CRA INTERNATIONAL, INC. 10-Q

ITEM 1. Financial Statements CRA INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share data) Fiscal Quarter Ended April 2, 2022 April 3, 2021 Revenues $ 148,382 $ 146,518 Costs of services (exclusive of depreciation and amortization) 104,060 105,374 Selling, general and administrative expenses 25,817 23,206 Depreciation and amortization 2,976 3,301 Income from operations 15,529 14,637 Interest expense, net ( 208 ) ( 199 ) Foreign currency gains (losses), net 199 ( 551 ) Income before provision for income taxes 15,520 13,887 Provision for income taxes 4,094 3,386 Net income $ 11,426 $ 10,501 Net income per share: Basic $ 1.55 $ 1.37 Diluted $ 1.52 $ 1.34 Weighted average number of shares outstanding: Basic 7,360 7,626 Diluted 7,503 7,831 See accompanying notes to the condensed consolidated financial statements. 3 Table of Contents CRA INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) (in thousands) Fiscal Quarter Ended April 2, 2022 April 3, 2021 Net income $ 11,426 $ 10,501 Other comprehensive income (loss) Foreign currency translation adjustments, net of tax ( 1,172 ) ( 111 ) Comprehensive income $ 10,254 $ 10,390 See accompanying notes to the condensed consolidated financial statements. 4 Table of Contents CRA INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands, except share data) April 2, 2022 January 1, 2022 ASSETS Current assets: 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 $ 1,440 and $ 1,364 , respectively 66,881 45,095 Prepaid expenses and other current assets 11,896 10,589 Forgivable loans 12,899 10,571 Total current assets 242,148 249,347 Property and equipment, net 51,836 53,612 Goodwill 90,959 88,936 Intangible assets, net 8,086 4,181 Right-of-use assets 107,655 110,475 Deferred income taxes 9,518 9,319 Forgivable loans, net of current portion 39,137 38,020 Other assets 1,503 1,470 Total assets $ 550,842 $ 555,360 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 20,252 $ 23,511 Accrued expenses 103,640 156,314 Deferred revenue and other liabilities 8,822 12,821 Current portion of lease liabilities 15,023 14,337 Current portion of deferred compensation 1,209 6,103 Revolving line of credit 60,000 — Total current liabilities 208,946 213,086 Non-current liabilities: Deferred compensation and other non-current liabilities 11,441 10,947 Non-current portion of lease liabilities 120,231 124,464 Deferred income taxes 999 1,029 Total non-current liabilities 132,671 136,440 Commitments and contingencies (Note 11) Shareholders’ equity: Preferred stock, no par value; 1,000,000 shares authorized; none issued and outstanding — — Common stock, no par value; 25,000,000 shares authorized; 7,339,985 and 7,362,703 shares issued and outstanding, respectively — — Retained earnings 220,347 215,784 Accumulated other comprehensive loss ( 11,122 ) ( 9,950 ) Total shareholders’ equity 209,225 205,834 Total liabilities and shareholders’ equity $ 550,842 $ 555,360 See accompanying notes to the condensed consolidated financial statements. 5 Table of Contents CRA INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands) Fiscal Quarter Ended April 2, 2022 April 3, 2021 OPERATING ACTIVITIES: Net income $ 11,426 $ 10,501 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 Right-of-use asset amortization 3,378 3,199 Deferred income taxes ( 197 ) ( 896 ) Share-based compensation expense 1,037 842 Bad debt expense (recovery) ( 121 ) ( 13 ) Unrealized foreign currency remeasurement (gains) losses, net 13 ( 284 ) Changes in operating assets and liabilities: Accounts receivable 13,522 20,033 Unbilled services ( 20,632 ) ( 23,063 ) Prepaid expenses and other current assets, and other assets ( 1,116 ) ( 2,733 ) Forgivable loans ( 3,433 ) 4,140 Incentive cash awards 1,759 1,729 Accounts payable, accrued expenses, and other liabilities ( 66,422 ) ( 52,839 ) Lease liabilities ( 4,028 ) ( 3,765 ) 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 ) FINANCING ACTIVITIES: Issuance of common stock, principally stock option exercises 341 1,113 Borrowings under revolving line of credit 60,000 42,000 Repayments under revolving line of credit — ( 2,000 ) Tax withholding payments reimbursed by shares ( 897 ) ( 588 ) Cash paid for contingent consideration — ( 2,357 ) Cash dividends paid ( 2,377 ) ( 2,061 ) Repurchase of common stock ( 4,956 ) ( 9,642 ) Net cash provided by financing activities 52,111 26,465 Effect of foreign exchange rates on cash and cash equivalents ( 716 ) 27 Net decrease in cash and cash equivalents ( 22,428 ) ( 14,048 ) Cash and cash equivalents at beginning of period 66,130 45,677 Cash at end of period $ 43,702 $ 31,629 Noncash investing and financing activities: 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 Restricted common stock issued for contingent consideration $ — $ 2,250 Supplemental cash flow information: Cash paid for taxes $ 1,622 $ 844 Cash paid for interest $ 97 $ 24 Cash paid for amounts included in operating lease liabilities $ 5,285 $ 5,157 See accompanying notes to the condensed consolidated financial statements. 6 Table of Contents CRA INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY FOR THE FISCAL QUARTER ENDED APRIL 2, 2022 (unaudited) (in thousands, except share data) Common Stock Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Shares Issued Amount BALANCE AT JANUARY 1, 2022 7,362,703 $ — $ 215,784 $ ( 9,950 ) $ 205,834 Net income — — 11,426 — 11,426 Foreign currency translation adjustment — — — ( 1,172 ) ( 1,172 ) Exercise of stock options 14,552 341 — — 341 Share-based compensation expense — 1,037 — — 1,037 Restricted shares vesting 29,558 — — — — Redemption of vested employee restricted shares for tax withholding ( 10,163 ) ( 897 ) — — ( 897 ) Shares repurchased ( 56,665 ) ( 481 ) ( 4,475 ) — ( 4,956 ) Accrued dividends on unvested shares — — ( 11 ) — ( 11 ) Cash dividends paid ($ 0.31 per share) — — ( 2,377 ) — ( 2,377 ) BALANCE AT APRIL 2, 2022 7,339,985 $ — $ 220,347 $ ( 11,122 ) $ 209,225 See accompanying notes to the condensed consolidated financial statements. 7 Table of Contents CRA INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY FOR THE FISCAL QUARTER ENDED APRIL 3, 2021 (unaudited) (in thousands, except share data) Common Stock Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Shares Issued Amount 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 vesting 29,494 — — — — Redemption of vested employee restricted shares for tax withholding ( 9,895 ) ( 588 ) — — ( 588 ) Shares repurchased ( 166,552 ) ( 4,120 ) ( 5,522 ) — ( 9,642 ) Accrued dividends on unvested shares — — 5 — 5 Cash dividends paid ($ 0.26 per share) — — ( 2,061 ) — ( 2,061 ) BALANCE AT APRIL 3, 2021 7,627,591 $ — $ 219,922 $ ( 8,594 ) $ 211,328 See accompanying notes to the condensed consolidated financial statements. 8 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Summary of Significant Accounting Policies Description of Business CRA International, Inc. (“CRA” or the “Company”) is a worldwide leading consulting services firm that applies advanced analytic techniques and in-depth industry knowledge to complex engagements for a broad range of clients. CRA offers services in two broad areas: litigation, regulatory, and financial consulting and management consulting. CRA operates in one business segment. CRA operates its business under its registered trade name, Charles River Associates. Basis of Presentation The unaudited condensed consolidated financial statements include the accounts of CRA International, Inc. and its wholly-owned subsidiaries (collectively the “Company”), which require consolidation after the elimination of intercompany accounts and transactions. These financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q. Accordingly, these financial statements do not include all the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements. In the opinion of management, these financial statements reflect all adjustments of a normal, recurring nature necessary for the fair presentation of CRA’s results of operations, financial position, cash flows, and shareholders’ equity for the interim periods presented in conformity with GAAP. Results of operations for the interim periods presented herein are not necessarily indicative of results of operations for a full year. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended January 1, 2022 included in CRA’s Annual Report on Form 10-K filed with the SEC on March 3, 2022 (the “2021 Form 10-K”). 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. Estimates 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, 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. Changes in estimates are recorded in the period in which they become known. CRA bases its estimates on historical experience and various other assumptions that CRA believes to be reasonable under the circumstances. Actual results may differ from those estimates if CRA’s assumptions based on past experience or other assumptions do not turn out to be substantially accurate. 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 9 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) 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. 2. 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): 10 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) 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. 3. 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 11 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) while fixed-price contracts are principally used for management consulting projects. In general, project costs are classified in costs of services and are based on the direct salary of CRA’s employee consultants on the engagement, plus all direct expenses incurred to complete the project, including any amounts billed to CRA by its non-employee experts. Disaggregation of Revenue The following tables disaggregate CRA’s revenue by type of contract and geographic location (in thousands): Fiscal Quarter Ended Type of Contract April 2, 2022 April 3, 2021 Consulting services revenues: Fixed-price $ 28,773 $ 33,433 Time-and-materials 119,609 113,085 Total $ 148,382 $ 146,518 Fiscal Quarter Ended Geographic Breakdown April 2, 2022 April 3, 2021 Consulting services revenues: United States $ 116,919 $ 117,247 United Kingdom 22,410 23,286 Other 9,053 5,985 Total $ 148,382 $ 146,518 Reserves for Variable Consideration and Credit Risk Revenues from CRA's consulting services are recorded at the net transaction price, which includes estimates of variable consideration for which reserves are established. Variable consideration reserves are based on specific price concessions and those expected to be extended to CRA customers estimated by CRA's historical realization rates. Reserves for variable consideration are recorded as a component of the allowances for accounts receivable and unbilled services on the condensed consolidated balance sheets. Adjustments to the reserves for variable consideration are included in revenues on the condensed consolidated statements of operations. CRA also maintains allowances for accounts receivable and unbilled services for estimated losses resulting from clients’ failure to make required payments. The following table presents CRA's bad debt expense, net of recoveries, of previously written off allowances (in thousands): Fiscal Quarter Ended April 2, 2022 April 3, 2021 Bad debt expense (recovery), net $ ( 121 ) $ ( 13 ) 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. CRA recovers substantially all of these costs. The following expenses are subject to reimbursement (in thousands): 12 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) Fiscal Quarter Ended April 2, 2022 April 3, 2021 Reimbursable expenses $ 16,204 $ 16,479 Contract Balances from Contracts with Customers CRA defines contract assets as assets for which it has recorded revenue because it determines that it is probable that it will earn a performance-based or contingent fee, but is not yet entitled to receive a fee because certain events, such as completion of the measurement period or client approval, must occur. The contract assets balance was immaterial as of 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. Contract liabilities are recognized as revenue after performance obligations have been satisfied and all revenue recognition criteria have been met. The following table presents the closing balances of CRA's contract liabilities (in thousands): April 2, 2022 January 1, 2022 Contract liabilities $ 4,572 $ 8,811 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 April 2, 2022 April 3, 2021 Amounts included in contract liabilities at the beginning of the period $ 6,543 $ 4,355 Performance obligations satisfied in previous periods $ 1,665 $ 2,183 4. 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 may be denominated in local currencies. A portion of these loans is collateralized. 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. 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. The following table presents forgivable loan activity for the respective periods (in thousands): 13 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) Fiscal Quarter Ended Fiscal Year Ended April 2, 2022 January 1, 2022 Beginning balance $ 48,591 $ 61,613 Advances 8,800 14,528 Repayments — ( 69 ) Reclassifications from accrued expenses or to other assets (1) — ( 2,229 ) Amortization ( 5,362 ) ( 25,187 ) Effects of foreign currency translation 7 ( 65 ) Ending balance $ 52,036 $ 48,591 Current portion of forgivable loans $ 12,899 $ 10,571 Non-current portion of forgivable loans $ 39,137 $ 38,020 _______________________________ (1) Relates to the reclassification of performance awards previously recorded as accrued expenses or forgivable loans that have been reclassified to other receivables. 5. Goodwill and Intangible Assets 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 Accumulated goodwill impairment ( 71,893 ) Goodwill, net at January 1, 2022 88,936 Additions due to acquisitions 2,409 Foreign currency translation adjustment ( 386 ) 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): April 2, 2022 January 1, 2022 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 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 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 14 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) 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. 6. Accrued Expenses Accrued expenses consist of the following (in thousands): April 2, 2022 January 1, 2022 Compensation and related expenses $ 88,439 $ 143,199 Performance awards 6,198 4,603 Direct project accruals 2,482 2,833 Other 6,521 5,679 Total accrued expenses $ 103,640 $ 156,314 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.” 7. Income Taxes 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. 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. 8. Net Income Per Share CRA calculates basic earnings per share using the two-class method. CRA calculates diluted earnings per share using the more dilutive of either the two-class method or treasury stock method. The two-class method was more dilutive for 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 ended April 2, 2022 and April 3, 2021. 15 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) The following table presents the calculation of basic and diluted net income per share (in thousands, except per share data): Fiscal Quarter Ended April 2, 2022 April 3, 2021 Numerator: Net income — basic $ 11,426 $ 10,501 Less: net income attributable to participating shares 48 46 Net income — diluted $ 11,378 $ 10,455 Denominator: 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. 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): Fiscal Quarter Ended April 2, 2022 April 3, 2021 Anti-dilutive share-based awards excluded — 14 9. Fair Value of Financial Instruments 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”). 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 January 1, 2022 Beginning balance $ 14,620 Accretion 380 Payment of contingent consideration ( 15,000 ) Ending balance $ — 16 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) 10. Credit Agreement 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, 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 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. 11. Commitments and Contingencies As described in the previous note, CRA is party to standby letters of credit with its bank in support of 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, 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. 12. Subsequent Events 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. 17 Table of Contents