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Note 6 - Acquisitions
 12 Months Ended
Jan. 03, 2015
Business Combinations [Abstract]  
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 January 3, 2015, the Company had two active acquisition agreements whereby additional contingent consideration may be earned by the acquired entities: 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 January 3, 2015 as follows:


Fiscal Year

 

BGA

   

PCI

   

Total

 

2015

  $ 217     $ 262     $ 479  

2016

    271       197       468  

2017

    -       307       307  

Estimated future contingent consideration payments

  $ 488     $ 766     $ 1,254  

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 January 3, 2015. 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.


During the fiscal years ended January 3, 2015 and December 28, 2013, the Company reduced its liability for contingent consideration by $129 and $92, respectively. The Company paid $0.3 million in contingent consideration during the fiscal year ended January 3, 2015 and no contingent consideration during the fiscal year ended December 28, 2013.


   

Short

Term

   

Long

Term

   

Total

 

Contingent consideration balance as of December 28, 2013

  $ 523     $ 407     $ 930  

Recorded for PCI

    261       505       766  

Paid in current year

    (313

)

    -       (313

)

Liability reduced in current year

    (117

)

    (12

)

    (129

)

Moved from long term to short term

    125       (125

)

    -  
                         

Contingent consideration balance as of January 3, 2015

  $ 479     $ 775     $ 1,254  

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

  $ 6  

Contingent consideration, net present value

    766  

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.


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