CRA INTERNATIONAL, INC. 10-K

Item 9A —Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. This is done in order to ensure that information we are required to disclose in the reports that are filed or submitted under the Securities Exchange Act of 1934 ("the Exchange Act"), as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Based upon that evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of January 2, 2021. (b) Management's Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting as of the end of the period covered by this report based on the framework in "Internal Control—Integrated Framework (2013)" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our President and Chief Executive Officer and our Chief Financial Officer concluded that our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. generally accepted accounting principles as of January 2, 2021. Our independent registered public accounting firm, Grant Thornton LLP, has issued an audit report on their assessment of our internal control over financial reporting. The audit report is included herein. Remediation of Material Weaknesses We previously reported material weaknesses that were identified as of December 28, 2019 regarding the design and operating effectiveness of our internal control over financial reporting relating to: 1) our incentive-based compensation liabilities as it relates to the review of the completeness and accuracy of key inputs into the computation of these liabilities; 2) certain aspects of accounting for revenue and related accounts; and 3) the completeness of certain accounts payable and expense accruals. With input and oversight from the Audit Committee, we took actions as outlined in the remediation plan detailed in our Form 10-K for the fiscal year ended December 28, 2019, to remediate these material weaknesses. Our efforts focused on strengthening our finance organization and implementing a suite of enhanced controls during fiscal 2020. More specifically in the following areas, we: 32 Table of Contents Incentive-based Compensation Liabilities • Enhanced our business processes, internal control design and source data validation procedures, over the execution, review and accounting for incentive-based compensation accruals; and • Provided additional training to our key stakeholders over roles and responsibilities, documentation standards, and expectations over retaining evidence that impact the determination of our financial accruals. Revenue • Enhanced the design and operation of our internal controls related to revenue accounting for client contracts, including the implementation of enhanced revenue assessment procedures; • Enhanced our management review controls over revenue forecasts and related assumptions used in the computation of incentive-based compensation; • Provided additional training on the importance of timely, accurate and complete financial information effecting the status of client projects; and • Implemented technological improvements, to ensure the timeliness, completeness and accuracy of our accounting records and enhanced reporting. Accounts Payable and Expense Accruals • Enhanced the design and operation of our internal controls related to accounts payable and certain accrued expenses; • Implemented measures to enhance the transparency, timeliness, and reporting of expense data; and • Enhanced our analytic procedures over the estimation and monitoring of our accrued expenses. As a result of the remediation activities and controls in place as of January 2, 2021 described above, we have remediated all material weaknesses that were disclosed and included in our Form 10-K for the fiscal year ended December 28, 2019. (c) Evaluation of Changes in Internal Control over Financial Reporting Under the supervision and with the participation of our management, including our President and Chief Executive Officer and Chief Financial Officer, we evaluated whether there were any changes in our internal control over financial reporting during the fourth quarter of fiscal 2020, including any changes related to COVID-19. Except for the remediation activities noted in Section (b) that were implemented throughout fiscal 2020, our evaluation of our internal control over financial reporting discussed in Section (b) did not identify any changes in our internal control over financial reporting during the fourth quarter of fiscal 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. (d) Important Considerations The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to various inherent limitations, including judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management. Item 9B —Other Information None 33 Table of Contents Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders CRA International, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of CRA International, Inc. (a Massachusetts corporation) and subsidiaries (the “Company”) as of January 2, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 2, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended January 2, 2021, and our report dated March 4, 2021 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Boston, Massachusetts March 4, 2021 34 Table of Contents PART III We have omitted the information required in Part III of this annual report because we intend to include that information in our definitive proxy statement for the 2021 annual meeting of shareholders, which we expect to file within 120 days (or such greater number as permitted by SEC rules) after the end of fiscal 2020. We incorporate that information in this annual report by reference to the proxy statement to be filed in connection with the 2021 annual meeting of our shareholders, which we will refer to herein as our "2021 annual proxy statement." Item 10 —Directors, Executive Officers and Corporate Governance We incorporate the information required by this item by reference to the sections captioned "Corporate Governance" (specifically, its subsections captioned "Overview," "Executive officers and directors" and "Audit committee") and "Delinquent Section 16(a) Reports" in our 2021 annual proxy statement. Item 11 —Executive Compensation We incorporate the information required by this item by reference to the section captioned "Compensation of Directors and Executive Officers" in our 2021 annual proxy statement. Item 12 —Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters We incorporate the information required by this item by reference to the sections captioned "Security Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plans" in our 2021 annual proxy statement. Item 13 —Certain Relationships and Related Transactions and Director Independence We incorporate the information required by this item by reference to the sections captioned "Transactions with Related Parties" and "Corporate Governance" (specifically, its subsection captioned "Overview") in our 2021 annual proxy statement. Item 14 —Principal Accountant Fees and Services We incorporate the information required by this item by reference to the section captioned "Principal Accountant Fees and Services" in our 2021 annual proxy statement. 35 Table of Contents PART IV Item 15 —Exhibits and Financial Statement Schedules (a) Financial Statements, Schedules, and Exhibits. We have listed our consolidated financial statements filed as part of this annual report in the index to consolidated financial statements on page FS-1. We have listed the exhibits filed as part of this annual report in the accompanying exhibit index, which follows the signature page to this annual report. (b) Exhibits. We have listed the exhibits filed as part of this annual report in the accompanying exhibit index, which follows the signature page to this annual report. (c) Financial Statement Schedules. We have omitted all financial statement schedules because they are not applicable or not required or because we have included the necessary information in our consolidated financial statements or related notes. 36 Table of Contents EXHIBIT INDEX Incorporated by Reference Exhibit No. Description Filed with this Form 10-K Form Filing Date Exhibit No. 3.1 Amended and Restated Articles of Organization, as amended by the Articles of Amendment to our Articles of Organization filed on May 6,2005. 10-K February 27, 2020 3.1 3.2 Amended and Restated By-Laws, as amended. 8-K January 31, 2011 3.2 4.1 Specimen certificate for common stock. S-8 April 21, 2006 4.4 4.2 Description of Capital Stock 10-K February 27, 2020 4.2 10.1* 1998 Employee Stock Purchase Plan. S-1/A April 3, 1998 10.2 10.2* Amended and Restated 2006 Equity Incentive Plan, as amended. DEF 14A April 27, 2018 Annex A 10.3* Form of Restricted Stock Agreement for Non-Employee Director Award Pursuant to Section 6.9 of the 2006 Equity Incentive Plan. 8-K April 27, 2006 10.2 10.4* Form of Restricted Stock Agreement for Non-Employee Director Award Pursuant to Section 6.9 of the 2006 Equity Incentive Plan with Company Right of First Refusal . 10-K February 12, 2009 10.9 10.5* Form of Restricted Stock Agreement for Non-Employee Director Award Pursuant to Section 6.9 of the 2006 Equity Incentive Plan, as amended. 10-K March 2, 2012 10.11 10.6* Form of Restricted Stock Agreement for Non-Employee Director Award Pursuant to Section 6.9 of the 2006 Equity Incentive Plan, as amended. 10-K March 15, 2017 10.9 10.7* Form of Restricted Stock Agreement for Non-Employee Director Award Pursuant to Section 6.9 of the 2006 Equity Incentive Plan, as amended. 10-K March 12, 2018 10.7 10.8* Form of Restricted Stock Agreement for Non-Employee Director Award Pursuant to Section 6.9 of the 2006 Equity Incentive Plan, as amended. 10-Q August 2, 2018 10.3 10.9* Form of Restricted Stock Agreement for Employee or Independent Contractor Awards under the 2006 Equity Incentive Plan. 8-K April 27, 2006 10.3 10.10* Form of Restricted Stock Agreement for Employee or Independent Contractor Awards under the 2006 Equity Incentive Plan with Company Right of First Refusal. 10-K February 12, 2009 10.11 10.11* Form of Restricted Stock Agreement for Employee or Independent Contractor Awards under the 2006 Equity Incentive Plan with Company, as amended. 10-K March 2, 2012 10.14 10.12* Form of Restricted Stock Agreement for Employee or Independent Contractor Award under the 2006 Equity Incentive Plan, as amended. 10-Q August 2, 2018 10.4 10.13* Form of Nonqualified Stock Option under the 2006 Equity Incentive Plan. 10-K February 8, 2007 10.10 10.14* Form of Nonqualified Stock Option under the 2006 Equity Incentive Plan with Stock Ownership Guidelines. 10-K March 2, 2012 10.16 10.15* Form of Nonqualified Stock Option under the 2006 Equity Incentive Plan with Ownership Guidelines. 10-K March 15, 2017 10.12 10.16* Form of Nonqualified Stock Option under the 2006 Equity Incentive Plan with Ownership Guidelines. 10-K March 12, 2018 10.14 10.17* Form of Restricted Stock Unit Award Agreement under the 2006 Equity Incentive Plan. 10-K January 29, 2010 10.14 10.18* Form of Restricted Stock Unit Award Agreement under the 2006 Equity Incentive Plan with Stock Ownership Guidelines. 10-K March 2, 2012 10.18 10.19* Form of Restricted Stock Unit Award Agreement under the 2006 Equity Incentive Plan with Ownership Guidelines. 10-K March 15, 2017 10.15 10.20* Form of Restricted Stock Unit Award Agreement under the 2006 Equity Incentive Plan with Ownership Guidelines. 10-K March 12, 2018 10.18 10.21* Form of Restricted Stock Unit Award Agreement for Performance under the 2006 Equity Incentive Plan. 10-K January 29, 2010 10.15 10.22* Form of Restricted Stock Unit Award Agreement for Performance under the 2006 Equity Incentive Plan with Stock Ownership Guidelines. 10-K March 2, 2012 10.20 37 Table of Contents Incorporated by Reference Exhibit No. Description Filed with this Form 10-K Form Filing Date Exhibit No. 10.23* Form of Restricted Stock Unit Award Agreement for Performance under the 2006 Equity Incentive Plan with Ownership Guidelines. 10-K March 15, 2017 10.18 10.24* Form of Restricted Stock Unit Award Agreement for Performance under the 2006 Equity Incentive Plan with Ownership Guidelines. 10-K March 12, 2018 10.22 10.25* CRA International, Inc. Cash Incentive Plan, as amended. DEF 14A April 28, 2017 Annex B 10.26* Form of Service Cash Awards Agreement under the Cash Incentive Plan with Ownership Guidelines. 8-K December 12, 2016 10.2 10.27* Form of Performance Cash Awards Agreement under the Cash Incentive Plan with Ownership Guidelines. 8-K December 12, 2016 10.3 10.28* Summary of Director Compensation. 10-K February 27, 2020 10.28 10.29 Lease dated February 24, 2014 by and between CRA International, Inc. and BP Hancock LLC 8-K February 27, 2014 10.1 10.30 First Amendment to Lease dated as of February 24, 2015 by and between CRA International, Inc. and BP Hancock LLC 8-K March 2, 2015 10.1 10.31 Second Amendment to Lease dated as of August 16, 2017 by and between CRA International, Inc. and BP Hancock LLC. 10-Q August 2, 2018 10.1 10.32 Third Amendment to Lease dated as of June 27, 2018 by and between CRA International, Inc. and BP Hancock LLC. 10-Q August 2, 2018 10.2 10.33 Office Lease dated as of November 29, 1999 between CRA and 1201 F Street, L.L.C., as amended. 10-K February 23, 2001 10.9 10.34 Addenda Nos. 3 and 4 to Office Lease dated as of November 29, 1999 between CRA and 1201 F Street, L.L.C. (or its successor in interest, 1201 F Street, L.P.), as amended. 10-K March 17, 2015 10.35 10.35 Addendum No. 5 to Office Lease dated as of November 29, 1999 between CRA and 1201 F Street, L.P., as amended. 8-K December 30, 2014 10.1 10.36 Amended and Restated Addendum No. 5 to Office Lease dated as of November 29, 1999 between CRA and 1201 F Street L.P., as amended. 