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Note 6 - Acquisitions and Divestitures
 12 Months Ended
Jan. 03, 2026
Notes to Financial Statements  
Business Combination [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.

 

As of January 3, 2026, there are no active acquisitions whereby contingent consideration could be paid.

 

The changes in the liability for contingent consideration from acquisitions for the fiscal years ended January 3, 2026 and December 28, 2024 are as follows:

 

Balance as of December 30, 2023

 $1,971 
     

Remeasurement of contingent consideration

  (1,759)
     

Balance as of December 28, 2024

 $212 
     

Contingent payments - cash

  (212)
     

Balance as of January 3, 2026

 $- 

 

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.

 

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended January 3, 2026 and December 28, 2024

 (In thousands, except share and per share amounts)

 

6.

ACQUISITIONS AND DIVESTITURES (CONTINUED)

 

Estimates of future contingent payments are subject to significant judgment and actual payments may materially differ from estimates. Contingent consideration related to acquisitions is recorded at fair value (level 3) with changes in fair value recorded in operating expense.