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 SEPTEMBER 30, 2006
November 8, 2006 -- RCM Technologies, Inc. (NASD: RCMT) today announced
financial results for the thirty-nine weeks and thirteen weeks ended September
30, 2006.
The Company announced revenues of $147.7 million for the thirty-nine weeks
ended September 30, 2006, up from $133.8 million for the thirty-nine weeks ended
October 1, 2005 (comparable prior year period). Net income for the thirty-nine
weeks ended September 30, 2006 was $4.0 million, or $.33 per diluted share, as
compared to net income of $2.7 million, or $.23 per diluted share, for the
comparable prior year period. Net income before equity-based compensation (1)
for the thirty-nine weeks ended September 30, 2006 was $4.7 million, or $.39 per
diluted share, and excludes net equity-based compensation expense of $693,000.
No equity based compensation expense was included in the 2005 period. Net income
for the 2006 period included a $1.0 million income tax credit, or $0.08 per
diluted share, as compared to no such tax credit in the 2005 period.
Revenues were $51.6 million for the thirteen weeks ended September 30,
2006, up from $43.4 million for the thirteen weeks ended October 1, 2005
(comparable prior year period). Net income for the thirteen weeks ended
September 30, 2006 was $1.3 million, or $.11 per diluted share, as compared to
net income of $717,000, or $.06 per diluted share, for the comparable prior year
period. Net income before equity-based compensation (1) for the thirteen weeks
ended September 30, 2006 was $1.4 million, or $.12 per diluted share, and
excludes net equity-based compensation expense of $99,400. No equity based
compensation expense was included in the 2005 period.
For the thirty-nine weeks ended September 30, 2006, earnings before
interest, income taxes, depreciation and amortization, or EBITDA, was $6.6
million, or $.55 per diluted share, as compared to $5.3 million, or $.45 per
diluted share, for the comparable prior year period. For the thirteen weeks
ended September 30, 2006, EBITDA was $2.7 million, or $.22 per diluted share, as
compared to $1.4 million, or $.12 per diluted share, for the comparable prior
year period.
Leon Kopyt, Chairman and CEO of RCM, commented: "We are encouraged with the
improvement in our operating results as all business segments showed increases
in revenue and operating income for comparable year over year periods. We expect
to continue to execute our growth strategy and maintain sound financial
management in order to gain market share and increase shareholder value."
1
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.
(1) On January 1, 2006, the Company adopted the provisions of SFAS No.
123(R), "Share-Based Payment" on a modified prospective basis, which required
the Company to record equity-based compensation expense for all awards granted
after the date of adoption and for the unvested portion of previously granted
awards outstanding as of the date of adoption. No compensation cost was
recognized in the statements of income for either the thirteen weeks or
thirty-nine weeks ended October 1, 2005. For these periods, the Company,
consistent with historical practice, applied the recognition and measurement
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," (APB No. 25) and related interpretations, as all options
granted by the Company had an exercise price that was equal to or greater than
the underlying common stock at the date of grant.
For the purposes of performing the calculation, of Net Income and Net
Income per Diluted Share before Equity-Based Compensation Expense all
equity-based compensation expense, net of income tax, is added back to net
income as calculated in accordance with Generally Accepted Accounting Principles
(GAAP). Net Income and Net income per Diluted Share before Equity-Based
Compensation Expense are not measurements calculated in accordance with GAAP in
the United States, and are not intended to be a replacement for, or considered
to be more important than, net income or net income per diluted share calculated
in accordance with GAAP. As the calculation of Net Income or Net Income per
Diluted Share before Equity-Based Compensation are not in accordance with GAAP,
the Company believes that the use of the calculations is significantly limited,
and should only be used to compare net income or net income per diluted share
year-over-year on a consistent basis. To mitigate this limitation, the Company
has provided net income and net income per diluted share calculated in
accordance with GAAP, which should be the primary measurements utilized to
analyze the Company's financial results.
The Company has provided these additional disclosures because net income
and net income per share calculated on a GAAP basis are not comparable
year-over-year, and the Company did not incur any equity-based compensation
expense in 2005. Accordingly, this reconciliation allows the Company to evaluate
the financial results of its operations year-over-year on a consistent basis.
Other than to measure net income and net income per share year-over-year on a
consistent basis, the Company does not utilize Net Income or Net Income per
Diluted Share before Equity-Based Compensation Expense for any other purpose.
Tables to Follow
2
RCM Technologies, Inc.
Consolidated Statements of Income
(Unaudited)
(In Thousands, Except Per Share Amounts)
Thirty-Nine Weeks Ended
---------------------------------------
September 30, October 1,
2006 2005
------------------ -----------------
Revenues $147,729 $133,797
Gross profit (1) 37,163 31,319
Selling, general and administrative (2) 30,521 26,045
Depreciation and amortization 1,115 801
Interest expense, net 204 171
Loss on foreign currency transactions 16 7
Income before income taxes 5,307 4,295
Income taxes 1,287 1,577
Net income $4,020 $2,718
Earnings per share (diluted)
Net income $.33 $.23
Thirteen Weeks Ended
---------------------------------------
September 30, October, 1
2006 2005
------------------ -----------------
Revenues $51,650 $43,391
Gross profit (3) 12,952 10,153
Selling, general and administrative (4) 10,251 8,711
Depreciation and amortization 394 273
Interest expense, net 74 64
Loss on foreign currency transactions 5 2
Income before income taxes 2,228 1,104
Income taxes 879 387
Net income $1,349 $717
Earnings per share (diluted)
Net income $.11 $.06
RCM Technologies, Inc.
