What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2025-03-13 compared with 2024-03-14 · 171 added, 215 removed, 363 unchanged (52% of the section changed)

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:

Weighted Average

Total Number of

Shares Purchased as

Part of Publicly

Announced Program

Approximate Dollar

Value of Shares that

Purchased Under

October 1, 2023 –

October 31, 2023

November 1, 2023 –

November 30, 2023

December 1, 2023 –

December 30, 2023

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.”

As of February 20, 2025, the approximate number of holders of record of the Company’s Common Stock was 223.

Since certain of our shares are held by brokers and other institutions on behalf of shareholders, the foregoing number is not representative of the number of beneficial owners.

No dividends were declared in fiscal 2023 or fiscal 2024.

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 28, 2024, there were no accrued dividends.

While the Company, at this time, has no plans to issue any future dividends, any future payment of dividends will depend upon, among other things, the Company’s earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions, and other factors that the Board of Directors deems relevant.

The Revolving Credit Facility (as discussed in Item 7 hereof) prohibits the payment of any dividends or distributions on account of the Company’s capital stock without the prior consent of the majority of the Company’s lenders.

Stock Repurchase by Issuer

On March 29, 2024, the Board authorized a program to repurchase shares of its common stock up to an amount not to exceed $50.0 million, inclusive of amounts remaining under the existing repurchase authorization.

The program (the Treasury Stock Repurchase Plan) 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.

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.

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.

There were no repurchased shares from September 29, 2024 through December 28, 2024.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

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This section of the Form 10-K generally discusses matters relating to the fiscal years ended December 28, 2024 and December 30, 2023 and year-to-year comparisons between such fiscal years.

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.

The Company participates in a market that is cyclical in nature and sensitive to economic changes.

Discussions of matters relating to the fiscal year ended December 31, 2022 and year-to-year comparison between that year and the year ended December 30, 2023 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 30, 2023.

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.

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GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period.

In our consolidated financial statements, estimates are used for, but not limited to, accounts receivable and allowance for doubtful accounts, goodwill, long-lived intangible assets, accounting for stock options and restricted stock awards, insurance liabilities, accounting for income taxes and accrued bonuses.

In our consolidated financial statements, estimates are used for, but not limited to, accounts receivable and provision for credit losses, goodwill, long-lived intangible assets, accounting for stock options and restricted stock awards, insurance liabilities, accounting for income taxes and accrued bonuses.

Revenue Recognition

The Company records revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers .

The Company records revenue under Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers .

Revenue is recognized when we satisfy a performance obligation by transferring services promised in a contract to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those services.

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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 Company’s Engineering Services and Life Sciences, Data and Solutions 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.

All of the Company’s segments perform staff augmentation services and derive revenue from permanent placement fees.

The majority of the Company’s revenue is invoiced on a time and materials basis.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

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Total Engineering

Life Sciences and Information Technology:

Life Sciences, Data and Solutions:

Time and Material

Permanent Placement Services

Total Life Sciences and Information Technology

Total Life Sciences, Data and Solutions

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’s Health Care segment predominantly recognizes revenue through time and material work while its Engineering and Life Sciences, Data and Solutions segments recognize revenue through both time and material and fixed fee work.

The Company’s time and material contracts are typically based on the number of hours worked at contractually agreed upon rates, therefore revenue associated with these time and materials contracts are recognized based on hours worked at contracted rates.

From time to time and predominantly in our Engineering segment, the Company will enter into contracts requiring the completion of specific deliverables.

From time to time and predominantly in our Engineering segment, the Company enters into contracts requiring the completion of specific deliverables.

The Company has master services agreements with many of its customers that broadly define terms and conditions.

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In instances where project services are provided on a fixed-price basis, revenue is recorded in accordance with the terms of each contract.

For engineering contracts estimated costs are budgeted by project, the Company then recognizes revenue by applying the costs incurred to date against the total budgeted costs and applying the percentage of completed cost against the total contract value to recognize revenue for each period.

In certain instances, revenue is invoiced at the time certain milestones are reached, as defined in the contract.

Revenue under these arrangements are recognized as the costs on these contracts are incurred.

From time-to-time, amounts paid in excess of revenue earned and recognized are recorded as deferred revenue, included in accounts payable and accrued expenses on the accompanying consolidated balance sheets.

Additionally, some contracts contain “Performance Fees” (bonuses) for completing a contract under budget.

Performance Fees, if any, are recorded when earned.

From time-to-time, amounts paid in excess of revenue earned and recognized are recorded as deferred revenue.

Some contracts also limit revenue and billings to specified maximum amounts.

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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.

Deferred revenue was $4.2 million as of December 28, 2024 and $1.9 million as of December 30, 2023.

Revenue is recognized when the service has been performed.

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In the fiscal years ended December 28, 2024 and December 30, 2023, the Company recognized revenue of $1.9 million and $1.1 million, respectively, that was included in deferred revenue at the beginning of the reporting period.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Provision for Credit Losses

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.

Accounts receivable payment terms vary and are stated in the financial statements at amounts due from customers net of a provision for credit losses.

Accounts outstanding longer than the payment terms are considered past due.

The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole.

The Company determines its provision by considering a number of factors, including the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole.

The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables previously written off are credited to bad debt expense.

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This approach uses earnings/revenue multiples of similar companies recently completing acquisitions and the ability of our reporting units to generate cash flows as measures of fair value of our reporting units.

The Company adopted Accounting Standards Update (“ASU”) 2017-04, “Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment” effective December 29, 2018 which has eliminated Step 2 from the goodwill impairment test.

The Company follows “Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment,” which has eliminated Step 2 from the goodwill impairment test.

Under this update, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

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.

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.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS (CONTINUED)

Goodwill (Continued)

There was no goodwill impairment in fiscal 2024 or 2023.

The Company reviewed industry and market conditions, reporting unit specific events as well as overall financial performance and determined that no indicators of impairment of goodwill existed in its Engineering and Specialty Health Care segments during the fiscal year ended December 28, 2024 and for all segments during the year ended December 30, 2023.

With respect to the fiscal year ended December 28, 2024, since the Company remeasured contingent consideration associated with its Life Sciences, Data and Solutions segment, the Company determined that further testing was necessary.

After comparing the fair value of the Life Sciences, Data and Solutions segment to its carrying amount, the Company determined that no impairment loss occurred for the Company’s goodwill related to that segment during the fiscal years ended December 28, 2024 or December 30, 2023.

Except for the aforementioned remeasurement of contingent consideration, 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.

Long-Lived and Intangible Assets

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Insurance Liabilities

The Company has risk participation arrangements with respect to workers compensation and health care insurance.

The Company has risk participation arrangements with respect to workers compensation and healthcare 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.

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.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS (CONTINUED)

Accounting for Income Taxes

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The deferred tax liabilities consist of acquisition amortization of $4.3 million, prepaid expenses of $1.1 million, advance depreciation deductions of $0.9 million and right of use assets of $1.2 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 domestic deferred tax assets consist of lease liabilities of $1.3 million, reserves and accruals of $0.5 million, compensation of $0.8 million and provision for credit losses of $0.4 million.

The realization of deferred tax assets is dependent upon the likelihood that future taxable income will be sufficient to realize these benefits over time, and the effectiveness of tax planning strategies in the relevant tax jurisdictions.

If actual results differ from these estimates and assessments, valuation allowances may be required.

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.

As of December 28, 2024, the Company had no foreign deferred tax balances associated with its Canadian operations and a deferred tax asset of $0.1 million associated with its German operations.

The Company conducts its operations in multiple tax jurisdictions in the United States, Canada, Germany, Philippines, Puerto Rico and Serbia.

The Company and its subsidiaries file a consolidated United States Federal income tax return and file in various states.

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The Company is no longer subject to audit in Canada for the tax years prior to tax year 2020.

The Company is under audit in Canada for tax years 2021 and 2022.

The Company is no longer subject to audit in Puerto Rico for the tax years prior to tax year 2019.

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The Company’s growth prospects are influenced by broad economic trends.

The pace of customer capital spending programs, new product launches and similar activities have a direct impact on the need for engineering, life sciences and information technology services.

The pace of customer capital spending programs, new product launches and similar activities have a direct impact on the need for engineering, life sciences, data and solutions.

When the U.S., Canadian or global economies decline, the Company’s operating performance could be adversely impacted.

In addition, global events such as international conflicts or health pandemics and endemics also have a substantial impact on our operations and financial results.

In addition, global events such as international conflicts, trade disputes, 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.

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Amortization of acquired intangible assets

Impairment of intangible assets

Potential stock issuance and financing activities

Remeasurement of contingent consideration

Gain on sale of assets

Remeasurement of acquisition-related

contingent consideration

Operating costs and expenses

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The fiscal years ended December 28, 2024 (fiscal 2024) and December 30, 2023 (fiscal 2023) consisted of fifty-two weeks each.

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”).

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.

Revenue increased 5.8%, or $15.1 million, for the fiscal year ended December 28, 2024 as compared to December 30, 2023 (the “comparable prior year period”).

Revenue increased $6.4 million in the Specialty Health Care segment, increased $11.8 million in the Engineering segment and decreased $3.1 million in the Life Sciences, Data and Solutions segment.

See Segment Discussion for further information on revenue changes.

Cost of Services and Gross Profit.

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%.

Cost of services increased 6.5%, or $12.1 million, for the fiscal year ended December 28, 2024 as compared to the comparable prior year period, primarily due to the increase in revenue.

Cost of services as a percentage of revenue was 71.3% for the fiscal year ended December 28, 2024 and 70.9% for the comparable prior year period.

See Segment Discussion for further information regarding changes in cost of services and gross profit.

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.

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See Segment Discussion for further information on SGA expense changes.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS (CONTINUED)

Fiscal Year Ended December 28, 2024 Compared to Fiscal Year Ended December 30, 2023 (Continued)

Costs Associated with Potential Stock Issuance and Financing Transactions.

In the fiscal year ended December 28, 2024, the Company filed a Registration Statement on Form S-3 (the Registration Statement) with the Securities and Exchange Commission for an offering of up to $100.0 million of various securities.

The Company also entered an At Market Issuance Sales Agreement under which the Company may sell, under the Registration Statement, up to $50.0 million worth of shares of the Company’s common stock.

The Company amended and extended its letter of credit facility with Citizens Bank through December 3, 2029.

The Company incurred total expenses of $0.3 million related to these transactions.

Gain on sale of assets.

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The two Canada Power Systems offices were part of a reporting unit within the Company’s Engineering segment.

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.

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.

For the fiscal year ended December 30, 2023, the Company recorded a discrete gain on the sale of these assets and liabilities of $0.4 million due to the final collection of escrow funds from the transaction.

Other Expense, Net.

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.

Interest expense increased due to increased borrowing.

Borrowings increased primarily to fund treasury stock purchases.

Other expense, net increased by $0.6 million for the fiscal year ended December 28, 2024 as compared to the comparable prior year period, primarily due to an increase in interest expense, net.

Interest expense increased due to increased borrowing and increased interest rates.

Income Tax Expense .

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The effective fiscal 2023 income tax rates as of December 28, 2024, were approximately 29.4%, 21.1% and 10.8% in the United States, Canada, and Europe, respectively.

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.

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 effective income tax rate can also be impacted by discrete permanent differences affecting any period presented.

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.

The primary reason for the increase in the consolidated effective rate in the current period was due to permanent tax differences in the United States during the fiscal year ended December 28, 2024.

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.

The actual effective tax rate may vary in future years depending on the actual operating income earned in various jurisdictions, the potential availability of tax credits, and the exercise of stock options and vesting of share-based awards.

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.

The actual 2024 effective tax rate may vary from the estimate depending on the actual operating income earned in various jurisdictions, the potential availability of tax credits, and the exercise of stock options and vesting of share-based awards.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

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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.

