RCM TECHNOLOGIES, INC. Private Securities Litigation Reform Act Safe Harbor Statement
Certain statements included herein and in other reports and public filings made
by
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COVID-19 Considerations
The Company's priorities during the COVID-19 pandemic are protecting the health and safety of our employees and, especially in the healthcare segment, deploying our resources, including the talents of our employees, to help the communities we serve meet and overcome the current challenges. In the future, the pandemic may continue to cause reduced demand for our services if, for example, the pandemic results in a prolonged recessionary economic environment affecting industries in which we serve; however, since certain services that we offer are essential to the daily lives of our customers, we believe that over the long term, there will continue to be demand for our services.
Our ability to continue to operate without any significant negative operational
impact from the COVID-19 pandemic will in part depend on our ability to protect
our employees and our supply chain. The Company has endeavored to follow the
recommended actions of government and health authorities to protect our
employees, with particular measures in place for those working in our customer
facilities. For the thirteen and twenty-six week periods ended
For additional information on risk factors related to the pandemic or other risks that could impact our results, please refer to "Risk Factors" in Part II, Item 1A of this Form 10-Q. For additional information on how COVID-19 has impacted operations and our financial position, please refer to the Segment Discussion and Liquidity and Capital Resources sections in Management's Discussion and Analysis of Financial Condition and Results of Operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Overview
RCM participates in a market that is cyclical in nature and sensitive to economic changes. As a result, the impact of economic changes on revenue and operations can be substantial, resulting in significant volatility in the Company's financial performance.
In
The Company believes it has developed and assembled an attractive portfolio of capabilities, established a proven record of performance and credibility and built an efficient pricing structure. The Company is committed to optimizing its business model as a single-source premier provider of business and technology solutions with a strong vertical focus offering an integrated suite of services through a global delivery platform.
The Company believes that most companies recognize the importance of advanced technologies and business processes to compete in today's business climate. However, the process of designing, developing and implementing business and technology solutions is becoming increasingly complex. The Company believes that many businesses today are focused on return on investment analysis in prioritizing their initiatives. This has had an adverse impact on spending by current and prospective clients for many emerging new solutions.
Nonetheless, the Company continues to believe that businesses must implement more advanced information technology and engineering solutions to upgrade their systems, applications and processes so that they can maximize their productivity and optimize their performance in order to maintain a competitive advantage. Although working under budgetary, personnel and expertise constraints, companies are driven to support increasingly complex systems, applications and processes of significant strategic value. This has given rise to a demand for outsourcing. The Company believes that its current and prospective clients are continuing to evaluate the potential for outsourcing business critical systems, applications and processes.
The Company provides project management and consulting services, which are billed based on either agreed-upon fixed fees or hourly rates, or a combination of both. The billing rates and profit margins for project management and solutions services are generally higher than those for professional consulting services. The Company generally endeavors to expand its sales of higher margin solutions and project management services. The Company also realizes revenue from client engagements that range from the placement of contract and temporary technical consultants to project assignments that entail the delivery of end-to-end solutions. These services are primarily provided to the client at hourly rates that are established for each of the Company's consultants based upon their skill level, experience and the type of work performed.
The majority of the Company's services are provided under purchase orders. Contracts are utilized on certain of the more complex assignments where the engagements are for longer terms or where precise documentation on the nature and scope of the assignment is necessary. Although contracts normally relate to longer-term and more complex engagements, they do not obligate the customer to purchase a minimum level of services and are generally terminable by the customer on 60 to 90 days' notice. The Company, from time to time, enters into contracts requiring the completion of specific deliverables. Typically these contracts are for less than one year. The Company recognizes revenue on these deliverables at the time the client accepts and approves the deliverables.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Overview (Continued)
Costs of services consist primarily of salaries and compensation-related expenses for billable consultants and employees, including payroll taxes, employee benefits and insurance. Selling, general and administrative expenses consist primarily of salaries and benefits of personnel responsible for business development, recruiting, operating activities, and training, and include corporate overhead expenses. Corporate overhead expenses relate to salaries and benefits of personnel responsible for corporate activities, including the Company's corporate marketing, administrative and financial reporting responsibilities and acquisition program. The Company records these expenses when incurred. Corporate overhead expenses are allocated to the segments based on revenue for the purpose of segment financial reporting.
