What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-07-30 compared with 2020-04-30 · 143 added, 207 removed, 59 unchanged (86% of the section changed)

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Except for historical facts, the statements in this quarterly report are forward-looking statements.

Forward-looking statements are merely our

current predictions of future

Forward-looking statements are merely our current predictions of future events.

These statements are inherently uncertain, and actual events could differ materially from our predictions.

Important factors that could cause actual events to vary from our predictions include

those discussed below under the heading "Risk Factors." We assume no obligation to update our forward-looking statements to reflect new information or developments.

We urge readers to review carefully

the risk factors described in the other documents that we file with the Securities and Exchange Commission, or SEC.

Important factors that could cause actual events to vary from our predictions include those discussed below under the heading “Risk Factors.” We assume no obligation to update our forward-looking statements to reflect new information or developments.

We urge readers to review carefully the risk factors described in the other documents that we file with the Securities and Exchange Commission, or SEC.

You can read these documents at www.sec.gov.

principal Internet address is www.crai.com.

Our website provides a link to a third-party website through which our annual, quarterly, and current reports, and amendments to those

reports, are available free of charge.

Our principal Internet address is www.crai.com.

Our website provides a link to a third-party website through which our annual, quarterly, and current reports, and amendments to those reports, are available free of charge.

We believe these reports are made available as soon as reasonably practicable after we file them electronically with, or furnish them to, the SEC.

maintain or provide any information directly to the third-party website, and we do not check its accuracy.

website also includes information about our corporate governance practices.

The Investor Relations page of our website provides a link to a web page where you can obtain a copy of

our code of business conduct and ethics applicable to our principal executive officer, principal financial officer, and principal accounting officer.

We do not maintain or provide any information directly to the third-party website, and we do not check its accuracy.

Our website also includes information about our corporate governance practices.

The Investor Relations page of our website provides a link to a web page where you can obtain a copy of our code of business conduct and ethics applicable to our principal executive officer, principal financial officer, and principal accounting officer.

COVID-19 Assessment

While the COVID-19 pandemic did not materially adversely affect the Company's financial results and business operations in the Company's first

fiscal quarter ended March 28, 2020, the COVID-19 pandemic may pose significant risks to our business.

It is too early to quantify the impact, if any, this situation will have on revenue for

the remainder of our fiscal year ended January 2, 2021 or beyond, but the public health actions being undertaken to reduce the spread of the virus may create significant disruptions with

respect to the demand for our services and impact our ability to conduct business activities in the ordinary course for an indefinite period.

Since March 16, 2020, when we implemented our

stay-at-home policy and successfully transitioned to a virtual work environment, we have been closely monitoring the COVID-19 pandemic and its impacts and potential impacts on our business.

because developments with respect to the spread of COVID-19 and its impacts have been occurring so rapidly and because of the unprecedented nature of the pandemic, we are unable to predict the extent

of any adverse financial impact of COVID-19 on our business, financial condition, results of operations and cash flows.

Due to the above circumstances and as described generally in this

Form 10-Q, the Company's results of operations for the three-month period ended March 28, 2020 are not necessarily indicative of the results to be expected for the full fiscal year.

of March 28, 2020, our cash and cash equivalents, were $15.9 million, and we had access to $50.6 million of borrowing capacity under our $125.0 million

revolving credit facility, which when combined with our ongoing operating cash flows, will help us manage the impacts of the COVID-19 pandemic on our business and address related liquidity needs.

see "Item 1A.

Risk Factors" in this Quarterly Report on Form 10-Q for an additional discussion of risks and potential risks of the COVID-19 pandemic on our business,

financial condition and results of operations.

While the COVID-19 pandemic did not materially adversely affect our financial results and business operations during the current fiscal quarter and fiscal year-to-date period ended June 27, 2020, the COVID-19 pandemic may continue to pose significant risks to our business.

The public health actions being undertaken to reduce the spread of the virus may create significant disruptions with respect to the demand for our services and impact our ability to conduct business activities in the ordinary course for an indefinite period.

Since March 16, 2020, when we implemented our stay-at-home policy and successfully transitioned to a virtual work environment, we have been closely monitoring the COVID-19 pandemic and its impacts and potential impacts on our business.

However, because developments with respect to the spread of COVID-19 and its impacts have been occurring so rapidly and because of the unprecedented nature of the pandemic, we are unable to predict the extent of any adverse financial impact of COVID-19 on our business, financial condition, results of operations and cash flows.

Due to the above circumstances and as described generally in this Form 10-Q, our results of operations for the fiscal quarter and fiscal year-to-date period ended June 27, 2020 are not necessarily indicative of the results to be expected for the full fiscal year.

As of June 27, 2020, our liquidity position amounts to $80.4 million, which is comprised of cash and cash equivalents of $18.8 million and $61.6 million of borrowing capacity under our $125.0 million revolving credit facility.

We believe our liquidity position, when combined with our ongoing operating cash flows, is sufficient to meet our operating needs over the next twelve months.

During the fiscal quarter ended June 27, 2020, we began preparing our offices to be a safe and healthy working environment.

All facilities have implemented enhanced safety procedures and enhanced cleaning protocols to protect the health of our colleagues.

