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What changed in RCM TECHNOLOGIES, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of RCM TECHNOLOGIES, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+241 added−244 removedSource: 10-K (2024-03-14) vs 10-K (2023-03-16)

Top changes in RCM TECHNOLOGIES, INC.'s 2024 10-K

241 paragraphs added · 244 removed · 217 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

61 edited+2 added−0 removed60 unchanged
Biggest changeThe Company’s relationships with these customers are typically formed at the customers’ local or regional level and from time to time, when appropriate, at the corporate level for national accounts. 10 ITEM 1. BUSINESS (CONTINUED) Key Customers The Company has established long-term relationships with many of its customers across each of its business segments.
Biggest changeThe Company serves Fortune 1000 companies and many middle market clients, competing on a national and global scale. The Company’s relationships with these customers are typically formed at the customers’ local or regional level and from time to time, when appropriate, at the corporate level for national accounts. 10 ITEM 1.
The goal of the full life cycle solution strategy is to fully address a client’s project implementation cycle at each stage of its development and deployment. This entails the Company working with its clients from the initial conceptualization of a project through its design and project execution, and extending into ongoing management and support of the delivered product.
The goal of the full life cycle solution strategy is to fully address a client’s project implementation cycle at each stage of its design, development and deployment. This entails the Company working with its clients from the initial conceptualization of a project through its design and project execution, and extending into ongoing management and support of the delivered product.
Our allied health care professionals and therapists work in schools, health systems, hospitals, nursing homes, and rehabilitation facilities. ● Correctional Healthcare Staffing : Staffing services for local, state and federal correctional facilities and provide screening, onboarding, and employee assessments as well as employee and inmate vaccination and treatment services. ● Health Information Management : Provide healthcare organizations with experienced medical coding professionals that manage staffing shortages, backlogs, vacation coverage and long-term coding support. ● Nursing Services : Provides nurse placement and staffing services in healthcare facilities, schools, hospitals and correctional facilities. ● Physicians and Advanced Practice : Our national locum tenens (temporary practitioner) practice specializes in placing physicians, physician assistants and nurse practitioners. ● School Services : Provides full-time and part-time nurse employment services for school districts across the country.
Our allied health care professionals and therapists work in schools, health systems, hospitals, nursing homes, and rehabilitation facilities. ● Correctional Healthcare Staffing : Staffing services for local, state and federal correctional facilities and provide screening, onboarding, and employee assessments as well as employee and inmate vaccination and treatment services. ● Health Information Management : Provide healthcare organizations with experienced medical coding professionals that manage staffing shortages, backlogs, vacation coverage and long-term coding support. ● Nursing Services : Provides nurse placement and staffing services in healthcare facilities, schools, hospitals and correctional facilities. ● Physicians and Advanced Practice : Our national locum tenens (temporary practitioner) practice specializes in placing physicians, physician assistants and nurse practitioners. ● School Staffing and Recruitment : Provides full-time and part-time nurse employment services for school districts across the country.
Achieve Internal Growth The Company continues to promote its internal growth strategies which it designed to better serve the Company’s customers, generate higher revenue and achieve greater operating efficiencies. Every division of the Company continuously focuses on services and client diversification. Business units are collaborating on penetrating and servicing accounts as sales teams are increasing their activity levels.
Achieve Internal Growth The Company continues to promote its internal growth strategies which it designed to better serve the Company’s customers, generate higher revenue and achieve greater operating efficiencies. Every division of the Company continuously focuses on services and client portfolio diversification. Business units are collaborating on penetrating and servicing accounts as sales teams are increasing their activity levels.
It therefore allows the Company to present and deliver enhanced value to those clients in the vertical markets in which RCM has assembled the greatest work experience. RCM’s consultants continue to acquire project experience that offers differentiated awareness of the business challenges that clients in that industry are facing. This alignment also facilitates and creates additional cross-selling opportunities.
It therefore allows the Company to present and deliver enhanced value to those clients in the vertical markets in which RCM has assembled the greatest work experience. RCM’s consultants continue to acquire project experience that offers differentiated awareness of the business challenges that clients in that industry are facing. This alignment also facilitates and creates additional innovative cross-selling opportunities.
Other Information Safeguards - Business, Disaster and Contingency Planning RCM has implemented a number of safeguards to protect the Company from various system-related risks including Redundant Telecommunications and server systems architecture, multi-tiered server and desktop backup infrastructure, and data center physical and environmental controls. In addition, RCM has developed disaster recovery / business continuity procedures for all offices.
Other Information Safeguards - Business, Disaster and Contingency Planning The Company has implemented a number of safeguards to protect the Company from various system-related risks including Redundant Telecommunications and server systems architecture, multi-tiered server and desktop backup infrastructure, and data center physical and environmental controls. In addition, the Company has developed disaster recovery / business continuity procedures for all offices.
RCM makes available on its website or by responding free of charge to requests addressed to the Company’s Corporate Secretary, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed by the Company with the SEC pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended.
The Company makes available on its website or by responding free of charge to requests addressed to the Company’s Corporate Secretary, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed by the Company with the SEC pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended.
The Company's employees and contractors have generally divided into four groups: 1) Nonbillable employees; 2) Billable salaried employees; 3) Billable hourly long-term employees; 4) Billable hourly short-term employees and contractors. Nonbillable employees are primarily full-time and salaried. These positions include but are not limited to executives, managers, general administration, finance, accounting, account managers, recruiters, credentialers, etcetera.
The Company's employees and contractors are generally divided into four groups: 1) Nonbillable employees; 2) Billable salaried employees; 3) Billable hourly long-term employees; 4) Billable hourly short-term employees and contractors. Nonbillable employees are primarily full-time and salaried. These positions include but are not limited to executives, managers, general administration, finance, accounting, account managers, recruiters, credentialers, etcetera.
Companies also need to keep pace with new technology developments, which often rapidly render existing equipment and internal skills obsolete. At the same time, varied factors have caused many organizations to focus on core competencies and trim workforces in the IT management area.
Companies also need to keep pace with new technology developments, which often rapidly render existing equipment and internal skills obsolete. At the same time, varied factors have caused many organizations to focus on core competencies and trim workforces in the IT and data management area.
Accordingly, these organizations often lack the quantity, quality and variety of IT skills necessary to design and support IT solutions. IT managers are charged with supporting increasingly complex systems and applications of significant strategic value, while working under budgetary, personnel and expertise constraints within their own organizations.
Accordingly, these organizations often lack the quantity, quality and variety of IT skills necessary to design and support IT and data solutions. IT managers are charged with supporting increasingly complex systems and applications of significant strategic value, while working under budgetary, personnel and expertise constraints within their own organizations.
The Company’s Engineering group remains focused on areas of growth, primarily within the electric power, aerospace, marine and transportation, commercial and industrial, oil and gas, as well as biofuel industries. Given the current composition of its customer base, the Engineering group’s performance is well balanced between its three segments.
The Company’s Engineering group remains focused on areas of growth, primarily within the utility/electric power, aerospace, marine and transportation, commercial and industrial, oil and gas, as well as biofuel industries. Given the current composition of its customer base, the Engineering group’s performance is well balanced between its three segments.
For example, comprehensive service level agreements for RCM’s data circuits and network devices guarantee minimal outages as well as network redundancy and scalability. The Company’s ability to protect its data assets against damage from fire, power loss, telecommunications failures, and facility violations is critical.
For example, comprehensive service level agreements for the Company’s data circuits and network devices guarantee minimal outages as well as network redundancy and scalability. The Company’s ability to protect its data assets against damage from fire, power loss, telecommunications failures, and facility violations is critical.
Reference herein to the Company’s website is an inactive text reference only. RCM has adopted a Code of Conduct applicable to all of its directors, officers and employees. In addition, the Company has adopted a Code of Ethics, within the meaning of applicable SEC rules, applicable to its Chief Executive Officer, Chief Financial Officer and Controller.
Reference herein to the Company’s website is an inactive text reference only. The Company has adopted a Code of Conduct applicable to all of its directors, officers and employees. In addition, the Company has adopted a Code of Ethics, within the meaning of applicable SEC rules, applicable to its Chief Executive Officer, Chief Financial Officer and Controller.
The Company believes this transition is accomplished by pursuing additional vertical market specific solutions in conjunction or combination with longer-term based solutions, through expansion of its client relationships and by pursuing strategic alliances and partnerships.
The Company believes this transition is accomplished by pursuing additional vertical market specific solutions in conjunction or combination with longer-term based solutions, through expansion of its global client relationships and by pursuing strategic alliances and partnerships.
This expansion will require extensive investment in the nation’s transmission infrastructure to interconnect these renewable resources to the energy grid. Projects of this scale will require engineering and design expertise, as well as the utilization of EPC services.
This expansion will require extensive investment in the nation’s transmission infrastructure to interconnect these renewable resources to the energy grid. Projects of this scale will require engineering and design expertise, as well as the utilization of integrated design and EPC services.
RCM’s strategy is to build projects and solutions offerings selectively, utilizing its extensive resource base. The Company believes that the effective execution of this strategy will generate improved margins on its existing resources.
RCM’s strategy is to build projects and integrated solutions offerings selectively, utilizing its extensive resource base. The Company believes that the effective execution of this strategy will generate improved margins on its existing resources.
LOCATION NUMBER OF OFFICES SERVICES PROVIDED(1) UNITED STATES Arizona 1 HC California 3 HC, IT Connecticut 1 E Florida 2 HC, E Hawaii 1 HC Illinois 1 HC Massachusetts 1 IT Michigan 1 HC New Jersey 2 E, IT New York 4 E, HC, IT North Carolina 1 HC Rhode Island 1 E Tennessee 1 HC Texas 1 HC 21 CANADA 1 E PUERTO RICO 1 E, IT SERBIA 3 E, IT (1) Services provided are abbreviated as follows: E - Engineering HC - Specialty Health Care IT - Life Sciences and Information Technology The Company is domiciled in the United States and its segments operate in the United States, Canada, Puerto Rico and Serbia. 9 ITEM 1.
LOCATION NUMBER OF OFFICES SERVICES PROVIDED(1) UNITED STATES Arizona 1 HC California 3 HC Connecticut 1 E Florida 2 HC, E Hawaii 1 HC Illinois 1 HC Massachusetts 1 HC Michigan 1 HC New Jersey 2 E, LS&IT New York 4 E, HC, LS&IT North Carolina 1 HC Rhode Island 1 E Tennessee 1 HC Texas 1 HC 21 CANADA 1 E GERMANY 1 E PUERTO RICO 2 E, LS&IT SERBIA 4 E, LS&IT (1) Services provided are abbreviated as follows: E - Engineering HC - Specialty Health Care LS&IT - Life Sciences and Information Technology The Company is domiciled in the United States and its segments operate in the United States, Canada, Germany, Puerto Rico and Serbia. 9 ITEM 1.
The Company also offers other health care professionals to perform school evaluations and treat students, including occupational and physical therapists, speech and language pathologists, as well as special education support services and registered behavioral technicians to support students’ individualized education plan and behavioral health needs. ● Telepractice : RCM’s teletherapy solution is an evidence-based service delivery option for students to receive Special Education services such as Speech-Language Therapy, Occupational Therapy, Physical Therapy, Behavioral and Mental Health services and other healthcare services through an online platform.
The Company also offers other health care professionals to perform school evaluations and treat students, including occupational and physical therapists, speech and language pathologists, as well as special education support services and registered behavioral technicians to support students’ individualized education plan and behavioral health needs. ● Telepractice : The Company’s teletherapy solution is an evidence-based service delivery option for students to receive Special Education services such as Speech-Language Therapy, Occupational Therapy, Physical Therapy, Behavioral and Mental Health services and other healthcare services through an online platform.
The group has project experience that encompasses multi-disciplined engineering and design services as well as providing technical support during design, construction and plant operational phases.
The group has highly technical project experience that encompasses multi-disciplined engineering and design services as well as providing technical support during design, construction and plant operational phases.
The Company believes its target market for IT services is among middle-market companies, which typically lack the time and technical resources to satisfy all of their IT needs internally. These companies commonly require sophisticated, experienced IT assistance to achieve their business objectives and often rely on IT service providers to help implement and manage their systems.
The Company believes its target market for IT services and data solutions is among middle-market companies, which typically lack the time and technical resources to satisfy all of their IT needs internally. These companies commonly require sophisticated, experienced IT assistance to achieve their business objectives and often rely on IT service providers to help implement and manage their systems.
The Company believes this strategy will lead to greater account penetration and enhanced client relationships. Operational strategies contributing to RCM’s internal productivity include the delineation of certain new solutions practice areas in markets where its clients had historically known the Company as a contract service provider.
The Company believes this strategy will lead to greater account penetration, strategic partnerships, and enhanced client relationships. Operational strategies contributing to RCM’s internal productivity include the delineation of certain new solutions practice areas in markets where its clients had historically known the Company as a contract service provider.
In addition, the IDC provides 24x7 security staffing, closed-circuit monitors, secure-card key access, biometrics scanners, man traps, and alarmed doors. 11 ITEM 1. BUSINESS (CONTINUED) Competition The market for engineering and IT services is highly competitive and is subject to rapid change.
In addition, the IDC provides 24x7 security staffing, closed-circuit monitors, secure-card key access, biometrics scanners, man traps, and alarmed doors. 11 ITEM 1. BUSINESS (CONTINUED) Competition The market for engineering and Life Sciences and IT services is highly competitive and is subject to rapid change.
The address of its principal executive office is 2500 McClellan Avenue, Suite 350, Pennsauken, NJ 08109-4613. RCM electronically files its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports with the Securities and Exchange Commission (“SEC”).
The address of its principal executive office is 2500 McClellan Avenue, Suite 350, Pennsauken, NJ 08109-4613. The Company electronically files its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports with the Securities and Exchange Commission (“SEC”).
Controls within the data center environment ensure that all systems are proactively monitored and data is properly archived. Additionally, RCM has contracted and brokered strategic relationships with third-party vendors to meet its recovery objectives in the event of a system disruption.
Controls within the data center environment ensure that all systems are proactively monitored and data is properly archived. Additionally, the Company has contracted and brokered strategic relationships with third-party vendors to meet its recovery objectives in the event of a system disruption.
The IDC provides RCM with a robust data center environment with redundant HVAC, commercial power feeds, ten 2000kW diesel generator sets with five 10,000-gallon, above-ground fuel oil storage tanks to provide standby power and dry pipe fire suppression.
The IDC provides the Company with a robust data center environment with redundant HVAC, commercial power feeds, ten 2000kW diesel generator sets with five 10,000-gallon, above-ground fuel oil storage tanks to provide standby power and dry pipe fire suppression.
Given the significant amount of data generated in the Company’s key processes including recruiting, sales, payroll and customer invoicing, RCM has established redundant procedures, functioning on a daily basis, within the Company’s primary data center, which is a third-party Internet Data Center (“IDC”).