Summary Consolidated Balance Sheet Data
(Unaudited)
(In Thousands)
September 30, December 31,
2006 2005
----------------- ----------------
Cash and equivalents $6,666 $3,761
Accounts receivable 48,836 44,930
Working capital 37,183 33,032
Goodwill and Intangible assets 38,860 38,469
Total assets 105,954 106,773
Senior debt 3,900 3,900
Total liabilities 25,251 31,084
Stockholders' equity $80,702 $75,689
<FN>
(1) Reflects stock based compensation expense of $29,750 included in cost of
services for the thirty-nine weeks ended September 30,
2006.
(2) Includes stock based compensation expense of $662,925 for the thirty-nine
weeks ended September 30, 2006.
(3) Reflects stock based compensation credit of $691 included in cost of
services for the thirteen weeks ended September 30, 2006.
(4) Includes stock based compensation expense of $100,050 for the thirteen weeks
ended September 30, 2006.
</FN>
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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, interest
expense, income taxes, depreciation and amortization. We believe that EBITDA, as
presented, represents a useful measure of assessing the performance of our
operating activities, as it reflects our earnings trends without the impact of
certain non-cash charges or income. 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 EBITDA 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, nor 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 (used in) provided by
operating activities.
Thirty-Nine Weeks Ended
-----------------------------------------
September 30 October 1,
2006 2005
-------------------- -----------------
(In Thousands)
-----------------------------------------
EBITDA (1) $6,626 $5,267
Depreciation and amortization (1,115) (801)
Interest expense, net of interest income (204) (171)
Income taxes (1,287) (1,577)
-------------------- -----------------
Net income $4,020 $2,718
==================== =================
Earnings per share (diluted)
EBITDA $.55 $.45
==================== =================
Net income $.33 $.23
==================== =================
Weighted average shares outstanding 12,020,901 11,617,444
==================== =================
Thirteen Weeks Ended
-----------------------------------------
September 30, October 1,
2006 2005
-------------------- -----------------
(In Thousands)
-----------------------------------------
EBITDA (2) $2,697 $1,440
Depreciation and amortization (394) (273)
Interest expense, net of interest income (75) (63)
Income taxes (credit) (879) (387)
-------------------- -----------------
Net income $1,349 $717
==================== =================
Earnings per share (diluted)
EBITDA $.22 $.12
==================== =================
Net income $.11 $.06
==================== =================
Weighted average shares outstanding 12,003,750 11,711,064
==================== =================
<FN>
(1) Includes stock based compensation expense of $692,675 for the
thirty-nine weeks ended September 30, 2006.
(2) Includes stock based compensation expense of $99,359 for the thirteen
weeks ended September 30, 2006.
</FN>
4
RCM Technologies, Inc.
Calculation of Net Income and Net Earnings per Diluted Share before
Equity-Based Compensation Expense (1)
(Unaudited)
Thirty-Nine Weeks Ended
-----------------------------------------
September October
30, 2006 1, 2005
-------------------- -----------------
(In Thousands)
-----------------------------------------
Net income $4,020 $2,718
Equity-based compensation, net of income tax 693
Net income before equity-based
compensation expense 4,713 2,718
Net earnings per diluted share before
equity-based compensation expense $.39 $.23
Thirteen Weeks Ended
-----------------------------------------
September October
30, 2006 1, 2005
-------------------- -----------------
(In Thousands)
-----------------------------------------
Net income $1,349 $717
Equity-based compensation, net of income tax 99
Net income before equity-based
compensation expense 1,448 717
Net earnings per diluted share before
equity-based compensation expense $.12 $.06
(1) See footnote 1 on page 2
5
RCM Technologies, Inc.
Reconciliation of EBITDA to Net Income and Cash Provided by
Operating Activities (Continued)
(Unaudited)
Thirty-Nine Weeks Ended
-----------------------------------------
September 30, October 1,
2006 2005
-------------------- -----------------
(In Thousands)
-----------------------------------------
Net income $4,020 $2,718
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization 1,115 801
Stock based compensation expense 693
Provision for losses on accounts receivable (109) (110)
Deferred tax assets (145) 82
Changes in operating assets and liabilities
Accounts receivable (3,797) (1,762)
Restricted cash 8,572 (205)
Prepaid expenses and other current assets 66 806
Accounts payable and accrued expenses (5,271) 693
Accrued compensation 1,337 (1,039)
Payroll and withheld taxes 250 (524)
Income taxes payable (2,149) 1,137
-------------------- -----------------
Cash provided by operating activities $4,582 $2,597
==================== =================
Thirteen Weeks Ended
-----------------------------------------
September 30, October 1,
2006 2005
-------------------- -----------------
(In Thousands)
-----------------------------------------
Net income $1,349 $717
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization 394 273
Stock based compensation expense 100
Provision for losses on accounts receivable (92) (91)
Deferred tax assets 41 82
Changes in operating assets and liabilities
Accounts receivable (660) 276
Restricted cash (57)
Prepaid expenses and other current assets 137 489
Accounts payable and accrued expenses 827 1,469
Accrued compensation (56) (1,411)
Payroll and withheld taxes 158 (196)
Income taxes payable (700) 759
-------------------- -----------------
Cash provided by operating activities $1,498 $2,310
==================== =================
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