Although our offices remain open and capable of hosting our colleagues, we have asked that they work from home whenever possible.

Currently, we are planning a phased, deliberate return to our offices, the timing of which depends on local conditions.

Please see “Item 1A.

Risk Factors” in this Quarterly Report on Form 10-Q for an additional discussion of risks and potential risks of the COVID-19 pandemic on our business, financial condition and results of operations.

Critical Accounting Policies and Significant Estimates

Our critical accounting policies involving the more significant estimates and judgments used in the preparation of our financial statements as

of March 28, 2020 remain unchanged from December 28,

Please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal

year ended December 28, 2019, filed with the Securities and Exchange Commission on February 27, 2020, for details on these critical accounting policies.

Except as noted below, there have

been no material changes to these critical accounting policies and significant estimates during the fiscal quarter ended March 28, 2020.

Our critical accounting policies involving the more significant estimates and judgments used in the preparation of our financial statements as of June 27, 2020 remain unchanged from December 28, 2019.

Please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 28, 2019, filed with the Securities and Exchange Commission on February 27, 2020, for details on these critical accounting policies.

Recent Accounting Standards

Please refer to the sections captioned "Recent Accounting Standards Adopted" and "Recent Accounting Standards Not Yet Adopted" included in

Note 1, "Summary of Significant Accounting Policies" in Part I, Item I, "Financial Statements" of this report.

Results of OperationsFor the Fiscal Quarter Ended March 28, 2020, Compared to the

Fiscal Quarter Ended March 30, 2019

Please refer to the sections captioned “Recent Accounting Standards Adopted” and “Recent Accounting Standards Not Yet Adopted” included in Note 1, “Summary of Significant Accounting Policies” in Part I, Item I, “Financial Statements” of this report.

Results of Operations—For the Fiscal Quarter and Fiscal Year-to-Date Period Ended June 27, 2020, Compared to the Fiscal Quarter and Fiscal Year-to-Date Period Ended June 29, 2019

The following table provides operating information as a percentage of revenues for the periods indicated:

Fiscal Quarter

Fiscal Year-to-Date

Costs of services (exclusive of depreciation and amortization)

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Provision for income taxes

Fiscal Quarter Ended March 28, 2020, Compared to the Fiscal Quarter Ended March 30, 2019

Revenues increased by $20.4 million, or 19.2%, to $126.2 million for the first quarter of fiscal 2020 from

$105.8 million for the first quarter of fiscal 2019.

The increase in net revenue was a result of an increase in gross revenues of $19.7 million as compared to the first quarter of fiscal

2019, and a decrease in write-offs and reserves of $0.7 million compared to the first quarter of fiscal 2019.

Utilization decreased to 71% for the first quarter of fiscal 2020 from 75% for the

first quarter of fiscal 2019, while consultant headcount grew 16.3% from 687 at the end of the first quarter of fiscal 2019 to 799 at the end of the first quarter of fiscal 2020.

Included in revenues

are the effect of changes in currency exchange rates resulting in a decrease to revenue of $0.4 million for the fiscal quarter ended March 28, 2020, and a decrease of $1.5 million

for the fiscal quarter ended March 30, 2019.

revenues outside of the U.S.

represented approximately 20% and 21% of total revenues for the first quarter of fiscal 2020 and fiscal 2019, respectively.

Revenues derived from

fixed-price engagements increased to 23% of total revenues for the first quarter of fiscal 2020 compared with 20% of total revenues for the first quarter of fiscal 2019.

These percentages of revenue

derived from fixed-price engagements depend largely on the proportion of our revenues derived from our management consulting business, which typically has a higher concentration of fixed-price service

Fiscal Quarter Ended June 27, 2020, Compared to the Fiscal Quarter Ended June 29, 2019

Revenues increased by $12.4 million, or 11.3%, to $123.0 million for the second quarter of fiscal 2020 from $110.6 million for the second quarter of fiscal 2019.

The increase in net revenue was a result of an increase in gross revenues of $11.9 million as compared to the second quarter of fiscal 2019, and a decrease in write-offs and reserves of $0.5 million compared to the second quarter of fiscal 2019.

Utilization decreased to 66% for the second quarter of fiscal 2020 from 77% for the second quarter of fiscal 2019, primarily driven by the increase in consultant headcount, which grew 20.8% from 664 at June 29, 2019 to 802 at June 27, 2020.

Included in revenues are the effect of changes in currency exchange rates resulting in a decrease to revenue of $0.7 million for the fiscal quarter ended June 27, 2020, and a decrease of $1.2 million for the fiscal quarter ended June 29, 2019.

Overall, revenues outside of the U.S.

represented approximately 19% and 21% of net revenues for the second quarter of fiscal 2020 and fiscal 2019, respectively.

Revenues derived from fixed-price projects increased to 25% of total revenues for the second quarter of fiscal 2020 compared with 23% of net revenues for the second quarter of fiscal 2019.

The percentage of revenue derived from fixed-price projects depends largely on the proportion of our revenues derived from our management consulting business, which typically has a higher concentration of fixed-price service contracts.

Costs of Services (exclusive of depreciation and amortization).

