What changed in this filing

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Item 1. Financial Statements

2023-08-03 compared with 2023-05-04 · 83 added, 70 removed, 371 unchanged (29% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

Fiscal Quarter Ended

2023 April 2,

Fiscal Quarter Ended Fiscal Year-to-Date

Revenues $ 161,965 $ 149,102 $ 314,810 $ 297,484

18 unchanged sentences

(in thousands)

Fiscal Quarter Ended

2023 April 2,

Fiscal Quarter Ended Fiscal Year-to-Date

Net income $ 9,508 $ 11,643 $ 18,426 $ 23,069

54 unchanged sentences

(in thousands)

Fiscal Quarter Ended

2023 April 2,

Fiscal Year-to-Date Period Ended

OPERATING ACTIVITIES:

29 unchanged sentences

Effect of foreign exchange rates on cash and cash equivalents 471 ( 1,545 )

Net increase (decrease) in cash and cash equivalents 4,072 ( 22,428 )

Net decrease in cash and cash equivalents ( 17,176 ) ( 50,509 )

Cash and cash equivalents at beginning of period 31,447 66,130

11 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE FISCAL QUARTER ENDED APRIL 1, 2023 (unaudited)

FOR THE FISCAL YEAR-TO-DATE PERIOD ENDED JULY 1, 2023 (unaudited)

(in thousands, except share data)

17 unchanged sentences

BALANCE AT APRIL 1, 2023 6,997,933 $ — $ 210,713 $ ( 13,929 ) $ 196,784

Net income — — 9,508 — 9,508

Foreign currency translation adjustment — — — 1,074 1,074

Exercise of stock options — — — — —

Share-based compensation expense — 1,158 — — 1,158

Restricted shares vesting 3,630 — — — —

Redemption of vested employee restricted shares for tax withholding ( 1,237 ) ( 136 ) — — ( 136 )

Shares repurchased ( 31,090 ) ( 554 ) ( 2,446 ) — ( 3,000 )

Accrued excise tax on shares repurchased — — ( 27 ) — ( 27 )

Accrued dividends on unvested shares — — ( 47 ) — ( 47 )

Cash dividends paid ($ 0.36 per share)

— — ( 2,528 ) — ( 2,528 )

BALANCE AT JULY 1, 2023 6,969,236 $ 468 $ 215,173 $ ( 12,855 ) $ 202,786

See accompanying notes to the condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

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

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

(in thousands, except share data)

16 unchanged sentences

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

Net income — — 11,643 — 11,643

Foreign currency translation adjustment — — — ( 3,860 ) ( 3,860 )

Share-based compensation expense — 1,041 — — 1,041

Restricted shares vesting 3,630 — — — —

Redemption of vested employee restricted shares for tax withholding ( 921 ) ( 78 ) — — ( 78 )

Shares repurchased ( 211,345 ) ( 963 ) ( 16,711 ) — ( 17,674 )

Accrued dividends on unvested shares — — ( 52 ) — ( 52 )

Cash dividends paid ($ 0.31 per share)

— — ( 2,259 ) — ( 2,259 )

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

See accompanying notes to the condensed consolidated financial statements.

24 unchanged sentences

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

Business Acquisition

Business Acquisitions

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

35 unchanged sentences

Net assets acquired $ 10,559

For the acquired assets and assumed liabilities, CRA has paid $ 10.6 million, net, as of April 1, 2023, 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 $ 10.6 million, net, the amount of which was based on adjusted estimates of certain net working capital items.

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.

8 unchanged sentences

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

The acquisition of bSG is not significant to our condensed consolidated financial statements for the quarter ended April 1, 2023.

The acquisition of bSG is not significant to our overall results presented in our condensed consolidated financial statements.

Revenues and Allowances

1 unchanged sentence

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

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

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

Disaggregation of Revenue

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

Fiscal Quarter Ended

Type of Contract April 1,

2023 April 2,

Fiscal Quarter Ended Fiscal Year-to-Date

Type of Contract July 1,

Consulting services revenues:

2 unchanged sentences

Total $ 161,965 $ 149,102 $ 314,810 $ 297,484

Fiscal Quarter Ended

Geographic Breakdown April 1,

2023 April 2,

Fiscal Quarter Ended Fiscal Year-to-Date

Geographic Breakdown July 1,

Consulting services revenues:

8 unchanged sentences

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

CRA also maintains allowances for accounts receivable and unbilled services for estimated losses resulting from clients’ failure to make required payments.

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

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fiscal Quarter Ended

2023 April 2,

CRA also maintains allowances for accounts receivable and unbilled services for estimated losses resulting from clients’ failure to make required payments.

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

Fiscal Quarter Ended Fiscal Year-to-Date

Bad debt expense (recovery), net $ 392 $ ( 141 ) $ 392 $ ( 262 )

3 unchanged sentences

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

Fiscal Quarter Ended

2023 April 2,

Fiscal Quarter Ended Fiscal Year-to-Date

Reimbursable expenses $ 17,252 $ 16,441 $ 31,233 $ 32,645

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 April 1, 2023 and December 31, 2022.

The contract assets balance was immaterial as of July 1, 2023 and December 31, 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.

4 unchanged sentences

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

Fiscal Quarter Ended

2023 April 2,

Fiscal Quarter Ended Fiscal Year-to-Date

Amounts included in contract liabilities at the beginning of the period $ 2,832 $ 3,331 $ 6,194 $ 7,656

Performance obligations satisfied in previous periods $ 3,298 $ 2,628 $ 2,744 $ 2,150

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Forgivable Loans

4 unchanged sentences

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

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fiscal Quarter Ended Fiscal Year Ended

Fiscal Year-to-Date Period Ended Fiscal Year Ended

2023 December 31,

11 unchanged sentences

Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the fiscal quarter ended April 1, 2023 are summarized as follows (in thousands):

The changes in the carrying amount of goodwill for the fiscal-year-to-date period ended July 1, 2023 are summarized as follows (in thousands):

Goodwill $ 164,815

3 unchanged sentences

Foreign currency translation adjustment 562

Goodwill, net at April 1, 2023 $ 93,578

Goodwill at April 1, 2023, is comprised of goodwill of $ 165.5 million and accumulated impairment of $ 71.9 million.

There were no impairment losses related to goodwill during the fiscal quarter ended April 1, 2023 or during the fiscal year ended December 31, 2022.

Goodwill, net at July 1, 2023 $ 93,899

Goodwill at July 1, 2023, is comprised of goodwill of $ 165.8 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 1, 2023 or during the fiscal year ended December 31, 2022.

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

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

April 1, 2023 December 31, 2022

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

July 1, 2023 December 31, 2022

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

1 unchanged sentence

$ 13,800 $ ( 5,914 ) $ 7,886 $ 13,800 $ ( 5,212 ) $ 8,588

There were no impairment losses related to intangible assets during the fiscal quarter ended April 1, 2023 or during the fiscal year ended December 31, 2022.

There were no impairment losses related to intangible assets during the fiscal-year-to-date period ended July 1, 2023 or during the fiscal year ended December 31, 2022.

As a result of the Welch Consulting acquisition, CRA recognized approximately $ 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 approximately $ 1.4 million of intangible assets related to customer relationships in the fourth

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

quarter of fiscal 2022.

Amortization expense related to intangible assets was $ 0.4 million and $ 0.2 million for the fiscal quarters ended April 1, 2023 and April 2, 2022, respectively.

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

Amortization expense related to intangible assets was $ 0.3 million and $ 0.7 million for the fiscal quarter and fiscal year-to-date period ended July 1, 2023, respectively, $ 0.3 million and $ 0.6 million for the fiscal quarter and fiscal year-to-date period ended July 2, 2022, respectively.

Accrued Expenses

6 unchanged sentences

Total accrued expenses $ 107,173 $ 155,864

As of April 1, 2023 and December 31, 2022, approximately $ 49.5 million and $ 116.1 million, respectively, of accrued bonuses were included above in “Compensation and related expenses.”

For the fiscal quarters ended April 1, 2023 and April 2, 2022, CRA’s effective income tax rate (“ETR”) was 29.2 % and 26.4 %, respectively.

The ETR for the first quarter of fiscal 2023 was higher than the first quarter of fiscal 2022 primarily due to a decrease in the tax benefit related to share-based compensation, an increase in nondeductible meals and entertainment expenses, and an increase in the UK statutory rate from 19% to 25% effective April 1, 2023, with a blended rate of 23.5% for the fiscal year.

As of July 1, 2023 and December 31, 2022, approximately $ 62.7 million and $ 116.1 million, respectively, of accrued bonuses were included above in “Compensation and related expenses.”

For the fiscal quarters ended July 1, 2023 and July 2, 2022, CRA’s effective income tax rate (“ETR”) was 30.1 % and 28.3 %, respectively.

The ETR for the second quarter of fiscal 2023 was higher than the second quarter of fiscal 2022 primarily due to an increase in nondeductible meals and entertainment expenses and an increase in the U.K.

statutory rate from 19% to 25% effective April 1, 2023, with a blended rate of 23.5% for the fiscal year.

The increase in the tax impact of the meals expense is a result of the expiration of the relief provided by The Consolidated Appropriations Act, 2021, whereby the deduction for business meals from restaurants was 100% during 2021 and 2022 and reverted back to 50% in 2023.

For the fiscal year-to-date periods ended July 1, 2023 and July 2, 2022, CRA's ETR was 29.7 % and 27.4 %, respectively.

The ETR for the current fiscal year-to-date period was higher than the prior year-to-date period primarily due to the same items noted above, as well as a decrease in the tax benefit related to share-based compensation.

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.

1 unchanged sentence

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.

During the fiscal quarter ended April 1, 2023, deferred taxes have been assessed as immaterial related to foreign exchange translation and not recorded.

During the fiscal quarter ended July 1, 2023, deferred taxes have been assessed as immaterial related to foreign exchange translation and not recorded.

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.

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

On August 16, 2022, the U.S.

1 unchanged sentence

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 had net share repurchases of $ 17.3 million for the fiscal quarter ended April 1, 2023 resulting in a tax payable of $ 0.2 million.

The Company had net share repurchases of $ 2.7 million for the fiscal quarter ended July 1, 2023 resulting in a tax payable of $ 0.03 million.

As the Company's issued and outstanding common stock on the condensed consolidated balance sheet is classified as permanent equity, the excise tax is treated as a specific incremental cost directly attributable to the repurchase.

3 unchanged sentences

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

The two-class method was more dilutive for the fiscal quarters ended April 1, 2023 and April 2, 2022.

The two-class method was more dilutive for the fiscal quarters and fiscal year-to-date periods ended July 1, 2023 and July 2, 2022.

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

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

awards that contain a nonforfeitable right to receive dividends and therefore are considered to participate in undistributed earnings with common shareholders.

Net earnings allocable to these participating securities were not material for the fiscal quarters ended April 1, 2023 and April 2, 2022.

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

Net earnings allocable to these participating securities were not material for the fiscal quarters and fiscal year-to-date periods ended July 1, 2023 and July 2, 2022.

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

Fiscal Quarter Ended

2023 April 2,

Fiscal Quarter Ended Fiscal Year-to-Date

Net income — basic $ 9,508 $ 11,643 $ 18,426 $ 23,069

7 unchanged sentences

Diluted $ 1.34 $ 1.57 $ 2.56 $ 3.09

For the fiscal quarter ended April 1, 2023, 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 196 shares.

There were no anti-dilutive share-based awards for the fiscal quarter ended April 2, 2022.

For the fiscal quarter and fiscal year-to-date period ended July 1, 2023, 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 17,120 and 4,329 shares, respectively.

There were no anti-dilutive share-based awards for the fiscal quarter and fiscal year-to-date period ended July 2, 2022.

Fair Value of Financial Instruments

The following tables show CRA's financial instruments recorded in the condensed consolidated financial statements as of April 1, 2023 and 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):

April 1, 2023

The following tables show CRA's financial instruments recorded in the condensed consolidated financial statements which are measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Level 1 Level 2 Level 3

3 unchanged sentences

Total Liabilities $ — $ — $ 1,092

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2022

6 unchanged sentences

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

Fiscal Quarter Ended Fiscal Year Ended

April 1, 2023 December 31, 2022

Fiscal Year-to-Date

Period Ended Fiscal Year Ended

July 1, 2023 December 31, 2022

Beginning balance $ 1,056 $ —

1 unchanged sentence

Accretion 36 —

Payment of contingent consideration — —

Ending balance $ 1,092 $ 1,056

4 unchanged sentences

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

There was $ 100.0 million in borrowings outstanding under the revolving credit facility as of April 1, 2023 and no borrowings outstanding as of December 31, 2022.

As of April 1, 2023, the amount available under the revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $ 5.7 million.

There were $ 80.0 million in borrowings outstanding under the revolving credit facility as of July 1, 2023 and no borrowings outstanding as of December 31, 2022.

As of July 1, 2023, the amount available under the revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $ 4.4 million.

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Under the Credit Agreement, CRA must comply with various financial and non-financial covenants.

3 unchanged sentences

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 April 1, 2023, CRA was in compliance with the covenants of the Credit Agreement.

As of July 1, 2023, CRA was in compliance with the covenants of the Credit Agreement.

Commitments and Contingencies

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 INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

CRA is subject to legal actions arising in the ordinary course of business.

3 unchanged sentences

Subsequent Events

On May 4, 2023, CRA announced that its Board of Directors declared a quarterly cash dividend of $ 0.36 per common share, payable on June 9, 2023 to shareholders of record as of May 30, 2023.

On August 3, 2023, CRA announced that its Board of Directors declared a quarterly cash dividend of $ 0.36 per common share, payable on September 8, 2023 to shareholders of record as of August 29, 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-Q

Item 1. Financial Statements