Given the significant amount of data generated in the Company’s key processes including recruiting, sales, payroll and customer invoicing, the Company has established redundant procedures, functioning on a daily basis, within the Company’s primary data center, which is a third-party Internet Data Center (“IDC”).
The formation of these practice areas facilitates the flow of project opportunities and the delivery of project-based solutions. 4 ITEM 1.
The formation of these new practice areas facilitates the flow of project opportunities and the delivery of project-based solutions. 4 ITEM 1.
As the world’s industrial output rebounds from pandemic-related weakness in 2020 and 2021, the Company believes its Process and Industrial group is positioned well to take advantage. Companies in the chemical industry are reprioritizing spending towards decarbonization technologies, with many US chemical companies expecting to place an emphasis on renewable feedstocks and new carbon recycling technologies.
As the world’s industrial output rebounds from pandemic-related weakness in 2020 and 2021, the Company believes its Process and Industrial group is positioned well to take advantage. Companies in the chemical industry are reprioritizing spending towards decarbonization technologies, with many U.S. chemical companies expecting to place an emphasis on renewable feedstocks and new carbon recycling technologies.
Increasing and maintaining access to proper care remains a top priority and the market opportunity for these services is expected to continue to grow. While the Company believes that the demand for Healthcare related services remains historically high, the Company also believes this demand has subsided some as COVID-19 shifts from a pandemic to an endemic.
Increasing and maintaining access to proper care remains a top priority and the market opportunity for these services is expected to continue to grow. While the Company believes that the demand for Healthcare related services remains historically high, the Company also believes this demand subsided some as COVID-19 shifted from a pandemic to an endemic.
RCM is structured to provide middle-market companies a single source for their IT needs. 3 ITEM 1. BUSINESS (CONTINUED) Business Strategy RCM is dedicated to providing solutions to meet its clients’ business needs by delivering specialty health care, engineering, life sciences and information technology services.
RCM is structured to provide middle-market companies a single source for their IT and digitization needs. 3 ITEM 1. BUSINESS (CONTINUED) Business Strategy The Company is dedicated to providing solutions to meet its clients’ business needs by delivering specialty health care, engineering, life sciences and information technology services.
Centralized administrative functions minimize the administrative burdens on branch office managers and allow them to spend more time focusing on sales and marketing and practice development activities. Branch offices are primarily located in markets that the Company believes have strong growth prospects for the Company’s services.
Centralized administrative functions and shared services minimize the administrative burdens on branch office managers and allow them to spend more time focusing on sales and marketing, client relations and practice development activities. Branch offices are primarily located in markets that the Company believes have strong growth prospects for the Company’s services.
Given RCM’s customer account relationships with several of the largest defense prime contractors, the Company believes there is ample opportunity for engineering services and technical publication work, including production and procurement engineering services as well as the need for sustainment and development program publication services. ● Process & Industrial Services : Provides engineering services to the industrial, chemical, commercial and oil and gas industries in the United States, Europe and Canada.
Given RCM’s customer account relationships with several of the largest defense prime contractors, the Company believes there is ample opportunity for engineering services and technical publication work, including production and procurement engineering services as well as the need for sustainment and development program publication services, data management and digital solutions. ● Process & Industrial Services : Provides engineering services to the industrial, chemical, commercial and oil and gas industries in the United States, Europe and Canada.
The Company believes that the deregulation of the utilities industry and the aging of nuclear power plants offer the Company an opportunity to capture a greater share of professional services and project management requirements of the utilities industry. Electric utilities have prioritized transitioning their power generation assets to cleaner sources of energy.
The Company believes that the deregulation of the utilities industry and the aging of nuclear power plants offer the Company an opportunity to capture a greater share of professional services and project management requirements of the utilities industry. Electric utilities have prioritized transitioning their power generation assets to cleaner sources of energy and grid modernization initiatives.
These reports are available as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The Company’s website is http://www.rcmt.com . The information contained on the Company’s website, or on other websites linked to the Company’s website, is not part of this document.
These reports are available as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The Company’s website is ht tp://www.rcmt.com . The information contained on the Company’s website, or on other websites linked to the Company’s website, is not part of this document.
The Company encourages its employees to participate in national and regional trade associations, local chambers of commerce and other civic associations. The Company seeks to develop strategic partnering relationships with its customers by providing comprehensive solutions for all aspects of a customer’s engineering, life sciences, information technology and other professional services needs.
The Company encourages its employees to participate in and support national and regional trade associations, economic development agencies, local chambers of commerce and other civic associations. The Company seeks to develop strategic partnering relationships with its customers by providing comprehensive solutions for all aspects of a customer’s engineering, life sciences, information technology and other professional services needs.
Attract and Retain Highly Qualified Consultants and Technical Resources The Company believes it has been successful in attracting and retaining highly qualified consultants and contractors by (i) providing stimulating and challenging work assignments, (ii) offering competitive wages, (iii) effectively communicating with its candidates, (iv) providing selective training to maintain and upgrade skills and (v) aligning the needs of its customers with appropriately skilled personnel.
Attract and Retain Highly Qualified Consultants and Technical Resources The Company believes it has been successful in attracting and retaining highly qualified consultants and contractors by (i) providing stimulating and challenging work assignments while fostering a culture of innovation, (ii) offering competitive wages, (iii) effectively communicating with its candidates, (iv) providing selective training to maintain and upgrade skills and (v) aligning the needs of its customers with appropriately skilled personnel.
BUSINESS (CONTINUED) Branch Offices The Company’s organization consists of 26 branch offices located in the United States, Canada, Puerto Rico and Serbia. The locations and services of each of the branch offices are set forth in the table below.
BUSINESS (CONTINUED) Branch Offices The Company’s organization consists of 29 branch offices located in the United States, Canada, Germany, Puerto Rico and Serbia. The locations and services of each of the branch offices are set forth in the table below.
BUSINESS (CONTINUED) Engineering RCM provides a full range of Engineering services including Project Management Engineering & Design, Engineering Analysis, Engineer-Procure-Construct, Configuration Management, Hardware/Software Validation & Verification, Quality Assurance, Technical Writing & Publications, Manufacturing Process Planning & Improvement and 3D/BIM Integrated Design. Engineering services are provided at the site of the client or at the Company’s own facilities.
BUSINESS (CONTINUED) Engineering RCM provides a full range of Engineering services including Project Management Engineering & Design, Engineering Analysis, Engineering-Procurement-Construction, Configuration Management, Hardware/Software Validation & Verification, Quality Assurance, Technical Writing & Publications, Manufacturing Process Planning & Improvement and 3D/BIM Integrated Design. Engineering services are provided at the site of the client or at the Company’s own facilities.
BUSINESS (CONTINUED) Specialty Health Care The Company’s Specialty Health Care Group specializes in long-term and short-term staffing as well as executive search and placement solutions for many of the largest healthcare institutions and school districts across the United States.
BUSINESS (CONTINUED) Specialty Health Care The Company’s Specialty Health Care Group specializes in long-term and short-term staffing of medical professionals as well as executive search, international recruitment, and placement solutions for many of the largest healthcare institutions and school districts across the United States.
Operating Strategy Develop and Maintain Strong Customer Relationships The Company seeks to develop and maintain strong interactive customer relationships by anticipating and focusing on its customers’ needs. The Company emphasizes a relationship-oriented approach to business, rather than the transaction or assignment-oriented approach that the Company believes is used by many of its competitors.
Operating Strategy Develop and Maintain Strong Customer Relationships The Company seeks to develop and maintain strong cross-functional customer relationships by anticipating and focusing on its customers’ needs. The Company emphasizes a relationship-oriented and partnership-based approach to business, rather than the transaction or assignment-oriented approach that the Company believes is used by many of its competitors.
These employees are not billed to clients. As of December 31, 2022, the Company employed approximately 280 nonbillable employees. The expense for these employees is included in the Company's selling, general, and administrative expense in its income statements. 13 ITEM 1. BUSINESS (CONTINUED) Billable salaried employees primarily include senior-level employees whose time is often billed to clients.
These employees are not billed to clients. As of December 30, 2023, the Company employed approximately 300 nonbillable employees. The expense for these employees is included in the Company's selling, general, and administrative expense in its income statements. 13 ITEM 1. BUSINESS (CONTINUED) Billable salaried employees primarily include senior-level employees whose time is often billed to clients.
The Company believes it is in material compliance with all employee related statutes. 12 ITEM 1. BUSINESS (CONTINUED) Intellectual Property Management believes the RCM Technologies, Inc. name is extremely valuable and important to its business.
The Company believes it is in material compliance with all employee related statutes. Intellectual Property Management believes the RCM Technologies, Inc. name is extremely valuable and important to its business.
The Company’s School Services and Telepractice offerings are well positioned to provide solutions in these areas of priority as the market opportunity for these services is expected to continue to grow. As of December 31, 2022, the Company assigned approximately 2,540 specialty health care services personnel to its customers. 6 ITEM 1.
The Company’s School Services and Telepractice offerings are well positioned to provide solutions in these areas of priority as the market opportunity for these services is expected to continue to grow. As of December 30, 2023, the Company assigned approximately 2,780 specialty health care services personnel to its customers. 6 ITEM 1.
The Company’s branches are operated in a decentralized, entrepreneurial manner with most offices operating as independent profit centers. Sales and Marketing Sales and marketing efforts are conducted at the local and national level through the Company’s network of branch offices. Sales activities and productivity are tracked and rankings established and published. Sales between business units are recognized and financially encouraged.
The Company’s branches are operated in a decentralized, entrepreneurial manner with most offices operating as independent profit centers. Sales and Marketing Sales and marketing efforts are conducted at the local and national level through the Company’s network of branch offices. Business development and sales activities and productivity are tracked and rankings established and published.
The group assists in staffing, solution planning and remediation needs in the areas of automation, compliance, data analytics, technical quality assurance and management, and validation and verification. ● IT Services & Solutions : Global provider of business and technology solutions designed to improve the operational performance of our clients. Specialties include software development, infrastructure services, and managed IT solutions.
The group assists in staffing, solution planning and remediation needs in the areas of automation, compliance, data analytics, technical quality assurance and management, and validation and verification. ● IT Services & Solutions : Global provider of business and technology solutions designed to improve the operational performance of our clients.
Each of these dynamics have been exacerbated by COVID-19. The pandemic has also altered patterns in health care delivery, with newer delivery models gaining traction, namely telemedicine. Given federal and state regulatory changes as well as private insurer reimbursement methods, utilization of telemedicine services increased significantly.
Each of these dynamics have been exacerbated by COVID-19. Various factors, including the pandemic, technological advances and patient habits, have also altered patterns in health care delivery, with newer delivery models gaining traction, namely telemedicine. Given federal and state regulatory changes as well as private insurer reimbursement methods, utilization of telemedicine services increased significantly.
As the COVID-19 pandemic has demonstrated, maintaining the utilization of telemedicine remains critical to providing necessary access to care. Expanding access to behavioral health and mental wellness services is also a priority for many public health officials.
Maintaining the utilization of telemedicine has become and remains critical to providing necessary access to care. Expanding access to behavioral health and mental wellness services is also a priority for many public health officials.
As of December 31, 2022, our billable workforce comprised approximately 2,540 Specialty Health Care services personnel, 490 Engineering and Technical personnel, and 230 Life Sciences and Information Technology personnel assigned by the Company to work on client projects or assignments for various periods. None of the Company's employees are party to a collective bargaining agreement.
As of December 30, 2023, our billable workforce comprised approximately 2,780 Specialty Health Care services personnel, 440 Engineering and Technical personnel, and 270 Life Sciences and Information Technology personnel assigned by the Company to work on client projects or assignments for various periods. None of the Company's employees are party to a collective bargaining agreement.
BUSINESS (CONTINUED) International Operations The Company operates its business in Canada and, to a less significant extent, in Puerto Rico and Serbia. For the fiscal year ended December 31, 2022, approximately 4.4% of the Company’s revenue were generated outside the United States.
BUSINESS (CONTINUED) International Operations The Company operates its business in Canada and, to a less significant extent, in Germany, Puerto Rico and Serbia. For the fiscal year ended December 30, 2023, approximately 6.3% of the Company’s revenue were generated outside the United States.
These include management consulting engagements, project management of client efforts, project implementation of client initiatives, outsourcing, both on and off site, and a full complement of resourcing alternatives. As of December 31, 2022, the Company assigned approximately 230 Life Sciences and Information Technology personnel to its customers. 8 ITEM 1.
These include management consulting engagements, project management of client efforts, project implementation of client initiatives, recruiting process outsourcing, both on and off site, and a full complement of human capital management solutions and resourcing alternatives. As of December 30, 2023, the Company assigned approximately 270 Life Sciences and Information Technology personnel to its customers. 8 ITEM 1.
The Company emphasizes long-term personal relationships with customers that are developed through regular assessment of customer requirements and proactive monitoring of service performance. The Company’s sales personnel make regular visits to existing and prospective customers. New customers are obtained through active sales programs and referrals.
Sales between business units are recognized and financially encouraged. The Company emphasizes long-term relationships and partnerships with customers that are developed through regular assessment of customer requirements and proactive monitoring of service performance. The Company’s sales and account management personnel make regular visits to existing and prospective customers. New customers are obtained through active sales programs and referrals.
With many companies in the chemical industry reprioritizing spending towards decarbonization technologies, many US chemical companies are expected to place an emphasis on renewable feedstocks and new carbon recycling technologies. The Company believes its process engineering services can play a vital role across this multibillion-dollar opportunity. The Company provides its engineering services through a number of delivery methods.
With many companies in the chemical industry reprioritizing spending towards decarbonization technologies, many U.S. chemical companies are expected to place an emphasis on renewable feedstocks and new carbon recycling technologies. The Company believes its process engineering services and specialized hydrogen capabilities can play a vital role across this multibillion-dollar opportunity.
These include managed tasks and resources, complete project services, outsourcing, both on and off-site, and a full complement of resourcing alternatives. As of December 31, 2022, the Company assigned approximately 490 engineering and technical personnel to its customers. 7 ITEM 1.
The Company provides its engineering services through a number of delivery methods. These include managed tasks and resources, complete project services, outsourcing, both on and off-site, and a full complement of resourcing alternatives. As of December 30, 2023, the Company assigned approximately 440 engineering and technical personnel to its customers. 7 ITEM 1.
The Company concentrates on providing carefully screened professionals with the appropriate skills in a timely manner and at competitive prices. The Company regularly monitors the quality of the services provided by its personnel and obtains feedback from its customers as to their satisfaction with the services provided. The Company serves Fortune 1000 companies and many middle market clients.
The Company concentrates on providing carefully screened professionals with a range of highly specialized and technical skills in a timely manner and at competitive prices. The Company regularly monitors the quality of the services provided by its personnel and obtains feedback from its customers as to their satisfaction with the services provided.