Costs of services (exclusive of depreciation and amortization) increased by $14.2 million, or 18.7%, to $90.2 million for the second quarter of fiscal 2020 from $76.0 million for the second quarter of fiscal 2019.

The increase in costs of services was due primarily to an increase of $6.8 million in employee compensation and fringe benefit costs attributable to our increased consultant headcount, an increase in incentive and retention compensation costs of $3.7 million, an increase in forgivable loan amortization of $1.0 million, and an increase in expense related to other compensation of $0.7 million.

These increased expenses were partially offset by a decrease in stock compensation of $0.2 million and a decrease in the valuation expense of the contingent consideration of $0.1 million.

Additionally, client reimbursable expenses increased by $2.3 million in the second quarter of fiscal 2020 compared to the second quarter of fiscal 2019.

As a percentage of revenues, costs of services (exclusive of depreciation and amortization) increased to 73.3% for the second quarter of fiscal 2020 from 68.7% for the second quarter of fiscal 2019.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses decreased by $2.3 million, or 9.7%, to $21.4 million for the second quarter of fiscal 2020 from $23.7 million for the second quarter of fiscal 2019.

Within this category of expenses, there was a $2.3 million decrease in travel and entertainment, a $0.8 million decrease in legal and other professional services fees, a $0.5 million decrease in training and marketing, a $0.2 million decrease in commissions to our non-employee experts, and a $0.2 million decrease in bad debt expense for the second quarter of fiscal 2020 as compared to the second quarter of fiscal 2019.

Partially offsetting the decrease in expenses was a $1.1 million increase in rent expense attributed to our Oakland and New York offices, a $0.2 million increase in software subscription and data services, and a $0.3 million increase in employee and incentive compensation.

As a percentage of revenues, selling, general and administrative expenses decreased to 17.4% for the second quarter of fiscal 2020 from 21.5% for the second quarter of fiscal 2019.

Commissions to our non-employee experts decreased to 2.4% of revenues for the second quarter of fiscal 2020 compared to 2.9% of revenues for the second quarter of fiscal 2019.

Provision for Income Taxes.

The income tax provision was $1.9 million and the effective tax rate was 24.6% for the second quarter of fiscal 2020 compared to $2.4 million and 29.8% for the second quarter of fiscal 2019.

The effective tax rate for the second quarter of fiscal 2020 was lower than the prior year due to increases in the tax benefit related to foreign-derived intangible income and the accounting for stock-based compensation, a decrease in non-deductible meals and entertainment , as well as the impact of continued strong profit generation in the second quarter of fiscal 2020.

The effective tax rate for the second quarter of fiscal 2020 was lower than the combined federal and state statutory tax rate due to the same drivers, partially offset by non-deductible items resulting from the limitations on the deductibility of compensation paid to executive officers and the deductibility of meals and entertainment.

The effective tax rate for the second quarter of fiscal 2019 was higher than the combined federal and state statutory tax rate primarily due to non-deductible items resulting from limitations on the deductibility of compensation paid to executive officers and the deductibility of meals and entertainment.

Net income increased by $0.3 million to $5.9 million for the second quarter of fiscal 2020 from $5.6 million for the second quarter of fiscal 2019.

The net income per diluted share was $0.75 per share for the second quarter of fiscal 2020, compared to $0.68 of net income per diluted share for the second quarter of fiscal 2019.

Weighted average diluted shares outstanding decreased by approximately 298,000 shares to approximately 7,920,000 shares for the second quarter of fiscal 2020 from approximately 8,218,000 shares for the second quarter of fiscal 2019.

The decrease in weighted average diluted shares outstanding was primarily due to the repurchase of shares of our common stock since June 29, 2019, offset in part by the vesting of shares of restricted stock and time-vesting restricted stock units, and the exercise of stock options since June 29, 2019.

Fiscal Year-to-Date Period Ended June 27, 2020, Compared to the Fiscal Year-to-Date Period Ended June 29, 2019

Revenues increased by $32.8 million, or 15.2%, to $249.2 million for the fiscal year-to-date period ended June 27, 2020 from $216.4 million for the fiscal year-to-date period ended June 29, 2019.

The increase in net revenue was a result of an increase in gross revenues of $31.6 million as compared to the first half of fiscal 2019, and a decrease in write-offs and reserves of $1.2 million as compared to the first half of fiscal 2019.

Utilization decreased to 68% for the first half of fiscal 2020 from 76% for the first half of fiscal 2019, primarily driven by the increase in consultant headcount, which grew 20.8% from 664 at June 29, 2019 to 802 at June 27, 2020.

Included in revenues are the effect of changes in currency exchange rates resulting in a decrease in revenue of $1.1 million for the first half of fiscal 2020 and a decrease in revenue of $2.7 million for the first half of fiscal 2019, respectively.

Overall, revenues outside of the U.S.

represented approximately 20% and 21% of net revenues for the fiscal year-to-date periods ended June 27, 2020 and June 29, 2019, respectively.

Revenues derived from fixed-price projects were 24% and 22% of net revenues for the fiscal year-to-date periods ended June 27, 2020 and June 29, 2019, respectively.

Costs of Services (exclusive of depreciation and amortization).

$17.4 million, or 23.6%, to $91.0 million for the first quarter of fiscal 2020 from $73.6 million for the first quarter of fiscal 2019.

The increase in costs of services was due

primarily to an increase of $4.9 million in employee compensation and fringe benefit costs attributable to our increased consultant headcount, an increase in incentive and retention

compensation costs of $6.3 million, an increase in forgivable loan and incentive awards amortization of $0.9 million, an increase in expense related to the net change in contingent

consideration valuation of $0.6 million and an increase in other compensation of $1.3 million.

Additionally, client reimbursable expenses increased by $3.6 million in the first

quarter of fiscal 2020 compared to the first quarter of fiscal 2019.

These increased expenses were partially offset by a decrease in stock compensation of $0.2 million.

As a percentage of

revenues, costs of services (exclusive of depreciation and amortization) increased to 72.1% for the first quarter of fiscal 2020 from 69.6% for the first quarter of fiscal 2019.

Costs of services (exclusive of depreciation and amortization) increased by $31.6 million, or 21.1%, to $181.2 million for the fiscal year-to-date period ended June 27, 2020 from $149.6 million for the fiscal year-to-date period ended June 29, 2019.

The increase in costs of services was due primarily to an increase of $11.7 million in employee compensation and fringe benefit costs associated with our increased consulting headcount, an increase in incentive and retention compensation costs of $9.9 million, an increase in forgivable loan amortization of $1.9 million, an increase in expense related to other compensation of $2.0 million, and an increase in the valuation expense of the contingent consideration of $0.6 million, partially offset by a decrease in stock compensation expense of $0.5 million.

Additionally, client reimbursable expenses increased by $5.9 million in the first half of fiscal 2020 compared to the first half of fiscal 2019.

As a percentage of revenues, costs of services (exclusive of depreciation and amortization) increased to 72.7% for the first half of fiscal 2020 from 69.1% for the first half of fiscal 2019.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses increased by $1.4 million, or 6.1%, to

$24.1 million for the first quarter of fiscal 2020 from $22.7 million for the first quarter of fiscal 2019.

Within this category of expenses, there was a $0.2 million increase in

employee compensation and fringe benefit costs and a $2.0 million increase in rent expense primarily due to additional space in our Boston and Oakland offices for the first quarter of fiscal

2020 as compared to the first quarter of fiscal 2019.

Partially offsetting these increased expenses was a $0.3 million decrease in other operating expenses primarily due to a decrease in legal

and other professional fees and a $0.5 million decrease in commissions to our nonemployee experts.

a percentage of revenues, selling, general and administrative expenses decreased to 19.1% for the first quarter of fiscal 2020 from 21.5% for the first quarter of fiscal 2019.

Commissions to our nonemployee experts decreased to 2.2% of revenues for the first quarter of fiscal 2020 compared to 3.2% of revenues for the first quarter of fiscal 2019.

Selling, general and administrative expenses decreased by $1.0 million, or 2.2%, to $45.5 million for the first half of fiscal 2020 from $46.5 million for the first half of fiscal 2019.

The primary contributors to this decrease were a $2.7 million decrease in travel and entertainment, a $1.0 million decrease in legal and other professional services fees, a $0.5 million decrease in training and marketing, a $0.1 million decrease in bad debt expense, and a $0.7 million decrease in commissions to non-employee experts.

These decreases were partially offset by increases of $3.0 million in rent expense primarily due to additional space in our Oakland and New York offices, employee and incentive compensation of $0.5 million, and software subscriptions and data services of $0.5 million.

As a percentage of revenues, selling, general and administrative expenses decreased to 18.3% for the fiscal year-to-date period ended June 27, 2020 from 21.5% for the fiscal year-to-date period ended June 29, 2019.

Commissions to our non-employee experts decreased to 2.3% of revenues for the fiscal year-to-date period ended June 27, 2020 compared to 3.0% of revenues for the fiscal year-to-date period ended June 29, 2019 as less revenue was sourced by non-employee experts in the first half of fiscal 2020 compared to the first half of fiscal 2019.

Provision for Income Taxes.

The income tax provision was $2.7 million and the effective tax rate was 29.4% for the first quarter

2020 compared to $1.4 million and 23.5% for the first quarter of fiscal 2019.

The effective tax rate for the first quarter of fiscal 2020 was higher than the prior year primarily due to a

decrease in the tax benefit related to the accounting for stock-based compensation, partially offset by a decrease in meals and entertainment.

The effective tax rate for the first quarter of fiscal

2020 was higher than the combined federal and state statutory tax rate primarily due to non-deductible items resulting from limitations on the deductibility of compensation paid to executive officers

and the deductibility of meals and entertainment.

The effective tax rate for the first quarter of fiscal 2019 was lower than the combined federal and state statutory tax rate primarily due to the tax

benefit related to the accounting for stock-based compensation, partially offset by non-deductible items resulting from limitations on the deductibility of compensation paid to executive officers and

the deductibility of meals and entertainment.

Net income increased by $1.8 million to $6.5 million for the first quarter of fiscal 2020 from $4.7 million

first quarter of fiscal 2019.

The net income per diluted share was $0.80 per share for the first quarter of fiscal 2020, compared to $0.56 of net income per diluted share for the first quarter

of fiscal 2019.

Weighted average diluted shares outstanding decreased by approximately 309,000 shares to approximately 8,037,000 shares for the first quarter of fiscal 2020 from approximately

8,346,000 shares for the first quarter of fiscal 2019.

The decrease in weighted average diluted shares outstanding was primarily due to the repurchase of shares of our common stock since the quarter

period ended March 30, 2019, offset in part by the issuance or vesting of shares of restricted stock and time-vesting restricted stock units, and the exercise of stock options, since the first

quarter of fiscal 2019.

For the fiscal year-to-date period ended June 27, 2020, our income tax provision was $4.6 million, and the effective tax rate was 27.2%, compared to a provision of $3.8 million and an effective tax rate of 27.1% for the fiscal year-to-date period ended June 29, 2019.

The effective tax rates for both fiscal year-to-date periods were the same as the combined federal and state statutory tax rate but included the effect of offsetting adjustments primarily driven by the tax benefit on stock-based compensation and non-deductible items resulting from limitations on the deductibility of compensation paid to executive officers and the deductibility of meals and entertainment.

Net income increased by $2.2 million to $12.4 million for the fiscal year-to-date period ended June 27, 2020 from $10.2 million for the fiscal year-to-date period ended June 29, 2019.

The diluted net income per share was $1.55 for the fiscal year-to-date period ended June 27, 2020, compared to diluted net income per share of $1.23 for the fiscal year-to-date period ended June 29, 2019.

Diluted weighted average shares outstanding decreased by approximately 303,000 to approximately 7,979,000 shares for the fiscal year-to-date period ended June 27, 2020 from approximately 8,282,000 shares for the fiscal year-to-date period ended June 29, 2019.

The decrease in weighted average diluted shares outstanding was primarily due to the repurchase of shares of our common stock since June 29, 2019, offset in part by the vesting of restricted stock and time-vesting restricted stock units and the exercise of stock options since June 29, 2019.

Liquidity and Capital Resources

We believe that our current cash, cash equivalents, cash generated from operations, and amounts available under our revolving credit facility

will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months.

During the fiscal quarter ended March 28, 2020, cash and cash equivalents decreased by $9.8 million.

with cash and cash equivalents of $15.8 million.

The principal drivers of the reduction of cash were payments of a significant portion of our fiscal 2019 performance bonuses, the funding of

forgivable loans, the repurchase of shares, and capital expenditures related to the buildout of the expanded New York and Toronto office space, as well as the Oakland office space, offset by net

borrowings of $70.0 million under our revolving credit facility.

the fiscal quarter ended March 28, 2020, working capital (defined as current assets less current liabilities) decreased by $12.6 million to $0.1 million.

addition to the reduction in cash balances noted above, the reduction in working capital is due to the $70.0 million of borrowings during the quarter, a portion of the proceeds from which were

used to fund forgivable loan issuances and leasehold improvements, much of which are classified as non-current assets.

the total cash and cash equivalents held at March 28, 2020, $7.1 million was held within the U.S.

We have sufficient sources of liquidity in the U.S., including cash

from operations and availability under our revolving credit facility, to fund U.S.

Fiscal Year-to-Date Period Ended June 27, 2020

We believe that our current cash, cash equivalents, cash generated from operations, and amounts available under our bank revolving line of credit will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months.

During the fiscal year-to-date period ended June 27, 2020, cash and cash equivalents decreased by $6.8 million.

We completed the period with cash and cash equivalents of $18.8 million.

The principal drivers of the reduction of cash were payment of a significant portion of our fiscal 2019 performance bonuses in the first and second quarters of 2020, the funding of forgivable loans, the repurchase of shares, and capital expenditures related to the buildout of the new Oakland and New York office spaces, offset by net borrowings of $59.0 million.

During the fiscal year-to-date period ended June 27, 2020, working capital decreased by $20.2 million such that current liabilities were in excess of current assets by $7.6 million.

The reduction in working capital is due in large part to the reclassification to a current liability of our contingent consideration liability of $12.6 million, which is due to be paid during the second quarter of fiscal 2021.

Also contributing to the reduction in working capital is the $59.0 million of borrowings during the first half of fiscal 2020, a portion of which was used to fund long-term investments, such as forgivable loan issuances and leasehold improvements, much of which are classified as non-current assets.

Offsetting these reductions in working capital were increases in accounts receivable and unbilled services of $7.6 million.

Of the total cash and cash equivalents held at June 27, 2020, $4.1 million was held within the U.S.

We have sufficient sources of liquidity in the U.S., including cash from operations and available borrowing capacity under our revolving credit facility, to fund U.S.

activities for the next 12 months.

Sources and Uses of Cash.

During the fiscal quarter ended March 28, 2020, net cash used in operating activities was

$65.4 million.

income was $6.5 million for the fiscal quarter ended March 28, 2020.

The primary factor in cash used in operations was a decrease in the accounts payable, accrued expenses, and other

liabilities of $39.1 million.

Other uses of cash included an increase of $8.2 million in unbilled receivables, a $5.3 million increase in prepaid expenses and other current

assets, $0.4 million unrealized foreign currency exchange gains, net, and a $1.2 million decrease in lease liabilities.

