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Item 7. Management’s Discussion and Analysis

2022-03-03 compared with 2021-03-04 · 76 added, 101 removed, 211 unchanged (46% of the section changed)

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This section of the Form 10-K does not address certain items regarding the year ended December 28, 2019.

Discussion and analysis of fiscal 2018 and year-to-year comparisons between fiscal 2019 and fiscal 2018 not included in this Form 10-K

can be found in "Item 7.

Management's Discussion and Analysis of Financial Conditions and Results of Operations" of our Annual Report on Form 10-K for the year ended December 28, 2019.

Discussion and analysis of year-to-year comparisons between fiscal 2020 and fiscal 2019 not included in this Form 10-K can be found in "Item 7.

Management's Discussion and Analysis of Financial Conditions and Results of Operations" of our Annual Report on Form 10-K for the year ended January 2, 2021.

We are a leading worldwide economic, financial, and management consulting firm that applies advanced analytic techniques and in-depth industry knowledge to complex engagements for a broad range of clients.

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Our bonus program awards discretionary bonuses based on our revenues and profitability and individual performance.

Costs of services also include out-of-pocket and other expenses, and the salaries of support staff whose time is billed directly to clients, such as librarians, editors, and programmers, as well as the amounts billed to us by our outside consultants for services rendered while completing a project.

Costs of services also include out-of-pocket and other third-party vendor expenses, and the salaries of support staff whose time is billed directly to clients, such as librarians, editors, and programmers, as well as the amounts billed to us by our outside consultants for services rendered while completing a project.

Selling, general and administrative expenses include salaries, bonuses, share-based compensation expense, and benefits of our administrative and support staff, fees to non-employee experts for generating new business, office rent, marketing, and other costs.

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

Since March 16, 2020, when we implemented our stay-at-home policy and successfully transitioned to a virtual work environment, we have been closely monitoring the COVID-19 pandemic and its impacts and potential impacts on our business.

Due to the above circumstances and as described generally in this Form 10-K, our results of operations for fiscal 2020 are not necessarily indicative of the results to be expected for future fiscal years.

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

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

Due to the above circumstances and as described generally in this Form 10-K, our results of operations for fiscal 2021 are not necessarily indicative of the results to be expected for future fiscal years.

See Item 1A in this annual report on Form 10-K for an additional discussion of risks and potential risks of the COVID-19 pandemic on our business, financial condition and results of operations.

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Revenue by country is detailed in Note 2 to our Notes to Consolidated Financial Statements.

Noncontrolling Interest

Please refer to the section captioned "Basis of Presentation" in Note 1 of our Notes to Consolidated Financial Statements contained in this Form 10-K.

Critical Accounting Policies and Estimates

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Changes in estimates are recorded in the period in which they become known.

We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances.

estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances.

Actual results may differ from our estimates if our assumptions based on past experience or our other assumptions do not turn out to be substantially accurate.

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Revenue Recognition.

We adopted ASC Topic 606, Revenue from Contracts with Customers ("ASC 606") on December 31, 2017 using the modified retrospective method for all contracts not completed as of the date of adoption.

Revenue is recognized under ASC 606 when we satisfy a performance obligation by transferring services promised in a contract to a client in an amount that reflects the consideration that we expect to receive in exchange for those services.

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

Performance obligations in our contracts represent distinct or separate service streams that we provide to our clients.

We evaluate our revenue contracts with clients 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, we determine that an enforceable contract does not exist, revenues are deferred until all criteria for an enforceable contract are met.

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Our 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.

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 third-party vendor expenses, 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.

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.

We base our estimate of variable consideration on historical realization rates.

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.

Differences between the timing of billing and the recognition of revenue are recognized as either unbilled services or deferred revenues in the accompanying consolidated balance sheets.

Revenues recognized for services performed but not yet billed to clients are recorded as unbilled services.

Client prepayments and retainers are classified as deferred revenues and recognized over future periods as earned in accordance with the applicable retention agreement.

Variable consideration estimates are based on specific price concessions already granted and those expected to be extended to our clients based on historical realization rates.

If actual results in the future vary from our estimates, we adjust these estimates in the period such variances become known.

We usually issue invoices to our 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.

We do not assess whether a significant financing component exists if the period between when we perform our obligations under the contract and when the customer pays is one year or less.

Deferred Compensation.

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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.

The requisite service period typically ranges from two to seven years starting with the employee's employment date or non-employee's affiliation date.

For an employee or non-employee consultant currently affiliated with us, the requisite service period generally begins at the start of the award's measurement period.

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The process of developing financial projections 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.

We reassess the fair value of these contingent consideration liabilities on a quarterly basis using additional information as it becomes available.

Any change in the fair value estimates are recorded in the earnings of that period.

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.

We reassessed the fair value of these contingent consideration liabilities on a quarterly basis using additional information as it became available.

Any change in the fair value estimates were recorded in the earnings of that period.

The measurement period for the contingent consideration liability ended in January 2021, and the contingent consideration liability was paid in February 2021.

Accounting for Income Taxes.

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The number of years with open tax audits varies depending on the tax jurisdiction.

Recent Accounting Standards Adopted and Not Yet Adopted

Please refer to the sections captioned "Recent Accounting Standards Adopted" and "Recent Accounting Standards Not Yet Adopted" in Note 1 of our Notes to Consolidated Financial Statements contained in this Form 10-K.

Recent Accounting Standards

Please refer to the section captioned "Recent Accounting Standards" in Note 1 of our Notes to Consolidated Financial Statements contained in this Form 10-K.

Results of Operations

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Income from operations 9.8 6.8 6.5

GNU gain on liquidation — — 0.1

Interest expense, net (0.2) (0.2) (0.3)

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Net income 7.4 % 4.8 % 4.6 %

Net loss attributable to noncontrolling interest, net of tax (2) — — —

Net income attributable to CRA International, Inc.

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(1) Percentage calculates to less than 0.1% for fiscal 2020.

(2) Percentage calculates to less than 0.1% for fiscal 2018.

Fiscal 2020 Compared to 2019

Fiscal 2021 Compared to Fiscal 2020

Our fiscal year end is the Saturday nearest December 31 of each year.

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The increase in net revenue was a result of an increase in gross revenues of $57.2 million as compared to fiscal 2020, coupled with a decrease in write-offs and reserves of $0.3 million as compared to fiscal 2020.

The increase in net revenue is also attributable to the inclusion of 53 weeks in fiscal 2020 as compared to 52 weeks in fiscal 2019.

Utilization decreased to 69% for fiscal 2020 from 75% for fiscal 2019, while consultant headcount increased by 52 consultants during fiscal 2020.

Utilization increased to 74% for fiscal 2021 from 69% for fiscal 2020, while consultant headcount increased by 30 consultants during fiscal 2021.

Billable hours increased by 8.7% for fiscal 2021 when compared to fiscal 2020.

Included in revenues are the effect of changes in currency exchange rates resulting in an increase to revenue of $0.5 million for fiscal 2020 and a decrease of $3.9 million for fiscal 2019.

Overall, revenues outside of the U.S.

represented approximately 20% and 21% of total revenues for fiscal 2020 and fiscal 2019, respectively.

Revenues derived from fixed-price engagements remained flat at 24% of total revenues for fiscal 2020 and fiscal 2019.

Revenues derived from time-and-materials engagements also remained flat at 76% of total revenues for fiscal 2020 and fiscal 2019.

The percentages of revenue derived from fixed-price engagements depends largely on the proportion of our revenues derived from our management consulting business, as the management consulting business typically has a higher concentration of fixed-price service engagements.

represented approximately 20% of net revenues in each of fiscal 2021 and fiscal 2020.

Revenues derived from fixed-price engagements remained flat at 24% of net revenues for fiscal 2021 and fiscal 2020.

Revenues derived from time-and-materials engagements also remained flat at 76% of net revenues for fiscal 2021 and fiscal 2020.

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

Costs of Services (exclusive of depreciation and amortization).

Costs of services (exclusive of depreciation and amortization) increased by $29.4 million, or 7.9%, to $400.1 million for fiscal 2021 from $370.7 million for fiscal 2020.

The increase in costs of services was due primarily to an increase of $23.1 million in employee compensation and fringe benefit costs attributable to salaries and benefits associated with our increased consulting headcount, an increase in forgivable loan amortization of $4.2 million, an increase in incentive and retention compensation costs of $20.2 million, and an increase in other compensation of $1.8 million.

The increase in costs of services was due primarily to an increase of $10.9 million in employee compensation and fringe benefit costs attributable to salaries and benefits associated with our increased consulting headcount, an increase in forgivable loan amortization of $2.1 million, and an increase in incentive and retention compensation costs of $16.1 million.

Additionally, client reimbursable expenses increased by $2.9 million in fiscal 2021 compared to fiscal 2020.

The increase in costs of services is also attributable to the inclusion of 53 weeks in fiscal 2020 as compared to 52 weeks in fiscal 2019.

These increases were partially offset by a decrease in stock compensation expense of $0.8 million and a decrease in expense related to contingent consideration of $2.4 million.

As a percentage of net revenue, costs of services increased to 72.9% for fiscal 2020 as compared to 70.4% for fiscal 2019.

These increases were partially offset by a decrease in expense related to contingent consideration of $2.6 million, as the measurement period ended and the contingent consideration was paid in the first quarter of fiscal 2021.

As a percentage of net revenue, costs of services decreased to 70.7% for fiscal 2021 as compared to 72.9% for fiscal 2020.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses decreased by $3.6 million, or 3.8%, to $90.0 million for fiscal 2020 from $93.6 million for fiscal 2019.

This decrease was due primarily to a decrease in travel and entertainment expenses of $7.0 million, a decrease in legal and professional services of $2.4 million, a decrease in training and marketing expenses of $0.9 million, and a $0.2 million decrease in other operating expenses.

These decreases were partially offset by a $3.7 million increase in rent expense due to a full year of rent for additional leased space in our Boston, New York, and Oakland offices in fiscal 2020, an increase in software subscription and data services of $1.3 million, and a $2.1 million increase to employee and incentive compensation.

Commissions to our non-employee experts experienced a decrease of $0.2 million.

The decrease in selling, general and administrative expenses was partially offset by the inclusion of 53 weeks in fiscal 2020 as compared to 52 weeks in 2019.

As a percentage of revenues, selling, general and administrative expenses decreased to 17.7% for fiscal 2020 from 20.7% for fiscal 2019 due primarily to the increase in revenues and reduction in travel and entertainment costs.

Commissions to non-employee experts decreased to 2.5% of revenue in fiscal 2020 compared to 2.8% of revenue in fiscal 2019.

Selling, general and administrative expenses increased by $7.4 million, or 8.2%, to $97.4 million for fiscal 2021 from $90.0 million for fiscal 2020.

This increase was due primarily to a $3.1 million increase to employee and incentive compensation, a $0.5 million increase in travel and entertainment expenses, a $0.9 million increase in software subscription and data services, a $0.7 million increase in training and marketing expenses, and a $0.1 million increase in other operating expenses.

These increases were partially offset by a $1.3 million decrease in rent expense, a $0.6 million decrease in legal and professional services, and a $0.2 million decrease in bad debt expense.

Commissions to our non-employee experts experienced an increase of $4.2 million.

As a percentage of revenues, selling, general and administrative expenses decreased to 17.2% for fiscal 2021 from 17.7% for fiscal 2020.

Commissions to non-employee experts increased to 3.0% of revenue in fiscal 2021 compared to 2.5% of revenue in fiscal 2020.

Provision for Income Taxes.

For fiscal 2021, our income tax provision was $12.6 million and the effective tax rate ("ETR") was 23.2%, as compared to a provision of $9.1 million and an effective tax rate of 27.1% for fiscal 2020.

The effective tax rate for fiscal 2020 was higher than the prior year due to a decrease in the tax benefit related to share-based compensation and the release of tax reserves recorded in the prior year that did not recur in the current year.

Partially offsetting this increase was a decrease in non-deductible meals and entertainment.

The ETR for fiscal 2020 was comparable to our combined federal and state statutory rate but included offsets of non-deductible compensation paid to executive officers and the tax benefit related to shared based compensation.

The ETR for fiscal 2019 was lower than our combined federal and state statutory rate primarily due to the tax benefit on share-based compensation and the reversal of tax reserves as a result of expiration of statutes of limitation.

This was partially offset by non-deductible items resulting from limitations on the deductibility of compensation paid to executive officers and the deductibility of meals and entertainment.

Net Income Attributable to CRA International, Inc.

Net income attributable to CRA International, Inc.

increased by $3.8 million to net income of $24.5 million for fiscal 2020 from net income of $20.7 million for fiscal 2019.

The effective tax rate for fiscal 2021 was lower than the prior year due to an increase in the tax benefit related to share-based compensation.

The ETR for fiscal 2021 was lower than our combined federal and state statutory rate due to the tax benefit on shared-based compensation, partially offset by non-deductible items resulting primarily from limitations of compensation paid to executive officers.

Net income increased by $17.2 million to $41.7 million for fiscal 2021 from $24.5 million for fiscal 2020.

The diluted net income per share was $5.45 per share for fiscal 2021, compared to diluted net income per share of $3.07 per share for fiscal 2020.

Diluted weighted average shares outstanding decreased by approximately 327,000 shares to approximately 7,621,000 shares for fiscal 2021 from approximately 7,948,000 shares for fiscal 2020.

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

The decrease in diluted weighted average shares outstanding was primarily due to the repurchase of shares of our common stock since January 2, 2021, offset in part by the issuance or vesting of shares of restricted stock and time-vesting restricted stock units, the issuance of common stock for contingent consideration, and the exercise of stock options.

Liquidity and Capital Resources

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

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

As of January 1, 2022, we have $66.1 million of cash and cash equivalents and $170.8 million of borrowing capacity under our revolving credit facility.

We believe our cash and cash equivalents and borrowing capacity, when combined with our ongoing operating cash flows, is sufficient to meet our operating needs over the next twelve months and to support our long-term liquidity needs as well.

In fiscal 2021, our cash and cash equivalents increased by $20.5 million, completing the year with cash and cash equivalents of $66.1 million.

The principal drivers of the increase of cash were strong collections of accounts receivable and reduced selling, general and administrative expenses.

The principal drivers of the increase of cash were growth in sales and strong collections of accounts receivable.

During fiscal 2021, working capital (defined as current assets less current liabilities) increased by $16.4 million to end fiscal 2021 at $36.3 million.

The increase in working capital was principally due to an increase in cash and cash equivalents of $20.1 million, an increase in accounts receivable and unbilled services of $8.1 million, an increase in the current portion of forgivable loans of $7.9 million, and a decrease in accounts payable of $6.7 million.

Partially offsetting these increases in working capital was an increase in accrued expenses of $15.1 million, an increase in deferred revenue and other liabilities of $3.2 million, and the reclassification to a current liability of our contingent consideration liability of $14.6 million, which is included in deferred compensation on our consolidated balance sheets.

At the conclusion of the measurement period in January 2021, the contingent consideration obligation was $15.0 million.

In February 2021, we paid the contingent consideration.

The increase in working capital was principally due to an increase in cash and cash equivalents of $20.5 million, an increase in accounts receivable and unbilled services of $9.6 million, and a decrease in the current portion of deferred compensation of $14.8 million, which was primarily related to the payment of contingent consideration.

Partially offsetting these increases to working capital was a decrease in the current portion of forgivable loans of $4.2 million, an increase in accounts payable of $4.1 million, an increase in accrued expenses of $19.9 million, and an increase in deferred revenue and other liabilities of $3.0 million.

At January 1, 2022, $36.8 million of our cash and cash equivalents were held within the U.S.

We have sufficient sources of liquidity in the U.S., including cash flow from operations and availability on our revolving line of credit, to fund U.S.

operations without the need to repatriate funds from our foreign subsidiaries.

As of January 2, 2021, CRA's cash accounts were concentrated at two financial institutions, which potentially exposes CRA to credit risks.

We have sufficient sources of liquidity in the U.S., including cash flow from operations and availability on our revolving credit facility, to fund U.S.

operations over the next 12 months without the need to repatriate funds from our foreign subsidiaries.

As of January 1, 2022, our cash accounts were concentrated at two financial institutions, which potentially exposes us to credit risks.

The financial institutions both have short-term credit ratings of A-1 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.

From time to time, CRA also makes investments in treasury money market mutual fund shares with a credit rating of AAA by Moody's.

CRA continually monitors the credit ratings of these institutions.

We have not experienced any losses related to such accounts.

We do not believe that there is significant risk of non-performance by the financial institutions, and its cash on deposit is fully liquid.

We continually monitor the credit ratings of these institutions.

Sources and Uses of Cash.

During fiscal 2020, net cash provided by operations was $54.7 million.

During fiscal 2021, net cash provided by operating activities was $75.7 million.

Net income was $41.7 million for fiscal 2021.

Cash provided by operations includes the non-cash items of depreciation and amortization expense of $12.8 million, share-based compensation expenses of $3.2 million, deferred income taxes of $1.1 million, and right-of-use asset amortization of $12.0 million.

Sources of cash were an increase in accounts payable, accrued expenses, and other liabilities of $25.3 million, a decrease in prepaid expenses and other current assets of $1.4 million, and an increase in incentive cash awards of $6.6 million.

Offsetting these sources of cash were an increase in accounts receivable of $2.4 million, an increase of unbilled services of $3.9 million, a decrease in lease liabilities of $10.5 million, and an increase in forgivable loans of $15.9 million.

The change in forgivable loans was primarily driven by $42.4 million of forgivable loan issuances, net of repayments, offset by $26.5 million of forgivable loan amortization netted with the effects of foreign currency translation.

During fiscal 2020, net cash used in investing activities was $17.1 million for capital expenditures, which were primarily used to build out our Oakland, New York, and Toronto office spaces.

We used $19.5 million of net cash in financing activities during fiscal 2020, primarily as a result of $13.4 million of repurchases of our common stock, payment of $7.4 million of cash dividends to shareholders, and tax withholding payments reimbursed by restricted shares of $0.9 million.

Offsetting these uses in cash was $2.2 million received upon the issuance of shares of common stock related to the exercise of stock options.

Sources of cash for operating activities included a $14.9 million increase in accounts payable, accrued expenses, and other liabilities and a $10.7 million decrease in forgivable loans, which was comprised of $14.5 million of forgivable loan issuances, net of repayments, offset by $25.2 million of forgivable loan amortization and related foreign currency translation.

Offsetting these sources of cash for operating activities included a $10.4 million increase in accounts receivable and unbilled receivables, a $15.5 million decrease in lease liabilities, and a $2.4 million increase in prepaid expenses and other current assets.

Cash provided by operating activities included non-cash depreciation and amortization expense of $12.8 million, share-based compensation expenses of $4.1 million, incentive cash awards of $6.7 million, right-of-use asset amortization of $13.0 million, and other non-cash deductions of $0.1 million.

During fiscal 2021, net cash used in investing activities was $2.6 million for capital expenditures, which were primarily used to support computer equipment and software needs.

We used $52.0 million of net cash in financing activities during fiscal 2021, primarily as a result of $45.0 million of repurchases of our common stock, payment of $8.3 million of cash dividends and dividend equivalents, tax withholding payments reimbursed by restricted shares of $1.5 million, and a portion of the payment of the contingent consideration classified as a financing activity in the amount of $2.4 million.

Offsetting these uses in cash for financing activities was $5.2 million received upon the issuance of shares of common stock related to the exercise of stock options.

Lease Commitments

We are a lessee under certain operating leases for office space and equipment, which have remaining lease terms between one and approximately eleven years, many of which include one or more options to extend the term for periods up to five years for each option.

We are a lessee under certain operating leases for office space and equipment, which have remaining lease terms between one and approximately ten years, many of which include one or more options to extend the term for periods of up to five years for each option.

The maturities of lease liabilities, as of January 1, 2022, related to office space and equipment are discussed in Note 4 in our Notes to Consolidated Financial Statements.

We have no additional operating leases we have committed to that have not yet commenced.

Certain of our operating leases have terms that impose asset retirement obligations due to office modifications or the periodic redecoration of the premises, which are included in facility-related liabilities on our consolidated balance sheets and are recorded at a value based on their estimated discounted cash flows.

Redecoration costs under these lease obligations are estimated to be approximately $0.3 million over the next twelve months.

Certain of our operating leases have terms that impose asset retirement obligations due to office modifications or the periodic redecoration of the premises, which are included in other liabilities on our consolidated balance sheets and are recorded at a value based on their estimated discounted cash flows.

We do not expect to incur asset retirement obligation or redecoration obligation costs over the next twelve months.

The remainder of our asset retirement obligations and redecoration obligations are approximately $2.9 million and are expected to be settled between fiscal 2026 and fiscal 2031 when the underlying leases terminate.

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The amount available under this revolving credit facility was reduced by $4.2 million of letters of credit outstanding as of January 1, 2022.

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

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

We are 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 our total leverage ratio.

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Any indebtedness outstanding under the revolving credit facility may become immediately due and payable upon the occurrence of stated events of default, including our failure to pay principal, interest or fees or a violation of any financial covenant.

The financial covenants require us 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 financial covenants require us to maintain an Adjusted Consolidated EBITDA, as defined in the credit agreement, 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, our ability to incur additional indebtedness, engage in acquisitions or dispositions, and enter into business combinations.

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A portion of these loans is collateralized by key person life insurance.

The forgivable loans have terms that are generally between one and eight years.

The forgivable loans have terms that are generally between two and six years.

The principal amount of forgivable loans and accrued interest is forgiven by us over the term of the loans, so long as the employee or non-employee expert continues employment or affiliation with us and complies with certain contractual requirements.

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We expect to fund any cash payments from existing cash resources, cash generated from operations, or borrowings on our revolving credit facility.

We have an active equity incentive plan.

Our Amended and Restated 2006 Equity Incentive Plan, as amended (the "2006 Equity Plan"), authorizes the grant of a variety of incentive and performance equity awards to our directors, employees and non-employee experts, including stock options, shares of restricted stock, restricted stock units, and other equity awards.

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As part of our business, we regularly evaluate opportunities to acquire other consulting firms, practices or groups, or other businesses.

In recent years, we have typically paid for acquisitions with cash, or a combination of cash and our common

stock, and we may continue to do so in the future.

In recent years, we have typically paid for acquisitions with cash, or a combination of cash and our common stock, and we may continue to do so in the future.

To pay for an acquisition, we may use cash on hand, cash generated from our operations, borrowings under our revolving credit facility, or we may pursue other forms of financing.

Our ability to secure short-term and long-term debt or equity financing in the future, including our ability to refinance our credit agreement, will depend on several factors, including our future profitability, the levels of our debt and equity, restrictions under our existing revolving line of credit with our bank, and the overall credit and equity market environments.

Our ability to secure short-term and long-term debt or equity financing in the future, including our ability to refinance our credit agreement, will depend on several factors, including our future profitability, the levels of our debt and equity, restrictions under our existing revolving credit facility with our bank, and the overall credit and equity market environments.

Share Repurchases

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

During fiscal 2020, we repurchased and retired 283,842 shares, under our share repurchase program at an average price per share of $47.14.

We had approximately $10.1 million available for future repurchases under our share repurchase program as of January 2, 2021.

As of February 26, 2021, we had approximately $42.1 million available for future repurchases under our share repurchase program.

Refer to the section titled "Self-Tender Offer" below for discussion of shares repurchased during the second quarter of fiscal 2021 under our modified "Dutch auction" self-tender offer.

During fiscal 2021, fiscal 2020, and fiscal 2019, we repurchased and retired 270,908 shares, 283,842 shares, and 421,112 shares, respectively, under our share repurchase program at an average price per share of $72.53, $47.14, and $42.94, respectively.

We had approximately $30.5 million and $50.5 million available for future repurchases under our share repurchase program as of January 1, 2022 and February 25, 2022, respectively.

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

We expect to continue to repurchase shares under our share repurchase program.

Self-Tender Offer

On March 8, 2021, we commenced a modified "Dutch auction" self-tender offer to purchase up to $25.0 million in value of shares of our common stock at a price of not less than $66.25 per share nor greater than $76.00 per share.

The self-tender offer expired on April 5, 2021.

On April 8, 2021, we paid $25.3 million, including transaction costs, to repurchase 337,837

shares at a purchase price of $74.00 per share.

The purchase price and transaction costs were funded from the revolving credit facility and cash on hand.

The repurchased shares were retired.

Dividends to Shareholders

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

During the fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018, we paid dividends of $7.5 million, $6.8 million, and $6.0 million, respectively.

During the fiscal years ended January 1, 2022, January 2, 2021, and December 28, 2019, we paid dividends of $8.3 million, $7.5 million, and $6.8 million, respectively.

Impact of Inflation

10 unchanged sentences

• potential acquisitions of businesses that would allow us to diversify or expand our service offerings;

• contingent obligations related to our acquisitions;

• potential contingent obligations related to our acquisitions;

• other known future contractual obligations.

17 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis