(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||||||||
Large accelerated filer | ☐ | x | Non-accelerated filer | ☐ | Smaller reporting company | Emerging growth company |
Class | Outstanding at October 28, 2022 | |||||||||||||
Common Stock, no par value per share |
Fiscal Quarter Ended | Fiscal Year-to-Date Period Ended | ||||||||||||||||||||||
October 1, 2022 | October 2, 2021 | October 1, 2022 | October 2, 2021 | ||||||||||||||||||||
Revenues | $ | $ | $ | $ | |||||||||||||||||||
Costs of services (exclusive of depreciation and amortization) | |||||||||||||||||||||||
Selling, general and administrative expenses | |||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Income from operations | |||||||||||||||||||||||
Interest expense, net | ( | ( | ( | ( | |||||||||||||||||||
Foreign currency gains (losses), net | ( | ||||||||||||||||||||||
Income before provision for income taxes | |||||||||||||||||||||||
Provision for income taxes | |||||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Net income per share: | |||||||||||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||||||||||
Diluted | $ | $ | $ | $ | |||||||||||||||||||
Weighted average number of shares outstanding: | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted |
Fiscal Quarter Ended | Fiscal Year-to-Date Period Ended | ||||||||||||||||||||||
October 1, 2022 | October 2, 2021 | October 1, 2022 | October 2, 2021 | ||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Other comprehensive income (loss) | |||||||||||||||||||||||
Foreign currency translation adjustments, net of tax | ( | ( | ( | ( | |||||||||||||||||||
Comprehensive income | $ | $ | $ | $ |
October 1, 2022 | January 1, 2022 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowances of $ | |||||||||||
Unbilled services, net of allowances of $ | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Forgivable loans | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
Goodwill | |||||||||||
Intangible assets, net | |||||||||||
Right-of-use assets | |||||||||||
Deferred income taxes | |||||||||||
Forgivable loans, net of current portion | |||||||||||
Other assets | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses | |||||||||||
Deferred revenue and other liabilities | |||||||||||
Current portion of lease liabilities | |||||||||||
Current portion of deferred compensation | |||||||||||
Revolving line of credit | |||||||||||
Total current liabilities | |||||||||||
Non-current liabilities: | |||||||||||
Deferred compensation and other non-current liabilities | |||||||||||
Non-current portion of lease liabilities | |||||||||||
Deferred income taxes | |||||||||||
Total non-current liabilities | |||||||||||
Commitments and contingencies (Note 11) | |||||||||||
Shareholders’ equity: | |||||||||||
Preferred stock, | |||||||||||
Common stock, | |||||||||||
Retained earnings | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Total shareholders’ equity | |||||||||||
Total liabilities and shareholders’ equity | $ | $ |
Fiscal Year-to-Date Period Ended | |||||||||||
October 1, 2022 | October 2, 2021 | ||||||||||
OPERATING ACTIVITIES: | |||||||||||
Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities, net of effect of acquired business: | |||||||||||
Depreciation and amortization | |||||||||||
Right-of-use asset amortization | |||||||||||
Deferred income taxes | ( | ( | |||||||||
Share-based compensation expense | |||||||||||
Bad debt expense (recovery) | ( | ||||||||||
Unrealized foreign currency remeasurement (gains) losses, net | ( | ( | |||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | ( | ||||||||||
Unbilled services | ( | ( | |||||||||
Prepaid expenses and other current assets, and other assets | ( | ( | |||||||||
Forgivable loans | ( | ||||||||||
Incentive cash awards | |||||||||||
Accounts payable, accrued expenses, and other liabilities | ( | ( | |||||||||
Lease liabilities | ( | ( | |||||||||
Net cash provided by (used in) operating activities | ( | ||||||||||
INVESTING ACTIVITIES: | |||||||||||
Purchases of property and equipment | ( | ( | |||||||||
Consideration paid for acquisition, net | ( | ||||||||||
Net cash used in investing activities | ( | ( | |||||||||
FINANCING ACTIVITIES: | |||||||||||
Issuance of common stock, principally stock option exercises | |||||||||||
Borrowings under revolving line of credit | |||||||||||
Repayments under revolving line of credit | ( | ( | |||||||||
Payments for debt issuance costs | ( | ||||||||||
Tax withholding payments reimbursed by shares | ( | ( | |||||||||
Cash paid for contingent consideration | ( | ||||||||||
Cash dividends paid | ( | ( | |||||||||
Repurchase of common stock | ( | ( | |||||||||
Net cash provided by (used in) financing activities | ( | ||||||||||
Effect of foreign exchange rates on cash and cash equivalents | ( | ( | |||||||||
Net decrease in cash and cash equivalents | ( | ( | |||||||||
Cash and cash equivalents at beginning of period | |||||||||||
Cash and cash equivalents at end of period | $ | $ | |||||||||
Noncash investing and financing activities: | |||||||||||
Increase (decrease) in accounts payable and accrued expenses for property and equipment | $ | ( | $ | ( | |||||||
Right-of-use assets obtained in exchange for lease obligations | $ | $ | |||||||||
Restricted common stock issued for contingent consideration | $ | $ | |||||||||
Supplemental cash flow information: | |||||||||||
Cash paid for taxes | $ | $ | |||||||||
Cash paid for interest | $ | $ | |||||||||
Cash paid for amounts included in operating lease liabilities | $ | $ |
Common Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | ||||||||||||||||||||||||||
Shares Issued | Amount | ||||||||||||||||||||||||||||
BALANCE AT JANUARY 1, 2022 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | ( | ( | ||||||||||||||||||||||||
Exercise of stock options | — | — | |||||||||||||||||||||||||||
Share-based compensation expense | — | — | — | ||||||||||||||||||||||||||
Restricted shares vesting | — | — | — | — | |||||||||||||||||||||||||
Redemption of vested employee restricted shares for tax withholding | ( | ( | — | — | ( | ||||||||||||||||||||||||
Shares repurchased | ( | ( | ( | — | ( | ||||||||||||||||||||||||
Accrued dividends on unvested shares | — | — | ( | — | ( | ||||||||||||||||||||||||
Cash dividends paid ($ | — | — | ( | — | ( | ||||||||||||||||||||||||
BALANCE AT APRIL 2, 2022 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | ( | ( | ||||||||||||||||||||||||
Share-based compensation expense | — | — | — | ||||||||||||||||||||||||||
Restricted shares vesting | — | — | — | — | |||||||||||||||||||||||||
Redemption of vested employee restricted shares for tax withholding | ( | ( | — | — | ( | ||||||||||||||||||||||||
Shares repurchased | ( | ( | ( | — | ( | ||||||||||||||||||||||||
Accrued dividends on unvested shares | — | — | ( | — | ( | ||||||||||||||||||||||||
Cash dividends paid ($ | — | — | ( | — | ( | ||||||||||||||||||||||||
BALANCE AT JULY 2, 2022 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | ( | ( | ||||||||||||||||||||||||
Exercise of stock options | — | — | |||||||||||||||||||||||||||
Share-based compensation expense | — | — | — | ||||||||||||||||||||||||||
Restricted shares vesting | — | — | — | — | |||||||||||||||||||||||||
Redemption of vested employee restricted shares for tax withholding | ( | ( | — | — | ( | ||||||||||||||||||||||||
Shares repurchased | ( | ( | ( | — | ( | ||||||||||||||||||||||||
Accrued dividends on unvested shares | — | — | ( | — | ( | ||||||||||||||||||||||||
Cash dividends paid ($ | — | — | ( | — | ( | ||||||||||||||||||||||||
BALANCE AT OCTOBER 1, 2022 | $ | $ | $ | ( | $ |
Common Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | ||||||||||||||||||||||||||
Shares Issued | Amount | ||||||||||||||||||||||||||||
BALANCE AT JANUARY 2, 2021 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | ( | ( | ||||||||||||||||||||||||
Issuance of restricted common stock for contingent consideration | — | — | |||||||||||||||||||||||||||
Exercise of stock options | — | — | |||||||||||||||||||||||||||
Share-based compensation expense | — | — | — | ||||||||||||||||||||||||||
Restricted shares vesting | — | — | — | — | |||||||||||||||||||||||||
Redemption of vested employee restricted shares for tax withholding | ( | ( | — | — | ( | ||||||||||||||||||||||||
Shares repurchased | ( | ( | ( | — | ( | ||||||||||||||||||||||||
Accrued dividends on unvested shares | — | — | — | ||||||||||||||||||||||||||
Cash dividends paid ($ | — | — | ( | — | ( | ||||||||||||||||||||||||
BALANCE AT APRIL 3, 2021 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | ( | ( | ||||||||||||||||||||||||
Exercise of stock options | — | — | |||||||||||||||||||||||||||
Share-based compensation expense | — | — | — | ||||||||||||||||||||||||||
Restricted shares vesting | — | — | — | — | |||||||||||||||||||||||||
Shares repurchased | ( | ( | ( | — | ( | ||||||||||||||||||||||||
Accrued dividends on unvested shares | — | — | ( | — | ( | ||||||||||||||||||||||||
Cash dividends paid ($ | — | — | ( | — | ( | ||||||||||||||||||||||||
BALANCE AT JULY 3, 2021 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | ( | ( | ||||||||||||||||||||||||
Exercise of stock options | — | — | |||||||||||||||||||||||||||
Share-based compensation expense | — | — | — | ||||||||||||||||||||||||||
Restricted shares vesting | — | — | — | — | |||||||||||||||||||||||||
Shares repurchased | ( | ( | ( | — | ( | ||||||||||||||||||||||||
Accrued dividends on unvested shares | — | — | ( | — | ( | ||||||||||||||||||||||||
Cash dividends paid ( $ | — | — | ( | — | ( | ||||||||||||||||||||||||
BALANCE AT OCTOBER 2, 2021 | $ | $ | $ | ( | $ |
Assets Acquired | |||||
Current assets: | |||||
Accounts receivable | $ | ||||
Unbilled services | |||||
Prepaid expenses and other current assets | |||||
Total current assets | |||||
Property and equipment | |||||
Goodwill | |||||
Intangible assets | |||||
Right-of-use assets | |||||
Other assets | |||||
Total assets acquired | $ | ||||
Liabilities Assumed | |||||
Current liabilities: | |||||
Accrued expenses | $ | ||||
Deferred revenue and other liabilities | |||||
Current portion of lease liabilities | |||||
Total current liabilities | |||||
Non-current portion of lease liabilities | |||||
Total liabilities assumed | $ | ||||
Net assets acquired | $ |
Fiscal Quarter Ended | Fiscal Year-to-Date Period Ended | |||||||||||||||||||||||||
Type of Contract | October 1, 2022 | October 2, 2021 | October 1, 2022 | October 2, 2021 | ||||||||||||||||||||||
Consulting services revenues: | ||||||||||||||||||||||||||
Fixed-price | $ | $ | $ | $ | ||||||||||||||||||||||
Time-and-materials | ||||||||||||||||||||||||||
Total | $ | $ | $ | $ |
Fiscal Quarter Ended | Fiscal Year-to-Date Period Ended | |||||||||||||||||||||||||
Geographic Breakdown | October 1, 2022 | October 2, 2021 | October 1, 2022 | October 2, 2021 | ||||||||||||||||||||||
Consulting services revenues: | ||||||||||||||||||||||||||
United States | $ | $ | $ | $ | ||||||||||||||||||||||
United Kingdom | ||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||
Total | $ | $ | $ | $ |
Fiscal Quarter Ended | Fiscal Year-to-Date Period Ended | |||||||||||||||||||||||||
October 1, 2022 | October 2, 2021 | October 1, 2022 | October 2, 2021 | |||||||||||||||||||||||
Bad debt expense (recovery), net | $ | ( | $ | $ | ( | $ |
Fiscal Quarter Ended | Fiscal Year-to-Date Period Ended | |||||||||||||||||||||||||
October 1, 2022 | October 2, 2021 | October 1, 2022 | October 2, 2021 | |||||||||||||||||||||||
Reimbursable expenses | $ | $ | $ | $ |
October 1, 2022 | January 1, 2022 | |||||||||||||
Contract liabilities | $ | $ |
Fiscal Quarter Ended | Fiscal Year-to-Date Period Ended | |||||||||||||||||||||||||
October 1, 2022 | October 2, 2021 | October 1, 2022 | October 2, 2021 | |||||||||||||||||||||||
Amounts included in contract liabilities at the beginning of the period | $ | $ | $ | $ | ||||||||||||||||||||||
Performance obligations satisfied in previous periods | $ | $ | $ | $ |
Fiscal Year-to-Date Period Ended | Fiscal Year Ended | |||||||||||||
October 1, 2022 | January 1, 2022 | |||||||||||||
Beginning balance | $ | $ | ||||||||||||
Advances | ||||||||||||||
Repayments | ( | ( | ||||||||||||
Reclassifications from accrued expenses or to other assets (1) | ( | ( | ||||||||||||
Amortization | ( | ( | ||||||||||||
Effects of foreign currency translation | ( | ( | ||||||||||||
Ending balance | $ | $ | ||||||||||||
Current portion of forgivable loans | $ | $ | ||||||||||||
Non-current portion of forgivable loans | $ | $ |
Goodwill | $ | |||||||
Accumulated goodwill impairment | ( | |||||||
Goodwill, net at January 1, 2022 | ||||||||
Additions due to acquisitions | ||||||||
Foreign currency translation adjustment | ( | |||||||
Goodwill, net at October 1, 2022 | $ |
October 1, 2022 | January 1, 2022 | ||||||||||||||||||||||||||||||||||||||||
Useful Life (in years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||||||||||||||||||
Non-competition agreements | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
Customer relationships | ( | ( | |||||||||||||||||||||||||||||||||||||||
Total | $ | $ | ( | $ | $ | $ | ( | $ |
October 1, 2022 | January 1, 2022 | ||||||||||
Compensation and related expenses | $ | $ | |||||||||
Performance awards | |||||||||||
Direct project accruals | |||||||||||
Other | |||||||||||
Total accrued expenses | $ | $ |
Fiscal Quarter Ended | Fiscal Year-to-Date Period Ended | |||||||||||||||||||||||||
October 1, 2022 | October 2, 2021 | October 1, 2022 | October 2, 2021 | |||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||||
Net income — basic | $ | $ | $ | $ | ||||||||||||||||||||||
Less: net income attributable to participating shares | ||||||||||||||||||||||||||
Net income — diluted | $ | $ | $ | $ | ||||||||||||||||||||||
Denominator: | ||||||||||||||||||||||||||
Weighted average shares outstanding — basic | ||||||||||||||||||||||||||
Effect of dilutive stock options and restricted stock units | ||||||||||||||||||||||||||
Weighted average shares outstanding — diluted | ||||||||||||||||||||||||||
Net income per share: | ||||||||||||||||||||||||||
Basic | $ | $ | $ | $ | ||||||||||||||||||||||
Diluted | $ | $ | $ | $ |
Fiscal Year Ended | ||||||||
January 1, 2022 | ||||||||
Beginning balance | $ | |||||||
Accretion | ||||||||
Payment of contingent consideration | ( | |||||||
Ending balance | $ |
Fiscal Quarter Ended | Fiscal Year-to-Date Period Ended | ||||||||||||||||||||||
October 1, 2022 | October 2, 2021 | October 1, 2022 | October 2, 2021 | ||||||||||||||||||||
Revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
Costs of services (exclusive of depreciation and amortization) | 68.9 | 70.4 | 69.4 | 71.1 | |||||||||||||||||||
Selling, general and administrative expenses | 19.0 | 18.0 | 18.4 | 16.6 | |||||||||||||||||||
Depreciation and amortization | 2.0 | 2.3 | 2.0 | 2.2 | |||||||||||||||||||
Income from operations | 10.0 | 9.4 | 10.2 | 10.1 | |||||||||||||||||||
Interest expense, net | (0.4) | (0.1) | (0.3) | (0.2) | |||||||||||||||||||
Foreign currency gains (losses), net | 1.1 | 0.2 | 0.8 | (0.1) | |||||||||||||||||||
Income before provision for income taxes | 10.7 | 9.4 | 10.7 | 9.8 | |||||||||||||||||||
Provision for income taxes | 2.7 | 1.4 | 2.9 | 2.2 | |||||||||||||||||||
Net income | 8.0 | % | 8.0 | % | 7.8 | % | 7.7 | % |
Period | (a) Total Number of Shares Purchased(1)(2) | (b) Average Price Paid per Share(1)(2) | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) | (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(2) | ||||||||||||||||||||||
July 3, 2022 to July 30, 2022 | 291 | $ | 94.31 | — | $ | 27,854,153 | ||||||||||||||||||||
July 31, 2022 to August 27, 2022 | 51,524 | $ | 97.04 | 51,524 | $ | 22,854,204 | ||||||||||||||||||||
August 28, 2022 to October 1, 2022 | — | $ | — | — | $ | 22,854,204 |
Item No. | Filed with this Form 10-Q | Description | ||||||||||||
3.1 | ||||||||||||||
3.2 | ||||||||||||||
10.1 | Credit Agreement, dated as of August 19, 2022, by and among CRA International, Inc., CRA International (UK) Limited, CRA International (Netherlands) B.V., and CRA International Limited, as the Borrowers, Bank of America, N.A., as Administrative Agent, Swingline Lender and L/C Issuer, the other L/C Issuers party thereto and the other Lenders party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on August 23, 2022). | |||||||||||||
31.1 | X | |||||||||||||
31.2 | X | |||||||||||||
32.1 | X | |||||||||||||
32.2 | X | |||||||||||||
101 | X | The following financial statements from CRA International, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 1, 2022, formatted in Inline XBRL (eXtensible Business Reporting Language), as follows: (i) Condensed Consolidated Statements of Operations (unaudited) for the fiscal quarters and fiscal year-to-date periods ended October 1, 2022 and October 2, 2021, (ii) Condensed Consolidated Statements of Comprehensive Income (unaudited) for the fiscal quarters and fiscal year-to-date periods ended October 1, 2022 and October 2, 2021, (iii) Condensed Consolidated Balance Sheets (unaudited) at October 1, 2022 and January 1, 2022, (iv) Condensed Consolidated Statements of Cash Flows (unaudited) for the fiscal year-to-date periods ended October 1, 2022 and October 2, 2021, (v) Condensed Consolidated Statement of Shareholders’ Equity (unaudited) for the fiscal year-to-date periods ended October 1, 2022 and October 2, 2021, and (vi) Notes to Condensed Consolidated Financial Statements (Unaudited). | ||||||||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
CRA INTERNATIONAL, INC. | ||||||||
Date: November 3, 2022 | By: | /s/ PAUL A. MALEH | ||||||
Paul A. Maleh | ||||||||
President and Chief Executive Officer | ||||||||
Date: November 3, 2022 | By: | /s/ DANIEL K. MAHONEY | ||||||
Daniel K. Mahoney | ||||||||
Chief Financial Officer, Executive Vice President and Treasurer | ||||||||
Date: November 3, 2022 | By: | /s/ PAUL A. MALEH | ||||||
Paul A. Maleh | ||||||||
President and Chief Executive Officer |
Date: November 3, 2022 | By: | /s/ DANIEL K. MAHONEY | ||||||
Daniel K. Mahoney | ||||||||
Chief Financial Officer, Executive Vice President and Treasurer |
/s/ PAUL A. MALEH | |||||
Paul A. Maleh | |||||
President and Chief Executive Officer | |||||
Date: November 3, 2022 |
/s/ DANIEL K. MAHONEY | |||||
Daniel K. Mahoney | |||||
Chief Financial Officer, Executive Vice President and Treasurer | |||||
Date: November 3, 2022 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 01, 2022 |
Oct. 02, 2021 |
Oct. 01, 2022 |
Oct. 02, 2021 |
|
Income Statement [Abstract] | ||||
Revenues | $ 148,441 | $ 136,412 | $ 445,925 | $ 431,167 |
Costs of services (exclusive of depreciation and amortization) | 102,267 | 95,980 | 309,403 | 306,396 |
Selling, general and administrative expenses | 28,246 | 24,490 | 82,026 | 71,740 |
Depreciation and amortization | 3,034 | 3,141 | 9,060 | 9,657 |
Income from operations | 14,894 | 12,801 | 45,436 | 43,374 |
Interest expense, net | (667) | (183) | (1,343) | (791) |
Foreign currency gains (losses), net | 1,667 | 235 | 3,566 | (253) |
Income before provision for income taxes | 15,894 | 12,853 | 47,659 | 42,330 |
Provision for income taxes | 4,017 | 1,908 | 12,713 | 9,318 |
Net income | $ 11,877 | $ 10,945 | $ 34,946 | $ 33,012 |
Net income per share: | ||||
Basic (in dollars per share) | $ 1.66 | $ 1.48 | $ 4.81 | $ 4.42 |
Diluted (in dollars per share) | $ 1.63 | $ 1.44 | $ 4.72 | $ 4.31 |
Weighted average number of shares outstanding: | ||||
Basic (in shares) | 7,119 | 7,375 | 7,247 | 7,440 |
Diluted (in shares) | 7,246 | 7,560 | 7,376 | 7,643 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 01, 2022 |
Oct. 02, 2021 |
Oct. 01, 2022 |
Oct. 02, 2021 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 11,877 | $ 10,945 | $ 34,946 | $ 33,012 |
Other comprehensive income (loss) | ||||
Foreign currency translation adjustments, net of tax | (3,806) | (1,028) | (8,838) | (1,275) |
Comprehensive income | $ 8,071 | $ 9,917 | $ 26,108 | $ 31,737 |
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - USD ($) $ in Thousands |
Oct. 01, 2022 |
Jan. 01, 2022 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for accounts receivable | $ 2,903 | $ 3,256 |
Allowance for unbilled services | $ 1,171 | $ 1,364 |
Preferred stock, par value (in dollars per share) | $ 0 | $ 0 |
Preferred stock, shares authorized (shares) | 1,000,000 | 1,000,000 |
Preferred stock, shares issued (shares) | 0 | 0 |
Preferred stock, shares outstanding (shares) | 0 | 0 |
Common stock, par value ( in dollars per share ) | $ 0 | $ 0 |
Common stock, shares authorized (shares) | 25,000,000 | 25,000,000 |
Common stock, shares issued (shares) | 7,108,853 | 7,362,703 |
Common stock, shares outstanding (shares) | 7,108,853 | 7,362,703 |
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (unaudited) (Parenthetical) - $ / shares |
3 Months Ended | |||
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Oct. 01, 2022 |
Jul. 02, 2022 |
Oct. 02, 2021 |
Jul. 03, 2021 |
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Statement of Stockholders' Equity [Abstract] | ||||
Cash dividends paid to shareholders (in dollars per share) | $ 0.31 | $ 0.31 | $ 0.26 | $ 0.26 |
Summary of Significant Accounting Policies |
9 Months Ended |
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Oct. 01, 2022 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Description of Business CRA International, Inc. (“CRA” or the “Company”) is a worldwide leading consulting services firm that applies advanced analytic techniques and in-depth industry knowledge to complex engagements for a broad range of clients. CRA offers services in two broad areas: litigation, regulatory, and financial consulting and management consulting. CRA operates in one business segment. CRA operates its business under its registered trade name, Charles River Associates. Basis of Presentation The unaudited condensed consolidated financial statements include the accounts of CRA International, Inc. and its wholly-owned subsidiaries (collectively the “Company”), which require consolidation after the elimination of intercompany accounts and transactions. These financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q. Accordingly, these financial statements do not include all the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements. In the opinion of management, these financial statements reflect all adjustments of a normal, recurring nature necessary for the fair presentation of CRA’s results of operations, financial position, cash flows, and shareholders’ equity for the interim periods presented in conformity with GAAP. Results of operations for the interim periods presented herein are not necessarily indicative of results of operations for a full year. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended January 1, 2022 included in CRA’s Annual Report on Form 10-K filed with the SEC on March 3, 2022 (the “2021 Form 10-K”). Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on previously reported results of operations, financial position, or cash flows. Estimates 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, 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. Changes in estimates are recorded in the period in which they become known. CRA bases its estimates on historical experience and various other assumptions that CRA believes to be reasonable under the circumstances. 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 Combinations CRA accounts for business acquisitions using the acquisition method of accounting, which requires assets acquired and liabilities assumed to be measured and recorded at their estimated fair values as of the acquisition date, with certain exceptions. The purchase price is determined as the fair value of consideration transferred. Goodwill is recognized for the excess of consideration transferred over the net value of assets acquired and liabilities assumed. The operating results of each acquired company is included in CRA's consolidated financial statements beginning on the date of acquisition. Fair value measurements require extensive use of estimates and assumptions, including estimates of future cash flows to be generated by the acquired assets. The useful lives of identifiable intangible assets acquired in a business acquisition are estimated based on the expected period that the Company will receive substantially all projected future benefits from the intangible asset. Transaction expenses directly related to acquisitions are expensed as incurred and are included in selling, general and administrative expenses on the condensed consolidated statements of operations. Recent Accounting Standards Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers In October 2021, the FASB issued Accounting Standards Update ("ASU") No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). The ASU requires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers ("ASC 606") at the acquisition date as if the acquirer had originated the contracts rather than adjust them to fair value. CRA elected to early adopt ASU 2021-08 on the first day of fiscal 2022. The adoption of the new standard had no impact on CRA's financial position, results of operations, cash flows, or disclosures on the date of transition.
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Business Acquisition |
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Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition | Business Acquisition On February 28, 2022, CRA acquired substantially all business assets and assumed certain liabilities of Welch Consulting, Ltd. (“Welch Consulting”), a Texas limited partnership. Welch Consulting provided economic, business, and strategic consulting services principally involving labor and employment issues. The acquisition expands CRA’s business opportunities, expertise, and market presence with the addition of 45 colleagues and offices in Bryan, Texas; Los Angeles, California; and Washington, D.C. A non-employee expert of CRA served as an agent and attorney-in-fact on behalf of Welch Consulting. The non-employee expert did not and will not receive compensation or a portion of the purchase price as part of the transaction. The acquisition has been accounted for as a business combination, and the results of operations have been included in the accompanying condensed consolidated financial statements from the date of acquisition. On the date of acquisition, right-of-use assets and lease liabilities were recorded in accordance with ASC Topic 842, Leases. In addition, contract assets and contract liabilities were recorded in accordance with ASC 606, as CRA adopted ASU 2021-08 on the first day of fiscal 2022. All other tangible assets and identifiable intangible assets acquired and liabilities assumed were recorded at their fair value as of the date of acquisition. The current values of assets acquired and liabilities assumed are preliminary and based on the best available information. Certain items, such as the working capital adjustments, intangible assets, and goodwill, may be subject to change as additional information is received. The allocation of the purchase price will be finalized as soon as practicable, but not later than one year from the date of acquisition. The final purchase price allocation may be different from the preliminary estimate reported as CRA receives additional information and completes its analysis of transaction-related activities, the impact of which is not expected to be material to CRA’s results of operations for fiscal 2022. The following table presents the preliminary assets acquired and liabilities assumed as of October 1, 2022 (in thousands):
For the acquired assets and assumed liabilities, CRA has paid $10.2 million, net, as of October 1, 2022, the amount of which was based on adjusted estimates of certain net working capital items. Additional adjustments to the purchase consideration may be due to or from Welch Consulting. Per the terms of the Asset Purchase Agreement, $0.5 million was withheld from the closing payment and will be paid to Welch Consulting within one year of the date of acquisition, subject to the satisfaction of certain assurances provided by Welch Consulting. In addition, CRA issued $7.9 million of forgivable loans and agreed to provide other deferred compensation to key employees and a non-employee expert, which is treated as post-transaction compensation expense as incurred. The intangible assets acquired are comprised of customer relationships, the fair value of which was determined using a multi-period excess earning method. The customer relationships intangible is being amortized over a ten-year life on a straight-line basis, which approximates the expected pattern of economic benefit from this asset. The Company also recorded $2.4 million of goodwill, all of which is expected to be deductible for tax purposes. Transaction related expenses, which are principally legal and accounting service fees, amounted to $0.2 million for the fiscal year-to-date period ended October 1, 2022 and are included in selling, general and administrative expenses on the condensed consolidated statements of operations.
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Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments As of October 1, 2022 and January 1, 2022, CRA did not have any financial instruments measured at fair value on a recurring basis. The contingent consideration liability pertained to estimated future contingent consideration payments related to the acquisition of C1 Consulting, LLC, an independent consulting firm, and its wholly-owned subsidiary C1 Associates. CRA had no contingent consideration obligation during the fiscal year-to-date period ended October 1, 2022. CRA paid the contingent consideration liability in the first quarter of fiscal 2021. The following table summarizes the changes in the contingent consideration liability for the fiscal year ended January 1, 2022 (in thousands):
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Revenue Recognition |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | Revenues and AllowancesThe contracts CRA enters into and operates under specify whether the projects are billed on a time-and-materials or a fixed-price basis. 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. Disaggregation of Revenue The following tables disaggregate CRA’s revenue by type of contract and geographic location (in thousands):
Reserves for Variable Consideration and Credit Risk Revenues from CRA's consulting services are recorded at the net transaction price, which includes estimates of variable consideration for which reserves are established. Variable consideration reserves are based on specific price concessions and those expected to be extended to CRA customers estimated by CRA's historical realization rates. Reserves for variable consideration are recorded as a component of the allowances for accounts receivable and unbilled services on the condensed consolidated balance sheets. 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):
Reimbursable Expenses Revenues also include reimbursements for costs incurred by CRA in fulfilling its performance obligations, including travel and other out-of-pocket expenses, fees for outside consultants, and other reimbursable expenses. CRA recovers substantially all of these costs. The following expenses are subject to reimbursement (in thousands):
Contract Balances from Contracts with Customers 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 October 1, 2022 and January 1, 2022. When consideration is received, or such consideration is unconditionally due from a customer prior to transferring consulting services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after performance obligations have been satisfied and all revenue recognition criteria have been met. The following table presents the closing balances of CRA's contract liabilities (in thousands):
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):
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Forgivable Loans |
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Forgivable Loans | Forgivable Loans In order to attract and retain highly skilled professionals, CRA may issue forgivable loans to employees and non-employee experts, certain of which may be denominated in local currencies. A portion of these loans is collateralized. The principal amount of forgivable loans and accrued interest is forgiven by CRA over the term of the loans, so long as the employee or non-employee expert continues employment or affiliation with CRA 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. The following table presents forgivable loan activity for the respective periods (in thousands):
_______________________________ (1)Relates to the reclassification of performance awards previously recorded as accrued expenses or forgivable loans that have been reclassified to other receivables.
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Goodwill and Intangible Assets |
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Goodwill and Intangible Assets | Goodwill and Intangible Assets The changes in the carrying amount of goodwill for the fiscal year-to-date period ended October 1, 2022 are summarized as follows (in thousands):
Goodwill at October 1, 2022, is comprised of goodwill of $160.9 million and accumulated impairment of $71.9 million. There were no impairment losses related to goodwill during the fiscal year-to-date period ended October 1, 2022 or during the fiscal year ended January 1, 2022. Intangible assets that are separable from goodwill and have determinable useful lives are valued separately and amortized using the straight-line method over their expected useful lives. The components of acquired identifiable intangible assets are as follows (in thousands):
There were no impairment losses related to intangible assets during the fiscal year-to-date period ended October 1, 2022 or during the fiscal year ended January 1, 2022. As a result of the Welch Consulting acquisition, CRA recognized approximately $4.2 million of intangible assets related to customer relationships in the first quarter of fiscal 2022. Amortization expense related to intangible assets was $0.3 million and $0.9 million for the fiscal quarter and fiscal year-to-date period ended October 1, 2022, respectively, and $0.2 million and $0.7 million for the fiscal quarter and fiscal year-to-date period ended October 2, 2021, respectively.
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Accrued Expenses |
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Accrued Expenses | Accrued Expenses Accrued expenses consist of the following (in thousands):
As of October 1, 2022 and January 1, 2022, approximately $89.1 million and $118.9 million, respectively, of accrued bonuses were included above in “Compensation and related expenses.”
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Income Taxes |
9 Months Ended |
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Oct. 01, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes For the fiscal quarters ended October 1, 2022 and October 2, 2021, CRA’s effective income tax rate (“ETR”) was 25.3% and 14.8%, respectively. The ETR for the third quarter of fiscal 2022 was higher than the third quarter of fiscal 2021 primarily due to a decrease in the tax benefit related to share-based compensation and foreign-derived intangible income, and higher nondeductible compensation paid to executive officers. For the fiscal year-to-date periods ended October 1, 2022 and October 2, 2021, CRA's ETR was 26.7% and 22.0%, respectively. The ETR for the current fiscal year-to-date period was higher than the prior year-to-date period primarily due to a decrease in the tax benefit related to share-based compensation and foreign-derived intangible income, and higher nondeductible compensation paid to executive officers, partially offset by the impact of the U.K. statutory rate increase in the second quarter of fiscal 2021 that did not recur in the current period. In fiscal 2020, as a result of both a qualitative and quantitative analysis, certain amounts of previously taxed and untaxed post fiscal 2018 U.K. earnings were no longer considered permanently reinvested. 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 current fiscal year-to-date period, deferred taxes of $0.2 million have been recorded as a consequence of foreign exchange translation. Deferred income taxes or foreign withholding taxes, estimated to be $0.4 million, have not been recorded for other jurisdictions as those earnings are considered to be permanently reinvested.
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Net Income Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Per Share | Net Income Per ShareCRA calculates basic earnings per share using the two-class method. 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 October 1, 2022 and October 2, 2021. Under the two-class method, net earnings are allocated to each class of common stock and participating security as if all the net earnings for the period had been distributed. CRA's participating securities consist of unvested share-based payment awards that contain a nonforfeitable right to receive dividends and therefore are considered to participate in undistributed earnings with common shareholders. Net earnings allocable to these participating securities were not material for the fiscal quarters ended October 1, 2022 and October 2, 2021. The following table presents the calculation of basic and diluted net income per share (in thousands, except per share data):
For the fiscal quarter and fiscal year-to-date period ended October 1, 2022, the anti-dilutive share-based awards that were excluded from the calculation of common stock equivalents for purposes of computing diluted weighted average shares outstanding amounted to 997 and 249 shares, respectively. There were no anti-dilutive share-based awards for the fiscal quarter and fiscal year-to-date period ended October 2, 2021.
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Credit Agreement |
9 Months Ended |
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Oct. 01, 2022 | |
Debt Disclosure [Abstract] | |
Credit Agreement | Credit Agreement CRA was a party to an amended and restated credit agreement (the "Initial Credit Agreement") that provided CRA with a $175.0 million revolving credit facility that included a $15.0 million sublimit for the issuance of letters of credit. The Initial Credit Agreement was scheduled to mature on October 24, 2022; CRA was permitted to repay any borrowings at any time prior to the maturity date. CRA was required to comply with various financial and non-financial covenants under the Initial Credit Agreement. On August 19, 2022, CRA refinanced its revolving credit facility under the Initial Credit Agreement by entering into a Credit Agreement (the "Credit Agreement") with Bank of America, N.A., as swingline lender, a letter of credit issuing bank and administrative agent, and with Citizens Bank, N.A., as a letter of credit issuing bank. The Credit Agreement provides CRA with a $250.0 million revolving credit facility, which may be decreased at CRA's option to $200.0 million during the period from July 16th in a year through January 15th in the next year. Additionally, for the period from January 16th to July 15th of each calendar year, CRA may elect to not increase the revolving credit facility to $250.0 million. The revolving credit facility includes a $25.0 million sublimit for the issuance of letters of credit. Concurrent with CRA's entry into the Credit Agreement, the Company terminated the Initial Credit Agreement and repaid in full all outstanding indebtedness under the Initial Credit Agreement of approximately $50.0 million. Also, letters of credit in the aggregate amount of approximately $4.4 million that had been issued under the Initial Credit Agreement were deemed to be issued and outstanding under the new revolving credit facility. In connection with the Credit Agreement, the Company incurred debt issuance costs from the lenders and third-parties of $1.0 million. CRA may use the proceeds of the revolving credit loans under the Credit Agreement for general corporate purposes and may repay any borrowings under the revolving credit facility at any time, but any borrowings must be repaid no later than August 19, 2027. Borrowings under the revolving credit facility bear interest at a rate per annum equal to one of the following rates, at CRA's election, plus an applicable margin as described below: (i) in the case of borrowings in U.S. dollars by the Company, the Base Rate (as defined in the Credit Agreement), (ii) in the case of borrowings in U.S. dollars, a rate based on Term SOFR (as defined in the Credit Agreement) for the applicable interest period, (iii) in the case of borrowings in Euros, EURIBOR (as defined in the Credit Agreement) for the applicable interest period, (iv) in the case of borrowings in Pounds Sterling, a daily rate based on SONIA (as defined in the Credit Agreement), (v) in the case of borrowings in Canadian Dollars, CDOR (as defined in the Credit Agreement) for the applicable interest period, (vi) in the case of borrowings in Swiss Francs, a daily rate based on SARON (as defined in the Credit Agreement), or (vii) in the case of borrowings in any other Alternate Currency (as defined in the Credit Agreement), the relevant daily or term rate determined as provided in the Credit Agreement. The applicable margin on borrowings based on the Base Rate varies within a range of 0.25% to 1.00% depending on CRA's consolidated net leverage ratio, and the applicable margin on borrowings based on any of the other rates described above varies within a range of 1.25% to 2.00% depending on CRA's consolidated net leverage ratio. CRA is required to pay a fee on the amount available to be drawn under any letter of credit issued under the revolving credit facility at a rate per annum that varies between 1.25% and 2.00% depending on CRA's consolidated net leverage ratio. In addition, CRA is required to pay a fee on the unused portion of the revolving credit facility at a rate per annum that varies between 0.175% and 0.250% depending on CRA's consolidated net leverage ratio. Under the Credit Agreement, CRA must comply with various financial and non-financial covenants. The primary financial covenants consist of a maximum consolidated net leverage ratio and a minimum consolidated interest coverage ratio. The primary non-financial covenants include, but are not limited to, restrictions on CRA's ability to incur future indebtedness, engage in acquisitions or dispositions, pay dividends or repurchase capital stock, and enter into business combinations. Any indebtedness outstanding under the revolving credit facility may become immediately due upon the occurrence of stated events of default, including CRA's failure to pay principal, interest or fees, or upon the breach of any covenant. As of October 1, 2022, CRA was in compliance with the covenants of the Credit Agreement. There was $45.0 million in borrowings outstanding under the revolving credit facility as of October 1, 2022 and no borrowings outstanding as of January 1, 2022. As of October 1, 2022, the amount available under the revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $4.4 million.
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Commitments and Contingencies |
9 Months Ended |
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Oct. 01, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 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 is subject to legal actions arising in the ordinary course of business. In management’s opinion, based on current knowledge, CRA believes it has adequate legal defenses or insurance coverage, or both, with respect to the eventuality of such actions. CRA does not believe any settlement or judgment relating to any pending legal action would materially affect its financial position or results of operations. However, the outcome of such legal actions is inherently unpredictable and subject to inherent uncertainties.
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Subsequent Events |
9 Months Ended |
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Oct. 01, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsOn November 3, 2022, CRA announced that its Board of Directors declared a quarterly cash dividend of $0.36 per common share, payable on December 9, 2022 to shareholders of record as of November 29, 2022. |
Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
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Oct. 01, 2022 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The unaudited condensed consolidated financial statements include the accounts of CRA International, Inc. and its wholly-owned subsidiaries (collectively the “Company”), which require consolidation after the elimination of intercompany accounts and transactions. These financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q. Accordingly, these financial statements do not include all the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements. In the opinion of management, these financial statements reflect all adjustments of a normal, recurring nature necessary for the fair presentation of CRA’s results of operations, financial position, cash flows, and shareholders’ equity for the interim periods presented in conformity with GAAP. Results of operations for the interim periods presented herein are not necessarily indicative of results of operations for a full year. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended January 1, 2022 included in CRA’s Annual Report on Form 10-K filed with the SEC on March 3, 2022 (the “2021 Form 10-K”). Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on previously reported results of operations, financial position, or cash flows.
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Estimates | Estimates 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, 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. Changes in estimates are recorded in the period in which they become known. CRA bases its estimates on historical experience and various other assumptions that CRA believes to be reasonable under the circumstances. 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.
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Business Combinations | Business Combinations CRA accounts for business acquisitions using the acquisition method of accounting, which requires assets acquired and liabilities assumed to be measured and recorded at their estimated fair values as of the acquisition date, with certain exceptions. The purchase price is determined as the fair value of consideration transferred. Goodwill is recognized for the excess of consideration transferred over the net value of assets acquired and liabilities assumed. The operating results of each acquired company is included in CRA's consolidated financial statements beginning on the date of acquisition. Fair value measurements require extensive use of estimates and assumptions, including estimates of future cash flows to be generated by the acquired assets. The useful lives of identifiable intangible assets acquired in a business acquisition are estimated based on the expected period that the Company will receive substantially all projected future benefits from the intangible asset. Transaction expenses directly related to acquisitions are expensed as incurred and are included in selling, general and administrative expenses on the condensed consolidated statements of operations.
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Recent Accounting Standards | Recent Accounting Standards Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers In October 2021, the FASB issued Accounting Standards Update ("ASU") No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). The ASU requires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers ("ASC 606") at the acquisition date as if the acquirer had originated the contracts rather than adjust them to fair value. CRA elected to early adopt ASU 2021-08 on the first day of fiscal 2022. The adoption of the new standard had no impact on CRA's financial position, results of operations, cash flows, or disclosures on the date of transition.
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Business Acquisition (Tables) |
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Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of assets acquired and liabilities assumed | The following table presents the preliminary assets acquired and liabilities assumed as of October 1, 2022 (in thousands):
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Fair value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the changes in the contingent consideration liabilities | The following table summarizes the changes in the contingent consideration liability for the fiscal year ended January 1, 2022 (in thousands):
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Revenue Recognition (Tables) |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of disaggregate CRA's revenue by type of contract and geographic location | The following tables disaggregate CRA’s revenue by type of contract and geographic location (in thousands):
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Schedule of bad debt expense, net of recoveries | The following table presents CRA's bad debt expense, net of recoveries of previously written off allowances (in thousands):
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Schedule of expenses are subject to reimbursement | The following expenses are subject to reimbursement (in thousands):
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Schedule of opening and closing balances and result of changes in contract liability balance (in thousands) | The following table presents the closing balances of CRA's contract liabilities (in thousands):
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):
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Forgivable Loans (Tables) |
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Schedule of forgivable loan activity | The following table presents forgivable loan activity for the respective periods (in thousands):
_______________________________ (1)Relates to the reclassification of performance awards previously recorded as accrued expenses or forgivable loans that have been reclassified to other receivables.
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Goodwill and Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes in the carrying amount of goodwill | The changes in the carrying amount of goodwill for the fiscal year-to-date period ended October 1, 2022 are summarized as follows (in thousands):
Goodwill at October 1, 2022, is comprised of goodwill of $160.9 million and accumulated impairment of $71.9 million. There were no impairment losses related to goodwill during the fiscal year-to-date period ended October 1, 2022 or during the fiscal year ended January 1, 2022.
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Schedule of components of acquired identifiable intangible assets | The components of acquired identifiable intangible assets are as follows (in thousands):
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Accrued Expenses (Tables) |
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Accrued Liabilities, Current [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accrued expenses | Accrued expenses consist of the following (in thousands):
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Net Income Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of earnings per share | The following table presents the calculation of basic and diluted net income per share (in thousands, except per share data):
|
Summary of Significant Accounting Policies - Description of Business and Fiscal Year (Details) |
9 Months Ended |
---|---|
Oct. 01, 2022
segment
area
| |
Accounting Policies [Abstract] | |
Number of broad areas of consulting services | area | 2 |
Number of business segment | segment | 1 |
Business Acquisition - Narrative (Details) $ in Thousands |
9 Months Ended | |||
---|---|---|---|---|
Feb. 28, 2022
USD ($)
colleague
|
Oct. 01, 2022
USD ($)
|
Oct. 02, 2021
USD ($)
|
Jan. 01, 2022
USD ($)
|
|
Business Acquisition [Line Items] | ||||
Consideration paid for acquisition, net | $ 10,185 | $ 0 | ||
Goodwill | 89,036 | $ 88,936 | ||
Welch Consulting, Ltd. | ||||
Business Acquisition [Line Items] | ||||
Business Combination, Number of New Employees | colleague | 45 | |||
Consideration paid for acquisition, net | $ 10,200 | |||
Contingent consideration liability | 500 | |||
Forgivable loans issued in transaction | $ 7,900 | |||
Acquired intangible assets, useful life | 10 years | |||
Goodwill | $ 2,409 | |||
Transaction related expenses | $ 200 |
Business Acquisition - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands |
Oct. 01, 2022 |
Feb. 28, 2022 |
Jan. 01, 2022 |
---|---|---|---|
Current assets: | |||
Goodwill | $ 89,036 | $ 88,936 | |
Welch Consulting, Ltd. | |||
Current assets: | |||
Accounts receivable | $ 3,778 | ||
Unbilled services | 1,507 | ||
Prepaid expenses and other current assets | 100 | ||
Total current assets | 5,385 | ||
Property and equipment | 141 | ||
Goodwill | 2,409 | ||
Intangible assets | 4,150 | ||
Right-of-use assets | 1,210 | ||
Other assets | 41 | ||
Total assets acquired | 13,336 | ||
Current liabilities: | |||
Accrued expenses | 1,280 | ||
Deferred revenue and other liabilities | 161 | ||
Current portion of lease liabilities | 549 | ||
Total current liabilities | 1,990 | ||
Non-current portion of lease liabilities | 661 | ||
Total liabilities assumed | 2,651 | ||
Net assets acquired | $ 10,685 |
Fair Value of Financial Instruments (Details) $ in Thousands |
12 Months Ended |
---|---|
Jan. 01, 2022
USD ($)
| |
Summary of changes in contingent consideration liability | |
Beginning balance | $ 14,620 |
Accretion | 380 |
Payment of contingent consideration | (15,000) |
Ending balance | $ 0 |
Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 01, 2022 |
Oct. 02, 2021 |
Oct. 01, 2022 |
Oct. 02, 2021 |
|
Disaggregation of Revenue | ||||
Consulting services revenues | $ 148,441 | $ 136,412 | $ 445,925 | $ 431,167 |
United States | ||||
Disaggregation of Revenue | ||||
Consulting services revenues | 121,496 | 109,387 | 358,583 | 347,444 |
United Kingdom | ||||
Disaggregation of Revenue | ||||
Consulting services revenues | 20,069 | 20,177 | 63,322 | 63,203 |
Other | ||||
Disaggregation of Revenue | ||||
Consulting services revenues | 6,876 | 6,848 | 24,020 | 20,520 |
Fixed-price | ||||
Disaggregation of Revenue | ||||
Consulting services revenues | 24,201 | 31,741 | 80,515 | 101,419 |
Time-and-materials | ||||
Disaggregation of Revenue | ||||
Consulting services revenues | $ 124,240 | $ 104,671 | $ 365,410 | $ 329,748 |
Revenue Recognition - Reserves for Variable Consideration and Credit Risk (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 01, 2022 |
Oct. 02, 2021 |
Oct. 01, 2022 |
Oct. 02, 2021 |
|
Revenue from Contract with Customer [Abstract] | ||||
Bad debt expense (recovery), net | $ (83) | $ 55 | $ (345) | $ 44 |
Reimbursable expenses | $ 15,009 | $ 15,727 | $ 47,654 | $ 49,382 |
Revenue Recognition - Contract Balances from Contracts with Customers (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Oct. 01, 2022 |
Oct. 02, 2021 |
Oct. 01, 2022 |
Oct. 02, 2021 |
Jan. 01, 2022 |
|
Contract liabilities: | |||||
Contract liabilities | $ 2,684 | $ 2,684 | $ 8,811 | ||
Revenue recognized from: | |||||
Amounts included in contract liabilities at the beginning of the period | 1,831 | $ 1,603 | 8,101 | $ 5,051 | |
Performance obligations satisfied in previous periods | $ 3,495 | $ 3,925 | $ 2,193 | $ 2,805 |
Forgivable Loans (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Oct. 01, 2022 |
Jan. 01, 2022 |
|
Forgivable loan activity | ||
Beginning balance | $ 48,591 | $ 61,613 |
Advances | 25,467 | 14,528 |
Repayments | (25) | (69) |
Reclassifications from accrued expenses or to other assets | (1,411) | (2,229) |
Amortization | (18,145) | (25,187) |
Effects of foreign currency translation | (734) | (65) |
Ending balance | 53,743 | 48,591 |
Current portion of forgivable loans | 10,453 | 10,571 |
Non-current portion of forgivable loans | $ 43,290 | $ 38,020 |
Goodwill and Intangible Assets - Schedule of Goodwill (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Oct. 01, 2022 |
Oct. 01, 2022 |
Jan. 01, 2022 |
|
Changes in the carrying amount of goodwill | |||
Goodwill | $ 160,900 | $ 160,900 | $ 160,829 |
Accumulated goodwill impairment | (71,900) | (71,900) | $ (71,893) |
Balance at the beginning of the period, Goodwill, net | 88,936 | ||
Additions due to acquisitions | 2,409 | ||
Foreign currency translation adjustment | (2,309) | ||
Balance at the end of the period, Goodwill, net | $ 89,036 | $ 89,036 |
Goodwill and Intangible Assets - Acquired and Amortization (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Oct. 01, 2022 |
Jan. 01, 2022 |
|
Acquired identifiable intangible assets | ||
Gross Carrying Amount | $ 12,370 | $ 8,500 |
Accumulated Amortization | (4,902) | (4,319) |
Net Carrying Amount | 7,468 | 4,181 |
Non-competition agreements | ||
Acquired identifiable intangible assets | ||
Gross Carrying Amount | 0 | 280 |
Accumulated Amortization | 0 | (275) |
Net Carrying Amount | $ 0 | 5 |
Useful Life (in years) | 5 years | |
Customer relationships | ||
Acquired identifiable intangible assets | ||
Gross Carrying Amount | $ 12,370 | 8,220 |
Accumulated Amortization | (4,902) | (4,044) |
Net Carrying Amount | $ 7,468 | $ 4,176 |
Useful Life (in years) | 10 years |
Goodwill and Intangible Assets - Narrative (Details) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Oct. 01, 2022 |
Oct. 02, 2021 |
Oct. 01, 2022 |
Oct. 02, 2021 |
Jan. 01, 2022 |
|
Acquired identifiable intangible assets | |||||
Intangible assets impairment losses | $ 0 | $ 0 | |||
Amortization | $ 300,000 | $ 200,000 | 900,000 | $ 700,000 | |
Customer relationships | |||||
Acquired identifiable intangible assets | |||||
intangible assets acquired | $ 4,200,000 |
Accrued Expenses (Details) - USD ($) $ in Thousands |
Oct. 01, 2022 |
Jan. 01, 2022 |
---|---|---|
Accrued Liabilities, Current [Abstract] | ||
Compensation and related expenses | $ 114,422 | $ 143,199 |
Performance awards | 8,819 | 4,603 |
Direct project accruals | 2,723 | 2,833 |
Other | 6,677 | 5,679 |
Total accrued expenses | 132,641 | 156,314 |
Compensation and related expenses | ||
Accrued bonuses | $ 89,100 | $ 118,900 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 01, 2022 |
Oct. 02, 2021 |
Oct. 01, 2022 |
Oct. 02, 2021 |
|
Income Tax Disclosure [Abstract] | ||||
Effective tax rate (as a percent) | 25.30% | 14.80% | 26.70% | 22.00% |
Deferred tax liability, foreign exchange translation | $ 200 | $ 200 | ||
Deferred tax liability recognized, undistributed foreign earnings | $ 400 | $ 400 |
Net Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 01, 2022 |
Oct. 02, 2021 |
Oct. 01, 2022 |
Oct. 02, 2021 |
|
Numerator: | ||||
Net income — basic | $ 11,877 | $ 10,945 | $ 34,946 | $ 33,012 |
Less: net income attributable to participating shares | 42 | 43 | 130 | 128 |
Net income — diluted | $ 11,835 | $ 10,902 | $ 34,816 | $ 32,884 |
Denominator: | ||||
Weighted average shares outstanding — basic (in shares) | 7,119,000 | 7,375,000 | 7,247,000 | 7,440,000 |
Effect of dilutive stock options and restricted stock units (in shares) | 127,000 | 185,000 | 129,000 | 203,000 |
Weighted average shares outstanding — diluted (in shares) | 7,246,000 | 7,560,000 | 7,376,000 | 7,643,000 |
Basic (in dollars per share) | $ 1.66 | $ 1.48 | $ 4.81 | $ 4.42 |
Diluted (in dollars per share) | $ 1.63 | $ 1.44 | $ 4.72 | $ 4.31 |
Anti-dilutive share-based awards excluded (in shares) | 997,000 | 0 | 249,000 | 0 |
Subsequent Events (Details) - $ / shares |
3 Months Ended | ||||
---|---|---|---|---|---|
Nov. 03, 2022 |
Oct. 01, 2022 |
Jul. 02, 2022 |
Oct. 02, 2021 |
Jul. 03, 2021 |
|
Subsequent Events | |||||
Common share quarterly cash dividend declared (in dollars per share) | $ 0.31 | $ 0.31 | $ 0.26 | $ 0.26 | |
Subsequent Events | |||||
Subsequent Events | |||||
Common share quarterly cash dividend declared (in dollars per share) | $ 0.36 |
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