As of December 31, 2022, the Company's workforce breaks out as follows: ● United States and Puerto Rico: approximately 257 nonbillable and 3,450 billable ● Canada: approximately five nonbillable and 30 billable ● Serbia/Europe: approximately 38 nonbillable and 80 billable Access to Company Information The Company is a Nevada corporation organized in 1971.
As of December 30, 2023, the Company's workforce breaks out as follows: ● United States and Puerto Rico: approximately 235 nonbillable and 3,375 billable ● International (primarily Canada and Europe): approximately 45 nonbillable and 115 billable Access to Company Information The Company is a Nevada corporation organized in 1971.
Human Capital Our employees and contractors (together, our "workforce") are the Company's most valuable resource for current and future success. We promote an environment that ensures safety, encourages diversity and inclusion, fosters growth and self-development, and provides meaningful work. All employees participate in our success through attractive and aligned rewards.
We promote an environment that ensures safety, encourages diversity and inclusion, fosters growth and self-development, and provides meaningful work. All employees participate in our success through attractive and aligned rewards.
The Company conducts business globally but is principally concentrated in the United States, Canada, Serbia/Europe, and Puerto Rico.
The Company conducts business globally but is principally concentrated in North America and Europe.
The Company has a 40-year history of providing qualified IT candidates to customers in a timely and cost-effective manner to address their specific business needs. The Company offers scalable solutions that can provide emerging growth companies with a single qualified resource or an entire project team along with RCM’s project management oversight to Fortune 100 clients.
The Company offers scalable solutions that can provide emerging growth companies with a single qualified resource or an entire project team along with RCM’s project management oversight to Fortune 100 clients.
The Company’s five, ten and twenty largest customers accounted for approximately 43.0%, 53.7% and 67.0%, respectively, of the Company’s revenue for the fiscal year ended December 31, 2022.
During the fiscal year ended December 30, 2023, the Company had two customers exceed 10% of consolidated revenue, representing 17.1% and 10.1% of consolidated revenue. The Company’s five, ten and twenty largest customers accounted for approximately 39.1%, 50.4% and 62.7%, respectively, of the Company’s revenue for the fiscal year ended December 30, 2023.
The Company endeavors to protect its intellectual property rights and maintain certain trademarks, trade names, service marks and other intellectual property rights, including The Source of Smart Solutions®. The Company is not currently aware of any infringing uses or other conditions that would be reasonably likely to materially and adversely affect the Company’s use of its proprietary rights.
The Company endeavors to protect its intellectual property rights and maintain certain trademarks, trade names, service marks and other intellectual property rights, including The Source of Smart Solutions® and Industries of Tomorrow, Today™ with a trademark application submitted for the use of the latter.
RCM’s emphasis on client retention has resulted in repeat business from many of its largest strategic accounts. During the fiscal year ended December 31, 2022, the Company had two customers exceed 10% of consolidated revenue, representing 13.2% and 12.7% of consolidated revenue.
BUSINESS (CONTINUED) Key Customers The Company has established long-term relationships with many of its customers across each of its business segments. The Company’s emphasis on client retention has resulted in repeat business from many of its largest strategic accounts.
Added
Specialties include software development, infrastructure services, data management, and managed IT solutions. The Company has a 40-year history of providing qualified IT candidates to customers in a timely and cost-effective manner to address their specific business needs.
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The Company is not currently aware of any infringing uses or other conditions that would be reasonably likely to materially and adversely affect the Company’s use of its proprietary rights. 12 ITEM 1. BUSINESS (CONTINUED) Human Capital Our employees and contractors (together, our "workforce") are the Company's most valuable resource for current and future success.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeGlobal Epidemics The COVID-19 pandemic and endemic, and associated initiatives to reduce its spread, have at times adversely affected the Company’s business and financial position, and may continue to do so. The impacts described in this risk factor as relating to COVID-19 could arise in the future with respect to any other global pandemics or endemics that may occur.
Biggest changeTo the extent the Company experiences these risks, the business and results of operations could be adversely affected. Global Epidemics As was the case with the COVID-19 pandemic and endemic, and associated initiatives to reduce its spread, any other global pandemics or endemics that may occur in the future could adversely affect the Company’s business and financial position.
Failure to comply with these regulations could result in the Company incurring penalties and other liabilities, monetary and otherwise. Highly Competitive Business The staffing services and outsourcing markets are highly competitive and have limited barriers to entry. RCM competes in global, national, regional, and local markets with numerous temporary staffing and permanent placement companies.
Failure to comply with these regulations could result in the Company incurring penalties and other liabilities, monetary and otherwise. Highly Competitive Business The staffing services and outsourcing markets are highly competitive and have limited barriers to entry. The Company competes in global, national, regional, and local markets with numerous temporary staffing and permanent placement companies.
In addition, customers may choose to reduce the business they do with RCM for other reasons or no reason. The Company could also be materially impacted by actions of prime contractors whereby the Company derives revenue through a subcontractor relationship.
In addition, customers may choose to reduce the business they do with the Company for other reasons or no reason. The Company could also be materially impacted by actions of prime contractors whereby the Company derives revenue through a subcontractor relationship.
Any failures to do so could result in governmental enforcement actions, fines, and other penalties, or other liabilities, that could adversely affect our business.
Any failures to do so could result in governmental enforcement actions, fines, and other penalties, or other liabilities, that could adversely affect our business. 20
The Company’s ability to protect its data center against damage from fire, power loss, telecommunications failure and other disasters is critical to business operations. In order to provide many of its services, RCM must be able to store, retrieve, process and manage large databases and periodically expand and upgrade its capabilities.
The Company’s ability to protect its data center against damage from fire, power loss, telecommunications failure and other disasters is critical to business operations. In order to provide many of its services, the Company must be able to store, retrieve, process and manage large databases and periodically expand and upgrade its capabilities.
Business,” our operating results are subject to seasonal fluctuations, with reduced demand often occurring during the first quarter of the year when clients are finalizing their engineering and IT budgets, and also during periods in which there are a substantial amount of holidays and season vacations.
Business,” our operating results are subject to seasonal fluctuations, with reduced demand often occurring during the first quarter of the year when clients are finalizing their engineering and Life Sciences and IT budgets, and also during periods in which there are a substantial amount of holidays and season vacations.
In order to fulfill the requirements of the Company’s customers, the Company must be able to recruit and retain appropriate personnel for client assignments. 17 ITEM 1A. RISK FACTORS (CONTINUED) Revolving Credit Facility and Liquidity If the Company were unable to borrow under its Revolving Credit Facility (see “Item 7.
In order to fulfill the requirements of the Company’s customers, the Company must be able to recruit and retain appropriate personnel for client assignments. 16 ITEM 1A. RISK FACTORS (CONTINUED) Revolving Credit Facility and Liquidity If the Company were unable to borrow under its Revolving Credit Facility (see “Item 7.
RISK FACTORS (CONTINUED) Government Regulations Staffing firms and employment service providers are generally subject to one or more of the following types of government regulation: (1) regulation of the employer/employee relationship between a firm and its employees, including tax withholding or reporting, social security or retirement, benefits, workplace compliance, wage and hour, anti-discrimination, immigration and workers’ compensation; (2) registration, licensing, record keeping and reporting requirements; and (3) federal contractor compliance.
Government Regulations Staffing firms and employment service providers are generally subject to one or more of the following types of government regulation: (1) regulation of the employer/employee relationship between a firm and its employees, including tax withholding or reporting, social security or retirement, benefits, workplace compliance, wage and hour, anti-discrimination, immigration and workers’ compensation; (2) registration, licensing, record keeping and reporting requirements; and (3) federal contractor compliance.
Dependence Upon Personnel The Company’s operations depend on the continued efforts of its officers and other executive management. The loss of key officers and members of executive management may cause a significant disruption to the Company’s business. RCM also depends on the performance and productivity of its local managers and field personnel.
Dependence Upon Personnel The Company’s operations depend on the continued efforts of its officers and other executive management. The loss of key officers and members of executive management may cause a significant disruption to the Company’s business. The Company also depends on the performance and productivity of its local managers and field personnel.
Our operating results for any given period may fluctuate as a result of the timing of holidays, vacations and other events, and if we were to experience unfavorable performance during periods in which we would otherwise expect to have high seasonal demand, we may have limited ability to make up for such performance during periods of seasonally lower demand.
Our operating results for any given period may fluctuate as a result of the timing of holidays, vacations and other events, and if we were to experience unfavorable performance during periods in which we would otherwise expect to have high seasonal demand, we may have limited ability to make up for such performance during periods of seasonally lower demand. 15 ITEM 1A.
Should any significant customers experience a downturn in their business that weakens their financial condition or merge with another company or otherwise cease independent operation, or limit their relationship with us, it is possible that the business that the customer does with the Company would be reduced or eliminated, which could adversely affect the Company’s business, financial condition and results of operations. 16 ITEM 1A.
Should any significant customers experience a downturn in their business that weakens their financial condition or merge with another company or otherwise cease independent operation, or limit their relationship with us, it is possible that the business that the customer does with the Company would be reduced or eliminated, which could adversely affect the Company’s business, financial condition and results of operations.
RCM expects that the level of competition will remain high in the future, which could limit RCM’s ability to maintain or increase its market share or profitability. Our inability to compete successfully with our competitors could adversely affect the Company’s business, financial condition and results of operations. Seasonality of Business As described in “Item 1.
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. Our inability to compete successfully with our competitors could adversely affect the Company’s business, financial condition and results of operations. Seasonality of Business As described in “Item 1.
RISK FACTORS (CONTINUED) Data Privacy We control, process, or have access to personal information regarding our own employees or employment candidates, as well as that of many of our customers or other third parties. Information concerning these individuals may also reside in systems controlled by third party vendors with whom we do business.
Data Privacy We control, process, or have access to personal information regarding our own employees or employment candidates, as well as that of many of our customers or other third parties. Information concerning these individuals may also reside in systems controlled by third party vendors with whom we do business.
There can be no assurance that the steps we take to abide by applicable requirements will meet all current and future regulatory. Any failures to do so could result in governmental enforcement actions, fines, and other penalties, or other liabilities, that could adversely affect our business. 20 ITEM 1A.
There can be no assurance that the steps we take to abide by applicable requirements will meet all current and future regulatory. Any failures to do so could result in governmental enforcement actions, fines, and other penalties, or other liabilities, that could adversely affect our business.
RCM’s exposure to foreign currency fluctuations relates to operations in Canada and Serbia, principally conducted through its Canadian and Serbian subsidiaries. Exchange rate fluctuations affect the United States dollar value of reported earnings derived from the Canadian operations as well as the carrying value of the Company’s investment in the net assets related to these operations.
The Company’s exposure to foreign currency fluctuations relates to operations in Canada, Germany and Serbia, principally conducted through its Canadian, German and Serbian subsidiaries. Exchange rate fluctuations affect the United States dollar value of reported earnings derived from the foreign operations as well as the carrying value of the Company’s investment in the net assets related to these operations.
RISK FACTORS (CONTINUED) Subcontractors, Transit Accounts Receivable and Transit Accounts Payables Related to Construction Management Contracts The Company’s Engineering segment has entered into arrangements to provide construction management and engineering services to customers under which arrangements the Company then engages subcontractors to provide the construction services.
Subcontractors, Transit Accounts Receivable and Transit Accounts Payables Related to Construction Management Contracts The Company’s Engineering segment has entered into arrangements to provide construction management and engineering services to customers under which arrangements the Company then engages subcontractors to provide the construction services.
Intellectual property litigation is expensive and time-consuming, and it is often difficult, if not impossible, to predict the outcome of such litigation. If the Company is involved in an intellectual property litigation, its business, financial condition and results of operations could be materially adversely affected. 19 ITEM 1A.
Intellectual property litigation is expensive and time-consuming, and it is often difficult, if not impossible, to predict the outcome of such litigation. If the Company is involved in intellectual property litigation, its business, financial condition and results of operations could be materially adversely affected.
RISK FACTORS (CONTINUED) Data Center Capacity and Telecommunication Links Uninterruptible Power Supply (UPS), card key access, fire suppression, and environmental control systems protect RCM’s datacenter. All systems are monitored on a 24/7 basis with alerting capabilities via voice or email. The telecommunications architecture at RCM utilizes managed private circuits from AT&T, which encompasses provisioning redundancy and diversity.
Data Center Capacity and Telecommunication Links Uninterruptible Power Supply (UPS), card key access, fire suppression, and environmental control systems protect the Company’s datacenter. All systems are monitored on a 24/7 basis with alerting capabilities via voice or email. The telecommunications architecture at the Company utilizes managed private circuits from AT&T, which encompasses provisioning redundancy and diversity.
However, public and private sector policies and initiatives to reduce the transmission of COVID-19, such as closures of schools, businesses and manufacturing facilities, the promotion of social distancing, the adoption of working from home by companies and institutions, and travel restrictions could adversely affect demand for our services and present challenges to us in delivering these services.
For example, public and private sector policies and initiatives to reduce the transmission of a highly transmissible disease, such as closures of schools, businesses and manufacturing facilities, the promotion of social distancing, the adoption of working from home by companies and institutions, and travel restrictions could adversely affect demand for our services and present challenges to us in delivering these services.
RCM’s ability to protect its data, provide services and safeguard its installations, as it relates to the IT infrastructure, is in part dependent on several outside vendors with whom the Company maintains service level agreements. Cyber Security We are highly dependent on information technology systems to operate our business.
The Company’s ability to protect its data, provide services and safeguard its installations, as it relates to the IT infrastructure, is in part dependent on several outside vendors with whom the Company maintains service level agreements. 19 ITEM 1A. RISK FACTORS (CONTINUED) Cyber Security We are highly dependent on information technology systems to operate our business.
Additionally, our operating results would be adversely affected if unexpected increases in the costs of labor and labor related costs, materials, supplies and equipment used in performing services (including the impact of potential tariffs and COVID-19) could not be passed on to our clients.
Additionally, our operating results would be adversely affected if unexpected increases in the costs of labor and labor related costs, materials, supplies and equipment used in performing services could not be passed on to our clients.
As a result, changes in United States federal tax laws could negatively impact our operating results, financial condition and business operations, and adversely impact the Company’s shareholders. At any time, tax laws in the Company’s other jurisdictions, Canada, Puerto Rico and Serbia, may also change. These tax law changes may have a material impact on the Company’s income tax expense.
As a result, changes in United States federal tax laws could negatively impact our operating results, financial condition and business operations, and adversely impact the Company’s shareholders. At any time, tax laws in the Company’s other jurisdictions, Canada, Germany, Puerto Rico and Serbia, may also change.
International Operations The Company operates its business in Canada and, to a less significant extent, in Puerto Rico and Serbia. For the fiscal year ended December 31, 2022, approximately 4.4% of the Company’s revenue were generated outside the United States.
