What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-11-04 · 173 added, 206 removed, 274 unchanged (58% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

Fiscal Quarter Ended Fiscal Year-to-Date

2021 September 26,

2020 October 2,

2021 September 26,

Fiscal Quarter Ended

2022 April 3,

Revenues $ 148,382 $ 146,518

18 unchanged sentences

(in thousands)

Fiscal Quarter Ended Fiscal Year-to-Date

2021 September 26,

2020 October 2,

2021 September 26,

Fiscal Quarter Ended

2022 April 3,

Net income $ 11,426 $ 10,501

8 unchanged sentences

Current assets:

Cash and cash equivalents $ 19,665 $ 45,677

Accounts receivable, net of allowances of $ 3,915 at October 2, 2021 and $ 3,595 at January 2, 2021

Cash $ 43,702 $ 66,130

Accounts receivable, net of allowances of $ 3,267 and $ 3,256 , respectively

106,770 116,962

Unbilled services, net of allowances of $ 1,204 at October 2, 2021 and $ 1,000 at January 2, 2021

Unbilled services, net of allowances of $ 1,440 and $ 1,364 , respectively

66,881 45,095

31 unchanged sentences

25,000,000 shares authorized;

7,396,296 and 7,693,497 shares issued and outstanding at October 2, 2021 and January 2, 2021, respectively

7,339,985 and 7,362,703 shares issued and outstanding, respectively

Retained earnings 220,347 215,784

6 unchanged sentences

(in thousands)

Fiscal Year-to-Date

2021 September 26,

Fiscal Quarter Ended

2022 April 3,

OPERATING ACTIVITIES:

Net income $ 11,426 $ 10,501

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash used in operating activities, net of effect of acquired business:

Depreciation and amortization 2,976 3,301

2 unchanged sentences

Share-based compensation expense 1,037 842

Accounts receivable allowances 327 ( 894 )

Bad debt expense (recovery) ( 121 ) ( 13 )

Unrealized foreign currency remeasurement (gains) losses, net 13 ( 284 )

1 unchanged sentence

Accounts receivable 13,522 20,033

Unbilled services, net ( 25,213 ) ( 14,994 )

Unbilled services ( 20,632 ) ( 23,063 )

Prepaid expenses and other current assets, and other assets ( 1,116 ) ( 2,733 )

3 unchanged sentences

Lease liabilities ( 4,028 ) ( 3,765 )

Net cash provided by (used in) operating activities 13,903 ( 10,652 )

Net cash used in operating activities ( 61,838 ) ( 39,848 )

INVESTING ACTIVITIES:

Purchases of property and equipment ( 1,346 ) ( 692 )

Consideration paid for acquisition ( 10,639 ) —

Net cash used in investing activities ( 11,985 ) ( 692 )

7 unchanged sentences

Repurchase of common stock ( 4,956 ) ( 9,642 )

Net cash provided by (used in) financing activities ( 37,820 ) 25,058

Net cash provided by financing activities 52,111 26,465

Effect of foreign exchange rates on cash and cash equivalents ( 716 ) 27

1 unchanged sentence

Cash and cash equivalents at beginning of period 66,130 45,677

Cash and cash equivalents at end of period $ 19,665 $ 24,108

Cash at end of period $ 43,702 $ 31,629

Noncash investing and financing activities:

Purchases of property and equipment not yet paid for $ 7 $ 3,923

Asset retirement obligations $ — $ 155

Increase (decrease) in accounts payable and accrued expenses for property and equipment $ ( 211 ) $ ( 294 )

Right-of-use assets obtained in exchange for lease obligations $ 1,210 $ 1,070

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE FISCAL YEAR-TO-DATE PERIOD ENDED OCTOBER 2, 2021 (unaudited)

FOR THE FISCAL QUARTER ENDED APRIL 2, 2022 (unaudited)

(in thousands, except share data)

7 unchanged sentences

Foreign currency translation adjustment — — — ( 1,172 ) ( 1,172 )

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

Exercise of stock options 14,552 341 — — 341

Share-based compensation expense — 1,037 — — 1,037

Restricted shares vestings 29,494 — — — —

Restricted shares vesting 29,558 — — — —

Redemption of vested employee restricted shares for tax withholding ( 10,163 ) ( 897 ) — — ( 897 )

4 unchanged sentences

BALANCE AT APRIL 2, 2022 7,339,985 $ — $ 220,347 $ ( 11,122 ) $ 209,225

Net income — — 11,566 — 11,566

Foreign currency translation adjustment — — — ( 136 ) ( 136 )

Exercise of stock options 48,562 1,387 — — 1,387

Share-based compensation expense — 980 — — 980

Restricted shares vestings 1,006 — — — —

Shares repurchased ( 337,837 ) ( 382 ) ( 24,953 ) — ( 25,335 )

Accrued dividends on unvested shares — — ( 50 ) — ( 50 )

Cash dividends paid ($ 0.26 per share)

— — ( 1,909 ) — ( 1,909 )

BALANCE AT JULY 3, 2021 7,339,322 $ 1,985 $ 204,576 $ ( 8,730 ) $ 197,831

Net income — — 10,945 — 10,945

Foreign currency translation adjustment — — — ( 1,028 ) ( 1,028 )

Exercise of stock options 98,310 2,505 — — 2,505

Share-based compensation expense — 1,008 — — 1,008

Restricted shares vestings 11,676 — — — —

Shares repurchased ( 53,012 ) ( 4,822 ) ( 178 ) — ( 5,000 )

Accrued dividends on unvested shares — — ( 43 ) — ( 43 )

Cash dividends paid ($ 0.26 per share)

— — ( 1,933 ) — ( 1,933 )

BALANCE AT OCTOBER 2, 2021 7,396,296 $ 676 $ 213,367 $ ( 9,758 ) $ 204,285

See accompanying notes to the condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE FISCAL YEAR-TO-DATE PERIOD ENDED SEPTEMBER 26, 2020 (unaudited)

FOR THE FISCAL QUARTER ENDED APRIL 3, 2021 (unaudited)

(in thousands, except share data)

4 unchanged sentences

Issued Amount

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

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

Net income — — 10,501 — 10,501

Foreign currency translation adjustment — — — ( 111 ) ( 111 )

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

Exercise of stock options 41,008 1,113 — — 1,113

Share-based compensation expense — 842 — — 842

Restricted shares vestings 23,884 — — — —

Restricted shares vesting 29,494 — — — —

Redemption of vested employee restricted shares for tax withholding ( 9,895 ) ( 588 ) — — ( 588 )

3 unchanged sentences

— — ( 2,061 ) — ( 2,061 )

BALANCE AT MARCH 28, 2020 7,756,425 $ 5,871 $ 204,679 $ ( 14,190 ) $ 196,360

Net income — — 5,931 — 5,931

Foreign currency translation adjustment — — — 536 536

Exercise of stock options 22,611 418 — — 418

Share-based compensation expense — 796 — — 796

Restricted shares vestings 513 — — — —

Accrued dividends on unvested shares — — ( 38 ) — ( 38 )

Cash dividends paid ($ 0.23 per share)

— — ( 1,788 ) — ( 1,788 )

BALANCE AT JUNE 27, 2020 7,779,549 $ 7,085 $ 208,784 $ ( 13,654 ) $ 202,215

Net income — — 5,403 — 5,403

Foreign currency translation adjustment — — — 1,589 1,589

Exercise of stock options 57,219 1,098 — — 1,098

Share-based compensation expense — 906 — — 906

Restricted shares vestings 12,936 — — — —

Shares repurchased ( 110,154 ) ( 4,997 ) — — ( 4,997 )

Accrued dividends on unvested shares — — ( 31 ) — ( 31 )

Cash dividends paid ($ 0.23 per share)

— — ( 1,788 ) — ( 1,788 )

BALANCE AT SEPTEMBER 26, 2020 7,739,550 $ 4,092 $ 212,368 $ ( 12,065 ) $ 204,395

BALANCE AT APRIL 3, 2021 7,627,591 $ — $ 219,922 $ ( 8,594 ) $ 211,328

See accompanying notes to the condensed consolidated financial statements.

21 unchanged sentences

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 condensed 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 contingent consideration liabilities, 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.

Estimates in these condensed 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 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.

2 unchanged sentences

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

Common Stock and Equity

Equity transactions consist primarily of the repurchase by CRA of its common stock under its share repurchase program and the recognition of compensation expense and issuance of common stock under CRA’s 2006 Equity Incentive Plan.

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

Business Combinations

CRA accounts for business acquisitions using the acquisition method of accounting, which requires assets acquired and liabilities assumed to be measured and recorded at their estimated fair values as of the acquisition date, with certain exceptions.

The purchase price is determined as the fair value of consideration transferred.

Goodwill is recognized for the excess of consideration transferred over the net value of assets acquired and liabilities assumed.

The operating results of each acquired company is included in CRA's consolidated financial statements beginning on the date of acquisition.

Fair value measurements require extensive use of estimates and assumptions, including estimates of future cash flows to be generated by the acquired assets.

The useful lives of identifiable intangible assets acquired in a business acquisition are

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

CRA’s common stock has no par value.

All shares repurchased have been retired.

Recent Accounting Standards Adopted

Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes

CRA adopted Accounting Standards Update ("ASU") No.

2019-12, Income Taxes (Topic 740):

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.

Revenue Recognition

estimated based on the expected period that the Company will receive substantially all the projected future benefits from the intangible asset.

Transaction expenses directly related to acquisitions are expensed as incurred and are included in selling, general and administrative expenses on the condensed consolidated statements of operations.

Recent Accounting Standards

Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

In October 2021, the FASB issued Accounting Standards Update ("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 ("ASC 606") at the acquisition date as if the acquirer had originated the contracts rather than adjust them to fair value.

CRA elected to early adopt ASU 2021-08 on the first day of fiscal 2022.

The adoption of the new standard had no impact on CRA's financial position, results of operations, cash flows, or disclosures on the date of transition.

Business Acquisition

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

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

Welch Consulting provided 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 has been accounted for as a business combination, and the results of operations have been included in the accompanying condensed consolidated financial statements from the date of acquisition.

The operating results of the acquired business for the fiscal quarter ended April 2, 2022 were not material to CRA's consolidated operating results.

On the date of acquisition, right-of-use assets and lease liabilities were recorded in accordance with ASC Topic 842, Leases .

In addition, contract assets and contract liabilities were recorded in accordance with ASC 606, as CRA adopted ASU 2021-08 on the first day of fiscal 2022.

All other tangible assets and identifiable intangible assets acquired and liabilities assumed were recorded at their fair value as of the date of acquisition.

The current values of assets acquired and liabilities assumed are preliminary and based on the best available information.

Certain items, such as the working capital adjustments, intangible assets, and goodwill, may be subject to change as additional information is received.

The allocation of the purchase price will be finalized as soon as practicable, but not later than one year from the date of acquisition.

The final purchase price allocation may be different from the preliminary estimate reported as CRA receives additional information and completes its analysis of transaction-related activities, the impact of which is not expected to be material to CRA’s results of operations for fiscal 2022.

The following table presents the preliminary assets acquired and liabilities assumed as of April 2, 2022 (in thousands):

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Assets Acquired

Current assets:

Accounts receivable $ 3,778

Unbilled services 1,507

Prepaid expenses and other current assets 100

Total current assets 5,385

Property and equipment 141

Goodwill 2,409

Intangible assets 4,150

Right-of-use assets 1,210

Other assets 41

Total assets acquired $ 13,336

Liabilities Assumed

Current liabilities:

Accrued expenses $ 1,280

Deferred revenue and other liabilities 161

Current portion of lease liabilities 549

Total current liabilities 1,990

Non-current portion of lease liabilities 661

Total liabilities assumed $ 2,651

Net assets acquired $ 10,685

For the acquired assets and assumed liabilities, CRA initially paid $ 10.6 million in cash, the amount of which was based on the estimates of certain net working capital items.

Subsequent to the acquisition date, certain net working capital items were adjusted.

These adjustments are reflected in the assets acquired and liabilities assumed in the table above.

Additional adjustment to the purchase consideration may be due to or from Welch Consulting.

Per the terms of the Asset Purchase Agreement, $ 0.5 million was to be withheld from the closing payment and paid to Welch Consulting within one year of the date of acquisition, subject to the satisfaction of certain assurances provided by Welch Consulting.

In addition, CRA issued $ 7.9 million of forgivable loans and agreed to provide other deferred compensation to key employees and a non-employee expert, which will be treated as post-transaction compensation expense as incurred.

The intangible assets acquired are comprised of customer relationships, the fair value of which was determined using a multi-period excess earning method.

The customer relationships intangible is being amortized over a ten-year life on a straight-line basis, which approximates the expected pattern of economic benefit from this asset.

The Company also recorded $ 2.4 million of goodwill, all of which is expected to be deductible for tax purposes.

Transaction related expenses, which are principally legal and accounting service fees, amounted to $ 0.2 million for the fiscal quarter ended April 2, 2022 and are included in selling, general and administrative expenses on the condensed consolidated statements of operations.

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.

Time-and-materials contracts are typically used for litigation, regulatory, and financial consulting projects while fixed-price contracts are principally used for management consulting projects.

Time-and-materials contracts are typically used for litigation, regulatory, and financial consulting projects

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

while fixed-price contracts are principally used for management consulting projects.

In general, project costs are classified in costs of services and are based on the direct salary of CRA’s employee consultants on the engagement, plus all direct expenses incurred to complete the project, including any amounts billed to CRA by its non-employee experts.

1 unchanged sentence

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

Fiscal Quarter Ended Fiscal Year-to-Date

Type of Contract October 2,

2021 September 26,

2020 October 2,

2021 September 26,

Fiscal Quarter Ended

Type of Contract April 2,

2022 April 3,

Consulting services revenues:

2 unchanged sentences

Total $ 148,382 $ 146,518

Fiscal Quarter Ended Fiscal Year-to-Date

Geographic Breakdown October 2,

2021 September 26,

2020 October 2,

2021 September 26,

Fiscal Quarter Ended

Geographic Breakdown April 2,

2022 April 3,

Consulting services revenues:

3 unchanged sentences

Total $ 148,382 $ 146,518

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Reserves for Variable Consideration and Credit Risk

4 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 ASU No.

2016-13, Financial Instruments — Credit Losses (Topic 326):

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 $ 0.2 million cumulative-effect increase to allowances for accounts receivable and unbilled services and a reduction to the fiscal 2020 opening balance of retained earnings.

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

Fiscal Quarter Ended Fiscal Year-to-Date

2021 September 26,

2020 October 2,

2021 September 26,

Fiscal Quarter Ended

2022 April 3,

Bad debt expense (recovery), net $ ( 121 ) $ ( 13 )

3 unchanged sentences

The following expenses are subject to reimbursement (in thousands):

Fiscal Quarter Ended Fiscal Year-to-Date

2021 September 26,

2020 October 2,

2021 September 26,

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fiscal Quarter Ended

2022 April 3,

Reimbursable expenses $ 16,204 $ 16,479

1 unchanged sentence

CRA defines contract assets as assets for which it has recorded revenue because it determines that it is probable that it will earn a performance-based or contingent fee, but is not yet entitled to receive a fee because certain events, such as completion of the measurement period or client approval, must occur.

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

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

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):

2022 January 1,

Contract liabilities $ 4,572 $ 8,811

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

CRA recognized the following revenue that was included in the contract liabilities balance as of the opening of the respective period or for performance obligations satisfied in previous periods (in thousands):

Fiscal Quarter Ended Fiscal Year-to-Date

2021 September 26,

2020 October 2,

2021 September 26,

Fiscal Quarter Ended

2022 April 3,

Amounts included in contract liabilities at the beginning of the period $ 6,543 $ 4,355

6 unchanged sentences

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

Fiscal Year-to-Date

Period Ended Fiscal Year Ended

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fiscal Quarter Ended Fiscal Year Ended

2022 January 1,

1 unchanged sentence

Advances 8,800 14,528

Repayments — ( 69 )

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

7 unchanged sentences

Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the fiscal year-to-date period ended October 2, 2021 are summarized as follows (in thousands):

The changes in the carrying amount of goodwill for the fiscal quarter ended April 2, 2022 are summarized as follows (in thousands):

Goodwill $ 160,829

1 unchanged sentence

Goodwill, net at January 1, 2022 88,936

Additions due to acquisitions 2,409

Foreign currency translation adjustment ( 386 )

Goodwill, net at October 2, 2021 (1) $ 88,966

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

_______________________________

(1) Goodwill, net at October 2, 2021, is comprised of goodwill of $ 160.9 million and accumulated impairment of $ 71.9 million.

Goodwill, net at April 2, 2022 $ 90,959

Goodwill at April 2, 2022, is comprised of goodwill of $ 162.9 million and accumulated impairment of $ 71.9 million.

There were no impairment losses related to goodwill during the fiscal quarter ended April 2, 2022 or during the fiscal year ended January 1, 2022.

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):

October 2, 2021 January 2, 2021

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

April 2, 2022 January 1, 2022

(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

Customer relationships 8 to 10

Customer relationships 10

12,370 ( 4,284 ) 8,086 8,220 ( 4,044 ) 4,176

Total $ 12,370 $ ( 4,284 ) $ 8,086 $ 8,500 $ ( 4,319 ) $ 4,181

Amortization expense related to intangible assets was $ 0.2 million and $ 0.7 million for the fiscal quarter and fiscal year-to-date period ended October 2, 2021, respectively, and $ 0.3 million and $ 1.0 million for the fiscal quarter and fiscal year-to-date period ended September 26, 2020, respectively.

There were no impairment losses related to intangible assets during the fiscal year-to-date period ended October 2, 2021 or during the fiscal year ended January 2, 2021.

There were no impairment losses related to intangible assets during the fiscal quarter ended April 2, 2022 or during the fiscal year ended January 1, 2022.

As a result of the Welch Consulting acquisition, CRA recognized approximately $ 4.2 million

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

of intangible assets related to customer relationships in the fiscal quarter ended April 2, 2022.

Amortization expense related to intangible assets was $ 0.2 million and $ 0.3 million for the fiscal quarters ended April 2, 2022 and April 3, 2021, respectively.

Accrued Expenses

2 unchanged sentences

Compensation and related expenses $ 88,439 $ 143,199

Income taxes payable 655 1,927

Performance awards 6,198 4,603

Other professional fees 1,677 1,541

Direct project accruals 2,482 2,833

Accrued leasehold improvements 39 52

Other 6,521 5,679

Total accrued expenses $ 103,640 $ 156,314

As of October 2, 2021 and January 2, 2021, approximately $ 93.5 million and $ 102.6 million, respectively, of accrued bonuses were included above in “Compensation and related expenses.”

For the fiscal quarters ended October 2, 2021 and September 26, 2020, CRA’s effective income tax rate (“ETR”) was 14.8 % and 28.2 %, respectively.

The ETR for the third quarter of fiscal 2021 was lower than the third quarter of fiscal 2020 primarily due to an increase in the tax benefit related to the accounting for stock-based compensation.

For the fiscal year-to-date periods ended October 2, 2021 and September 26, 2020, CRA's ETR was 22.0 % and 27.5 %, respectively.

The ETR for the current fiscal year-to-date period was lower than the prior year-to-date period primarily due to an increase in the tax benefit related to the accounting for stock-based compensation, partially offset by the enactment of the U.K.

statutory tax rate increase during the second fiscal quarter whereby the U.K.'s long-term deferred tax liabilities were remeasured.

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

During the fourth quarter of fiscal 2020, CRA considered the operating needs of the United Kingdom ("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.

As of April 2, 2022 and January 1, 2022, approximately $ 49.9 million and $ 118.9 million, respectively, of accrued bonuses were included above in “Compensation and related expenses.”

For the fiscal quarters ended April 2, 2022 and April 3, 2021, CRA’s effective income tax rate (“ETR”) was 26.4 % and 24.4 %, respectively.

The ETR for the first quarter of fiscal 2022 was higher than the first quarter of fiscal 2021 due to a decrease in the tax benefit related to share-based compensation, the establishment of a valuation allowance in a foreign jurisdiction, and higher state taxes and nondeductible compensation paid to executive officers.

Deferred taxes that are a consequence of foreign exchange translation resulting from earnings that are no longer considered permanently reinvested are recorded as a component of foreign currency translation adjustments on the condensed consolidated statements of comprehensive income.

For the fiscal year-to-date period ended October 2, 2021, CRA’s U.K.

subsidiary distributed approximately £ 12.0 million of both previously taxed and untaxed earnings to CRA’s U.S.

parent entity, the foreign currency translation impact of which was immaterial.

In fiscal 2020, as a result of both a qualitative and quantitative analysis, certain amounts of previously taxed and untaxed post fiscal 2018 U.K.

earnings were no longer considered permanently reinvested.

Deferred income taxes or foreign withholding taxes, estimated to be $ 0.4 million, have not been recorded for other jurisdictions as those earnings are considered to be permanently reinvested.

2 unchanged sentences

CRA calculates diluted earnings per share using the more dilutive of either the two-class method or treasury stock method.

The two-class method was more dilutive for the fiscal quarters and fiscal year-to-date periods ended October 2, 2021 and September 26, 2020.

The two-class method was more dilutive for the fiscal quarters ended April 2, 2022 and April 3, 2021.

Under the two-class method, net earnings are allocated to each class of common stock and participating security as if all the net earnings for the period had been distributed.

CRA's participating securities consist of unvested share-based payment awards that contain a nonforfeitable right to receive dividends and therefore are considered to participate in undistributed earnings with common shareholders.

Net earnings allocable to these participating securities were not material for the fiscal quarters and fiscal year-to-date periods ended October 2, 2021 and September 26, 2020.

The following table presents a reconciliation from net income to the net income available to common shareholders (in thousands):

Fiscal Quarter Ended Fiscal Year-to-Date

2021 September 26,

2020 October 2,

2021 September 26,

Net income, as reported $ 10,945 $ 5,403 $ 33,012 $ 17,802

net income attributable to participating shares 43 22 128 53

Net income available to common shareholders $ 10,902 $ 5,381 $ 32,884 $ 17,749

The following table presents a reconciliation of basic to diluted weighted average shares of common stock outstanding (in thousands):

Fiscal Quarter Ended Fiscal Year-to-Date

2021 September 26,

2020 October 2,

2021 September 26,

Basic weighted average shares outstanding 7,375 7,771 7,440 7,780

Dilutive stock options and restricted stock units 185 163 203 184

Diluted weighted average shares outstanding 7,560 7,934 7,643 7,964

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.

For the fiscal quarter and fiscal year-to-date period ended September 26, 2020, the share-based awards each period were anti-dilutive because their exercise price exceeded the average market price over the respective period.

There were no anti-dilutive shares for the fiscal quarter and fiscal year-to-date period ended October 2, 2021.

Net earnings allocable to these participating securities were not material for the fiscal quarters ended April 2, 2022 and April 3, 2021.

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fiscal Quarter Ended Fiscal Year-to-Date

2021 September 26,

2020 October 2,

2021 September 26,

The following table presents the calculation of basic and diluted net income per share (in thousands, except per share data):

Fiscal Quarter Ended

2022 April 3,

Net income — basic $ 11,426 $ 10,501

net income attributable to participating shares 48 46

Net income — diluted $ 11,378 $ 10,455

Weighted average shares outstanding — basic 7,360 7,626

Effect of dilutive stock options and restricted stock units 143 205

Weighted average shares outstanding — diluted 7,503 7,831

Net income per share:

Basic $ 1.55 $ 1.37

Diluted $ 1.52 $ 1.34

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

Fiscal Quarter Ended

2022 April 3,

Anti-dilutive share-based awards excluded — 14

Fair Value of Financial Instruments

As of October 2, 2021, CRA did not have any financial instruments measured at fair value on a recurring basis.

The following table presents CRA’s financial instruments recorded in the condensed consolidated financial statements at 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

Money market mutual funds $ 150 $ — $ —

Total Assets $ 150 $ — $ —

Contingent consideration liability $ — $ — $ 14,620

Total Liabilities $ — $ — $ 14,620

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

As of April 2, 2022 and January 1, 2022, CRA did not have any financial instruments measured at fair value on a recurring basis.

The contingent consideration liability 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”).

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

Fiscal Year-to-Date Period Ended Fiscal Year Ended

2021 January 2,

CRA had no contingent consideration obligation during the fiscal quarter ended April 2, 2022.

CRA paid the contingent consideration liability in the first quarter of fiscal 2021.

The following table summarizes the changes in the contingent consideration liability for the fiscal year ended January 1, 2022 (in thousands):

Fiscal Year Ended

Beginning balance $ 14,620

Remeasurement of acquisition-related contingent consideration — 1,156

Accretion 380

1 unchanged sentence

Ending balance $ —

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Credit Agreement

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 is party to an amended and restated credit agreement that provides the Company with a $ 175.0 million revolving credit facility that 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 any borrowings must be repaid no later than October 24, 2022.

There was $ 6.0 million in borrowings outstanding under this revolving credit facility as of October 2, 2021.

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, the maturity date.

There was $ 60.0 million in borrowings outstanding under this revolving credit facility as of April 2, 2022.

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

As of October 2, 2021, the amount available under this revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $ 4.2 million.

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

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

financial covenants.

Compliance with these financial covenants is tested on a fiscal quarterly basis.

As of October 2, 2021, CRA was in compliance with the covenants of its credit agreement.

As of April 2, 2022, the amount available under this revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $ 4.4 million.

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

Compliance with these financial covenants is reviewed on a fiscal quarterly basis.

As of April 2, 2022, CRA was in compliance with the covenants of its credit agreement.

Commitments and Contingencies

4 unchanged sentences

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

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.

Subsequent Events

On November 4, 2021, CRA announced that its Board of Directors declared a quarterly cash dividend of $ 0.31 per common share, payable on December 10, 2021 to shareholders of record as of November 30, 2021.

On May 5, 2022, CRA announced that its Board of Directors declared a quarterly cash dividend of $ 0.31 per common share, payable on June 10, 2022 to shareholders of record as of May 31, 2022.

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

What changed 10-Q

Item 1. Financial Statements