What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-04 · 120 added, 49 removed, 406 unchanged (29% of the section changed)

4 unchanged sentences

Fiscal Quarter Ended Fiscal Year-to-Date

2022 October 2,

2021 October 1,

2022 October 2,

Revenues $ 148,441 $ 136,412 $ 445,925 $ 431,167

19 unchanged sentences

Fiscal Quarter Ended Fiscal Year-to-Date

2022 October 2,

2021 October 1,

2022 October 2,

Net income $ 11,877 $ 10,945 $ 34,946 $ 33,012

54 unchanged sentences

(in thousands)

Fiscal Year-to-Date Ended

Fiscal Year-to-Date Period Ended

2022 October 2,

OPERATING ACTIVITIES:

Net income $ 34,946 $ 33,012

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

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

Depreciation and amortization 9,060 9,657

12 unchanged sentences

Lease liabilities ( 12,114 ) ( 11,549 )

Net cash used in operating activities ( 78,812 ) ( 36,223 )

Net cash provided by (used in) operating activities ( 35,015 ) 13,903

INVESTING ACTIVITIES:

6 unchanged sentences

Repayments under revolving line of credit ( 79,000 ) ( 66,000 )

Payments for debt issuance costs ( 1,008 ) —

Tax withholding payments reimbursed by shares ( 1,002 ) ( 588 )

2 unchanged sentences

Repurchase of common stock ( 27,630 ) ( 39,977 )

Net cash provided by financing activities 42,100 5,608

Net cash provided by (used in) financing activities 9,260 ( 37,820 )

Effect of foreign exchange rates on cash and cash equivalents ( 3,098 ) ( 365 )

13 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE FISCAL YEAR-TO-DATE ENDED JULY 2, 2022 (unaudited)

FOR THE FISCAL YEAR-TO-DATE PERIOD ENDED OCTOBER 1, 2022 (unaudited)

(in thousands, except share data)

26 unchanged sentences

BALANCE AT JULY 2, 2022 7,131,349 $ — $ 212,968 $ ( 14,982 ) $ 197,986

Net income — — 11,877 — 11,877

Foreign currency translation adjustment — — — ( 3,806 ) ( 3,806 )

Exercise of stock options 19,476 419 — — 419

Share-based compensation expense — 1,489 — — 1,489

Restricted shares vesting 9,843 — — — —

Redemption of vested employee restricted shares for tax withholding ( 291 ) ( 27 ) — — ( 27 )

Shares repurchased ( 51,524 ) ( 852 ) ( 4,148 ) — ( 5,000 )

Accrued dividends on unvested shares — — ( 39 ) — ( 39 )

Cash dividends paid ($ 0.31 per share)

— — ( 2,224 ) — ( 2,224 )

BALANCE AT OCTOBER 1, 2022 7,108,853 $ 1,029 $ 218,434 $ ( 18,788 ) $ 200,675

See accompanying notes to the condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE FISCAL YEAR-TO-DATE ENDED JULY 3, 2021 (unaudited)

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

(in thousands, except share data)

27 unchanged sentences

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 vesting 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.

63 unchanged sentences

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 July 2, 2022 (in thousands):

The following table presents the preliminary assets acquired and liabilities assumed as of October 1, 2022 (in thousands):

CRA INTERNATIONAL, INC.

21 unchanged sentences

Net assets acquired $ 10,685

For the acquired assets and assumed liabilities, CRA has paid $ 10.2 million, net, as of July 2, 2022, the amount of which was based on adjusted estimates of certain net working capital items.

For the acquired assets and assumed liabilities, CRA has paid $ 10.2 million, net, as of October 1, 2022, the amount of which was based on adjusted estimates of certain net working capital items.

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

Per the terms of the Asset Purchase Agreement, $ 0.5 million was withheld from the closing payment and will be 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.

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 is 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.

1 unchanged sentence

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 year-to-date period ended July 2, 2022 and are included in selling, general and administrative expenses on the condensed consolidated statements of operations.

Transaction related expenses, which are principally legal and accounting service fees, amounted to $ 0.2 million for the fiscal year-to-date period ended October 1, 2022 and are included in selling, general and administrative expenses on the condensed consolidated statements of operations.

Revenues and Allowances

8 unchanged sentences

Fiscal Quarter Ended Fiscal Year-to-Date

Type of Contract July 2,

Type of Contract October 1,

2022 October 2,

2021 October 1,

2022 October 2,

Consulting services revenues:

3 unchanged sentences

Fiscal Quarter Ended Fiscal Year-to-Date

Geographic Breakdown July 2,

Geographic Breakdown October 1,

2022 October 2,

2021 October 1,

2022 October 2,

Consulting services revenues:

11 unchanged sentences

Fiscal Quarter Ended Fiscal Year-to-Date

2022 October 2,

2021 October 1,

2022 October 2,

Bad debt expense (recovery), net $ ( 83 ) $ 55 $ ( 345 ) $ 44

6 unchanged sentences

Fiscal Quarter Ended Fiscal Year-to-Date

2022 October 2,

2021 October 1,

2022 October 2,

Reimbursable expenses $ 15,009 $ 15,727 $ 47,654 $ 49,382

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 July 2, 2022 and January 1, 2022.

The contract assets balance was immaterial as of October 1, 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.

5 unchanged sentences

Fiscal Quarter Ended Fiscal Year-to-Date

2022 October 2,

2021 October 1,

2022 October 2,

Amounts included in contract liabilities at the beginning of the period $ 1,831 $ 1,603 $ 8,101 $ 5,051

22 unchanged sentences

Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the fiscal-year-to-date period ended July 2, 2022 are summarized as follows (in thousands):

The changes in the carrying amount of goodwill for the fiscal year-to-date period ended October 1, 2022 are summarized as follows (in thousands):

Goodwill $ 160,829

3 unchanged sentences

Foreign currency translation adjustment ( 2,309 )

Goodwill, net at July 2, 2022 $ 89,963

Goodwill at July 2, 2022, is comprised of goodwill of $ 161.9 million and accumulated impairment of $ 71.9 million.

There were no impairment losses related to goodwill during the fiscal year-to-date period ended July 2, 2022 or during the fiscal year ended January 1, 2022.

Goodwill, net at October 1, 2022 $ 89,036

Goodwill at October 1, 2022, is comprised of goodwill of $ 160.9 million and accumulated impairment of $ 71.9 million.

There were no impairment losses related to goodwill during the fiscal year-to-date period ended October 1, 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):

July 2, 2022 January 1, 2022

October 1, 2022 January 1, 2022

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

3 unchanged sentences

Total $ 12,370 $ ( 4,902 ) $ 7,468 $ 8,500 $ ( 4,319 ) $ 4,181

There were no impairment losses related to intangible assets during the fiscal year-to-date period ended July 2, 2022 or during the fiscal year ended January 1, 2022.

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

There were no impairment losses related to intangible assets during the fiscal year-to-date period ended October 1, 2022 or during the fiscal year ended January 1, 2022.

As a result of the Welch Consulting acquisition, CRA recognized

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

$ 4.2 million of intangible assets related to customer relationships in the first quarter of fiscal 2022.

Amortization expense related to intangible assets was $ 0.3 million and $ 0.6 million for the fiscal quarter and fiscal year-to-date period ended July 2, 2022, respectively, and $ 0.2 million and $ 0.5 million for the fiscal quarter and fiscal year-to-date period ended July 3, 2021, respectively.

approximately $ 4.2 million of intangible assets related to customer relationships in the first quarter of fiscal 2022.

Amortization expense related to intangible assets was $ 0.3 million and $ 0.9 million for the fiscal quarter and fiscal year-to-date period ended October 1, 2022, respectively, and $ 0.2 million and $ 0.7 million for the fiscal quarter and fiscal year-to-date period ended October 2, 2021, respectively.

Accrued Expenses

6 unchanged sentences

Total accrued expenses $ 132,641 $ 156,314

As of July 2, 2022 and January 1, 2022, approximately $ 61.3 million and $ 118.9 million, respectively, of accrued bonuses were included above in “Compensation and related expenses.”

For the fiscal quarters ended July 2, 2022 and July 3, 2021, CRA’s effective income tax rate (“ETR”) was 28.3 % and 25.8 %, respectively.

The ETR for the second quarter of fiscal 2022 was higher than the second quarter of fiscal 2021 primarily due to a decrease in the tax benefit related to share-based compensation, an increase in the valuation allowance, and higher nondeductible compensation paid to executive officers, partially offset by the remeasurement of the U.K.'s long-term deferred tax liabilities in the second quarter of fiscal 2021 stemming from the enactment of U.K.’s statutory rate increase.

For the fiscal year-to-date periods ended July 2, 2022 and July 3, 2021, CRA's ETR was 27.4 % and 25.1 %, respectively.

The ETR for the current fiscal year-to-date period was higher than the prior year-to-date period primarily due to a decrease in the tax benefit related to share-based compensation, an increase in the valuation allowance, and higher nondeductible compensation paid to executive officers, partially offset by the impact of the U.K.

statutory rate increase in the second quarter of fiscal 2021.

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.

As of October 1, 2022 and January 1, 2022, approximately $ 89.1 million and $ 118.9 million, respectively, of accrued bonuses were included above in “Compensation and related expenses.”

For the fiscal quarters ended October 1, 2022 and October 2, 2021, CRA’s effective income tax rate (“ETR”) was 25.3 % and 14.8 %, respectively.

The ETR for the third quarter of fiscal 2022 was higher than the third quarter of fiscal 2021 primarily due to a decrease in the tax benefit related to share-based compensation and foreign-derived intangible income, and higher nondeductible compensation paid to executive officers.

For the fiscal year-to-date periods ended October 1, 2022 and October 2, 2021, CRA's ETR was 26.7 % and 22.0 %, respectively.

The ETR for the current fiscal year-to-date period was higher than the prior year-to-date period primarily due to a decrease in the tax benefit related to share-based compensation and foreign-derived intangible income, and higher nondeductible compensation paid to executive officers, partially offset by the impact of the U.K.

statutory rate increase in the second quarter of fiscal 2021 that did not recur in the current period.

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.

During the current fiscal year-to-date period, deferred taxes of $ 0.2 million have been recorded as a consequence of foreign exchange translation.

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.

On August 16, 2022, the U.S.

government enacted the Inflation Reduction Act of 2022 that includes, among other provisions, changes to the U.S.

corporate income tax system, including a fifteen percent minimum tax based on "adjusted financial statement income,” and a one percent excise tax on net repurchases of stock after December 31, 2022.

The Company is continuing to evaluate the Inflation Reduction Act and its requirements, as well as the application to its business.

Net Income Per Share

1 unchanged sentence

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 July 2, 2022 and July 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 July 2, 2022 and July 3, 2021.

The two-class method was more dilutive for the fiscal quarters ended October 1, 2022 and October 2, 2021.

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

Net earnings allocable to these participating securities were not material for the fiscal quarters ended October 1, 2022 and October 2, 2021.

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

Fiscal Quarter Ended Fiscal Year-to-Date

2022 October 2,

2021 October 1,

2022 October 2,

Net income — basic $ 11,877 $ 10,945 $ 34,946 $ 33,012

7 unchanged sentences

Diluted $ 1.63 $ 1.44 $ 4.72 $ 4.31

Anti-dilutive share-based awards are excluded from the calculation of common stock equivalents for purposes of computing diluted weighted average shares outstanding.

There were no anti-dilutive share-based awards for the fiscal quarters and fiscal year-to-date periods ended July 2, 2022 and July 3, 2021.

For the fiscal quarter and fiscal year-to-date period ended October 1, 2022, 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 997 and 249 shares, respectively.

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

Fair Value of Financial Instruments

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

As of October 1, 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.

CRA had no contingent consideration obligation during the fiscal year-to-date period ended July 2, 2022.

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

CRA had no contingent consideration obligation during the fiscal year-to-date period ended October 1, 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):

4 unchanged sentences

Ending balance $ —

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

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

There was $ 70.0 million in borrowings outstanding under this revolving credit facility as of July 2, 2022.

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

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

Credit Agreement

CRA was a party to an amended and restated credit agreement (the "Initial Credit Agreement") that provided CRA with a $ 175.0 million revolving credit facility that included a $ 15.0 million sublimit for the issuance of letters of credit.

The Initial Credit Agreement was scheduled to mature on October 24, 2022;

CRA was permitted to repay any borrowings at any time prior to the maturity date.

CRA was required to comply with various financial and non-financial covenants under the Initial Credit Agreement.

On August 19, 2022, CRA refinanced its revolving credit facility under the Initial Credit Agreement by entering into a Credit Agreement (the "Credit Agreement") with Bank of America, N.A., as swingline lender, a letter of credit issuing bank and administrative agent, and with Citizens Bank, N.A., as a letter of credit issuing bank.

The Credit Agreement provides CRA with a $ 250.0 million revolving credit facility, which may be decreased at CRA's option to $ 200.0 million during the period from July 16th in a year through January 15th in the next year.

Additionally, for the period from January 16th to July 15th of each calendar year, CRA may elect to not increase the revolving credit facility to $ 250.0 million.

The revolving credit facility includes a $ 25.0 million sublimit for the issuance of letters of credit.

Concurrent with CRA's entry into the Credit Agreement, the Company terminated the Initial Credit Agreement and repaid in full all outstanding indebtedness under the Initial Credit Agreement of approximately $ 50.0 million.

Also, letters of credit in the aggregate amount of approximately $ 4.4 million that had been issued under the Initial Credit Agreement were deemed to be issued and outstanding under the new revolving credit facility.

In connection with the Credit Agreement, the Company incurred debt issuance costs from the lenders and third-parties of $ 1.0 million.

CRA may use the proceeds of the revolving credit loans under the Credit Agreement for general corporate purposes and may repay any borrowings under the revolving credit facility at any time, but any borrowings must be repaid no later than August 19, 2027.

Borrowings under the revolving credit facility bear interest at a rate per annum equal to one of the following rates, at CRA's election, plus an applicable margin as described below:

(i) in the case of borrowings in U.S.

dollars by the Company, the Base Rate (as defined in the Credit Agreement), (ii) in the case of borrowings in U.S.

dollars, a rate based on Term SOFR (as defined in the Credit Agreement) for the applicable interest period, (iii) in the case of borrowings in Euros, EURIBOR (as defined in the Credit Agreement) for the applicable interest period, (iv) in the case of borrowings in Pounds Sterling, a daily rate based on SONIA (as defined in the Credit Agreement), (v) in the case of borrowings in Canadian Dollars, CDOR (as defined in the Credit Agreement) for the applicable interest period, (vi) in the case of borrowings in Swiss Francs, a daily rate based on SARON (as defined in the Credit Agreement), or (vii) in the case of borrowings in any other Alternate Currency (as defined in the Credit Agreement), the relevant daily or term rate determined as provided in the Credit Agreement.

The applicable margin on borrowings based on the Base Rate varies within a range of 0.25 % to 1.00 % depending on CRA's consolidated net leverage ratio, and the applicable margin on borrowings based on any of the other rates described above varies within a range of 1.25 % to 2.00 % depending on CRA's consolidated net leverage ratio.

CRA is required to pay a fee on the amount available to be drawn under any letter of credit issued under the revolving credit facility at a rate per annum that varies between 1.25 % and 2.00 % depending on CRA's consolidated net leverage ratio.

In addition, CRA is required to pay a fee on the unused portion of the revolving credit facility at a rate per annum that varies between 0.175 % and 0.250 % depending on CRA's consolidated net leverage ratio.

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

The primary financial covenants consist of a maximum consolidated net leverage ratio and a minimum consolidated interest coverage ratio.

The primary non-financial covenants include, but are not limited to, restrictions on CRA's ability to incur future indebtedness, engage in acquisitions or dispositions, pay dividends or repurchase capital stock, and enter into business combinations.

Any indebtedness outstanding under the revolving credit facility may become immediately due upon the occurrence of stated events of default, including CRA's failure to pay principal, interest or fees, or upon the breach of any covenant.

As of October 1, 2022, CRA was in compliance with the covenants of the Credit Agreement.

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

There was $ 45.0 million in borrowings outstanding under the revolving credit facility as of October 1, 2022 and no borrowings outstanding as of January 1, 2022.

As of October 1, 2022, the amount available under the revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $ 4.4 million.

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.

As described in the previous note, CRA is party to standby letters of credit with its lenders 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.

3 unchanged sentences

Subsequent Events

On August 4, 2022, CRA announced that its Board of Directors declared a quarterly cash dividend of $ 0.31 per common share, payable on September 9, 2022 to shareholders of record as of August 30, 2022.

On November 3, 2022, CRA announced that its Board of Directors declared a quarterly cash dividend of $ 0.36 per common share, payable on December 9, 2022 to shareholders of record as of November 29, 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