International Operations The Company operates its business in Canada and, to a less significant extent, in Germany, Puerto Rico and Serbia. For the fiscal year ended December 30, 2023, approximately 6.3% of the Company’s revenue were generated outside the United States.
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. At December 31, 2022, the Company was in compliance with the covenants and other provisions of the Credit Facility.
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 December 30, 2023, the Company was in compliance with all covenants contained in the Revolving Credit Facility.
The Company’s five, ten and twenty largest customers accounted for approximately 43.0%, 53.7% and 67.0%, respectively, of the Company’s revenue for the fiscal year ended December 31, 2022. The Company’s customers may be affected by the current state of the economy or developments in the credit markets or may engage in mergers or similar transactions.
The Company’s five, ten and twenty largest customers accounted for approximately 39.1%, 50.4% and 62.7%, respectively, of the Company’s revenue for the fiscal year ended December 30, 2023. The Company’s customers may be affected by the current state of the economy or developments in the credit markets or may engage in mergers or similar transactions.
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. 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 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. All borrowings under the Fourth Amended and Restated Loan Agreement remain collateralized with substantially all of the Company’s assets, as well as the capital stock of its subsidiaries.
Events Affecting Significant Customers As disclosed in “Item 1. Business,” during the fiscal year ended December 31, 2022, the Company had two customers exceed 10% of consolidated revenue, representing 13.2% and 12.7% of consolidated revenue.
RISK FACTORS (CONTINUED) Events Affecting Significant Customers As disclosed in “Item 1. Business,” during the fiscal year ended December 30, 2023, the Company had two customers exceed 10% of consolidated revenue, representing 17.1% and 10.1% of consolidated revenue.
At December 31, 2022, the Company had $8.8 million in borrowings under the Revolving Credit Facility outstanding and $1.9 million outstanding under letters of credit, with availability for additional borrowings under the Revolving Credit Facility of $34.3 million.
At December 30, 2023, the Company had $30.9 million in borrowings under the Revolving Credit Facility outstanding and $2.0 million outstanding under letters of credit, with availability for additional borrowings under the Revolving Credit Facility of $12.1 million.
Furthermore, we believe that our ability to sustain the internal development of managerial personnel is an important factor impacting future operating results and the successful execution of our projected growth strategies. Certainly, the ongoing COVID-19 pandemic and could make these objective more difficult to attain. 15 ITEM 1A.
Furthermore, we believe that our ability to sustain the internal development of managerial personnel is an important factor impacting future operating results and the successful execution of our projected growth strategies. A future pandemic could make these objective more difficult to attain. Trademarks Management believes the RCM Technologies, Inc. name is extremely valuable and important to its business.
The Company endeavors to protect its intellectual property rights and maintain certain trademarks, trade names, service marks and other intellectual property rights, including The Source of Smart Solutions®. The Company is not currently aware of any infringing uses or other conditions that would be reasonably likely to materially and adversely affect the Company’s use of its proprietary rights.
The Company is not currently aware of any infringing uses or other conditions that would be reasonably likely to materially and adversely affect the Company’s use of its proprietary rights.
Workers ’ Compensation and Employee Medical Insurance The Company self-insures a portion of the exposure for losses related to workers’ compensation and employees’ medical insurance. The Company has established reserves for workers’ compensation and employee medical insurance claims based on historical loss statistics and periodic independent actuarial valuations.
These tax law changes may have a material impact on the Company’s income tax expense. Workers ’ Compensation and Employee Medical Insurance The Company self-insures a portion of the exposure for losses related to workers’ compensation and employees’ medical insurance.
Borrowings under the Revolving Credit Facility bear interest at one of two alternative rates, as selected by the Company at each incremental borrowing.
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) SOFR (Secured Overnight Financing Rate), plus applicable margin or (ii) the agent bank’s prime rate generally borrowed over shorter durations.
These impacts on our business could have an adverse effect on our liquidity position and access to capital, including our ability to access our line of credit. The Company can give no assurance that the line of credit will be available in the future.
These impacts on our business could have an adverse effect on our liquidity position and access to capital, including our ability to access our line of credit. 18 ITEM 1A. RISK FACTORS (CONTINUED) Global Epidemics (Continued) These factors, in addition to delays in payment, could continue result in significant bad debts in the near future.
Significant differences in actual experience or significant changes in assumptions may materially affect the Company’s future financial results. 18 ITEM 1A.
The Company has established reserves for workers’ compensation and employee medical insurance claims based on historical loss statistics and periodic independent actuarial valuations. Significant differences in actual experience or significant changes in assumptions may materially affect the Company’s future financial results. 17 ITEM 1A.
Any failure to be in compliance could have a material adverse effect on liquidity, results of operations and financial condition. Foreign Currency Fluctuations and Changes in Exchange Rates The Company is exposed to risks associated with foreign currency fluctuations and changes in exchange rates.
The Company believes that it will maintain compliance with its financial covenants for the foreseeable future. Foreign Currency Fluctuations and Changes in Exchange Rates The Company is exposed to risks associated with foreign currency fluctuations and changes in exchange rates.
Removed
Our business has been, and may continue to be, adversely impacted by the effects of the COVID-19 pandemic and endemic.
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The Company endeavors to protect its intellectual property rights and maintain certain trademarks, trade names, service marks and other intellectual property rights, including The Source of Smart Solutions® and Industries of Tomorrow, Today™ with a trademark application submitted for the use of the latter.
Removed
As COVID-19 continues to present various health, business and other challenges globally, including significant impacts in the United States, we are taking a variety of measures to protect 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.
Removed
The extent to which COVID-19 impacts operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information which may emerge concerning the severity of the pandemic and endemic, and the actions to contain COVID-19 or treat its impact, among others.
Removed
These factors, in addition to delays in payment could continue result in significant bad debts in the near future.
Removed
These alternatives are: (i) SOFR (Secured Overnight Financing Rate) (which replaced LIBOR (London Interbank Offered Rate) upon the phasing out of LIBOR), plus applicable margin, typically borrowed in fixed 30-day increments, plus applicable margin, typically borrowed in fixed 30-day increments or (ii) the agent bank’s prime rate generally borrowed over shorter durations.
Removed
To the extent the Company experiences these risks, the business and results of operations could be adversely affected. Trademarks Management believes the RCM Technologies, Inc. name is extremely valuable and important to its business.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company’s operational office is located at 20 Waterview Boulevard, 4 th Floor, Parsippany, NJ 07054-1271. These premises consist of approximately 9,200 square feet and are leased at a rate of approximately $25.50 per square foot per annum for a term ending on January 31, 2024. 21
Biggest changeThese premises consist of approximately 3,500 square feet and are leased at a rate of approximately $15.00 per square foot per annum for a term ending on November 30, 2025. The Company’s operational office is located at 20 Waterview Boulevard, 4 th Floor, Parsippany, NJ 07054-1271.
ITEM 2. PROPERTIES The Company provides specialty professional consulting services, principally performed at various client locations, through 26 administrative and sales offices located in the United States, Puerto Rico, Canada and Serbia. The majority of the Company’s offices typically consist of 1,000 to 11,000 square feet and are typically leased by the Company for terms of one to five years.
ITEM 2. PROPERTIES The Company provides specialty professional consulting services, principally performed at various client locations, through 29 administrative and sales offices located in the United States, Puerto Rico, Canada, Germany and Serbia.
Offices in larger or smaller markets may vary in size from the typical office. The Company does not expect that it will be difficult to maintain or find suitable lease space at reasonable rates in its markets or in areas where the Company contemplates expansion.
The Company does not expect that it will be difficult to maintain or find suitable lease space at reasonable rates in its markets or in areas where the Company contemplates expansion. The Company’s executive office is located at 2500 McClellan Avenue, Suite 350, Pennsauken, New Jersey 08109-4613.
The Company’s executive office is located at 2500 McClellan Avenue, Suite 350, Pennsauken, New Jersey 08109-4613. These premises consist of approximately 3,500 square feet and are leased at a rate of approximately $15.00 per square foot per annum for a term ending on November 30, 2025.
These premises consist of approximately 9,200 square feet and are leased at a rate of approximately $25.50 per square foot per annum for a term ending on April 30, 2024. 22
Added
The majority of the Company’s offices typically consist of 1,000 to 15,000 square feet and are typically leased by the Company for terms of one to five years. Offices in larger or smaller markets may vary in size from the typical office.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOnce established, a provision may change in the future due to new developments or changes in circumstances and could increase or decrease the Company’s earnings in the period that the changes are made. The Company is exposed to various asserted claims as of December 31, 2022, where the Company believes it has a probability of loss.
Biggest changeThe Company could increase or decrease its earnings in the period that the changes are made. The Company is exposed to various asserted claims as of December 30, 2023, where the Company believes it has a probability of loss.
From time to time, the Company must estimate the potential loss even though the party adverse to the Company has not asserted any specific amounts. Significant judgment is required to determine both probability of loss and the estimated amount.
From time to time, the Company must estimate the potential loss even though the party adverse to the Company has not asserted any specific amounts. Significant judgment is required to determine both the probability of loss and the estimated amount.
However, the Company believes that such matters will not, either individually or in the aggregate, have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows. As of December 31, 2022, the Company has accrued $2.9 million for asserted claims.
However, the Company believes that such matters will not, either individually or in the aggregate, have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows. As of December 30, 2023, the Company has accrued $2.9 million for asserted claims.
The Company reviews its loss contingencies at least quarterly and adjusts its accruals and/or disclosures to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, or other new information, as deemed necessary.
The Company reviews its loss contingencies at least quarterly and it adjusts its accruals and/or disclosures to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, or other new information, as deemed necessary. Once established, a provision may change in the future due to new developments or changes in circumstances.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis new purchase program replaces the Company’s prior existing program to repurchase shares of the Common Stock, which was terminated in connection with the approval of the new program. The program is designed to provide the Company with enhanced flexibility over the long term to optimize its capital structure.
Biggest changeThe program is designed to provide the Company with enhanced flexibility over the long term to optimize its capital structure. Shares of the Common Stock may be repurchased in the open market or through negotiated transactions. The program may be terminated or suspended at any time at the discretion of the Company.
Dividends No dividends were declared in fiscal 2021 or fiscal 2022. All restricted share awards contain a dividend equivalent provision entitling holders to dividends paid between the restricted stock unit grant date and ultimate share distribution date. As of December 31, 2022, there were no accrued dividends.
Dividends No dividends were declared in fiscal 2022 or fiscal 2023. All restricted share awards contain a dividend equivalent provision entitling holders to dividends paid between the restricted stock award grant date and ultimate share distribution date. As of December 30, 2023, there were no accrued dividends.
MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Shares of the Company’s common stock are traded on The NASDAQ Global Market under the Symbol “RCMT.” Holders As of February 27, 2023, the approximate number of holders of record of the Company’s Common Stock was 280 and the number of beneficial owners of its Common Stock was approximately 1,702.
MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Shares of the Company’s common stock are traded on The NASDAQ Global Market under the Symbol “RCMT.” Holders As of February 20, 2024, the approximate number of holders of record of the Company’s Common Stock was 247 and the number of beneficial owners of its Common Stock was approximately 7,650.
MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES (CONT ’ D) Stock Repurchase by Issuer (Continued) The following table provides information relating to the shares we purchased during the fourth quarter of the fiscal year ended December 31, 2022: Period Total Number of Shares Purchased Weighted Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program October 2, 2022 – October 31, 2022 167,853 $ 16.12 167,853 $ 18,682,000 November 1, 2022 – November 30, 2022 257,906 $ 15.50 257,906 $ 14,684,000 December 1, 2022 – December 31, 2022 327,296 $ 13.64 327,296 $ 10,221,000 Total 753,055 $ 14.83 753,055 24
MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES (CONT ’ D) Stock Repurchase by Issuer (Continued) The following table provides information relating to the shares we purchased during the fourth quarter of the fiscal year ended December 30, 2023: Period Total Number of Shares Purchased Weighted Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program October 1, 2023 – October 31, 2023 53,837 $ 19.23 53,837 $ 13,905,000 November 1, 2023 – November 30, 2023 13,960 $ 19.29 13,960 $ 13,635,000 December 1, 2023 – December 30, 2023 - - - Total 67,797 $ 19.24 67,797
Such a plan would enable the Company to repurchase its shares during periods outside of its normal trading windows, when the Company typically would not be active in the market. The time of purchases and the exact number of shares to be purchased will depend on market conditions.
Such a plan would enable the Company to repurchase its shares during periods outside of its normal trading windows when the Company typically would not be active in the market. 24 ITEM 5.
Stock Repurchase by Issuer On August 5, 2022, the Company’s Board of Directors authorized a new program to repurchase shares of the Common Stock constituting, in the aggregate, up to an amount not to exceed $25.0 million.
Stock Repurchase by Issuer On April 25, 2023, the Company’s Board of Directors authorized a program to repurchase shares of its common stock up to an amount not to exceed $25.0 million. This program succeeds the Company’s prior repurchase program authorized in November 2021, which was substantially completed in April 2023.
Shares of the Common Stock may be repurchased in the open market or through negotiated transactions. The program may be terminated or suspended at any time at the discretion of the Company. The Company may enter into a Rule 10b5-1 trading plan to effect a portion of the authorized purchases, if criteria set forth in the plan are met.
The Company may enter into a Rule 10b5-1 trading plan to effect a portion of the authorized purchases if the criteria set forth in the plan are met.
Removed
The repurchase program does not include specific price targets or timetables and may be suspended or terminated at any time. The Company intends to finance any purchases using available working capital and capacity from the Company’s revolving line of credit. 23 ITEM 5.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeMANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Revenue Recognition (Continued) The following table presents our revenue disaggregated by revenue source for the fiscal years ended December 31, 2022 and January 1, 2022: December 31, 2022 January 1, 2022 Specialty Health Care: Time and Material $ 158,001 $ 97,363 Permanent Placement Services 1,447 1,132 Total Specialty Health Care $ 159,448 $ 98,495 Engineering: Time and Material $ 44,915 $ 33,937 Fixed Fee 41,021 32,168 Permanent Placement Services 1 67 Total Engineering $ 85,937 $ 66,172 Life Sciences and Information Technology: Time and Material $ 35,473 $ 37,181 Fixed Fee 3,022 1,390 Permanent Placement Services 800 637 Total Life Sciences and Information Technology $ 39,295 $ 39,208 $ 284,680 $ 203,875 Time and Material The Company’s Life Sciences and Information Technology and Healthcare segments predominantly recognize revenue through time and material work while its Engineering segment recognizes revenue through both time and material and fixed fee work.