The change in forgivable loans for the period of

$27.1 million was primarily driven by $33.4 million of forgivable loan issuances, net of repayments, offset by $6.3 million of forgivable loan amortization.

Offsetting these uses

of cash was a $1.4 million decrease in accounts receivable, net, as well as a decrease in incentive cash awards expense of $1.4 million.

Cash provided by operations included non-cash

depreciation and amortization expense of $2.9 million, share-based compensation expenses of $0.7 million, and $3.0 million in ROU asset amortization.

the fiscal quarter ended March 28, 2020, net cash used in investing activities was $7.9 million for capital expenditures primarily related to the buildout of the New

York, Toronto, and Oakland office space.

the fiscal quarter ended March 28, 2020, net cash provided by financing activities was $64.1 million, primarily as a result of borrowings under the revolving credit

facility of $70.0 million, and $0.2 million received upon the issuance of shares of common stock related to the exercise of stock options.

Offsetting these increases in cash were the tax

withholding payments reimbursed by restricted shares of $0.4 million, payment of $1.8 million of cash dividends to shareholders, and $3.8 million of repurchases of common stock.

We are party to a credit agreement that provides us with a $125.0 million revolving credit facility and a $15.0 million sublimit

for the issuance of letters of credit.

During the fiscal year-to-date period ended June 27, 2020, net cash used in operating activities was $44.3 million.

Net income was $12.4 million for the fiscal year-to-date period ended June 27, 2020.

The primary factor in cash used in operations was the decrease in the “accounts payable, accrued expenses, and other liabilities” line item of our condensed consolidated statement of cash flows of $31.4 million due to the payment of a significant portion of our fiscal 2019 performance bonuses and performance awards.

Other uses of cash included an increase of $14.0 million in unbilled receivables due primarily to the increase in revenues, a $2.7 million increase in prepaid expenses and other current assets, and a $3.1 million decrease in lease liabilities.

The increase in forgivable loans for the period of $25.5 million was primarily driven by $38.4 million of forgivable loan issuances, net of repayments, offset by $12.8 million of forgivable loan amortization.

Offsetting these uses of cash was a $5.0 million decrease in accounts receivable, net of allowances.

Cash provided by operations included incentive cash award expense of $3.0 million, non-cash depreciation and amortization expense of $6.1 million, and $5.9 million in ROU amortization.

During the fiscal year-to-date period ended June 27, 2020, net cash used in investing activities was $13.5 million for capital expenditures primarily related to the buildout of the Oakland and New York offices.

During the fiscal year-to-date period ended June 27, 2020, net cash provided by financing activities was $51.7 million, primarily as a result of borrowings, net of repayments, under the revolving line of credit of $59.0 million and $0.6 million received upon the issuance of shares of common stock related to the exercise of stock options.

Offsetting these increases in cash were the tax withholding payments reimbursed by restricted shares of $0.4 million, payment of $3.6 million of cash dividends to shareholders, and $3.8 million of repurchases of common stock.

We are party to a credit agreement that provides us with a $125.0 million revolving credit facility and a $15.0 million sublimit for the issuance of letters of credit.

We may use the proceeds of the revolving credit facility to provide working capital and for other general corporate purposes.

Generally, we may repay any

borrowings under the revolving credit facility at any time, but we must repay any outstanding borrowings no later than October 24, 2022.

There was $70.0 million in outstanding borrowings

under this revolving credit facility as of March 28, 2020.

The amount available under this revolving credit facility is reduced by certain letters of credit outstanding, which amounted to $4.4 million as of

March 28, 2020.

Borrowings under the revolving credit facility bear interest at a rate per annum, at our election, of either (i) the adjusted base rate, as defined in the credit

agreement, plus an applicable margin, which varies between 0.25% and 1.25% depending on our 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% depending on our total leverage ratio.

We are 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 our total leverage ratio.

Borrowings under the revolving credit facility are secured by 100% of the

stock of certain of our U.S.

subsidiaries and 65% of the stock of certain of our foreign subsidiaries, which represent approximately $32.9 million in net assets as of March 28, 2020.

the credit agreement, we must comply with various financial and non-financial covenants.

Generally, we may repay any borrowings under the revolving credit facility at any time, but we must repay all borrowings no later than October 24, 2022.

There was $59.0 million in outstanding borrowings under this revolving line of credit as of June 27, 2020.

The amount available under this revolving line of credit is reduced by certain letters of credit outstanding, which amounted to $4.4 million as of June 27, 2020.

Borrowings under the revolving credit facility bear interest at a rate per annum, at our election, of either (i) the adjusted base rate, as defined in the credit agreement, plus an applicable margin, which varies between 0.25% and 1.25% depending on our 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% depending on our total leverage ratio.

We are 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 our total leverage ratio.

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

subsidiaries and 65% of the stock of certain of our foreign subsidiaries, which represent approximately $34.1 million in net assets as of June 27, 2020.

Under the credit agreement, we must comply with various financial and non-financial covenants.

Compliance with these financial covenants is tested on a fiscal quarterly basis.

indebtedness outstanding under the revolving credit facility may become immediately due and payable upon the occurrence of stated events of default, including our failure to pay principal, interest or

fees or a violation of any financial covenant.

The financial covenants require us to maintain an adjusted consolidated EBITDA 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 credit agreement include, but are not limited to, our ability to incur additional indebtedness, engage in acquisitions or dispositions, and enter into business

combinations.

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

The financial covenants require us to maintain an adjusted consolidated EBITDA 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, our ability to incur additional indebtedness, engage in acquisitions or dispositions, and enter into business combinations.

Forgivable Loans and Term Loans

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The forgivable loans have terms that are generally between two and eight years.

The principal amount of forgivable loans and

accrued interest is forgiven by us over the term of the loans, so long as the employee or non-employee expert continues employment or affiliation with us and complies with certain contractual

requirements.

The expense associated with the forgiveness of the principal amount of the loans is recorded as compensation expense over the service period, which is consistent with the term of the

The principal amount of forgivable loans and accrued interest is forgiven by us over the term of the loans, so long as the employee or non-employee expert continues employment or affiliation with us and complies with certain contractual requirements.

The expense associated with the forgiveness of the principal amount of the loans is recorded as compensation expense over the service period, which is consistent with the term of the loans.

Compensation Arrangements

We have entered into compensation arrangements for the payment of incentive performance awards to certain of our employees and non-employee

experts if specific performance targets are met.

The amounts of the awards to be paid under these compensation arrangements could fluctuate depending on future performance through the respective

measurement periods.

We have entered into compensation arrangements for the payment of incentive performance awards to certain of our employees and non-employee experts if specific performance targets are met.

The amounts of the awards to be paid under these compensation arrangements could fluctuate depending on future performance through the respective measurement periods.

Increases in estimated awards are expensed prospectively over the remaining service period.

Decreases in estimated awards are recorded in the period incurred.

We believe that we

will have sufficient funds to satisfy any obligations related to the incentive performance awards.

We expect to fund these payments, if any, from existing cash resources, cash generated from

operations, or borrowings on our revolving credit facility.

We believe that we will have sufficient funds to satisfy any obligations related to the incentive performance awards.

We expect to fund these payments, if any, from existing cash resources, cash generated from operations, or borrowings on our revolving credit facility.

Business and Talent Acquisitions

As part of our business, we regularly evaluate opportunities to acquire other consulting firms, practices or groups or other businesses.

recent years, we have typically paid for acquisitions with cash, or a combination of cash and our common stock, and we may continue to do so in the future.

To pay for an acquisition, we may use cash

on hand, cash generated from our operations, borrowings under our revolving credit facility, or we may pursue other forms of financing.

to secure short-term and long-term debt or equity financing in the future will depend on several factors,

our future profitability, the levels of our debt and equity, restrictions under our revolving credit facility, and the overall credit and equity market environments.

In recent years, we have typically paid for acquisitions with cash, or a combination of cash and our common stock, and we may continue to do so in the future.

To pay for an acquisition, we may use cash on hand, cash generated from our operations, borrowings under our revolving credit facility, or we may pursue other forms of financing.

Our ability to secure short-term and long-term debt or equity financing in the future will depend on several factors, including our future profitability, the levels of our debt and equity, restrictions under our revolving credit facility, and the overall credit and equity market environments.

Share Repurchases

In February 2020, our Board of Directors authorized an expansion to our existing share repurchase program, authorizing the purchase of an

additional $20.0 million of our common stock.

We may repurchase shares under this program in open market purchases (including through any Rule 10b5-1 plan adopted by us) or in privately

negotiated transactions in accordance with applicable insider trading and other securities laws and regulations.

During the fiscal quarter ended March 28, 2020, we repurchased and retired

82,613 shares, under our share repurchase program at an average price per share of $46.15.

During the fiscal quarter ended March 30, 2019, we repurchased and retired 86,609 shares, under our

share repurchase program at an average price per share of $50.25.

As of March 28, 2020, we had approximately $19.7 million available for future repurchases under our share repurchase

In February 2020, our Board of Directors authorized an expansion to our existing share repurchase program, authorizing the purchase of an additional $20.0 million of our common stock.

We may repurchase shares under this program in open market purchases (including through any Rule 10b5-1 plan adopted by us) or in privately negotiated transactions in accordance with applicable insider trading and other securities laws and regulations.

During the fiscal year-to-date period ended June 27, 2020, we repurchased and retired 82,613 shares, under our share repurchase program at an average price per share of $46.15 with no repurchases occurring in the fiscal quarter ended June 27, 2020.

During the fiscal quarter and fiscal year-to-date period ended June 29, 2019, we repurchased and retired 177,101 shares and 263,710 shares, respectively, under our share repurchase program at an average price per share of $40.47 and $43.68, respectively.

As of June 27, 2020, we had approximately $19.7 million available for future repurchases under our share repurchase program.

We plan to finance future repurchases with available cash, cash from future operations, and funds from our revolving credit facility.

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We anticipate paying regular quarterly dividends each year.

These dividends are anticipated to be funded through cash flow from operations,

available cash on hand, and/or borrowings under our revolving credit facility.

