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Item 2. Management’s Discussion and Analysis

2020-10-29 compared with 2020-07-30 · 89 added, 76 removed, 126 unchanged (57% of the section changed)

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COVID-19 Assessment

While the COVID-19 pandemic did not materially adversely affect our financial results and business operations during the current fiscal quarter and fiscal year-to-date period ended June 27, 2020, the COVID-19 pandemic may continue to pose significant risks to our business.

While the COVID-19 pandemic did not materially adversely affect our financial results and business operations during the current fiscal quarter and fiscal year-to-date periods ended September 26, 2020, the COVID-19 pandemic may continue to pose significant risks to our business.

The public health actions being undertaken to reduce the spread of the virus may create significant disruptions with respect to the demand for our services and impact our ability to conduct business activities in the ordinary course for an indefinite period.

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However, because developments with respect to the spread of COVID-19 and its impacts have been occurring so rapidly and because of the unprecedented nature of the pandemic, we are unable to predict the extent of any adverse financial impact of COVID-19 on our business, financial condition, results of operations and cash flows.

Due to the above circumstances and as described generally in this Form 10-Q, our results of operations for the fiscal quarter and fiscal year-to-date period ended June 27, 2020 are not necessarily indicative of the results to be expected for the full fiscal year.

As of June 27, 2020, our liquidity position amounts to $80.4 million, which is comprised of cash and cash equivalents of $18.8 million and $61.6 million of borrowing capacity under our $125.0 million revolving credit facility.

We believe our liquidity position, when combined with our ongoing operating cash flows, is sufficient to meet our operating needs over the next twelve months.

During the fiscal quarter ended June 27, 2020, we began preparing our offices to be a safe and healthy working environment.

All facilities have implemented enhanced safety procedures and enhanced cleaning protocols to protect the health of our colleagues.

Although our offices remain open and capable of hosting our colleagues, we have asked that they work from home whenever possible.

Currently, we are planning a phased, deliberate return to our offices, the timing of which depends on local conditions.

Due to the above circumstances and as described generally in this Form 10-Q, our results of operations for the fiscal quarter and fiscal year-to-date periods ended September 26, 2020 are not necessarily indicative of the results to be expected for the full fiscal year.

As of September 26, 2020, we have $24.1 million of cash and cash equivalents and $82.3 million of borrowing capacity under our $125.0 million revolving credit facility.

We believe our cash and cash equivalents and borrowing capacity, when combined with our ongoing operating cash flows, is sufficient to meet our operating needs over the next twelve months.

We have implemented enhanced safety procedures and enhanced cleaning protocols at our facilities to protect the health of our colleagues.

Although our offices remain open and capable of hosting our colleagues, we have invited them to work wherever they feel most comfortable.

Please see “Item 1A.

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Critical Accounting Policies and Significant Estimates

Our critical accounting policies involving the more significant estimates and judgments used in the preparation of our financial statements as of June 27, 2020 remain unchanged from December 28, 2019.

Our critical accounting policies involving the more significant estimates and judgments used in the preparation of our financial statements as of September 26, 2020 remain unchanged from December 28, 2019.

Please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 28, 2019, filed with the Securities and Exchange Commission on February 27, 2020, for details on these critical accounting policies.

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Please refer to the sections captioned “Recent Accounting Standards Adopted” and “Recent Accounting Standards Not Yet Adopted” included in Note 1, “Summary of Significant Accounting Policies” in Part I, Item I, “Financial Statements” of this report.

Results of Operations—For the Fiscal Quarter and Fiscal Year-to-Date Period Ended June 27, 2020, Compared to the Fiscal Quarter and Fiscal Year-to-Date Period Ended June 29, 2019

Results of Operations—For the Fiscal Quarter and Fiscal Year-to-Date Periods Ended September 26, 2020, Compared to the Fiscal Quarter and Fiscal Year-to-Date Periods Ended September 28, 2019

The following table provides operating information as a percentage of revenues for the periods indicated:

Fiscal Quarter

Fiscal Year-to-Date

Ended Fiscal Year-to-Date

September 26,

September 28,

September 26,

September 28,

Revenues 100.0 % 100.0 % 100.0 % 100.0 %

Costs of services (exclusive of depreciation and amortization) 72.5 72.4 72.6 70.3

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Provision for income taxes 1.7 0.8 1.8 1.4

Fiscal Quarter Ended June 27, 2020, Compared to the Fiscal Quarter Ended June 29, 2019

Revenues increased by $12.4 million, or 11.3%, to $123.0 million for the second quarter of fiscal 2020 from $110.6 million for the second quarter of fiscal 2019.