Biggest changeMANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Revenue Recognition (Continued) The following table presents our revenue disaggregated by revenue source for the fiscal years ended December 30, 2023 and December 31, 2022: December 30, 2023 December 31, 2022 Specialty Health Care: Time and Material $ 134,941 $ 158,001 Permanent Placement Services 1,300 1,447 Total Specialty Health Care $ 136,241 $ 159,448 Engineering: Time and Material $ 42,443 $ 44,915 Fixed Fee 42,232 41,021 Permanent Placement Services - 1 Total Engineering $ 84,675 $ 85,937 Life Sciences and Information Technology: Time and Material $ 35,368 $ 35,473 Fixed Fee 6,551 3,022 Permanent Placement Services 402 800 Total Life Sciences and Information Technology $ 42,321 $ 39,295 $ 263,237 $ 284,680 Time and Material The Company’s Health Care segment predominantly recognizes revenue through time and material work while its Engineering and Life Sciences and Information Technology segments recognize revenue through both time and material and fixed fee work.
The Company derives its revenue from several sources. The Company’s Engineering Services, Life Sciences and Information Technology segments perform consulting and project solution services. The Healthcare segment specializes in long-term and short-term staffing and placement services to hospitals, schools and long-term care facilities amongst others.
The Company derives its revenue from several sources. The Company’s Engineering Services and Life Sciences and Information Technology segments perform consulting and project solution services. The Healthcare segment specializes in long-term and short-term staffing and placement services to hospitals, schools and long-term care facilities amongst others.
Dividends for these grants are accrued on the dividend payment dates and included in accounts payable and accrued expenses on the accompanying consolidated balance sheet. Dividends for performance-based restricted stock awards that ultimately do not vest are forfeited. Forward-looking Information The Company’s growth prospects are influenced by broad economic trends.
Dividends for these grants are accrued on the dividend payment dates and included in accounts payable and accrued expenses on the accompanying consolidated balance sheet. Dividends for performance-based restricted stock and stock unit awards that ultimately do not vest are forfeited. Forward-looking Information The Company’s growth prospects are influenced by broad economic trends.
These performance-based restricted stock awards typically include dividend accrual equivalents, which means that any dividends paid by the Company during the vesting period become due and payable after the vesting period on any stock awards that actually vest, if any.
These performance-based restricted stock and stock unit awards typically include dividend accrual equivalents, which means that any dividends paid by the Company during the vesting period become due and payable after the vesting period on any stock and stock unit awards that actually vest, if any.
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.
Overview The Company 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.
When the Company determines that it is probable that undiscounted future cash flows will not be sufficient to recover an asset’s carrying amount, the asset is written down to its fair value. Assets to be disposed of by sale, if any, are reported at the lower of the carrying amount or fair value less cost to sell. 29 ITEM 7.
When the Company determines that it is probable that undiscounted future cash flows will not be sufficient to recover an asset’s carrying amount, the asset is written down to its fair value. Assets to be disposed of by sale, if any, are reported at the lower of the carrying amount or fair value less cost to sell.
Discussions of matters relating to the fiscal year ended January 2, 2021 and year-to-year comparison between that year and the year ended January 1, 2022 that are not included in this Form 10-K can be found in “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations ” in Part II, Item 7 of RCM ’ s Annual Report on Form 10-K for the fiscal year ended January 1, 2022.
Discussions of matters relating to the fiscal year ended January 1, 2022 and year-to-year comparison between that year and the year ended December 31, 2022 that are not included in this Form 10-K can be found in “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations ” in Part II, Item 7 of the Company ’ s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Accounts Receivable and Allowance for Doubtful Accounts The Company’s accounts receivable are primarily due from trade customers. Credit is extended based on evaluation of customers’ financial condition and, generally, collateral is not required. Accounts receivable payment terms vary and are stated in the financial statements at amounts due from customers net of an allowance for doubtful accounts.
Credit is extended based on evaluation of customers’ financial condition and, generally, collateral is not required. Accounts receivable payment terms vary and are stated in the financial statements at amounts due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than the payment terms are considered past due.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The following discussion and analysis contains forward-looking statements, including, without limitation, statements relating to our plans, strategies, objectives, expectations, intentions and resources. Such forward-looking statements should be read in conjunction with our disclosures under “ Item 1A. Risk Factors ” of this Form 10-K.
ITEM 6. RESERVED 25 ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The following discussion and analysis contains forward-looking statements, including, without limitation, statements relating to our plans, strategies, objectives, expectations, intentions and resources. Such forward-looking statements should be read in conjunction with our disclosures under “ Item 1A.
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.
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. 26 ITEM 7.
In addition, global events such as the ongoing COVID-19 pandemic and endemic also have a substantial impact on our operations and financial results. The Company believes that its fiscal discipline, strategic focus on targeted vertical markets and diversification of service offerings provides some insulation from adverse trends.
In addition, global events such as international conflicts or health pandemics and endemics also have a substantial impact on our operations and financial results. The Company believes that its fiscal discipline, strategic focus on targeted vertical markets and diversification of service offerings provides some insulation from adverse trends.
As of December 31, 2022, the Company had both domestic and foreign net deferred tax liabilities of $1.7 million. The domestic long term net deferred tax liability of $1.5 million includes $4.0 million in deferred liabilities offset by $2.5 million in deferred tax assets.
As of December 30, 2023, the Company had both domestic and foreign net deferred tax liabilities of $1.7 million. The domestic long term net deferred tax liability of $1.6 million includes $4.3 million in deferred liabilities offset by $2.7 million in deferred tax assets.
Variances in actual results versus budgeted amounts can have a significant impact on the calculations and therefore on the estimates of the required accruals. Accordingly, the actual earned bonuses may be materially different from the estimates used to determine the quarterly accruals. Performance-Based Restricted Stock Awards From time-to-time the Company issues performance-based restricted stock awards to its executives.
Variances in actual results versus budgeted amounts can have a significant impact on the calculations and therefore on the estimates of the required accruals. Accordingly, the actual earned bonuses may be materially different from the estimates used to determine the quarterly accruals.
This section of the Form 10-K generally discusses matters relating to the fiscal years ended December 31, 2022 and January 1, 2022 and year-to-year comparisons between such fiscal years.
Risk Factors ” of this Form 10-K. This section of the Form 10-K generally discusses matters relating to the fiscal years ended December 30, 2023 and December 31, 2022 and year-to-year comparisons between such fiscal years.
Long-Lived and Intangible Assets The Company evaluates long-lived assets and intangible assets with definite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Long-Lived and Intangible Assets The Company evaluates long-lived assets and intangible assets with definite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The Company recognizes revenue on these deliverables at the time the client accepts and approves the deliverables. 26 ITEM 7. 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.
The Company recognizes revenue on these deliverables at the time the client accepts and approves the deliverables. Costs of services consist primarily of salaries and compensation-related expenses for billable consultants and employees, including payroll taxes, employee benefits and insurance.
The deferred tax liabilities consist of acquisition amortization of $1.7 million, prepaid expenses of $0.9 million and advance depreciation deductions of $0.4 million. The domestic deferred tax assets consist of lease liabilities of $1.1 million and various deferred expense accruals and reserves of $0.9 million.
The deferred tax liabilities consist of acquisition amortization of $1.8 million, prepaid expenses of $1.0 million, advance depreciation deductions of $0.7 million and right of use assets of $0.7 million. The domestic deferred tax assets consist of lease liabilities of $0.8 million, reserves and accruals of $0.8 million, compensation of $0.7 million and allowance for doubtful accounts of $0.4 million.
The Company establishes loss provisions based on historical experience and in the case of expected losses from workers compensation, considers input from third parties. The amounts included in the Company’s costs related to this risk participation are estimated and can vary based on changes in assumptions, the Company’s claims experience or the providers included in the associated insurance programs.
The amounts included in the Company’s costs related to this risk participation are estimated and can vary based on changes in assumptions, the Company’s claims experience or the providers included in the associated insurance programs.
In addition, the Company is subject to the examination of its income tax returns by the Internal Revenue Service and other tax authorities. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. 30 ITEM 7.
The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. 30 ITEM 7.
The Company will then recognize the appropriate expense cumulatively in the year performance becomes probable and recognize the remaining compensation cost over the remaining requisite service period. If at a later measurement date the Company determines that performance-based restricted stock awards deemed as likely to vest are deemed as unlikely to vest, the expense recognized will be reversed.
If at a later measurement date the Company determines that performance-based restricted stock or stock unit awards deemed as likely to vest are deemed as unlikely to vest, the expense recognized will be reversed.
The Company has no open Federal audits as of December 31, 2022. Except for limited exceptions, the Company is no longer subject to audits by state and local tax authorities for tax years prior to 2018. The Company is no longer subject to audit in Canada for the tax years prior to tax year 2018.
The Company and its subsidiaries file a consolidated United States Federal income tax return and file in various states. The Company has no open Federal audits as of December 30, 2023. Except for limited exceptions, the Company is no longer subject to audits by state and local tax authorities for tax years prior to 2019.
There was no goodwill impairment in fiscal 2022 or 2021. During all periods presented, the Company determined that the existing qualitative factors did not suggest that an impairment of goodwill exists. There can be no assurance that future indicators of impairment and tests of goodwill impairment will not result in impairment charges for both its Engineering and Specialty Healthcare segments.
There was no goodwill impairment in fiscal 2023 or 2022. During all periods presented, the Company determined that the existing qualitative factors did not suggest that an impairment of goodwill exists.
The Company is no longer subject to audit in Puerto Rico for the tax years prior to tax year 2012. The Company’s future effective tax rates could be adversely affected by changes in the valuation of its deferred tax assets or liabilities or changes in tax laws or interpretations thereof.
The Company’s future effective tax rates could be adversely affected by changes in the valuation of its deferred tax assets or liabilities or changes in tax laws or interpretations thereof. In addition, the Company is subject to the examination of its income tax returns by the Internal Revenue Service and other tax authorities.
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.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Overview (Continued) 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.
The Company also had $0.2 million in foreign net deferred tax liabilities as of December 31, 2022. The Company conducts its operations in multiple tax jurisdictions in the United States, Canada, Puerto Rico and Serbia. The Company and its subsidiaries file a consolidated United States Federal income tax return and file in various states.
As of December 30, 2023, the Company had $0.1 million in foreign net deferred tax liabilities associated with its Canadian operations and a small deferred tax asset associated with its German operations. The Company conducts its operations in multiple tax jurisdictions in the United States, Canada, Germany, Puerto Rico and Serbia.
The Company measures stock-based compensation cost using the Black-Scholes option pricing model for stock options and the fair value of the underlying common stock at the date of grant for restricted stock awards. Insurance Liabilities The Company has risk participation arrangements with respect to workers compensation and health care insurance.
This compensation cost is measured based on the fair value of the equity or liability instruments issued. The Company measures stock-based compensation cost using the Black-Scholes option pricing model for stock options and the fair value of the underlying common stock at the date of grant for restricted stock awards.
The Company follows Financial Accounting Standards Board (FASB), Accounting Standards Codification (ASC) Topic 718 “Compensation – Stock Compensation” which requires that the compensation cost relating to stock-based payment transactions be recognized in the financial statements. This compensation cost is measured based on the fair value of the equity or liability instruments issued.
Accounting for Restricted Stock Awards The Company uses restricted stock awards to attract, retain and reward employees for long-term service. The Company follows Financial Accounting Standards Board (FASB), Accounting Standards Codification (ASC) Topic 718 “Compensation – Stock Compensation” which requires that the compensation cost relating to stock-based payment transactions be recognized in the financial statements.
Deferred revenue may be recognized over a period exceeding one year from the time it was recorded on the balance sheet. In the fiscal years ended December 31, 2022 and January 1, 2022, the Company recognized revenue of $3.4 million and $0.4 million, respectively, that was included in deferred revenue at the beginning of the reporting period.
In the fiscal years ended December 30, 2023 and December 31, 2022, the Company recognized revenue of $1.1 million and $3.4 million, respectively, that was included in deferred revenue at the beginning of the reporting period. Accounts Receivable and Allowance for Doubtful Accounts The Company’s accounts receivable are primarily due from trade customers.
Performance-based restricted stock awards are typically vested based on certain multi-year performance metrics as determined by the Board of Directors Compensation Committee. The Company will reassess at each reporting date whether achievement of any performance condition is probable and would begin recognizing additional compensation cost if and when achievement of the performance condition becomes probable.
The Company will reassess at each reporting date whether achievement of any performance condition is probable and would begin recognizing additional compensation cost if and when achievement of the performance condition becomes probable. The Company will then recognize the appropriate expense cumulatively in the year performance becomes probable and recognize the remaining compensation cost over the remaining requisite service period.
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MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS COVID-19 Considerations The Company’s priorities during the COVID-19 pandemic and endemic 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.
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These fees are typically based on a percentage of the compensation paid to the person placed with the Company’s client. The Company guarantees its permanent placements on a prorated basis for 90 days. In the event a candidate is not retained for the 90-day period, the Company will provide a suitable replacement candidate.
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In the future, the pandemic and endemic may cause reduced demand for our services if, for example, the pandemic and endemic 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.
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In the event a replacement candidate cannot be located, the Company will provide a prorated refund to the client. An allowance for refunds, based upon the Company’s historical experience, is recorded in the financial statements. Deferred Revenue There was $1.9 million of deferred revenue as of December 30, 2023. Deferred revenue was $1.1 million as of December 31, 2022.
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Our ability to continue to operate without any significant negative operational impact from the COVID-19 pandemic and endemic will in part depend on our ability to protect our employees and our supply chain.
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Revenue is recognized when the service has been performed. Deferred revenue may be recognized over a period exceeding one year from the time it was recorded on the balance sheet, although this is an infrequent occurrence.
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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.
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There can be no assurance that future indicators of impairment and tests of goodwill impairment will not result in impairment charges for both its Engineering and Specialty Healthcare segments. 29 ITEM 7.
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While our revenue, gross profit and operating income were negatively impacted in fiscal 2020 on a consolidated basis and in fiscal 2021 for certain business lines, we have maintained the consistency of our operations, to a substantial degree, from the onset of the COVID-19 pandemic and endemic.
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Insurance Liabilities The Company has risk participation arrangements with respect to workers compensation and health care insurance. The Company establishes loss provisions based on historical experience and in the case of expected losses from workers compensation, considers input from third parties.
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We intend to continue to adhere to our employee safety measures as we seek to ensure that any disruptions to our operations remain as limited as possible during the pandemic and endemic.
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The Company is no longer subject to audit in Canada for the tax years prior to tax year 2019. The Company is no longer subject to audit in Puerto Rico for the tax years prior to tax year 2018.
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However, the uncertainty resulting from the pandemic and endemic could result in an unforeseen disruption to our workforce and supply chain (for example, an inability of a key supplier or transportation supplier to source and transport materials) that could negatively impact our operations.
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Performance-Based Restricted Stock and Stock Unit Awards From time-to-time the Company issues performance-based restricted stock and stock unit awards to its executives. Performance-based restricted stock and stock unit awards are typically vested based on certain multi-year performance metrics as determined by the Board of Directors Compensation Committee.