Critical Accounting Policies and Use of Estimates
This Management's Discussion and Analysis of Financial Condition and Results of
Operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in
A summary of our significant accounting policies is included in our Consolidated
Financial Statements, Note 1, Summary of Significant Accounting Policies, in our
Annual Report on Form 10-K for the year ended
Recently Issued Accounting Pronouncements
A discussion of the recently issued accounting pronouncements is set forth in Note 13, New Accounting Standards, in the unaudited condensed consolidated financial statements included in Part I, Item I of this Quarterly Report on Form 10-Q and is incorporated herein by reference.
Forward-looking Information
The Company's growth prospects are influenced by broad economic trends. The pace
of customer capital spending programs, new product launches and similar
activities have a direct impact on the need for engineering and information
technology services. When the
Additionally, changes in government regulations could result in prohibition or restriction of certain types of employment services or the imposition of new or additional employee benefits, licensing or tax requirements with respect to the provision of employment services that may reduce the Company's future earnings. There can be no assurance that the Company will be able to increase the fees charged to its clients in a timely manner and in a sufficient amount to cover increased costs as a result of any of the foregoing.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Forward-looking Information (Continued)
The consulting and employment services market is highly competitive with limited barriers to entry. The Company competes in global, national, regional and local markets with numerous competitors in all of the Company's service lines. Price competition in the industries the Company serves is significant, and pricing pressures from competitors and customers are increasing. The Company expects that the level of competition will remain high in the future, which could limit the Company's ability to maintain or increase its market share or profitability.
Thirteen Week Period Ended
A summary of operating results for the thirteen week periods ended
July 3, 2021 June 27, 2020
% of % of
Amount Revenue Amount Revenue
Revenue $ 48,933 100.0 $ 32,652 100.0
Cost of services 36,667 74.9 24,149 74.0
Gross profit 12,266 25.1 8,503 26.0
Selling, general and administrative 9,995 20.4 8,994 27.6
Depreciation and amortization of
property and equipment 259 0.6 246 0.8
Amortization of acquired intangible
assets 9 0.0 80 0.2
Write-off of receivables and
professional fees
incurred related to arbitration - 0.0 350 1.0
Tax credit professional fees 60 0.1 - 0.0
10,323 21.1 9,670 29.6
Operating income (loss) 1,943 4.0 (1,167 ) (3.6 )
Other expense, net 201 0.4 233 0.7
Income (loss) before income taxes 1,742 3.6 (1,400 ) (4.3 )
Income tax expense (benefit) 486 1.0 (408 ) (1.3 )
Net income (loss) $ 1,256 2.6 $ (992 ) (3.0 )
The Company follows a 52/53 week fiscal reporting calendar ending on the
Saturday closest to
Revenue. Revenue increased 49.9%, or
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Thirteen Week Period Ended
Cost of Services and Gross Profit. Cost of services increased 51.8%, or
Selling, General and Administrative. Selling, general and administrative
("SGA") expenses were
Write-off of receivables related to arbitration. The Company recorded a charge
of
Tax Credit Professional Fees. The Company incurred
Other Expense. Other expense consists of interest expense, unused line fees and amortized loan costs on the Company's line of credit, net of interest income, imputed interest on contingent consideration and gains and losses on foreign currency transactions. Other expense, net experienced a negligible decrease as compared to the comparable prior year period. The primary component of the decrease related to interest expense, which decreased primarily due to a decreased average borrowing and a decreased borrowing rate under the Company's line of credit. The primary reason for the decreased average borrowing rate was change in macroeconomic borrowing rates.
Income Tax Expense (Benefit). The Company recognized
Differences between the effective tax rate and the applicable
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Thirteen Week Period Ended
Segment Discussion Engineering
Engineering revenues of
On
COVID-19 Impact to Engineering Segment
It is difficult to assess both the current and future impact from COVID-19 to the Engineering segment, due to the high degree of uncertainty around COVID-19 and the duration and extent of the pandemic. The Engineering segment has seen a decline in its field services work as its personnel has limited access to client facilities. It is difficult to determine the impact on revenue from the loss in field services work. The Company believes that an undetermined amount of field services work will eventually return as a portion of that work is mission-critical to our clients. However, given the uncertainties around COVID-19, the Company can give no assurances that it will see an increase in field services revenue. Additionally, the Company believes that COVID-19 has had a significant adverse impact on the budgets of many of its Aerospace and Utilities clients. The Company's Aerospace clients have seen an impact to their commercial lines of business. A number of the Company's Utility clients have been impacted by their customers' inability to pay their monthly electric bills.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Thirteen Week Period Ended
Segment Discussion (Continued)
COVID-19 Impact to Engineering Segment
The Company has transitioned most of its Engineering workforce to work from home. While this has constituted a significant effort, particularly from a technology standpoint, the Company believes that this effort has been completed relatively effectively. The Company also believes that its Engineering clients have been generally supportive of these efforts and believes further that it has not lost any significant, previously awarded work. The Engineering segment continues to see new work proposals, but not at the same level as seen prior to COVID-19. The Engineering segment's general response to the effects of COVID-19 is to continue to focus on maximizing gross margin by focusing on utilization of billable consultants and maximizing the efficiency of its SGA expense. The Company plans to refine its strategy for responding to COVID-19 as necessary as the situation develops.
Specialty Health Care
Specialty Health Care revenue of
COVID-19 Impact to Specialty Health Care Segment
It is difficult to assess both the current and future impact from COVID-19 to the Specialty Health Care segment, due to the high degree of uncertainty around COVID-19 and the duration and extent of the pandemic, especially as it may impact schools where many of our personnel work. While the Company has worked to transition a portion of its Specialty Health Care workforce to work from home, this has been a difficult task. The Specialty Health Care segment has a small number of billable professionals performing services from home, in particular telehealth services. The Specialty Health Care segment's telehealth services are primarily a new service offering. The majority of the Specialty Health Care segment's services are historically delivered at schools and health care facilities. The Company believes that demand for much of its non-school services is very high as a result of COVID-19. However, health care professionals, such as nurses and doctors, are scarce and difficult to recruit. Furthermore, the Company believes that demand for non-COVID-19 related healthcare services has been reduced as a result of the pandemic.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Thirteen Week Period Ended
Segment Discussion (Continued)
COVID-19 Impact to Specialty Health Care Segment
The Specialty Health Care Segment has historically derived much of its revenue
from school systems. Many school systems nationwide, including most of the
Company's school clients, closed down for in-person instruction in
It is difficult to estimate the impact of the school closures and reopenings on the Company's fiscal 2021 and beyond. At some point in the future, its school clients will return to a normalized level of operations. However, the Company can give no assurance of when or even if this normalization will occur.
The Specialty Health Care segment continues to see new work proposals related to non-school related revenue streams. The Specialty Health Care segment's general response to the effects of COVID-19 is to continue to focus on maximizing gross margin by focusing on utilization of billable personnel and maximizing the efficiency of its SGA expense. The Company plans to refine its strategy for responding to COVID-19 as necessary as the situation develops.