The increase in net revenue was a result of an increase in gross revenues of $11.9 million as compared to the second quarter of fiscal 2019, and a decrease in write-offs and reserves of $0.5 million compared to the second quarter of fiscal 2019.

Utilization decreased to 66% for the second quarter of fiscal 2020 from 77% for the second quarter of fiscal 2019, primarily driven by the increase in consultant headcount, which grew 20.8% from 664 at June 29, 2019 to 802 at June 27, 2020.

Included in revenues are the effect of changes in currency exchange rates resulting in a decrease to revenue of $0.7 million for the fiscal quarter ended June 27, 2020, and a decrease of $1.2 million for the fiscal quarter ended June 29, 2019.

Net income 4.4 % 5.0 % 4.8 % 4.8 %

Fiscal Quarter Ended September 26, 2020, Compared to the Fiscal Quarter Ended September 28, 2019

Revenues increased by $6.1 million, or 5.3%, to $121.8 million for the third quarter of fiscal 2020 from $115.7 million for the third quarter of fiscal 2019.

The increase in net revenue was a result of an increase in gross revenues of $6.3 million as compared to the third quarter of fiscal 2019, partially offset by an increase in write-offs and reserves of $0.2 million compared to the third quarter of fiscal 2019.

Utilization decreased to 69% for the third quarter of fiscal 2020 from 76% for the third quarter of fiscal 2019, primarily driven by the increase in consultant headcount, which grew 11.5% from 741 at the end of the third quarter of fiscal 2019 to 826 at the end of the third quarter of fiscal 2020.

Included in revenues are the effect of changes in currency exchange rates resulting in an increase to revenue of $0.9 million for the third quarter of fiscal 2020, and a decrease of $1.1 million for the third quarter of fiscal 2019.

Overall, revenues outside of the U.S.

represented approximately 19% and 21% of net revenues for the second quarter of fiscal 2020 and fiscal 2019, respectively.

Revenues derived from fixed-price projects increased to 25% of total revenues for the second quarter of fiscal 2020 compared with 23% of net revenues for the second quarter of fiscal 2019.

represented approximately 21% and 20% of net revenues for the third quarter of fiscal 2020 and fiscal 2019, respectively.

Revenues derived from fixed-price projects decreased to 22% of total revenues for the third quarter of fiscal 2020 compared with 26% of net revenues for the third quarter of fiscal 2019.

The percentage of revenue derived from fixed-price projects depends largely on the proportion of our revenues derived from our management consulting business, which typically has a higher concentration of fixed-price service contracts.

Costs of Services (exclusive of depreciation and amortization).

Costs of services (exclusive of depreciation and amortization) increased by $14.2 million, or 18.7%, to $90.2 million for the second quarter of fiscal 2020 from $76.0 million for the second quarter of fiscal 2019.

The increase in costs of services was due primarily to an increase of $6.8 million in employee compensation and fringe benefit costs attributable to our increased consultant headcount, an increase in incentive and retention compensation costs of $3.7 million, an increase in forgivable loan amortization of $1.0 million, and an increase in expense related to other compensation of $0.7 million.

Costs of services (exclusive of depreciation and amortization) increased by $4.5 million, or 5.4%, to $88.3 million for the third quarter of fiscal 2020 from $83.8 million for the third quarter of fiscal 2019.

The increase in costs of services was due primarily to an increase of $5.3 million in employee compensation and fringe benefit costs attributable to our increased consultant headcount, an increase in incentive and retention compensation costs of $1.3 million and an increase in forgivable loan amortization of $1.2 million.

These increased expenses were partially offset by a decrease in stock compensation of $0.3 million and a decrease in the valuation expense of the contingent consideration of $2.1 million.

Additionally, client reimbursable expenses increased by $2.3 million in the second quarter of fiscal 2020 compared to the second quarter of fiscal 2019.

As a percentage of revenues, costs of services (exclusive of depreciation and amortization) increased to 73.3% for the second quarter of fiscal 2020 from 68.7% for the second quarter of fiscal 2019.

