What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-03-03 compared with 2021-03-04 · 282 added, 341 removed, 997 unchanged (38% of the section changed)

11 unchanged sentences

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:

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;

• 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.

• 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;

• 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;

• 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.

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.

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 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B —Other Information

Item 9C —Disclosures Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable.

Report of Independent Registered Public Accounting Firm

7 unchanged sentences

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.

206 unchanged sentences

Form 10-K Form Filing Date Exhibit No.

10.65 Incremental Amendment to Amended and Restated Credit Agreement, dated as of January 12, 2021, 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 and a 2021 Incremental Revolving Lender, and Bank of America, N.A., as a 2021 Incremental Revolving Lender

8-K January 14, 2021 10.1

10.66 Third Amendment to Lease dated August 11, 2021 by and between CRA International, Inc., 601W South Wacker LLC and 601 Sunset Wacker LLC.

10-Q November 4, 2021 10.1

10.67 Suspension of Rights Agreement dated November 19, 2021 , by and among Citizens Bank, N.A., CRA International, Inc., CRA International (UK) Limited, CRA International Limited and CRA International (Netherlands) B.V.

21.1 Subsidiaries.

6 unchanged sentences

101 The following financial statements from CRA International, Inc.'s Annual Report on Form 10-K for the fiscal year ended January 1, 2022, 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.

(i) Consolidated Statements of Operations for the fiscal years ended January 1, 2022, January 2, 2021, and December 28, 2019, (ii) Consolidated Statements of Comprehensive Income for the fiscal years ended January 1, 2022, January 2, 2021, and December 28, 2019, (iii) Consolidated Balance Sheets at January 1, 2022 and January 2, 2021, (iv) Consolidated Statements of Cash Flows for the fiscal years ended January 1, 2022, January 2, 2021, and December 28, 2019, (v) Consolidated Statements of Shareholders' Equity for the fiscal years ended January 1, 2022, January 2, 2021, and December 28, 2019 and (vi) Notes to Consolidated Financial Statements.

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

24 unchanged sentences

CONSOLIDATED FINANCIAL STATEMENTS

Report s of Independent Registered Public Accounting Fir ms

Reports of Independent Registered Public Accounting Firms

Consolidated Statements of Operations

8 unchanged sentences

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 have audited the accompanying consolidated balance sheets of CRA International, Inc.

(a Massachusetts corporation) and subsidiaries (the "Company") as of January 1, 2022 and January 2, 2021, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the two years in the period ended January 1, 2022, 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 1, 2022 and January 2, 2021, and the results of its operations and its cash flows for each of the two years in the period ended January 1, 2022, 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 1, 2022, 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 3, 2022 expressed an unqualified opinion.

22 unchanged sentences

• 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.

• For a sample of fixed-price arrangements, we obtained subsequent actual costs incurred and subsequent estimates of total costs to complete and compared to the Company's estimate.

Deferred Compensation – Performance-Based Awards

2 unchanged sentences

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.

The principal consideration for our determination that the estimation uncertainty related to 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.

Our audit procedures related to the estimation uncertainty related to the achievement of the financial targets 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.

9 unchanged sentences

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.

We have audited the accompanying consolidated statements of operations and comprehensive income, shareholders’ equity and cash flows of CRA International, Inc.

(the Company) for the year 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 results of its operations and its cash flows for the year ended December 28, 2019, in conformity with U.S.

generally accepted accounting principles.

4 unchanged sentences

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.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

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.

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 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.

Our audit 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.

Our audit 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 audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

11 unchanged sentences

Income from operations 55,739 34,796 29,348

GNU gain on liquidation — — 258

Interest expense, net ( 970 ) ( 1,216 ) ( 1,254 )

3 unchanged sentences

Net income $ 41,679 $ 24,507 $ 20,747

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.:

Net income per share:

Basic $ 5.59 $ 3.14 $ 2.63

10 unchanged sentences

Other comprehensive income (loss)

Foreign currency translation adjustments 3,280 831 ( 2,698 )

Foreign currency translation adjustments, net of tax ( 1,467 ) 3,280 831

Comprehensive income $ 40,212 $ 27,787 $ 21,578

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.

