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Note 6 - Acquisitions and Divestitures

12 Months Ended

Dec. 28, 2024

Notes to Financial Statements

Business Combination Disclosure [Text Block]

6. ACQUISITIONS AND DIVESTITURES

The purchase method of accounting in accordance with FASB ASC 805, “Business Combination,” was applied for all acquisitions. This requires the cost of an acquisition to be allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values at the date of acquisition with the excess cost accounted for as goodwill. Goodwill arising from the acquisitions is attributable to expected sales synergies from combining the operations of the acquired business with those of the Company.

Potential future contingent payments to be made to all active acquisitions after December 28, 2024 are capped at a cumulative maximum of $0.2 million.

The changes in the liability for contingent consideration from acquisitions for the fiscal years ended December 28, 2024 and December 30, 2023 are as follows:

Balance as of December 31, 2022		$	2,442

Contingent payments - cash			(339	)
Contingent payments - stock			(132	)

Balance as of December 30, 2023		$	1,971

Remeasurement of contingent consideration			(1,759	)

Balance as of December 28, 2024		$	212

Future Contingent Payments

As of December 28, 2024, the Company had one acquisition agreement whereby additional contingent consideration may be earned by the sellers: effective September 30, 2018, the Company acquired certain assets of Thermal Kinetics Engineering, PLLC and Thermal Kinetics Systems, LLC. The Company estimates future contingent payments at December 28, 2024 as follows:

		Total
Payable in fiscal 2025		$	212

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.

Estimates of future contingent payments are subject to significant judgment and actual payments may materially differ from estimates. The Company estimates future contingent consideration payments based on forecasted performance and recorded the fair value of those expected payments as of December 28, 2024. Contingent consideration related to acquisitions is recorded at fair value (level 3) with changes in fair value recorded in operating expense.

Divestiture of Assets

On July 30, 2021, the Company sold the principal assets and certain liabilities of its Pickering and Kincardine offices in Ontario, Canada. These two offices were often called Canada Power Systems and principally provided engineering services to two major nuclear power providers in Canada. The two Canada Power Systems offices were part of a reporting unit within the Company’s Engineering segment. The purchase agreement provided for a typical indemnity escrow held by an independent escrow agent. The net proceeds released from the escrow account generated a gain on sale of assets of $0.4 million for the year ended December 30, 2023.