The decrease in revenue was driven by both the Company’s school and non-school clients.

Specialty Health Care revenue of $142.7 million for the fiscal year ended December 28, 2024, increased 4.7%, or $6.4 million, compared to the comparable prior-year period.

The increase in revenue was driven by the Company’s school clients, offset by a decrease in revenue from the Company’s non-school clients.

Revenue from school clients for the fiscal year ended December 28, 2024, was $117.7 million as compared to $103.0 million for the comparable prior-year period.

Revenue from non-school clients for the fiscal year ended December 28, 2024, was $25.0 million as compared to $33.2 million for the comparable prior-year period.

Revenue decreases were primarily due to decreased demand associated with COVID-19 transitioning from a high level of activity relating during the fiscal year ended December 31, 2022 to a lesser level of activity associated with the change of COVID-19 to an endemic during the fiscal year ended December 30, 2023.

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.

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.

The decrease in non-school revenue was primarily driven by the reduction in revenue from a large long-term care group where the Company deliberately reduced services, which generated $3.2 million in the current period as compared to $9.8 million in the comparable prior-year period.

Gross profit increased by 6.5%, or $2.6 million, to $42.5 million for the fiscal year ended December 28, 2024 as compared to $39.9 million in the comparable prior-year period.

Gross profit increased due to an increase in revenue and gross profit margin.

Gross profit margin for the fiscal year ended December 28, 2024, increased to 29.8% compared to 29.3% for the comparable prior-year period.

The increase in gross profit margin was primarily attributed to a greater mix shift to school services as opposed to non-school services, offset by increased unemployment tax rates in New York.

Specialty Health Care experienced operating income of $11.7 million for the fiscal year ended December 28, 2024, as compared to $13.5 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.

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.

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.

The Company believes that, except for seasonality, it is well positioned for growth in revenue going forward.

The primary reason for the decrease in operating income was an increase in SGA expense to $30.3 million for the fiscal year ended December 28, 2024 compared to $26.0 million for the comparable prior-year period.

SGA expense increased primarily due to sales and recruiting infrastructure investments expected to generate higher growth rates for the 2024/2025 and 2025/2026 school years and a higher allocation of corporate SGA expense.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

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Segment Discussion (Continued)

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.

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.

The Company believes the decrease in Industrial Processing revenue was primarily due to the irregular timing of large contracts with its Industrial Processing clients.

Gross profit decreased by 5.1%, or $1.1 million, as compared to the comparable prior-year period.

Gross profit decreased because of the decrease in revenue and a decrease in gross profit margin.

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.

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.

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.

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.

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.

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.

The increase in SGA expense was primarily due to the acquisition of TalentHerder in the fourth quarter of fiscal 2022 and a higher allocation of corporate SGA expenses.

Engineering revenue of $96.5 million for the fiscal year ended December 28, 2024, increased 13.9%, or $11.8 million, compared to the comparable prior-year period.

The increase in revenue comprised the following:

an increase in Energy Services revenue of $15.1 million, offset by decreases in Aerospace revenue of $0.2 million and Industrial Processing revenue of $3.1 million.

Aerospace revenue decreased primarily due to a contract reduction for the Company’s major outsourcing client.

The Company believes the decrease in Industrial Processing revenue was mainly due to the irregular timing of large contracts with its Industrial Processing clients.

Gross profit increased by 9.4%, or $1.9 million, compared to the comparable prior-year period.

Gross profit increased because of the increase in revenue, offset by a decrease in gross profit margin.

The gross profit margin of 23.4% for the current period decreased from 24.3% for the comparable prior-year period.

The decrease in gross profit margin was primarily due to lower utilization and mix-shift associated with fixed-price project revenue from the Energy Services group.

The Engineering segment experienced operating income of $4.5 million for the fiscal year ended December 28, 2024, compared to $3.5 million for the comparable prior-year period.

Operating income increased due to the increase in gross profit, offset by an increase in SGA expense.

The Engineering segment’s SGA expense of $17.4 million increased from $17.0 million, primarily due to a higher allocation of corporate SGA expense.

Life Sciences, Data and Solutions

Life Sciences, Data and Solutions revenue of $39.2 million for the fiscal year ended December 28, 2024, decreased 7.3%, or $3.1 million, compared to the comparable prior-year period.

The Company primarily attributes the decrease in revenue to the timing of large projects and a deemphasis of the Company’s legacy staffing business.

Gross profit of $14.7 million for the fiscal year ended December 28, 2024, decreased 9.0%, or $1.5 million, compared to $16.2 million for the comparable prior-year period.

Gross profit decreased due to the decrease in revenue and a decrease in gross margin.

Gross profit margin for the fiscal year ended December 28, 2024, was 37.5% as compared to 38.2% for the comparable prior-year period.

The Company attributes the gross profit margin decrease to normal fluctuations in high margin project work.

The Life Sciences, Data and Solutions segment experienced operating income of $6.5 million for the fiscal year ended December 28, 2024 compared to $6.6 million for the comparable prior-year period.

The decrease in operating income was primarily due to the decrease in gross profit and a small increase in SGA expense of $0.1 million, offset by a remeasurement of contingent consideration of $1.8 million for the fiscal year ended December 28, 2024.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

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Gain on sale of assets

Remeasurement of acquisition related

contingent consideration

Remeasurement of contingent consideration

Equity compensation

Potential stock issuance and financing transaction

Impairment of intangible assets

Adjusted operating income (non-GAAP)

6 unchanged sentences

Gain on sale of assets

Remeasurement of acquisition related

contingent consideration

Loss (gain) on foreign currency transactions

Remeasurement of contingent consideration

(Gain) loss on foreign currency transactions

Equity compensation

Potential stock issuance and financing transaction

Impairment of intangible assets

Adjusted EBITDA (non-GAAP)

5 unchanged sentences

Gain on sale of assets

Remeasurement of acquisition related

contingent consideration

Loss (gain) on foreign currency transactions

Remeasurement of contingent consideration

(Gain) loss on foreign currency transactions

Equity compensation

Potential stock issuance and financing transaction

Impairment of intangible assets

Tax impact from normalized rate

2 unchanged sentences

Gain on sale of assets

Remeasurement of acquisition related

contingent consideration

Loss (gain) on foreign currency transactions

Remeasurement of contingent consideration

(Gain) loss on foreign currency transactions

Equity compensation

Tax impact from normalized rate

Potential stock issuance and financing transaction

Impairment of intangible assets

Tax impact from normalized rate (a)

Adjusted diluted net earnings per share (non-GAAP)

Amount reflects an adjustment to income tax expense applied to non-GAAP adjusted consolidated taxable income.

The Company used an estimated effective income tax rate of 26.5% for both periods presented, approximating the Company’s federal USA income tax rate plus the tax-affected rate for states and Puerto Rico.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

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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.

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:

Operating activities provided $6.2 million of cash for the fiscal year ended December 28, 2024 as compared to providing $12.5 million in the comparable prior year period.

The major components of cash provided by operating activities in the fiscal year ended December 28, 2024 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.

For the fiscal year ended December 28, 2024, the Company experienced net income of $15.0 million as compared to $16.8 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.

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.

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 to net transit payable as of December 30, 2023 was due to several large, multiyear EPC (Engineering, Procurement and Construction) projects starting in the Company’s second fiscal quarter.

In a typical EPC contract, the Company receives significant cash upfront to fund equipment procurement and construction subcontractors throughout the project.

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.

Since certain expenses are paid before a fiscal year concludes and are amortized over the next fiscal year, prepaid expenses and other current assets generally tend to increase at the end of a fiscal year and decrease during the first three quarters of the following fiscal year.

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.

An increase in accounts receivables in the fiscal year ended December 28, 2024, used $7.3 million of cash as compared to using $20.6 million in the comparable prior year period.

The Company primarily attributes this increase in accounts receivables for the fiscal year that ended December 28, 2024, to these factors:

A large school client stopped payments early in the fourth quarter due to administrative issues unrelated to the Company.

