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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-10245
RCM TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its Charter)
Nevada 95-1480559
(State of Incorporation) (I.R.S. Employer Identification No.)
2500 McClellan Avenue, Suite 350, Pennsauken, New Jersey 08109-4613
(Address of Principal Executive Offices) (Zip Code)
(856) 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.
Common Stock, $0.05 par value, 10,598,364 shares outstanding
as of August 02, 2002.
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Page
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 2002 (Unaudited)
and December 31, 2001 3
Unaudited Consolidated Statements of Income and Comprehensive Income
for the Six-Month Periods Ended June 30, 2002 and 2001 5
Unaudited Consolidated Statements of Income and Comprehensive Income
for the Three-Month Periods Ended June 30, 2002 and 2001 6
Unaudited Consolidated Statement of Changes in Shareholders'
Equity for the Six-Month Period Ended June 30, 2002 7
Unaudited Consolidated Statements of Cash Flows for the Six-
Month Periods Ended June 30, 2002 and 2001 8
Notes to Unaudited Consolidated Financial Statements 10
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 15
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 23
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 24
Item 6 - Exhibits and Reports on Form 8-K 24
Signatures 25
2
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2002 and December 31, 2001
ASSETS
June 30, December 31,
2002 2001
--------------- ---------------
(Unaudited)
Current assets
Cash and cash equivalents $ 1,917,799 $ 2,289,743
Accounts receivable, net of allowance for doubtful accounts
of $1,468,000 and $1,795,000, respectively 36,302,720 41,174,828
Income tax refund receivable (Note 2) 14,841,135 6,810,093
Prepaid expenses and other current assets 2,684,107 2,968,612
Deferred tax assets 581,261 5,600,000
--------------- ---------------
Total current assets 56,327,022 58,843,276
--------------- ---------------
Property and equipment, at cost
Equipment and leasehold improvements 10,557,150 11,131,750
Less: accumulated depreciation and amortization 3,984,745 4,282,985
--------------- ---------------
6,572,405 6,848,765
--------------- ---------------
Other assets
Deposits 135,731 175,691
Goodwill, net of accumulated amortization
of $10,478,200 and $10,478,600 respectively 66,752,354 62,499,000
Intangible assets, net of accumulated amortization
of $200,800 and $190,400 respectively 110,000 120,400
Deferred tax assets 2,668,813
--------------- ---------------
66,998,085 65,463,904
--------------- ---------------
Total assets $129,897,512 $131,155,945
=============== ===============
3
The accompanying notes are an integral part of these
financial statements.
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
June 30, 2002 and December 31, 2001
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, December 31,
2002 2001
--------------- ---------------
(Unaudited)
Current liabilities
Note payable $24,900,000 $31,500,000
Accounts payable and accrued expenses 7,345,233 8,653,876
Accrued payroll 4,972,271 5,137,336
Payroll and withheld taxes 613,794 375,784
Income taxes payable 4,455,725 2,199,149
--------------- ---------------
Total current liabilities 42,287,023 47,866,145
--------------- ---------------
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; 10,598,364 and
10,571,761 shares issued and outstanding
at June 30, 2002 and December 31, 2001, respectively 529,918 528,588
Accumulated other comprehensive loss ( 521,814) ( 484,283)
Additional paid-in capital 93,845,385 93,746,569
Accumulated deficit ( 6,243,000) ( 10,501,074)
--------------- ---------------
87,610,489 83,289,800
--------------- ---------------
Total liabilities and shareholders' equity $129,897,512 $131,155,945
=============== ===============
4
The accompanying notes are an integral part of these
financial statements.
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Six Months Ended June 30, 2002 and 2001
(Unaudited)
2002 2001
---------------- ---------------
Revenues $89,815,361 $123,019,699
Cost of services 65,501,011 88,469,679
---------------- ---------------
Gross profit 24,314,350 34,550,020
---------------- ---------------
Operating costs and expenses
Selling, general and administrative 16,909,247 23,680,387
Depreciation 609,515 493,670
Amortization 10,362 3,366,554
---------------- ---------------
17,529,124 27,540,611
---------------- ---------------
Operating income 6,785,226 7,009,409
---------------- ---------------
Other expenses (income)
Interest expense, net of interest (income) ( 31,096) 1,315,629
Gain on foreign currency transactions ( 5,107) ( 10,149)
---------------- ---------------
( 36,203) 1,305,480
---------------- ---------------
Income before income taxes 6,821,429 5,703,929
Income taxes 2,563,355 3,200,869
---------------- ---------------
Net income 4,258,074 2,503,060
Other comprehensive loss
Foreign currency translation adjustment ( 37,531) ( 227,973)
---------------- ---------------
Comprehensive income $4,220,543 $ 2,275,087
================ ===============
Basic earnings per share $.40 $.24
==== ====
Weighted average number of common
shares outstanding 10,572,146 10,499,651
========== ==========
Diluted earnings per share $.40 $.23
==== ====
Weighted average number of common
and common equivalent shares outstanding 10,775,112 10,665,107
========== ==========
5
The accompanying notes are an integral part of these
financial statements.
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three Months Ended June 30, 2002 and 2001
(Unaudited)
2002 2001
---------------- ---------------
Revenues $44,705,733 $58,365,909
Cost of services 32,901,049 41,887,806
---------------- ---------------
Gross profit 11,804,684 16,478,103
---------------- ---------------
Operating costs and expenses
Selling, general and administrative 8,413,017 11,236,560
Depreciation 307,200 258,209
Amortization 5,181 1,323,064
---------------- ---------------
8,725,398 12,817,833
---------------- ---------------
Operating income 3,079,286 3,660,270
---------------- ---------------
Other expenses (income)
Interest expense, net of interest (income) ( 299,049) 573,809
Gain on foreign currency transactions ( 2,167) ( 6,089)
---------------- ---------------
( 301,216) 567,720
---------------- ---------------
Income before income taxes 3,380,502 3,092,550
Income taxes 1,267,015 1,740,434
---------------- ---------------
Net income 2,113,487 1,352,116
Other comprehensive loss
Foreign currency translation adjustment ( 1,540) ( 156,740)
---------------- ---------------
Comprehensive income $2,111,947 $1,195,376
================ ===============
Basic earnings per share $.20 $.13
==== ====
Weighted average number of common
shares outstanding 10,572,527 10,499,651
========== ==========
Diluted earnings per share $.20 $.13
==== ====
Weighted average number of common
and common equivalent shares outstanding 10,814,779 10,736,087
========== ==========
6
The accompanying notes are an integral part of these
financial statements.
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Six Months Ended June 30, 2002
(Unaudited)
Accumulated
Other Additional
Common Stock Comprehensive Paid-in Retained
------------
Loss Capital Earnings Total
Shares Amount
Balance, January 1, 2002 10,571,761 $528,588 ($484,283) $93,746,569 ($10,501,074) $83,289,800
Issuance of stock under
stock purchase plan 25,948 1,297 98,084 99,381
Exercise of stock options 655 33 732
765
Translation adjustment ( 37,531) ( 37,531)
Net income 4,358,074 4,258,074
--------- ---------
Balance, June 30, 2002 10,598,364 $529,918 ($521,814) $93,845,385 ($6,243,000) $87,610,489
========== ======== ========== =========== =========== ===========
7
The accompanying notes are an integral part of these
financial statements.
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2002 and 2001
(Unaudited)
2002 2001
--------------- --------------
Cash flows from operating activities:
Net income $4,258,074 $2,503,060
--------------- --------------
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 619,877 3,860,224
Provision for losses on accounts receivable ( 327,000) ( 156,000)
Changes in assets and liabilities:
Accounts receivable 5,199,108 13,806,594
Income tax refund receivable ( 8,031,043) 1,897,777
Deferred tax asset 7,687,553 ( 34,131)
Prepaid expenses and other current assets ( 823,401) 1,330,922
Accounts payable and accrued expenses ( 2,241,976) 709,342
Accrued payroll ( 165,065) ( 628,280)
Payroll and withheld taxes 238,010 ( 1,039,850)
Income taxes payable 3,364,481 ( 783,398)
--------------- --------------
Total adjustments 5,520,544 18,963,200
--------------- --------------
Net cash provided by operating activities $9,778,618 $21,466,260
--------------- --------------
8
The accompanying notes are an integral part of these
financial statements.
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2002 and 2001 - (Continued)
(Unaudited)
2002 2001
--------------- --------------
Cash flows from investing activities:
Property and equipment acquired ( $ 338,346) ( $1,103,777)
Decrease in deposits 39,960 12,244
Purchase of acquired companies including
contingent consideration, net of cash acquired ( 3,314,791) ( 4,307,071)
--------------- --------------
Net cash used in investing activities ( 3,613,177) ( 5,398,604)
--------------- --------------
Cash flows from financing activities:
Sale of stock for employee stock purchase plan 99,381
Repayments of note payable 133,239
Exercise of stock options 765
Repayments of long-term debt ( 6,600,000) ( 12,400,000)
--------------- --------------
Net cash provided by (used in) financing activities ( 6,499,854) ( 12,266,761)
--------------- --------------
Effect of exchange rate changes on cash and cash equivalents ( 37,531) ( 227,973)
--------------- --------------
(Decrease) increase in cash and cash equivalents ( 371,944) 3,572,922
Cash and cash equivalents at beginning of period 2,289,743 3,170,658
--------------- --------------
Cash and cash equivalents at end of period $1,917,799 $6,743,580
=============== ==============
Supplemental cash flow information:
Cash paid for:
Interest expense $501,796 $1,366,420
Income taxes $650,269 $1,700,388
9
The accompanying notes are an integral part of these
financial statements.
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 Quarterly Report on Form 10-Q should be
read in conjunction with the Company's Annual Report on Form 10-K for the
year ended December 31, 2001. 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 six months ended June 30, 2002 are not necessarily
indicative of the results to be expected for the full year.
2. Subsequent Event
Subsequent to June 30, 2002, the Company received from the Internal Revenue
Service an income tax refund in the amount of $14.8 million, inclusive of
$535,000 of interest income. A portion of the proceeds was used for the
repayment of borrowings under our note payable agreements (Note 4). The
note payable amount outstanding was $10.0 million at August 2, 2002.
3. Recent Accounting Pronouncements
On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, Business
Combinations, and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is
effective for all business combinations completed after June 30, 2001. SFAS
142 is effective for fiscal years beginning after December 15, 2001;
however, certain provisions of this Statement apply to goodwill and other
intangible assets acquired between July 1, 2001 and the effective date of
SFAS 142. Major provisions of these Statements and their effective dates
for the Company are as follows: (1) all business combinations initiated
after June 30, 2001 must use the purchase method of accounting. The pooling
of interest method of accounting is prohibited except for transactions
initiated before July 1, 2001, (2) intangible assets acquired in a business
combination must be recorded separately from goodwill if they arise from
contractual or other legal rights or are separable from the acquired entity
and can be sold, transferred, licensed, rented or exchanged, either
individually or as part of a related contract, asset or liability, (3)
goodwill, as well as intangible assets with indefinite lives, acquired
after June 30, 2001, will not be amortized. Effective January 1, 2002, all
previously recognized goodwill and intangible assets with indefinite lives
is no longer subject to amortization, (4) effective January 1, 2002,
goodwill and intangible assets with indefinite lives will be tested for
impairment annually and whenever there is an impairment indicator, (5) all
acquired goodwill must be assigned to reporting units for purposes of
impairment testing and segment reporting. The adoption of SFAS No. 142 had
a significant impact on the results of operations of the Company for the
six months and three months ended June 30, 2002 by eliminating amortization
of goodwill.
Under the provisions of SFAS No. 142, the Company is required to perform a
transitional goodwill impairment test within six months of adopting the new
standard and to test for impairment on at least an annual basis thereafter.
For purposes of transitional impairment testing, the Company determined the
fair value of its reporting units using discounted cash flow models and
relative market multiples for comparable businesses. The Company compared
the fair value of each of its reporting units to their respective carrying
values, including related goodwill, which resulted in no impairment loss
being recognized.
10
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
3. Recent Accounting Pronouncements (Continued)
In August 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations. SFAS 143 applies to all entities, including rate-regulated
entities, that have legal obligations associated with the retirement of a
tangible long-lived asset that result from acquisition, construction or
development and (or) normal operations of the long-lived asset. The
application of this Statement is not limited to certain specialized
industries, such as the extractive or nuclear industries. A liability for
an asset retirement obligation should be recognized if the obligation meets
the definition of a liability and can be reasonably estimated. The initial
recording should be at fair value. SFAS 143 is effective for financial
statements issued for fiscal years beginning after June 15, 2002, with
earlier application encouraged. The provisions of the Statement are not
expected to have a material impact on the financial condition or results of
operations of the Company.
In August 2001, the FASB issued SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS 144 retains the existing requirements
to recognize and measure the impairment of long-lived assets to be held and
used or to be disposed of by sale. However, SFAS 144 makes changes to the
scope and certain measurement requirements of existing accounting guidance.
SFAS 144 also changes the requirements relating to reporting the effects of
a disposal or discontinuation of a segment of a business. SFAS 144 is
effective for financial statements issued for fiscal years beginning after
December 15, 2001 and interim periods within those fiscal years. The
adoption of this Statement did not have a significant impact on the
financial condition or results of operations of the Company.
4. Note Payable
The Company and its subsidiaries entered into an amended and restated loan
agreement on May 31, 2002 with Citizens Bank (successor to Mellon Bank
N.A.), administrative agent for a syndicate of banks, which provides for a
$40.0 million Revolving Credit Facility (the "Revolving Credit Facility")
and a $7.5 million Term Loan Facility (the "Term Loan Facility"). The $7.5
million outstanding balance under the Term Loan Facility was paid on July
2, 2002 thereby canceling the Term Loan Facility. Availability under the
Revolving Credit Facility is based on 80% of the aggregate amount of
accounts receivable as to which not more than ninety days have elapsed
since the date of the original invoice. Borrowings under the Revolving
Credit Facility bear interest at one of two alternative rates, as selected
by the Company. These alternatives are: LIBOR (London Interbank Offered
Rate), plus applicable margin, or the agent bank's prime rate.
All borrowings under the Revolving Credit Facility are collateralized by
all of the assets of the Company and its subsidiaries and a pledge of the
stock of its subsidiaries. The Revolving Credit Facility also contains
various financial and non-financial covenants, such as restrictions on the
Company's ability to pay dividends. The Revolving Credit Facility expires
August 2004. The weighted average interest rates under the Revolving Credit
Facility and Term Loan Facility for the six months ended June 30, 2002 and
2001 were 3.89% and 5.69%, respectively. The amounts outstanding under the
Revolving Credit Facility at June 30, 2002 and December 31, 2001 were $24.9
million and $31.5 million, respectively. (Note 2)
5. Interest (Expense) Income, Net
Interest (expense) income, net consisted of the following:
Six Months Ended June 30, Three Months Ended June 30,
------------------------------- -------------------------------
2002 2001 2002 2001
-------------- -------------- -------------- --------------
Interest expense ($538,082) ($1,520,775) ($249,738) ($669,731)
Interest income (Note 2) 569,178 205,146 548,787 95,922
-------------- -------------- -------------- --------------
$ 31,096 ($1,315,629) $299,049 ($573,809)
============== ============== ============== ==============
11
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
6. Segment Information
The Company has adopted SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which establishes
standards for companies to report information about operating segments,
geographic areas and major customers. The adoption of SFAS 131 has no
effect on the Company's consolidated financial position, consolidated
results of operations or liquidity.
The Company uses earnings before interest and taxes (operating income) to
measure segment profit. Segment operating income includes selling, general
and administrative expenses directly attributable to that segment as well
as charges for allocating corporate costs to each of the operating
segments. The following tables reflect the results of the segments
consistent with the Company's management system (in thousands):
Six Months Ended Information Professional Commercial
June 30, 2002 Technology Engineering Services Corporate Total
--------------- ------------- -------------- ------------- -------------
Revenue $55,467 $23,497 $10,851 $89,815
Operating expenses (1) 50,357 21,464 10,589 82,410
--------------- ------------- -------------- ------------- -------------
EBITDA (2) 5,110 2,033 262 7,405
Depreciation 385 190 34 609
Amortization of intangibles 10 1 11
--------------- ------------- -------------- ------------- -------------
Operating income $4,715 $1,842 $ 228 $6,785
=============== ============= ============== ============= =============
Total assets $86,420 $13,430 $6,314 $23,152 $129,316
Capital expenditures $338 $338
Six Months Ended Information Professional Commercial
June 30, 2001 Technology Engineering Services Corporate Total
--------------- ------------- -------------- ------------- -------------
Revenue $90,342 $20,249 $12,429 $123,020
Operating expenses (1) 81,972 18,205 11,973 112,150
--------------- ------------- -------------- ------------- -------------
EBITDA (2) 8,370 2,044 456 10,870
Depreciation 369 102 23 494
Amortization of intangibles 3,022 327 18 3,367
--------------- ------------- -------------- ------------- -------------
Operating income $ 4,979 $1,615 $ 415 $ 7,009
=============== ============= ============== ============= =============
Total assets $126,173 $17,346 $6,154 $ 19,478 $169,151
Capital expenditures $379 $725 $ 1,104
12
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
6. Segment Information - (Continued)
Three Months Ended Information Professional Commercial
June 30, 2002 Technology Engineering Services Corporate Total
--------------- ------------- -------------- ------------- -------------
Revenue $26,479 $12,602 $5,625 $44,706
Operating expenses (1) 24,489 11,377 5,448 41,304
--------------- ------------- -------------- ------------- -------------
EBITDA (2) 1990 1,225 177 3,392
Depreciation 191 99 17 307
Amortization of intangibles 5 1 6
--------------- ------------- -------------- ------------- -------------
Operating income $1,794 $1,125 $ 160 $3,079
=============== ============= ============== ============= =============
Total assets $86,420 $13,430 $6,314 $23,152 $129,316
Capital expenditures $206 $206
Three Months Ended Information Professional Commercial
June 30, 2001 Technology Engineering Services Corporate Total
--------------- ------------- -------------- ------------- -------------
Revenue $41,768 $10,328 $6,270 $58,366
Operating expenses (1) 38,191 8,884 6,050 53,125
--------------- ------------- -------------- ------------- -------------
EBITDA (2) 3,577 1,444 220 5,241
Depreciation 191 54 13 258
Amortization of intangibles 1,148 166 9 1,323
--------------- ------------- -------------- ------------- -------------
Operating income $ 2,238 $1,224 $ 199 $ 3,660
=============== ============= ============== ============= =============
Total assets $126,173 $17,346 $6,154 $ 19,478 $169,151
Capital expenditures $221 $499 $720
(1) Operating expenses excludes depreciation and amortization.
(2) EBITDA consists of earnings before interest income, interest expense, other
non-operating income and expense, income taxes, depreciation and
amortization. EBITDA is not a measure of financial performance under
generally accepted accounting principles and should not be considered in
isolation or as an alternative to net income as an indicator of a company's
performance or to cash flows from operating activities as a measure of
liquidity.
13
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
7. Commitment
On June 10, 2002, the Company entered into a Severance Agreement (the
"Severance Agreement") with its Chief Executive Officer, Leon Kopyt. The
agreement provides for certain payments to be made to Mr. Kopyt and for the
continuation of Mr. Kopyt's employee benefits for a specified time after
his service with the Company is terminated other than for Cause, as defined
in the Severance Agreement. Amounts payable to Mr. Kopyt under the
Severance Agreement would be offset and reduced by any amounts received by
Mr. Kopyt after his termination of employment under his current employment
and termination benefits agreements, which are supplemented and not
superseded by the Severance Agreement. If Mr. Kopyt had been terminated as
of June 30, 2002, then under the terms of the Severance Agreement, he would
have been entitled to cash payments of approximately $1.2 million,
inclusive of employee benefits.
8. Contingencies
The Company has received claims and notices of possible claims from various
persons from whom the Company acquired stock or assets in four separate
acquisitions that occurred during 1998 and 1999. Such claims and possible
claims are not related to one another. These claims and possible claims
relate to allegations of wrongful termination and failure of the Company to
pay deferred consideration under the relevant acquisition agreements. In
the opinion of management, the Company has meritorious defenses to such
claims and possible claims and does not believe that the resolution of such
claims and possible claims should have a material adverse effect on the
Company, its financial position, its results of operations or its cash
flows.
In 1998, two former officers filed suit against the Company alleging
wrongful termination of their employment, failure to make required
severance payments and wrongful conduct by the Company in connection with
the grant to the plaintiffs and non-vestiture of options to purchase the
Company's common stock. The complaint also alleges that the Company
wrongfully limited the number of shares of the Company's common stock that
could be sold by the plaintiffs under a Registration Rights Agreement and
contains various other claims. The complaint seeks damages of approximately
$480,000, as well as additional unliquidated damages. The claims
relating to wrongful termination of employment and wrongful conduct by the
Company in connection with the grant of stock options to the plaintiffs
have been resolved in binding arbitration. With respect to the Company's
alleged wrongful limiting of the number of shares the plaintiffs could sell
and one plaintiff's claim of entitlement to severance pay of $240,000, the
Company is awaiting completion of discovery and the fixing of a trial date.
The Company is also awaiting the court's ruling on its motion for summary
judgment in its favor with respect to the plaintiffs' claims concerning the
non-vestiture of their stock options. Substantial damages are being sought
on the share-selling limitation and stock option claims; however, the
alleged damages are subject to significant reduction by reason of their
speculative nature and for having been avoidable losses. Management
believes the suit is without merit and will continue to defend the claims
vigorously.
9. Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements. Actual results could differ from
those estimates. Such estimates include the Company's estimates of reserves
such as the allowance for doubtful accounts receivable.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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
Certain statements included herein and in other Company reports and public
filings are forward-looking within the meaning of the Private Securities
Litigation Reform Act of 1995. Readers are cautioned that such forward-looking
statements, which may be identified by words such as "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend," and similar
expressions, are only predictions and are subject to risks and uncertainties
that could cause the Company's actual results and financial position to differ
materially. Such risks and uncertainties include, without limitation: (i)
unemployment and general economic conditions associated with the provision of
information technology and engineering services and solutions and placement of
temporary staffing personnel; (ii) the Company's ability to continue to attract,
train and retain personnel qualified to meet the requirements of its clients;
(iii) the Company's ability to identify appropriate acquisition candidates,
complete such acquisitions and successfully integrate acquired businesses; (iv)
uncertainties regarding pro forma financial information and the underlying
assumptions relating to acquisitions and acquired businesses; (v) uncertainties
regarding amounts of deferred consideration and earnout payments to become
payable to former shareholders of acquired businesses; (vi) possible adverse
effects on the market price of the Company's common stock due to the resale into
the market of significant amounts of common stock; (vii) the potential adverse
effect a decrease in the trading price of the Company's common stock would have
upon the Company's ability to acquire businesses through the issuance of its
securities; (viii) the Company's ability to obtain financing on satisfactory
terms; (ix) the reliance of the Company upon the continued service of its
executive officers; (x) the Company's ability to remain competitive in the
markets which it serves; (xi) the Company's ability to maintain its unemployment
insurance premiums and workers compensation premiums; (xii) the risk of claims
being made against the Company associated with providing temporary staffing
services; (xiii) the Company's ability to manage significant amounts of
information, and periodically expand and upgrade its information processing
capabilities; (xiv) the Company's ability to remain in compliance with federal
and state wage and hour laws and regulations; (xv) predictions as to the future
need for the Company's services; (xvi) uncertainties relating to the allocation
of costs and expenses to each of the Company's operating segments; and (xvii)
other economic, competitive and governmental factors affecting the Company's
operations, markets, products and services. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date made. The Company undertakes no obligation to publicly release the results
of any revision of these forward-looking statements to reflect these ends or
circumstances after the date they are made or to reflect the occurrence of
unanticipated events.
15
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations - (Continued)
Overview
RCM Technologies is a premier provider of business and technology solutions
designed to enhance and maximize the 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 services to various industries. RCM's offices are located throughout North
America, including many major metropolitan centers. The Company provides a
diversified and extensive range of service offerings and deliverables. Its
portfolio of Information Technology services includes e-Business, Enterprise
Management, Enterprise Application Integration and Supply Chain. RCM's
Engineering services focus on Engineering Design, Technical Support, and Project
Management and Implementation. The Company's Commercial Services business unit
provides Healthcare contract professionals as well as Clerical and Light
Industrial temporary personnel. The Company provides its services to clients in
banking and finance, healthcare, insurance, aerospace, pharmaceutical,
telecommunications, utility, technology, manufacturing, distribution and
government sectors. The Company believes that the breadth of services fosters
long-term client relationships, affords cross-selling opportunities and
minimizes the Company's dependence on any single technology or industry sector.
RCM sells and delivers its services through a network of branch offices located
in selected regions throughout North America. The Company has executed a
regional strategy to better leverage its consulting services offering. The
Company centrally manages its Solutions practices to maximize the potential for
sales and marketing of those services.
Many of the Company's clients are facing challenging economic times. This is
creating uncertainty in their ability to pursue technology projects, which had
previously been considered a competitive imperative. Many clients have laid off
portions of their own permanent staff and greatly reduced the demand for
consulting services in attempts to maintain profitability. This has had a direct
impact on RCM's revenues.
Management believes that most companies have recognized the importance of the
Internet and information management technologies to competing in today's
business climate. However, the uncertain economic environment has curtailed many
companies' motivation for rapid adoption of many technological enhancements. The
process of designing, developing and implementing software solutions has become
increasingly complex. Management believes that many companies today are focused
on return on investment analysis in prioritizing the initiatives they undertake.
This has had the effect of delaying or totally negating spending on many
emerging new solutions, which management formally anticipated.
Nonetheless, IT managers must integrate and manage computing environments
consisting of multiple computing platforms, operating systems, databases and
networking protocols, and must implement packaged software applications to
support existing business objectives. Companies also need to continually keep
pace with new developments, which often render existing equipment and internal
skills obsolete. Consequently, business drivers cause IT managers to support
increasingly complex systems and applications of significant strategic value,
while working under budgetary, personnel and expertise constraints. This has
given rise to increasing demand for outsourcing. Clients are increasingly
evaluating the potential for outsourcing business critical applications and
entire business functions.
16
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations - (Continued)
Overview (Continued)
The Company presently realizes revenues from client engagements that range from
the placement of contract and temporary technical consultants to project
assignments that entail the delivery of end-to-end solutions. These services are
primarily provided to the client at hourly rates that are established for each
of the Company's consultants based upon their skill level, experience and the
type of work performed. The Company also provides project management and
consulting work which are billed either by an agreed upon fixed fee or hourly
rates, or a combination of both. The billing rates and profit margins for
project management and solutions work are higher than those for professional
consulting services. The Company has an ongoing effort to expand its sales of
higher margin solution and project management services.
The majority of the Company's services are provided under purchase orders.
Contracts are utilized on more of the complex assignments where the engagements
are for longer terms or where precise documentation on the nature and scope of
the assignment is necessary. Contracts, although they normally relate to
longer-term and more complex engagements, generally do not obligate the customer
to purchase a minimum level of services and are generally terminable by the
customer on 60 to 90 days' notice. Revenues are recognized when services are
provided.
Costs of services consist primarily of salaries and compensation-related
expenses for billable consultants, including payroll taxes, employee benefits
and insurances. Selling, general and administrative expenses consist primarily
of salaries and benefits of personnel responsible for business development,
recruiting, operating activities and training, 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 in 2002
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. See
Footnote 3 to financial statements.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations
are based upon the Company's consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
the Company to make estimates and judgments that affect the reported amount of
assets and liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities at the date of the Company's financial
statements. Actual results may differ from these estimates under different
assumptions or conditions.
Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and potentially result in materially
different results under different assumptions and conditions. The Company
believes that its critical accounting policies include those described below.
Accounts Receivable
The Company performs ongoing credit evaluations of its customers and adjusts
credit limits based on payment history and the customer's current credit
worthiness, as determined by a review of their current credit information. The
Company continuously monitors collections and payments from its customers and
maintains a provision for estimated credit losses based on historical experience
and any specific customer collection issues that have been identified. While
such credit losses have historically been within the Company's expectations and
the provisions established, the Company cannot guarantee that it will continue
to experience the same credit loss rates that it has in the past.
17
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations - (Continued)
Goodwill and intangibles
Pursuant to the adoption of SFAS 142, the Company changed its accounting policy
related to goodwill and intangible assets, effective January 1, 2002. Goodwill
and indefinite-lived intangible assets are no longer amortized but are subject
to periodic impairment assessment. The transitional impairment testing for such
assets was completed during the second quarter of 2002 and as of December 31,
2001, the transition date, there was no impairment to such assets. In accordance
with SFAS 142, the Company will be subject to a 2002 annual impairment test, as
well as, impairment tests each year thereafter. The Company cannot guarantee
that there will not be impairments in subsequent quarters in 2002 or in
subsequent years.
In addition, the Company recognizes contingent consideration from past
acquisitions, which are based on earn-out agreements, as additional goodwill
when earned. The Company cannot guarantee that earn-out provisions will be met.
Revenue Recognition on Long-Term Contracts
When the performance of a contract will extend beyond a 12-month period, revenue
and related costs are recognized on the percentage-of-completion method of
accounting. Profits expected to be realized on such contracts are based on total
estimated sales for the contract compared to total estimated costs at completion
of the contract. These estimates are reviewed periodically throughout the lives
of the contracts, and adjustments to profits resulting from such revisions are
made cumulative to the date of the change. Estimated losses on long-term
contracts are recorded in the period in which the losses become known.
If the Company does not accurately estimate the total sales and related costs on
such contracts, or if the Company is unsuccessful in the ultimate collection of
associated contract claims, the estimated gross margins may be impacted or
losses may need to be recognized in future periods. Any such resulting
reductions in margins or contract losses could be material to the Company's
results of operations and financial position.
18
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations - (Continued)
Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001
A summary of operating results for the six months ended June 30, 2002 and 2001
is as follows (in thousands, except for earnings per share data):
2002 2001
------------------------- ------------------------
% of % of
Amount Revenue Amount Revenue
Revenues $89,815 100.0% $123,020 100.0 %
Cost of services 65,501 72.9 88,470 71.9
--------- ---- --------- ----
Gross profit 24,314 27.1 34,550 28.1
-------- ---- --------- ----
Selling, general and administrative 16,909 18.8 23,680 19.3
Depreciation 609 .7 494 .4
-------- ------ --------- ------
17,518 19.5 24,174 19.7
-------- ---- --------- ----
Income before other income (expense),
income taxes, and amortization of intangibles 6,796 7.6 10,376 8.4
Other (expense) income 36 ( 1,305) ( 1.1 )
-------- ---- -------- ---
Income before income taxes
and amortization of intangibles 6,832 7.6 9,070 7.4
Income taxes 2,568 2.9 3,751 3.0
-------- --- --------- ---
Income before amortization of intangibles 4,264 4.7 5,319 4.4
Amortization of intangibles, net of income tax benefits 6 2,816 2.4
-------- --- --------- ---
Net income $ 4,258 4.7% $ 2,503 2.0 %
======== === ========= ===
2002 2001
---------- ---------
Earnings per share:
Basic:
Income before amortization of intangibles $.40 $.52
Amortization of intangibles .28
---- -----
Net income $.40 $.24
==== ====
Diluted:
Income before amortization of intangibles $.40 $.51
Amortization of intangibles .28
---- -----
Net income $.40 $.23
==== ====
Revenues. Revenues decreased 27.0%, or $33.2 million, for the six months ended
June 30, 2002 as compared to the same period in the prior year (the "comparable
prior year period"). The revenue decline was primarily attributable to softness
in the Information Technology ("IT") sector. Management attributes this softness
to overall economic conditions as well as hesitancy by customers to launch new
capital spending programs.
Cost of Services. Cost of services decreased 26.0%, or $23.0 million, for the
six months ended June 30, 2002 as compared to the comparable prior year period.
This decrease was primarily due to a decrease in salaries and compensation
associated with decreased revenues experienced during the six months ended June
30, 2002. Cost of services as a percentage of revenues increased to 72.9% for
the six months ended June 30, 2002 from 71.9% for the comparable prior year
period. This increase was primarily attributable to an increase of the Company's
revenues being derived from Professional Engineering services, which have
historically had lower gross profit margins.
19
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations - (Continued)
Six Months Ended June 30, 2002 Compared to
Six Months Ended June 30, 2001 - (Continued)
Selling, General and Administrative. Selling, general and administrative
expenses decreased 28.6%, or $6.8 million, for the six months ended June 30,
2002 as compared to the comparable prior year period. This decrease was
primarily attributable to a reduction in revenues, a corresponding reduction in
related variable costs, and cost cutting initiatives. SGA expenses as a
percentage of revenues were 18.8% for the six months ended June 30, 2002 as
compared to 19.3% for the comparable prior year period.
Depreciation. Depreciation increased 23.3%, or $115,000, for the six months
ended June 30, 2002 as compared to the comparable prior year period. This
increase was primarily due to the depreciation and amortization of
infrastructure and leasehold improvements incurred since June 30, 2001.
Other Expense. Other expense consists principally of interest expense, net of
interest income. For the six months ended June 30, 2002, actual interest expense
of $538,000 was offset by $569,000 of interest income, which was principally
earned from an income tax refund claim with the Internal Revenue Service.
Interest expense, net decreased $1.3 million for the six months ended June 30,
2002 as compared to the comparable prior year period. This decrease was
primarily due to the cash derived from operating activities, which was used to
reduce interest bearing debt as well as the aforementioned interest income
earned on the income tax refund.
Income Tax. Income tax expense decreased 31.5%, or $1.2 million, for the six
months ended June 30, 2002 as compared to the comparable prior year period. This
decrease was attributable to a lower level of income before taxes for the six
months ended June 30, 2002 compared to the comparable prior year period.
Amortization of Intangibles. Amortization of intangibles for the six months
ended June 30, 2002 and 2001 was net of income tax benefit of $4,000 and
$550,000, respectively. Amortization of intangibles decreased 99.8%, or $2.8
million for the six months ended June 30, 2002 as compared to the comparable
prior year period. On July 20, 2001, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) 142, Goodwill
and Intangible Assets. SFAS 142 is effective for all fiscal periods beginning
after December 15, 2001. In accordance with SFAS 142, for the six months ended
June 30, 2002, all previously recognized goodwill and intangible assets with
indefinite lives was no longer subject to amortization.
20
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations - (Continued)
Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001
A summary of operating results for the three months ended June 30, 2002 and 2001
is as follows (in thousands, except for earnings per share data):
2002 2001
------------------------ -----------------------
% of % of
Amount Revenue Amount Revenue
Revenues $ 44,706 100.0% $58,366 100.0%
Cost of services 32,901 73.6 41,888 71.8
-------- ---- --------- ----
Gross profit 11,805 26.4 16,478 28.2
-------- ---- --------- ----
Selling, general and administrative 8,413 18.8 11,237 19.3
Depreciation 307 .7 258 .4
-------- ------ --------- -----
8,720 19.5 11,495 19.7
-------- ---- --------- ----
Income before other income (expense),
income taxes and amortization of goodwill 3,085 6.9 4,983 8.5
Other (expense) income 301 .7 ( 568) 1.0
-------- ---- --------- ---------
Income before income taxes
and amortization of intangibles 3,386 7.6 4,415 7.6
Income taxes 1,270 2.9 1,894 3.3
-------- --- --------- ---
Income before amortization of intangibles 2,116 4.7 2,521 4.3
Amortization of intangibles, net of income tax benefits 3 1,169 2.0
-------- --- --------- ---
Net income $ 2,113 4.7% $ 1,352 2.3%
======== === ========== ===
2002 2001
--------- --------
Earnings per share:
Basic:
Income before amortization of intangibles $.20 $.26
Amortization of intangibles .13
---- -----
Net income $.20 $.13
==== ====
Diluted:
Income before amortization of intangibles $.20 $.25
Amortization of intangibles .12
---- -----
Net income $.20 $.13
==== ====
Revenues. Revenues decreased 23.4%, or $13.6 million, for the three months ended
June 30, 2002 as compared to the same period in the prior year (the "comparable
prior year period"). Revenue decline was primarily attributable to softness in
the Information Technology ("IT") sector. Management attributes this softness to
overall economic conditions as well as hesitancy by customers to launch new
capital spending programs.
21
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations - (Continued)
Three Months Ended June 30, 2002 Compared to
Three Months Ended June 30, 2001 - (Continued)
Cost of Services. Cost of services decreased 21.4%, or $9.0 million, for the
three months ended June 30, 2002 as compared to the comparable prior year
period. This decrease was primarily due to a decrease in salaries and
compensation associated with decreased revenues experienced during the three
months ended June 30, 2002. Cost of services as a percentage of revenues
increased to 73.6% for the three months ended June 30, 2002 from 71.8% for the
comparable prior year period. This increase was primarily attributable to an
increase of the Company's revenues being derived from Professional Engineering
services.
Selling, General and Administrative. Selling, general and administrative
expenses decreased 25.1%, or $2.8 million, for the three months ended June 30,
2002 as compared to the comparable prior year period. This decrease was
primarily attributable to a reduction in revenues and a corresponding reduction
in the related variable costs and cost cutting initiatives. SGA expenses, as a
percentage of revenues was 18.8% for the three months ended June 30, 2002 as
compared to 19.3% for the comparable prior year period.
Depreciation. Depreciation increased 19.0%, or $49,000, for the three months
ended June 30, 2002 as compared to the comparable prior year period. This
increase was primarily due to the depreciation and amortization infrastructure
and leasehold improvements incurred since June 30, 2001.
Other Expense. Other expense consists principally of interest expense, net of
interest income. For the three months ended June 30, 2002, actual interest
expense of $250,000 was offset by $549,000 of interest income, which was
principally earned from an income tax refund claim with the Internal Revenue
Service. Interest expense, net decreased $873,000 for the three months ended
June 30, 2002 as compared to the comparable prior year period. This decrease was
primarily due to the cash derived from operating activities, which was used to
reduce interest bearing debt as well as the aforementioned interest income
earned on the income tax refund.
Income Tax. Income tax expense decreased 32.9%, or $624,000, for the three
months ended June 30, 2002 as compared to the comparable prior year period. This
decrease was attributable to a lower level of income before taxes for the three
months ended June 30, 2002 compared to the comparable prior year period.