10-K March 4, 2016 10.28 10.37 Addendum No. 6 to Lease dated July 11, 2016 by and between CRA International, Inc. and 1201 F Street, L.P. 10-Q October 31, 2017 10.3 10.38 Agreement for Leases dated May 20, 2016 by and among Mitsubishi Estate London Limited, CRA International (UK) Limited and CRA International, Inc. 8-K May 25, 2016 10.1 10.39 Lease relating to Unit 2, Part Ground Floor, 8 Finsbury Circus, London EC2 dated May 20, 2016 by and among Mitsubishi Estate London Limited, CRA International (UK) Limited and CRA International, Inc. 8-K May 25, 2016 10.2 10.40 Lease relating to Fourth Floor, 8 Finsbury Circus, London EC2 dated May 20, 2016 by and among Mitsubishi Estate London Limited, CRA International (UK) Limited and CRA International, Inc. 8-K May 25, 2016 10.3 10.41 Licence to Carry Out Works relating to Unit 2, Part Ground Floor, 8 Finsbury Circus, London EC2 dated May 20, 2016 by and among Mitsubishi Estate London Limited, CRA International (UK) Limited and CRA International, Inc. 8-K May 25, 2016 10.4 10.42 Licence to Carry Out Works relating to Fourth Floor, 8 Finsbury Circus, London EC2 dated May 20, 2016 by and among Mitsubishi Estate London Limited, CRA International (UK) Limited and CRA International, Inc. 8-K May 25, 2016 10.5 10.43 Side Deed dated May 20, 2016 by and among Mitsubishi Estate London Limited, CRA International (UK) Limited and CRA International, Inc. 8-K May 25, 2016 10.6 10.44 Agreement for Lease dated November 21, 2017 by and among Mitsubishi Estate London Limited, CRA International (UK) Limited and CRA International, Inc. 8-K November 27, 2017 10.1 10.45 Lease dated February 12, 2018 by and among Mitsubishi Estate London Limited, CRA International (UK) Limited and CRA International, Inc. 10-Q May 8, 2018 10.2 38 Table of Contents Incorporated by Reference Exhibit No. Description Filed with this Form 10-K Form Filing Date Exhibit No. 10.46 Deed of Variation of a Lease of Fourth Floor, 8 Finsbury Circus, London EC2 dated October 17, 2018 between Mitsubishi Estate London Limited, CRA International (UK) Limited and CRA International, Inc. 10-K February 28, 2019 10.46 10.47 Deed of Variation of a Lease of Part Third Floor, 8 Finsbury Circus, London EC2 dated October 17, 2018 between Mitsubishi Estate London Limited, CRA International (UK) Limited and CRA International, Inc. 10-K February 28, 2019 10.47 10.48 Licence to Carry Out Works relating to Part Third Floor and Fourth Floor, 8 Finsbury Circus, London EC2 dated October 17, 2018 between Mitsubishi Estate London Limited, CRA International (UK) Limited and CRA International, Inc. 10-K February 28, 2019 10.48 10.49 Lease dated July 15, 2015 by and between CRA International, Inc. and 1411 IC-SIC Property LLC. 8-K July 21, 2015 10.1 10.50 First Amendment to Lease dated April 21, 2017 by and between CRA International, Inc. and 1411 IC-SIC Property LLC 8-K May 5, 2017 10.1 10.51 Second Amendment to Lease dated July 28, 2017 by and between CRA International, Inc. and 1411 IC-SIC Property LLC. 10-Q May 8, 2018 10.1 10.52 Lease dated as of February 14, 2008 by and between Teachers Insurance and Annuity Association of America, as landlord, and CRA International, Inc., as tenant, and the First Amendment to Lease dated as of May 8, 2017 by and among John Hancock Life Insurance Company (U.S.A.), as landlord and successor-in-interest to Teachers Insurance and Annuity Association of America, and CRA International, Inc., as tenant. 10-Q May 11, 2017 10.2 10.53 Office Lease dated April 2, 2013 by and between C1 Consulting Limited Liability Company and 221 Main Property Owner LLC, as amended by First Amendment to Lease dated July 21, 2017 by and between CRA International, Inc. (as successor to C1 Consulting Limited Liability Company) and Columbia REIT—221 Main, LLC (as successor to 221 Main Property Owner LLC) 10-Q October 31, 2017 10.2 10.54 Form of consulting agreement with outside experts. S-1/A April 3, 1998 10.8 10.55 Amended and Restated Credit Agreement, dated as of October 24, 2017, by and among CRA International, Inc., CRA International (UK) Limited, CRA International (Netherlands) B.V., and CRA International Limited, as the Borrowers, Citizens Bank, N.A., as Administrative Agent, a Lender and an Issuing Bank, Bank of America, N.A., as a Lender and an Issuing Bank, and Santander Bank, N.A., as a Lender 8-K October 26, 2017 10.1 10.56 Amended and Restated Securities Pledge Agreement, dated as of October 24, 2017, by and between CRA International, Inc., as Pledgor, and Citizens Bank, N.A., as Administrative Agent 8-K October 26, 2017 10.2 10.57 Transaction Agreement dated November 20, 2017 by and among IMSWorld Publications Ltd., IMS Health Technology Solutions Norway AS, IMS Health GmbH & Co. OHG, IQVIA Inc., CRA International, Inc., CRA International (UK) Limited and the Former Employees 8-K November 27, 2017 10.2 10.58 Office Lease dated June 18, 2019 between 601 City Center LLC and CRA International, LLC 8-K June 24, 2019 10.1 10.59 Third Amendment to Lease dated September 9, 2019 by and between CRA International, Inc. and 1411 IC-SIC Property LLC 10-Q October 31, 2019 10.1 10.60* Offer Letter between CRA International, Inc. and Daniel Mahoney effective March 17, 2020. 8-K March 20, 2020 10.1 10.61* Severance Agreement between CRA International, Inc. and Paul A. Maleh dated March 17, 2020. 8-K March 20, 2020 10.2 10.62* Severance Agreement between CRA International, Inc. and Chad M. Holmes dated March 17, 2020. 8-K March 20, 2020 10.3 10.63* Severance Agreement between CRA International, Inc. and Jonathan Yellin dated March 17, 2020. 8-K March 20, 2020 10.4 10.64* Severance Agreement between CRA International, Inc. and Daniel Mahoney dated March 17, 2020. 8-K March 20, 2020 10.5 39 Table of Contents Incorporated by Reference Exhibit No. Description Filed with this Form 10-K Form Filing Date Exhibit No. 21.1 Subsidiaries. X 23.1 Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm. X 23.2 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm X 31.1 Rule 13a-14(a)/15d-14(a) certification of principal executive officer. X 31.2 Rule 13a-14(a)/15d-14(a) certification of principal financial officer. X 32.1 Section 1350 certification of principal executive officer. X 32.2 Section 1350 certification of principal financial officer. X 101 The following financial statements from CRA International, Inc.'s Annual Report on Form 10-K for the fiscal year ended January 2, 2021, formatted in Inline XBRL (eXtensible Business Reporting Language), as follows: (i) Consolidated Statements of Operations for the fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018, (ii) Consolidated Statements of Comprehensive Income (Loss) for the fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018, (iii) Consolidated Balance Sheets as at January 2, 2021 and December 28, 2019, (iv) Consolidated Statements of Cash Flows for the fiscal years ended January 2, 2021, December 28, 2019, and December 29,2018, (v) Consolidated Statements of Shareholders' Equity for the fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018 and (vi) Notes to Consolidated Financial Statements. X 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). * Management contract or compensatory plan, contract or arrangement. Item 16 —Form 10-K Summary None. 40 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CRA INTERNATIONAL, INC. By: /s/ PAUL A. MALEH Paul A. Maleh President, Chief Executive Officer and Director Date: March 4, 2021 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated. Signature Title Date /s/ PAUL A. MALEH President, Chief Executive Officer, and Chairman of the Board (principal executive officer) March 4, 2021 Paul A. Maleh /s/ DANIEL K. MAHONEY Chief Financial Officer, Executive Vice President, and Treasurer (principal financial officer and principal accounting officer) March 4, 2021 Daniel K. Mahoney /s/ RICHARD D. BOOTH Director March 4, 2021 Richard D. Booth /s/ THOMAS A. AVERY Director March 4, 2021 Thomas A. Avery /s/ WILLIAM F. CONCANNON Director March 4, 2021 William F. Concannon /s/ NANCY HAWTHORNE Director March 4, 2021 Nancy Hawthorne /s/ ROBERT W. HOLTHAUSEN Director March 4, 2021 Robert W. Holthausen /s/ CHRISTINE R. DETRICK Director March 4, 2021 Christine R. Detrick 41 Table of Contents CRA INTERNATIONAL, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report s of Independent Registered Public Accounting Fir ms FS- 2 Consolidated Statements of Operations FS- 5 Consolidated Statements of Comprehensive Income FS- 6 Consolidated Balance Sheets FS- 7 Consolidated Statements of Cash Flows FS- 8 Consolidated Statements of Shareholders' Equity FS- 9 Notes to Consolidated Financial Statements FS- 10 FS-1 Table of Contents Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders CRA International, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheet of CRA International, Inc. (a Massachusetts corporation) and subsidiaries (the Company) as of January 2, 2021, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the year ended January 2, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 2, 2021, and the results of its operations and its cash flows for the year ended January 2, 2021, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 2, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 4, 2021 expressed an unqualified opinion. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Fixed-Price Revenue Recognition – Estimates of total costs to complete a performance obligation As described further in Notes 1 and 2 to the consolidated financial statements, the Company recognizes revenue from fixed-price arrangements using the ratio of costs incurred to total estimated costs for completing a performance obligation. We identified the Company’s estimates of total costs to complete a performance obligation in a fixed-price contract as a critical audit matter. The principal considerations for our determination that the Company’s estimates of total costs to complete a performance obligation in a fixed-price arrangement is a critical audit matter are the significant management judgement in estimating forecasted direct labor, subcontract labor and other direct costs remaining to complete a performance obligation and to determine the related revenue recognized. Significant management estimates are subject to estimation uncertainty and require significant auditor subjectivity in evaluating the results of our procedures and the reasonableness of those estimates. FS-2 Table of Contents Our audit procedures related to the estimates of total costs to complete a performance obligation included the following, among others. • We tested the design and operating effectiveness of internal controls relating to management’s estimates of total costs to complete a performance obligation in a fixed-price arrangement. • We evaluated management’s historical ability to estimate total costs to complete a performance obligation in a fixed-price arrangement. • For a sample of fixed-price arrangements, we obtained subsequent actual costs incurred and subsequent estimates of total cost to complete and compared to the Company's estimate. Deferred Compensation - Performance-Based Awards As described further in Note 1 to the consolidated financial statements, the Company provides performance-based awards where the amount to be paid depends upon achievement of minimum required financial targets over the award’s measurement period. These financial targets may include a measure of revenue generation, profitability, or both. We identified the estimation uncertainty related to the achievement of the financial targets used in the calculation of the performance-based awards deferred compensation liability as a critical audit matter. The principal consideration for our determination that the achievement of the financial targets is a critical audit matter is that it requires management judgement in estimating forecasted future revenues for the remaining measurement period. This requires management to evaluate historical results and expectations of future performance based on available information, including each recipient’s specific performance. Significant management estimates are subject to estimation uncertainty and require significant auditor subjectivity in evaluating the results of our procedures and the reasonableness of those estimates. Our audit procedures related to this matter included the following, among others. • We tested the design and operating effectiveness of internal controls over management’s estimates related to forecasted future revenues for the remaining measurement period. • We evaluated management’s historical ability to estimate revenues. • We obtained and tested the Company’s key inputs and assumptions used to estimate the forecasted future revenues for the remaining measurement period. Our testing included evaluating key inputs and assumptions by comparing them to historical results and performing sensitivity analysis. /s/ GRANT THORNTON LLP We have served as the Company's auditor since 2020. Boston, Massachusetts March 4, 2021 FS-3 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of CRA International, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of CRA International, Inc. (the Company) as of December 28, 2019, the related consolidated statements of operations and comprehensive income, shareholders’ equity and cash flows for each of the two years in the period ended December 28, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 28, 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 28, 2019, in conformity with U.S. generally accepted accounting principles. Adoption of ASU No. 2016-02 As discussed in Note 1 to the consolidated financial statements, the Company changed its method for accounting for leases in fiscal year 2019 due to the adoption of ASU No. 2016-02, Leases , and associated amendments (Topic 842), using the modified retrospective method. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We served as the Company's auditor from 2014 to 2020. Boston, Massachusetts February 27, 2020 FS-4 Table of Contents CRA INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended Year Ended Year Ended January 2, 2021 (53 weeks) December 28, 2019 (52 weeks) December 29, 2018 (52 weeks) (in thousands, except per share data) Revenues $ 508,373 $ 451,370 $ 417,648 Costs of services (exclusive of depreciation and amortization) 370,709 317,761 289,185 Selling, general and administrative expenses 90,028 93,613 89,533 Depreciation and amortization 12,840 10,648 9,995 Income from operations 34,796 29,348 28,935 GNU gain on liquidation — — 258 Interest expense, net ( 1,216 ) ( 1,254 ) ( 647 ) Foreign currency gains (losses), net 42 ( 1,297 ) 387 Income before provision for income taxes 33,622 26,797 28,933 Provision for income taxes 9,115 6,050 6,461 Net income 24,507 20,747 22,472 Net loss attributable to noncontrolling interest, net of tax — — 20 Net income attributable to CRA International, Inc. $ 24,507 $ 20,747 $ 22,492 Net income per share attributable to CRA International, Inc.: Basic $ 3.14 $ 2.63 $ 2.76 Diluted $ 3.07 $ 2.53 $ 2.61 Weighted average number of shares outstanding: Basic 7,768 7,866 8,107 Diluted 7,948 8,167 8,570 See accompanying notes to the consolidated financial statements. FS-5 Table of Contents CRA INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended Year Ended Year Ended January 2, 2021 (53 weeks) December 28, 2019 (52 weeks) December 29, 2018 (52 weeks) (in thousands) Net income $ 24,507 $ 20,747 $ 22,472 Other comprehensive income (loss) Foreign currency translation adjustments 3,280 831 ( 2,698 ) Comprehensive income 27,787 21,578 19,774 Comprehensive loss attributable to noncontrolling interest — — 20 Comprehensive income attributable to CRA International, Inc. $ 27,787 $ 21,578 $ 19,794 See accompanying notes to the consolidated financial statements. FS-6 Table of Contents CRA INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS January 2, 2021 December 28, 2019 (in thousands, except share data) ASSETS Current assets: Cash and cash equivalents $ 45,677 $ 25,639 Accounts receivable, net of allowances of $ 3,595 at January 2, 2021 and $ 3,838 at December 28, 2019 111,595 107,841 Unbilled services, net of allowances of $ 1,000 at January 2, 2021 and $ 1,503 at December 28, 2019 40,881 36,569 Prepaid expenses and other current assets 7,068 7,277 Forgivable loans 14,749 6,751 Total current assets 219,970 184,077 Property and equipment, net 62,878 61,295 Goodwill 89,187 88,504 Intangible assets, net 5,108 6,476 Right-of-use assets 122,144 130,173 Deferred income taxes 9,667 10,670 Forgivable loans, net of current portion 46,864 48,390 Other assets 2,692 3,658 Total assets $ 558,510 $ 533,243 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 19,430 $ 26,069 Accrued expenses 136,376 121,301 Deferred revenue and other liabilities 9,866 6,723 Current portion of lease liabilities 13,557 12,847 Current portion of deferred compensation 20,902 4,470 Total current liabilities 200,131 171,410 Non-current liabilities: Deferred compensation and other non-current liabilities 7,075 15,071 Facility-related non-current liabilities 2,113 1,956 Non-current portion of lease liabilities 139,447 146,551 Deferred income taxes 725 504 Total non-current liabilities 149,360 164,082 Commitments and contingencies (Note 16) Shareholders’ equity: Preferred stock, no par value; 1,000,000 shares authorized; none issued and outstanding — — Common stock, no par value; 25,000,000 shares authorized; 7,693,497 and 7,814,797 shares issued and outstanding at January 2, 2021 and December 28, 2019, respectively 503 9,265 Retained earnings 216,999 200,249 Accumulated other comprehensive loss ( 8,483 ) ( 11,763 ) Total shareholders’ equity 209,019 197,751 Total liabilities and shareholders’ equity $ 558,510 $ 533,243 See accompanying notes to the consolidated financial statements. FS-7 Table of Contents CRA INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended Year Ended Year Ended January 2, 2021 (53 weeks) December 28, 2019 (52 weeks) December 29, 2018 (52 weeks) (in thousands) OPERATING ACTIVITIES: Net income $ 24,507 $ 20,747 $ 22,472 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 12,840 10,648 9,996 GNU gain on liquidation — — ( 258 ) Deferred rent and facility-related liabilities 142 117 3,596 Right-of-use asset amortization 12,037 10,662 — Deferred income taxes 1,114 ( 1,159 ) ( 829 ) Share-based compensation expenses 3,235 3,461 4,819 Accounts receivable allowances ( 479 ) 47 ( 1,410 ) Unrealized foreign currency remeasurement losses, net 247 — — Changes in operating assets and liabilities: Accounts receivable ( 1,948 ) ( 12,759 ) ( 14,427 ) Unbilled services, net ( 3,940 ) ( 352 ) ( 2,987 ) Prepaid expenses and other current assets, and other assets 1,377 ( 2,120 ) 5,502 Forgivable loans ( 15,868 ) ( 16,331 ) ( 12,277 ) Incentive cash awards 6,602 4,839 3,206 Accounts payable, accrued expenses, and other liabilities 25,336 16,194 18,786 Lease liabilities ( 10,539 ) ( 6,162 ) — Net cash provided by operating activities 54,663 27,832 36,189 INVESTING ACTIVITIES: Purchases of property and equipment ( 17,094 ) ( 16,693 ) ( 15,447 ) Net cash used in investing activities ( 17,094 ) ( 16,693 ) ( 15,447 ) FINANCING ACTIVITIES: Issuance of common stock, principally stock options exercises 2,236 3,211 2,166 Borrowings under revolving line of credit 77,000 54,000 30,161 Repayments under revolving line of credit ( 77,000 ) ( 54,000 ) ( 30,161 ) Tax withholding payments reimbursed by shares ( 862 ) ( 2,176 ) ( 3,946 ) Cash paid on dividend equivalents ( 108 ) ( 246 ) ( 256 ) Cash dividends paid to shareholders ( 7,395 ) ( 6,539 ) ( 5,784 ) Repurchase of common stock ( 13,371 ) ( 18,068 ) ( 27,884 ) Distribution to noncontrolling interest — — ( 43 ) Net cash used in financing activities ( 19,500 ) ( 23,818 ) ( 35,747 ) Effect of foreign exchange rates on cash and cash equivalents 1,969 290 ( 1,002 ) Net increase (decrease) in cash and cash equivalents 20,038 ( 12,389 ) ( 16,007 ) Cash and cash equivalents at beginning of period 25,639 38,028 54,035 Cash and cash equivalents at end of period $ 45,677 $ 25,639 $ 38,028 Noncash investing and financing activities: Purchases of property and equipment not yet paid for $ 4,749 $ 4,914 $ 303 Purchases of property and equipment paid by a third party $ — $ 156 $ 133 Asset retirement obligations $ 155 $ 428 $ 223 Right-of-use assets obtained in exchange for lease obligations $ 2,640 $ 57,827 $ — Right-of-use assets related to the adoption of ASC 842 $ — $ 82,329 $ — Lease liabilities related to the adoption of ASC 842 $ — $ 106,765 $ — Supplemental cash flow information: Cash paid for taxes $ 6,535 $ 7,590 $ 4,813 Cash paid for interest $ 1,162 $ 1,157 $ 509 Cash paid for amounts included in operating lease liabilities $ 20,436 $ 14,620 $ — See accompanying notes to the consolidated financial statements. FS-8 Table of Contents CRA INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands, except share data) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) CRA International, Inc. Shareholders' Equity Noncontrolling Interest Total Shareholders' Equity Shares Issued Amount BALANCE AT DECEMBER 30, 2017 8,297,172 $ 47,414 $ 169,390 $ ( 9,896 ) $ 206,908 $ 321 $ 207,229 Balance at December 31, 2017, as previously reported 8,297,172 47,414 169,390 ( 9,896 ) 206,908 321 207,229 Cumulative effect of a change in accounting principle related to ASC 606 366 366 366 Balance at December 31, 2017, as adjusted 8,297,172 $ 47,414 $ 169,756 $ ( 9,896 ) $ 207,274 $ 321 $ 207,595 Net income 22,492 22,492 ( 20 ) 22,472 Foreign currency translation adjustment ( 2,698 ) ( 2,698 ) ( 2,698 ) Exercise of stock options 100,771 2,166 2,166 2,166 Share-based compensation expense for employees and non-employees 4,819 4,819 4,819 Restricted shares vesting 237,509 Redemption of vested employee restricted shares for tax withholding ( 83,341 ) ( 3,946 ) ( 3,946 ) ( 3,946 ) Shares repurchased ( 541,631 ) ( 27,616 ) ( 27,616 ) ( 27,616 ) GNU gain on liquidation ( 258 ) ( 258 ) Distribution to noncontrolling interest ( 43 ) ( 43 ) Accrued dividends on unvested shares 21 21 21 Cash paid on dividend equivalents ( 256 ) ( 256 ) ( 256 ) Cash dividends paid to shareholders ($ 0.71 per share). ( 5,784 ) ( 5,784 ) ( 5,784 ) BALANCE AT DECEMBER 29, 2018 8,010,480 $ 22,837 $ 186,229 $ ( 12,594 ) $ 196,472 $ — $ 196,472 Net income 20,747 20,747 20,747 Foreign currency translation adjustment 831 831 831 Exercise of stock options 140,513 3,211 3,211 3,211 Share-based compensation expense for employees 3,461 3,461 3,461 Restricted shares vesting 128,089 Redemption of vested employee restricted shares for tax withholding ( 43,173 ) ( 2,176 ) ( 2,176 ) ( 2,176 ) Shares repurchased ( 421,112 ) ( 18,068 ) ( 18,068 ) ( 18,068 ) Accrued dividends on unvested shares 58 58 58 Cash paid on dividend equivalents ( 246 ) ( 246 ) ( 246 ) Cash dividends paid to shareholders ($ 0.83 per share) ( 6,539 ) ( 6,539 ) ( 6,539 ) BALANCE AT DECEMBER 28, 2019 7,814,797 $ 9,265 $ 200,249 $ ( 11,763 ) $ 197,751 $ — $ 197,751 Balance at December 29, 2019, as previously reported 7,814,797 $ 9,265 $ 200,249 $ ( 11,763 ) $ 197,751 $ — $ 197,751 Cumulative effect of a change in accounting principle related to ASC 326 $ ( 203 ) $ ( 203 ) $ ( 203 ) Balance at December 29, 2019, as adjusted 7,814,797 $ 9,265 $ 200,046 $ ( 11,763 ) $ 197,548 $ — $ 197,548 Net income 24,507 24,507 24,507 Foreign currency translation adjustment 3,280 3,280 3,280 Exercise of stock options 118,841 2,236 2,236 2,236 Share-based compensation expense for employees 3,235 3,235 3,235 Restricted shares vesting 61,396 — — Redemption of vested employee restricted shares for tax withholding ( 17,695 ) ( 862 ) ( 862 ) ( 862 ) Shares repurchased ( 283,842 ) ( 13,371 ) ( 13,371 ) ( 13,371 ) Accrued dividends on unvested shares ( 51 ) ( 51 ) ( 51 ) Cash paid on dividend equivalents ( 108 ) ( 108 ) ( 108 ) Cash dividends paid to shareholders ($ 0.95 per share) ( 7,395 ) ( 7,395 ) ( 7,395 ) BALANCE AT JANUARY 2, 2021 7,693,497 $ 503 $ 216,999 $ ( 8,483 ) $ 209,019 $ — $ 209,019 See accompanying notes to the consolidated financial statements FS-9 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Description of Business CRA International, Inc. ("CRA or the "Company") is a worldwide leading consulting services firm that applies advanced analytic techniques and in-depth industry knowledge to complex engagements for a broad range of clients. CRA offers services in two broad areas: litigation, regulatory, and financial consulting and management consulting. CRA operates in one business segment. CRA operates its business under its registered trade name, Charles River Associates. Fiscal Year and Quarters CRA's fiscal year end is the Saturday nearest December 31 of each year. CRA's fiscal years periodically contain 53 weeks rather than 52 weeks. Fiscal 2020 was a 53 -week year. Fiscal 2019 and fiscal 2018 were 52 -week years. CRA's fiscal quarter ends are determined as the last Saturday nearest the respective calendar quarter end. Basis of Presentation The Consolidated Financial Statements include the accounts of CRA International, Inc. and its wholly-owned subsidiaries (collectively the 'Company') which require consolidation, after the elimination of intercompany accounts and transactions. In addition, as more fully explained in Note 11, the consolidated financial statements include CRA's interest in GNU123 Liquidating Corporation ('GNU') for fiscal 2018. Certain prior year amounts have been reclassified to conform to current year presentation. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make significant estimates and judgments that affect the reported amounts of assets and liabilities, as well as the related disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of consolidated revenues and expenses during the reporting period. Estimates in these consolidated financial statements include, but are not limited to, allowances for accounts receivable and unbilled services, revenue recognition on fixed price contracts, variable consideration to be included in the transaction price of revenue contracts, depreciation of property and equipment, measurement of operating lease right-of-use ("ROU") assets and liabilities, share-based compensation, valuation of the contingent consideration liability, valuation of acquired intangible assets, impairment of long-lived assets, goodwill, accrued and deferred income taxes, valuation allowances on deferred tax assets, accrued incentive compensation, and certain other accrued expenses. These items are monitored and analyzed by CRA for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. CRA bases its estimates on historical experience and various other assumptions that CRA believes to be reasonable under the circumstances. Actual results may differ from those estimates if CRA's assumptions based on past experience or other assumptions do not turn out to be substantially accurate. Cash and Cash Equivalents As of January 2, 2021, CRA's cash accounts were concentrated at two financial institutions, which potentially exposes CRA to credit risks. The financial institutions both have short-term credit ratings of A-2 by Standard & Poor's ratings services. CRA has not experienced any losses related to such accounts. CRA does not believe that there is significant risk of non-performance by the financial institutions, and its cash on deposit is fully liquid. CRA continually monitors the credit ratings of the institutions. Cash equivalents consist principally of money market funds with maturities of three months or less when purchased. Foreign Currency Translation Asset and liability accounts of CRA's foreign subsidiaries are translated into U.S. dollars at period-end exchange rates and operating accounts are translated at average exchange rates for each reporting period. The resulting translation adjustments are recorded in shareholders' equity as a component of accumulated other comprehensive income (loss). Foreign currency FS-10 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) transactions are remeasured at current exchanges rates, with adjustments recorded in the consolidated statement of operations. The effect of transaction gains and losses recorded in income before provision for income taxes amounted to gains of $ 0.04 million for fiscal 2020, losses of $ 1.3 million for fiscal 2019, and gains of $ 0.4 million for fiscal 2018. Revenue Recognition and Allowances for Accounts Receivable and Unbilled Services On December 31, 2017, CRA adopted ASC Topic 606, Revenue from Contracts with Customers ("ASC 606") using the modified retrospective method for all contracts not completed as of the date of adoption. The cumulative effect of applying ASC 606 to all contracts with customers that were not completed as of December 30, 2017 resulted in an increase to CRA's fiscal 2018 opening balance of retained earnings of $ 0.4 million, net of tax. Prior periods were not retrospectively adjusted. Under ASC 606, revenue is recognized when CRA satisfies a performance obligation by transferring services promised in a contract to a client in an amount that reflects the consideration that CRA expects to receive in exchange for those services. Performance obligations in CRA's contracts represent distinct or separate service streams that CRA provides to clients Revenue contracts with clients are evaluated based on the five-step model under ASC 606: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to separate performance obligations; and (5) recognize revenues when (or as) each performance obligation is satisfied. If, at the outset of an arrangement, CRA determines that an enforceable contract does not exist, revenues are deferred until all criteria for an enforceable contract are met. CRA derives substantially all of its revenues from the performance of professional services for its clients. The contracts that CRA enters into and operates under specify whether the engagement will be billed on a time-and-materials basis or a fixed-price basis. These engagements generally last three to six months , although some engagements can be much longer in duration. • Time-and-materials arrangements require the client to pay based on the number of hours worked at contractually agreed-upon hourly rates. Revenues are recognized from these arrangements based on hours incurred and contracted rates based on a right-to-payment for services completed to date. When a time-and-materials arrangement has a "cap" or "limit" amount, revenue is recognized up to the cap or limit amount specified by the client, based on the efforts or hours incurred and expenses incurred. Thereafter, revenue is reserved pending an amendment of the cap or limit. • Fixed-price arrangements require the client to pay a contractually agreed-upon fee in exchange for a pre-established set of professional services. Fees are based on estimates of the costs and timing for completing a performance obligation. Under fixed-price arrangements, revenues are generally recognized using a proportional performance method, which is based on the ratio of costs incurred to the total estimated costs for completing a performance obligation. CRA's fixed-price arrangements generally have a single performance obligation. For arrangements that contain multiple performance obligations, the fixed price is allocated based on the estimated relative standalone selling prices of the promised services underlying each performance obligation. Reimbursable expenses, including those relating to travel, out-of-pocket expenses, outside consultants and other outside service costs, are generally included in revenues, and an equivalent amount of reimbursable expenses is included in costs of services in the period in which the expense is incurred. Sales, value-added, and other taxes collected on behalf of third parties are excluded from revenue. CRA usually issues invoices to its customers on a monthly basis, and payment is due upon receipt of the invoice. When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in ASC 606, CRA does not assess whether a significant financing component exists if the period between when it performs its obligations under the contract and when the customer pays is one year or less. None of CRA's contracts contained a significant financing component as of January 2, 2021 or December 28, 2019. Contract Balances from Contracts with Customers The timing of revenue recognition, billings, and cash collections results in accounts receivables, unbilled services, and contract liabilities on the consolidated balance sheets. Revenues recognized for services performed but not yet billed to clients are recorded as unbilled services. FS-11 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) CRA defines contract assets as assets for which it has recorded revenue because it determines that it is probable that it will earn a performance-based or contingent fee, but is not yet entitled to receive a fee because certain events, such as completion of the measurement period or client approval, must occur. CRA defines contract liabilities as advance payments from or billings to its clients for services that have not yet been performed or earned. When consideration is received, or such consideration is unconditionally due from a customer prior to transferring consulting services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after performance obligations have been satisfied and all revenue recognition criteria have been met. Contract liabilities are included in deferred revenue and other liabilities on the consolidated balance sheets. Variable Consideration Variable consideration to be included in the transaction price is estimated using either the expected value method or the most likely method based on facts and circumstances. Variable consideration is included in the transaction price if it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Revenues from CRA's consulting services are recorded at the net transaction price, which includes estimates of variable consideration for which reserves are established. These variable consideration reserves, which are based on specific price concessions and those expected to be extended to CRA clients estimated by CRA's historical realization rates, are classified as reductions of accounts receivable and unbilled services. Actual amounts of consideration ultimately received may differ from CRA's estimates. If actual results in the future vary from its estimates, CRA adjusts these estimates, which would affect net revenue and earnings in the period such variances become known. Reserves for Credit Risk CRA's accounts receivable and unbilled services consist of receivables from a broad range of clients in a variety of industries located throughout the U.S. and in other countries. CRA performs a credit evaluation of its clients to minimize its collectability risk. Periodically, CRA will require advance payment from certain clients. However, CRA does not require collateral or other security. CRA adopted ASU No. 2016-13, Financial Instruments – Credit Loss (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASC 326) on December 29, 2019, which changed the method CRA utilizes to estimate reserves related to credit risk. As a result of the adoption, CRA recognized a cumulative-effect adjustment of $ 0.2 million to retained earnings and allowances for accounts receivable. Comparative periods and their respective disclosures prior to the adoption of ASC 326 have not been adjusted. Under ASC 326, CRA maintains allowances for accounts receivable and unbilled services for estimated losses resulting from clients’ failure to make required payments. CRA estimates these allowances based on historical charge-off rates, adjusted for days of sales outstanding and expected changes to clients’ financial conditions during the anticipated collection period. CRA writes off allowances when management determines the balance is uncollectible and all efforts of collection have been exhausted. Bad debt expense, net of recoveries of previously written off allowances, is recorded as a component of selling, general and administrative expenses on the consolidated statements of operations. Prior to adopting ASC 326, CRA determined allowances for accounts receivable and unbilled services for specific customer accounts based on the financial condition of the customer and related facts and circumstances. Expenses associated with these allowances were recorded as a component of selling, general and administrative expenses on the consolidated statements of operations. Deferred Compensation CRA accounts for performance-based and service-based cash awards using an accrual method where changes in estimates are accounted for prospectively over the remaining service period. To the extent the terms of an award attribute all or a portion of the expected future benefits to a period of service greater than one year, the cost of those benefits is accrued over the employee's or non-employee's requisite service period in a systematic and rational manner, usually on a straight-line basis. The requisite service period typically ranges from three to six years starting with the employee's employment date or non-employee's affiliation date. For an employee or non-employee consultant currently affiliated with CRA, the requisite service period generally begins at the start of the award's measurement period. A recipient of such an award is expected to be employed by or affiliated with CRA for the entire measurement period. If the recipient's employment or affiliation with CRA FS-12 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) terminates during the measurement period, the amount paid will be determined in accordance with the recipient's specific contract provisions. The terms of award agreements may include the achievement of minimum required financial targets over the award's measurement period. These financial targets may include a measure of revenue generation, profitability, or both. The amount of the liability of the award agreements is estimated based on internally generated financial projections. The process of projecting these financial targets over the measurement period is highly subjective and requires significant judgment and estimates. There can be no assurance that the estimates and assumptions used in preparing these projections will prove to be accurate. Leases CRA is a lessee under certain operating leases for office space and equipment. Prior to adopting ASC Topic 842, Leases ("ASC 842") on December 30, 2018, CRA followed the lease accounting guidance as issued in ASC Topic 840, Leases ("ASC 840"). Under ASC 840, CRA classified its leases as operating or capital leases based on evaluation of certain criteria of the lease agreement. For leases that contained rent escalations or rent holidays, CRA recorded the total rent expense during the lease term on a straight-line basis over the term of the lease and recorded the difference between the rents paid and the straight-line rent expense as deferred rent on the balance sheet. Any tenant improvement allowances received from the lessor were recorded as a reduction to rent expense over the term of the lease. CRA adopted ASC 842 on the first day of fiscal 2019 using the modified retrospective transition method. The cumulative effect of the transition adjustments was recognized as of the date of adoption. As a result of adopting the new standard, CRA recognized ROU assets of $ 82.3 million and lease liabilities of $ 106.8 million. The difference between the amount of ROU assets and lease liabilities recognized was an adjustment to deferred rent. There was no change to net deferred tax assets as a result of CRA's adoption of ASC 842. The adoption of ASC 842 did not have a material impact on CRA's results of operations or cash flows, nor did it have an impact on any of CRA's existing debt covenants. The reported results for fiscal 2019 reflect the application of ASC 842 guidance, whereas comparative periods and their respective disclosures prior to the adoption of ASC 842 are presented using the legacy guidance of ASC 840. ASC 842 requires lessees to recognize leases on the balance sheet as a lease liability with a corresponding ROU asset, subject to certain permitted accounting policy elections. Under ASC 842, CRA determines whether a contract is a lease at the inception of the contract. This determination is based on whether the contract provides CRA the right to control the use of a physically distinct asset or substantially all of the capacity of an asset. Leases with an initial noncancellable term of twelve months or less that do not include an option to purchase the underlying asset that CRA is reasonably certain to exercise are classified as short-term leases. ROU assets and lease liabilities related to short-term leases are excluded from the consolidated balance sheets. CRA recognizes rent expense for its operating leases on a straight-line basis over the term of the lease. Many of CRA's equipment leases are short-term or cancellable with notice. CRA's office space leases have remaining lease terms between one and approximately eleven years , many of which include one or more options to extend the term for periods of up to five years for each option. Certain leases contain options to terminate the lease early, which may include a penalty for exercising the option. Many of the termination options require notice within a specified period, after which the option is no longer available to CRA if not exercised. The extension options and termination options may be exercised at CRA's sole discretion. CRA does not consider in the measurement of ROU assets and lease liabilities an option to extend or terminate a lease if CRA is not reasonably certain to exercise the option. As of January 2, 2021, CRA has not included any options to extend or terminate in its measurement of ROU assets or lease liabilities. Certain of CRA's leases include covenants that oblige CRA, at its sole expense, to repair and maintain the leased asset periodically during the lease term. CRA is not a party to any leases that contain residual value guarantees nor is CRA a party to any leases that provide an option to purchase the underlying asset. Many of CRA's office space leases include fixed and variable payments. Variable payments relate to real estate taxes, sales or use taxes, insurance, operating expenses, and common area maintenance, which are usually billed at actual amounts incurred proportionate to CRA's rented square feet of the building. Variable payments that do not depend on an index or rate are expensed by CRA as they are incurred and are not included in the measurement of the lease liability. Many of CRA's leases contain both lease and non-lease components. For office space leases, lease and non-lease components are accounted for as a single component. For equipment leases, fixed and variable payments are allocated to each component relative to observable or estimated standalone prices. CRA measures its variable lease costs as the portion of variable payments that are allocated to lease components. FS-13 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) CRA measures its lease liability for each leased asset as the present value of lease payments, as defined in ASC 842, allocated to the lease component, discounted using an incremental borrowing rate specific to the underlying asset. CRA's ROU assets are equal to the lease liability, adjusted for payments made to the lessor prior to the lease commencement date and lease incentives received, which include tenant improvement allowances. CRA estimates its incremental borrowing rate for each leased asset based on the interest rate CRA would incur to borrow an amount equal to the lease payments on a collateralized basis over a similar term in a similar economic environment. Goodwill In accordance with ASC Topic 350, Intangibles —Goodwill and Other ("ASC Topic 350"), goodwill and intangible assets with indefinite lives are not subject to amortization but are monitored annually as of October 15th for impairment, or more frequently, as necessary, if events or circumstances exist that would more likely than not reduce the fair value of the reporting unit below its carrying amount. For CRA's fiscal 2020 goodwill impairment analysis, it operates as one reporting unit, which is its consulting services. Under ASC Topic 350, in performing the goodwill impairment testing and measurement process, CRA compares the estimated value of its reporting unit to its net book value to identify potential impairment. CRA estimates the fair value of its consulting business reporting unit utilizing its market capitalization plus an appropriate control premium. Market capitalization is determined by multiplying CRA's shares outstanding on the test date by the market price of its common stock on that date. CRA determines the control premium utilizing data from publicly available premium studies for the trailing four quarters for public company transactions in its industry group. If the estimated fair value of the reporting unit is less than its net book value, an impairment charge would be recorded in CRA's consolidated statement of operations. Intangible Assets Intangible assets are comprised of non-competition agreements and customer relationship intangibles, which are separable from goodwill and have determinable useful lives. CRA's intangible assets are valued separately and amortized over their estimated useful lives based on the pattern in which the economic benefit of the asset is expected to be consumed, if reliably determinable. Non-competition agreements are amortized on a straight-line basis over their useful lives, which are estimated to be five years . Customer relationship intangible assets are amortized on a straight-line basis over periods that range between eight and ten years , which approximates the pattern of economic benefit. Property and Equipment Property and equipment are recorded at cost. Depreciation is calculated using the straight-line method based on the estimated useful lives of three years for computer equipment, three to ten years for computer software, and ten years for furniture and fixtures. Amortization of leasehold improvements is calculated using the straight-line method over the shorter of the lease term or the estimated useful life of the leasehold improvements. Expenditures for maintenance and repairs are expensed as incurred. Expenditures for renewals and betterments are capitalized. Impairment of Long-Lived Assets CRA reviews the carrying value of its long-lived assets (primarily property and equipment, intangible assets, and ROU assets) to assess the recoverability of these assets whenever events or circumstances indicate that impairment may have occurred. Factors CRA considers important that could trigger an impairment review include, among others, the following: • a significant underperformance relative to expected historical or projected future operating results; • a significant change in the manner of CRA's use of the acquired asset or the strategy for CRA's overall business; and • a significant negative industry or economic trend. If CRA determines that an impairment review is required, CRA would review the expected future undiscounted cash flows to be generated by the assets or asset groups. If CRA determines that the carrying value of long-lived assets or asset groups may not be recoverable, CRA would measure any impairment based on a projected discounted cash flow method using a discount rate determined by CRA to be commensurate with the risk inherent in CRA's current business model. If impairment is indicated through this review, the carrying amount of the assets would be reduced to their estimated fair value. FS-14 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Fair Value of Financial Instruments ASC Topic 820, Fair Value Measurement, establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurement), then priority to quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market (Level 2 measurement), then the lowest priority to unobservable inputs (Level 3 measurement). CRA's financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses, are carried at cost, which approximates their fair value because of the short-term maturity of these instruments or because their stated interest rates are indicative of market interest rates. The contingent consideration liability, which is included in deferred compensation on our consolidated balance sheets, is for estimated future contingent consideration payments related to the acquisition of C1 Consulting, LLC, an independent consulting firm, and its wholly-owned subsidiary C1 Associates (collectively, "C1"). The fair value measurement of the liability is based on significant inputs not observed in the market and thus represent a Level 3 measurement. The significant unobservable inputs used in the fair value measurement of the contingent consideration liability are CRA's measures of the estimated payouts based on internally generated revenue projections, expected volatility of the revenue projections, and discount rates. The fair value of the contingent consideration had been determined using a Monte Carlo simulation in prior fiscal years. As of the current fiscal year end, the liability was estimated using an accrual method that approximates the fair value, as the end of the measurement period occurs in January 2021. The fair value of the contingent consideration liability is reassessed on a quarterly basis by CRA using additional information as it becomes available, and any change in the fair value estimates are recorded in costs of services (exclusive of depreciation and amortization) on the consolidated statements of operations. Income Taxes CRA records income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized based on estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. CRA includes in the estimate of deferred tax assets and liabilities an estimate of the realizable benefits from operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. CRA is required to establish a valuation allowance on its deferred tax assets to reflect the likelihood of realization. Significant management judgment is required in determining deferred tax assets and liabilities and any valuation allowance recorded against its net deferred tax assets. The weight of all available evidence is evaluated to determine whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The decision to record a valuation allowance requires varying degrees of judgment based upon the nature of the item giving rise to the deferred tax asset. If, after a valuation allowance is recorded, it is determined that CRA would be able to realize deferred tax assets in the future in excess of their net recorded amount, CRA would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. CRA's effective tax rate may vary from period to period based on changes in estimated taxable income or loss; changes to the valuation allowance; changes to federal, state, or foreign tax laws; future expansion into areas with varying country, state, and local income tax rates; deductibility of certain costs; uncertain tax positions; expenses by jurisdiction; and results of acquisitions or dispositions. The calculation of CRA's tax liabilities involves dealing with uncertainties in the application of complex tax regulations in several different tax jurisdictions. CRA is periodically reviewed by domestic and foreign tax authorities. These reviews include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. CRA accounts for uncertainties in income tax positions in accordance with ASC Topic 740, Income Taxes ("ASC 740"). The number of years with open tax audits varies depending on the tax jurisdiction. The Company has elected to recognize the tax on global intangible low-taxed income ("GILTI") as a period expense in the period the tax is incurred. As such, CRA has included its GILTI provision associated with current-year operations solely within the estimated annual effective tax rate ("EAETR") and has not provided additional GILTI on deferred items. FS-15 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Share-Based Compensation CRA accounts for equity-based compensation using a fair value based recognition method. Under the fair value recognition requirements of ASC Topic 718, Compensation-Stock Compensation ("ASC Topic 718"), share-based compensation cost is estimated at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the award. For those awards that are deemed probable of vesting, CRA recognizes the estimated fair value as expense over the requisite service period of the award. The amount of share-based compensation expense recognized at any date must at least equal the portion of grant date value of the award that is vested at that date. In accordance with ASC Topic 718, for time-vesting restricted stock units awarded to employees, CRA estimates share-based compensation cost at the grant date based on the fair value of the restricted stock units and awards and recognizes the cost for awards that are probable of vesting over the requisite service period on a straight-line basis. Performance-vesting restricted stock units are expensed using the graded attribution method. Common Stock and Equity Equity transactions consist primarily of the repurchase by CRA of its common stock under its share repurchase program and the recognition of compensation expense and issuance of common stock under CRA’s 2006 Equity Incentive Plan. Under CRA’s share repurchase program, the Company repurchases its common stock in open market purchases (including through any Rule 10b5-1 plan adopted by CRA) or in privately negotiated transactions in accordance with applicable insider trading and other securities laws and regulations. The purchase price is first charged against available paid-in capital (“PIC”) until PIC is exhausted, wherein purchases will be charged to retained earnings. CRA’s common stock has no par value. All shares repurchased have been retired. Net Income (Loss) Per Share CRA computes basic net income or loss per share utilizing the two-class method, whereby net earnings are allocated to each class of common stock and participating security as if all the net earnings for the period had been distributed. Under the two-class method, basic net income or loss per share is computed by dividing net income or loss allocated to common stock by the weighted-average number of common shares outstanding. CRA's participating securities consist of unvested share-based payment awards that contain a nonforfeitable right to receive dividends. Potentially dilutive shares are excluded from the basic net income or loss per share calculation. CRA computes diluted net income or loss per share utilizing the more dilutive of either the two-class method or the treasury stock method. Under the two-class method, diluted net income or loss per share is computed by dividing net income or loss by the sum of the weighted-average number of shares determined from the basic earnings per share computation and the number of common stock equivalents that would have a dilutive effect. Under the treasury stock method, the weighted average number of common shares outstanding is increased by the potentially dilutive common shares. Potentially dilutive shares are related to our restricted stock, stock options, time-vesting RSUs, and performance-vesting RSUs. To the extent that there is a net loss, CRA assumes all common stock equivalents to be anti-dilutive, and they are excluded from diluted weighted-average shares outstanding. Recent Accounting Standards Adopted Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments CRA adopted ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on the first day of fiscal 2020. ASC 326 replaces the methodology that recognizes impairment of financial instruments when losses have been incurred with a methodology that recognizes impairment of financial instruments when losses are expected. The amendment requires entities to use a forward-looking “expected loss” model for most financial instruments, including accounts receivable, unbilled services, and loans, that is based on historical information, current information, and reasonable and supportable forecasts. As a result of adopting the new standard, CRA recognized a cumulative increase to allowances for accounts receivable and unbilled services and a reduction to the fiscal 2020 opening balance of retained earnings of $ 0.2 million. Comparative periods prior to the adoption of ASC 326 and their respective disclosures have not been adjusted. The adoption of ASC 326 did not have a material impact on CRA’s results of operations or cash flows on the date of transition. Fair Value Measurements (Topic 820) FS-16 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) CRA adopted ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU No. 2018-13”) on the first day of fiscal 2020. The ASU eliminates, adds, and modifies certain disclosure requirements for fair value measurements from ASC 820. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurement. The adoption of the new standard did not have a material impact on CRA’s financial position, results of operations, cash flows, or disclosures on the date of transition. Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement CRA adopted ASU No. 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”) on the first day of fiscal 2020. ASU 2018-15 clarifies the accounting for implementation costs in a cloud computing arrangement that is a service contract and aligns the requirements for capitalizing those costs with the capitalization requirements for costs incurred to develop or obtain internal-use software. CRA adopted the ASU using the prospective transition approach, as permitted under the new guidance. The adoption of the new standard did not have a material impact on CRA’s financial position, results of operations, cash flows, or disclosures on the date of transition. Recent Accounting Standards Not Yet Adopted Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies or clarifies accounting for income taxes by changing the following current guidance: accounting for year-to-date losses in interim periods, accounting for tax law changes in interim periods, determining when a deferred tax liability is recognized for foreign subsidiaries that transition to or from being accounted for as equity method investments, application of income tax guidance to franchise taxes that are partially based on income, and making an intra-period allocation in situations where there is a loss in continuing operations and income or gain from other items. ASU 2019-12 also introduces new guidance to evaluate whether a step up in the tax basis of goodwill relates to a business combination or a separate transaction and provides a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax. ASU 2019-12 is effective for CRA for interim and annual periods beginning after December 15, 2020. CRA plans to adopt the amendments during the first fiscal quarter of 2021. CRA is in the process of finalizing its evaluation of the impact of adopting ASU 2019-12. CRA currently estimates that the ASU will not have a material impact on its financial position, results of operations, cash flows, or disclosures. 2. Revenue Recognition The contracts CRA enters into and operates under specify whether the projects are billed on a time-and-materials or a fixed-price basis. Time-and-materials contracts are typically used for litigation, regulatory, and financial consulting projects while fixed-price contracts are principally used for management consulting projects. In general, project costs are classified in costs of services and are based on the direct salary of CRA's employee consultants on the engagement, plus all direct expenses incurred to complete the project, including any amounts billed to CRA by its non-employee experts. Disaggregation of Revenue The following tables disaggregates CRA's revenue by type of contract and geographic location (in thousands). Year Ended Year Ended Year Ended Type of Contract January 2, 2021 (53 weeks) December 28, 2019 (52 weeks) December 29, 2018 (52 weeks) Consulting services revenues Fixed-price $ 124,383 $ 107,344 $ 95,096 Time-and-materials 383,990 344,026 322,552 Total $ 508,373 $ 451,370 $ 417,648 FS-17 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year Ended Year Ended Year Ended Geographic Breakdown January 2, 2021 (53 weeks) December 28, 2019 (52 weeks) December 29, 2018 (52 weeks) Consulting services revenues United States $ 405,808 $ 357,156 $ 329,678 United Kingdom 79,922 72,169 65,874 Other 22,643 22,045 22,096 Total $ 508,373 $ 451,370 $ 417,648 Reserves for Variable Consideration and Credit Risk Revenues from CRA's consulting services are recorded at the net transaction price, which includes estimates of variable consideration for which reserves are established. Variable consideration reserves are based on specific price concessions and those expected to be extended to CRA customers estimated by CRA's historical realization rates. Reserves for variable consideration are recorded as a component of the allowances for accounts receivable and unbilled services on the consolidated balance sheets. Adjustments to the reserves for variable consideration are included in revenues on the consolidated statements of operations. CRA also maintains allowances for accounts receivable and unbilled services for estimated losses resulting from clients’ failure to make required payments. CRA adopted ASC 326 on December 29, 2019, which changed the method CRA utilizes to estimate reserves related to credit risk. Comparative periods and their respective disclosures prior to the adoption of ASC 326 have not been adjusted. Prior to adopting ASC 326, CRA determined allowances for accounts receivable and unbilled services for specific customer accounts based on the financial condition of the customer and related facts and circumstances. Under ASC 326, CRA estimates allowances based on historical charge-off rates, adjusted for days of sales outstanding and expected changes to clients’ financial conditions during the anticipated collection period. Bad debt expense, net of recoveries of previously written off allowances, is recorded as a component of selling, general and administrative expenses on the consolidated statements of operations. A rollforward of the variable consideration and doubtful accounts reserves for accounts receivable, which includes allowances for doubtful accounts of $ 0.7 million and $ 0.4 million as of January 2, 2021 and December 28, 2019, respectively, is as follows (in thousands): Fiscal Year Fiscal Year 2020 2019 Balance at beginning of fiscal year $ 3,838 $ 3,764 Increases to reserves, net of recoveries (1) 2,092 2,926 Amounts written off and foreign currency translation ( 2,335 ) ( 2,852 ) Balance at end of fiscal year $ 3,595 $ 3,838 _______________________________ (1) Fiscal 2020 includes the cumulative effect of a change in accounting principle related to ASC 326 in the amount of $ 0.2 million. FS-18 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) A rollforward of the variable consideration and doubtful accounts reserves for unbilled services is as follows (in thousands): Fiscal Year Fiscal Year 2020 2019 Balance at beginning of fiscal year $ 1,503 $ 415 Increases to reserves, net of recoveries 6,847 5,548 Amounts written off and foreign currency translation ( 7,350 ) ( 4,460 ) Balance at end of fiscal year $ 1,000 $ 1,503 The following table presents CRA's bad debt expense, net of recoveries of previously written off allowances (in thousands): Year Ended Year Ended Year Ended January 2, 2021 (53 weeks) December 28, 2019 (52 weeks) December 29, 2018 (52 weeks) Bad debt expense, net $ 227 $ 173 $ 1,237 Revenues also include reimbursements for costs incurred by CRA in fulfilling its performance obligations, including travel and other out-of-pocket expenses, fees for outside consultants and other reimbursable expenses. CRA recovers substantially all of these costs. The following expenses are subject to reimbursement (in thousands): Year Ended Year Ended Year Ended January 2, 2021 (53 weeks) December 28, 2019 (52 weeks) December 29, 2018 (52 weeks) Reimbursable expenses $ 61,661 $ 54,871 $ 48,817 Contract Balances from Contracts with Customers CRA defines contract assets as assets for which it has recorded revenue because it determines that it is probable that it will earn a performance-based or contingent fee, but is not yet entitled to receive a fee because certain events, such as completion of the measurement period or client approval, must occur. The contract assets balance was immaterial as of January 2, 2021 and December 28, 2019. When consideration is received, or such consideration is unconditionally due from a customer prior to transferring consulting services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after performance obligations have been satisfied and all revenue recognition criteria have been met. The following table presents the closing balances of CRA's contract liabilities (in thousands): January 2, 2021 December 28, 2019 December 29, 2018 Contract liabilities $ 5,527 $ 4,007 $ 5,453 CRA recognized the following revenue that was included in the contract liabilities balance as of the opening of the respective period or for performance obligations satisfied in previous periods (in thousands): Year Ended Year Ended Year Ended January 2, 2021 (53 weeks) December 28, 2019 (52 weeks) December 29, 2018 (52 weeks) Amounts included in contract liabilities at the beginning of the year $ 3,533 $ 5,155 $ 3,149 Performance obligations satisfied in previous years $ 4,503 $ 3,603 $ 3,346 FS-19 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Forgivable Loans In order to attract and retain highly skilled professionals, CRA may issue forgivable loans to employees and non-employee experts, certain of which loans may be denominated in local currencies. A portion of these loans is collateralized. The forgivable loans have terms that are generally between one and eight years with interest rates currently ranging up to 2.83 %. The principal amount of forgivable loans and accrued interest is forgiven by CRA over the term of the loans, so long as the employee or non-employee expert continues employment or affiliation with CRA and complies with certain contractual requirements. During fiscal years 2020, 2019 and 2018 there were no balances due under these loans for which the full principal and interest were not forgiven in the normal course or not collected upon termination of employment or affiliation with CRA. The expense associated with the forgiveness of the principal amount of the loans is recorded as compensation expense over the service period, which is consistent with the term of the loans. Forgivable loan activity for fiscal years 2020 and 2019 is as follows (in thousands): Fiscal Year Fiscal Year 2020 2019 Beginning balance $ 55,141 $ 40,294 Advances 42,418 35,166 Repayments — ( 1,173 ) Reclassification from accrued expenses / to other assets (1) ( 9,713 ) ( 1,734 ) Amortization ( 26,628 ) ( 17,700 ) Effects of foreign currency translation 395 288 Ending balance $ 61,613 $ 55,141 Current portion of forgivable loans $ 14,749 $ 6,751 Non-current portion of forgivable loans $ 46,864 $ 48,390 _______________________________ (1) Relates to the reclassification of performance awards previously recorded as accrued expenses or forgivable loans that have been reclassified to other receivables. 4. Leases The components of CRA's lease expenses, which are included in the consolidated statements of operations, are as follows (in thousands): Year Ended Year Ended January 2, 2021 (53 weeks) December 28, 2019 (52 weeks) Operating lease cost $ 17,803 $ 15,731 Short-term lease cost 908 511 Variable lease cost 6,155 4,461 Total lease cost $ 24,866 $ 20,703 Base rent expense was approximately $ 13.2 million in fiscal 2018. The following table presents summary information for CRA's lease terms and discount rates for its operating leases: January 2, 2021 December 28, 2019 Weighted average remaining lease term—operating leases 8.6 years 9.6 years Weighted average discount rate—operating leases 3.6 % 3.7 % FS-20 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) At January 2, 2021, CRA had the following maturities of lease liabilities related to office space and equipment, all of which are under non-cancellable operating leases (in thousands): Fiscal Year Operating Lease Commitments 2021 $ 18,355 2022 20,823 2023 21,052 2024 21,068 2025 20,788 Thereafter 76,554 Total lease payments 178,640 Less: imputed interest ( 25,636 ) Total $ 153,004 As of January 2, 2021, CRA had no additional operating leases that had not yet commenced. 5. Goodwill and Intangible Assets The changes in the carrying amount of goodwill for fiscal 2020 and fiscal 2019 are as follows (in thousands): Fiscal Year Fiscal Year 2020 2019 Goodwill $ 164,921 $ 164,625 Accumulated goodwill impairment ( 76,417 ) ( 76,417 ) Goodwill, net at beginning of fiscal year 88,504 88,208 Foreign currency translation adjustment and other (1) 683 296 Goodwill, net at end of fiscal year $ 89,187 $ 88,504 _______________________________ (1) During the first quarter of fiscal 2020, goodwill and accumulated goodwill impairment were reduced by $ 4.5 million as a result of the dissolution and final liquidation of GNU. Goodwill, net at January 2, 2021, is comprised of goodwill of $ 161.1 million and accumulated impairment of $ 71.9 million. There were no impairment losses related to goodwill during fiscal 2020, fiscal 2019, or fiscal 2018. Intangible assets that are separable from goodwill and have determinable useful lives are valued separately and amortized over their expected useful lives. There were no impairment losses related to intangible assets during fiscal 2020, fiscal 2019, or fiscal 2018. The components of acquired identifiable intangible assets are as follows (in thousands): January 2, 2021 December 28, 2019 Non-competition agreements $ 280 $ 324 Customer relationships 12,120 12,120 Total cost 12,400 12,444 Accumulated amortization ( 7,292 ) ( 5,968 ) Total intangible assets, net $ 5,108 $ 6,476 FS-21 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Amortization expense related to intangible assets was $ 1.4 million for each of fiscal 2020, fiscal 2019, and fiscal 2018. Amortization of intangible assets held at January 2, 2021 for the next five fiscal years and thereafter is expected to be as follows (in thousands): Fiscal Year Amortization Expense 2021 $ 927 2022 827 2023 822 2024 822 2025 822 Thereafter 888 $ 5,108 6. Property and Equipment Property and equipment consist of the following (in thousands): January 2, 2021 December 28, 2019 Computer, office equipment, and software $ 29,432 $ 30,627 Leasehold improvements 62,180 55,471 Furniture 15,967 14,481 Total cost 107,579 100,579 Accumulated depreciation and amortization ( 44,701 ) ( 39,284 ) Total property and equipment, net $ 62,878 $ 61,295 Depreciation expense was $ 11.4 million, $ 9.2 million, and $ 8.6 million in fiscal 2020, fiscal 2019, and fiscal 2018, respectively. Long-lived assets by geographic location are as follows (in thousands): Geographic Breakdown January 2, 2021 December 28, 2019 Long-lived assets (property and equipment, net): United States $ 52,040 $ 51,974 United Kingdom 7,534 7,803 Other 3,304 1,518 Total long-lived assets (property and equipment, net) $ 62,878 $ 61,295 7. Accrued Expenses Accrued expenses consist of the following (in thousands): January 2, 2021 December 28, 2019 Compensation and related expenses $ 123,540 $ 99,993 Income taxes payable 1,927 430 Performance awards 2,176 9,961 Other professional fees 1,541 2,077 Direct project accruals 3,988 3,201 Accrued leasehold improvements 52 2,166 Other 3,152 3,473 Total accrued expenses $ 136,376 $ 121,301 FS-22 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of January 2, 2021 and December 28, 2019, $ 102.6 million and $ 81.2 million, respectively, of accrued bonuses for fiscal 2020 and fiscal 2019 were included above in "Compensation and related expenses". In prior periods, “Performance awards” was labeled as “Commissions due to non-employee experts.” 8. Income Taxes The components of income before provision for income taxes are as follows (in thousands): Year Ended Year Ended Year Ended January 2, 2021 (53 weeks) December 28, 2019 (52 weeks) December 29, 2018 (52 weeks) Income before provision for income taxes: U.S. $ 26,054 $ 20,778 $ 21,118 Foreign 7,568 6,019 7,815 Total $ 33,622 $ 26,797 $ 28,933 The provision (benefit) for income taxes consists of the following (in thousands): Year Ended Year Ended Year Ended January 2, 2021 (53 weeks) December 28, 2019 (52 weeks) December 29, 2018 (52 weeks) Currently payable: Federal $ 4,039 $ 4,252 $ 4,015 Foreign 1,335 1,119 1,487 State 2,627 1,838 1,788 Total current expense 8,001 7,209 7,290 Deferred: Federal 1,170 ( 869 ) ( 384 ) Foreign 309 331 ( 88 ) State ( 365 ) ( 621 ) ( 357 ) Total deferred expense (benefit) 1,114 ( 1,159 ) ( 829 ) Total tax expense $ 9,115 $ 6,050 $ 6,461 A reconciliation of CRA's tax rates with the federal statutory rate is as follows: Fiscal Year Fiscal Year Fiscal Year 2020 2019 2018 Federal statutory rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal income tax benefit 5.8 5.5 4.9 Tax law changes 0.2 — 0.9 Share-based compensation ( 1.8 ) ( 5.0 ) ( 6.3 ) Meals & Entertainment Expense 0.2 1.7 1.3 Executive Compensation 1.6 1.6 1.0 Uncertain tax positions ( 0.1 ) ( 2.5 ) ( 1.1 ) Other 0.2 0.3 0.6 Annual effective tax rate 27.1 % 22.6 % 22.3 % FS-23 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The components of CRA's deferred tax assets (liabilities) are as follows (in thousands): January 2, 2021 December 28, 2019 Deferred tax assets: Accrued compensation and related expense $ 15,453 $ 12,842 Allowance for doubtful accounts 1,535 2,023 Net operating loss carryforwards 194 335 Lease liabilities 38,146 39,747 Foreign exchange and other 79 119 Total gross deferred tax assets 55,407 55,066 Less: valuation allowance — — Total deferred tax assets, net of valuation allowance 55,407 55,066 Deferred tax liabilities: Goodwill and other intangible asset amortization 3,523 3,650 Right-of-Use assets 30,761 33,012 Property and equipment 11,595 7,690 Prepaids and other 586 548 Total deferred tax liabilities 46,465 44,900 Net deferred tax assets $ 8,942 $ 10,166 At January 2, 2021, CRA had U.S. local and foreign net operating losses of $ 1.3 million with lives ranging from 20 years to indefinite. The aggregate changes in the balances of gross unrecognized tax benefits were as follows (in thousands): Fiscal Year Fiscal Year 2020 2019 Balance at beginning of period $ 242 $ 867 Additions for tax positions taken during prior years 43 — Reductions for tax positions taken during prior years — ( 25 ) Additions for tax positions taken during the current year — — Reductions as a result of a lapse of the applicable statutes of limitations ( 82 ) ( 600 ) Settlements with tax authorities — — Balance at end of the period $ 203 $ 242 CRA files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. A number of years may elapse before an uncertain tax position, for which CRA has unrecognized tax benefits, is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, CRA believes that its unrecognized tax benefits reflect the most likely outcome. CRA adjusts these unrecognized tax benefits, and the associated interest, in light of changing facts and circumstances. At the end of fiscal 2020, accrued interest for uncertain tax positions was immaterial. CRA's total unrecognized tax benefit at the end of fiscal 2020 is $ 0.2 million. Settlement of any particular position could require the use of cash. Of the total $ 0.2 million balance at the end of fiscal 2020, a favorable resolution would result in $ 0.2 million being recognized as a reduction to the effective income tax rate in the period of resolution. It is reasonably likely that $ 0.2 million of gross unrecognized tax benefits will reverse within the next twelve months due to lapse of the applicable statute of limitations or exam closures. The number of years with open tax audits varies depending on the tax jurisdiction. CRA's major taxing jurisdiction is the United States where CRA is no longer subject to U.S. federal examinations by the Internal Revenue Service for years before fiscal 2017. Within the significant states where CRA is subject to income tax, CRA is no longer subject to examinations by state taxing authorities before fiscal 2016. CRA's United Kingdom ("UK") subsidiary's corporate tax returns are no longer subject to examination by Her Majesty's Revenue and Customs for years before fiscal 2019. During fiscal 2019, an examination FS-24 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) by the German Tax Authority for fiscal years 2014-2016 commenced. CRA believes its reserves for uncertain tax positions are adequate. During the fourth quarter of fiscal 2020, CRA considered the operating needs of the UK business, as well as the tax implications of no longer asserting indefinite reinvestment with respect to the UK operations. As a result of both a qualitative and quantitative analysis, $ 0.1 million of deferred taxes associated with previously taxed and untaxed post fiscal 2018 UK earnings that are no longer considered permanently reinvested was recorded. The deferred taxes are a tax consequence of foreign exchange translation, and as such, are recorded as a component of foreign currency translation adjustments on the consolidated statements of comprehensive income. Deferred income taxes or foreign withholding taxes, estimated to be $ 0.3 million, have not been recorded for other jurisdictions as those earnings are considered to be permanently reinvested. Effects of the CARES Act On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was signed into law, which included a retroactive, technical correction that allows 100% bonus depreciation for qualified improvement property (“QIP”). This technical correction became effective as of the enactment of the Tax Cuts and Jobs Act of 2017 (“TCJA”) and effected a $ 2.2 million tax receivable stemming from 2018 and 2019 leasehold improvements that previously had a thirty-nine year life. Additionally, the CARES Act allows for employers to defer the payment of the employer share of the Social Security taxes to be paid in two installments: the first by December 31, 2021, and the remainder by December 31, 2022. Accordingly, we have deferred a total of $ 2.7 million of tax which creates a book/tax temporary difference until paid. 9. Share-Based Compensation CRA recorded approximately $ 3.2 million, $ 3.5 million, and $ 4.8 million of compensation expense for fiscal 2020, fiscal 2019, and fiscal 2018, respectively, for share-based awards consisting of stock options, shares of restricted stock, time-vesting restricted stock units, and performance-vesting restricted stock units issued to employees and directors, based on their respective estimated grant date fair values. Performance-vesting restricted stock units are expensed using the graded attribution method. Share-based Compensation Plans. As of January 2, 2021, CRA's active equity-based compensation plans consist of its Amended and Restated 2006 Equity Incentive Plan, as amended (the "2006 Equity Plan"), and its 1998 Employee Stock Purchase Plan (the "1998 ESPP"), a tax-qualified plan under Section 423 of the Internal Revenue Code. During fiscal 2009, CRA implemented a long-term incentive program, or "LTIP," as a framework for grants made under the 2006 Equity Plan to its senior corporate leaders, practice leaders and key revenue generators. Under the LTIP, participants have received a mixture of stock options, time-vesting restricted stock units, and performance-vesting restricted stock units. In December 2016, CRA's Board of Directors amended CRA's Cash Incentive Plan to facilitate the grant to LTIP participants of service-based and performance-based cash awards as a component of the LTIP. The LTIP is designed to reward CRA's senior corporate leaders, practice leaders and key revenue generators and provide them with the opportunity to share in the long-term growth of CRA. 2006 Equity Plan: Maximum and Available Shares. The 2006 Equity Plan authorizes the grant of a variety of incentive and performance awards to CRA's directors, employees and non-employee experts, including stock options, shares of restricted stock, restricted stock units, and other equity awards. The shares available for grant under the 2006 Equity Plan as of January 2, 2021 was 454,497 . FS-25 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Stock Options. A summary of option activity during fiscal 2020 from the 2006 Equity Plan is as follows: Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands) Outstanding at December 28, 2019 444,489 $ 26.31 $ 12,115 Fiscal 2020: Granted — — Exercised ( 118,841 ) 18.82 $ 2,807 Expired — — Forfeited — — $ — Outstanding at January 2, 2021 325,648 $ 29.05 2.41 $ 7,126 Option exercisable at January 2, 2021 308,735 $ 28.09 2.12 $ 7,052 Vest or expected to vest at January 2, 2021 325,569 $ 29.04 2.41 $ 7,125 The weighted average fair market value using the Black-Scholes option-pricing model of the stock options granted under the 2006 Equity Incentive Plan in fiscal 2018 was $ 19.96 . There were no stock options granted in fiscal 2020 and fiscal 2019. The fair market value of the stock options at the date of grant were estimated using the Black-Scholes option-pricing model with the following weighted average assumptions: Fiscal Year 2018 Risk-free interest rate 2.8 % Expected volatility 39 % Expected dividend yield 1.7 % Forfeiture rate 0.4 % Weighted average expected life (in years) 10.00 The risk-free interest rate is based on U.S. Treasury interest rates with corresponding terms consistent with the expected life of the stock options. Expected volatility and expected life are based on CRA's historical experience. Expected dividend yield was determined based on CRA's annualized dividend rate per share, as a percentage of average market price of the common stock, on each dividend payment date. The forfeiture rate used was based upon historical experience. CRA believes its historical experience is an appropriate indicator of future forfeitures. The aggregate intrinsic value of stock options exercised in fiscal 2020, fiscal 2019, and fiscal 2018 was approximately $ 2.8 million, $ 3.7 million, and $ 3.0 million, respectively. The following table provides a roll-forward of the outstanding non-vested stock options over fiscal 2020: Options Number of Shares Weighted-Average Grant Date Fair Value Non-vested at December 28, 2019 36,212 $ 14.80 Granted — — Vested ( 19,299 ) 12.76 Forfeited — — Non-vested at January 2, 2021 16,913 $ 17.13 The total fair value of stock options that vested during fiscal 2020, fiscal 2019, and fiscal 2018 was $ 0.2 million, $ 0.7 million, and $ 1.1 million, respectively. As of January 2, 2021, there was $ 0.3 million of total unrecognized compensation cost, FS-26 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) net of expected forfeitures, related to non-vested stock options granted. That cost is expected to be recognized over a weighted-average period of 1.7 years. Options granted during or prior to fiscal 2016 expire on the seventh anniversary of the date of grant. Options granted during or after fiscal 2017 expire on the tenth anniversary of the date of grant. Restricted Stock. CRA grants shares of restricted stock, which are subject to the execution of a restricted stock agreement, under its 2006 Equity Incentive Plan. Generally, shares of restricted stock vest in four equal annual installments beginning on the first anniversary of the date of grant. Total unrecognized compensation cost, net of expected forfeitures, related to shares of restricted stock as of January 2, 2021 was $ 0.9 million, which is expected to be recognized over a weighted-average period of 2.9 years. The forfeiture rate of 0.9 % used for shares of restricted stock was based upon historical experience. CRA believes its historical experience is an appropriate indicator of future forfeitures. The following table provides a roll-forward of the shares of restricted stock under the 2006 Equity Incentive Plan over fiscal 2020: Shares of Restricted Stock Number of Shares Weighted-Average Grant Date Fair Value Non-vested at December 28, 2019 31,523 $ 38.66 Granted 16,454 36.46 Vested ( 14,437 ) 34.78 Forfeited — — Non-vested at January 2, 2021 33,540 $ 38.73 The total fair value of shares of restricted stock that vested during fiscal 2020, fiscal 2019, and fiscal 2018 was $ 0.5 million, $ 0.5 million, and $ 0.6 million, respectively. Time-Vesting RSUs. CRA grants time-vesting restricted stock units, which are subject to the execution of a restricted stock unit agreement, under its 2006 Equity Incentive Plan. Generally, time-vesting restricted stock units vest in four equal annual installments beginning on the first anniversary of the date of grant. Total unrecognized compensation cost, net of expected forfeitures, related to time-vesting restricted stock units as of January 2, 2021 was $ 3.3 million, which is expected to be recognized over a weighted-average period of 3.2 years. The forfeiture rate of 0.9 % used for time-vesting restricted stock units was based upon historical experience. CRA believes its historical experience is an appropriate indicator of future forfeitures. The following table provides a roll-forward of the time-vesting restricted stock units under the 2006 Equity Incentive Plan over fiscal 2020: Time-Vesting Restricted Stock Units Number of Units Weighted-Average Grant Date Fair Value Non-vested at December 28, 2019 64,638 $ 43.87 Granted 43,334 46.75 Vested ( 22,983 ) 41.68 Forfeited — — Non-vested at January 2, 2021 84,989 $ 45.93 The total fair value of time-vesting restricted stock units that vested during fiscal 2020, fiscal 2019, and fiscal 2018 was $ 1.0 million, $ 1.3 million, and $ 1.7 million, respectively. Performance-Vesting RSUs. CRA grants performance-vesting restricted stock units ("PRSUs"), which are subject to the execution of a restricted stock unit agreement, under its 2006 Equity Incentive Plan. Generally, achievement of performance measures for PRSUs are based on a two-year performance period, after which the units determined based on this achievement will vest three-fourths in the first year following the performance period and one-fourth on the fourth anniversary of the date of FS-27 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) grant. The number of units determined based on the achievement of a PRSUs performance measures generally ranges from 50 % to 125 % of the PRSUs' target number of units. In accordance with ASC Topic 718, for PRSUs awarded to employees, CRA estimates share-based compensation cost at the grant date based on the fair value of the award and recognizes the cost over the requisite service period using the graded attribution method. The following table provides a roll-forward of the performance-vesting restricted stock units under the 2006 Equity Incentive Plan over fiscal 2020. For purposes of this table, granted PRSUs are counted based on the maximum number of units that could vest upon achievement of the PRSUs' performance conditions which, for all periods presented, equaled 125 % of the PRSUs' target number of units. Performance-Vesting Restricted Stock Units Number of Units Weighted-Average Grant Date Fair Value Non-vested at December 28, 2019 82,150 $ 45.88 Granted 33,621 52.98 Vested ( 23,976 ) 39.71 Forfeited ( 1,215 ) 44.87 Non-vested at January 2, 2021 90,580 $ 50.06 1998 ESPP. In fiscal 1998, CRA adopted the 1998 ESPP, a tax-qualified plan under Section 423 of the Internal Revenue Code. The 1998 ESPP authorizes the issuance of up to an aggregate of 243,000 shares of common stock to participating employees at a purchase price equal to 85 % of fair market value on either the first or the last day of the one-year offering period under the plan. In fiscal 2020, fiscal 2019, and fiscal 2018, there were no offering periods under this plan and no shares were issued. As of January 2, 2021, there were 211,777 shares available for grant under the 1998 ESPP. 10. Net Income Per Share CRA calculates basic earnings per share using the two-class method. CRA calculates diluted earnings per share using the more dilutive of either the two-class method or treasury stock method. The two-class method was more dilutive for fiscal 2020, fiscal 2019, and fiscal 2018. Under the two-class method, net earnings are allocated to each class of common stock and participating security as if all the net earnings for the period had been distributed. CRA's participating securities consist of unvested share-based payment awards that contain a nonforfeitable right to receive dividends and therefore are considered to participate in undistributed earnings with common shareholders Net earnings allocable to these participating securities were not material for fiscal 2020, fiscal 2019, and fiscal 2018. The following table presents a reconciliation from net income to the net income available to common shareholders (in thousands): Year Ended Year Ended Year Ended January 2, 2021 (53 weeks) December 28, 2019 (52 weeks) December 29, 2018 (52 weeks) Net income attributable to CRA, as reported $ 24,507 $ 20,747 $ 22,492 Less: net income attributable to participating shares 93 55 108 Net income available to common shareholders $ 24,414 $ 20,692 $ 22,384 FS-28 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table presents a reconciliation of basic to diluted weighted average shares of common stock outstanding (in thousands): Year Ended Year Ended Year Ended January 2, 2021 December 28, 2019 December 29, 2018 Basic weighted average shares outstanding 7,768 7,866 8,107 Common stock equivalents: Stock options and restricted stock units 180 301 463 Diluted weighted average shares outstanding 7,948 8,167 8,570 For fiscal 2020, fiscal 2019, and fiscal 2018, the anti-dilutive share-based awards that were excluded from the calculation of common stock equivalents for purposes of computing diluted weighted average shares outstanding amounted to 80,211 , 62,367 , and 29,612 shares, respectively. These share-based awards were anti-dilutive because their exercise price exceeded the average market price over the respective period. 11. GNU Interest In fiscal 2016, a buyer acquired substantially all of the business assets and assumed substantially all of the liabilities of GNU. On December 15, 2017, GNU was dissolved. CRA received a final liquidating distribution from GNU in fiscal 2018 and recognized a gain of $ 0.3 million. Prior to liquidation of GNU on December 18, 2018, CRA's ownership interest in GNU was 55.89 %. GNU's financial results had been consolidated with CRA, and the portion of GNU's results allocable to its other owners was shown as "noncontrolling interest." GNU's reporting schedule and fiscal year differed from CRA's. The reporting lag did not have a significant impact on CRA's consolidated statements of operations or financial condition. 12. Fair Value of Financial Instruments The following table shows CRA's financial instruments as of January 2, 2021 and December 28, 2019 that are measured and recorded in the consolidated financial statements at fair value on a recurring basis (in thousands): January 2, 2021 Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Other Observable Inputs Significant Unobservable Inputs Level 1 Level 2 Level 3 Assets : Money market mutual funds $ 150 $ — $ — Total Assets $ 150 $ — $ — Liabilities : Contingent consideration liability $ — $ — $ 14,620 Total Liabilities $ — $ — $ 14,620 FS-29 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 28, 2019 Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Other Observable Inputs Significant Unobservable Inputs Level 1 Level 2 Level 3 Assets : Money market mutual funds $ 150 $ — $ — Total Assets $ 150 $ — $ — Liabilities : Contingent consideration liability $ — $ — $ 11,579 Total Liabilities $ — $ — $ 11,579 The fair value of CRA's money market mutual fund share holdings is $ 1.00 per share. The contingent consideration liability in the table above is for estimated future contingent consideration payments related to the acquisition of C1. In February 2021, CRA paid the contingent consideration. The following table summarizes the changes in the contingent consideration liabilities (in thousands): Fiscal Year Fiscal Year 2020 2019 Beginning balance $ 11,579 $ 6,197 Remeasurement of acquisition-related contingent consideration 1,156 3,285 Accretion 1,885 2,097 Ending balance $ 14,620 $ 11,579 13. Credit Agreement As of January 2, 2021, CRA was party to an amended and restated credit agreement that provided CRA with a $ 125.0 million revolving credit facility and a $ 15.0 million sublimit for the issuance of letters of credit. Following an amendment to the credit agreement on January 12, 2021, the revolving credit facility was increased to a total capacity of $ 175.0 million. CRA may use the proceeds of the revolving credit facility to provide working capital and for other general corporate purposes. CRA may repay any borrowings under the revolving credit facility at any time but must repay all borrowings no later than October 24, 2022. There were no borrowings outstanding under this revolving credit facility as of January 2, 2021 or December 28, 2019. As of January 2, 2021, the amount available under this revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $ 4.7 million and are in support of minimum future lease payments under leases for permanent office space. Borrowings under the revolving credit facility bear interest at a rate per annum, at CRA's 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 CRA's 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 CRA's total leverage ratio. CRA is required to pay a fee on the unused portion of the revolving credit facility at a rate per annum that varies between 0.20 % and 0.35 % depending on its total leverage ratio. Borrowings under the revolving credit facility are secured by 100 % of the stock of certain of CRA's U.S. subsidiaries and 65 % of the stock of certain of its foreign subsidiaries, which represent approximately $ 39.4 million and $ 32.9 million in net assets as of January 2, 2021 and December 28, 2019, respectively. Under the credit agreement, CRA must comply with various financial and non-financial covenants. Compliance with these financial covenants is tested on a fiscal quarterly basis. Any indebtedness outstanding under the revolving credit facility may become immediately due and payable upon the occurrence of stated events of default, including CRA's failure to pay principal, interest or fees or a violation of any financial covenant. The financial covenants require CRA to maintain an adjusted consolidated EBITDA to consolidated interest expense ratio of more than 2.5 :1.0 and to comply with a consolidated debt to adjusted consolidated EBITDA ratio of not more than 3.0 :1.0. The non-financial covenant restrictions of the senior credit agreement include, but are not limited to, CRA's ability to incur additional indebtedness, engage in acquisitions or dispositions, FS-30 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) and enter into business combinations. As of January 2, 2021, CRA was in compliance with the covenants of its credit agreement. 14. Employee Benefit Plans CRA maintains a qualified defined-contribution plan under Section 401(k) of the Internal Revenue Code, covering all regular U.S. employees who meet specified age, hour, and service requirements. Company contributions are made at the discretion of CRA, and cannot exceed the maximum amount deductible under applicable provisions of the Internal Revenue Code. CRA also has defined-contribution plans covering employees in Canada (the "Canada plan") and the United Kingdom (the "United Kingdom plan"). Company contributions to the Canada plan are made at the discretion of CRA, while company contributions to the United Kingdom plan are made in accordance with the minimum required contributions per the United Kingdom auto-enrolment legislation. Company contributions under these plans amounted to approximately $ 4.5 million, $ 3.9 million, and $ 3.5 million for fiscal 2020, fiscal 2019, and fiscal 2018, respectively. 15. Related-Party Transactions CRA made payments to shareholders of CRA who performed consulting services exclusively for CRA in the amounts of $ 9.8 million, $ 9.3 million, and $ 8.8 million in fiscal 2020, fiscal 2019, and fiscal 2018, respectively. These payments were to exclusive non-employee experts for consulting services performed for CRA's clients in the ordinary course of business. 16. Commitments and Contingencies Commitments CRA is party to standby letters of credit with its bank in support of the minimum future lease payments under leases for permanent office space amounting to $ 4.7 million as of January 2, 2021. Contingencies CRA is subject to legal actions arising in the ordinary course of business. In management's opinion, CRA believes it has adequate legal defenses and/or insurance coverage with respect to the eventuality of such actions. CRA does not believe any settlement or judgment relating to any pending legal action would materially affect its financial position or results of operations. 17. Subsequent Events On February 4, 2021, CRA's Board of Directors authorized the repurchase of an additional $ 40.0 million of shares of CRA's common stock under its existing share repurchase program. On March 4, 2021, CRA announced that its Board of Directors declared a quarterly cash dividend of $ 0.26 per common share, payable on March 26, 2021 to shareholders of record as of March 16, 2021. FS-31