The Company estimates that this school client's December 28, 2024 accounts receivable balance exceeded normalized levels by approximately $6.0 million.

The Company expects this balance to approximate normalized levels by the end of the first quarter of fiscal 2025.

A Life Sciences, Data and Solutions client stopped making payments while negotiating change orders and a two-year contract extension.

The Company estimates that this school client's December 28, 2024 accounts receivable balance exceeded normalized levels by approximately $3.8 million.

The Company expects this balance to approximate normalized levels by the end of the first quarter of fiscal 2025.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

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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.

The net of transit accounts payable and transit accounts receivable was a net payable of $16.6 million as of December 28, 2024 as compared to a net payable of $22.2 million as of December 30, 2023, using $5.6 million of cash during the fiscal year ended December 28, 2024.

The decrease to net transit payable as of December 28, 2024 was due to normal fluctuations associated with several large, multiyear EPC projects.

In a typical EPC contract, the Company receives significant cash upfront to fund equipment procurement and construction subcontractors throughout the project.

Prepaid expenses and other current assets used cash of $3.7 million for the fiscal year ended December 28, 2024 as compared to providing negligible cash for the comparable prior year period.

The Company typically attributes changes to prepaid expenses and other current assets, if any, to general timing of payments in the normal course of business.

The December 28, 2024 prepaid expense balance of $8.3 million included $3.1 million for domestic tax payments, as compared to $0.6 million as of December 30, 2023.

An increase in accounts payable and accrued expenses provided cash of $1.1 million for the fiscal year ended December 28, 2024 as compared to using $1.5 million for the comparable prior year period.

The Company attributes these changes to typical fluctuations in the normal course of business.

Changes in accrued payroll and related costs used $1.3 million for the fiscal year ended December 28, 2024 as compared to using cash of $1.8 million for the fiscal year ended December 30, 2023.

There are four primary factors that generally impact accrued payroll and related costs:

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The Company’s last major payroll for the fiscal year ended December 28, 2024 was paid on December 27, 2024.

Historically, the Company has experienced small deferred revenue balances.

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.

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.

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.

The Company’s deferred revenue balance as of December 28, 2024 was $4.2 million, compared to $1.9 million as of December 30, 2023, providing cash from operations of $2.3 million for the fiscal year ended December 28, 2024.

The increase was associated with upfront payments for future labor associated with the Company’s EPC contracts.

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 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.

Financing Activities

Financing activities used $3.9 million of cash for the fiscal year ended December 30, 2023 and $23.1 million for the fiscal year ended December 31, 2022.

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.

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.

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.

Investing activities used $2.6 million of cash for the fiscal year ended December 28, 2024 as compared to using $2.5 million in the comparable prior year period.

Investing activities used $2.6 million for the purchase of property and equipment in the current period as compared to using $2.9 million in the prior year comparable period.

The fiscal year ended December 30, 2023 included a discrete gain associated with the Company’s sale of its Canada Power Systems business unit.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

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Liquidity and Capital Resources (Continued)

Financing Activities (Continued)

Financing Activities

Financing activities used $4.8 million of cash for the fiscal year ended December 28, 2024 as compared to using $3.9 million in the comparable prior year period.

The Company made net borrowings under its line of credit of $4.2 million during the fiscal year ended December 28, 2024 as compared to net borrowings of $22.0 million in the comparable prior year period.

During the fiscal year ended December 28, 2024, the Company used $1.3 million to pay withholding taxes upon the vesting of equity grants, in connection with which a commensurate number of vesting shares was retired.

The Company used $7.8 million to repurchase and retire shares of its common stock during the fiscal year ended December 28, 2024 as compared to using $25.8 million in the comparable prior year period.

The Company generated cash of $0.7 million from sales of shares from its equity plans for both periods presented.

The Company did not pay contingent consideration in the current period as compared to paying $0.3 million in the comparable prior year period.

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, 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.

(i) SOFR (Secured Overnight Financing Rate), plus applicable margin, typically borrowed in fixed 30-day increments, or (ii) the agent bank’s prime rate generally borrowed over shorter durations.

The Company also pays unused line fees based on the amount of the Revolving Credit Facility that is not drawn.

Unused line fees are recorded as interest expense.

The effective weighted average interest rate, including unused line fees, for the 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.

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.

The effective weighted average

interest rate, including unused line fees, for the fiscal years ended December 28, 2024 and December 30, 2023 was 6.6% and 6.5%, respectively.

All borrowings under the Fifth Amended and Restated Loan Agreement remain collateralized with substantially all of the Company’s assets, as well as the capital 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.

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At December 28, 2024 and December 30, 2023, the Company had availability for additional borrowings under the Revolving Credit Facility of $22.6 million and $12.1 million, respectively.

In addition to borrowings and sales of shares from its equity plans, the Company may raise capital through sales of shares of common stock under its at-the-market issuance program (the “ATM Program”) established under its May 2021 At Market Issuance Sales Agreement with B.

In addition to borrowings and sales of shares from its equity plans, the Company may raise capital through sales of shares of common stock under its at the market issuance program (the “ATM Program”) established under its March 2024 At Market Issuance Sales Agreement with B.

Riley Securities, Inc., as the agent (the “Agent”).

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Commitments and Contingencies (Continued)

In April 2022, a client of the Company’s Industrial Processing Group alleged that a system partially designed by the Company is not operating as intended and that the Company is responsible.

In April 2022, a client of the Company’s Engineering segment alleged that a system partially designed by the Company is not operating as intended and that the Company is responsible.

The Company has not determined if it has any liability.

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Furthermore, the Company believes that if it were found liable, any damages would be covered by insurance, subject to a deductible of $0.5 million and maximum coverage of $5.0 million.

While the clients estimated damages are not known, the client has either inferred or asserted during settlement discussions that it’s damages significantly exceed the Company’s insurance coverage of $5 million.

While the Company attempts to find a mutually agreeable solution, the Company has reserved $0.5 million for this project.

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The Company is also subject to other pending legal proceedings and claims that arise from time to time in the ordinary course of its business, which may not be covered by insurance.

The Company utilizes SAP software for its financial reporting and accounting system which was implemented in 1999 and has not undergone significant upgrades since its initial implementation.

The Company is currently implementing an upgrade of its current system and expects to go live in 2024.

The Company estimates this upgrade or replacement of its financial reporting and accounting system will cost between $0.5 million and $1.0 million.

These estimates are subject to material change.

The Company utilizes SAP software for its financial reporting and accounting system which was initially implemented in 1999 and was upgraded during fiscal years 2023 and 2024.

The Company went live with its new SAP system in April 2024.

The Company’s current commitments consist primarily of lease obligations for office space.

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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.

As of December 28, 2024, the Company had one acquisition agreement whereby additional contingent consideration may be earned by the sellers:

effective September 30, 2018, the Company acquired certain assets of Thermal Kinetics Engineering, PLLC and Thermal Kinetics Systems, LLC.

The Company estimates future contingent payments at December 28, 2024 as follows:

Fiscal Years Ending

The four quarters following December 30, 2023

Estimated future contingent consideration payments

Payable in fiscal 2025

Estimates of future contingent payments are subject to significant judgment and actual payments may materially differ from estimates.

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Contingent consideration related to acquisitions is recorded at fair value (level 3) with changes in fair value recorded in other (expense) income, net.

Significant employment agreements are as follows:

Executive Severance Agreements

The Company is a party to an Executive Severance Agreement (the “Executive Severance Agreement”) with each of Bradley S.

Vizi, the Company's Executive Chairman and President (dated as of June 1, 2018), and Kevin D.

Miller, the Company’s Chief Financial Officer (dated as of February 28, 2014, as amended), which set forth the terms and conditions of certain payments to be made by the Company to the executive in the event, while employed by the Company, such executive experiences (a) a termination of employment unrelated to a “Change in Control” (as defined therein) or (b) there occurs a Change in Control and either (i) the executive’s employment is terminated for a reason related to the Change in Control or (ii) in the case of Mr.