Additionally, client reimbursable expenses decreased by $0.9 million in the third quarter of fiscal 2020 compared to the third quarter of fiscal 2019.

As a percentage of revenues, costs of services (exclusive of depreciation and amortization) increased to 72.5% for the third quarter of fiscal 2020 from 72.4% for the third quarter of fiscal 2019.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses decreased by $2.3 million, or 9.7%, to $21.4 million for the second quarter of fiscal 2020 from $23.7 million for the second quarter of fiscal 2019.

Within this category of expenses, there was a $2.3 million decrease in travel and entertainment, a $0.8 million decrease in legal and other professional services fees, a $0.5 million decrease in training and marketing, a $0.2 million decrease in commissions to our non-employee experts, and a $0.2 million decrease in bad debt expense for the second quarter of fiscal 2020 as compared to the second quarter of fiscal 2019.

Partially offsetting the decrease in expenses was a $1.1 million increase in rent expense attributed to our Oakland and New York offices, a $0.2 million increase in software subscription and data services, and a $0.3 million increase in employee and incentive compensation.

As a percentage of revenues, selling, general and administrative expenses decreased to 17.4% for the second quarter of fiscal 2020 from 21.5% for the second quarter of fiscal 2019.

Commissions to our non-employee experts decreased to 2.4% of revenues for the second quarter of fiscal 2020 compared to 2.9% of revenues for the second quarter of fiscal 2019.

Selling, general and administrative expenses decreased by $0.2 million, or 1.1%, to $22.2 million for the third quarter of fiscal 2020 from $22.4 million for the third quarter of fiscal 2019.

Within this category of expenses, there was a $2.0 million decrease in travel and entertainment, a $0.7 million decrease in legal and other professional services fees, and a $0.2 million decrease in training and marketing.

Partially offsetting the decrease in expenses was a $0.6 million increase in commissions to our non-employee experts, a $0.5 million increase in rent expense attributed to our Oakland and New York offices, a $0.2 million increase in software subscription and data services, a $0.9 million increase in employee and incentive compensation, a $0.2 million increase in bad debt expense, and a $0.3 million increase in other expenses for the third quarter of fiscal 2020 as compared to the third quarter of fiscal 2019.

As a percentage of revenues, selling, general and administrative expenses decreased to 18.2% for the third quarter of fiscal 2020 from 19.4% for the third quarter of fiscal 2019.

Commissions to our non-employee experts increased to 3.0% of revenues for the third quarter of fiscal 2020 compared to 2.6% of revenues for the third quarter of fiscal 2019.

Provision for Income Taxes.

The income tax provision was $1.9 million and the effective tax rate was 24.6% for the second quarter of fiscal 2020 compared to $2.4 million and 29.8% for the second quarter of fiscal 2019.

The effective tax rate for the second quarter of fiscal 2020 was lower than the prior year due to increases in the tax benefit related to foreign-derived intangible income and the accounting for stock-based compensation, a decrease in non-deductible meals and entertainment , as well as the impact of continued strong profit generation in the second quarter of fiscal 2020.

The effective tax rate for the second quarter of fiscal 2020 was lower than the combined federal and state statutory tax rate due to the same drivers, partially offset by non-deductible items resulting from the limitations on the deductibility of compensation paid to executive officers and the deductibility of meals and entertainment.

The effective tax rate for the second quarter of fiscal 2019 was higher than the combined federal and state statutory tax rate primarily due to non-deductible items resulting from limitations on the deductibility of compensation paid to executive officers and the deductibility of meals and entertainment.

Net income increased by $0.3 million to $5.9 million for the second quarter of fiscal 2020 from $5.6 million for the second quarter of fiscal 2019.

The net income per diluted share was $0.75 per share for the second quarter of fiscal 2020, compared to $0.68 of net income per diluted share for the second quarter of fiscal 2019.

Weighted average diluted shares outstanding decreased by approximately 298,000 shares to approximately 7,920,000 shares for the second quarter of fiscal 2020 from approximately 8,218,000 shares for the second quarter of fiscal 2019.

The decrease in weighted average diluted shares outstanding was primarily due to the repurchase of shares of our common stock since June 29, 2019, offset in part by the vesting of shares of restricted stock and time-vesting restricted stock units, and the exercise of stock options since June 29, 2019.

