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Note 6 - Acquisitions

6 Months Ended

Jul. 03, 2021

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. The Company gives no assurance that it will make acquisitions in the future or that if it does make acquisitions, such acquisitions will be successful.

Future Contingent Payments

As of July 3, 2021, the Company had two active acquisition agreements whereby additional contingent consideration may be earned by the former shareholders: 1) effective October 1, 2017, the Company acquired all of the stock of PSR Engineering Solutions d.o.o. Beograd (Voždovac) (“PSR”) and 2) effective September 30, 2018, the Company acquired certain assets of Thermal Kinetics Engineering, PLLC and Thermal Kinetics Systems, LLC (together, “TKE”). The Company estimates future contingent payments at July 3, 2021 as follows:

Fiscal Year Ending	Total
January 1, 2022 (after July 3, 2021)	$	28
December 31, 2022		1,750
December 30, 2023		638
Estimated future contingent consideration payments	$	2,416

Estimates of future contingent payments are subject to significant judgment and actual payments may materially differ from estimates. Potential future contingent payments to be made to all active acquisitions after July 3, 2021 are capped at a cumulative maximum of $2.4 million. The Company estimates future contingent consideration payments based on forecasted performance and recorded the fair value of those expected payments as of July 3, 2021. During the twenty-six week period ended July 3, 2021, the Company measured contingent consideration at fair value on a non-recurring basis. Contingent consideration related to acquisitions is recorded at fair value (level 3) due to the lack of observable market inputs. Changes in fair value are recorded in other (expense) income, net.

For acquisitions that involve contingent consideration, the Company records a liability equal to the fair value of the estimated contingent consideration obligation as of the acquisition date. The Company determines the acquisition date fair value of the contingent consideration based on the likelihood of paying the additional consideration. The fair value is estimated using projected future operating results and the corresponding future earn-out payments that can be earned upon the achievement of specified operating objectives and financial results by acquired companies using Level 3 inputs and the amounts are then discounted to present value. These liabilities are measured quarterly at fair value, and any change in the fair value of the contingent consideration liability is recognized in the consolidated statements of operations. During the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding adjustment to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in the consolidated statements of operations.

The Company paid $0.5 million and $0.3 million of contingent consideration during the twenty-six week periods ended July 3, 2021 and June 27, 2020, respectively.