Information Technology
Information Technology revenue of
It is difficult to assess both the current and future impact from COVID-19 to the Information Technology segment, due to the high degree of uncertainty around COVID-19 and the duration and extent of the pandemic. The Information Technology segment has seen a decline in its field services work as its personnel has limited access to client facilities. It is difficult to determine the impact on revenue from the loss in field services work.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Thirteen Week Period Ended
Segment Discussion (Continued)
COVID-19 Impact to Information Technology Segment
The Company has transitioned most of its Information Technology workforce to work from home. While this has constituted a significant effort, particularly from a technology standpoint, the Company believes that this effort has been completed relatively effectively. The Company also believes that its Information Technology clients have been generally supportive of these efforts and believes further that it has not lost any significant, previously awarded work. The Information Technology segment's general response to the effects of COVID-19 is to continue to focus on maximizing gross margin by focusing on utilization of billable consultants and maximizing the efficiency of its SGA expense. The Company plans to refine its strategy for responding to COVID-19 as necessary as the situation develops.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Twenty-Six Week Period Ended
A summary of operating results for the twenty-six week periods ended
July 3, 2021 June 27, 2020
% of % of
Amount Revenue Amount Revenue
Revenue $ 93,482 100.0 $ 77,685 100.0
Cost of services 70,366 75.3 58,339 75.1
Gross profit 23,116 24.7 19,346 24.9
Selling, general and administrative 19,064 20.4 19,231 24.8
Depreciation and amortization of
property and equipment 525 0.6 501 0.6
Amortization of acquired intangible
assets 89 0.1 160 0.2
Write-off of receivables and
professional fees
incurred related to arbitration - 0.0 8,397 10.8
Tax credit professional fees 120 0.1 - 0.0
19,798 21.2 28,289 36.4
Operating income (loss) 3,318 3.5 (8,943 ) (11.5 )
Other expense, net 213 0.2 642 0.8
Income (loss) before income taxes 3,105 3.3 (9,585 ) (12.3 )
Income tax expense (benefit) 842 0.9 (2,648 ) (3.4 )
Net income (loss) $ 2,263 2.4 $ (6,937 ) (8.9 )
The Company follows a 52/53 week fiscal reporting calendar ending on the
Saturday closest to
Revenue. Revenue increased 20.3%, or
Cost of Services and Gross Profit. Cost of services increased 20.6%, or
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Twenty-Six Week Period Ended
Selling, General and Administrative. Selling, general and administrative
("SGA") expenses were
Write-off of receivables related to arbitration. The Company recorded a charge
of
Tax Credit Professional Fees. The Company incurred
Other Expense. Other expense consists of interest expense, unused line fees and
amortized loan costs on the Company's line of credit, net of interest income,
imputed interest on contingent consideration and gains and losses on foreign
currency transactions. Other expense, net decreased by
Income Tax Expense (Benefit). The Company recognized
Differences between the effective tax rate and the applicable
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Twenty-Six Week Period Ended
Segment Discussion Engineering
Engineering revenues of
On
COVID-19 Impact to Engineering Segment
It is difficult to assess both the current and future impact from COVID-19 to the Engineering segment, due to the high degree of uncertainty around COVID-19 and the duration and extent of the pandemic. The Engineering segment has seen a decline in its field services work as its personnel has limited access to client facilities. It is difficult to determine the impact on revenue from the loss in field services work. The Company believes that an undetermined amount of field services work will eventually return as a portion of that work is mission-critical to our clients. However, given the uncertainties around COVID-19, the Company can give no assurances that it will see an increase in field services revenue. Additionally, the Company believes that COVID-19 has had a significant adverse impact on the budgets of many of its Aerospace and Utilities clients. The Company's Aerospace clients have seen an impact to their commercial lines of business. A number of the Company's Utility clients have been impacted by their customers' inability to pay their monthly electric bills.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Twenty-Six Week Period Ended
Segment Discussion (Continued)
COVID-19 Impact to Engineering Segment (Continued)
The Company has transitioned most of its Engineering workforce to work from home. While this has constituted a significant effort, particularly from a technology standpoint, the Company believes that this effort has been completed relatively effectively. The Company also believes that its Engineering clients have been generally supportive of these efforts and believes further that it has not lost any significant, previously awarded work. The Engineering segment continues to see new work proposals, but not at the same level as seen prior to COVID-19. The Engineering segment's general response to the effects of COVID-19 is to continue to focus on maximizing gross margin by focusing on utilization of billable consultants and maximizing the efficiency of its SGA expense. The Company plans to refine its strategy for responding to COVID-19 as necessary as the situation develops.
Specialty Health Care
Specialty Health Care revenue of
COVID-19 Impact to Specialty Health Care Segment
It is difficult to assess both the current and future impact from COVID-19 to the Specialty Health Care segment, due to the high degree of uncertainty around COVID-19 and the duration and extent of the pandemic, especially as it may impact schools where many of our personnel work. While the Company has worked to transition a portion of its Specialty Health Care workforce to work from home, this has been a difficult task. The Specialty Health Care segment has a small number of billable professionals performing services from home, in particular telehealth services. The Specialty Health Care segment's telehealth services are primarily a new service offering. The majority of the Specialty Health Care segment's services are historically delivered at schools and health care facilities. The Company believes that demand for much of its non-school services is very high as a result of COVID-19. However, health care professionals, such as nurses and doctors, are scarce and difficult to recruit. Furthermore, the Company believes that the demand for non-COVID-19 related healthcare services has been reduced as a result of the pandemic.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Twenty-Six Week Period Ended
Segment Discussion (Continued)
COVID-19 Impact to Specialty Health Care Segment (Continued)
The Specialty Health Care Segment has historically derived much of its revenue
from school systems. Many school systems nationwide, including most of the
Company's school clients, closed down for in-person instruction in
It is difficult to estimate the impact of the school closures and reopenings on the Company's fiscal 2021 and beyond. At some point in the future, its school clients will return to a normalized level of operations. However, the Company can give no assurance of when or even if this normalization will occur.
The Specialty Health Care segment continues to see new work proposals related to non-school related revenue streams. The Specialty Health Care segment's general response to the effects of COVID-19 is to continue to focus on maximizing gross margin by focusing on utilization of billable personnel and maximizing the efficiency of its SGA expense. The Company plans to refine its strategy for responding to COVID-19 as necessary as the situation develops.
Information Technology
Information Technology revenue of
It is difficult to assess both the current and future impact from COVID-19 to the Information Technology segment, due to the high degree of uncertainty around COVID-19 and the duration and extent of the pandemic. The Information Technology segment has seen a decline in its field services work as its personnel has limited access to client facilities. It is difficult to determine the impact on revenue from the loss in field services work.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Segment Discussion (Continued)
COVID-19 Impact to Information Technology Segment
The Company has transitioned most of its Information Technology workforce to work from home. While this has constituted a significant effort, particularly from a technology standpoint, the Company believes that this effort has been completed relatively effectively. The Company also believes that its Information Technology clients have been generally supportive of these efforts and believes further that it has not lost any significant, previously awarded work. The Information Technology segment's general response to the effects of COVID-19 is to continue to focus on maximizing gross margin by focusing on utilization of billable consultants and maximizing the efficiency of its SGA expense. The Company plans to refine its strategy for responding to COVID-19 as necessary as the situation develops.
Liquidity and Capital Resources
The following table summarizes the major captions from the Company's Condensed Consolidated Statements of Cash Flows (in thousands):
Twenty-Six Week Periods Ended
July 3, June 27,
2021 2020
Cash provided by (used in):
Operating activities $ 6,117 $ 17,783
Investing activities $ (136 ) $ (111 )
Financing activities $ (5,214 ) $ (17,764 )
Operating Activities
Operating activities provided
For the twenty-six week period ended
While highly variable, the Company's transit accounts payable typically exceeds
the Company's transit accounts receivable, but absolute amounts and differences
fluctuate significantly from quarter to quarter in the normal course of
business. The net of transit accounts payable and transit accounts receivable
was a net payable of
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Liquidity and Capital Resources (Continued)
Operating Activities (Continued)
Prepaid expenses and other current assets provided cash of
An increase in accounts payable and accrued expenses provided cash of
Changes in accrued payroll and related costs used
Investing Activities
Investing activities used
Financing Activities
Financing activities used
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Liquidity and Capital Resources (Continued)
Financing Activities (Continued)
Borrowings under the Revolving Credit Facility bear interest at one of two
alternative rates, as selected by the Company at each incremental borrowing.
These alternatives are: (i) LIBOR (London Interbank Offered Rate), plus
applicable margin, typically borrowed in fixed 30-day increments or (ii) the
agent bank's prime rate generally borrowed over shorter durations. The Company
also pays unused line fees based on the amount of the Revolving Credit Facility
that is not drawn. Unused line fees are recorded as interest expense. The
effective weighted average interest rate, including unused line fees, for the
twenty-six week period ended
All borrowings under the Revolving Credit Facility are collateralized by all of
the assets of the Company and its subsidiaries and a pledge of the stock of its
subsidiaries. The Revolving Credit Facility also contains various financial and
non-financial covenants, such as a covenant that restricts the Company's ability
to borrow in order to pay dividends. As of
Borrowings under the line of credit as of
Impact to Line of Credit from COVID-19
The Company is negatively impacted by COVID-19. While COVID-19 is expected to continue to negatively impact revenue, gross profit, and operating income for an undetermined period of time, the Company nevertheless does not expect a material negative impact from recent results. The Company plans to refine its strategy for responding to COVID-19 as the situation develops. The Company believes that its current line of credit is adequate to provide the necessary liquidity while COVID-19 impacts its operations.
Current Liquidity and Revolving Credit Facility
Liquidity is a measure of our ability to meet potential cash requirements,
maintain our assets, fund our operations, and meet the other general cash needs
of our business. Our liquidity is impacted by general economic, financial,
competitive, and other factors beyond our control. Our liquidity requirements
consist primarily of funds necessary to pay our expenses, principally
labor-costs, and other related expenditures. We generally satisfy our liquidity
needs through cash provided by operations and, when necessary, our revolving
line of credit from
The Company experiences volatility in its daily cash flow and, at times, relies
on the revolving line of credit to provide daily liquidity for the Company's
financial operations. As of
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Liquidity and Capital Resources (Continued)
Commitments and Contingencies
The Company anticipates that its primary uses of capital in future periods will be for working capital purposes. Funding for any long-term and short-term capital requirements as well as future acquisitions will be derived from one or more of the Revolving Credit Facility (or a replacement thereof), funds generated through operations or future financing transactions. The Company is subject to legal proceedings and claims that arise from time to time in the ordinary course of its business, which may or may not be covered by insurance. Were an unfavorable final outcome to occur, there exists the possibility of a material adverse impact on our financial position, liquidity, and the results of operations.
The Company's business strategy is to achieve growth both internally through operations and externally through strategic acquisitions. The Company from time to time engages in discussions with potential acquisition candidates. The Company has acquired numerous companies throughout its history and those acquisitions have generally included significant future contingent consideration. As the size of the Company and its financial resources increase however, acquisition opportunities requiring significant commitments of capital may arise. In order to pursue such opportunities, the Company may be required to incur debt or issue potentially dilutive securities in the future. No assurance can be given as to the Company's future acquisition and expansion opportunities or how such opportunities will be financed.
The Company is exposed to various asserted claims as of
The Company utilizes SAP software for its financial reporting and accounting
system which was implemented in 1999 and has not undergone significant upgrades
since its initial implementation. The Company believes that it will become
necessary to upgrade or replace its SAP financial reporting and accounting
system. The Company has not determined when this contemplated replacement may be
necessary. The Company estimates this upgrade or replacement of its financial
reporting and accounting system will cost between
The Company's current commitments consist primarily of lease obligations for office space. The Company believes that its capital resources are sufficient to meet its present obligations and those to be incurred in the normal course of business for at least the next 12 months.
The Company leases office facilities and various equipment under non-cancelable
leases expiring at various dates through
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Liquidity and Capital Resources (Continued)
Future Contingent Payments
Maturities of lease liabilities are as follows:
Operating Finance
Fiscal Year Leases Leases
2021 (after July 3, 2021) $ 1,036 $ 104
2022 1,542 108
2023 967 -
2024 233 -
2025 48 -
Total lease payments 3,826 212
Less: imputed interest (157 ) (2 )
Total $ 3,669 $ 210 As of
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
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
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