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Any material changes to labor rates for the Company’s workforce may have a material negative impact to revenue, gross profit and operating income. For additional information on risk factors related to the pandemic and endemic or other risks that could impact our results, please refer to “Risk Factors” in Part II, Item 1A of this Form 10-K.
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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. 25 ITEM 7.
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These fees are typically based on a percentage of the compensation paid to the person placed with the Company’s client. There was $1.1 million of deferred revenue as of December 31, 2022. Deferred revenue was $3.4 million as of January 1, 2022. Revenue is recognized when the service has been performed.
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Accounts outstanding longer than the payment terms are considered past due.
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MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Accounting for Restricted Stock Awards The Company uses restricted stock awards to attract, retain and reward employees for long-term service.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

75 edited+13 added−8 removed44 unchanged
Biggest changeMANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year Ended December 31, 2022 Compared to Fiscal Year Ended January 1, 2022 A summary of operating results for the fiscal years ended December 31, 2022 and January 1, 2022 is as follows (in thousands): Fiscal Years Ended December 31, 2022 January 1, 2022 Amount % of Revenue Amount % of Revenue Revenue $ 284,680 100.0 $ 203,875 100.0 Cost of services 201,753 70.9 150,751 73.9 Gross profit 82,927 29.1 53,124 26.1 Selling, general and administrative 53,395 18.8 42,019 20.6 Depreciation and amortization of property and equipment 995 0.3 1,007 0.5 Amortization of acquired intangible assets 46 0.0 95 0.1 Gain on sale of assets (219 ) (0.1 ) (2,420 ) (1.2 ) Remeasurement of acquisition-related contingent consideration (88 ) (0.0 ) (1,713 ) (0.8 ) Operating costs and expenses 54,129 19.0 38,988 19.2 Operating income 28,798 10.1 14,136 6.9 Other expense, net 318 0.1 222 0.1 Income before income taxes 28,480 10.0 13,914 6.8 Income tax expense 7,591 2.7 2,925 1.4 Net income $ 20,889 7.3 $ 10,989 5.4 The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31.
Biggest changeMANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year Ended December 30, 2023 Compared to Fiscal Year Ended December 31, 2022 A summary of operating results for the fiscal years ended December 30, 2023 and December 31, 2022 is as follows (in thousands): Fiscal Years Ended December 30, 2023 December 31, 2022 Amount % of Revenue Amount % of Revenue Revenue $ 263,237 100.0 $ 284,680 100.0 Cost of services 186,541 70.9 201,753 70.9 Gross profit 76,696 29.1 82,927 29.1 Selling, general and administrative 52,185 19.8 53,395 18.8 Depreciation and amortization of property and equipment 1,032 0.4 995 0.3 Amortization of acquired intangible assets 182 0.1 46 0.0 Gain on sale of assets (395 ) (0.2 ) (219 ) (0.1 ) Remeasurement of acquisition-related contingent consideration - - (88 ) - Operating costs and expenses 53,004 20.1 54,129 19.0 Operating income 23,692 9.0 28,798 10.1 Other expense, net 1,497 0.6 318 0.1 Income before income taxes 22,195 8.4 28,480 10.0 Income tax expense 5,364 2.0 7,591 2.7 Net income $ 16,831 6.4 $ 20,889 7.3 The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31.
Under the terms of the Executive Severance Agreement, if either (a) the executive is involuntarily terminated by the Company for any reason other than “Cause” (as defined therein), “Disability” (as defined therein) or death, or (b) the executive resigns for “Good Reason” (as defined therein), and, in each case, the termination is not a “Termination Related to a Change in Control” (as defined below), the executive will receive the following severance payments: (i) an amount equal to 1.5 times the sum of (a) the executive’s annual base salary as in effect immediately prior to the termination date (before taking into account any reduction that constitutes Good Reason) (“Annual Base Salary”) and (b) the highest annual bonus paid to the executive in any of the three fiscal years immediately preceding the executive’s termination date (“Bonus”), to be paid in installments over the twelve month period following the executive’s termination date; and (ii) for a period of eighteen months following the executive’s termination date, a monthly payment equal to the monthly COBRA premium that the executive is required to pay to continue medical, vision, and dental coverage, for himself and, where applicable, his spouse and eligible dependents. 43 ITEM 7.
Under the terms of the Executive Severance Agreement, if either (a) the executive is involuntarily terminated by the Company for any reason other than “Cause” (as defined therein), “Disability” (as defined therein) or death, or (b) the executive resigns for “Good Reason” (as defined therein), and, in each case, the termination is not a “Termination Related to a Change in Control” (as defined below), the executive will receive the following severance payments: (i) an amount equal to 1.5 times the sum of (a) the executive’s annual base salary as in effect immediately prior to the termination date (before taking into account any reduction that constitutes Good Reason) (“Annual Base Salary”) and (b) the highest annual bonus paid to the executive in any of the three fiscal years immediately preceding the executive’s termination date (“Bonus”), to be paid in installments over the twelve month period following the executive’s termination date; and (ii) for a period of eighteen months following the executive’s termination date, a monthly payment equal to the monthly COBRA premium that the executive is required to pay to continue medical, vision, and dental coverage, for himself and, where applicable, his spouse and eligible dependents.
There are four primary factors that generally impact accrued payroll and related costs: 1) there is a general correlation to operating expenses as payroll and related costs is the Company’s largest expense group, so as operating costs increase or decrease, absent all other factors, so will the accrued payroll and related costs; 2) the Company pays the majority of its payroll every two weeks and normally has thirteen weeks in a fiscal quarter, which means that the Company normally has a major payroll on the last business day of every other quarter; 3) the timing of various payroll related payments varies in the normal course of business; and 4) most of the Company’s senior management participate in annual incentive plans and while progress advances are sometimes made during the fiscal year, these accrued bonus balances, to the extent they are projected to be achieved, generally accumulate throughout the year.
There are four primary factors that generally impact accrued payroll and related costs: 1) there is a general correlation to operating expenses as payroll and related costs is the Company’s largest expense group, so as operating costs increase or decrease, absent all other factors, so will the accrued payroll and related costs; 2) the Company pays the majority of its payroll every two weeks and normally has thirty-nine weeks in a fiscal quarter, which means that the Company normally has a major payroll on the last business day of every other quarter; 3) the timing of various payroll related payments varies in the normal course of business; and 4) most of the Company’s senior management participate in annual incentive plans and while progress advances are sometimes made during the fiscal year, these accrued bonus balances, to the extent they are projected to be achieved, generally accumulate throughout the year.
While the Company expects to receive future upfront payments from its Industrial Processing clients, the Company cannot reasonably forecast deferred revenue balances as the timing of contract wins and front-loaded payments are typically haphazard.
While the Company expects to receive future upfront payments from its Industrial Processing clients, the Company cannot reasonably forecast deferred revenue balances as the timing of contract wins and front-loaded payments are typically irregular.
However, the Company believes that such matters will not, either individually or in the aggregate, have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows. As of December 31, 2022, the Company has accrued $2.9 million for asserted claims. 41 ITEM 7.
However, the Company believes that such matters will not, either individually or in the aggregate, have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows. As of December 30, 2023, the Company has accrued $2.9 million for asserted claims. 41 ITEM 7.
The Company paid contingent consideration of $0.1 million in the current period as compared to $0.5 million in the comparable prior year period. 39 ITEM 7.
The Company paid contingent consideration of $0.3 million in the current period as compared to $0.1 million in the comparable prior year period. 39 ITEM 7.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources (Continued) Future Contingent Payments As of December 31, 2022, the Company had two active acquisition agreements whereby additional contingent consideration may be earned by the sellers: 1) effective September 30, 2018, the Company acquired certain assets of Thermal Kinetics Engineering, PLLC and Thermal Kinetics Systems, LLC (together, “TKE”), and 2) effective October 2, 2022, the Company acquired certain assets of TalentHerder LLC.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources (Continued) Future Contingent Payments As of December 30, 2023, the Company had two acquisition agreements whereby additional contingent consideration may be earned by the sellers: 1) effective September 30, 2018, the Company acquired certain assets of Thermal Kinetics Engineering, PLLC and Thermal Kinetics Systems, LLC, and 2) effective October 2, 2022, the Company acquired certain assets of TalentHerder LLC.
The major components of cash used in or provided by operating activities in the fiscal year ended December 31, 2022 and the comparable prior year period are as follows: net income and changes in accounts receivable, the net of transit accounts payable and transit accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and accrued payroll and related costs, and deferred revenue.
The major components of cash used in or provided by operating activities in the fiscal year ended December 30, 2023 and the comparable prior year period are as follows: net income and changes in accounts receivable, the net of transit accounts payable and transit accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and accrued payroll and related costs, and deferred revenue.
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 November 2027.
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 October 2029.
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 December 31, 2022, where the Company believes it has a probability of loss.
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 December 30, 2023, where the Company believes it has a probability of loss.
The Company estimates future contingent consideration payments based on forecasted performance and recorded the fair value of those expected payments as of December 31, 2022. Contingent consideration related to acquisitions is recorded at fair value (level 3) with changes in fair value recorded in other (expense) income, net.
The Company estimates future contingent consideration payments based on forecasted performance and recorded the fair value of those expected payments as of December 30, 2023. Contingent consideration related to acquisitions is recorded at fair value (level 3) with changes in fair value recorded in other (expense) income, net.
Other expense (income) consists of interest expense, unused line fees and amortized loan costs on the Company’s line of credit, net of interest income and gains and losses on foreign currency transactions. Other expense (income) increased by $0.1 million as compared to the comparable prior year period, primarily due to a decrease in gains on foreign currency transactions.
Other expense, net consists of interest expense, unused line fees and amortized loan costs on the Company’s line of credit, net of interest income and gains and losses on foreign currency transactions. Other expense, net increased by $1.1 million as compared to the comparable prior year period, primarily due to an increase in interest expense, net.
The following unaudited tables present the Company's GAAP net income and GAAP operating income and the corresponding adjustments used to calculate Adjusted operating income, EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted diluted net earnings per share for the fiscal years ended December 31, 2022 and January 1, 2022.
The following unaudited tables present the Company's GAAP net income and GAAP operating income and the corresponding adjustments used to calculate Adjusted operating income, EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted diluted net earnings per share for the fiscal years ended December 30, 2023 and December 31, 2022.
The Company used $17.6 million to repurchase shares of its common stock in the current period as compared to $9.0 million in the comparable prior year period. The Company generated cash of $0.4 million and $0.1 million from sales of shares from its equity plans for the current period and the comparable prior year period, respectively.
The Company used $25.8 million to repurchase shares of its common stock in the current period as compared to $17.6 million in the comparable prior year period. The Company generated cash of $0.7 million and $0.4 million from sales of shares from its equity plans for the current period and the comparable prior year period, respectively.
As of December 31, 2022, the Company was in compliance with all financial covenants contained in the Revolving Credit Facility. The Company believes that it will maintain compliance with its financial covenants for the foreseeable future.
As of December 30, 2023, the Company was in compliance with all financial covenants contained in the Revolving Credit Facility. The Company believes that it will maintain compliance with its financial covenants for the foreseeable future.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources (Continued) Operating Activities (Continued) Changes in accrued payroll and related costs provided negligible cash for the fiscal year ended December 31, 2022 as compared to $0.1 million for the fiscal year ended January 1, 2022.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources (Continued) Operating Activities (Continued) Changes in accrued payroll and related costs used $1.3 million for the fiscal year ended December 30, 2023 as compared to negligible cash for the fiscal year ended December 31, 2022.
Differences between the effective tax rate and the applicable U.S. federal statutory rate may arise, primarily from the effect of state and local income taxes, share-based compensation, and potential tax credits available to the Company.
Differences between the effective tax rate and the applicable U.S. federal statutory rate may arise, primarily from the effect of state and local income taxes, and share-based compensation.
Dividends All restricted share awards contain a dividend equivalent provision entitling holders to dividends paid between the restricted stock unit grant date and ultimate share distribution date. As of December 31, 2022, there were no accrued dividends.
Dividends All restricted share awards contain a dividend equivalent provision entitling holders to dividends paid between the restricted stock award grant date and ultimate share distribution date. As of December 30, 2023, there were no accrued dividends.
SGA expense increased to $8.5 million as compared to $8.3 million in the comparable prior-year period. The Life Sciences and Information Technology segment experienced operating income of $4.7 million as compared to $3.3 million for the comparable prior-year period. The increase in operating income was primarily due to the increase in gross profit. 35 ITEM 7.
The Life Sciences and Information Technology segment experienced operating income of $6.6 million as compared to $4.7 million for the comparable prior-year period. The increase in operating income was primarily due to an increase in gross profit, offset by an increase to SGA expense. SGA expense increased to $9.2 million as compared to $8.5 million in the comparable prior-year period.
Specialty Health Care experienced operating income of $19.8 million for the fiscal year ended December 31, 2022, as compared to $5.5 million for the comparable prior-year period. The primary reason for the increase in operating income was the increase to gross profit, offset by an increase in SGA expense.
Specialty Health Care experienced operating income of $13.5 million for the fiscal year ended December 30, 2023, as compared to $19.8 million for the comparable prior-year period. The primary reason for the decrease in operating income was the decrease in gross profit, offset by a decrease in SGA expense.
Revenue increased $60.9 million in the Specialty Health Care segment, $19.8 million in the Engineering segment and $0.1 million in the Life Sciences and Information Technology segment. See Segment Discussion for further information on revenue changes. Cost of Services and Gross Profit.
Revenue decreased $23.2 million in the Specialty Health Care segment, decreased $1.2 million in the Engineering segment and increased $3.0 million in the Life Sciences and Information Technology segment. See Segment Discussion for further information on revenue changes. Cost of Services and Gross Profit.
The Life Sciences and Information Technology gross profit margin for the fiscal year ended December 31, 2022 was 33.9% as compared to 30.0% for the comparable prior-year period. The Company attributes the gross profit margin increase to higher revenue from its Life Sciences practice and a concerted effort to increase gross profit margin through its managed service offerings.
The Life Sciences and Information Technology gross profit margin for the fiscal year ended December 30, 2023 was 38.2% as compared to 33.9% for the comparable prior-year period. The Company attributes the gross profit margin increase to a concerted effort to increase gross profit margin through its managed service offerings.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources The following table summarizes the major captions from the Company’s Consolidated Statements of Cash Flows ($ in thousands): Fiscal Years Ended December 31, 2022 January 1, 2022 Cash provided by (used in): Operating activities $ 28,283 $ 915 Investing activities $ (4,820 ) $ 6,291 Financing activities $ (23,127 ) $ (7,554 ) Operating Activities Operating activities provided $28.3 million of cash for the fiscal year ended December 31, 2022 as compared to $0.9 million in the comparable prior year period.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources The following table summarizes the major captions from the Company’s Consolidated Statements of Cash Flows ($ in thousands): Fiscal Years Ended December 30, 2023 December 31, 2022 Cash provided by (used in): Operating activities $ 12,482 $ 28,283 Investing activities $ (2,536 ) $ (4,820 ) Financing activities $ (3,855 ) $ (23,127 ) Operating Activities Operating activities provided $12.5 million of cash for the fiscal year ended December 30, 2023 as compared to $28.3 million in the comparable prior year period.
An increase in accounts payable and accrued expenses provided cash of $4.9 million for the fiscal year ended December 31, 2022 as compared to $1.5 million for the comparable prior year period. The Company attributes these changes to typical fluctuations in the normal course of business. 38 ITEM 7.
A decrease in accounts payable and accrued expenses used cash of $1.5 million for the fiscal year ended December 30, 2023 as compared to providing $4.9 million for the comparable prior year period. The Company attributes these changes to typical fluctuations in the normal course of business. 38 ITEM 7.
Investing Activities Investing activities used $4.8 million of cash for the fiscal year ended December 31, 2022 and provided $6.3 million for the fiscal year ended January 1, 2022. Investing activities used $0.9 million for the purchase of property and equipment in the current period as compared to $0.6 million in the prior year comparable period.
Investing Activities Investing activities used $2.5 million of cash for the fiscal year ended December 30, 2023 and $4.8 million for the fiscal year ended December 31, 2022. Investing activities used $2.9 million for the purchase of property and equipment in the current period as compared to $0.9 million in the prior year comparable period.
The Company made net payments under its line of credit of $5.4 million during the fiscal year ended December 31, 2022 as compared to net borrowings of $2.3 million in the comparable prior year period.
The Company made net borrowings under its line of credit of $22.0 million during the fiscal year ended December 30, 2023 as compared to net payments of $5.4 million in the comparable prior year period.
Prepaid expenses and other current assets used cash of $2.4 million for the fiscal year ended December 31, 2022 as compared to providing $1.8 million of cash for the comparable prior year period. The Company attributes changes to prepaid expenses and other current assets, if any, to general timing of payments in the normal course of business.
Prepaid expenses and other current assets provided negligible cash for the fiscal year ended December 30, 2023 as compared to using $2.4 million of cash for the comparable prior year period. The Company attributes changes to prepaid expenses and other current assets, if any, to general timing of payments in the normal course of business.
Life Sciences and Information Technology Life Sciences and Information Technology revenue of $39.3 million for the fiscal year ended December 31, 2022 increased by $0.1 million, as compared to $39.2 million for the comparable prior-year period.
Life Sciences and Information Technology Life Sciences and Information Technology revenue of $42.3 million for the fiscal year ended December 30, 2023 increased by 7.7%, or $3.0 million, as compared to $39.3 million for the comparable prior-year period.
The net of transit accounts payable and transit accounts receivable was a net payable of $6.5 million as of December 31, 2022 as compared to a net payable of $1.1 million as of January 1, 2022, providing $5.4 million of cash during the fiscal year ended December 31, 2022.
The net of transit accounts payable and transit accounts receivable was a net payable of $22.2 million as of December 30, 2023 as compared to a net payable of $6.5 million as of December 31, 2022, providing $15.7 million of cash during the fiscal year ended December 30, 2023.
The increase in revenue was driven by both the Company’s school and non-school clients. Revenue from school clients for the fiscal year ended December 31, 2022 was $114.2 million as compared to $66.6 million for the comparable prior-year period.
The decrease in revenue was driven by both the Company’s school and non-school clients. Revenue from school clients for the fiscal year ended December 30, 2023 was $103.0 million as compared to $114.2 million for the comparable prior-year period.
The Company believes that it can satisfy its liquidity needs for at least the next twelve months. The Company’s liquidity and capital resources as of December 31, 2022, included accounts receivable and total current asset balances of $50.8 million and $59.0 million, respectively.
The Company believes that it can satisfy its liquidity needs for at least the next twelve months. The Company’s liquidity and capital resources as of December 30, 2023, included accounts receivable and total current asset balances of $70.7 million and $90.5 million, respectively.
The Company estimates future contingent payments at December 31, 2022 as follows: Fiscal Years Ending Total December 30, 2023 $ 472 Thereafter 1,970 Estimated future contingent consideration payments $ 2,442 Estimates of future contingent payments are subject to significant judgment and actual payments may materially differ from estimates.
The Company estimates future contingent payments at December 30, 2023 as follows: Fiscal Years Ending Total The four quarters following December 30, 2023 $ 300 Thereafter 1,671 Estimated future contingent consideration payments $ 1,971 Estimates of future contingent payments are subject to significant judgment and actual payments may materially differ from estimates.
Selling, general and administrative (“SGA”) expenses were $53.4 million for the fiscal year ended December 31, 2022 as compared to $42.0 million for the comparable prior year period. As a percentage of revenue, SGA expenses were 18.8% for the fiscal year ended December 31, 2022 and 20.6% for the comparable prior year period.
Selling, general and administrative (“SGA”) expenses were $52.2 million for the fiscal year ended December 30, 2023 as compared to $53.4 million for the comparable prior year period. As a percentage of revenue, SGA expenses were 19.8% for the fiscal year ended December 30, 2023 and 18.8% for the comparable prior year period.
For the fiscal year ended December 31, 2022, the Company experienced net income of $20.9 million as compared to $11.0 million for the comparable prior year period. An increase in accounts receivables in the fiscal year ended December 31, 2022, used $1.5 million of cash as compared to $14.7 million in the comparable prior year period.
For the fiscal year ended December 30, 2023, the Company experienced net income of $16.8 million as compared to $20.9 million for the comparable prior year period. An increase in accounts receivables in the fiscal year ended December 30, 2023, used $20.6 million of cash as compared to $1.5 million in the comparable prior year period.
Under the terms of the Executive Severance Agreement, if a Change in Control occurs and (a) the executive experiences a Termination Related to a Change in Control on account of (i) an involuntary termination by the Company for any reason other than Cause, death, or Disability, (ii) an involuntary termination by the Company within a specified period of time following a Change in Control (12 months for Mr.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources (Continued) Future Contingent Payments (Continued) Executive Severance Agreements (Continued) Under the terms of the Executive Severance Agreement, if a Change in Control occurs and (a) the executive experiences a Termination Related to a Change in Control on account of (i) an involuntary termination by the Company for any reason other than Cause, death, or Disability, (ii) an involuntary termination by the Company within a specified period of time following a Change in Control (12 months for Mr.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources (Continued) Future Contingent Payments (Continued) Executive Severance Agreements (Continued) Notwithstanding the above, if the executive has a termination as described above and can reasonably demonstrate that such termination would constitute a Termination Related to a Change in Control, and a Change in Control occurs within 120 days following the executive’s termination date, the executive will be entitled to receive the payments set forth below for a Termination Related to a Change in Control, less any amounts already paid to the executive, upon consummation of the Change in Control.
Notwithstanding the above, if the executive has a termination as described above and can reasonably demonstrate that such termination would constitute a Termination Related to a Change in Control, and a Change in Control occurs within 120 days following the executive’s termination date, the executive will be entitled to receive the payments set forth below for a Termination Related to a Change in Control, less any amounts already paid to the executive, upon consummation of the Change in Control. 43 ITEM 7.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year Ended December 31, 2022 Compared to Fiscal Year Ended January 1, 2022 (Continued) Segment Discussion (Continued) Engineering Engineering revenue of $85.9 million for the fiscal year ended December 31, 2022 increased 29.9%, or $19.8 million, compared to the comparable prior-year period.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year Ended December 30, 2023 Compared to Fiscal Year Ended December 31, 2022 (Continued) Segment Discussion (Continued) Engineering Engineering revenue of $84.7 million for the fiscal year ended December 30, 2023 decreased by 1.5%, or $1.2 million, compared to the comparable prior-year period.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year Ended December 31, 2022 Compared to Fiscal Year Ended January 1, 2022 (Continued) Segment Discussion Specialty Health Care Specialty Health Care revenue of $159.4 million for the fiscal year ended December 31, 2022 increased 61.9%, or $60.9 million, as compared to the comparable prior-year period.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year Ended December 30, 2023 Compared to Fiscal Year Ended December 31, 2022 (Continued) Segment Discussion Specialty Health Care Specialty Health Care revenue of $136.2 million for the fiscal year ended December 30, 2023 decreased 14.6%, or $23.2 million, as compared to the comparable prior-year period.
As a result, the Company’s deferred revenue balance as of December 31, 2022, was $1.1 million, compared to $3.4 million as of January 1, 2022, creating positive cash from operations of $2.3 million for the fiscal year ending December 31, 2022.
As a result, the Company’s deferred revenue balance as of December 30, 2023 was $0.3 million, compared to $1.1 million as of December 31, 2022, using cash from operations of $0.8 million for the fiscal year ended December 30, 2023.
At both December 31, 2022 and January 1, 2022 there were letters of credit outstanding for $1.9 million. At December 31, 2022 and January 1, 2022, the Company had availability for additional borrowings under the Revolving Credit Facility of $34.3 million and $28.9 million, respectively.
At December 30, 2023 and December 31, 2022, the Company had availability for additional borrowings under the Revolving Credit Facility of $12.1 million and $34.3 million, respectively.
The Company recorded a net gain on the sale of these assets and liabilities of $2.4 million for the fiscal year ended January 1, 2022. For the fiscal year ended December 31, 2022, the Company recorded a gain of $0.2 million, which was due to receiving escrow funds associated with the sale of Canada Power Systems in fiscal 2021.
For the fiscal years ended December 30, 2023 and December 31, 2022, the Company recorded a gain of $0.4 and $0.2 million, respectively, which was due to receiving escrow funds associated with the sale of Canada Power Systems in fiscal 2021. Remeasurement of acquisition related contingent consideration.
As of December 31, 2022, the Company was in compliance with all covenants contained in the Revolving Credit Facility (as amended). The Company believes that it will maintain compliance with its financial covenants for the foreseeable future. Borrowings under the line of credit as of December 31, 2022 and January 1, 2022 were $8.8 million and $14.2 million, respectively.
The Company believes that it will maintain compliance with its financial covenants for the foreseeable future. Borrowings under the line of credit as of December 30, 2023 and December 31, 2022 were $30.9 million and $8.8 million, respectively. At December 30, 2023 and December 31, 2022, there were letters of credit outstanding for $2.0 and $1.9 million, respectively.
A significant portion of these incentive plan accruals are typically paid at the beginning of one fiscal year, pertaining to the prior fiscal year. The Company’s last major payroll for the fiscal year ended December 31, 2022 was paid on December 30, 2022. During fiscal 2020, the Company deferred $3.3 million of employer payroll taxes under the CARES Act.
A significant portion of these incentive plan accruals are typically paid at the beginning of one fiscal year, pertaining to the prior fiscal year. The Company’s last major payroll for the fiscal year ended December 30, 2023 was paid on December 29, 2023. Historically, the Company has experienced small deferred revenue balances.
The fiscal years ended December 31, 2022 (fiscal 2022) and January 1, 2022 (fiscal 2021) consisted of fifty-two weeks each. Revenue. Revenue increased 39.6%, or $80.8 million, for the fiscal year ended December 31, 2022 as compared to January 1, 2022 (the “comparable prior year period”).
The fiscal years ended December 30, 2023 (fiscal 2023) and December 31, 2022 (fiscal 2022) consisted of fifty-two weeks each. Revenue. Revenue decreased 7.5%, or $21.4 million, for the fiscal year ended December 30, 2023 as compared to December 31, 2022 (the “comparable prior year period”).
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.
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 December 30, 2023, the Company was in compliance with all covenants contained in the Revolving Credit Facility .
Gross profit of $13.3 million for the fiscal year ended December 31, 2022 increased 13.3%, or $1.6 million, as compared to $11.7 million for the comparable prior-year period. The increase in gross profit was primarily due to an increase in gross profit margin.
Gross profit of $16.2 million for the fiscal year ended December 30, 2023 increased 21.5%, or $2.9 million, as compared to $13.3 million for the comparable prior-year period. The increase in gross profit was due to the increase in revenue and an increase in gross profit margin.
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 Company primarily attributes this increase in accounts receivables for the fiscal year ended December 30, 2023 to normal fluctuations in accounts receivable relative to revenue. 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.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Supplemental Operating Results on a Non-GAAP Basis (Continued) Fiscal Years Ended December 31, 2022 January 1, 2022 GAAP net income $ 20,884 $ 10,989 Adjustments Gain on sale of assets (219 ) (2,420 ) Remeasurement of acquisition related contingent consideration (88 ) (1,713 ) Tax impact from normalized rate 83 (237 ) Adjusted net income (non-GAAP) $ 20,660 $ 7,093 GAAP diluted net earnings per share $ 2.00 $ 0.95 Adjustments Gain on sale of assets $ (0.02 ) $ (0.21 ) Remeasurement of acquisition related contingent consideration $ (0.01 ) $ (0.15 ) Tax impact from normalized rate $ 0.01 $ 0.02 Adjusted diluted net earnings per share (non-GAAP) $ 1.98 $ 0.61 37 ITEM 7.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Supplemental Operating Results on a Non-GAAP Basis (Continued) Fiscal Years Ended December 30, 2023 December 31, 2022 GAAP net income $ 16,831 $ 20,889 Adjustments Gain on sale of assets (395 ) (219 ) Remeasurement of acquisition related contingent consideration - (88 ) Loss (gain) on foreign currency transactions 98 (52 ) Equity compensation 2,092 1,582 Tax impact from normalized rate (467 ) (356 ) Adjusted net income (non-GAAP) $ 18,159 $ 21,756 GAAP diluted net earnings per share $ 1.96 $ 2.00 Adjustments Gain on sale of assets $ (0.05 ) $ (0.02 ) Remeasurement of acquisition related contingent consideration - $ (0.01 ) Loss (gain) on foreign currency transactions $ 0.01 $ (0.01 ) Equity compensation $ 0.24 $ 0.15 Tax impact from normalized rate $ (0.05 ) $ (0.03 ) Adjusted diluted net earnings per share (non-GAAP) $ 2.11 $ 2.08 37 ITEM 7.
While it is the overall impact of these offsetting dynamics is uncertain, the Company believes that, except for seasonality, it is well positioned for potential growth in revenue. 34 ITEM 7.
The Company believes that, except for seasonality, it is well positioned for growth in revenue going forward. 34 ITEM 7.
The Company’s business is labor intensive; therefore, the Company has a high exposure to increasing health care benefit costs.
Permanent placement services are priced as a function of salary levels of the job candidates. The Company’s business is labor intensive; therefore, the Company has a high exposure to increasing health care benefit costs.
Miller receives the Change in Control Payment, he will not be eligible to receive any severance payments under his Executive Severance Agreement. Mr. Saks, along with several other members of the Company’s senior management (not including Mr. Vizi and Mr. Miller), is covered by our Change in Control Plan for Selected Executive Management (the “CIC Plan”). Off-Balance Sheet Arrangements None.