Amortization of Intangibles. Amortization of intangibles for the three months
ended June 30, 2002 and 2001 was net of income tax benefit of $2,000 and
$154,000, respectively. Amortization of intangibles decreased 99.7%, or $1.1
million for the three months ended June 30, 2002 as compared to the comparable
prior year period. On July 20, 2001, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) 142, Goodwill
and Intangible Assets. SFAS is effective for all fiscal periods beginning after
December 15, 2001. In accordance with SFAS 142, for the three months ended June
30, 2002, all previously recognized goodwill and intangible assets with
indefinite lives was no longer subject to amortization.
Liquidity and Capital Resources
Operating activities provided $9.8 million of cash for the six months ended June
30, 2002 as compared to operating activities providing $21.5 million of cash for
the six months ended June 30, 2001. The decrease in cash provided by operating
activities was primarily attributable to decreases in accounts receivable,
deferred tax asset, and increases in payroll and withheld taxes and income taxes
payable, which was partially offset by an increase in income tax receivable,
prepaid expenses and other current assets and by decreases in accounts payable
and accrued expenses, and accrued payroll.
22
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations - (Continued)
Liquidity and Capital Resources - (Continued)
Investing activities used $3.6 million for the six months ended June 30, 2002 as
compared to $5.4 million for the comparable prior period. The reduction in the
use of cash for investing activities for the six months ended June 30, 2002 as
compared to the comparable prior period was primarily attributable to a
reduction in property and equipment expenditures and acquisition and deferred
consideration payments.
Financing activities (principally debt reduction activities) used $6.5 million
for the six months ended June 30, 2002 as compared to financing activities using
$12.3 million for the comparable prior period.
The Company and its subsidiaries entered into an amended and restated
loan agreement on May 31, 2002 with Citizens Bank (successor to Mellon Bank
N.A.), administrative agent for a syndicate of banks, which provides for a $40.0
million Revolving Credit Facility (the "Revolving Credit Facility") and a $7.5
million Term Loan Facility ("Term Loan Facility"). The $7.5 million outstanding
balance under the Term Loan Facility was paid on July 2, 2002 thereby canceling
the Term Loan Facility. Availability under the Revolving Credit Facility is
based on 80% of the aggregate amount of accounts receivable as to which not more
than ninety days have elapsed since the date of the original invoice. Borrowings
under the Facilities bear interest at one of two alternative rates, as selected
by the Company. These alternatives are: LIBOR (London Interbank Offered Rate),
plus applicable margin, or the agent bank's prime rate.
All borrowings under the Facilities are collateralized by all of the assets of
the Company and its subsidiaries and a pledge of the stock of its subsidiaries.
The Facilities also contain various financial and non-financial covenants, such
as restrictions on the Company's ability to pay dividends. The Facilities expire
August 2004. The weighted average interest rates for the six months ended June
30, 2002 and 2001 were 3.89% and 5.69%, respectively. The amounts outstanding
under the Revolving Credit Facility at June 30, 2002 and December 31, 2001 were
$24.9 million and $31.5 million, respectively. (Note 2)
The Company anticipates that its primary uses of capital in future periods will
be for working capital purposes. Funding for any future acquisitions will be
derived from one or more of 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 from time
to time engages in discussions with potential acquisition candidates. As the
size of the Company and its financial resources increase, however, acquisition
opportunities requiring significant commitments of capital may arise. In order
to pursue such opportunities, the Company may be required to incur debt or issue
potentially dilutive securities in the future. No assurance can be given as to
the Company's future acquisition and expansion opportunities or how such
opportunities will be financed.
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'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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to the Company's exposure to market risk
since its Annual Report on Form 10-K for the year ended December 31, 2001.
23
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on June 20, 2002.
The following actions were taken:
1.) The following directors were elected to serve as Class C
directors on the Board of Directors, and shall serve terms
expiring at the Company's Annual Meeting in 2005, and until
their respective successors shall be elected and qualified.
Tabulated voting results were as follows:
Leon Kopyt (Class C) (For 9,649,887; Withheld 534,794)
Stanton Remer (Class C) (For 9,649,887; Withheld 534,794)
Each of the Class A directors of the Company, Norman Berson
and Brian Delle Donne, will continue to serve on the Board of
Directors for a term expiring at the Company's Annual Meeting
in 2003, and until his successor has been elected and
qualified.
The Class B directors of the Company, Robert B. Kerr and David
Gilfor, will continue to serve on the Board of Directors for a
term expiring at the Company's Annual Meeting in 2004, and
until his successor has been elected and qualified.
2.) Approval of Grant Thornton LLP as the independent auditing
firm for the Company for the fiscal year ending December
31, 2002.
Votes For - 9,720,122; Votes Against - 448,144;
Abstentions - 16,415
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10. Amended and Restated Loan and Security Agreement
dated May 31, 2002 between RCM Technologies, Inc. and All of Its
Subsidiaries with Citizens Bank of Pennsylvania,
as Administrative Agent and Arranger.
10a. Severance Agreement dated June 10, 2002 between RCM Technologies, Inc.
and Leon Kopyt.
10b. Exhibit A To Severance Agreement General Release.
99.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant
To Section 906 Of The Sarbanes-Oxley Act Of 2002.
99.2 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant
To Section 906 Of The Sarbanes-Oxley Act Of 2002.
(b) Reports on Form 8-K
None
24
RCM TECHNOLOGIES, INC.
SIGNATURES
Pursuant to the requirements 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.
Date: August 05, 2002 By:/s/ Stanton Remer
--- ------- -----
Stanton Remer
Chief Financial Officer,
Treasurer, Secretary and Director
(Principal Financial Officer and
Duly Authorized Officer of the Registrant)
25