Fiscal Year-to-Date Period Ended June 27, 2020, Compared to the Fiscal Year-to-Date Period Ended June 29, 2019

Revenues increased by $32.8 million, or 15.2%, to $249.2 million for the fiscal year-to-date period ended June 27, 2020 from $216.4 million for the fiscal year-to-date period ended June 29, 2019.

The increase in net revenue was a result of an increase in gross revenues of $31.6 million as compared to the first half of fiscal 2019, and a decrease in write-offs and reserves of $1.2 million as compared to the first half of fiscal 2019.

Utilization decreased to 68% for the first half of fiscal 2020 from 76% for the first half of fiscal 2019, primarily driven by the increase in consultant headcount, which grew 20.8% from 664 at June 29, 2019 to 802 at June 27, 2020.

Included in revenues are the effect of changes in currency exchange rates resulting in a decrease in revenue of $1.1 million for the first half of fiscal 2020 and a decrease in revenue of $2.7 million for the first half of fiscal 2019, respectively.

The income tax provision was $2.1 million and the effective tax rate was 28.2% for the third quarter of fiscal 2020 compared to $1.0 million and 14.2% for the third quarter of fiscal 2019.

The effective tax rate for the third quarter of fiscal 2020 was higher than the prior year primarily due to the release of tax reserves recorded in the prior year as well as the increased provision related to remeasuring the U.S.

deferred tax assets and liabilities based on expected fiscal 2020 state apportionment.

This was partially offset by an increase in the tax benefit related to the accounting for stock-based compensation and a decrease in non-deductible meals and entertainment in the current year.

The effective tax rate for the third quarter of fiscal 2020 was slightly higher than the combined federal and state statutory tax rate due to non-deductible items resulting primarily from limitations of compensation paid to executive officers as well as the remeasurement of U.S.

deferred tax assets and liabilities as previously noted, partially offset by the tax benefit related to the accounting for stock-based compensation.

The effective tax rate in the third quarter of fiscal 2019 was lower than the combined federal and state statutory tax rate primarily due to the reversal of tax reserves as a result of expiration of statutes of limitation, the tax benefit related to the accounting for stock-based compensation, and the remeasurement of U.S deferred tax assets and liabilities based on expected fiscal 2019 applicable state apportionment and statutory rates, partially offset by non-deductible items resulting from limitations of compensation paid to executive officers and the deductibility of meals and entertainment.

Net income decreased by $0.3 million to $5.4 million for the third quarter of fiscal 2020 from $5.7 million for the third quarter of fiscal 2019.

The net income per diluted share was $0.68 per share for the third quarter of fiscal 2020, compared to $0.71 of net income per diluted share for the third quarter of fiscal 2019.

Weighted average diluted shares outstanding decreased by approximately 116,000 shares to approximately 7,934,000 shares for the third quarter of fiscal 2020 from approximately 8,050,000 shares for the third quarter of fiscal 2019.

The decrease in weighted average diluted shares outstanding was primarily due to the repurchase of shares of our common stock since September 28, 2019, offset in part by the vesting of shares of restricted stock and time-vesting restricted stock units, and the exercise of stock options since September 28, 2019.

Fiscal Year-to-Date Period Ended September 26, 2020, Compared to the Fiscal Year-to-Date Period Ended September 28, 2019

Revenues increased by $38.8 million, or 11.7%, to $371.0 million for the fiscal year-to-date period ended September 26, 2020 from $332.1 million for the fiscal year-to-date period ended September 28, 2019.

The increase in net revenue was a result of an increase in gross revenues of $38.0 million as compared to the fiscal year-to-date period ended September 28, 2019, and a decrease in write-offs and reserves of $0.8 million as compared to the fiscal year-to-date period ended September 28, 2019.

Utilization decreased to 69% for the fiscal year-to-date period ended September 26, 2020 from 76% for the fiscal year-to-date period ended September 28, 2019, primarily driven by the increase in consultant headcount, which grew 11.5% from 741 at September 28, 2019 to 826 at September 26, 2020.

Included in revenues are the effect of changes in currency exchange rates resulting in a decrease in revenue of $0.2 million for the fiscal year-to-date period ended September 26, 2020 and a decrease in revenue of $3.8 million for the fiscal year-to-date period ended September 28, 2019, respectively.