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

2021 December 28,

2022 January 2,

(in thousands, except

1 unchanged sentence

Cash and cash equivalents $ 66,130 $ 45,677

Accounts receivable, net of allowances of $ 3,595 at January 2, 2021 and $ 3,838 at December 28, 2019

Accounts receivable, net of allowances of $ 3,256 at January 1, 2022 and $ 3,595 at January 2, 2021

116,962 111,595

Unbilled services, net of allowances of $ 1,000 at January 2, 2021 and $ 1,503 at December 28, 2019

Unbilled services, net of allowances of $ 1,364 at January 1, 2022 and $ 1,000 at January 2, 2021

45,095 40,881

20 unchanged sentences

Deferred compensation and other non-current liabilities 10,947 9,188

Facility-related non-current liabilities 2,113 1,956

Non-current portion of lease liabilities 124,464 139,447

8 unchanged sentences

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

7,362,703 and 7,693,497 shares issued and outstanding at January 1, 2022 and January 2, 2021, respectively

Retained earnings 215,784 216,999

11 unchanged sentences

Depreciation and amortization 12,768 12,840 10,648

GNU gain on liquidation — — ( 258 )

Deferred rent and facility-related liabilities 142 117 3,596

Right-of-use asset amortization 13,011 12,037 10,662

2 unchanged sentences

Accounts receivable allowances ( 337 ) ( 479 ) 47

Unrealized foreign currency remeasurement losses, net 247 — —

Unrealized foreign currency remeasurement (gains) losses, net ( 294 ) 247 —

Changes in operating assets and liabilities:

15 unchanged sentences

Tax withholding payments reimbursed by shares ( 1,528 ) ( 862 ) ( 2,176 )

Cash paid on dividend equivalents ( 108 ) ( 246 ) ( 256 )

Cash dividends paid to shareholders ( 7,395 ) ( 6,539 ) ( 5,784 )

Cash paid for contingent consideration ( 2,357 ) — —

Cash dividends paid ( 8,289 ) ( 7,503 ) ( 6,785 )

Repurchase of common stock ( 44,976 ) ( 13,371 ) ( 18,068 )

Distribution to noncontrolling interest — — ( 43 )

Net cash used in financing activities ( 51,993 ) ( 19,500 ) ( 23,818 )

10 unchanged sentences

Lease liabilities related to the adoption of ASC 842 $ — $ — $ 106,765

Restricted common stock issued for contingent consideration $ 2,250 $ — $ —

Supplemental cash flow information:

9 unchanged sentences

Comprehensive

Income (Loss) CRA

International, Inc.

Shareholders'

Equity Noncontrolling

Interest Total

Income (Loss) Total

Shareholders'

1 unchanged sentence

BALANCE AT DECEMBER 29, 2018 8,010,480 $ 22,837 $ 186,229 $ ( 12,594 ) $ 196,472

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 — — 20,747 — 20,747

1 unchanged sentence

Exercise of stock options 140,513 3,211 — — 3,211

Share-based compensation expense for employees and non-employees 4,819 4,819 4,819

Share-based compensation expense — 3,461 — — 3,461

Restricted shares vesting 128,089 — — — —

1 unchanged sentence

Shares repurchased ( 421,112 ) ( 18,068 ) — — ( 18,068 )

GNU gain on liquidation ( 258 ) ( 258 )

Distribution to noncontrolling interest ( 43 ) ( 43 )

Accrued dividends on unvested shares — — 58 — 58

Cash paid on dividend equivalents ( 256 ) ( 256 ) ( 256 )

Cash dividends paid to shareholders ($ 0.71 per share).

Cash dividends paid ($ 0.83 per share)

— — ( 6,785 ) — ( 6,785 )

BALANCE AT DECEMBER 28, 2019 7,814,797 $ 9,265 $ 200,249 $ ( 11,763 ) $ 197,751

Balance at December 29, 2019, as previously reported 7,814,797 9,265 200,249 ( 11,763 ) 197,751

Cumulative effect of a change in accounting principle related to ASC 326 — — ( 203 ) — ( 203 )

Balance at December 29, 2019, as adjusted 7,814,797 $ 9,265 $ 200,046 $ ( 11,763 ) $ 197,548

Net income — — 24,507 — 24,507

1 unchanged sentence

Exercise of stock options 118,841 2,236 — — 2,236

Share-based compensation expense for employees 3,461 3,461 3,461

Share-based compensation expense — 3,235 — — 3,235

Restricted shares vesting 61,396 — — — —

2 unchanged sentences

Accrued dividends on unvested shares — — ( 51 ) — ( 51 )

Cash paid on dividend equivalents ( 246 ) ( 246 ) ( 246 )

Cash dividends paid to shareholders ($ 0.83 per share)

Cash dividends paid ($ 0.95 per share)

— — ( 7,503 ) — ( 7,503 )

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

BALANCE AT JANUARY 2, 2021 7,693,497 $ 503 $ 216,999 $ ( 8,483 ) $ 209,019

Net income — — 41,679 — 41,679

Foreign currency translation adjustment — — — ( 1,467 ) ( 1,467 )

Issuance of restricted common stock for contingent consideration 40,039 2,250 — — 2,250

Exercise of stock options 192,803 5,157 — — 5,157

Share-based compensation expense for employees 3,235 3,235 3,235

Share-based compensation expense — 4,086 — — 4,086

Restricted shares vesting 65,242 — — — —

2 unchanged sentences

Accrued dividends on unvested shares — — ( 97 ) — ( 97 )

Cash paid on dividend equivalents ( 108 ) ( 108 ) ( 108 )

Cash dividends paid to shareholders ($ 0.95 per share)

Cash dividends paid ($ 1.09 per share)

— — ( 8,289 ) — ( 8,289 )

14 unchanged sentences

CRA's fiscal years periodically contain 53 weeks rather than 52 weeks.

Fiscal 2020 was a 53 -week year.

Fiscal 2021 and fiscal 2019 were 52 -week years.

Fiscal 2020 was a 53 -week year.

CRA's fiscal quarter ends are determined as the last Saturday nearest the respective calendar quarter end.

2 unchanged sentences

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.

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.

Certain prior period amounts have been reclassified to conform to the current period presentation.

These reclassifications had no effect on previously reported results of operations, financial position, or cash flows.

The preparation of financial statements in conformity with 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, the useful life of long-lived assets, measurement of operating lease right-of-use ("ROU") assets and liabilities, share-based compensation, valuation of contingent consideration liabilities, valuation of acquired intangible 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.

3 unchanged sentences

Cash and Cash Equivalents

CRA considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Cash equivalents consist principally of money market funds with original maturities of three months or less when purchased.

Concentrations of Credit Risk

CRA holds cash in accounts at various third-party financial institutions.

At times, these deposits may exceed federally insured limits.

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

3 unchanged sentences

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.

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Dollars at reporting period-end exchange rates and operating accounts are translated at average exchange rates for each fiscal month.

The resulting translation adjustments are recorded in shareholders' equity as a component of accumulated other comprehensive income (loss).

Foreign currency

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.

Foreign currency transactions are remeasured at current exchanges rates, with adjustments recorded as foreign currency gains (losses), net, on the consolidated statements of operations.

These foreign currency transactions may be realized or unrealized based upon whether the transaction has settled as of the reporting period-end.

The effect of transaction gains and losses recorded in income before provision for income taxes amounted to losses of $ 0.5 million for fiscal 2021, gains of $ 0.04 million for fiscal 2020, and losses of $ 1.3 million for fiscal 2019.

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.

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.

11 unchanged sentences

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.

CRA has elected as a practical expedient to not disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations as of January 1, 2022, as CRA's contracts have an original expected duration of one year or less or revenue has been recognized at the amount for which CRA has the right to invoice for consulting services performed.

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.

Sales, value-added, and other taxes collected on behalf of third parties are excluded from revenue.

Commissions to non-employee experts are expensed when incurred if the related contract term is expected to be one year or less.

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.

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.

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 1, 2022 or January 2, 2021.

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contract Balances from Contracts with Customers

1 unchanged sentence

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

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.

7 unchanged sentences

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.

Variable consideration reserves are based on specific price concessions and those expected to be extended to CRA clients 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.

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.

If actual results in the future vary from its estimates, CRA adjusts these estimates in the period such variances become known.

Adjustments to the reserves for variable consideration are included in revenues on the consolidated statement of operations.

Reserves for Credit Risk

6 unchanged sentences

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.

Measurement of Credit Losses on Financial Instruments ("ASC 326") on the first day of fiscal 2020, 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 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.

3 unchanged sentences

Expenses associated with these allowances were recorded as a component of selling, general and administrative expenses on the consolidated statements of operations.

