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Note 6 - Acquisitions
 9 Months Ended
Sep. 27, 2014
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]

6.

Acquisitions


The Company has acquired numerous companies throughout its history and those acquisitions have generally included significant future contingent consideration relative to the total estimated purchase price.


Future Contingent Payments


As of September 27, 2014, the Company had two active acquisition agreements whereby additional contingent consideration may be earned: 1) effective July 1, 2012 the Company acquired certain assets of BGA, LLC (“BGA”); and 2) effective August 1, 2014 the Company acquired all of the stock of Point Comm, Inc. (“PCI”), an Ontario amalgamated corporation, as more fully described below. The Company cannot estimate future contingent payments with any certainty. However, the Company estimates future contingent payments at September 27, 2014 as follows:


Period Ending

 

BGA

   

PCI

   

Total

 

January 3, 2015

  $ 88     $ -     $ 88  

January 2, 2016

    222       261       483  

December 31, 2016

    307       197       504  

December 30, 2017

    -       307       307  

Estimated future contingent consideration payments

  $ 617     $ 765     $ 1,382  

Actual future contingent payments may materially differ from the estimates above. Future contingent payments to be made to BGA and PCI are capped at cumulative maximums of $2.7 million and $2.0 million, respectively. The Company estimates future contingent consideration in payments based on forecasted performance and recorded the net present value of those expected payments as of September 27, 2014. The measurement is based on significant inputs that are not observable in the market, which “Fair Value Measurements and Disclosures” (ASU Topic 820-10-35) refers to as Level 3 inputs.


The Company paid $0.3 million in contingent consideration during the thirty-nine week period ended September 27, 2014. The Company did not pay any contingent consideration in the comparable prior year period. There were no other changes to the fair value of the contingent consideration during the thirty-nine week period ended September 27, 2014.


PCI


Effective August 1, 2014, the Company purchased the stock of PCI. PCI is a Toronto, Canada based engineering company specializing in the design, installation, supervision and commissioning of high voltage electrical equipment in substations and power plants. PCI provides comprehensive design and engineering of substations at any voltage level, system studies, 3D implementation, site commissioning, project management, consulting and site management. RCM expects the purchase of PCI to complement and expand RCM’s engineering services offerings and provide RCM’s customers with a stronger depth of experienced engineering resources. The Company believes that the PCI assembled workforce consists of highly trained and experienced engineers that will greatly assist RCM in executing future growth in revenues. The PCI acquisition will operate as part of the Company’s Engineering segment.  The PCI purchase consideration consisted of the following:


Assumption of current liabilities, net of current assets

  $ 7  

Contingent consideration, net present value

    765  

Total consideration

  $ 772  

The shareholders of PCI are eligible to receive post-closing contingent consideration upon PCI exceeding certain base levels of operating income, potentially earned over three years and not to exceed a total of $2.0 million cumulatively.  The amount recorded for contingent consideration represents the acquisition date fair value of expected consideration to be paid based on PCI’s forecasted operating income during the three year period. In order to prepare the unaudited Financial Statements included in its unaudited Form 10-Q for the thirteen weeks ended September 27, 2014, the Company estimated the expected future contingent consideration to be paid to the PCI shareholders. It is anticipated that such estimates will undergo further review and analysis as the Company prepares the audited financial statements to be included in its Form 10-K for the fiscal year ending January 3, 2015. While the Company anticipates that the estimated contingent consideration recorded as of September 27, 2014 may differ from the final estimated contingent consideration, the Company does not believe the difference, if any, will be material.


Estimated 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 approximately the same.


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

  $ 26  

Restricted covenants

    23  

Customer relationships

    45  

Goodwill

    678  

Total consideration

  $ 772