Overall, revenues outside of the U.S.

represented approximately 20% and 21% of net revenues for the fiscal year-to-date periods ended June 27, 2020 and June 29, 2019, respectively.

Revenues derived from fixed-price projects were 24% and 22% of net revenues for the fiscal year-to-date periods ended June 27, 2020 and June 29, 2019, respectively.

represented approximately 20% and 21% of net revenues for the fiscal year-to-date periods ended September 26, 2020 and September 28, 2019, respectively.

Revenues derived from fixed-price projects were 23% of net revenues for each of the fiscal year-to-date periods ended September 26, 2020 and September 28, 2019.

Costs of Services (exclusive of depreciation and amortization).

Costs of services (exclusive of depreciation and amortization) increased by $31.6 million, or 21.1%, to $181.2 million for the fiscal year-to-date period ended June 27, 2020 from $149.6 million for the fiscal year-to-date period ended June 29, 2019.

The increase in costs of services was due primarily to an increase of $11.7 million in employee compensation and fringe benefit costs associated with our increased consulting headcount, an increase in incentive and retention compensation costs of $9.9 million, an increase in forgivable loan amortization of $1.9 million, an increase in expense related to other compensation of $2.0 million, and an increase in the valuation expense of the contingent consideration of $0.6 million, partially offset by a decrease in stock compensation expense of $0.5 million.

Additionally, client reimbursable expenses increased by $5.9 million in the first half of fiscal 2020 compared to the first half of fiscal 2019.

As a percentage of revenues, costs of services (exclusive of depreciation and amortization) increased to 72.7% for the first half of fiscal 2020 from 69.1% for the first half of fiscal 2019.

Costs of services (exclusive of depreciation and amortization) increased by $36.1 million, or 15.4%, to $269.5 million for the fiscal year-to-date period ended September 26, 2020 from $233.4 million for the fiscal year-to-date period ended September 28, 2019.

The increase in costs of services was due primarily to an increase of $17.1 million in employee compensation and fringe benefit costs associated with our increased consulting headcount, an increase in incentive and retention compensation costs of $11.1 million, an increase in forgivable loan amortization of $3.1 million, and an increase in expense related to other compensation of $1.9 million, partially offset by a decrease in the valuation expense of the contingent consideration of $1.5 million and a decrease in stock compensation expense of $0.7 million.

Additionally, client reimbursable expenses increased by $5.1 million in the fiscal year-to-date period ended September 26, 2020 compared to the fiscal year-to-date period ended September 28, 2019.

As a percentage of revenues, costs of services (exclusive of depreciation and amortization) increased to 72.6% for the fiscal year-to-date period ended September 26, 2020 from 70.3% for the fiscal year-to-date period ended September 28, 2019.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses decreased by $1.0 million, or 2.2%, to $45.5 million for the first half of fiscal 2020 from $46.5 million for the first half of fiscal 2019.

The primary contributors to this decrease were a $2.7 million decrease in travel and entertainment, a $1.0 million decrease in legal and other professional services fees, a $0.5 million decrease in training and marketing, a $0.1 million decrease in bad debt expense, and a $0.7 million decrease in commissions to non-employee experts.

These decreases were partially offset by increases of $3.0 million in rent expense primarily due to additional space in our Oakland and New York offices, employee and incentive compensation of $0.5 million, and software subscriptions and data services of $0.5 million.

As a percentage of revenues, selling, general and administrative expenses decreased to 18.3% for the fiscal year-to-date period ended June 27, 2020 from 21.5% for the fiscal year-to-date period ended June 29, 2019.

Commissions to our non-employee experts decreased to 2.3% of revenues for the fiscal year-to-date period ended June 27, 2020 compared to 3.0% of revenues for the fiscal year-to-date period ended June 29, 2019 as less revenue was sourced by non-employee experts in the first half of fiscal 2020 compared to the first half of fiscal 2019.

Selling, general and administrative expenses decreased by $1.2 million, or 1.7%, to $67.7 million for the fiscal year-to-date period ended September 26, 2020 from $68.9 million for the fiscal year-to-date period ended September 28, 2019.

The primary contributors to this decrease were a $4.4 million decrease in travel and entertainment, a $1.8 million decrease in legal and other professional services fees, a $0.7 million decrease in training and marketing, and a $0.2 million decrease in commissions to non-employee experts.

These decreases were partially offset by increases of $3.6 million in rent expense primarily due to additional space in our Oakland and New York offices, employee and incentive compensation of $1.4 million, other costs of $0.1 million, and software subscriptions and data services of $0.8 million.

As a percentage of revenues, selling, general and administrative expenses decreased to 18.3% for the fiscal year-to-date period ended September 26, 2020 from 20.8% for the fiscal year-to-date period ended September 28, 2019.

Commissions to our non-employee experts decreased to 2.5% of revenues for the fiscal year-to-date period ended September 26, 2020 compared to 2.9% of revenues for the fiscal year-to-date period ended September 28, 2019 as less revenue was sourced by non-employee experts in the fiscal year-to-date period ended September 26, 2020 compared to the fiscal year-to-date period ended September 28, 2019.

Provision for Income Taxes.

For the fiscal year-to-date period ended June 27, 2020, our income tax provision was $4.6 million, and the effective tax rate was 27.2%, compared to a provision of $3.8 million and an effective tax rate of 27.1% for the fiscal year-to-date period ended June 29, 2019.

The effective tax rates for both fiscal year-to-date periods were the same as the combined federal and state statutory tax rate but included the effect of offsetting adjustments primarily driven by the tax benefit on stock-based compensation and non-deductible items resulting from limitations on the deductibility of compensation paid to executive officers and the deductibility of meals and entertainment.

Net income increased by $2.2 million to $12.4 million for the fiscal year-to-date period ended June 27, 2020 from $10.2 million for the fiscal year-to-date period ended June 29, 2019.

The diluted net income per share was $1.55 for the fiscal year-to-date period ended June 27, 2020, compared to diluted net income per share of $1.23 for the fiscal year-to-date period ended June 29, 2019.

Diluted weighted average shares outstanding decreased by approximately 303,000 to approximately 7,979,000 shares for the fiscal year-to-date period ended June 27, 2020 from approximately 8,282,000 shares for the fiscal year-to-date period ended June 29, 2019.

The decrease in weighted average diluted shares outstanding was primarily due to the repurchase of shares of our common stock since June 29, 2019, offset in part by the vesting of restricted stock and time-vesting restricted stock units and the exercise of stock options since June 29, 2019.

For the fiscal year-to-date period ended September 26, 2020, our income tax provision was $6.7 million, and the effective tax rate was 27.5%, compared to a provision of $4.8 million and an effective tax rate of 22.9% for the fiscal year-to-date period ended September 28, 2019.

The effective tax rate for the fiscal year-to-date period ended September 26, 2020 was higher than the prior year due to the release of tax reserves recorded in the prior year as well as the increased provision related to remeasuring the U.S.

deferred tax assets and liabilities based on expected fiscal 2020 state apportionment.

The effective tax rate in the fiscal year-to-date period ended September 26, 2020 was the same as the combined federal and state statutory tax rate but included increases in the rate for non-deductible compensation paid to executive officers and the remeasurement of U.S.

deferred tax assets and liabilities, offset by decreases in the rate related to the accounting for stock-based compensation.

The effective tax rate in the fiscal year-to-date period ended September 28, 2019 was lower than the combined federal and state statutory tax rate primarily due to the release of tax reserves as a result of expiration of statutes of limitation, the tax benefit related to the accounting for stock-based compensation, and the remeasurement of U.S deferred tax assets and liabilities based on the expected fiscal 2019 applicable state apportionment and statutory rates, partially offset by non-deductible items resulting from limitations of compensation paid to executive officers and the deductibility of meals and entertainment.

Net income increased by $1.8 million to $17.8 million for the fiscal year-to-date period ended September 26, 2020 from $16.0 million for the fiscal year-to-date period ended September 28, 2019.

The diluted net income per share was $2.23 for the fiscal year-to-date period ended September 26, 2020, compared to diluted net income per share of $1.94 for the fiscal year-to-date period ended September 28, 2019.

Diluted weighted average shares outstanding decreased by approximately 241,000 to approximately 7,964,000 shares for the fiscal year-to-date period ended September 26, 2020 from approximately 8,205,000 shares for the fiscal year-to-date period ended September 28, 2019.

The decrease in weighted average diluted shares outstanding was primarily due to the repurchase of shares of our common stock since September 28, 2019, offset in part by the vesting of restricted stock and time-vesting restricted stock units and the exercise of stock options since September 28, 2019.

Liquidity and Capital Resources

Fiscal Year-to-Date Period Ended June 27, 2020

Fiscal Year-to-Date Period Ended September 26, 2020

We believe that our current cash, cash equivalents, cash generated from operations, and amounts available under our bank revolving line of credit will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months.

During the fiscal year-to-date period ended June 27, 2020, cash and cash equivalents decreased by $6.8 million.

During the fiscal year-to-date period ended September 26, 2020, cash and cash equivalents decreased by $1.5 million.

We completed the period with cash and cash equivalents of $24.1 million.

The principal drivers of the reduction of cash were payment of a significant portion of our fiscal 2019 performance bonuses in the first and second quarters of 2020, the funding of forgivable loans, the repurchase of shares, and capital expenditures related to the buildout of the new Oakland and New York office spaces, offset by net borrowings of $59.0 million.

During the fiscal year-to-date period ended June 27, 2020, working capital decreased by $20.2 million such that current liabilities were in excess of current assets by $7.6 million.

The principal drivers of the reduction of cash were payment of a significant portion of our fiscal 2019 performance bonuses in the first and second quarters of 2020, the funding of forgivable loans, the repurchase of shares, the payment of dividends, and capital expenditures related to the build-out of the new Oakland and New York office spaces, offset by net borrowings of $38.0 million.

During the fiscal year-to-date period ended September 26, 2020, working capital decreased by $13.2 million such that current liabilities were in excess of current assets by $0.5 million.

The reduction in working capital is due in large part to the reclassification to a current liability of our contingent consideration liability of $13.5 million, which is due to be paid during the second quarter of fiscal 2021.

Also contributing to the reduction in working capital is the $59.0 million of borrowings during the first half of fiscal 2020, a portion of which was used to fund long-term investments, such as forgivable loan issuances and leasehold improvements, much of which are classified as non-current assets.

Also contributing to the reduction in working capital is the $38.0 million of borrowings during

the first half of fiscal 2020, a portion of which was used to fund long-term investments, such as forgivable loan issuances and leasehold improvements, much of which are classified as non-current assets.

Offsetting these reductions in working capital were increases in accounts receivable and unbilled services of $13.3 million.

Of the total cash and cash equivalents held at June 27, 2020, $4.1 million was held within the U.S.

Of the total cash and cash equivalents held at September 26, 2020, $1.9 million was held within the U.S.

We have sufficient sources of liquidity in the U.S., including cash from operations and available borrowing capacity under our revolving credit facility, to fund U.S.

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Sources and Uses of Cash.

During the fiscal year-to-date period ended June 27, 2020, net cash used in operating activities was $44.3 million.

Net income was $12.4 million for the fiscal year-to-date period ended June 27, 2020.

During the fiscal year-to-date period ended September 26, 2020, net cash used in operating activities was $10.6 million.

Net income was $17.8 million for the fiscal year-to-date period ended September 26, 2020.

The primary factor in cash used in operations was the decrease in the “accounts payable, accrued expenses, and other liabilities” line item of our condensed consolidated statement of cash flows of $15.2 million due to the payment of a significant portion of our fiscal 2019 performance bonuses and performance awards.

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Offsetting these uses of cash was a $1.1 million decrease in accounts receivable, net of allowances.

Cash provided by operations included incentive cash award expense of $3.0 million, non-cash depreciation and amortization expense of $6.1 million, and $5.9 million in ROU amortization.

During the fiscal year-to-date period ended June 27, 2020, net cash used in investing activities was $13.5 million for capital expenditures primarily related to the buildout of the Oakland and New York offices.

During the fiscal year-to-date period ended June 27, 2020, net cash provided by financing activities was $51.7 million, primarily as a result of borrowings, net of repayments, under the revolving line of credit of $59.0 million and $0.6 million received upon the issuance of shares of common stock related to the exercise of stock options.

Cash provided by operations included incentive cash award expense of $4.9 million, non-cash depreciation and amortization expense of $9.3 million, ROU amortization of $8.9 million, share-based compensation expenses of $2.4 million, and other non-cash expenses of $0.7 million.

During the fiscal year-to-date period ended September 26, 2020, net cash used in investing activities was $15.7 million for capital expenditures primarily related to the build-out of the new Oakland and New York offices.

During the fiscal year-to-date period ended September 26, 2020, net cash provided by financing activities was $25.1 million, primarily as a result of borrowings, net of repayments, under the revolving line of credit of $38.0 million and $1.7 million received upon the issuance of shares of common stock related to the exercise of stock options.

Offsetting these increases in cash were the tax withholding payments reimbursed by restricted shares of $0.4 million, payment of $5.4 million of cash dividends to shareholders, and $8.8 million of repurchases of common stock.

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Generally, we may repay any borrowings under the revolving credit facility at any time, but we must repay all borrowings no later than October 24, 2022.

There was $59.0 million in outstanding borrowings under this revolving line of credit as of June 27, 2020.

The amount available under this revolving line of credit is reduced by certain letters of credit outstanding, which amounted to $4.4 million as of June 27, 2020.

There was $38.0 million in outstanding borrowings under this revolving line of credit as of September 26, 2020.

The amount available under this revolving line of credit is reduced by certain letters of credit outstanding, which amounted to $4.7 million as of September 26, 2020.

Borrowings under the revolving credit facility bear interest at a rate per annum, at our election, of either (i) the adjusted base rate, as defined in the credit agreement, plus an applicable margin, which varies between 0.25% and 1.25% depending on our total leverage ratio as determined under the credit agreement, or (ii) the adjusted eurocurrency rate, as defined in the credit agreement, plus an applicable margin, which varies between 1.25% and 2.25% depending on our total leverage ratio.

1 unchanged sentence

Borrowings under the revolving credit facility are secured by 100% of the stock of certain of our U.S.

subsidiaries and 65% of the stock of certain of our foreign subsidiaries, which represent approximately $34.1 million in net assets as of June 27, 2020.

subsidiaries and 65% of the stock of certain of our foreign subsidiaries, which represent approximately $36.2 million in net assets as of September 26, 2020.

Under the credit agreement, we must comply with various financial and non-financial covenants.

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The non-financial covenant restrictions of the senior credit agreement include, but are not limited to, our ability to incur additional indebtedness, engage in acquisitions or dispositions, and enter into business combinations.

As of September 26, 2020, we were in compliance with the covenants of our credit agreement.

Forgivable Loans and Term Loans

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We may repurchase shares under this program in open market purchases (including through any Rule 10b5-1 plan adopted by us) or in privately negotiated transactions in accordance with applicable insider trading and other securities laws and regulations.

During the fiscal year-to-date period ended June 27, 2020, we repurchased and retired 82,613 shares, under our share repurchase program at an average price per share of $46.15 with no repurchases occurring in the fiscal quarter ended June 27, 2020.

During the fiscal quarter and fiscal year-to-date period ended June 29, 2019, we repurchased and retired 177,101 shares and 263,710 shares, respectively, under our share repurchase program at an average price per share of $40.47 and $43.68, respectively.

As of June 27, 2020, we had approximately $19.7 million available for future repurchases under our share repurchase program.

During the fiscal quarter and fiscal year-to-date periods ended September 26, 2020, we repurchased and retired 110,154 shares and 192,767 shares, respectively, under our share repurchase program at an average price per share of $45.39 and $45.72, respectively.

During the fiscal quarter and fiscal year-to-date periods ended September 28, 2019, we repurchased and retired 157,402 shares and 421,112 shares, respectively, under our share repurchase program at an average price per share of $41.69 and $42.94, respectively.

As of September 26, 2020, we had approximately $14.7 million available for future repurchases under our share repurchase program.

We plan to finance future repurchases with available cash, cash from future operations, and funds from our revolving credit facility.

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Although we anticipate paying regular quarterly dividends on our common stock for the foreseeable future, the declaration of any future dividends is subject to the discretion of our Board of Directors.

During the fiscal quarter and fiscal year-to-date period ended June 27, 2020, we paid dividends of $1.8 million and $3.6 million, respectively.

During the fiscal quarter and fiscal year-to-date period ended June 29, 2019, we paid dividends of $1.6 million and $3.2 million, respectively.

During the fiscal quarter and fiscal year-to-date periods ended September 26, 2020, we paid dividends of $1.8 million and $5.4 million, respectively.

During the fiscal quarter and fiscal year-to-date periods ended September 28, 2019, we paid dividends of $1.5 million and $4.8 million, respectively.

Impact of Inflation

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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-Q

Item 2. Management’s Discussion and Analysis