Costs of Services

Costs of services include the salaries, bonuses, share-based compensation expense, forgivable loan amortization, and benefits of our employee consultants.

Costs of services also include out-of-pocket and other third-party vendor expenses, and

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 does not include depreciation and amortization.

Selling, General and Administrative Expenses

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.

Deferred Compensation

1 unchanged sentence

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 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

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.

If the recipient's employment or affiliation with CRA 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.

4 unchanged sentences

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.

CRA adopted ASC Topic 842, Leases ("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.

3 unchanged sentences

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 determines whether a contract is a lease at the inception of the contract, 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.

At the commencement date, operating lease liabilities and ROU assets are recognized on the balance sheet.

Lease liabilities are based on the present value of lease payments over the lease term, discounted using an incremental borrowing rate specific to the underlying asset.

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, such as 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.

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.

CRA classifies as short-term leases any 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.

ROU assets and lease liabilities related to short-term leases are excluded from the consolidated balance sheets.

CRA leases office space and equipment.

CRA's equipment leases are generally short-term.

CRA's office space leases 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.

Certain office space 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,

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

1 unchanged sentence

As of January 1, 2022, 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.

Certain of CRA's office space leases impose asset retirement obligations due to office modifications or include covenants that oblige CRA, at its sole expense, to repair and maintain the leased asset periodically during the lease term.

These obligations are included in other liabilities on the consolidated balance sheets and are recorded at a value based on their estimated discounted cash flows.

Many of CRA's office space leases include fixed and variable payments.

5 unchanged sentences

CRA measures its variable lease costs as the portion of variable payments that are allocated to lease components.

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.

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.

Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair value of the identifiable net assets acquired.

Goodwill is tested annually for impairment as of October 15th and if events or changes in circumstances indicate that the carrying value may not be recoverable.

Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair values of the identifiable assets acquired.

CRA assesses goodwill at the reporting unit level.

For CRA's fiscal 2021 goodwill impairment analysis, it operated as one reporting unit, which is its consulting services.

The annual goodwill impairment test may use a qualitative or quantitative assessment.

In performing the qualitative assessment, CRA considers various factors, such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, changes in management or key personnel, a sustained decrease in share price, and factors specific to the reporting unit.

In performing the quantitative assessment, 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.

Market capitalization is determined by multiplying CRA's shares outstanding by the market price of its common stock.

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.

If the estimated fair value of the reporting unit is less than its net book value, goodwill is impaired.

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.

CRA's intangible assets are valued separately and amortized over their estimated useful lives using the straight-line method.

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.

Depreciation is calculated using the straight-line method based on the estimated useful lives of approximately 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.

2 unchanged sentences

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.

CRA reviews the carrying value of its long-lived assets (primarily property and equipment, finite-lived 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;

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• a significant change in the manner of CRA's use of the acquired asset or the strategy for CRA's overall business;

3 unchanged sentences

If impairment is indicated through this review, the carrying amount of the assets would be reduced to their estimated fair value.

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value of Financial Instruments

2 unchanged sentences

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.

The contingent consideration liability, which was paid in February 2021, pertained to 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"), and was included in deferred compensation on our consolidated balance sheets.

The fair value measurement of the liability was based on significant inputs not observed in the market and thus represented a Level 3 measurement.

The significant unobservable inputs used in the fair value measurement of the contingent consideration liability were CRA's estimate of the payout 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, and was reassessed on a quarterly basis by CRA using additional information as it became available.

Changes in the fair value estimate were recorded in costs of services (exclusive of depreciation and amortization) on the consolidated statements of operations.

CRA records income taxes using the asset and liability method.

16 unchanged sentences

and results of acquisitions or dispositions.

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The calculation of CRA's tax liabilities involves dealing with uncertainties in the application of complex tax regulations in several different tax jurisdictions.

5 unchanged sentences

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.

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Share-Based Compensation

7 unchanged sentences

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.

The Company repurchases its common stock under its share repurchase program 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.

During the second fiscal quarter of fiscal 2021, CRA repurchased shares of its common stock through a modified "Dutch auction" self-tender offer, as further described in Note 11.

The purchase price of common stock is first charged against available paid-in capital (“PIC”) until PIC is exhausted, after which the purchase price is charged to retained earnings.

As of January 1, 2022, PIC was exhausted.

CRA’s common stock has no par value.

10 unchanged sentences

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)

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

Recent Accounting Standards

Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU No.

CRA adopted Accounting Standards Update ("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.

Simplifying the Accounting for Income Taxes (“ASU 2019-12”) on the first day of fiscal 2021.

ASU 2019-12 simplifies or clarifies accounting for income taxes by changing prior guidance related to 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.

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.

Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08") .

The ASU requires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers at the acquisition date as if the acquirer had originated the contracts rather than adjust them to fair value.

ASU 2021-08 is effective for CRA for interim and annual periods beginning after December 15, 2022.

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.

Revenue Recognition

The ASU requires application of the guidance prospectively to business combinations occurring on or after the effective date of ASU 2021-08.

Early adoption of the amendments is permitted, including adoption in an interim period.

Adoption in an interim period, however, requires application of the guidance retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early adoption.

CRA is in the process of determining the timing of adopting ASU 2021-08 as well as the effects, if any, the adoption may have on its financial position, results of operations, cash flows, or disclosures.

Revenues and Allowances

The contracts CRA enters into and operates under specify whether the projects are billed on a time-and-materials or a fixed-price basis.

2 unchanged sentences

Disaggregation of Revenue

The following tables disaggregates CRA's revenue by type of contract and geographic location (in thousands).

The following tables disaggregate CRA's revenue by type of contract and geographic location (in thousands).

Year Ended Year Ended Year Ended

19 unchanged sentences

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.

CRA adopted ASC 326 on the first day of fiscal 2020, which changed the method CRA utilizes to estimate reserves related to credit risk.

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):

A rollforward of the variable consideration and doubtful accounts reserves for accounts receivable, which includes allowances for doubtful accounts of $ 0.5 million and $ 0.7 million as of January 1, 2022 and January 2, 2021, respectively, is as follows (in thousands):

Fiscal Year Fiscal Year

5 unchanged sentences

(1) Fiscal 2020 includes the cumulative effect of a change in accounting principle related to ASC 326 in the amount of $ 0.2 million.

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):

4 unchanged sentences

Balance at end of fiscal year $ 1,364 $ 1,000

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents CRA's bad debt expense, net of recoveries of previously written off allowances (in thousands):

1 unchanged sentence

Bad debt expense, net $ 27 $ 227 $ 173

Reimbursable Expenses

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.

5 unchanged sentences

The contract assets balance was immaterial as of January 2, 2021 and December 28, 2019.

The contract assets balance was immaterial as of January 1, 2022 and January 2, 2021.

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.

1 unchanged sentence

The following table presents the closing balances of CRA's contract liabilities (in thousands):

2021 December 28,

2022 January 2,

2021 December 28,

2 unchanged sentences

Year Ended Year Ended Year Ended

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

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Amounts included in contract liabilities at the beginning of the fiscal year $ 5,185 $ 3,533 $ 5,155

Performance obligations satisfied in previous fiscal years $ 2,827 $ 4,503 $ 3,603

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.

In order to attract and retain highly skilled professionals, CRA may issue forgivable loans to employees and non-employee experts, certain of which 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 forgivable loans have terms that are generally between two and six 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.

During fiscal years 2021, 2020 and 2019 there were no balances due under these loans for which the full principal and interest were not forgiven 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):

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents forgivable loan activity for the respective periods (in thousands):

Fiscal Year Fiscal Year

2 unchanged sentences

Repayments ( 69 ) —

Reclassification from accrued expenses / to other assets (1) ( 9,713 ) ( 1,734 )

Reclassifications from accrued expenses or to other assets (1) ( 2,229 ) ( 9,713 )

Amortization ( 25,187 ) ( 26,628 )

6 unchanged sentences

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

Year Ended Year Ended Year Ended

Operating lease cost $ 18,293 $ 17,803 $ 15,731

2 unchanged sentences

Total lease cost $ 24,008 $ 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:

2022 January 2,

2021 December 28,

Weighted average remaining lease term—operating leases 8.6 years 9.6 years

Weighted average remaining lease term—operating leases 7.7 years 8.6 years 9.6 years

Weighted average discount rate—operating leases 3.6 % 3.6 % 3.7 %

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):

At January 1, 2022, CRA had the following maturities of lease liabilities related to office space, all of which are under non-cancellable operating leases (in thousands):

Fiscal Year Operating Lease

4 unchanged sentences

Total $ 138,801

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

As of January 1, 2022 and January 2, 2021, these redecoration and asset retirement obligations were approximately $ 2.0 million and $ 2.1 million, respectively.

As of January 1, 2022, CRA had no additional operating leases that had not yet commenced.

7 unchanged sentences

Goodwill, net at end of fiscal year $ 88,936 $ 89,187

_______________________________

(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 1, 2022, is comprised of goodwill of $ 160.8 million and accumulated impairment of $ 71.9 million.

There were no impairment losses related to goodwill during fiscal 2021, fiscal 2020, or fiscal 2019.

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.

Intangible assets that are separable from goodwill and have determinable useful lives are valued separately and amortized using the straight-line method over their expected useful lives.

The components of acquired identifiable intangible assets are as follows (in thousands):

2021 December 28,

January 1, 2022 January 2, 2021

Useful Life (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

Non-competition agreements 5 $ 280 $ ( 275 ) $ 5 $ 280 $ ( 219 ) $ 61

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

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.

Customer relationships 8 to 10

8,220 ( 4,044 ) 4,176 12,120 ( 7,073 ) 5,047

Total $ 8,500 $ ( 4,319 ) $ 4,181 $ 12,400 $ ( 7,292 ) $ 5,108

There were no impairment losses related to intangible assets during fiscal 2021, fiscal 2020, or fiscal 2019.

Amortization expense related to intangible assets was $ 0.9 million, $ 1.4 million, and $ 1.4 million for fiscal 2021, fiscal 2020, and fiscal 2019, respectively.

Amortization of intangible assets held at January 1, 2022 for the next five fiscal years and thereafter is expected to be as follows (in thousands):

3 unchanged sentences

Property and equipment consist of the following (in thousands):

2021 December 28,

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2022 January 2,

Computer, office equipment, and software $ 28,778 $ 29,432

7 unchanged sentences

Geographic Breakdown January 1,

2021 December 28,

2022 January 2,

Long-lived assets (property and equipment, net):

5 unchanged sentences

Accrued expenses consist of the following (in thousands):

2021 December 28,

2022 January 2,

Compensation and related expenses $ 143,199 $ 123,540

Income taxes payable 1,927 430

Performance awards 4,603 2,176

Other professional fees 1,541 2,077

Direct project accruals 2,833 3,988

Accrued leasehold improvements 52 2,166

Other 5,679 6,672

Total accrued expenses $ 156,314 $ 136,376

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.”

As of January 1, 2022 and January 2, 2021, approximately $ 118.9 million and $ 102.6 million, respectively, of accrued bonuses for fiscal 2021 and fiscal 2020 were included above in "Compensation and related expenses".

The components of income before provision for income taxes are as follows (in thousands):

4 unchanged sentences

Total $ 54,275 $ 33,622 $ 26,797

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The provision (benefit) for income taxes consists of the following (in thousands):

25 unchanged sentences

The components of CRA's deferred tax assets (liabilities) are as follows (in thousands):

2021 December 28,

2022 January 2,

Deferred tax assets:

20 unchanged sentences

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 ( 162 ) ( 82 )

Settlements with tax authorities — —

Balance at end of the period $ 41 $ 203

4 unchanged sentences

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.

At the end of fiscal 2021, accrued interest for uncertain tax positions and total unrecognized tax benefit were immaterial.

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

2 unchanged sentences

Within the significant states where CRA is subject to income tax, CRA is no longer subject to examinations by state taxing authorities before fiscal 2017.

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

CRA's United Kingdom ("U.K.") subsidiary's corporate tax returns are no longer subject to examination by Her Majesty's Revenue and Customs for years before fiscal 2020.

During fiscal 2019, an examination 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 U.K.

subsidiary, as well as the tax implications of no longer asserting indefinite reinvestment with respect to the U.K.

As a result of both a qualitative and quantitative analysis, previously taxed and untaxed post fiscal 2018 U.K.

earnings were no longer considered permanently reinvested.

Deferred taxes that are a consequence of foreign exchange translation resulting from earnings that are no longer

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.

considered permanently reinvested are recorded as a component of foreign currency translation adjustments on the consolidated statements of comprehensive income.

In fiscal 2021, CRA's U.S.

parent entity received approximately $ 16.3 million in cash dividends from CRA's U.K.

These dividends were distributed out of both previously taxed and untaxed earnings.

The foreign exchange translation was previously accounted for through deferred taxes during fiscal 2020.

Incremental foreign exchange translation on the actual distribution was immaterial.

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.

4 unchanged sentences

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.

Accordingly, CRA had deferred $ 1.3 million and $ 2.7 million of tax at the end of fiscal 2021 and 2020, respectively, which created book-to-tax temporary differences until paid.

Share-Based Compensation

19 unchanged sentences

(in thousands)

Outstanding at December 28, 2019 444,489 $ 26.31 $ 12,115

Outstanding at January 2, 2021 325,648 $ 29.05 $ 7,126

Exercised ( 192,803 ) 26.75 $ 11,233

2 unchanged sentences

Option exercisable at January 1, 2022 127,232 $ 31.72 2.81 $ 7,843

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:

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.

Vested or expected to vest at January 1, 2022 132,826 $ 32.38 2.99 $ 8,100

There were no stock options granted in fiscal 2021, fiscal 2020, and fiscal 2019 .

CRA determines the weighted average fair market value for stock options granted using the Black-Scholes option-pricing model.

Generally, 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.

Expected dividend yield is 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 is based upon historical experience.

CRA believes its historical experience is an appropriate indicator of future forfeitures.

2 unchanged sentences

Shares Weighted-Average

Non-vested at December 28, 2019 36,212 $ 14.80

Non-vested at January 2, 2021 16,913 $ 17.13

Vested ( 11,300 ) 15.72

2 unchanged sentences

The total fair value of stock options that vested during fiscal 2021, fiscal 2020, and fiscal 2019 was $ 0.2 million, $ 0.2 million, and $ 0.7 million, respectively.

As of January 2, 2021, there was $ 0.3 million of total unrecognized compensation cost,

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

net of expected forfeitures, related to non-vested stock options granted.

As of January 1, 2022, there was $ 0.1 million of total unrecognized compensation cost, net of expected forfeitures, related to non-vested stock options granted.

That cost is expected to be recognized over a weighted-average period of 0.9 years.

7 unchanged sentences

CRA believes its historical experience is an appropriate indicator of future forfeitures.

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides a roll-forward of the shares of restricted stock under the 2006 Equity Incentive Plan over fiscal 2021:

1 unchanged sentence

Shares Weighted-Average

Non-vested at December 28, 2019 31,523 $ 38.66

Non-vested at January 2, 2021 33,540 $ 38.73

Granted 10,491 85.78

5 unchanged sentences

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.

Generally, time-vesting restricted stock units vest in four or five 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 1, 2022 was $ 3.4 million, which is expected to be recognized over a weighted-average period of 2.9 years.

4 unchanged sentences

Units Weighted-Average

Non-vested at December 28, 2019 64,638 $ 43.87

Non-vested at January 2, 2021 84,989 $ 45.93

Granted 26,563 61.90

5 unchanged sentences

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

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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 2021.

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.

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Performance-Vesting

1 unchanged sentence

Units Weighted-Average

Non-vested at December 28, 2019 82,150 $ 45.88

Non-vested at January 2, 2021 90,580 $ 50.06

Granted 25,924 68.71

14 unchanged sentences

Year Ended Year Ended Year Ended

Net income attributable to CRA, as reported $ 24,507 $ 20,747 $ 22,492

Net income, as reported $ 41,679 $ 24,507 $ 20,747

net income attributable to participating shares 175 93 55

Net income available to common shareholders $ 41,504 $ 24,414 $ 20,692

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

2021 December 28,

2022 January 2,

2021 December 28,

3 unchanged sentences

Diluted weighted average shares outstanding 7,621 7,948 8,167

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.

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.

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

Inputs Significant

Level 1 Level 2 Level 3

Money market mutual funds $ 150 $ — $ —

Total Assets $ 150 $ — $ —

Liabilities :

Contingent consideration liability $ — $ — $ 14,620

Total Liabilities $ — $ — $ 14,620

Certain share-based awards were anti-dilutive because their exercise price exceeded the average market price over the respective period.

The following table presents 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 (in thousands):

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year Ended Year Ended Year Ended

2022 January 2,

2021 December 28,

Quoted Prices in

Active Markets

for Identical

Assets or Liabilities Significant

Inputs Significant

Anti-dilutive share-based awards excluded 3 80 62

Self-Tender Offer

On March 8, 2021, CRA commenced a modified "Dutch auction" self-tender offer to purchase up to $ 25.0 million in value of shares of its 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, CRA 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.

Fair Value of Financial Instruments

As of January 1, 2022, CRA did not have any financial instruments measured at fair value on a recurring basis.

The following table shows CRA's financial instruments recorded in the consolidated financial statements as of January 2, 2021, which are measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

January 2, 2021

Level 1 Level 2 Level 3

4 unchanged sentences

Total Liabilities $ — $ — $ 14,620

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.

As of January 2, 2021, the fair value of CRA's money market mutual fund share holdings was $ 1.00 per share.

The contingent consideration liability pertained to estimated future contingent consideration payments related to the acquisition of C1.

The following table summarizes the changes in the contingent consideration liabilities (in thousands):

3 unchanged sentences

Accretion 380 1,885

Payments of contingent consideration ( 15,000 ) —

Ending balance $ — $ 14,620

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 is party to an amended and restated credit agreement that provides the Company with a $ 175.0 million revolving credit facility, which reflects an increase to the capacity by $ 50.0 million per an amendment to the credit agreement on January 12, 2021, and includes a $ 15.0 million sublimit for the issuance of letters of credit.

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.

CRA may repay any borrowings under the revolving credit facility at any time, but any borrowings must be repaid no later than October 24, 2022.

There were no borrowings outstanding under this facility as of January 1, 2022 or January 2, 2021.

As of January 1, 2022, the amount available under this revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $ 4.2 million.

Borrowings under the revolving credit facility bear interest at a rate per annum, at CRA's 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 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 %

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 CRA's 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.

subsidiaries and 65 % of the stock of certain of its foreign subsidiaries, which represent approximately $ 33.8 million and $ 39.4 million in net assets as of January 1, 2022 and January 2, 2021, respectively.

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

1 unchanged sentence

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,

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

and enter into business combinations.

The financial covenants require CRA 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, CRA's ability to incur additional indebtedness, engage in acquisitions or dispositions, and enter into business combinations.

As of January 1, 2022, CRA was in compliance with the covenants of its credit agreement.

5 unchanged sentences

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.

CRA also provides a pension plan contribution for its Belgium employees.

Company contributions to the Belgium pension fund are made in accordance with the minimum required contributions based on statutory requirements.

CRA also provides a private pension plan for its Brazil employees (the “Brazil plan”).

Company contributions to the Brazil plan are made in accordance with statutory requirements.

Company contributions under these plans amounted to approximately $ 5.0 million, $ 4.5 million, and $ 3.9 million for fiscal 2021, fiscal 2020, and fiscal 2019, respectively.

3 unchanged sentences

Commitments and Contingencies

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

As described in Note 13, CRA is party to standby letters of credit with its bank in support of the minimum future lease payments under certain operating leases for office space.

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.

In management's opinion, based on current knowledge, CRA believes it has adequate legal defenses or insurance coverage, or both, 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.

However, the outcome of such legal actions is inherently unpredictable and subject to inherent uncertainties.

Subsequent Events

On February 28, 2022, CRA acquired substantially all of the business assets and assumed certain liabilities of Welch Consulting, Ltd.

(“Welch Consulting”), a Texas limited partnership.

The acquisition was paid for with cash to Welch Consulting.

In addition, CRA will provide deferred compensation to key employees, which will be treated as post-transaction compensation expense.

Welch Consulting provides economic, business, and strategic consulting services principally involving labor and employment issues.

The acquisition expands CRA’s business opportunities, expertise, and market presence with the addition of 45 colleagues and offices in Bryan, Texas;

Los Angeles, California;

and Washington, D.C.

A non-employee expert of CRA served as an agent and attorney-in-fact on behalf of Welch Consulting.

The non-employee expert did not and will not receive compensation or a portion of the purchase price as part of the transaction.

The acquisition will be accounted for as a business combination, and the results of operations will be included in CRA’s consolidated financial statements from the date

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

of the acquisition.

As the transaction recently closed, information necessary to complete the purchase accounting is not yet available.

On February 7, 2022, CRA's Board of Directors authorized the repurchase of an additional $ 20.0 million of shares of CRA's common stock under its existing share repurchase program.

1 unchanged sentence

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 9A. Controls and Procedures