million for the thirty-nine weeks ended
October 1, 2005, up from $127.6 million for the forty weeks ended October 2,
2004 (same period a year ago). Net income for the thirty-nine weeks ended
October 1, 2005 was $2.7 million, or $.23 per diluted share, as compared to net
income of $2.4 million, or $.21 per diluted share, for the forty weeks ended
October 2, 2004. For the thirty-nine weeks ended October 1, 2005, earnings
before interest, income taxes, depreciation and amortization, or EBITDA, was
$5.3 million, or $.45 per diluted share, as compared to $5.0 million, or $.43
per diluted share, for the forty weeks ended October 2, 2004.
Revenues were $43.4 million for the thirteen weeks ended October 1, 2005, up
from $40.9 million for the thirteen weeks ended October 2, 2004 (same period a
year ago). Net income for the thirteen weeks ended October 1, 2005 was $717,000,
or $.06 per diluted share, as compared to net income of $766,000, or $.07 per
diluted share, for the thirteen weeks ended October 2, 2004. For the thirteen
weeks ended October 1, 2005, EBITDA was $1.4 million, or $.12 per diluted share,
as compared to $1.6 million, or $.14 per diluted share, for the thirteen weeks
ended October 2, 2004.
Revenues were $43.4 million for the thirteen weeks ended October 1, 2005, down
sequentially from $46.3 million for the thirteen weeks ended July 2, 2005. Net
income for the thirteen weeks ended October 1, 2005 was $717,000, or $.06 per
diluted share, as compared to net income of $1.2 million, or $.10 per diluted
share, for the thirteen weeks ended July 2, 2005. For the thirteen weeks ended
October 1, 2005, EBITDA was $1.4 million, or $.12 per diluted share, as compared
to $2.1 million, or $.18 per diluted share, for the thirteen weeks ended July 2,
2005.
The Company attributes the sequential decline in revenues and operating income
from the second quarter to the third quarter of 2005 primarily to two different
unexpected events and a seasonal factor. Specifically, during the early part of
the third quarter, a client of the Company's Power Systems group abruptly
terminated fully negotiated but unsigned contracts with RCM and other suppliers
to that client and reduced the scope of several other ongoing projects with the
Company and other suppliers. RCM estimates the termination of these contracts
and reduction in scope of the ongoing projects reduced revenues to RCM in the
third quarter by approximately $1.5 million. In addition, early in the third
quarter approximately 20 of the Company's consultants completed a major project
with a pharmaceutical client. RCM had previously expected the majority of those
consultants to immediately start on another project, which did not ultimately
commence until early in the fourth quarter. Consequently, revenues for the
pharmaceutical project were approximately $700,000 less in the third quarter
than in the second quarter. In addition, revenues from a major commercial
services client, which virtually shuts down during the summer months, declined
as expected by approximately $900,000 in the third quarter as compared to the
second quarter.
Also, the Company experienced a substantial increase in legal fees in the third
quarter for previously disclosed litigation in which the Company is both a
defendant and a plaintiff. Legal fees related to this matter increased in the
third quarter by approximately $290,000 and $260,000 as compared to the second
and first quarters of 2005, respectively.
Leon Kopyt, Chairman and CEO of RCM, commented: "Although our revenue for the
third quarter rose modestly compared to the same quarter a year ago, earnings
and sales on a sequential basis were disappointing. We believe that the
shortfall in this quarter, as we have explained above, can be remedied, and it
does not affect our view of a more positive trend in activities and bookings
going forward. At this time, RCM's pipeline remains strong and we are optimistic
about 2006."
About RCM
RCM Technologies, Inc. is a premier provider of business and
technology solutions designed to enhance and maximize the operational
performance of its customers through the adaptation and deployment of advanced
information technology and engineering services. RCM is an innovative leader in
the design, development and delivery of these solutions to commercial and
government sectors for more than 30 years. RCM's offices are located in major
metropolitan centers throughout North America. Additional information can be
found at www.rcmt.com.
The Statements contained in this release that are not purely historical are
forward-looking statements within the Private Securities Litigation Reform Act
of 1995 and are subject to various risks, uncertainties and other factors that
could cause the Company's actual results, performance or achievements to differ
materially from those expressed or implied by such forward-looking statements.
Forward-looking statements include, but are not limited to, those relating to
demand for the Company's services, expected demand for our services and
expectations regarding our revenues, the Company's ability to continue to
utilize goodwill, to continue to increase gross margins, to achieve and manage
growth, to develop and market new applications and services, risks relating to
the acquisition and integration of acquired businesses, demand for new services
and applications, timing of demand for services, industry strength and
competition and general economic factors. Investors are directed to consider
such risks, uncertainties and other factors described in documents filed by the
Company with the Securities and Exchange Commission.
Tables to Follow
RCM Technologies, Inc.
Consolidated Statements of Income
(Unaudited)
(In Thousands, Except Per Share Amounts)
Thirty-Nine Forty
Weeks Ended Weeks Ended
October 1, 2005 October 2, 2004
------------------ -----------------
Revenues $133,797 $127,555
Gross profit 31,319 30,691
Selling, general and administrative 26,045 25,649
Depreciation and amortization 801 905
Other expense 178 357
Income before income taxes 4,295 3,780
Income taxes 1,577 1,349
Net income $2,718 $2,431
Earnings per share (diluted)
Net income $.23 $.21
Thirteen Weeks Thirteen Weeks
Ended Ended
October 1, 2005 October 2, 2004
------------------ -----------------
Revenues $43,391 $40,933
Gross profit 10,153 9,964
Selling, general and administrative 8,711 8,322
Depreciation and amortization 273 305
Other expense 66 116
Income before income taxes 1,104 1,221
Income taxes 387 455
Net income $717 $766
Earnings per share (diluted)
Net income $.06 $.07
RCM Technologies, Inc.
Summary Consolidated Balance Sheet Data
(Unaudited)
(In Thousands)
October 1, January 1,
2005 2005
---------------- ---------------
Cash and equivalents $4,685 $2,402
Accounts receivable 42,426 40,536
Working capital 31,086 29,545
Goodwill 38,237 35,843
Total assets $103,831 98,101
Senior debt $3,900 4,900
Total liabilities $30,087 28,156
Stockholders' equity $73,744 $69,945
RCM Technologies, Inc.
Reconciliation of EBITDA to Net Income and Cash Provided by
Operating Activities
(Unaudited)
As used in this report, EBITDA means earnings before interest, income taxes,
depreciation and amortization. We believe that EBITDA, as presented, represents
a useful measure of assessing the performance of our operating activities.
EBITDA is also used by our creditors in assessing debt covenant compliance. We
understand that, although security analysts frequently use EBITDA in the
evaluation of companies, it is not necessarily comparable to other similarly
titled captions of other companies due to potential inconsistencies in the
method of calculation. EBITDA is not intended as an alternative to cash flow
provided by operating activities as a measure of liquidity, as an alternative to
net income as an indicator of our operating performance, nor as an alternative
to any other measure of performance in conformity with generally accepted
accounting principles. The following is a reconciliation of EBITDA to both net
income and cash flow provided by operating activities.
Thirty-Nine Forty
Weeks Ended Weeks Ended
October 1, 2005 October 2, 2004
------------------ -----------------
(In Thousands)
---------------------------------------
EBITDA $5,267 $5,037
Depreciation and amortization (801) (905)
Interest expense, net of interest income (171) (352)
Income taxes (1,577) (1,349)
------------------ -----------------
Net income $2,718 $2,431
================== =================
Net income $2,718 $2,431
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 801 905
Provision for losses on accounts receivable (110) 63
Changes in operating assets and liabilities
Accounts receivable (1,762) (1,408)
Restricted cash (205)
Prepaid expenses and other current assets 806 702
Deferred tax assets 82
Accounts payable and accrued expenses 693 (3,507)
Accrued compensation (1,039) 110
Payroll and withheld taxes (524) 726
Income taxes payable 1,137 63
------------------ -----------------
Cash provided by operating activities $2,597 $85
================== =================
Thirteen Weeks Thirteen Weeks Thirteen Weeks
Ended Ended Ended
October 1, 2005 October 2, 2004 July 2, 2005
----------------------------------------------------------
(In Thousands)
----------------------------------------------------------
EBITDA $1,440 $1,645 $2,128
Depreciation and amortization (273) (305) (268)
Interest expense, net of interest income (63) (119) 15
Income taxes (387) (455) (707)
------------------- ------------------ -----------------
Net income $717 $766 $1,168
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Net income $717 $766 $1,168
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 273 305 268
Provision for losses on accounts receivable (91) 93 (10)
Changes in operating assets and liabilities
Accounts receivable 276 172 (808)
Restricted cash (57) (148)
Prepaid expenses and other current assets 489 910 (219)
Deferred tax assets 82
Accounts payable and accrued expenses 1,469 (453) (437)
Accrued compensation (1,411) (802) 1,777
Payroll and withheld taxes (196) 59 359
Income taxes payable 759 199 210
------------------- ------------------ -----------------
Cash provided by operating activities $2,310 $1,249 $2,160
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