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Note 6 - Acquisitions
 12 Months Ended
Dec. 29, 2012
Business Combination Disclosure [Text Block]
6.ACQUISITIONS

General

The Company has acquired numerous companies throughout its history and those acquisitions have generally included significant future contingent consideration.  The Company gives no assurance that it will make acquisitions in the future and if they do make acquisitions gives no assurance that such acquisitions will be successful.  

Future Contingent Payments

As of December 29, 2012, the Company had two active acquisition agreements whereby additional contingent consideration may be earned: 1) the Company acquired certain assets of Project Solutions Group, Inc. (“PSG”) in 2009; and 2) effective July 1, 2012 the Company acquired certain assets of BGA, LLC (“BGA”) as more fully described below. The Company cannot estimate future contingent payments with any certainty.  However, the Company estimates future contingent payments as follows:

Period Ending
 
PSG
   
BGA
   
Total
 
December 28, 2013
  $ 92     $ 228     $ 320  
January 3, 2015
    -       253       253  
January 2, 2016
    -       269       269  
December 31, 2016
    -       307       307  
Estimated future contingent consideration payments
  $ 92     $ 1,057     $ 1,149  

Actual future contingent payments may materially exceed the estimates above.  In the case of future payments to PSG, the Company believes that it is highly unlikely that any future payments will materially exceed the estimates above.  Future contingent payments to be made to BGA shall in no event exceed $3.0 million cumulatively.  The Company estimates future contingent consideration in payments based on forecasted performance and records the net preset value of those expected payments as of December 29, 2012.

During the fiscal year ended December 29, 2012, the Company reduced its liability for contingent consideration by $135, which relates to the PSG acquisition and is reflected in other income.  The Company paid no contingent consideration during the fiscal year ended December 29, 2012 and paid $128 during the comparable prior year period.

BGA, LLC

Effective July 1, 2012, the Company purchased the operating assets of BGA. BGA provides comprehensive multidiscipline engineering solutions across numerous industry sectors including Power Generation (both Nuclear and Fossil), Energy Delivery, Energy Management, Architecture, Commercial Building and Manufacturing.  The Company believes that the BGA assembled workforce consists of highly trained and experienced engineers that will greatly assist RCM in executing future growth in revenues.  The BGA acquisition will operate as part of the Company’s Engineering segment.  The BGA purchase consideration consisted of the following:

Cash
  $ 1,292  
Lease in excess of market, net present value
    469  
Contingent consideration, net present value
    930  
         
Total consideration 
  $ 2,691  

The facility lease payments in excess of market value are expected to be incurred over a four year period following the effective date of the BGA acquisition.  The acquired above market lease is recorded at its fair value based on the present value, using a discount rate that reflects the risks associated with the acquired lease, equal to the difference between the contractual amounts to be paid under the lease agreement and an estimate of the fair market lease rate at the acquisition date.  The shareholders of BGA are eligible to receive post-closing contingent consideration upon BGA exceeding certain base levels of operating income, potentially earned over four years and not to exceed a total of $3.0 million cumulatively.  The amount recorded for the contingent consideration represents the acquisition date fair value of expected consideration to be paid based on BGA’s forecasted operating income during the four year period. Expected consideration was valued based on different possible scenarios for projected operating income.  Each case was assigned a probability which was used to calculate an estimate of the forecasted future payments.  Then a discount rate was applied to these forecasted future payments to determine the acquisition date fair value to be recorded.  At the time of the acquisition, the book and tax basis of assets and liabilities acquired are the same, except for the above market value lease which gave rise to a deferred tax asset as shown below.

The acquisition has been accounted for under the purchase method of accounting. The total preliminary estimated purchase price has been allocated as follows:

Fixed assets
  $ 28  
Restricted covenants
    70  
Customer relationships
    180  
Deferred tax asset
    187  
Goodwill
    2,226  
Total consideration 
  $ 2,691  

The primary item that generated goodwill was the acquisition of a highly skilled and trained assembled workforce of engineers that the Company anticipates will allow it to win contract awards from its current and future customer base that the Company would not otherwise win.  

Pro Forma Results of Operations

The following (unaudited) results of operations have been prepared assuming the BGA acquisition had occurred

as of the beginning of the periods presented. Those results are not necessarily indicative of results of future

operations or of results that would have occurred had the acquisition occurred as of the beginning of the periods

presented.

   
Fiscal Years Ended
 
   
December 29,
2012
   
December 31,
2011
 
Revenues
  $ 148,420     $ 148,783  
Operating income
  $ 5,363     $ 7,042  
Diluted earnings per share
  $ 0.26     $ 0.33