Miller receives the Change in Control Payment, he will not be eligible to receive any severance payments under his Executive Severance Agreement. Michael Saks, our Division President, Health Care Services, as well as several other members of the Company’s senior management (not including Mr. Vizi and Mr.
Half of these deferred payroll taxes were paid in fiscal December 2021 and the remaining portion was paid in fiscal December 2022. Historically, the Company has experienced small deferred revenue balances. In fiscal 2022 and 2021, the Company’s Industrial Processing group secured several contracts with significant front-loaded payments, thereby generating larger deferred revenue balances than typically generated.
In fiscal 2023 and 2022, the Company’s Industrial Processing group secured several contracts with significant front-loaded payments, thereby generating larger deferred revenue balances than typically generated.
Current liabilities were $40.4 million as of December 31, 2022 and were exceeded by total current assets by $18.6 million. 40 ITEM 7.
Current liabilities were $58.2 million as of December 30, 2023 and were exceeded by total current assets by $32.3 million. 40 ITEM 7.
The Specialty Health Care segment’s gross profit increased by 89.2%, or $22.6 million, to $47.9 million for the fiscal year ended December 31, 2022, as compared to $25.3 million for the prior-year period. The increase in gross profit was primarily driven by the increase in revenue, but also a higher gross profit margin.
The Specialty Health Care segment’s gross profit decreased by 16.6%, or $8.0 million, to $39.9 million for the fiscal year ended December 30, 2023, as compared to $47.9 million for the prior-year period. The decrease in gross profit was primarily driven by the decrease in revenue.
Maturities of lease liabilities are as follows: Fiscal Year Operating Leases Finance Leases 2023 $ 1,460 $ 467 2024 754 233 2025 493 - 2026 409 - 2027 302 - Thereafter 1,455 - Total lease payments 4,873 700 Less: imputed interest (592 ) (6 ) Total $ 4,281 $ 694 42 ITEM 7.
Maturities of lease liabilities are as follows: Fiscal Year Operating Leases Finance Leases 2024 $ 771 $ 233 2025 506 - 2026 409 - 2027 302 - 2028 144 - Thereafter 1,311 - Total lease payments $ 3,443 $ 233 Less: imputed interest (482 ) - Total $ 2,961 $ 233 42 ITEM 7.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year Ended December 31, 2022 Compared to Fiscal Year Ended January 1, 2022 (Continued) Selling, General and Administrative.
See Segment Discussion for further information regarding changes in cost of services and gross profit. 32 ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year Ended December 30, 2023 Compared to Fiscal Year Ended December 31, 2022 (Continued) Selling, General and Administrative.
These alternatives are: (i) SOFR (Secured Overnight Financing Rate) (which replaced LIBOR (London Interbank Offered Rate) upon the phasing out of LIBOR), plus applicable margin, typically borrowed in fixed 30-day increments, plus applicable margin, typically borrowed in fixed 30-day increments or (ii) the agent bank’s prime rate generally borrowed over shorter durations.
These alternatives are: (i) SOFR (Secured Overnight Financing Rate), plus applicable margin, typically borrowed in fixed 30-day increments, 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.
Remeasurement of acquisition related contingent consideration. During both periods presented, the Company adjusted the forecasted contingent consideration for active acquisition agreements, which created discreet gains of $0.1 million for the fiscal year ended December 31, 2022 and $1.7 million for the comparable prior year period . Other Expense (Income).
The Company adjusted the forecasted contingent consideration for active acquisition agreements, which created a discreet gain of $0.1 million for the fiscal year ended December 31, 2022 . There was no remeasurement in the current fiscal year ended December 30, 2023. Other Expense, Net.
The Company is in the process of determining the effects the adoption will have on its consolidated financial statements. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.
The Company adopted the standard in its first quarter of 2023. There was no material impact on the results of operations. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.
Impact of Inflation Consulting, staffing, and project services are generally priced based on mark-ups on prevailing rates of pay, and as a result are able to generally maintain their relationship to direct labor costs. Permanent placement services are priced as a function of salary levels of the job candidates.
Miller), are covered by our Change in Control Plan for Selected Executive Management (the “CIC Plan”). Off-Balance Sheet Arrangements None. Impact of Inflation Consulting, staffing, and project services are generally priced based on mark-ups on prevailing rates of pay, and as a result are able to generally maintain their relationship to direct labor costs.
The Engineering segment’s SGA expense of $17.3 million increased by $3.1 million due to investment in new personnel to reposition and generate future growth. The Engineering segment experienced operating income of $4.3 million for the fiscal year ended December 31, 2022, as compared to $5.4 million for the comparable prior-year period.
The Engineering segment experienced operating income of $3.5 million for the fiscal year ended December 30, 2023, as compared to $4.3 million for the comparable prior-year period. The decrease in operating income was primarily due to the decrease in gross profit, offset by a $0.3 million decrease in SGA expense.
Gross profit margin for the fiscal year ended December 31, 2022 increased to 30.0% as compared to 25.7% for the comparable prior-year period. The increase in gross profit margin was primarily due to more normalized revenue and the high demand for certain services.
Gross profit margin for the fiscal year ended December 30, 2023 decreased to 29.3% as compared to 30.0% for the comparable prior-year period. The decrease in gross profit margin was primarily due to a mix shift for certain lower margin services.
Fiscal Years Ended December 31, 2022 January 1, 2022 GAAP operating income $ 28,798 $ 14,136 Adjustments Gain on sale of assets (219 ) (2,420 ) Remeasurement of acquisition related contingent consideration (88 ) (1,713 ) Adjusted operating income (non-GAAP) $ 28,491 $ 10,003 GAAP net income $ 20,884 $ 10,989 Income tax expense 7,591 2,925 Interest expense, net 370 365 Change in fair value of contingent consideration - 52 Depreciation of property and equipment 995 1,007 Amortization of acquired intangible assets 46 95 EBITDA (non-GAAP) $ 29,886 $ 15,433 Adjustments Gain on sale of assets (219 ) (2,420 ) Remeasurement of acquisition related contingent consideration (88 ) (1,713 ) Loss (gain) on foreign currency transactions (52 ) (195 ) Adjusted EBITDA (non-GAAP) $ 29,527 $ 11,105 36 ITEM 7.
Fiscal Years Ended December 30, 2023 December 31, 2022 GAAP operating income $ 23,692 $ 28,798 Adjustments Gain on sale of assets (395 ) (219 ) Remeasurement of acquisition related contingent consideration - (88 ) Equity compensation 2,092 1,582 Adjusted operating income (non-GAAP) $ 25,389 $ 30,073 GAAP net income $ 16,831 $ 20,889 Income tax expense 5,364 7,591 Interest expense, net 1,399 370 Depreciation of property and equipment 1,032 995 Amortization of acquired intangible assets 182 46 EBITDA (non-GAAP) $ 24,808 $ 29,891 Adjustments Gain on sale of assets (395 ) (219 ) Remeasurement of acquisition related contingent consideration - (88 ) Loss (gain) on foreign currency transactions 98 (52 ) Equity compensation 2,092 1,582 Adjusted EBITDA (non-GAAP) $ 26,603 $ 31,114 36 ITEM 7.
Revenue from non-school clients for the fiscal year ended December 31, 2022 was $45.2 million as compared to $31.9 million for the comparable prior-year period. Revenue increases were due to the reopening of Specialty Health Care school clients and unprecedented demand for health care professionals across all types of clients served.
Revenue from non-school clients for the fiscal year ended December 30, 2023 was $33.2 million as compared to $45.2 million for the comparable prior-year period.
The increase in revenue was comprised of the following: increases in Aerospace revenue of $16.3 million, Industrial Processing revenue of $5.3 million, and Energy Services revenue of $3.1 million, offset by a decrease in revenue of $4.9 million resulting from the sale of the Canadian Power Systems Group.
The decrease in revenue comprised the following: decreases in Aerospace revenue of $4.9 million and Industrial Processing revenue of $4.8 million, offset by an increase to Energy Services revenue of $8.5 million. The decrease in Aerospace revenue was primarily due to a contract reduction for the Company’s major outsourcing client.
Cost of services increased 33.8%, or $51.0 million, for the fiscal year ended December 31, 2022 as compared to the comparable prior year period. Cost of services increased primarily due to the increase in revenue.
Cost of services decreased 7.5%, or $15.2 million, for the fiscal year ended December 30, 2023 as compared to the comparable prior year period. Cost of services decreased primarily due to the decrease in revenue. Cost of services as a percentage of revenue for the fiscal years ended December 30, 2023 and the comparable prior year period was 70.9%.
The Company’s tax rates for fiscal 2022 are 27.0% for the United States, 23.3% for Canada, and 16.8% for Serbia. The relative income or loss generated in each jurisdiction can materially impact the overall effective income tax rate of the Company, particularly the ratio of Canadian and Serbian pretax income versus U.S. pretax income.
The relative income or loss generated in each jurisdiction can materially impact the overall effective income tax rate of the Company, particularly the ratio of Canadian and European pretax income versus U.S. pretax income. The effective income tax rate can also be impacted by discrete permanent differences affecting any period presented.
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 fiscal years ended December 31, 2022 and January 1, 2022 were 2.2% and 2.0%, respectively.
Unused line fees are recorded as interest expense. The effective weighted average interest rate, including unused line fees, for the fiscal years ended December 30, 2023 and December 31, 2022 were 6.5% and 2.2%, respectively. However, during the Company’s fiscal fourth quarter of 2023, it experienced a weighted average interest rate of 6.8%, including unused line.
Income Tax Expense . The Company recognized $7.6 million of income tax expense for the fiscal year ended December 31, 2022, as compared to $2.9 million for the comparable prior-year period. The consolidated effective income tax rate for the current period was 26.7% as compared to 21.0% for the comparable prior-year period.
The consolidated effective income tax rate for the current period was 24.2% as compared to 26.7% for the comparable prior-year period. The effective fiscal 2023 income tax rates as of December 30, 2023, were approximately 24.5%, 23.9% and 10.5% in the United States, Canada, and Europe, respectively.
The current year period used $4.2 million for the acquisition of TalentHerder. The prior year period includes $6.9 million in proceeds for the sale of the Company’s Canadian Power Systems business. Financing Activities Financing activities used $23.1 million of cash for the fiscal year ended December 31, 2022 and $7.6 million for the fiscal year ended January 1, 2022.
The fiscal years ended December 30, 2023 and December 31, 2022 both included discrete gains associated with the Company’s sale of its Canada Power Systems business unit. The prior year period used $4.2 million for the acquisition of TalentHerder.
The Company believes that the impact of the COVID-19 pandemic helped to increase Specialty Health Care revenue and gross margin in the fourth quarter of fiscal 2021 and the first half of fiscal 2022. The Company also believes the COVID-19 pandemic began to shift to an endemic in the second half of fiscal 2022.
The Company believes that the impact of the COVID-19 pandemic helped to increase Specialty Health Care revenue and gross margin in the first half of fiscal 2022, which impact did not materially affect any portion of fiscal 2023. However, the Company also believes that the demand for its Healthcare services is greater than it had been before the COVID-19 pandemic.
Gross profit increased by 35.2%, or $5.7 million, as compared to the comparable prior-year period. Gross profit increased because of the increase in revenue and an increase in gross profit margin. Gross profit margin of 25.3% for the current period increased from 24.3% for the comparable prior-year period.
Gross profit margin of 24.3% for the current period decreased from 25.3% for the comparable prior-year period. The decrease in gross profit margin was primarily due to lower utilization resulting from an increase in staff associated with lower revenue as the Company absorbed fixed salaried costs over lower revenue.
SGA expense increased by $8.2 million to $27.7 million, as compared to $19.5 million in the comparable prior-year period. The increase in SGA expense was primarily due to increasing our workforce to help meet increased demand.
SGA expense decreased by $1.7 million to $26.0 million, as compared to $27.7 million in the comparable prior-year period. The decrease in SGA expense was primarily due to a decrease in expenses associated with lower revenue and a lower allocation of corporate SGA expenses.
However, during the Company’s fiscal fourth quarter of 2022, it experienced a weighted average interest rate of 5.6%, including unused line. The Company believes its fourth quarter interest rate is more reflective of rates expected in the near term.
The Company believes its fourth quarter interest rate is more reflective of rates expected in the near term. 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.
ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2022. The Company believes the adoption will modify the way the Company analyzes financial instruments, but it does not anticipate a material impact on results of operations.
ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2022. CECL estimates of expected credit losses on trade receivables over their life will be required to be recorded at inception, based on historical information, current conditions, and reasonable and supportable forecasts.
Removed
Cost of services as a percentage of revenue for the fiscal years ended December 31, 2022 and the comparable prior year period were 70.9% and 73.9%, respectively. See Segment Discussion for further information regarding changes in cost of services and gross profit. 32 ITEM 7.
Added
Interest expense increased due to increased borrowing. Borrowings increased primarily to fund treasury stock purchases. Income Tax Expense . The Company recognized $5.4 million of income tax expense for the fiscal year ended December 30, 2023, as compared to $7.6 million for the comparable prior-year period.
Removed
The effective income tax rate can also be impacted by discrete permanent differences affecting any period presented. The Company considers its 2021 effective income tax rate to be abnormally low, due mainly to permanent differences detailed in footnote 15 in the Company’s financial statements.
Added
The primary reason for the decrease in the consolidated effective rate in the current period was due to a permanent tax difference associated with the tax deduction for equity grants in the United States that vested during the fiscal year ended December 30, 2023.
Removed
The Company estimates its normalized tax rates for fiscal 2021 as 28.5% for the United States, 26.5% for Canada, and 16.5% for Serbia. Based on the fiscal 2021 pretax income mix, the Company estimates its normalized consolidated tax rate as 27.5%.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed3 unchanged
Biggest changeBased on the Company’s variable-rate line of credit balances during the fiscal year ended December 31, 2022, if the interest rate on the Company’s variable-rate line of credit (using an incremental borrowing rate) during the period had been 1.0% higher, the Company’s interest expense on an annualized basis would have increased by $0.1 million.
Biggest changeBased on the Company’s variable-rate line of credit balances during the fiscal year ended December 30, 2023, if the interest rate on the Company’s variable-rate line of credit (using an incremental borrowing rate) during the period had been 1.0% higher, the Company’s interest expense on an annualized basis would have increased by $0.2 million.
The Company places its investments in instruments that meet high credit quality standards. The Company is adverse to principal loss and ensures the safety and preservation of its invested funds by limiting default risk, market risk and reinvestment risk. As of December 31, 2022, the Company’s investments consisted of cash and money market funds.
The Company places its investments in instruments that meet high credit quality standards. The Company is adverse to principal loss and ensures the safety and preservation of its invested funds by limiting default risk, market risk and reinvestment risk. As of December 30, 2023, the Company’s investments consisted of cash and money market funds.

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