Miller, the executive remains continuously employed with the Company for a period of three months following the Change in Control.

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.

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.

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.

Vizi and three months for Mr.

Miller) on account of Disability or death, or (iii) a resignation by the executive with Good Reason;

or (b) in the case of Mr.

Miller, the executive resigns, with or without Good Reason, which results in a termination date that is the last day of the three month period following the Change in Control, then the executive will receive the following severance payments:

(1) a lump sum payment equal to two times the sum of the executive’s (a) Annual Base Salary and (b) Bonus;

and (2) a lump sum payment equal to 24 multiplied by the monthly COBRA premium cost, as in effect immediately prior to the executive’s termination date, for the executive to continue medical, dental and vision coverage, as applicable, in such Company plans for himself and, if applicable, his spouse and eligible dependents.

Upon the occurrence of a Change in Control, the Company shall establish an irrevocable rabbi trust and contribute to the rabbi trust the applicable amounts due under the Executive Severance Agreement.

Miller receives the Change in Control Payment following his resignation at the end of the three month period following the Change in Control, he will not be eligible to receive any severance payments under his Executive Severance Agreement.

Miller’s Executive Severance Agreement provides that if Mr.

Miller remains continuously employed for three months following a Change in Control and is employed by the Company on the last day of such specified period, Mr.

Miller will receive a lump sum payment equal to two times the sum of his (a) Annual Base Salary and (b) Bonus (the “Change in Control Payment”).

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.

Miller), are covered by our Change in Control Plan for Selected Executive Management (the “CIC Plan”).

Off-Balance Sheet Arrangements

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The Company’s business is labor intensive;

therefore, the Company has a high exposure to increasing health care benefit costs.

The Company attempts to compensate for these escalating costs in its business cost models and customer pricing by passing along some of these increased health care benefit costs to its customers and employees, however, the Company has not been able to pass on all increases.

therefore, the Company has a high exposure to increasing healthcare benefit costs.

The Company attempts to compensate for these escalating costs in its business cost models and customer pricing by passing along some of these increased healthcare benefit costs to its customers and employees, however, the Company has not been able to pass on all increases.

The Company is continuing to review its options to further control these costs, which the Company does not believe are representative of general inflationary trends.

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New Accounting Standards

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses (Topic 326).

The new standard amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities.

In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No.

2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller reporting companies.

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.

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.

This standard only applies to contracts and other transactions that reference London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued due to reference rate reform.

This guidance provides temporary optional expedients and exceptions to accounting guidance on contract modifications and hedge accounting to ease entities’ financial reporting burdens as the market transitions from the LIBOR and other interbank offered rates to alternative reference rates.

In December 2022, the FASB issued ASU No.

2022-06, Deferral of the sunset date of Topic 848.

This update defers the sunset date from December 31, 2022 to December 31, 2024.

The Company may elect to apply the amendments prospectively through December 31, 2024.

The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures.

In November 2023, the Financial Accounting Standard Board (FASB) issued ASU 2023-07, “Segment reporting (Topic 280)”, which is intended to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which is intended to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses.

The amendments require disclosure of significant segment expenses regularly provided to the chief operating decision maker (CODM) as well as other segment items, extend certain annual disclosures to interim periods, clarify the applicability to single reportable segment entities, permit more than one measure of profit or loss to be reported under certain conditions, and require disclosure of the title and position of the CODM.

The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements.

Early adoption is also permitted.

We are currently evaluating the provisions of this ASU and expect to adopt them for the fiscal year ending December 28, 2024.

We adopted this ASU for the fiscal year ended December 28, 2024.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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ASU 2023-09 is effective for the Company’s annual reporting periods beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis, with a retrospective option.

We are currently evaluating the effect that adoption of ASU 2023-09 will have on our disclosures.

We are currently evaluating the effect that adoption of this ASU will have on our disclosures.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity