What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-08-03 · 105 added, 39 removed, 415 unchanged (26% of the section changed)

4 unchanged sentences

Fiscal Quarter Ended Fiscal Year-to-Date

September 30,

2023 October 1,

2022 September 30,

2023 October 1,

Revenues $ 147,553 $ 148,441 $ 462,363 $ 445,925

19 unchanged sentences

Fiscal Quarter Ended Fiscal Year-to-Date

September 30,

2023 October 1,

2022 September 30,

2023 October 1,

Net income $ 8,596 $ 11,877 $ 27,022 $ 34,946

6 unchanged sentences

(in thousands, except share data)

September 30,

2023 December 31,

47 unchanged sentences

Fiscal Year-to-Date Period Ended

September 30,

2023 October 1,

OPERATING ACTIVITIES:

24 unchanged sentences

Repayments under revolving line of credit ( 73,000 ) ( 79,000 )

Payments for debt issuance costs — ( 1,008 )

Tax withholding payments reimbursed by shares ( 2,040 ) ( 1,002 )

1 unchanged sentence

Repurchase of common stock ( 23,577 ) ( 27,630 )

Net cash provided by financing activities 49,184 42,100

Net cash provided by (used in) financing activities ( 1,390 ) 9,260

Effect of foreign exchange rates on cash and cash equivalents 159 ( 3,098 )

13 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

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

FOR THE FISCAL YEAR-TO-DATE PERIOD ENDED SEPTEMBER 30, 2023 (unaudited)

(in thousands, except share data)

29 unchanged sentences

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

Net income — — 8,596 — 8,596

Foreign currency translation adjustment — — — ( 1,755 ) ( 1,755 )

Issuance of common stock — — — — —

Exercise of stock options — — — — —

Share-based compensation expense — 926 — — 926

Restricted shares vesting 10,004 — — — —

Redemption of vested employee restricted shares for tax withholding ( 299 ) ( 31 ) — — ( 31 )

Shares repurchased — — — — —

Accrued excise tax on shares repurchased — — 10 — 10

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

Cash dividends paid ($ 0.36 per share)

— — ( 2,543 ) — ( 2,543 )

BALANCE AT SEPTEMBER 30, 2023 6,978,941 $ 1,363 $ 221,205 $ ( 14,610 ) $ 207,958

See accompanying notes to the condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

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

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

(in thousands, except share data)

26 unchanged sentences

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

Net income — — 11,877 — 11,877

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

Exercise of stock options 19,476 419 — — 419

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

Restricted shares vesting 9,843 — — — —

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

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

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

Cash dividends paid ($ 0.31 per share)

— — ( 2,224 ) — ( 2,224 )

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

See accompanying notes to the condensed consolidated financial statements.

19 unchanged sentences

The preparation of financial statements in conformity with GAAP requires management to make significant estimates and judgments that affect the reported amounts of assets and liabilities, as well as the related disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of consolidated revenues and expenses during the reporting period.

Estimates in these condensed consolidated financial statements include, but are not limited to, allowances for accounts receivable and unbilled services, revenue recognition on fixed-price contracts, variable consideration to be included in the transaction price of revenue contracts, the useful life of long-lived assets, measurement of operating lease right-of-use (“ROU”) assets and liabilities, share-based compensation, valuation of acquired intangible assets, valuation of contingent consideration liabilities, goodwill, accrued and deferred income taxes, valuation allowances on deferred tax assets, accrued incentive compensation, and certain other accrued expenses.

Estimates in these condensed consolidated financial statements include, but are not limited to, allowances for accounts receivable and unbilled services, revenue recognition on fixed-price contracts, variable consideration to be included in the transaction price of revenue contracts, the useful life of long-lived assets, measurement of operating lease right-of-use assets and liabilities, share-based compensation, valuation of acquired intangible assets, valuation of contingent consideration liabilities, goodwill, accrued and deferred income taxes, valuation allowances on deferred tax assets, accrued incentive compensation, and certain other accrued expenses.

These items are monitored and analyzed by CRA for changes in facts and circumstances, and material changes in these estimates could occur in the future.

6 unchanged sentences

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;

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

Los Angeles, California;

31 unchanged sentences

Net assets acquired $ 10,559

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.

For the acquired assets and assumed liabilities, CRA 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.

6 unchanged sentences

(“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 expanded 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 condensed consolidated financial statements from the date of acquisition.

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

The acquisition of bSG is not significant to the Company's overall results presented in its condensed consolidated financial statements.

Revenues and Allowances

5 unchanged sentences

Fiscal Quarter Ended Fiscal Year-to-Date

Type of Contract July 1,

Type of Contract September 30,

2023 October 1,

2022 September 30,

2023 October 1,

Consulting services revenues:

3 unchanged sentences

Fiscal Quarter Ended Fiscal Year-to-Date

Geographic Breakdown July 1,

Geographic Breakdown September 30,

2023 October 1,

2022 September 30,

2023 October 1,

Consulting services revenues:

13 unchanged sentences

Fiscal Quarter Ended Fiscal Year-to-Date

September 30,

2023 October 1,

2022 September 30,

2023 October 1,

Bad debt expense (recovery), net $ 131 $ ( 83 ) $ 523 $ ( 345 )

4 unchanged sentences

Fiscal Quarter Ended Fiscal Year-to-Date

September 30,

2023 October 1,

2022 September 30,

2023 October 1,

Reimbursable expenses $ 17,932 $ 15,009 $ 49,165 $ 47,654

1 unchanged sentence

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

The contract assets balance was immaterial as of July 1, 2023 and December 31, 2022.

The contract assets balance was immaterial as of September 30, 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.

1 unchanged sentence

The following table presents the closing balances of CRA's contract liabilities (in thousands):

September 30,

2023 December 31,

2 unchanged sentences

Fiscal Quarter Ended Fiscal Year-to-Date

September 30,

2023 October 1,

2022 September 30,

2023 October 1,

Amounts included in contract liabilities at the beginning of the period $ 2,580 $ 1,831 $ 6,619 $ 8,101

9 unchanged sentences

Fiscal Year-to-Date Period Ended Fiscal Year Ended

September 30,

2023 December 31,

11 unchanged sentences

Goodwill and Intangible Assets

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

The changes in the carrying amount of goodwill for the fiscal year-to-date period ended September 30, 2023 are summarized as follows (in thousands):

Goodwill, at December 31, 2022 $ 164,815

Accumulated goodwill impairment ( 71,893 )

2 unchanged sentences

Foreign currency translation adjustment 130

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.

Goodwill, net at September 30, 2023 $ 93,467

Goodwill at September 30, 2023, is comprised of goodwill of $ 165.4 million and accumulated impairment of $ 71.9 million.

There were no impairment losses related to goodwill during the fiscal year-to-date period ended September 30, 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.

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

July 1, 2023 December 31, 2022

September 30, 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 $ ( 6,259 ) $ 7,541 $ 13,800 $ ( 5,212 ) $ 8,588

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.

There were no impairment losses related to intangible assets during the fiscal year-to-date period ended September 30, 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 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.

Amortization expense related to intangible assets was $ 0.3 million and $ 1.0 million for the fiscal quarter and fiscal year-to-date period ended September 30, 2023, respectively, and $ 0.3 million and $ 0.9 million for the fiscal quarter and fiscal year-to-date period ended October 1, 2022, respectively.

Accrued Expenses

Accrued expenses consist of the following (in thousands):

September 30,

2023 December 31,

4 unchanged sentences

Total accrued expenses $ 137,920 $ 155,864

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.

As of September 30, 2023 and December 31, 2022, approximately $ 86.7 million and $ 116.1 million, respectively, of accrued bonuses were included above in “Compensation and related expenses.”

For the fiscal quarters ended September 30, 2023 and October 1, 2022, CRA’s effective income tax rate (“ETR”) was 18.3 % and 25.3 %, respectively.

The ETR for the third quarter of fiscal 2023 was lower than the third quarter of fiscal 2022 primarily due to the release of a valuation allowance in a foreign jurisdiction coupled with the revaluation of the deferred tax asset, partially offset by a decrease in the tax benefit related to share-based compensation, 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.

The change in the total valuation allowance for the current fiscal quarter was a decrease of approximately $ 0.7 million compared to the same fiscal quarter of the prior year.

The $ 0.7 million decrease is comprised primarily of foreign net operating loss carryforwards that have an indefinite life and are forecasted to be utilized over approximately a forty-year period.

The change in assessment was prompted by the enactment of new legislation in the foreign jurisdiction, and as a result, the foreign entity will be profitable in the current and future years.

For the fiscal year-to-date periods ended September 30, 2023 and October 1, 2022, CRA's ETR was 26.4 % and 26.7 %, respectively.

The ETR for the current fiscal year-to-date period was slightly lower than the prior year-to-date period primarily due to the same items noted above.

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

earnings were no longer considered permanently reinvested.

Deferred 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 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.

Deferred taxes that are a consequence of foreign exchange translation resulting from earnings that are no longer considered permanently reinvested are recorded as a

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

component of foreign currency translation adjustments on the condensed consolidated statements of comprehensive income.

During the fiscal quarter ended September 30, 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.

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 $ 2.7 million for the fiscal quarter ended July 1, 2023 resulting in a tax payable of $ 0.03 million.

For the fiscal quarter ended September 30, 2023, net share repurchases were immaterial.

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 and fiscal year-to-date periods ended July 1, 2023 and July 2, 2022.

The two-class method was more dilutive for the fiscal quarters and fiscal year-to-date periods ended September 30, 2023 and October 1, 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 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.

Net earnings allocable to these participating securities were not material for the fiscal quarters and fiscal year-to-date periods ended September 30, 2023 and October 1, 2022.

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

Fiscal Quarter Ended Fiscal Year-to-Date

September 30,

2023 October 1,

2022 September 30,

2023 October 1,

Net income — basic $ 8,596 $ 11,877 $ 27,022 $ 34,946

7 unchanged sentences

Diluted $ 1.21 $ 1.63 $ 3.78 $ 4.72

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 which are measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

For the fiscal quarter and fiscal year-to-date period ended September 30, 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 6,185 and 5,875 shares, respectively.

For the fiscal quarter and fiscal year-to-date period ended October 1, 2022, the anti-dilutive share-based awards that were excluded from the calculation of common stock equivalents for purposes of computing diluted weighted average shares outstanding amounted to 997 and 249 shares, respectively.

CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fair Value of Financial Instruments

September 30, 2023

Level 1 Level 2 Level 3

13 unchanged sentences

Period Ended Fiscal Year Ended

July 1, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Beginning balance $ 1,056 $ —

7 unchanged sentences

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

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)

There were $ 32.0 million in borrowings outstanding under the revolving credit facility as of September 30, 2023 and no borrowings outstanding as of December 31, 2022.

As of September 30, 2023, the amount available under the revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $ 4.5 million.

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

As of September 30, 2023, CRA was in compliance with the covenants of the Credit Agreement.

Commitments and Contingencies

5 unchanged sentences

Subsequent Events

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.

On November 2, 2023, CRA announced that its Board of Directors declared a quarterly cash dividend of $ 0.42 per common share, payable on December 8, 2023 to shareholders of record as of November 28, 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