-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AgOGIldlAV/VQIix1OXdNHsVGnQaU26buGHDL6M0M6dDmriqcRtbZf+NB1caKbKj kNziUUQDbfOecqsvxu3meg== 0000700841-98-000004.txt : 19980306 0000700841-98-000004.hdr.sgml : 19980306 ACCESSION NUMBER: 0000700841-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980305 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RCM TECHNOLOGIES INC CENTRAL INDEX KEY: 0000700841 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 951480559 STATE OF INCORPORATION: NV FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10245 FILM NUMBER: 98558084 BUSINESS ADDRESS: STREET 1: 2500 MCCLELLAN AVE STE 350 CITY: PENNSAUKEN STATE: NJ ZIP: 08109 BUSINESS PHONE: 6094861777 MAIL ADDRESS: STREET 1: 2500 MCCLELLAN AVENUE STREET 2: STE 350 CITY: PENNSAUKEN STATE: NJ ZIP: 08109-4613 10-Q 1 FIRST QUARTER FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 31, 1998 Commission file number: 1-10245 RCM TECHNOLOGIES, INC. (Exact name of Registrant as specified in its charter) Nevada 95-1480559 (State of Incorporation) (IRS Employer Identification No.) 2500 McClellan Avenue, Suite 350, Pennsauken, New Jersey 08109-4613 (Address of principal executive offices) (609) 486-1777 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate the number of shares outstanding of the Registrant's class of common stock, as of the latest practicable date. CLASS Common Stock, $.05 par value 7,634,131 Outstanding as of March 5, 1998 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements Page Consolidated Balance Sheets as of January 31, 1998 (Unaudited) and October 31, 1997 (Audited) 3 Unaudited Consolidated Statements of Income for the Three Month Periods Ended January 31, 1998 and 1997 5 Unaudited Consolidated Statement of Changes in Shareholders' Equity for the Three Month Period Ended January 31, 1998 6 Unaudited Consolidated Statements of Cash Flows for the Three Month Periods Ended January 31, 1998 and 1997 7 Notes to Unaudited Consolidated Financial Statements 9 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II - OTHER INFORMATION ITEM 6 - Exhibits and Reports on Form 8-K 16 SIGNATURES 17
2 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS January 31, 1998 and October 31, 1997 ASSETS
1998 1997 -------------- --------- (Unaudited) (Audited) Current assets Cash and cash equivalents $ 557,089 $ 918,028 Accounts receivable, net of allowance for doubtful accounts of $331,000 and $316,000 in 1998 and 1997, respectively 26,476,435 24,850,304 Prepaid expenses and other current assets 347,479 673,265 ------- ------- Total current assets 27,381,003 26,441,597 ---------- ---------- Property and equipment, at cost Equipment and leasehold improvements 3,390,018 2,508,680 Less: accumulated depreciation and amortization 1,904,668 1,373,275 --------- --------- 1,485,350 1,135,405 --------- --------- Other assets Deposits 102,847 94,149 Intangible assets (net of accumulated amortization of $989,797 and $804,640 in 1998 and 1997, respectively) 29,493,114 26,411,445 ---------- ---------- 29,595,961 26,505,594 Total assets $ 58,462,314 $ 54,082,596 = ========== = ==========
The accompanying notes are an integral part of these financial statements. 3 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - CONTINUED January 31, 1998 and October 31, 1997 LIABILITIES AND SHAREHOLDERS' EQUITY
1998 1997 ---- ---- (Unaudited) (Audited) Current liabilities Note payable - bank $ 2,000,000 $ 2,000,000 Accounts payable and accrued expenses 1,619,559 1,315,937 Accrued payroll 4,193,615 4,501,502 Taxes other than income taxes 2,110,627 665,106 Income taxes payable 1,396,852 679,937 --------- ------- Total current liabilities 11,320,653 9,162,482 ---------- --------- Income taxes payable 198,047 308,129 ------- ------- Shareholders' equity Preferred stock, $1.00 par value; 5,000,000 shares authorized; no shares issued or outstanding Common stock, $0.05 par value; 40,000,000 shares authorized; 7,624,152 and 7,582,206 shares issued in 1998 and 1997, respectively 381,208 379,110 Additional paid-in capital 41,429,670 40,877,540 Retained earnings 5,132,736 3,355,335 --------- --------- 46,943,614 44,611,985 Total liabilities and shareholders' equity $ 58,462,314 $ 54,082,596 = ========== = ==========
The accompanying notes are an integral part of these financial statements. 4 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended January 31, 1998 1997 ---- ---- (Unaudited) (Unaudited) Revenues $ 37,232,243 $ 21,150,721 Cost of services 28,080,004 16,051,317 ---------- ---------- Gross profit 9,152,239 5,099,404 --------- --------- Operating costs and expenses Selling, general and administrative 5,813,557 3,625,653 Depreciation and amortization 251,256 118,629 ------- ------- 6,064,813 3,744,282 --------- --------- Operating income 3,087,426 1,355,122 Interest expense, net of interest income 39,332 84,801 ------ ------ Income before income taxes 3,048,094 1,270,321 Income taxes 1,270,693 489,334 --------- ------- Net income $ 1,777,401 $ 780,987 = ========= = ======= Net earnings per share $.22 $.16 ==== ====
The accompanying notes are an integral part of these financial statements. 5 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Three Months Ended January 31, 1998 (Unaudited)
Additional Common Stock Paid-in Retained Shares Amount Capital Earnings ------ ------ ------- -------- Balance, October 31, 1997 7,582,206 $ 379,110 $40,877,540 $3,355,335 Exercise of Stock Options 7,100 356 49,931 Exercise of Warrants 34,846 1,742 502,199 Net Income 1,777,401 ---------- ------- ---------- --------- Balance, January 31, 1998 7,624,152 $ 381,208 $41,429,670 $5,132,736 ========== ========= =========== ==========
The accompanying notes are an integral part of these financial statements. 6 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended January 31, 1998 1997 ---- ---- (Unaudited) (Unaudited) Cash flows from operating activities: Net income $ 1,777,401 $ 780,987 - --------- - ------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 251,256 118,629 Provision for losses on accounts receivable 15,000 81,000 Changes in assets and liabilities: Accounts receivable ( 1,641,131) 278,442 Prepaid expenses and other current assets 325,786 ( 246,776 ) Accounts payable and accrued expenses 303,622 ( 76,269 ) Accrued payroll ( 307,887) ( 215,376 ) Taxes other than income taxes 1,445,521 227,921 Income taxes payable 606,833 162,914 ------- ------- Total adjustments 999,000 330,485 ------- ------- Net cash provided by operating activities 2,776,401 1,111,472 --------- ---------
The accompanying notes are an integral part of these financial statements. 7 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Three Months Ended January 31, 1998 1997 ---- ---- (Unaudited) (Unaudited) Cash flows from investing activities: Increase in intangible assets ($ 141,826) ($ 137,272 ) Property and equipment acquired ( 416,044) ( 80,546 ) Increase in deposits ( 8,698) ( 4,333 ) Cash paid for acquisitions, net of cash acquired ( 3,125,000) ( 5,012,394 ) --------- --------- Net cash used in investing activities ( 3,691,568) ( 5,225,879 ) --------- --------- Cash flows from financing activities: Exercise of stock options and warrants 554,228 Net borrowings under short term debt arrangements 4,253,364 Repayments of long term debt ( 20,090 ) ------ Net cash provided by financing activities 554,228 4,233,274 ------- --------- Net increase (decrease) in cash and cash equivalents ( 360,939) 118,867 Cash and cash equivalents at beginning of period 918,028 5,989 ------- ----- Cash and cash equivalents at January 31, $ 557,089 $ 124,856 = ======= = ======= Supplemental cash flow information: Cash paid for: Interest expense $ 55,114 $ 90,189 Income taxes $ 663,860 $ 197,438 Acquisitions: Fair value of assets acquired $ 4,440,881 $ Liabilities assumed 1,315,881 --------- Cash paid, net of cash acquired $ 3,125,000 $ = ========= =
The accompanying notes are an integral part of these financial statements. 8 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. General The accompanying consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). This Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended October 31, 1997. Certain information and footnote disclosures which are normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules and regulations. The information reflects all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position of the Company and its results of operations for the interim periods set forth herein. The results for the three months ended January 31, 1998 are not necessarily indicative of the results to be expected for the full year. 2. Acquisition On January 5, 1998, the Company purchased Northern Technical Services, Inc. ("NTS"), a privately-held, provider of technical professional and information technology personnel. The purchase price was $3,125,000 plus $1,500,000 of contingent consideration payable over two years. The agreement provides for additional purchase consideration upon the attainment of certain earnings targets at the end of each twelve month period following the closing, for a period of two years. Any additional consideration paid will be recorded as additional purchase price. Revenues for the year ended November 30, 1997, provided by the management of NTS, were $12.6 million. On February 27, 1998, the Company purchased Staffworks, Inc. ("Staffworks"), a privately-held, provider of technical professional and information technology personnel. The purchase price was $3,000,000 plus $2,000,000 of contingent consideration payable over three years. The agreement provides for additional purchase consideration upon the attainment of certain earnings targets at the end of each twelve month period following the closing, for a period of three years. Any additional consideration paid will be recorded as additional purchase price. Current annualized revenues provided by the management of Staffworks, is approximately $12.0 million. The following unaudited results of operations have been prepared assuming that all acquisitions which have occurred since November 1, 1996 had occurred at the beginning of the periods presented. Those results are not necessarily indicative of results of future operations nor of results that would have occurred had the acquisitions been consummated as of the beginning of the periods presented.
Three Months Ended January 31, 1998 1997 ---- ---- Revenues $ 39,371,000 $ 30,834,000 Operating income $ 3,242,000 $ 2,210,000 Net income $ 1,848,000 $ 1,050,000 Earnings per common share $.23 $.21
3. Earnings Per Share Earnings per share is based on the weighted average number of common shares outstanding during the periods presented. For the three months ended January 31, 1998 and 1997, the weighted average number of shares outstanding was 8,177,283 and 4,970,620, respectively. 9 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 4. Interest Expense Interest expense for the three months ended January 31, 1998 and 1997 was $55,114 and $90,189, respectively. 5. Reclassification Certain items in the 1997 Statement of Income have been reclassified to conform to 1998 financial statement presentation. 6. New Accounting Standard On November 1, 1997, the Company adopted the provisions of Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). SFAS 128 eliminates primary and fully diluted earnings per share and requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. Prior period earnings per share calculations have been restated to reflect the adoption of SFAS 128. 10 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations Private Securities Litigation Reform Act Safe Harbor Statement When used in or incorporated by reference into this Report, the words "estimate," "project," "intend," "expect" and similar expressions are intended to identify forward-looking statements regarding events and financial trends which may affect the Company's future operating results and financial position. Such statements are subject to risks and uncertainties that could cause the Company's actual results and financial position to differ materially. Certain of these factors have been identified within the Company's various Reports, Registration Statements and other filings previously made with the SEC. Overview The Company provides contract and temporary personnel in the information technology, professional engineering and technical, specialty healthcare and general support sectors of the staffing industry to a diversified base of national, regional and local customers. The Company's business and strategy have changed dramatically since its inception in 1971. From 1992 through 1994, current management repositioned its core staffing business to improve profitability and to take advantage of consolidating market dynamics. Significant revenue growth began in Fiscal 1995 as the Company implemented a growth strategy that since then has resulted in the acquisition of twelve businesses in the staffing industry. These acquisitions shifted the Company's business toward the higher margin information technology and specialty healthcare sectors. During this time, the Company also elected to discontinue providing certain lower margin general support services. General support services, which from Fiscal 1992 to Fiscal 1994 accounted for approximately 51.0% of the Company's revenues, decreased as a percentage of the Company's revenues to 14.7% during the three months ended January 31, 1998. Correspondingly, revenues from the Company's specialty professional services accounted for 85.3% of the Company's revenues during the three months ended January 31, 1998. Prior to implementation of its growth strategy, in Fiscal 1994 the Company's revenues and operating income for the three months ended January 31, 1994, were $6.8 million and $216,000, respectively. The Company's revenues and operating income for the three months ended January 31, 1998, were $37.2 million and $3.1 million, respectively. On a pro forma basis, after giving effect to the acquisitions that occurred during Fiscal 1997 and the three months ended January 31, 1998, as if they had occurred on November 1, 1997, the Company's revenues and operating income would have increased to $39.4 million and $1.8 million, respectively. The Company realizes revenues from the placement of contract and temporary staffing personnel. Revenues are recognized when the services are provided. Principally all of these services are provided to the customer on a time and material basis at hourly rates that are established for each of the Company's staffing personnel, based upon their skill level, experience and type of work performed. In some instances, the Company derives revenues on a fixed fee basis in connection with consulting projects. In view of the diversification of the Company's service offerings, and by drawing upon the skills developed within the Company's engineering and technical group, management intends to develop project management skills within its information technology and other groups and believes that an additional percentage of its business may be derived in the future from larger-scale consulting projects. Costs of services, which entail the principal cost associated with operations, consist primarily of salaries and compensation related expenses for billable staffing personnel, including payroll taxes, employee benefits, worker's compensation and other insurance. Principally all of the billable personnel are treated by the Company as employees, although a small segment of information technology personnel are treated as independent contractors. Selling, general 11 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations - (Continued) Overview - (Continued) and administrative expenses consist primarily of salaries and benefits of personnel responsible for operating activities and include corporate overhead expenses. Corporate overhead expenses relate to salaries and benefits of personnel responsible for corporate activities, including the Company's acquisition program and corporate marketing, administrative and reporting responsibilities. The Company records these expenses when incurred. Depreciation relates primarily to the fixed assets of the Company. Amortization relates principally to the goodwill resulting from the Company's acquisitions. These acquisitions have been accounted for under the purchase method of accounting for financial reporting purposes and have created goodwill estimated at $30.4 million which is being amortized over a 40 year period currently resulting in amortization expense aggregating approximately $762,000 annually. Liquidity and Capital Resources Operating activities provided $2.8 million and $1.1 million of cash during the three months ended January 31, 1998 and 1997, respectively. The change was primarily attributable to an increase in accounts receivable which was partially offset by increased levels of profitability, income taxes payable and withheld payroll taxes and depreciation and amortization associated with the acquisitions that were completed during Fiscal 1997 and the three months ended January 31, 1998. Investing activities utilized $3.7 million and $5.2 million in the three months ended January 31, 1998 and 1997, respectively. During three months ended January 31, 1998, the Company purchased one staffing company which required the use of $3.1 million in cash. During three months ended January 31, 1997, the Company purchased one staffing company which required the use of $4.5 million in cash. Financing activities provided $554,000 and $4.2 million for three months ended January 31, 1998 and 1997, respectively. The Company has historically funded its capital requirements with cash generated from operations and advances under its outstanding credit facility. On June 13, 1997, the Company completed a public offering of 2,875,000 shares of Common Stock, of which, 2,698,187 shares were offered and sold by the Company and 176,813 shares were offered by certain selling stockholders ("the Public Offering"). The Public Offering was undertaken pursuant to the terms of a Registration Statement on Form S-1 originally filed with the Securities and Exchange Commission on March 21, 1997 and a final Prospectus dated June 10, 1997. The net proceeds to the Company after offering costs was $23,271,723. The Company at January 31, 1998, had approximately $557,000 million in cash and approximately $12.7 million in loan availability on its revolving line of credit. The net offering proceeds through January 31, 1998, have been used to retire bank debt and fund acquisitions (requiring $15.6 million). On February 25, 1998, the Company completed the acquisition of Staffworks, Inc. which required the use of $3.1 million of loan availability on its revolving line of credit. On December 19, 1996, the Company and its subsidiaries entered into an amended and restated loan agreement with Mellon Bank, N.A. for providing a credit facility of up to $20.0 million (the "Revolving Credit Facility") which expires on June 30, 1999. The Revolving Credit Facility is collateralized by accounts receivable, contract rights and furniture and fixtures together with unlimited guarantees from the Company. The Revolving Credit Facility requires the Company and its subsidiaries to meet certain financial objectives and maintain certain financial covenants with respect to net income, effective net worth, working capital, senior indebtedness to effective net worth ratios, capital expenditures, current assets to current liabilities ratios, consolidated working capital and consolidated tangible net worth. At January 31, 1998, the Company and its subsidiaries were in compliance with all financial covenants contained within the Revolving Credit Facility. 12 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations - (Continued) Liquidity and Capital Resources - (Continued) Borrowings under the Revolving Credit Facility are to be used to meet cash flow requirements for the subsidiaries as well as operating expenses for the Company. Borrowings under the Revolving Credit Facility bear interest at the Company's option, at LIBOR (London Interbank Offered Rate) or the bank's prime rate, plus applicable margin. The Company anticipates that its primary uses of capital in future periods will be for acquisitions and the funding of increases in accounts receivables. The Company has fully utilized the net proceeds made available through the Public Offering. Accordingly, funding for further acquisitions will be derived from the Revolving Credit Facility, funds generated through operations, or future financing transactions. The Company's business strategy is to achieve growth both internally through operations and externally through strategic acquisitions. The Company's liquidity and capital resources may be affected in the future as the Company continues to grow through implementation of this strategy which may involve acquisitions facilitated through the use of cash and/or debt and equity securities. The Company does not currently have material commitments for capital expenditures and does not anticipate entering into any such commitments during the next twelve months. The Company continues to evaluate acquisitions of various businesses which are complementary to its current operations. The Company's current commitments consist primarily of lease obligations for office space. The Company believes that its capital resources are sufficient to meet its present obligations and those to be incurred in the normal course of business for the next twelve months. The Company may derive up to approximately $2.3 million of proceeds from the issuance of up to approximately 157,000 shares of Common Stock that may occur upon the exercise of all of its outstanding Class C Warrants. At March 5, 1998, there were 562,584 Class C Warrants outstanding. The Class C Warrants were issued in a public offering undertaken by the Company during 1989, and after several extensions, are scheduled to expire on April 30, 1998. As adjusted by a subsequent recapitalization of the Company, each five Class C Warrants entitle the holder to purchase one share of Common Stock at an exercise price of $15.00. As of March 5, 1998, the Company had received $672,000 from the exercise of the Class C Warrants. 13 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations - (Continued)
Three Months Ended January 31, 1998 Compared to Three Months Ended January 31, 1997 Three Months Ended January 31, 1998 1997 ---- ---- % Of % Of Amount Revenue Amount Revenue ------ ------- ------ ------- Revenues $ 37,232,243 100.0% $ 21,150,721 100.0 % Cost of services 28,080,004 75.4 16,051,317 75.9 Gross profit 9,152,239 24.6 5,099,404 24.1 Selling, general and administrative 5,813,557 15.6 3,625,653 17.1 Depreciation and amortization 251,256 .7 118,629 .6 Operating income 3,087,426 8.3 1,355,122 6.4 Interest expense, net of interest income 39,332 .1 84,801 .4 Income before income taxes 3,048,094 8.2 1,270,321 6.0 Income taxes 1,270,693 3.4 489,334 2.3 Net income $ 1,777,401 4.8% $ 780,987 3.7 % Earnings per share $.22 $.16 ==== ====
REVENUES. Revenues increased 76.0%, or $16.1 million, for the three months ended January 31, 1998 as compared to the comparable prior year period. The increase was due to the acquisition of five companies during Fiscal 1997 and one company during the three months ended January 31, 1998 along with strong internal growth. The pro forma internal growth rate (as if all acquisitions occurred as of November 1, 1996) for the three months ended January 31, 1998 was 27.7%. COST OF SERVICES. Cost of services increased 75.0%, or $12.0 million, for the three months ended January 31, 1998 as compared to the equivalent prior year period. This increase was primarily due to increased salaries and compensation associated with the increased revenues experienced during this period. Cost of services as a percentage of revenues decreased to 75.4% for the three months ended January 31, 1998 from 75.9% for the comparable prior year period. This decline was primarily due to a greater percentage of the Company's revenues being derived from specialty staffing services. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expenses increased 60.3%, or $2.2 million, for the three months ended January 31, 1998 as compared to the comparable prior year period. This increase resulted from the change in the mix of the business during the three months ended January 31, 1998, which required higher marketing, sales, recruiting and administrative expenses than the comparable prior year period. Selling, general and administrative expenses as a percentage of revenues decreased to 15.6% for the three months ended January 31, 1998 from 17.1% in the comparable prior year period, primarily attributable to the sharing of administrative overhead over a larger revenue base. DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 111.8%, or $133,000, for the three months ended January 31, 1998 as compared to the comparable prior year period. This increase was primarily due to the amortization of intangible assets incurred in connection with the acquisitions that occurred after the first quarter of fiscal 1997. 14 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations - (Continued) Three Months Ended January 31, 1998 Compared to Three Months Ended January 31, 1997 - (Continued) INTEREST EXPENSE, NET OF INTEREST INCOME. Actual interest expense of $55,000 for three months ended January 31, 1998, was partially offset by $16,000 of interest income, that was earned from the investment in interest bearing deposits of the net proceeds of the Company's recent public offering, after the retirement of bank debt. Interest expense decreased 38.9%, or $35,100, for three months ended January 31, 1998 as compared to the comparable prior year period. This decrease was due to the decreased borrowings necessary to provide the funds for working capital. INCOME TAX. Income tax expense increased 159.7%, or $781,000, for the three months ended January 31, 1998 as compared to the comparable prior year period. This increase was due to increased levels of income and an increase in the effective tax rate from 38.5% to 41.7%. The increase in the effective tax rate was primarily due to the non deductibility of goodwill amortization. 15 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11 Computation of earnings per share. 27 Financial Data Schedule. 27a Restated Financial Data Schedule (b) Reports on Form 8-K The Company did not file a report of Form 8-K during the period ended January 31, 1998. 16 RCM TECHNOLOGIES, INC. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. RCM Technologies, Inc. (Registrant) Date: March 5, 1998 By:/s/ Stanton Remer ----------------- Stanton Remer Chief Financial Officer, (Principal Accounting Officer) Treasurer, Secretary and Director 17 EXHIBIT 11 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE Three Months Ended January 31, 1998 and 1997
1998 1997 ---- ---- Diluted earnings Net income applicable to common stock $ 1,777,401 $ 780,987 = ========= = ======= Shares Weighted average number of shares outstanding 7,593,447 4,815,676 Common stock equivalents 583,836 146,865 ------- ------- Total 8,177,283 4,962,541 ============== ========= Diluted earnings per common share $.22 $.16 ==== ==== Basic earnings Net income applicable to common stock $ 1,777,401 $ 780,987 ============= =============== Shares Weighted average number of shares outstanding 7,593,447 4,815,676 ============== ============= Basic earnings per common share $.23 $.16 ==== ====
EX-27 2 FDS --
5 THIS SCHEDULE SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JANUARY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS. 0000700841 RCM Technologies, Inc. 1 U.S. Dollars 3-MOS OCT-31-1998 NOV-01-1997 JAN-31-1998 1 557,089 0 26,807,435 331,000 0 27,381,003 3,390,018 1,904,668 58,462,314 11,320,653 0 0 0 381,208 46,562,406 58,462,314 37,232,243 37,232,243 28,080,004 34,144,817 0 0 39,332 3,048,094 1,270,693 1,777,401 0 0 0 1,777,401 .23 .22
EX-27 3 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JANUARY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS. 0000700841 RCM TECHNOLOGIES, INC 1 U.S. DOLLARS 3-MOS OCT-31-1997 NOV-01-1996 JAN-31-1997 1 124,856 0 14,906,871 157,000 0 15,546,791 1,975,849 1,199,043 30,190,876 12,627,467 0 0 0 243,924 16,757,173 30,190,876 21,150,721 21,150,721 16,051,317 19,795,599 0 0 90,189 1,270,321 489,334 780,987 0 0 0 780,987 .16 .16
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