Although we anticipate paying regular quarterly dividends on our common stock for the foreseeable future, the declaration

of any future dividends is subject to the discretion of our Board of Directors.

During the fiscal quarters ended March 28, 2020 and March 30, 2019, we paid dividends and dividend

equivalents of $1.8 million and $1.7 million, respectively, to our shareholders.

These dividends are anticipated to be funded through cash flow from operations, available cash on hand, and/or borrowings under our revolving credit facility.

Although we anticipate paying regular quarterly dividends on our common stock for the foreseeable future, the declaration of any future dividends is subject to the discretion of our Board of Directors.

During the fiscal quarter and fiscal year-to-date period ended June 27, 2020, we paid dividends of $1.8 million and $3.6 million, respectively.

During the fiscal quarter and fiscal year-to-date period ended June 29, 2019, we paid dividends of $1.6 million and $3.2 million, respectively.

Impact of Inflation

To date, inflation has not had a material impact on our financial results.

There can be no assurance, however, that inflation will not adversely

affect our financial results in the future.

There can be no assurance, however, that inflation will not adversely affect our financial results in the future.

Future Capital and Liquidity Needs

We anticipate that our future capital and liquidity needs will principally consist of funds required

operating and general corporate expenses relating to the operation of our business, including the compensation of our employees under various

annual bonus or long-term incentive compensation programs;

We anticipate that our future capital and liquidity needs will principally consist of funds required for:

● operating and general corporate expenses relating to the operation of our business, including the compensation of our employees under various annual bonus or long-term incentive compensation programs;

● the hiring of individuals to replenish and expand our employee base;

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● other known future contractual obligations.

hiring of individuals to replenish and expand our employee base is an essential part of our business operations and has historically been funded principally from operations.

the other above activities are discretionary in nature.

For example, capital expenditures can be deferred, acquisitions can be forgone, and share repurchase programs and regular dividends can be

The hiring of individuals to replenish and expand our employee base is an essential part of our business operations and has historically been funded principally from operations.

Many of the other above activities are discretionary in nature.

For example, capital expenditures can be deferred, acquisitions can be forgone, and share repurchase programs and regular dividends can be suspended.

As such, our operating model provides flexibility with respect to the deployment of cash flow from operations.

Given this flexibility, we believe that our cash flows from operations,

supplemented by cash on hand and borrowings under our revolving credit facility (as necessary), will provide adequate cash to fund our long-term cash needs from normal operations for at least the next

twelve months.

conclusion that we will be able to fund our cash requirements by using existing capital resources and cash generated from operations does not take into account the impact of any

future acquisition transactions or any unexpected significant changes in the number of employees or other expenditures that are currently not contemplated.

The anticipated cash needs of our business

significantly if we pursue and complete additional business acquisitions, if our business plans change, if economic conditions change from those currently prevailing or from those now anticipated

(including in connection with the COVID-19 pandemic), or if other unexpected circumstances arise that have a material effect on the cash flow or profitability of our business.

Any of these events or

circumstances, including any new business opportunities or the length and severity of the COVID-19 pandemic, could involve or result in significant additional funding needs in excess of the identified

currently available sources and could require us to raise additional debt or equity funding to meet those needs on terms that may be less favorable compared to our current sources of capital.

ability to raise additional capital over the next 12 months, if necessary, is subject to a variety of factors that we cannot predict with certainty,

Given this flexibility, we believe that our cash flows from operations, supplemented by cash on hand and borrowings under our revolving credit facility (as necessary), will provide adequate cash to fund our long-term cash needs from normal operations for at least the next twelve months.

Our conclusion that we will be able to fund our cash requirements by using existing capital resources and cash generated from operations does not take into account the impact of any future acquisition transactions or any unexpected significant changes in the number of employees or other expenditures that are currently not contemplated.

The anticipated cash needs of our business could change significantly if we pursue and complete additional business acquisitions, if our business plans change, if economic conditions change from those currently prevailing or from those now anticipated (including in connection with the COVID-19 pandemic), or if other unexpected circumstances arise that have a material effect on the cash flow or profitability of our business.

Any of these events or circumstances, including any new business opportunities or the length and severity of the COVID-19 pandemic, could involve or result in significant additional funding needs in excess of the identified currently available sources and could require us to raise additional debt or equity funding to meet those needs on terms that may be less favorable compared to our current sources of capital.

Our ability to raise additional capital over the next 12 months, if necessary, is subject to a variety of factors that we cannot predict with certainty, including:

● our future profitability;

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Factors Affecting Future Performance

Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this Quarterly Report

on Form 10-Q, as well as a description of

material risks we face, are set forth below under the heading "Risk Factors" and included in Part IItem 1A "Risk Factors" of the 2019 Form 10-K.

If any of these

risks, or any risks not presently known to us or that we currently believe are not significant, develops into an actual event, then our business, financial condition, and results of operations could

be adversely affected.

Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this Quarterly Report on Form 10-Q, as well as a description of material risks we face, are set forth below under the heading “Risk Factors” and included in Part I -Item 1A “Risk Factors” of the 2019 Form 10-K.

If any of these risks, or any risks not presently known to us or that we currently believe are not significant, develops into an actual event, then our business, financial condition, and results of operations could be adversely affected.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis