What changed in this filing

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Item 9A. Controls and Procedures

2023-03-02 compared with 2022-03-03 · 257 added, 253 removed, 1026 unchanged (33% of the section changed)

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This is done in order to ensure that information we are required to disclose in the reports that are filed or submitted under the Securities Exchange Act of 1934 ("the Exchange Act"), as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

Based upon that evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of January 1, 2022.

Based upon that evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2022.

(b) Management's Report on Internal Control over Financial Reporting

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Based on that assessment, our President and Chief Executive Officer and our Chief Financial Officer concluded that our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with U.S.

generally accepted accounting principles as of January 1, 2022.

generally accepted accounting principles as of December 31, 2022.

Our independent registered public accounting firm, Grant Thornton LLP, has issued an audit report on their assessment of our internal control over financial reporting.

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We have audited the internal control over financial reporting of CRA International, Inc.

(a Massachusetts corporation) and subsidiaries (the “Company”) as of January 1, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 1, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended January 1, 2022, and our report dated March 3, 2022 expressed an unqualified opinion on those financial statements.

(a Massachusetts corporation) and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2022, and our report dated March 2, 2023 expressed an unqualified opinion on those financial statements.

Basis for opinion

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

10-K March 3, 2022 10.67

10.68 Credit Agreement, dated as of August 19, 2022, by and among CRA International, Inc., CRA International (UK) Limited, CRA International (Netherlands) B.V., and CRA International Limited, as the Borrowers, Bank of America, N.A., as Administrative Agent, Swingline Lender and L/C Issuer, the other L/C Issuers party thereto and the other Lenders party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on August 23, 2022).

8-K August 23, 2022 10.1

21.1 Subsidiaries.

23.1 Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm.

23.2 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm

31.1 Rule 13a-14(a)/15d-14(a) certification of principal executive officer.

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32.2 Section 1350 certification of principal financial officer.

101 The following financial statements from CRA International, Inc.'s Annual Report on Form 10-K for the fiscal year ended January 1, 2022, formatted in Inline XBRL (eXtensible Business Reporting Language), as follows:

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

101 The following financial statements from CRA International, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, formatted in Inline XBRL (eXtensible Business Reporting Language), as follows:

(i) Consolidated Statements of Operations for the fiscal years ended December 31, 2022, January 1, 2022, and January 2, 2021, (ii) Consolidated Statements of Comprehensive Income for the fiscal years ended December 31, 2022, January 1, 2022, and January 2, 2021, (iii) Consolidated Balance Sheets at December 31, 2022 and January 1, 2022, (iv) Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2022, January 1, 2022, and January 2, 2021, (v) Consolidated Statements of Shareholders' Equity for the fiscal years ended December 31, 2022, January 1, 2022, and January 2, 2021 and (vi) Notes to Consolidated Financial Statements.

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

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CONCANNON Director March 2, 2023

/s/ NANCY HAWTHORNE Director March 3, 2022

Nancy Hawthorne

TAYLOR Director March 2, 2023

/s/ ROBERT W.

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DETRICK Director March 2, 2023

/s/ HEATHER E.

TOOKES Director March 2, 2023

CRA INTERNATIONAL, INC.

CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firms

Report of Independent Registered Public Accounting Firm (PCAOB ID 248 )

Consolidated Statements of Operations

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

(a Massachusetts corporation) and subsidiaries (the "Company") as of January 1, 2022 and January 2, 2021, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the two years in the period ended January 1, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 1, 2022 and January 2, 2021, and the results of its operations and its cash flows for each of the two years in the period ended January 1, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 1, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 3, 2022 expressed an unqualified opinion.

(a Massachusetts corporation) and subsidiaries (the "Company") as of December 31, 2022 and January 1, 2022, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and January 1, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 2, 2023 expressed an unqualified opinion.

Basis for opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Fixed-Price Revenue Recognition – Estimates of total costs to complete a performance obligation

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

Deferred Compensation – Performance-Based Awards

As described further in Note 1 to the consolidated financial statements, the Company provides performance-based awards where the amount to be paid depends upon achievement of minimum required financial targets over the award’s measurement period.

These financial targets may include a measure of revenue generation, profitability, or both.

We identified the estimation uncertainty related to the achievement of the financial targets used in the calculation of the performance-based awards deferred compensation liability as a critical audit matter.

The principal consideration for our determination that the estimation uncertainty related to the achievement of the financial targets is a critical audit matter is that it requires management judgement in estimating forecasted future revenues for the remaining measurement period.

This requires management to evaluate historical results and expectations of future performance based on available information, including each recipient’s specific performance.

Significant management estimates are subject to estimation uncertainty and require significant auditor subjectivity in evaluating the results of our procedures and the reasonableness of those estimates.

Our audit procedures related to the estimation uncertainty related to the achievement of the financial targets included the following, among others.

• We tested the design and operating effectiveness of internal controls over management’s estimates related to forecasted future revenues for the remaining measurement period.

• We evaluated management’s historical ability to estimate revenues.

• We obtained and tested the Company’s key inputs and assumptions used to estimate the forecasted future revenues for the remaining measurement period.

Our testing included evaluating key inputs and assumptions by comparing them to historical results and performing sensitivity analysis.

/s/ GRANT THORNTON LLP

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March 2, 2023

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of CRA International, Inc.

Opinion on the Financial Statements

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

(the Company) for the year ended December 28, 2019, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 28, 2019, in conformity with U.S.

generally accepted accounting principles.

Adoption of ASU No.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method for accounting for leases in fiscal year 2019 due to the adoption of ASU No.

2016-02, Leases , and associated amendments (Topic 842), using the modified retrospective method.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

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

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We served as the Company's auditor from 2014 to 2020.

Boston, Massachusetts

February 27, 2020

CRA INTERNATIONAL, INC.

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Cash and cash equivalents $ 31,447 $ 66,130

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

Accounts receivable, net of allowances of $ 2,640 and $ 3,256 , respectively

143,644 116,962

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

Unbilled services, net of allowances of $ 1,120 and $ 1,364 , respectively

51,343 45,095

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25,000,000 shares authorized;

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

7,149,884 and 7,362,703 shares issued and outstanding, respectively

Retained earnings 224,392 215,784

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Net income $ 43,619 $ 41,679 $ 24,507

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities, net of effect of acquired businesses:

Depreciation and amortization 11,996 12,768 12,840

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Deferred income taxes 189 446 1,114

Share-based compensation expenses 4,086 3,235 3,461

Accounts receivable allowances ( 337 ) ( 479 ) 47

Share-based compensation expense 4,773 4,086 3,235

Bad debt expense (recovery) ( 345 ) 27 227

Unrealized foreign currency remeasurement (gains) losses, net 122 ( 294 ) 247

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Accounts receivable ( 24,929 ) ( 6,053 ) ( 2,654 )

Unbilled services, net ( 4,399 ) ( 3,940 ) ( 352 )

Unbilled services ( 5,382 ) ( 4,399 ) ( 3,940 )

Prepaid expenses and other current assets, and other assets ( 485 ) ( 2,399 ) 1,377

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Purchases of property and equipment ( 3,813 ) ( 2,623 ) ( 17,094 )

Consideration paid for acquisitions, net ( 14,352 ) — —

Net cash used in investing activities ( 18,165 ) ( 2,623 ) ( 17,094 )

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Repayments under revolving line of credit ( 126,000 ) ( 74,000 ) ( 77,000 )

Payments for debt issuance costs ( 1,008 ) — —

Tax withholding payments reimbursed by shares ( 2,145 ) ( 1,528 ) ( 862 )

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Noncash investing and financing activities:

Purchases of property and equipment not yet paid for $ ( 8 ) $ 4,749 $ 4,914

Purchases of property and equipment paid by a third party $ — $ — $ 156

Increase (decrease) in accounts payable and accrued expenses for property and equipment $ ( 268 ) $ 8 $ ( 4,749 )

Asset retirement obligations $ — $ — $ 155

Right-of-use assets obtained in exchange for lease obligations $ 2,436 $ 1,751 $ 2,640

Right-of-use assets related to the adoption of ASC 842 $ — $ — $ 82,329

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

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

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

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

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

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

Net income — — 24,507 — 24,507

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— — ( 7,503 ) — ( 7,503 )

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 — — 41,679 — 41,679

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

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

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

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Foreign currency translation adjustment — — — ( 5,031 ) ( 5,031 )

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

Exercise of stock options 61,645 1,411 — — 1,411

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— — ( 9,580 ) — ( 9,580 )

BALANCE AT JANUARY 1, 2022 7,362,703 $ — $ 215,784 $ ( 9,950 ) $ 205,834

BALANCE AT DECEMBER 31, 2022 7,149,884 $ 1,743 $ 224,392 $ ( 14,981 ) $ 211,154

See accompanying notes to the consolidated financial statements

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At times, these deposits may exceed federally insured limits.

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

The financial institutions both have short-term credit ratings of A-1 by Standard & Poor's ratings services.

As of December 31, 2022, CRA's cash accounts were concentrated at two financial institutions, which potentially exposes CRA to credit risks.

The financial institutions have short-term credit ratings of A-1 and A-2 by Standard & Poor's ratings services.

CRA has not experienced any losses related to such accounts.

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

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

The effect of transaction gains and losses recorded in income before provision for income taxes amounted to gains of $ 1.9 million for fiscal 2022, losses of $ 0.5 million for fiscal 2021, and gains of approximately $0.1 million for fiscal 2020.

Revenue Recognition and Allowances for Accounts Receivable and Unbilled Services

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For arrangements that contain multiple performance obligations, the fixed price is allocated based on the estimated relative standalone selling prices of the promised services underlying each performance obligation.

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

CRA has elected as a practical expedient to not disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations as of December 31, 2022 and January 1, 2022, as CRA's contracts have an original expected duration of one year or less or revenue has been recognized at the amount for which CRA has the right to invoice for consulting services performed.

Reimbursable expenses, including those relating to travel, out-of-pocket expenses, outside consultants and other third-party vendor expenses, are generally included in revenues, and an equivalent amount of reimbursable expenses is included in costs of services in the period in which the expense is incurred.

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

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

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

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

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

CRA usually issues invoices to its customers on a monthly basis, and payment is due upon receipt of the invoice.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component.

CRA does not assess whether a significant financing component exists if the period between when it performs its obligations under the contract and when the customer pays is one year or less.

None of CRA's contracts contained a significant financing component as of January 1, 2022 or January 2, 2021.

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

CRA usually issues invoices to its customers on a monthly basis, and payment is usually due upon receipt of the invoice unless contract terms state otherwise.

CRA does not assess whether a significant financing component exists if the period between when it performs its obligations under the contract and when the customer pays is one year or less.

None of CRA's contracts contained a significant financing component as of December 31, 2022 or January 1, 2022.

Contract Balances from Contracts with Customers

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Bad debt expense, net of recoveries of previously written off allowances, is recorded as a component of selling, general and administrative expenses on the consolidated statements of operations.

Prior to adopting ASC 326, CRA determined allowances for accounts receivable and unbilled services for specific customer accounts based on the financial condition of the customer and related facts and circumstances.

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

Costs of Services

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

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

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Costs of Services

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

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

Costs of services does not include depreciation and amortization.

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

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 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 estimated based on the expected period that the Company will receive substantially all 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 consolidated statements of operations.

Deferred Compensation

CRA accounts for performance-based and service-based cash awards using an accrual method where changes in estimates are accounted for prospectively over the remaining service period.

To the extent the terms of an award attribute all or a portion of the expected future benefits to a period of service greater than one year, the cost of those benefits is accrued over the employee's or non-employee's requisite service period in a systematic and rational manner, usually on a straight-line basis.

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

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The amount of the liability of the award agreements is estimated based on internally generated financial projections.

The process of projecting these financial targets over the measurement period is highly subjective and requires significant judgment and estimates.

The process of projecting these financial targets over the measurement period is subjective and requires judgment and estimates.

There can be no assurance that the estimates and assumptions used in preparing these projections will prove to be accurate.

CRA is a lessee under certain operating leases for office space and equipment.

CRA adopted ASC Topic 842, Leases ("ASC 842") on the first day of fiscal 2019 using the modified retrospective transition method.

The cumulative effect of the transition adjustments was recognized as of the date of adoption.

As a result of adopting the new standard, CRA recognized ROU assets of $ 82.3 million and lease liabilities of $ 106.8 million.

The difference between the amount of ROU assets and lease liabilities recognized was an adjustment to deferred rent.

There was no change to net deferred tax assets as a result of CRA's adoption of ASC 842.

The adoption of ASC 842 did not have a material impact on CRA's results of operations or cash flows, nor did it have an impact on any of CRA's existing debt covenants.

CRA determines whether a contract is a lease at the inception of the contract, based on whether the contract provides CRA the right to control the use of a physically distinct asset or substantially all of the capacity of an asset.

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

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

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

ROU assets are equal to the lease liability, adjusted for payments made to the lessor prior to the lease commencement date and lease incentives received, such as tenant improvement allowances.

CRA estimates its incremental borrowing rate for each leased asset based on the interest rate CRA would incur to borrow an amount equal to the lease payments on a collateralized basis over a similar term in a similar economic environment.

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

similar economic environment.

CRA recognizes rent expense for its operating leases on a straight-line basis over the term of the lease.

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CRA's equipment leases are generally short-term.

CRA's office space leases have remaining lease terms between one and approximately ten years , many of which include one or more options to extend the term for periods of up to five years for each option.

CRA's office space leases have remaining lease terms between one and approximately nine years , many of which include one or more options to extend the term for periods of up to five years for each option.

Certain office space leases contain options to terminate the lease early, which may include a penalty for exercising the option.

Many of the termination options require notice within a specified period,

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

after which the option is no longer available to CRA if not exercised.

Many of the termination options require notice within a specified period, after which the option is no longer available to CRA if not exercised.

The extension options and termination options may be exercised at CRA's sole discretion.

CRA does not consider in the measurement of ROU assets and lease liabilities an option to extend or terminate a lease if CRA is not reasonably certain to exercise the option.

As of January 1, 2022, CRA has not included any options to extend or terminate in its measurement of ROU assets or lease liabilities.

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

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

As of December 31, 2022, CRA has not included any options to extend or terminate in its measurement of ROU assets or lease liabilities.

Certain of CRA's office space leases impose asset retirement obligations due to office modifications or the periodic redecoration of the premises.

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

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

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Property and equipment are recorded at cost.

Depreciation is calculated using the straight-line method based on the estimated useful lives of approximately three years for computer equipment, three to ten years for computer software, and ten years for furniture and fixtures.

Depreciation is calculated using the straight-line method based on the estimated useful lives of approximately three years for computer equipment, three to ten years for computer software, and ten

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

years for furniture and fixtures.

Amortization of leasehold improvements is calculated using the straight-line method over the shorter of the lease term or the estimated useful life of the leasehold improvements.

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Expenditures for renewals and betterments are capitalized.

Debt Issuance Costs

The Company records its debt issuance costs related to its revolving credit facility as an asset and amortizes the costs over the term of the credit agreement using the straight-line method.

Debt issuance costs in the amount of $ 0.2 million and $ 0.7 million are included in prepaid expenses and other current assets and other assets, respectively, on the consolidated balance sheets as of December 31, 2022.

Debt issuance costs in the amount of $ 0.2 million are included in prepaid expenses and other current assets on the consolidated balance sheets as of January 1, 2022.

Impairment of Long-Lived Assets

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• a significant underperformance relative to expected historical or projected future operating results;

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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CRA's financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses, are carried at cost, which approximates their fair value because of the short-term maturity of these instruments or because their stated interest rates are indicative of market interest rates.

The contingent consideration liability, which was paid in February 2021, pertained to estimated future contingent consideration payments related to the acquisition of C1 Consulting, LLC, an independent consulting firm, and its wholly-owned subsidiary C1 Associates (collectively, "C1"), and was included in deferred compensation on our consolidated balance sheets.

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

The significant unobservable inputs used in the fair value measurement of the contingent consideration liability were CRA's estimate of the payout based on internally generated revenue projections, expected volatility of the revenue projections, and discount rates.

A contingent consideration liability paid in February 2021, pertained to estimated future contingent consideration payments related to the acquisition of C1 Consulting, LLC, an independent consulting firm, and its wholly-owned subsidiary C1 Associates (collectively, "C1").

CRA recorded an additional contingent consideration liability of $ 1.1 million during fiscal year 2022 related to the acquisition of bSG.

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

The significant unobservable inputs used in the fair value measurement of the contingent consideration liabilities were CRA's estimate of the payout based on internally generated revenue projections, expected volatility of the revenue projections, and discount rates.

The fair value of the contingent consideration had been determined using a Monte Carlo simulation, and was reassessed on a quarterly basis by CRA using additional information as it became available.

2 unchanged sentences

Deferred tax assets and liabilities are recognized based on estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases.

CRA includes in the estimate of deferred tax assets and liabilities an estimate of the realizable benefits from operating loss and tax credit carryforwards.

CRA includes in the estimate of deferred tax assets and liabilities an

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

estimate of the realizable benefits from operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

13 unchanged sentences

and results of acquisitions or dispositions.

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

17 unchanged sentences

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

As of January 1, 2022, PIC was exhausted.

CRA’s common stock has no par value.

All shares repurchased have been retired.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Net Income (Loss) Per Share

8 unchanged sentences

To the extent that there is a net loss, CRA assumes all common stock equivalents to be anti-dilutive, and they are excluded from diluted weighted-average shares outstanding.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recent Accounting Standards

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.

Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

In October 2021, the FASB issued ASU No.

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 at the acquisition date as if the acquirer had originated the contracts rather than adjust them to fair value.

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

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

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

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

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

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 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 consolidated financial statements from the date of acquisition.

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.

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Welch Consulting's results of operations have been included in the accompanying consolidated statements of operations from the date of acquisition.

The following table is the final allocation of the purchase price to the estimated fair value of assets acquired and liabilities assumed (in thousands):

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 has paid $ 10.2 million, net, as of December 31, 2022, the amount of which was based on adjusted estimates of certain net working capital items.

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 is treated as post-transaction compensation expense over the term of the loan.

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.

On November 29, 2022, CRA acquired substantially all of the business assets and assumed certain liabilities of bioStrategies Group, Inc.

(“bSG”), a Chicago-based consulting firm focused on developing commercial strategies for healthcare products and technologies.

The acquisition expands CRA’s business opportunities, expertise, and market presence with the addition of 17 colleagues with an office in Chicago, Illinois.

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

The acquisition of bSG is not significant to our consolidated financial statements for the year ended December 31, 2022.

Transaction related expenses, which are principally legal and accounting service fees, amounted to $ 0.3 million for the fiscal year-to-date period ended December 31, 2022 and are included in selling, general and administrative expenses on the consolidated statements of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenues and Allowances

5 unchanged sentences

Year Ended Year Ended Year Ended

Type of Contract January 1,

Type of Contract December 31,

Consulting services revenues:

2 unchanged sentences

Total $ 590,901 $ 565,933 $ 508,373

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year Ended Year Ended Year Ended

Geographic Breakdown January 1,

Geographic Breakdown December 31,

Consulting services revenues:

12 unchanged sentences

Bad debt expense, net of recoveries of previously written off allowances, is recorded as a component of selling, general and administrative expenses on the consolidated statements of operations.

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

A rollforward of the variable consideration and doubtful accounts reserves for accounts receivable, which includes allowances for doubtful accounts of $ 0.1 million and $ 0.5 million as of December 31, 2022 and January 1, 2022, respectively, is as follows (in thousands):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fiscal Year Fiscal Year

3 unchanged sentences

Balance at end of fiscal year $ 2,640 $ 3,256

_______________________________

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

A rollforward of the variable consideration and doubtful accounts reserves for unbilled services is as follows (in thousands):

4 unchanged sentences

Balance at end of fiscal year $ 1,120 $ 1,364

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

9 unchanged sentences

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 January 1, 2022 and January 2, 2021.

The contract assets balance was immaterial as of December 31, 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.

2 unchanged sentences

2022 January 1,

2021 December 28,

2022 January 2,

Contract liabilities $ 6,977 $ 8,811 $ 5,527

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NOTES TO 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):

9 unchanged sentences

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.

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

17 unchanged sentences

Total lease cost $ 24,765 $ 24,008 $ 24,866

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents summary information for CRA's lease terms and discount rates for its operating leases:

2022 January 1,

2021 December 28,

2022 January 2,

Weighted average remaining lease term—operating leases 6.7 years 7.7 years 8.6 years

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

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

At December 31, 2022, CRA had the following maturities of lease liabilities related to office space, all of which are under non-cancellable operating leases (in thousands):

Fiscal Year Operating Lease

4 unchanged sentences

Total $ 121,980

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Certain of our operating leases have terms that impose asset retirement obligations due to office modifications or the periodic redecoration of the premises, which are included in other liabilities on our consolidated balance sheets.

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

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

As of December 31, 2022 and January 1, 2022, these redecoration and asset retirement obligations were approximately $ 1.9 million and $ 2.0 million, respectively.

As of December 31, 2022, CRA had no additional operating leases that had not yet commenced.

Goodwill and Intangible Assets

4 unchanged sentences

Goodwill, net at beginning of fiscal year 88,936 89,187

Foreign currency translation adjustment and other (1) ( 251 ) 683

Additions due to acquisitions 5,361 —

Foreign currency translation adjustment ( 1,375 ) ( 251 )

Goodwill, net at end of fiscal year $ 92,922 $ 88,936

Goodwill, net at January 1, 2022, is comprised of goodwill of $ 160.8 million and accumulated impairment of $ 71.9 million.

Goodwill, net at December 31, 2022, is comprised of goodwill of $ 164.8 million and accumulated impairment of $ 71.9 million.

There were no impairment losses related to goodwill during fiscal 2022, fiscal 2021, or fiscal 2020.

1 unchanged sentence

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

January 1, 2022 January 2, 2021

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 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 8 to 10

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

Customer relationships 10 13,800 ( 5,212 ) 8,588 8,220 ( 4,044 ) 4,176

Total $ 13,800 $ ( 5,212 ) $ 8,588 $ 8,500 $ ( 4,319 ) $ 4,181

There were no impairment losses related to intangible assets during fiscal 2022, fiscal 2021, or fiscal 2020.

As a result of the Welch Consulting acquisition, CRA recognized $ 4.2 million of intangible assets related to customer relationships in the first quarter of fiscal 2022.

As a result of the bSG acquisition, CRA recognized $ 1.4 million of intangible assets related to customer relationships in the fourth quarter of fiscal 2022.

Amortization expense related to intangible assets was $ 1.2 million, $ 0.9 million, and $ 1.4 million for fiscal 2022, fiscal 2021, and fiscal 2020, respectively.

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

Amortization of intangible assets held at December 31, 2022 for the next five fiscal years and thereafter is expected to be as follows (in thousands):

Fiscal Year Amortization

2 unchanged sentences

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

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2022 January 1,

7 unchanged sentences

Long-lived assets by geographic location are as follows (in thousands):

Geographic Breakdown January 1,

Geographic Breakdown December 31,

2022 January 1,

4 unchanged sentences

Total long-lived assets (property and equipment, net) $ 45,582 $ 53,612

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accrued Expenses

6 unchanged sentences

Total accrued expenses $ 155,864 $ 156,314

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

As of December 31, 2022 and January 1, 2022, approximately $ 116.1 million and $ 118.9 million, respectively, of accrued bonuses for fiscal 2022 and fiscal 2021 were included above in "Compensation and related expenses".

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

4 unchanged sentences

Total $ 58,800 $ 54,275 $ 33,622

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

8 unchanged sentences

State 96 308 ( 365 )

Total deferred expense (benefit) 446 1,114 ( 1,159 )

Total deferred expense 189 446 1,114

Total tax expense $ 15,181 $ 12,596 $ 9,115

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A reconciliation of CRA's tax rates with the federal statutory rate is as follows:

3 unchanged sentences

State income taxes, net of federal income tax benefit 5.2 5.3 5.8

Tax law changes 0.4 0.2 —

Share-based compensation ( 2.4 ) ( 5.0 ) ( 1.8 )

1 unchanged sentence

Executive Compensation 1.6 1.3 1.6

Uncertain tax positions ( 0.3 ) ( 0.1 ) ( 2.5 )

Other 0.1 0.5 0.3

Annual effective tax rate 25.8 % 23.2 % 27.1 %

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

16 unchanged sentences

Net deferred tax assets $ 8,210 $ 8,290

At January 1, 2022, CRA had U.S.

At December 31, 2022, CRA had U.S.

local and foreign net operating losses of $ 2.4 million with lives ranging from 20 years to indefinite.

2 unchanged sentences

Balance at beginning of period $ 41 $ 203

Additions for tax positions taken during prior years — 43

Reductions as a result of a lapse of the applicable statutes of limitations ( 6 ) ( 162 )

6 unchanged sentences

At the end of fiscal 2022, accrued interest for uncertain tax positions and total unrecognized tax benefit were immaterial.

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

3 unchanged sentences

CRA's United Kingdom ("U.K.") subsidiary's corporate tax returns are no longer subject to examination by Her Majesty's Revenue and Customs for years before fiscal 2021.

During fiscal 2019, an examination by the German Tax Authority for fiscal years 2014-2016 commenced.

During fiscal 2022, an examination by the German Tax Authority for fiscal years 2014-2016 concluded with no material adjustment.

CRA believes its reserves for uncertain tax positions are adequate.

3 unchanged sentences

earnings were no longer considered permanently reinvested.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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 consolidated statements of comprehensive income.

In fiscal 2022, CRA's U.S.

parent entity received approximately $ 6.0 million in cash dividends from CRA's U.K.

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

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

Incremental foreign exchange translation on the actual distribution was immaterial.

These dividends were distributed out of primarily untaxed earnings and therefore qualified for a full dividends-received-deduction.

As a result, foreign exchange on the transaction was negligible.

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.

Effects of the CARES Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was signed into law, which included a retroactive, technical correction that allows 100% bonus depreciation for qualified improvement property (“QIP”).

This technical correction became effective as of the enactment of the Tax Cuts and Jobs Act of 2017 (“TCJA”) and effected a $ 2.2 million tax receivable stemming from 2018 and 2019 leasehold improvements that previously had a thirty-nine year life.

Additionally, the CARES Act allows for employers to defer the payment of the employer share of the Social Security taxes to be paid in two installments:

the first by December 31, 2021, and the remainder by December 31, 2022.

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

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 .

Share-Based Compensation

2 unchanged sentences

Share-based Compensation Plans.

As of January 1, 2022, CRA's active equity-based compensation plans consist of its Amended and Restated 2006 Equity Incentive Plan, as amended (the "2006 Equity Plan"), and its 1998 Employee Stock Purchase Plan (the "1998 ESPP"), a tax-qualified plan under Section 423 of the Internal Revenue Code.

As of December 31, 2022, CRA's active equity-based compensation plans consist of its Amended and Restated 2006 Equity Incentive Plan, as amended (the "2006 Equity Plan"), and its 1998 Employee Stock Purchase Plan (the "1998 ESPP"), a tax-qualified plan under Section 423 of the Internal Revenue Code.

During fiscal 2009, CRA implemented a long-term incentive program, or "LTIP," as a framework for grants made under the 2006 Equity Plan to its senior corporate leaders, practice leaders and key revenue generators.

5 unchanged sentences

The 2006 Equity Plan authorizes the grant of a variety of incentive and performance awards to CRA's directors, employees and non-employee experts, including stock options, shares of restricted stock, restricted stock units, and other equity awards.

The shares available for grant under the 2006 Equity Plan as of January 1, 2022 was 339,796 .

The shares available for grant under the 2006 Equity Plan as of December 31, 2022 was 238,061 .

CRA INTERNATIONAL, INC.

9 unchanged sentences

Forfeited — — $ —

Outstanding at January 1, 2022 132,845 $ 32.38 2.99 $ 8,100

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

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

Outstanding at December 31, 2022 71,200 $ 40.60 3.78 $ 5,826

Option exercisable at December 31, 2022 71,200 $ 40.60 3.78 $ 5,826

Vested or expected to vest at December 31, 2022 71,200 $ 40.60 3.78 $ 5,826

There were no stock options granted in fiscal 2022, fiscal 2021, and fiscal 2020 .

12 unchanged sentences

Forfeited — —

Non-vested at January 1, 2022 5,613 $ 19.96

Non-vested at December 31, 2022 — $ —

The total fair value of stock options that vested during fiscal 2022, fiscal 2021, and fiscal 2020 was $ 0.1 million, $ 0.2 million, and $ 0.2 million, respectively.

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

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

As of December 31, 2022, there was no unrecognized compensation cost, net of expected forfeitures, related to non-vested stock options granted.

Options granted during or prior to fiscal 2016 expire on the seventh anniversary of the date of grant.

3 unchanged sentences

Generally, shares of restricted stock vest in four equal annual installments beginning on the first anniversary of the date of grant.

Total unrecognized compensation cost, net of expected forfeitures, related to shares of restricted stock as of January 1, 2022 was $ 1.3 million, which is expected to be recognized over a weighted-average period of 3.0 years.

Total unrecognized compensation cost, net of expected forfeitures, related to shares of restricted stock as of December 31, 2022 was $ 1.3 million, which is expected to be recognized over a weighted-average period of 2.9 years.

The forfeiture rate of 0.9 % used for shares of restricted stock was based upon historical experience.

9 unchanged sentences

Forfeited ( 1,325 ) 39.73

Non-vested at January 1, 2022 30,783 $ 54.58

Non-vested at December 31, 2022 26,909 $ 71.48

The total fair value of shares of restricted stock that vested during fiscal 2022, fiscal 2021, and fiscal 2020 was $ 0.6 million, $ 0.5 million, and $ 0.5 million, respectively.

2 unchanged sentences

Generally, time-vesting restricted stock units vest in four or five equal annual installments beginning on the first anniversary of the date of grant.

Total unrecognized compensation cost, net of expected forfeitures, related to time-vesting restricted stock units as of January 1, 2022 was $ 3.4 million, which is expected to be recognized over a weighted-average period of 2.9 years.

Total unrecognized compensation cost, net of expected forfeitures, related to time-vesting restricted stock units as of December 31, 2022 was $ 3.5 million, which is expected to be recognized over a weighted-average period of 2.7 years.

The forfeiture rate of 0.9 % used for time-vesting restricted stock units was based upon historical experience.

7 unchanged sentences

Forfeited — —

Non-vested at January 1, 2022 82,381 $ 51.48

Non-vested at December 31, 2022 74,056 $ 61.36

The total fair value of time-vesting restricted stock units that vested during fiscal 2022, fiscal 2021, and fiscal 2020 was $ 1.4 million, $ 1.3 million, and $ 1.0 million, respectively.

2 unchanged sentences

Generally, achievement of performance measures for PRSUs are based on a two-year performance period, after which the units determined based on this achievement will vest three-fourths in the first year following the performance period and one-fourth on the fourth anniversary of the date of grant.

Beginning with the 2021 grant, fifty percent will vest in the first year following the performance period and one-fourth on the fourth and fifth anniversaries of the date of the grant.

The number of units determined based on the achievement of a PRSUs performance measures generally ranges from 50 % to 150 % of the PRSUs' target number of units.

1 unchanged sentence

The following table provides a roll-forward of the performance-vesting restricted stock units under the 2006 Equity Incentive Plan over fiscal 2022.

For purposes of this table, granted PRSUs are counted based on the maximum number of units that could vest upon achievement of the PRSUs' performance conditions which, for all periods presented, equaled 125 % of the PRSUs' target number of units.

For purposes of this table, granted PRSUs are counted based on the maximum number of units that could vest upon achievement of the PRSUs' performance conditions which equaled 150 % of the PRSU's target number of units for the 2022 grants and 125 % of the PRSUs' target number of units for all grants issued prior to 2022.

CRA INTERNATIONAL, INC.

7 unchanged sentences

Forfeited — —

Non-vested at January 1, 2022 93,381 $ 56.55

Non-vested at December 31, 2022 95,046 $ 66.76

In fiscal 1998, CRA adopted the 1998 ESPP, a tax-qualified plan under Section 423 of the Internal Revenue Code.

1 unchanged sentence

In fiscal 2022, fiscal 2021, and fiscal 2020, there were no offering periods under this plan and no shares were issued.

As of January 1, 2022, there were 211,777 shares available for grant under the 1998 ESPP.

As of December 31, 2022, there were 211,777 shares available for grant under the 1998 ESPP.

Net Income Per Share

4 unchanged sentences

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 fiscal 2022, fiscal 2021, and fiscal 2020.

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

Year Ended Year Ended Year Ended

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

net income attributable to participating shares 175 93 55

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

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

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

Year Ended Year Ended Year Ended

2022 January 1,

2021 December 28,

Basic weighted average shares outstanding 7,423 7,768 7,866

Common stock equivalents:

Stock options and restricted stock units 198 180 301

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

2022 January 2,

Net income — basic $ 43,619 $ 41,679 $ 24,507

net income attributable to participating shares 167 175 93

Net income — diluted $ 43,452 $ 41,504 $ 24,414

Weighted average shares outstanding — basic 7,218 7,423 7,768

Effect of dilutive stock options and restricted stock units 137 198 180

Weighted average shares outstanding — diluted 7,355 7,621 7,948

Net income per share:

Basic $ 6.02 $ 5.59 $ 3.14

Diluted $ 5.91 $ 5.45 $ 3.07

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

4 unchanged sentences

2022 January 1,

2021 December 28,

2022 January 2,

Anti-dilutive share-based awards excluded — 3 80

6 unchanged sentences

Fair Value of Financial Instruments

The contingent consideration liabilities in the table below are for estimated future contingent consideration payments related to the acquisition of bSG, an independent consulting firm.

The fair value measurement of these liabilities is based on significant inputs not observed in the market and thus represent a Level 3 measurement.

The significant unobservable inputs used in the fair value measurements of these contingent consideration liabilities are CRA's measures of the estimated payouts based on internally generated revenue projections, expected volatility of the revenue projections, and discount rates.

The fair value of the contingent consideration was determined using a Monte Carlo simulation.

The fair value of these contingent consideration liabilities are reassessed on a quarterly basis by CRA using additional information as it becomes available, and any change in the fair value estimates are recorded in costs of services (exclusive of depreciation and amortization) on the consolidated statements of operations.

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

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

January 2, 2021

The following table shows CRA's financial instruments recorded in the consolidated financial statements as of December 31, 2022, which are measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

December 31, 2022

Level 1 Level 2 Level 3

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Total Assets $ — $ — $ —

Liabilities :

Contingent consideration liability $ — $ — $ 1,056

Total Liabilities $ — $ — $ 1,056

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

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

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

In a prior fiscal year, CRA had recorded a contingent consideration liability, which pertained to estimated future contingent consideration payments related to the acquisition of C1.

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

CRA recorded a contingent consideration liability of $ 1.1 million during fiscal year 2022 related to the acquisition of bSG.

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

Fiscal Year Fiscal Year

Beginning balance $ — $ 14,620

Remeasurement of acquisition-related contingent consideration — 1,156

Acquisition-related contingent consideration 1,056 —

Accretion — 380

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Ending balance $ 1,056 $ —

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

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

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

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

depending on CRA's total leverage ratio.

CRA is required to pay a fee on the unused portion of the revolving credit facility at a rate per annum that varies between 0.20 % and 0.35 % depending on CRA's total leverage ratio.

Borrowings under the revolving credit facility are secured by 100 % of the stock of certain of CRA's U.S.

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

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 maturity date of the Initial Credit Agreement was October 24, 2022;

CRA complied with the 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 revolving credit facility under the Credit Agreement.

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 tested on a fiscal quarterly basis.

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

The financial covenants require CRA to maintain an Adjusted Consolidated EBITDA, as defined in the credit agreement, to consolidated interest expense ratio of more than 2.5 :1.0 and to comply with a consolidated debt to Adjusted Consolidated EBITDA ratio of not more than 3.0 :1.0.

The non-financial covenant restrictions of the senior credit agreement include, but are not limited to, CRA's ability to incur additional indebtedness, engage in acquisitions or dispositions, and enter into business combinations.

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

The primary financial covenants consist of a maximum consolidated net leverage ratio of 3.0 to 1 and a minimum consolidated interest coverage ratio of 2.5 to 1.

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 December 31, 2022, CRA was in compliance with the covenants of the Credit Agreement.

There were no borrowings outstanding under the Credit Agreement and Initial Credit Agreement as of December 31, 2022 or January 1, 2022, respectively.

As of December 31, 2022, the amount available under the revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $ 4.4 million.

Employee Benefit Plans

1 unchanged sentence

employees who meet specified age, hour, and service requirements.

Company contributions are made at the discretion of CRA, and cannot exceed the maximum amount deductible under applicable provisions of the Internal Revenue Code.

Company contributions are made at the

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

discretion of CRA, and cannot exceed the maximum amount deductible under applicable provisions of the Internal Revenue Code.

CRA also has defined-contribution plans covering employees in Canada (the "Canada plan") and the United Kingdom (the "United Kingdom plan").

2 unchanged sentences

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

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

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

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

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

Company contributions under these plans amounted to approximately $ 5.4 million, $ 5.0 million, and $ 4.5 million for fiscal 2022, fiscal 2021, and fiscal 2020, respectively.

9 unchanged sentences

Subsequent Events

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

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

The acquisition was paid for with cash to Welch Consulting.

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

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

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

Los Angeles, California;

and Washington, D.C.

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

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

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

CRA INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

of the acquisition.

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

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

On March 2, 2023, CRA announced that its Board of Directors authorized a $ 20.0 million expansion to its existing share repurchase program.

On March 2, 2023, CRA announced that its Board of Directors declared a quarterly cash dividend of $ 0.36 per common share, payable on March 24, 2023 to shareholders of record as of March 14, 2023.

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

What changed 10-K

Item 9A. Controls and Procedures