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Revenues Costs of services (exclusive of depreciation and amortization) Selling, general and administrative expenses Depreciation and amortization Income from operations GNU gain on sale of business assets Interest expense, net Other income (expense), net Income before provision for income taxes Provision for income taxes Net income Net (income) loss attributable to noncontrolling interest, net of tax Net income attributable to CRA International, Inc. Net income per share attributable to CRA International, Inc: Basic Diluted Weighted average number of shares outstanding: Basic Diluted See accompanying notes to the condensed consolidated financial statements. Net income Other comprehensive (loss) income: Foreign currency translation adjustments Comprehensive income Less: comprehensive (income) loss attributable to noncontrolling interest Comprehensive income attributable to CRA International, Inc. Assets Current assets: Cash and cash equivalents Accounts receivable, net of allowances of $7,486 at September 30, 2017 and $4,253 at December 31, 2016 Unbilled services, net of allowances of $2,531 at September 30, 2017 and $1,720 at December 31, 2016 Prepaid expenses and other current assets Forgivable loans Total current assets Property and equipment, net Goodwill Intangible assets, net 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 deferred rent Current portion of deferred compensation Total current liabilities Non-current liabilities: Deferred rent and facility-related non-current liabilities Deferred compensation and other non-current liabilities Deferred income taxes Total non-current liabilities Commitments and contingencies (Note 16) Shareholders' equity: Preferred stock, no par value; 1,000,000 shares authorized; none issued and outstanding Common stock, no par value; 25,000,000 shares authorized; 8,055,783 shares and 8,333,990 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively Retained earnings Accumulated other comprehensive loss Total CRA International, Inc. shareholders' equity Noncontrolling interest Total shareholders' equity Total liabilities and shareholders' equity See accompanying notes to the condensed consolidated financial statements. Operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Loss on disposal of property and equipment Impairment of intangible assets GNU gain on sale of business assets Deferred rent Deferred income taxes Share-based compensation expenses Excess tax benefits from share-based compensation Accounts receivable allowances 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 Net cash provided by operating activities Investing activities: Cash consideration paid for acquisitions Purchases of property and equipment GNU cash proceeds from sale of business assets Net cash used in investing activities Financing activities: Issuance of common stock, principally stock option exercises Payments on notes payable Borrowings under line of credit Repayments under line of credit Tax withholding payments reimbursed by restricted shares Excess tax benefits from share-based compensation Cash paid on dividend equivalents Cash dividends paid to stockholders Repurchases of common stock Net cash 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: Issuance of common stock for acquired business Purchases of property and equipment not yet paid for Purchases of property and equipment paid by a third party Asset retirement obligations Supplemental cash flow information: Cash paid for income taxes Cash paid for interest BALANCE AT DECEMBER 31, 2016 Net income Foreign currency translation adjustment Issuance of common stock for acquired businesses Exercise of stock options Share-based compensation expense for employees Restricted share and unit vestings Redemption of vested employee restricted shares for tax withholding Cumulative effect of a change in accounting principle related to ASU 2016-09 Shares repurchases Share-based compensation expense for non-employees Accrued dividends on unvested units Cash paid on dividend equivalents Cash dividends paid to stockholders BALANCE AT SEPTEMBER 30, 2017 See accompanying notes to the condensed consolidated financial statements. the condensed consolidated financial statements. 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. 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 2021-08, Acquisition transaction. 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 2022. The following table Assets Acquired: Current assets: Accounts receivable and unbilled receivables Other current assets Total current assets Property and equipment Other non-current assets Intangible assets Goodwill Total assets acquired Liabilities Assumed: Current liabilities: Deferred revenue Accrued expenses and other current liabilities Total current liabilities Contingent consideration Total liabilities assumed Net assets acquired The intangible assets acquired are comprised deductible for tax purposes. make required payments. The following table Assets: Money market funds Total Assets Liabilities: Contingent consideration liability Total Liabilities Assets: Money market funds Total Assets Liabilities: Contingent consideration liability Total Liabilities all revenue recognition criteria have been met. The following table Beginning balance Acquisitions Remeasurement of acquisition-related contingent consideration Accretion Payments Effects of foreign currency translation Ending balance Beginning balance Advances Accruals Repayments Reclassification to other receivables Amortization Effect of foreign currency translation Ending balance Current portion of forgivable loans Non-current portion of forgivable loans Balance at December 31, 2016 Goodwill adjustment related to acquisition Effect of foreign currency translation Balance at September 30, 2017 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. Non-competition agreements, net of accumulated amortization of $437 and $3,821, respectively Customer relationships, net of accumulated amortization of $2,838 and $5,181, respectively Total, net of accumulated amortization Compensation and related expenses Income taxes payable Other Total As of Balance at beginning of period Increases to reserve Amounts written off Effects of foreign currency translation Balance at end of period Balance at beginning of period Increases to reserves Amounts written off Effects of foreign currency translation Balance at end of period Reimbursable expenses October 2, 2021. Net income, as reported Less: net income attributable to participating shares Net income available to common shareholders Basic weighted average shares outstanding Stock options Diluted weighted average shares outstanding For the Revenue: United States United Kingdom Other Total foreign Total Revenue Long-lived assets (property and equipment, net): United States United Kingdom Other Total foreign Total Long-lived assets 2022, Compared to the Fiscal Quarter and Fiscal Year-to-Date Period Ended October 2, 2021 Revenues Costs of services (exclusive of depreciation and amortization) Selling, general and administrative expenses Depreciation and amortization Income from operations GNU gain on sale of business assets Interest expense, net Other income (expense), net Income before provision for income taxes Provision for income taxes Net income Net (income) loss attributable to noncontrolling interest, net of tax Net income attributable to CRA International, Inc. 2022, Compared to the Fiscal Quarter Ended October 2, 2021 of fiscal 2022. $6.6 million primarily 2021. 2021. 2021. the tax benefit related to share-based compensation, partially offset by non-deductible compensation paid to executive officers. October 2, 2021. 2, 2021 2022. 2022 from 71.1% for the fiscal year-to-date period ended October 2, 2021. fiscal year-to-date period ended October 2, 2021. 2, 2021. October 1, 2022 operations for the next 12 months without the need to repatriate funds from our foreign subsidiaries. amortization expense of $9.1 million, right-of-use amortization of $10.3 million, share-based compensation expenses of $3.6 million, and other non-cash gains and benefits of $1.2 million. August 19, 2027. Borrowings under the revolving credit facility bear interest at a rate per annum equal to one of the following rates, at our election, which amounted to $4.4 million. Compensation Arrangements report. under our share repurchase program. We our share repurchase program. Directors. During the fiscal quarter and fiscal year-to-date period ended October 1, 2022, we paid dividends and dividend equivalents of $2.2 million and $6.9 million, respectively. During the fiscal quarter and fiscal year-to-date period ended October 2, 2021, we paid dividends and dividend equivalents of $1.9 million and $5.9 million, respectively. Future Capital and Liquidity Needs July 2, 2017 to July 29, 2017 July 30, 2017 to August 26, 2017 August 27, 2017 to September, 2017UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-QýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended September 30, 2017OroTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Massachusetts 04-2372210 (State or other jurisdiction of
incorporation or organization)(I.R.S. Employer Identification No.) 02116-5092 (Address of principal executive offices) (Zip Code) Massachusetts04-2372210(State or other jurisdictionTitle of incorporation or organization) each class(I.R.S. Employer Identification No.)Trading SymbolName of each exchange on which registered 200 Clarendon Street, Boston, MA
Common Stock, no par value02116-5092(Address of principal executive offices)CRAI (Zip Code)Nasdaq Global Select Market (617) 425-3000(Registrant's telephone number, including area code)ýx No o and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ýx No oor a smaller reporting company, or an emerging growth company. See definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer,” “smaller reporting company,” and "smaller reporting company"“emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filer o☐ Accelerated filer ýx Non-accelerated filer o(Do not check if a smallerreporting company)☐ Smaller reporting company o☐ Emerging growth company o☐ o☐ No ýxissuer'sissuer’s classes of common stock, as of the latest practicable date.ClassOutstanding at October 25, 2017Common Stock, no par value per share8,109,135 sharesClass Outstanding at October 28, 2022 Common Stock, no par value per share 7,134,885 shares SignaturesInternational, Inc.Condensed Consolidated Income StatementsINTERNATIONAL, INC.Inin thousands, except per share data)Fiscal Quarter Ended Fiscal Year-to-Date
Period EndedOctober 1,
2022October 2,
2021October 1,
2022October 2,
2021Revenues $ 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 $ 1.66 $ 1.48 $ 4.81 $ 4.42 Diluted $ 1.63 $ 1.44 $ 4.72 $ 4.31 Weighted average number of shares outstanding: Basic 7,119 7,375 7,247 7,440 Diluted 7,246 7,560 7,376 7,643 Quarter Ended Fiscal Year-to-Date
Period Ended September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 $ 91,325 $ 81,691 $ 273,059 $ 245,210 62,422 57,832 190,223 171,297 20,803 16,671 59,778 52,748 2,453 1,891 6,652 5,861 5,647 5,297 16,406 15,304 — — 250 3,836 (116 ) (129 ) (361 ) (356 ) 4 (108 ) (233 ) (270 ) 5,535 5,060 16,062 18,514 (2,310 ) (1,909 ) (6,100 ) (6,357 ) 3,225 3,151 9,962 12,157 (11 ) 42 (82 ) (1,327 ) $ 3,214 $ 3,193 $ 9,880 $ 10,830 $ 0.39 $ 0.39 $ 1.18 $ 1.25 $ 0.38 $ 0.38 $ 1.15 $ 1.24 8,149 8,177 8,332 8,581 8,353 8,309 8,530 8,653 CRA International, Inc.Condensed Consolidated Statements of Comprehensive Income (unaudited)(In thousands) Quarter Ended Fiscal Year-to-Date
Period Ended September 30,
2017 October 1,
2016 September 30
2017 October 1,
2016 $ 3,225 $ 3,151 $ 9,962 $ 12,157 1,274 (608 ) 3,611 (2,523 ) 4,499 2,543 13,573 9,634 (11 ) 42 (82 ) (1,327 ) $ 4,488 $ 2,585 $ 13,491 $ 8,307 Fiscal Quarter Ended Fiscal Year-to-Date
Period EndedOctober 1,
2022October 2,
2021October 1,
2022October 2,
2021Net 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 International, Inc.Condensed Consolidated Balance SheetsINTERNATIONAL, INC.Inin thousands, except share data)October 1,
2022January 1,
2022ASSETS Current assets: Cash and cash equivalents $ 24,093 $ 66,130 Accounts receivable, net of allowances of $2,903 and $3,256, respectively 133,895 116,962 Unbilled services, net of allowances of $1,171 and $1,364, respectively 74,955 45,095 Prepaid expenses and other current assets 13,993 10,589 Forgivable loans 10,453 10,571 Total current assets 257,389 249,347 Property and equipment, net 46,967 53,612 Goodwill 89,036 88,936 Intangible assets, net 7,468 4,181 Right-of-use assets 98,425 110,475 Deferred income taxes 9,449 9,319 Forgivable loans, net of current portion 43,290 38,020 Other assets 2,255 1,470 Total assets $ 554,279 $ 555,360 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 26,387 $ 23,511 Accrued expenses 132,641 156,314 Deferred revenue and other liabilities 7,327 12,821 Current portion of lease liabilities 15,478 14,337 Current portion of deferred compensation 4,204 6,103 Revolving line of credit 45,000 — Total current liabilities 231,037 213,086 Non-current liabilities: Deferred compensation and other non-current liabilities 12,783 10,947 Non-current portion of lease liabilities 108,936 124,464 Deferred income taxes 848 1,029 Total non-current liabilities 122,567 136,440 Commitments and contingencies (Note 11) Shareholders’ equity: Preferred stock, no par value; 1,000,000 shares authorized; none issued and outstanding — — Common stock, no par value; 25,000,000 shares authorized; 7,108,853 and 7,362,703 shares issued and outstanding, respectively 1,029 — Retained earnings 218,434 215,784 Accumulated other comprehensive loss (18,788) (9,950) Total shareholders’ equity 200,675 205,834 Total liabilities and shareholders’ equity $ 554,279 $ 555,360 September 30,
2017 December 31,
2016 $ 20,899 $ 53,530 76,819 66,852 41,536 24,937 12,211 19,295 6,474 5,897 157,939 170,511 41,062 36,381 88,529 74,764 9,867 2,685 10,105 10,049 25,388 28,065 1,530 1,187 $ 334,420 $ 323,642 $ 17,162 $ 13,729 74,285 75,281 3,980 3,021 1,110 1,499 851 570 97,388 94,100 18,790 15,191 9,710 6,346 355 122 28,855 21,659 — — 44,520 54,124 173,119 166,914 (10,207 ) (13,818 ) 207,432 207,220 745 663 208,177 207,883 $ 334,420 $ 323,642 CRA International, Inc.Condensed Consolidated Statements of Cash Flows (unaudited)(In thousands) Fiscal Year-to-Date
Period Ended September 30,
2017 October 1,
2016 $ 9,962 $ 12,157 6,636 5,848 10 3 523 — (250 ) (3,836 ) 1,316 3,250 230 886 4,633 4,791 — (55 ) 3,166 (247 ) (11,600 ) (3,627 ) (15,533 ) (11,874 ) 6,505 1,588 2,418 7,743 956 — (1,181 ) (414 ) 7,791 16,213 (16,163 ) — (5,366 ) (11,808 ) 250 1,100 (21,279 ) (10,708 ) 2,950 1,448 — (75 ) 11,500 7,500 (11,500 ) (7,500 ) (703 ) (490 ) — 55 (25 ) — (3,529 ) — (19,528 ) (19,318 ) (20,835 ) (18,380 ) 1,692 (80 ) (32,631 ) (12,955 ) 53,530 38,139 $ 20,899 $ 25,184 $ 3,044 $ 44 $ 2,568 $ 1,234 $ 1,640 $ — $ — $ 1,479 $ 7,297 $ 3,959 $ 248 $ 327 Fiscal Year-to-Date Period Ended October 1,
2022October 2,
2021OPERATING ACTIVITIES: Net income $ 34,946 $ 33,012 Adjustments to reconcile net income to net cash provided by (used in) operating activities, net of effect of acquired business: Depreciation and amortization 9,060 9,657 Right-of-use asset amortization 10,260 9,711 Deferred income taxes (157) (1,357) Share-based compensation expense 3,567 2,830 Bad debt expense (recovery) (345) 44 Unrealized foreign currency remeasurement (gains) losses, net (662) (220) Changes in operating assets and liabilities: Accounts receivable (17,989) 3,172 Unbilled services (30,864) (25,213) Prepaid expenses and other current assets, and other assets (1,883) (2,850) Forgivable loans (7,361) 9,304 Incentive cash awards 4,863 5,030 Accounts payable, accrued expenses, and other liabilities (26,336) (17,668) Lease liabilities (12,114) (11,549) Net cash provided by (used in) operating activities (35,015) 13,903 INVESTING ACTIVITIES: Purchases of property and equipment (2,999) (1,730) Consideration paid for acquisition, net (10,185) — Net cash used in investing activities (13,184) (1,730) FINANCING ACTIVITIES: Issuance of common stock, principally stock option exercises 760 5,005 Borrowings under revolving line of credit 124,000 72,000 Repayments under revolving line of credit (79,000) (66,000) Payments for debt issuance costs (1,008) — Tax withholding payments reimbursed by shares (1,002) (588) Cash paid for contingent consideration — (2,357) Cash dividends paid (6,860) (5,903) Repurchase of common stock (27,630) (39,977) Net cash provided by (used in) financing activities 9,260 (37,820) Effect of foreign exchange rates on cash and cash equivalents (3,098) (365) Net decrease in cash and cash equivalents (42,037) (26,012) Cash and cash equivalents at beginning of period 66,130 45,677 Cash and cash equivalents at end of period $ 24,093 $ 19,665 Noncash investing and financing activities: Increase (decrease) in accounts payable and accrued expenses for property and equipment $ (201) $ (7) Right-of-use assets obtained in exchange for lease obligations $ 2,146 $ 1,751 Restricted common stock issued for contingent consideration $ — $ 2,250 Supplemental cash flow information: Cash paid for taxes $ 11,407 $ 12,484 Cash paid for interest $ 1,026 $ 528 Cash paid for amounts included in operating lease liabilities $ 15,864 $ 15,556 International, Inc.Condensed Consolidated Statement of Shareholders' EquityINTERNATIONAL, INC.Inin thousands, except share data)Common Stock Retained
EarningsAccumulated
Other
Comprehensive
LossTotal
Shareholders’
EquityShares
IssuedAmount BALANCE AT JANUARY 1, 2022 7,362,703 $ — $ 215,784 $ (9,950) $ 205,834 Net income — — 11,426 — 11,426 Foreign currency translation adjustment — — — (1,172) (1,172) Exercise of stock options 14,552 341 — — 341 Share-based compensation expense — 1,037 — — 1,037 Restricted shares vesting 29,558 — — — — Redemption of vested employee restricted shares for tax withholding (10,163) (897) — — (897) Shares repurchased (56,665) (481) (4,475) — (4,956) Accrued dividends on unvested shares — — (11) — (11) Cash dividends paid ($0.31 per share) — — (2,377) — (2,377) BALANCE AT APRIL 2, 2022 7,339,985 $ — $ 220,347 $ (11,122) $ 209,225 Net income — — 11,643 — 11,643 Foreign currency translation adjustment — — — (3,860) (3,860) Share-based compensation expense — 1,041 — — 1,041 Restricted shares vesting 3,630 — — — — Redemption of vested employee restricted shares for tax withholding (921) (78) — — (78) Shares repurchased (211,345) (963) (16,711) — (17,674) Accrued dividends on unvested shares — — (52) — (52) Cash dividends paid ($0.31 per share) — — (2,259) — (2,259) BALANCE AT JULY 2, 2022 7,131,349 $ — $ 212,968 $ (14,982) $ 197,986 Net income — — 11,877 — 11,877 Foreign currency translation adjustment — — — (3,806) (3,806) Exercise of stock options 19,476 419 — — 419 Share-based compensation expense — 1,489 — — 1,489 Restricted shares vesting 9,843 — — — — Redemption of vested employee restricted shares for tax withholding (291) (27) — — (27) Shares repurchased (51,524) (852) (4,148) — (5,000) Accrued dividends on unvested shares — — (39) — (39) Cash dividends paid ($0.31 per share) — — (2,224) — (2,224) BALANCE AT OCTOBER 1, 2022 7,108,853 $ 1,029 $ 218,434 $ (18,788) $ 200,675 Common Stock CRA
International,
Inc.
Shareholders'
Equity Accumulated
Other
Comprehensive
Loss Shares
Issued Amount Retained
Earnings Noncontrolling
Interest Total
Shareholders'
Equity 8,333,990 $ 54,124 $ 166,914 $ (13,818 ) $ 207,220 $ 663 $ 207,883 — — 9,880 — 9,880 82 9,962 — — — 3,611 3,611 — 3,611 89,312 3,044 — — 3,044 — 3,044 133,955 2,950 — — 2,950 — 2,950 — 4,540 — — 4,540 — 4,540 72,753 — — — — — — (19,519 ) (703 ) — — (703 ) — (703 ) — — 48 — 48 — 48 (554,708 ) (19,528 ) — — (19,528 ) — (19,528 ) — 93 — — 93 — 93 — — (169 ) — (169 ) — (169 ) — — (25 ) — (25 ) — (25 ) — — (3,529 ) — (3,529 ) — (3,529 ) 8,055,783 $ 44,520 $ 173,119 $ (10,207 ) $ 207,432 $ 745 $ 208,177 International, Inc.NotesINTERNATIONAL, INC.Common Stock Retained
EarningsAccumulated
Other
Comprehensive
LossTotal
Shareholders’
EquityShares
IssuedAmount BALANCE AT JANUARY 2, 2021 7,693,497 $ 503 $ 216,999 $ (8,483) $ 209,019 Net income — — 10,501 — 10,501 Foreign currency translation adjustment — — — (111) (111) Issuance of restricted common stock for contingent consideration 40,039 2,250 — — 2,250 Exercise of stock options 41,008 1,113 — — 1,113 Share-based compensation expense — 842 — — 842 Restricted shares vesting 29,494 — — — — Redemption of vested employee restricted shares for tax withholding (9,895) (588) — — (588) Shares repurchased (166,552) (4,120) (5,522) — (9,642) Accrued dividends on unvested shares — — 5 — 5 Cash dividends paid ($0.26 per share) — — (2,061) — (2,061) BALANCE AT APRIL 3, 2021 7,627,591 $ — $ 219,922 $ (8,594) $ 211,328 Net income — — 11,566 — 11,566 Foreign currency translation adjustment — — — (136) (136) Exercise of stock options 48,562 1,387 — — 1,387 Share-based compensation expense — 980 — — 980 Restricted shares vesting 1,006 — — — — Shares repurchased (337,837) (382) (24,953) — (25,335) Accrued dividends on unvested shares — — (50) — (50) Cash dividends paid ($0.26 per share) — — (1,909) — (1,909) BALANCE AT JULY 3, 2021 7,339,322 $ 1,985 $ 204,576 $ (8,730) $ 197,831 Net income — — 10,945 — 10,945 Foreign currency translation adjustment — — — (1,028) (1,028) Exercise of stock options 98,310 2,505 — — 2,505 Share-based compensation expense — 1,008 — — 1,008 Restricted shares vesting 11,676 — — — — Shares repurchased (53,012) (4,822) (178) — (5,000) Accrued dividends on unvested shares — — (43) — (43) Cash dividends paid ( $0.26 per share) — — (1,933) — (1,933) BALANCE AT OCTOBER 2, 2021 7,396,296 $ 676 $ 213,367 $ (9,758) $ 204,285 Condensed Consolidated Financial Statements("CRA"(“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.2. and Estimates accompanying unaudited condensed consolidated financial statements reflectinclude the resultsaccounts of operations, financial position, cash flows,CRA International, Inc. and stockholders' equity asits wholly-owned subsidiaries (collectively the “Company”), which require consolidation after the elimination of intercompany accounts and for the fiscal quarters and year-to-date periods ended September 30, 2017 and October 1, 2016, respectively.transactions. These financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"(“SEC”) for Quarterly Reports on Form 10-Q. Accordingly, these financial statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America ("GAAP"(“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 statementpresentation of CRA'sCRA’s results of operations, financial position, cash flows, and stockholders'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 December 31, 2016,January 1, 2022 included in ourCRA’s Annual Report on Form 10-K filed with the SEC on March 15, 2017.fixedfixed-price contracts, variable consideration to be included in the transaction price of revenue contracts, depreciationthe useful life of propertylong-lived assets, measurement of operating lease right-of-use (“ROU”) assets and equipment,liabilities, share-based compensation, valuation of acquired intangible assets, impairment of long lived assets, goodwill, accrued and deferred income taxes, valuation allowances on deferred tax assets, accrued incentive compensation, accrued exit costs, 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'sCRA’s assumptions based on past experience or other assumptions do not turn out to be substantially accurate.3. PrinciplesConsolidationcondensedpurchase 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 includebeginning on the accountsdate of acquisition.its wholly owned subsidiaries. In addition,are included in selling, general and administrative expenses on the condensed consolidated financial statements include CRA's interest in GNU123 Liquidating Corporation ("GNU", formerly known as NeuCo Inc.). All significant intercompany transactions and accounts have been eliminated.CRA International, Inc.Notes to Condensed Consolidated Financial Statements (Continued)(Unaudited)3. Principles of Consolidation (Continued) CRA's ownership interest in GNU was 55.89% for all periods presented. GNU's financial results have been consolidated with CRA, and the portion of GNU's results allocable to its other owners is shown as "noncontrolling interest." GNU's interim reporting schedule is based on calendar month-ends, but its fiscal year end is the last Saturday of November. CRA's quarterly results could include a few days reporting lag between CRA's quarter end and the most recent financial statements available from GNU. CRA does not believe that the reporting lag will have a significant impact on CRA's consolidated income statements or financial condition. On April 13, 2016, a buyer acquired substantially all of the business assets and assumed substantially all of the liabilities of GNU for a purchase price of $1.35 million. Of this amount, $1.1 million was received at closing, with the remaining $0.25 million payable on or after April 13, 2017, subject to contingencies, as outlined in the asset purchase agreement, which remaining amount was paid in full on May 3, 2017. GNU recognized a gain on sale of its business assets of $0.25 million during the second quarter of fiscal 2017, of which $0.14 million is attributed to CRA, and $3.8 million during the second quarter of fiscal 2016, of which $2.1 million is attributed to CRA.4. operations. AdoptedImprovements to Employee Share-Based Payment In March 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-09,Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 requires all of the tax effects related to share-based payments to be recorded through the income statement. The new pronouncement also allows for the option of estimating awards expected to vest or accounting for forfeitures when they occur. In the statement of cash flows, cash paid by employers when withholding shares for tax withholding purposes should be classified as a financing activity whereas cash flows resulting from excess tax benefits should be reported in operating activities. The amendments in this update are effective for annual periods beginning after December 15, 2016,Contract Assets and interim periods within those annual periods. Accordingly, CRA adopted ASU No. 2016-09 on January 1, 2017, resulting in the recognition of a tax benefit of $0.5 million to retained earnings as of that date. CRA had traditionally classified employee taxes paid through employer share withholdings as financing activities, therefore no further adjustment was necessary. CRA has classified the excess tax benefits from share-based compensation as operating activities on a prospective basis beginning in the quarter ended April 1, 2017. Additionally, CRA did not make any changes to its accounting for forfeitures and continues to estimate forfeitures based on historical experience.5. Recent Accounting Standards Not Yet AdoptedRevenueContract Liabilities from Contracts with CustomersAugust 2015, FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date ("ASU 2015-14"). ASU 2015-14 defers by one year the effective date of ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). The deferral results in ASU 2014-09 being effective for fiscal years, and interim periods within those fiscalCRA International, Inc.Notes to Condensed Consolidated Financial Statements (Continued)(Unaudited)5. Recent Accounting Standards Not Yet Adopted (Continued)years, beginning after December 15, 2017. The main provision of ASU 2014-09 is to recognize revenue when control of the goods or services transfers to the customer, as opposed to the existing guidance of recognizing revenue when the risks and rewards transfer to the customer. The standard is expected to have an impact on the amount and timing of revenue recognized and the related disclosures on CRA's financial statements. CRA will adopt ASU 2014-09 effective January 1, 2018 and CRA expects to adopt this new standard using the modified retrospective method, which requires a cumulative-effect adjustment to retained earnings in the period of adoption. CRA currently anticipates that the most significant impact to adopting this guidance will occur with contracts which include variable consideration. The adoption of ASU 2014-09 will not have a material impact on CRA's consolidated financial position, results of operations, equity or cash flows.Leases (Topic 842) In February 2016,October 2021, the FASB issued Accounting Standards Update ("ASU") No. 2016-02,Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 establishes a comprehensive new lease accounting model. The new standard clarifies the definition of a lease, requires a dual approach to lease classification similar to current lease classifications, and causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease term of more than twelve months. The new standard is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The new standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does not require transition accounting for leases that expire prior to the date of initial application. CRA has not yet determined the effects, if any, that the adoption of ASU 2016-02 may have on its financial position, results of operations, cash flows, or disclosures.Statement of Cash Flows (Topic 230): Restricted Cash In November 2016, the FASB issued ASU No. 2016-18,Statement of Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"). ASU 2016-18 amends ASC 230 to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. The new standard requires cash and cash equivalents balances on the statement of cash flows to include restricted cash and cash equivalent balances. ASU 2016-18 requires the registrant to provide appropriate disclosures about its accounting policies pertaining to restricted cash in accordance with GAAP. Additionally, changes in restricted cash and restricted cash equivalents that result from transfers between cash, cash equivalents, and restricted cash and restricted cash equivalents should not be presented as cash flow activities in the statement of cash flows. A registrant with a material balance of amounts generally described as restricted cash and restricted cash equivalents must disclose information about the nature of the restrictions. The new standard is effective for interim and annual periods beginning after December 15, 2017. CRA believes that the adoption of ASU 2016-18 will not have a material impact on its financial position, results of operations, cash flows, or disclosures.CRA International, Inc.Notes to Condensed Consolidated Financial Statements (Continued)(Unaudited)5. Recent Accounting Standards Not Yet Adopted (Continued)Clarifying the Definition of a Business On January 5, 2017, the FASB issued a new Accounting for Contract Assets and Contract Liabilities from Contracts with Customers No. 2017-01,Business Combinations (Topic 805): Clarifying the Definition of a Business ("2021-08"). The ASU 2017-01"). ASU 2017-01 clarifies the definition ofrequires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with the objective of adding guidance to assist companies and other reporting organizationsASC Topic 606, Revenue from Contracts with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the amendments, a business is an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs, or other economic benefits directly to investors or other owners, members, or participants. For public companies, ASU 2017-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early application of the amendments in ASU 2017-01 is allowed for transactions of whichCustomers ("ASC 606") at the acquisition date occurs beforeas if the issuance date or effective dateacquirer 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 amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance; and for transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. CRA has not yet determined the effects, if any, that the adoption of ASU 2017-01 may have on its financial position, results of operations, cash flows, or disclosures.Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment On January 26, 2017, the FASB issued a new ASU No. 2017-04,Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 simplifies the subsequent measurement of goodwill, and gives the option to eliminate Step 2 from the goodwill impairment test. Under the amendments, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The amendment also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. For public companies, ASU 2017-04 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. CRA has not yet determined the effects, if any, that the adoption of ASU 2017-04 may have on its financial position, results of operations, cash flows, or disclosures.CRA International, Inc.Notes to Condensed Consolidated Financial Statements (Continued)(Unaudited)5. Recent Accounting Standards Not Yet Adopted (Continued)Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting On May 10, 2017, the FASB issued a new ASU No. 2017-09,Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting ("ASU 2017-09"). ASU 2017-09 updates guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Under the amendments, an entity should account for the effects of a modification unless all the following conditions are met. First, the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification. Second, the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. Third, the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The new standard is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for public entities for reporting periods for which financial statements have not yet been issued. CRA will adopt ASU 2017-09 during the first quarter of 2018. CRA has not completed its assessment of this standard and has not yet determined whether thehad no impact of the adoption of this standard on itsCRA's financial position, results of operations, cash flows, or disclosures will be material.6.on the date of transition.AcquisitionsJanuary 30, 2017,February 28, 2022, CRA acquired substantially all of thebusiness assets and assumed certain liabilities of C1Welch Consulting, LLC,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 independent consulting firm,agent and its wholly-owned subsidiary C1 Associates (collectively, "C1") for initial consideration comprisedattorney-in-fact on behalf of cashWelch Consulting. The non-employee expert did not and CRA restricted common stock. The asset purchase agreement provided for additional purchase consideration to be paid for up to four years following the transaction in the form of an earnout, if specific performance targets are met. These earnout payments are payable in cash and CRA restricted common stock. The fair value of this obligation was measured as of the acquisition date and accounted for aswill not receive compensation or a componentportion of the purchase consideration, any adjustments to this initial valuation in future accounting periods will be reportedprice as an adjustment to net income. C1 provides management consulting services in the life sciences industry, and has built a reputation for its specialty consulting services. Acquiring C1 will assist CRA in expanding its geographical presence in the western part of the United States and Europe, servicing CRA's existing life sciences customers more efficiently, and providing opportunities to engage with new clients in both the United States and European markets.underas a business combination, and the purchase method of accounting, and C1's results of operations have been included in the accompanying condensed consolidated incomefinancial statements from the date of acquisition. The following is a preliminary allocationOn 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 purchase price to the estimated fair valuedate of acquisition.assumed.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 CRA receives additional information relevant tosoon as practicable, but not later than one year from the acquisition and completes its analysisdate of transaction-related activities.acquisition. The final purchase price allocation may be different from theCRA International, Inc.Notes to Condensed Consolidated Financial Statements (Continued)(Unaudited)6. Business Acquisitions (Continued)CRA'sCRA’s results of operations for fiscal 2017.shows CRA'spresents the preliminary assets acquired and liabilities assumed as of October 1, 2022 (in thousands):Assets Acquired Current assets: Accounts receivable $ 3,778 Unbilled services 1,507 Prepaid expenses and other current assets 100 Total current assets 5,385 Property and equipment 141 Goodwill 2,409 Intangible assets 4,150 Right-of-use assets 1,210 Other assets 41 Total assets acquired $ 13,336 Liabilities Assumed Current liabilities: Accrued expenses $ 1,280 Deferred revenue and other liabilities 161 Current portion of lease liabilities 549 Total current liabilities 1,990 Non-current portion of lease liabilities 661 Total liabilities assumed $ 2,651 Net assets acquired $ 10,685 assumedCRA 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 purchaseclosing payment and will be paid to Welch Consulting within one year of C1 Consulting (in thousands): $ 3,820 10 3,830 206 106 8,800 12,626 $ 25,568 $ 3,396 652 4,048 2,357 6,405 $ 19,163 of non-compete agreements and the value of customer relationships, the fair value of which was determined using the incremental income method anda multi-period excess earnings method, respectively. The non-compete agreements are being amortized over the stated term of five years on a straight-line basis.earning method. The customer relationships intangible is being amortized over a ten yearten-year life on a straight-line basis, which approximates the expected pattern of economic benefit from this asset. The fair valueCompany also recorded $2.4 million of the contingent consideration was determined using a monte carlo simulation and willgoodwill, all of which is expected to be accreted over the liabilities' measurement period to its expected future payment value on a straight-line basis. The fair value of the contingent acquisition liability will be reassessed on a quarterly basis by CRA using additional information as it becomes available, and any change in the fair value estimate will be recorded in the earnings of that period.costs,expenses, which are principally legal and accounting service fees, amountamounted to $0.5$0.2 million for the fiscal year-to-date period ended September 30, 2017October 1, 2022 and are included in selling, general and administrative expenses on the condensed consolidated income statement.statements of operations.International, Inc.NotesINTERNATIONAL, INC.Condensed Consolidated Financial Statements (Continued)(Unaudited)7. Cashcomplete the project, including any amounts billed to CRA by its non-employee experts.Cash Equivalents Cash equivalents consist principallygeographic location (in thousands):Fiscal Quarter Ended Fiscal Year-to-Date
Period EndedType of Contract October 1,
2022October 2,
2021October 1,
2022October 2,
2021Consulting services revenues: Fixed-price $ 24,201 $ 31,741 $ 80,515 $ 101,419 Time-and-materials 124,240 104,671 365,410 329,748 Total $ 148,441 $ 136,412 $ 445,925 $ 431,167 Fiscal Quarter Ended Fiscal Year-to-Date
Period EndedGeographic Breakdown October 1,
2022October 2,
2021October 1,
2022October 2,
2021Consulting services revenues: United States $ 121,496 $ 109,387 $ 358,583 $ 347,444 United Kingdom 20,069 20,177 63,322 63,203 Other 6,876 6,848 24,020 20,520 Total $ 148,441 $ 136,412 $ 445,925 $ 431,167 money market funds with maturities of three months or less when purchased. As of September 30, 2017,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 substantial portion of CRA's cash accounts were concentrated at a single financial institution, which potentially exposes CRA to credit risks. The financial institution has a short-term credit rating of A-2 by Standard & Poor's ratings services. CRA has not experienced any losses related to such accounts. CRA does not believe that there is significant risk of non-performance by the financial institution, and its cash on deposit is fully liquid. CRA continually monitors the credit ratingscomponent of the institution.8. Fair Valueallowances 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 Financial Instruments Accounting Standards Codification ("ASC") Topic 820,Fair Value Measurementsoperations.Disclosures, establishes a fair value hierarchy that prioritizes the inputs usedunbilled services for estimated losses resulting from clients’ failure to measure fair value. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurement), then priority to quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market (Level 2 measurement), then the lowest priority to unobservable inputs (Level 3 measurement).showspresents CRA's financial instruments asbad debt expense, net of September 30, 2017 and December 31, 2016 that are measured and recorded in the financial statements at fair value on a recurring basisrecoveries of previously written off allowances (in thousands):Fiscal Quarter Ended Fiscal Year-to-Date
Period EndedOctober 1,
2022October 2,
2021October 1,
2022October 2,
2021Bad debt expense (recovery), net $ (83) $ 55 $ (345) $ 44 September 30, 2017 Quoted Prices in Active Markets
for Identical Assets or Liabilities Significant Other
Observable Inputs Significant
Unobservable
Inputs Level 1 Level 2 Level 3 $ 5 $ — $ — $ 5 $ — $ — $ — $ — $ 3,375 $ — $ — $ 3,375 International, Inc.Notes to Condensed Consolidated Financial Statements (Continued)(Unaudited)8. Fair Value of Financial Instruments (Continued) December 31, 2016 Quoted Prices in Active Markets
for Identical Assets or Liabilities Significant Other
Observable Inputs Significant
Unobservable
Inputs Level 1 Level 2 Level 3 $ 10,024 $ — $ — $ 10,024 $ — $ — $ — $ — $ 549 $ — $ — $ 549 Fiscal Quarter Ended Fiscal Year-to-Date
Period EndedOctober 1,
2022October 2,
2021October 1,
2022October 2,
2021Reimbursable expenses $ 15,009 $ 15,727 $ 47,654 $ 49,382 fair valuescontract assets balance was immaterial as of CRA's money market funds are based on quotesOctober 1, 2022 and January 1, 2022.third-party banks. The contingent consideration liabilities ina customer prior to transferring consulting services to the tables above are for estimated future contingent consideration payments related to prior acquisitions. The fair value measurecustomer under the terms of thesea contract, a contract liability is recorded. Contract liabilities are based on significant inputs not observed in the marketrecognized as revenue after performance obligations have been satisfied and thus represent Level 3 measurement. The significant unobservable inputs used in the fair value measurements of these contingent acquisition liabilities are CRA's measures of the estimated payouts based on internally generated financial projections and discount rates. The fair value of these contingent acquisition liabilities are reassessed on a quarterly basis by CRA using additional information as it becomes available, and any change in the fair value estimates are recorded in the earnings of that period.summarizespresents the changesclosing balances of CRA's contract liabilities (in thousands):October 1,
2022January 1,
2022Contract liabilities $ 2,684 $ 8,811 contingent considerationcontract liabilities balance as of the opening of the respective period or for performance obligations satisfied in previous periods (in thousands):Fiscal Quarter Ended Fiscal Year-to-Date
Period EndedOctober 1,
2022October 2,
2021October 1,
2022October 2,
2021Amounts 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 fiscal year-to-dateterm 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, ended September 30, 2017 andwhich is consistent with the fiscal year ended December 31, 2016 (in thousands): September 30,
2017 December 31,
2016 $ 549 $ 773 2,357 — (296 ) 71 1,018 — (299 ) (292 ) 46 (3 ) $ 3,375 $ 549 CRA International, Inc.Notes to Condensed Consolidated Financial Statements (Continued)(Unaudited)9. Forgivable Loans ForgivableThe following table presents forgivable loan activity for the fiscal year-to-date period ended September 30, 2017 and the fiscal year ended December 31, 2016 is as followsrespective periods (in thousands):Fiscal Year-to-Date Period Ended Fiscal Year Ended October 1,
2022January 1,
2022Beginning balance $ 48,591 $ 61,613 Advances 25,467 14,528 Repayments (25) (69) Reclassifications from accrued expenses or to other assets (1) (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 September 30,
2017 December 31,
2016 $ 33,962 $ 44,685 10,134 6,949 670 316 (1,884 ) (709 ) (1,102 ) — (10,293 ) (16,575 ) 375 (704 ) $ 31,862 $ 33,962 $ 6,474 $ 5,897 $ 25,388 $ 28,065 10.5. Goodwill and Intangible AssetsGoodwill $ 160,829 Accumulated goodwill impairment (71,893) Goodwill, net at January 1, 2022 88,936 Additions due to acquisitions 2,409 Foreign currency translation adjustment (2,309) Goodwill, net at October 1, 2022 $ 89,036 September 30, 2017, are as follows (in thousands): Goodwill,
gross Accumulated
impairment
losses Goodwill,
net $ 151,181 $ (76,417 ) $ 74,764 12,626 — 12,626 1,139 — 1,139 $ 164,946 $ (76,417 ) $ 88,529 There were impairment lossesThe components of $0.5 million related toacquired identifiable intangible assets during the fiscal year-to-date period ended September 30, 2017. are as follows (in thousands):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 5 $ — $ — $ — $ 280 $ (275) $ 5 Customer relationships 10 12,370 (4,902) 7,468 8,220 (4,044) 4,176 Total $ 12,370 $ (4,902) $ 7,468 $ 8,500 $ (4,319) $ 4,181 December 31, 2016. The componentsJanuary 1, 2022. As a result of acquired identifiable intangible assets are as follows (in thousands): September 30,
2017 December 31,
2016 $ 286 $ 80 9,581 2,605 $ 9,867 $ 2,685 International, Inc.NotesINTERNATIONAL, INC.Condensed Consolidated Financial Statements (Continued)(Unaudited)11.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.October 1,
2022January 1,
2022Compensation 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 September 30,
2017 December 31,
2016 $ 60,254 $ 67,582 465 534 13,566 7,165 $ 74,285 $ 75,281 September 30, 2017October 1, 2022 and December 31, 2016,January 1, 2022, approximately $47.2$89.1 million and $53.9$118.9 million, respectively, of accrued bonuses were included above in "Compensation“Compensation and related expenses".12. Credit Agreement CRA is partyexpenses.”credit agreement that provides CRA with a $125.0 million revolving credit facilitydecrease in the tax benefit related to share-based compensation and a $15.0 million sublimitforeign-derived intangible income, and higher nondeductible compensation paid to executive officers.issuance of letters of credit. CRA may use the proceeds of the revolving credit facility to provide working capital and for other general corporate purposes. CRA may repay any borrowings under the revolving credit facility at any time, but no later than April 24, 2018. There were no borrowings outstanding under this revolving credit facility as of September 30, 2017 and December 31, 2016. As of September 30, 2017 and December 31, 2016, the amount available under this revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $3.6 million and $2.2 million, respectively. Under the credit agreement, CRA must comply with various financial and non-financial covenants. Compliance with these financial covenants is tested on a fiscal quarterly basis. As of September 30, 2017, CRA was in compliance with the covenants of its credit agreement.13. Revenue Recognition CRA offers consulting services in two broad areas: litigation, regulatory, and financial consulting and management consulting. Together, these two service areas comprised 100.0% of CRA's consolidated revenues for the fiscal quarter andcurrent fiscal year-to-date period ended September 30, 2017. CRA recognizes all project revenue onwas higher than the prior year-to-date period primarily due to a gross basis based on considerationdecrease 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 criteria set forthU.K. statutory rate increase in ASC Topic 605-45,Principal Agent Considerations. The contractsthe second quarter of fiscal 2021 that CRA enters intodid not recur in the current period.operates under specify whether the engagement will be billed onquantitative 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 time-and-materials or a fixed-price basis. Mostconsequence of CRA's revenue is derived from time-and-materials service contracts. Revenues from time-and-materials service contracts are recognized as services are provided based upon hours worked and contractually agreed-upon hourly rates, as well as indirect fees based upon hours worked. Revenues from a majority of CRA's fixed-price engagements are recognized on a proportional performance method based on the ratio of costs incurred, substantially all of which are labor-related, to the total estimated project costs. In general, project costs are classified in costs of services and are based on the direct salary of the consultants on the engagement plus all direct expenses incurred to complete the engagement, including any amounts billed to CRA by its non-employee experts.CRA International, Inc.Notes to Condensed Consolidated Financial Statements (Continued)(Unaudited)13. Revenue Recognition (Continued) CRA's billed and unbilled receivables consist of receivables from a broad range of clients in a variety of industries located throughout the U.S. and in other countries. CRA performs a credit evaluation of its clients to minimize its collectability risk. Periodically, CRA will require advance payment from certain clients. However, CRA does not require collateral or other security. CRA maintains accounts receivable allowances for estimated losses and disputed amountsforeign exchange translation resulting from clients' failures to make required payments. CRA bases its estimates on historical collection experience, current trends, and credit policy. In determining these estimates, CRA examines historical write-offs of its receivables and reviews client accounts to identify any specific customer collection issues. If the financial condition of any of CRA's customers were to deteriorate, resulting in an impairment of their ability or intent to make payment, additional allowances may be required. A rollforward of the accounts receivable allowance is as follows (in thousands): Fiscal Year-to-Date
Period Ended Fiscal Year
Ended September 30,
2017 December 31,
2016 $ 4,253 $ 3,648 6,076 2,761 (2,852 ) (2,156 ) 9 — $ 7,486 $ 4,253 A rollforward of the unbilled receivables allowance is as follows (in thousands): Fiscal Year-to-Date
Period Ended Fiscal Year
Ended September 30,
2017 December 31,
2016 $ 1,720 $ 2,354 1,727 2,102 (914 ) (2,736 ) (2 ) — $ 2,531 $ 1,720 Generally, accounts and unbilled receivables allowancesearnings that are no longer considered permanently reinvested are recorded as a reduction to revenues.component of foreign currency translation adjustments on the condensed consolidated statements of comprehensive income. During the current fiscal 2016, $1.1year-to-date period, deferred taxes of $0.2 million washave been recorded as a bad debt expenseconsequence 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.reporteda one percent excise tax on net repurchases of stock after December 31, 2022. The Company is continuing to evaluate the Inflation Reduction Act and its requirements, as a component of selling, general and administrative expenses relatedwell as the application to credit-related losses.
its business.CRA International, Inc.Notes to Condensed Consolidated Financial Statements (Continued)(Unaudited)13. Revenue Recognition (Continued) Revenues also include reimbursable expenses, which include travel and other out-of-pocket expenses, outside consultants, and other reimbursable expenses. Reimbursable expenses are as follows (in thousands): Quarter Ended Fiscal Year-to-Date
Period Ended September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 $ 9,675 $ 8,969 $ 29,463 $ 25,510 CRA collects goods and services and value added taxes from customers and records these amounts on a net basis, which is within the scope of ASC Topic 605-45,Principal Agent Considerations.14.8. Net Income perPer Shareand diluted earnings per common 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.of the net earnings offor 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. Basic earnings per common share excludes dilution and is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares as of the balance sheet date, as adjusted for the potential dilutive effect of non-participating share-based awards. Net earnings allocable to these participating securities were not significantmaterial for the third quarter of fiscal 2017quarters ended October 1, 2022 and fiscal 2016.a reconciliation fromthe calculation of basic and diluted net income attributable to CRA International, Inc. to net income available to common shareholdersper share (in thousands)thousands, except per share data):Fiscal Quarter Ended Fiscal Year-to-Date
Period EndedOctober 1,
2022October 2,
2021October 1,
2022October 2,
2021Numerator: 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 7,119 7,375 7,247 7,440 Effect of dilutive stock options and restricted stock units 127 185 129 203 Weighted average shares outstanding — diluted 7,246 7,560 7,376 7,643 Net income per share: Basic $ 1.66 $ 1.48 $ 4.81 $ 4.42 Diluted $ 1.63 $ 1.44 $ 4.72 $ 4.31 Quarter Ended Fiscal Year-to-Date
Period Ended September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 $ 3,214 $ 3,193 $ 9,880 $ 10,830 21 24 66 74 $ 3,193 $ 3,169 $ 9,814 $ 10,756 CRA International, Inc.Notes to Condensed Consolidated Financial Statements (Continued)(Unaudited)14. Net Income per Share (Continued) The following table presents a reconciliation of basic to diluted weighted average shares of common stock outstanding (in thousands): Quarter Ended Fiscal Year-to-Date
Period Ended September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 8,149 8,177 8,332 8,581 204 132 198 72 8,353 8,309 8,530 8,653 thirdfiscal quarter and fiscal year-to-date periodsperiod ended September 30, 2017,October 1, 2022, the anti-dilutive share basedshare-based awards that were excluded from the calculation of common stock equivalents for purposes of computing diluted weighted average shares outstanding amounted to 40,439997 and 66,470249 shares, respectively. For the third quarter and fiscal year-to-date periods ended October 1, 2016, theThere were no 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 205,015 and 680,950 shares, respectively. These share-based awards were anti-dilutive because their exercise price exceededfor the average market price over the respective period. On March 21, 2016 and May 3, 2017, CRA's Board of Directors authorized the repurchase of up to an additional $20.0 million and $20.0 million, respectively, of CRA's common stock. Repurchases under these programs are discretionary and CRA may make repurchases under any of these programs in the open market (including under any Rule 10b5-1 plan adopted by CRA) or in privately negotiated transactions, in each case in accordance with applicable insider trading and other securities laws and regulations. CRA records the retirement of its repurchased shares as a reduction to common stock. During the third quarter of fiscal year 2017 and fiscal year-to-date period ended September 30, 2017, CRA repurchased and retired 165,629 shares and 554,708 shares, respectively, under these share repurchase programs at an average price per share of $36.63 and $35.23, respectively. During the third quarter and fiscal year-to-date period ended October 2, 2021.2016,2022 and January 1, 2022, CRA repurchased and retired 110,908 shares and 783,703 shares, respectively, under these share repurchase programsdid not have any financial instruments measured at an average price per share of $25.84 and $24.33, respectively. There was approximately $9.5 million available forfair value on a recurring basis.repurchases under these programs as of September 30, 2017.15. Income Taxes CRA's effective income tax rates were 41.7% and 37.7% for the third quarters of fiscal year 2017 and fiscal year 2016, respectively. The effective tax rate for the third quarter of fiscal year 2017 was higher than the prior year stemming from changes in the jurisdictional mix of earnings, executive compensation expenses, and the correction of a prior year estimate. This increase in rate was partially offset by the tax benefitscontingent consideration payments related to stock-based compensationthe acquisition of approximately $0.1 million as well as provision to return true-ups. The effective tax rate in the third quarter of fiscal year 2017 was higher than the combined FederalC1 Consulting, LLC, an independent consulting firm, and state statutory tax rate also due to higher executive compensation and
its wholly-owned subsidiary C1 Associates. CRA International, Inc.Notes to Condensed Consolidated Financial Statements (Continued)(Unaudited)15. Income Taxes (Continued)the correction of a prior year estimate. The effective tax rate in the third quarter of fiscal year 2016 was lower than the combined Federal and state statutory tax rate due to a favorable geographical mix of earnings. CRA's effective income tax rates were 38.0% and 34.3% for the fiscal year-to-date periods ended September 30, 2017 and October 1, 2016, respectively. The effective tax rate for the fiscal year-to-date period ended September 30, 2017 was higher than the prior year primarily due to a non-recurring item in the prior year that drove the rate down and was not replicated in the current year. Other drivers of a higher year-to-date fiscal year 2017 effective tax rate are executive compensation expenses and unfavorable discrete items, which were partially offset by a tax benefit related to stock-based compensation of approximately $0.4 million, as well as the tax implications associated with the reversal of contingent consideration. The effective tax rate for the fiscal year-to-date period ended September 30, 2017 was lower than the combined Federal and state statutory tax rate primarily due to a favorable geographical mix of earnings, as well as the tax benefit related to stock-based compensation and the tax implications associated with the reversal ofhad no contingent consideration offset partially by executive compensation and other discrete unfavorable items. The effective tax rateobligation during the fiscal year-to-date period ended October 1, 20162022. 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):Fiscal Year Ended January 1,
2022Beginning balance $ 14,620 Accretion 380 Payment of contingent consideration (15,000) Ending balance $ — lower thana 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 combined Federalissuance 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 state statutory tax rate primarily due tonon-financial covenants under the Initial Credit Agreement.favorable geographical mixCredit Agreement (the "Credit Agreement") with Bank of earnings,America, N.A., as well as the saleswingline lender, a letter of GNU's business assets. CRA has not provided for deferred income taxes or foreign withholding taxes on undistributed earnings from its foreign subsidiaries as of September 30, 2017 because such earnings are considered to be indefinitely reinvested. CRA does not rely on these unremitted earningscredit issuing bank and administrative agent, and with Citizens Bank, N.A., as a sourceletter of fundscredit 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 its domestic business, as it expectsthe period from January 16th to have sufficient cash flow from operations and availability from its U.S.July 15th of each calendar year, CRA may elect to not increase the revolving credit facility to fund its$250.0 million. The revolving credit facility includes a $25.0 million sublimit for the issuance of letters of credit.operationaldollars 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 strategic needs.16.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.management'smanagement’s opinion, based on current knowledge, CRA believes it has adequate legal defenses and/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.17. Business SegmentoperationsGeographic Information CRA is a leading consulting firm specializing in providing economic, financial and management consulting services. It offers consulting services in two broad areas: litigation, regulatory, and financial consulting and management consulting. These two areas represented approximately 100% of our consolidated revenues for fiscal 2017 and 2016. CRA manages its business on an integrated basis through its international network of offices and areas of functional expertise. Many of CRA's practice areas are represented in several of its offices and are managed across geographic borders. When CRA evaluated its business, and possible operating segments, CRA reviewed the manner in which it is organized and managed, composition and responsibilities of its management team, the identification of its chief operating decision maker, as well as the availability of discrete financial information for its various business components and geographic areas. During fiscal 2017 and the majority of fiscal 2016, it determined that CRA operated in one business segment, its consulting services business. Priorsubject to the sale of substantially all of GNU's business assets on April 13, 2016, CRA operated in two operating
inherent uncertainties.CRA International, Inc.Notes to Condensed Consolidated Financial Statements (Continued)(Unaudited)17. Business Segment and Geographic Information (Continued)segments. GNU's financial information is included below and is immaterial to the overall consolidated financial statements. Revenue based on the physical location of the operation to which the revenues relate, are as follows (in thousands): Quarter
Ended
September 30,
2017 Quarter
Ended
October 1,
2016 Fiscal Year-to-
Date Ended
September 30,
2017 Fiscal Year-to-
Date Ended
October 1,
2016 $ 70,910 $ 63,955 $ 217,608 $ 189,832 13,572 12,463 40,444 40,421 6,843 5,273 15,007 14,957 20,415 17,736 55,451 55,378 $ 91,325 $ 81,691 $ 273,059 $ 245,210 Long-lived assets by physical location are as follows (in thousands): September 30,
2017 December 31,
2016 $ 34,005 $ 30,735 5,560 5,253 1,497 393 7,057 5,646 $ 41,062 $ 36,381 18. 12.Subsequent EventsOctober 26, 2017,November 3, 2022, CRA announced that its Board of Directors declared a quarterly cash dividend of $0.17$0.36 per common share, payable on December 15, 20179, 2022 to shareholders of record as of November 28, 2017. On October 24, 2017, the Company extended its $125.0 million revolving credit facility for five years. The Company may use the proceeds of the revolving credit facility to provide working capital and for other general corporate purposes. Other than the letters of credit of approximately $3.6 million that had been issued under the previous credit agreement, no other outstanding borrowings existed at the time of the extension.Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations"Risk“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.("SEC"). You can read these documents at www.sec.gov.Significant Estimates The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with generally acceptedprinciples inpolicies involving the U.S. ("U.S. GAAP"). The preparation of these financial statements requires us to makemore significant estimates and judgments that affectused in the reported amountspreparation of assets and liabilities, as well as the related disclosure of contingent assets and liabilities, at the date of theour financial statements andas of October 1, 2022 remain unchanged from January 1, 2022, except for the reported amounts of revenues and expenses during the reporting period. Estimates in these condensed consolidated financial statements include, but are not limitedaccounting policies related to allowances for accounts receivable and unbilled services, revenue recognition on fixed price contracts, depreciation of property and equipment, share-based compensation, valuation of acquired intangible assets, impairment of long lived assets, goodwill, accrued and deferred income taxes, valuation allowances on deferred tax assets, accrued compensation, accrued exit costs, and other accrued expenses. These items are monitored and analyzed by management 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. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if our assumptions based on past experience or our other assumptions do not turn out to be substantially accurate. Apart from the additional business combinations accounting policy included below, we haveas described our significant accounting policies in Note 1below. Please refer to our consolidated financial statements included in our annual report on Form 10-K for fiscal 2016, which was filed with the SEC on March 15, 2017. We have reviewed our accounting policies, identifying those that we believe to be critical to the preparation and understanding of our consolidated financial statements in the list set forth below. See the disclosure under the heading "Critical Accounting Policies" inPart II, Item 7, “Management’s Discussion and Analysis of Part IIFinancial Condition and Results of Operations” of our Annual Report on Form 10-K for fiscal 2016 for a detailed description of these policies and their potential effects on our results of operations and financial condition.•Revenue recognition and allowances for accounts receivable and unbilled services•Share-based compensation expense•Deferred compensation•Valuation of goodwill and other intangible assets•Accounting for income taxes We did not adopt any changes in the fiscal year-to-date periodyear ended September 30, 2017 that had a material effectJanuary 1, 2022, filed with the SEC on March 3, 2022 (the "2021 Form 10-K") for details on these critical accounting policies nor did we make any changes to ourpolicies.policies in the fiscal year-to-date period ended September 30, 2017 that changed these critical accounting policies. Business Combinations. We recognize and measure identifiablewhich requires assets acquired and liabilities assumed of our acquireesto be measured and recorded at their estimated fair values as of the acquisition date, with certain exceptions. Right-of-use assets and lease liabilities are recorded on the date of acquisition in accordance with ASC Topic 842, value.value as of the date of acquisition.assets. In addition,assets, discount rates that we recognizebelieve reflect the risk factors associated with the related cash flows, and measure contingent consideration at fair value asestimates of useful lives. The useful lives of identifiable intangible assets acquired in a business acquisition are estimated based on the expected period that we will receive substantially all of the acquisition date. Contingent consideration obligations that are classified as liabilities are remeasured at fair value each reporting period withprojected future benefits from the changes in fair value resulting from either the passage of time, revised expectations of performance, or ultimate settlementintangible asset.amount or timing of the initial measurement recognized in the consolidated statements of comprehensive income.Recentsections captioned “Recent Accounting Standards See Note 5 to our condensed consolidated financial statementsStandards” included in Note 1, “Summary of Significant Accounting Policies” in Part I, Item I, “Financial Statements” of this quarterly reportQuarterly Report on Form 10-Q for a discussion of recent accounting standards that we have not yet adopted. Additionally, Note 5 should be read in conjunction with the disclosure under the heading "Recent Accounting Standards" contained in Note 1 of the consolidated financial statements and the notes contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.Quarter and Fiscal Year-to-Date Period Ended September 30, 2017, Compared to the Quarter and Fiscal Year-to-Date Period Ended October 1, 2016Fiscal Quarter
EndedFiscal Year-to-Date
Period EndedOctober 1,
2022October 2,
2021October 1,
2022October 2,
2021Revenues 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 % Quarter Ended Fiscal Year-to-
Date Period
Ended September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016 100.0 % 100.0 % 100.0 % 100.0 % 68.4 70.8 69.7 69.9 22.8 20.4 21.9 21.5 2.7 2.3 2.4 2.4 6.2 6.5 6.0 6.2 — — 0.1 1.5 (0.1 ) (0.2 ) (0.2 ) (0.1 ) 0.0 (0.1 ) (0.1 ) (0.1 ) 6.1 6.2 5.9 7.6 (2.5 ) (2.3 ) (2.2 ) (2.6 ) 3.5 3.9 3.6 5.0 0.0 0.1 0.0 (0.5 ) 3.5 % 3.9 % 3.6 % 4.4 % Quarter Ended September 30, 2017 Compared to theFiscal Quarter Ended October 1, 2016$9.6$12.0 million, or 11.8%8.8%, to $91.3$148.4 million for the third quarter of fiscal 20172022 from $81.7$136.4 million for the third quarter of fiscal 2016. Revenues2021. Utilization increased primarily in our business consulting practice. The increase in net revenue was a result of an increase in gross revenues of $10.5 million as compared to the third quarter of fiscal 2016, offset by an increase in write-offs and reserves of $0.9 million as compared to the third quarter of 2016. Utilization was up 1% to 74% for the third quarter of fiscal 20172022 from 73% infor the third quarter of fiscal 2016,2021, while overallconsultant headcount increasedgrew 3.3% from 882 at the end of the third quarter of fiscal 20162021 to 911 at the end of the third quarter of fiscal 2017 by 98 consultants, driven by2022. The primary driver of consultant headcount growth was the addition of 8437 consultants resulting from the C1 acquisition and other recruiting activitiesof Welch Consulting, Ltd. (“Welch Consulting”) in the first quarter ended September 30, 2017.22%18% and 20% of totalnet revenues for the third quarters of fiscal 2022 and fiscal 2021, respectively. Revenues derived from fixed-price projects decreased to 16% of net revenues for the third quarter of fiscal 2017 and the third quarter2022 compared with 23% of fiscal 2016. Revenues derived from fixed-price engagements increased to 25% of total revenuesnet revenue for the third quarter of fiscal 2017 compared with 18% for the third quarter of fiscal 2016. These percentages2021. The percentage of revenue derived from fixed-price engagements dependprojects 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. This increase in revenues derived from fixed-price engagements was primarily attributable to the acquisition of C1.Services.Services (exclusive of depreciation and amortization). Costs of services (exclusive of depreciation and amortization) increased by $4.6$6.3 million, or 8.0%6.6%, to $62.4$102.3 million for the third quarter of fiscal 20172022 from $57.8$96.0 million for the third quarter of fiscal 2016.2021. The increase in costs of services was due primarily to an increase of $4.4 million in employee compensation and fringe benefit costs attributable to salaries and benefits for our increased consulting headcount, which was attributable to the C1 acquisition, as well as a result of a higher headcount and an increase in forgivable loan amortization of $0.4 million, increasepartially offset by a decrease in accretion related to contingent consideration from prior acquisitions. Additionally, client reimbursable expenses increased byof $0.7 million in the third quarter of fiscal 2017 compared to the third quarter of fiscal 2016. Partially offsetting these increases was a $1.0 million decrease in retention and incentive compensation. Despite the overall increase in cost of services, asmillion. As a percentage of revenues, costs of services (exclusive of depreciation and amortization) decreased to 68.4%68.9% for the third quarter of fiscal 20172022 from 70.8%70.4% for the third quarter of fiscal 2016, as this increase in cost of services was outpaced by the increase in revenue in the third quarter of fiscal 2017 compared to the third quarter of fiscal 2016.$4.1$3.7 million, or 24.6%15.3%, to $20.8$28.2 million for the third quarter of fiscal 20172022 from $16.7$24.5 million for the third quarter of fiscal 2016. Significant contributors to2021. Within this increase were an increase in commissions to our non-employee expertscategory of $0.4 million for the third quarter of fiscal 2017 as compared to the third quarter of fiscal 2016, asexpenses, there was a higher percentage of our revenue for the third quarter of fiscal 2017 was sourced by our non-employee experts, as well as a $1.4$1.2 million increase in other professional fees, $0.7travel and entertainment, a $1.0 million increase in employee compensation and fringe benefit costs, a $0.7 million increase in miscellaneous and other costs, a $0.6 million increase in travelsoftware subscription and entertainment expenses,data services, and a $0.5$0.4 million increase in design costs relatedcommissions to capitalized software,our non-employee experts. Partially offsetting the increase in these expenses was a $0.2 million increase in rent expense, and a $0.2 million increasedecrease in bad debt reserves and write-offsexpense for loans to employees in the third quarter of fiscal 20172022 as compared to the third quarter of fiscal 2016.22.8%19.0% for the third quarter of fiscal 20172022 from 20.4%18.0% for the third quarter of fiscal 2016, due primarily to the aforementioned increase in selling, general and administrative expenses modestly outpacing the increase in revenues in the third quarter of fiscal 2017 as compared with the third quarter of fiscal 2016.2021. Commissions to our non-employee experts increased to 2.5%remained flat at 3.2% of revenues for the third quarter of fiscal 2017 compared to 2.4% of revenues for third quarter of fiscal 2016, as more revenue was sourced by non-employee experts in2022 and the third quarter of fiscal 2017.$2.3$4.0 million and the effective tax rate ("ETR") was 41.7%,25.3% for the third quarter of fiscal 20172022 compared to $1.9 million and 37.7%14.8% for the third quarter of fiscal 2016.2021. The effective tax rateETR for the thirdcurrent fiscal quarter of fiscal 2017 was higher than the prior year stemming from changesprimarily due to a decrease in the jurisdictional mix of earnings, executive compensation expenses, and true-ups to prior year estimates. This increase in rate was partially offset by tax benefitsbenefit related to stock-basedshare-based compensation of approximately $0.1 million as well as provisionand foreign-derived intangible income, and higher nondeductible compensation paid to return true-ups.executive officers. The effective tax rate inETR for the third quarter of both fiscal 2017 was comparable to the combined Federal2022 and state statutory tax rate. The effective tax rate in the third quarter of fiscal 2016 was2021 were lower than the combined Federalfederal and state statutory tax rate primarily duea favorable geographical mix of earnings.Income Attributable to Noncontrolling Interest, Net of Tax. Our ownership interest in GNU was 55.89% for the third quarters of fiscal 2017 and fiscal 2016. GNU's financial results are consolidated with ours, and allocations of the noncontrolling interest's share of GNU's net income result in deductions to our net income, while allocations of the noncontrolling interest's share of GNU's net loss result in additions to our net income. The results of operations of GNU allocable to its other owners was a net income of $11 thousand for the third quarter of fiscal 2017 and a net loss of $42 thousand for the third quarter of fiscal 2016. Net Income Attributable to CRA International, Inc.Income.attributableincreased to CRA International, Inc. remained flat at $3.2$11.9 million for the third quarter of fiscal 2017 and2022 from $10.9 million for the third quarter of fiscal 2016.2021. The net income per diluted share was $0.38$1.63 per share for the third quarter of fiscal 2017 and2022, compared to $1.44 of net income per diluted share for the third quarter of fiscal 2016. Diluted weighted2021. Weighted average diluted shares outstanding increaseddecreased by approximately 44,000314,000 shares to approximately 8,353,0007,246,000 shares for the third quarter of fiscal 20172022 from approximately 8,309,0007,560,000 shares for the third quarter of fiscal 2016.2021. The increasedecrease indiluted weighted average diluted shares outstanding was primarily due to the issuance orrepurchase of shares of our common stock since October 2, 2021, offset in part by the vesting of shares of restricted stock and time-vesting restricted stock units and the exercise of stock options since the third quarter of fiscal 2016, offset in part by the repurchase of shares of our common stock since the third quarter of fiscal 2016.September 30, 2017October 1, 2022, Compared to the Fiscal Year-to-Date Period Ended October 1, 2016$27.9$14.7 million, or 11.4%3.4%, to $273.0 million for the fiscal year-to-date period ended September 30, 2017 from $245.2$445.9 million for the fiscal year-to-date period ended October 1, 2016. Revenues increased primarily in our business consulting service line. The increase in net revenue was a result of an increase in gross revenues of $31.72022 from $431.2 million as compared to the fiscal year-to-date period ended October 1, 2016, offset by an increase in write-offs and reserves of $3.3 million as compared to the fiscal year-to-date period ended October 1, 2016. Notwithstanding a reduction in utilization to 74% for the fiscal year-to-date period ended September 30, 2017 from 75% for the fiscal year-to-date period ended October 2, 2021. Utilization was 75% for the fiscal year-to-date periods ended October 1, 2016, revenue growth followed an increase in consulting2022 and October 2, 2021, while consultant headcount grew 3.3% from 882 at the end of the third quarter of fiscal 20162021 to 911 at the end of the third quarter of fiscal 20172022. The primary driver of 98, principally driven byconsultant headcount growth was the addition of 8437 consultants resulting from the C1 acquisition and other recruiting activitiesof Welch Consulting in the first quarter of fiscal year-to-date period ended September 30, 2017. Offsetting this increase, GNU had a decrease in revenue of $0.8 million in the fiscal year-to-date period ended September 30, 2017 compared with the fiscal year-to-date period ended October 1, 2016, principally due to the cessation of its operations in April 2016.23%19% of totalnet revenues for the fiscal year-to-date periods ended October 1, 2022 and October 2, 2021, respectively. Revenues derived from fixed-price projects decreased to 18% of net revenues for the fiscal year-to-date period ended September 30, 2017 andOctober 1, 2022 compared with 24% of net revenue for the fiscal year-to-date period ended October 1, 2016, respectively. Revenues derived from fixed-price engagements were 25% and 17% of total revenues for the fiscal year-to-date period ended September 30, 2017 and the fiscal year-to-date period ended October 1, 2016, respectively. These percentages2, 2021. The percentage of revenue derived from fixed-price engagements dependprojects 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. The increase in the fiscal year-to-date period ended September 30, 2017 compared with the fiscal year-to-date period ended October 1, 2016 is primarily attributable to the acquisition of C1 and the performance of certain of our other practices.Services.Services (exclusive of depreciation and amortization). Costs of services (exclusive of depreciation and amortization) increased by $18.9$3.0 million, or 11.0%1.0%, to $190.2 million for the fiscal year-to-date period ended September 30, 2017 from $171.3$309.4 million for the fiscal year-to-date period ended October 1, 2016.2022 from $306.4 million for the fiscal year-to-date period ended October 2, 2021. The increase in costs of services was due primarily to an increase of $11.4$3.8 million in employee compensation and fringe benefit costs attributable to salariesprimarily as a result of a higher headcount and benefits associated with our increased consulting headcount, primarily attributable to the C1 acquisition, an increase in incentive and retention compensation costsforgivable loan amortization of $3.3$1.3 million, partially offset by a decrease in client reimbursable expenses of $1.7 million and a $0.7 million increasedecrease in accretion related tothe valuation expense of the contingent consideration from prior acquisitions. Additionally, client reimbursable expenses increased by $4.0 million in the fiscal year-to-date period ended September 30, 2017 compared to the fiscal year-to-date period ended October1, 2016. Partially offsetting these increases, cost of services for GNU decreased by $0.3 million for the fiscal year-to-date period ended September 30, 2017, due to the sale of its business assets and cessation of operations in April 2016.$0.4 million. As a percentage of revenues, costs of services remained essentially flat at 69.7%(exclusive of depreciation and amortization) decreased to 69.4% for fiscal year-to-date period ended September 30, 2017 andthe fiscal year-to-date period ended October 1, 2016.$7.1$10.3 million, or 13.5%14.3%, to $59.8$82.0 million for three quarters ofthe fiscal 2017year-to-date period ended October 1, 2022 from $52.7$71.7 million for three quartersthe fiscal year-to-date period ended October 2, 2021. Within this category of fiscal 2016. The primary contributors to this increase were anexpenses, there was a $2.7 million increase in other professional fees of $2.9 million,travel and entertainment, a $1.0$2.2 million increase in employee compensation and fringe benefit costs, a $1.6 million increase in commissions to our non-employee experts, a $1.2 million increase in software subscription and data services, a $1.1 million increase in travelmiscellaneous and entertainment expenses,other costs, a $0.5$0.9 million increase in designcosts related to capitalized software,legal and other professional services fees, and a $0.5 million increase in intangible impairments, a $0.6$0.9 million increase in rent expense related toexpense. Partially offsetting the additional office space attributed to the C1 acquisition incurred in the fiscal year-to-date period ended September 30, 2017, and an increase in other operatingthese expenses of $1.4 million. Additionally, selling, general and administrative expenses for GNU decreased by $0.5was a $0.3 million decrease in bad debt expense for the fiscal year-to-date period ended September 30, 2017, dueOctober 1, 2022 as compared to the sale of its business assets and cessation of operations in April 2016.21.9%18.4% for the fiscal year-to-date period ended September 30, 2017October 1, 2022 from 21.5%16.6% for the fiscal year-to-date period ended October 1, 2016 due primarily to the quarter over quarter increase selling, general and administrative expenses outpacing the quarter over quarter revenue increase.2, 2021. Commissions to our non-employee experts decreasedincreased to 2.7%3.3% of revenues for the fiscal year-to-date period ended September 30, 2017October 1, 2022 compared to 2.8%3.0% of revenues for the fiscal year-to-date period ended October 2, 2021.2016 as less revenue was sourced by non-employee experts in2022, compared to $9.3 million and 22.0% for the fiscal year-to-date period ended September 30, 2017. GNU Gain on Sale of Business Assets. On April 13, 2016,October 2, 2021. The ETR for the current fiscal year-to-date period was higher than the prior year-to-date period primarily due to a buyer acquired substantially alldecrease 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 business assets and assumed substantially all of the liabilities of GNU for a purchase price of $1.35 million. Of this amount, $1.1 million was received at closing, with the remaining $0.25 million payable on or after April 13, 2017, subject to contingencies, as outlinedU.K. statutory rate increase in the asset purchase agreement, which remaining amount was paid in full on May 3, 2017. GNU recognized a gain on sale of its business assets of $0.25 million during the second quarter of fiscal 2017, of which $0.14 million is attributed to CRA, and $3.8 million during the second quarter of fiscal 2016, of which $2.1 million is attributed to CRA. Provision for Income Taxes. For the first three quarters of fiscal 2017, our income tax provision was $6.1 million, and the effective tax rate was 38.0%, compared to a provision of $6.4 million and an effective tax rate of 34.3% for the first three quarters of fiscal 2016. The effective tax rate for the first three quarters of fiscal 2017 was higher than the prior year primarily due to a non-recurring item in the prior year2021 that drove the rate down and wasdid not replicatedrecur in the current year. Other drivers of a higherperiod. The ETR for the current fiscal year-to-date fiscal 2017 effectiveperiod was approximately the same as the combined federal and state statutory tax rate are executive compensation expenses and unfavorable discreteincluded offsetting items which were partially offset by aprimarily related to the tax benefit relatedfor share-based compensation and nondeductible compensation paid to stock-based compensationexecutive officers. The ETR for the fiscalFederalfederal and state statutory tax rate primarily due to a favorable geographical mix of earnings, as well as the tax benefit related to stock-basedshare-based compensation, partially offset by non-deductible compensation paid to executive officers and the tax implications associated withimpact of the reversal of contingent consideration, offset partially by executive compensation and other discrete unfavorable items. The effective tax rate in the first three quarters of fiscal 2016 was lower than the combined Federal and stateU.K. statutory tax rate primarily duechange.a favorable geographical mix of earnings, as well as the sale of GNU's business assets. Net Income Attributable to Noncontrolling Interest, Net of Tax. Our ownership interest in GNU was 55.89% for the fiscal year-to-date period ended September 30, 2017 and the fiscal year-to-date period ended October 1, 2016. GNU's financial results are consolidated with ours and allocations of the noncontrolling interest's share of GNU's net income result in deductions to our net income, while allocations of the noncontrolling interest's share of GNU's net loss result in additions to our net income. The results of operations of GNU allocable to its other owners was net income of $82 thousand for the fiscal year-to-date period ended September 30, 2017, and net income of $1.3 million, primarily as a result of the gain on sale attributable to its other owners of $1.7$34.9 million for the fiscal year-to-date period ended October 1, 2016. Net Income Attributable to CRA International, Inc. Net income attributable to CRA International, Inc. decreased by $0.9 million to $9.9 million for the fiscal year-to-date period endedSeptember 30, 20172022 from $10.8$33.0 million for the fiscal year-to-date period ended October 1, 2016.2, 2021. The diluted net income per share was $1.15$4.72 for the fiscal year-to-date period ended September 30, 2017,October 1, 2022, compared to diluted net income per share of $1.24 per share$4.31 for the fiscal year-to-date period ended October 1, 2016. Diluted weighted2, 2021. Weighted average diluted shares outstanding decreased by approximately 123,000267,000 to approximately 8,530,000 shares for the fiscal year-to-date period ended September 30, 2017 from approximately 8,653,0007,376,000 shares for the fiscal year-to-date period ended October 1, 2016.2022 from approximately 7,643,000 shares for the fiscal year-to-date period ended October 2, 2021. The decrease in diluted weighted average diluted shares outstanding was primarily due to the repurchase of shares of our common stock since October 1, 2016,2, 2021, 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 that have been exercised, since October 1, 2016.September 30, 2017 existing revolving credit facility will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months. In During the fiscal year-to-date period ended September 30, 2017,October 1, 2022, cash and cash equivalents decreased by $32.6$42.0 million. We completed the period with cash and cash equivalents of $20.9 million$24.1 million. The principal drivers of the reduction of cash and cash equivalents were payment of a significant portion of our fiscal 2021 performance bonuses in the first and second quarters of fiscal 2022, the consideration paid for the acquisition of Welch Consulting, the repurchase of shares, and the payment of dividends, offset by net borrowings of $45.0 million.of $60.6decreased by $9.9 million to $26.4 million. The principal drivers of the reduction of cashdecrease in working capital was payment ofprincipally due to a significant portion of our fiscal 2016 performance bonuses, the buildout of new leased office space, the repurchase and retirement of shares of our common stock, and cash paid for the C1 acquisition. Of the totaldecrease in cash and cash equivalents of $20.9$42.0 million at September 30, 2017, $6.4and an increase in borrowings of $45.0 million. Partially offsetting these decreases to working capital was an increase in accounts receivable and unbilled services of $46.8 million, an increase in prepaid expenses and other current assets of $3.4 million, a decrease in accrued expenses of $23.7 million, and a decrease in deferred revenue and other liabilities of $5.5 million.cashliquidity in the U.S., including cash flow from operations and availability on our revolving line of credit facility to fund U.S. activities.September 30, 2017,October 1, 2022, net cash provided byused in operating activities was $7.8$35.0 million. Net income was $10.0$34.9 million for the fiscal year-to-date period ended September 30, 2017. The primary factorOctober 1, 2022. Uses of cash for operating activities included a $12.1 million decrease in cash used in operations was thelease liabilities, a net increase of $8.4$48.9 million in the "accounts receivable"accounts receivable and "accounts receivable allowances" line item of the cash flow statementunbilled receivables, and ana $1.9 million increase in the "unbilled services" line item of the cash flow statement of $15.5 million dueprepaid expenses and other current assets primarily related to the increase in unbilled amounts.timing of renewing annual subscriptions. Other uses of cash included a decrease of $1.2 million in the "accountsaccounts payable, accrued expenses, and other liabilities" line itemliabilities of $26.3 million, primarily due to the cash flow statement. Offsetting these usespayment of cash was a $6.5 million decrease in the "prepaid expensessignificant portion of our fiscal 2021 performance bonuses and other current assets,performance awards, and other assets" line item of the cash flow statement. Cash provided by operations included non-cash items related to depreciation and amortization expense of $6.6 million and to share-based compensation expenses of $4.6 million. The changean increase in forgivable loans for the period of $2.4$7.4 million, which was primarily driven by $10.3 million of forgivable loan amortization, $3.0 million repayments and reclassifications, net of $10.8$25.5 million of forgivable loan issuances, net of repayments, offset by $18.1 million of forgivable loan amortization.accruals.September 30, 2017,October 1, 2022, net cash used in investing activities was $21.3$13.2 million, which included $16.2$10.2 million inof net consideration relating topaid for the C1 acquisition of Welch Consulting and $5.4$3.0 million for capital expenditures, primarily related to computer equipment and leasehold improvements for newpurchases of office leased space. We used $20.8 million of net cash in financing activities duringequipment.September 30, 2017,October 1, 2022, net cash provided by financing activities was $9.3 million, primarily foras a result of net borrowings under the repurchaserevolving credit facility of $45.0 million and retirement of shares of our common stock of $19.5 million, the payment of $3.5 million in cash dividends to shareholders, and $0.7 million in vested employee restricted shares for tax withholdings. Offsetting these uses of cash was $3.0$0.8 million received upon the issuance of shares of common stock related to the exercise of stock options. Offsetting these increases in cash provided byIndebtednessaan amended and restated credit agreement (the "Initial Credit Agreement") that providesprovided us with a $125.0$175.0 million revolving credit facility andthat 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; we were permitted to repay any borrowings at any time prior to the maturity date.facility to provide working capital andloans under the Credit Agreement for other general corporate purposes. Generally, wepurposes and may repay any borrowings under the revolving credit facility at any time, but any borrowings must repay all borrowingsbe repaid no later than April 24, 2018. There were no borrowings outstanding under this revolving credit facility as of September 30, 2017. The amount available under this revolving credit facility is reduced by certain letters of credit outstanding, which amounted to $3.6 million and $2.2 million, respectively, as of September 30, 2017 and December 31, 2016. of either (i) the adjusted base rate, as defined in the credit agreement, plus an applicable margin whichas described below: (i) in the case of borrowings in U.S. dollars by us, 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 between 0.50% and 1.50%within a range of 0.25% to 1.00% depending on our totalconsolidated net leverage ratio, as determined underand the credit agreement, or (ii) the adjusted eurocurrency rate, as defined in the credit agreement, plus an applicable margin whichon borrowings based on any of the other rates described above varies between 1.50% and 2.50%within a range of 1.25% to 2.00% depending on our totalconsolidated net leverage ratio.0.25%0.175% and 0.375%0.250% depending on our totalconsolidated net 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 $26.4 million in net assets as of September 30, 2017.credit agreement,Credit Agreement, we must comply with various financial and non-financial covenants. Compliance with theseThe primary financial covenants is testedconsist 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 a fiscal quarterly basis.our ability to incur future indebtedness, engage in acquisitions or dispositions, pay dividends or repurchase capital stock, and enter into business combinations. Any and payable upon the occurrence of stated events of default, including our failure to pay principal, interest or fees, or a violationupon the breach of any financial covenant. The financialAs of October 1, 2022, we were in compliance with the 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, engageCredit Agreement.acquisitions or dispositions, and enter into business combinations. On October 24, 2017, the Company extended its $125.0 million revolving credit facility for five years. The Company may use the proceeds ofborrowings outstanding under the revolving credit facility to provide working capital and for other general corporate purposes. Other thanas of October 1, 2022. As of October 1, 2022, the amount available under the revolving credit facility was reduced by certain letters of credit of approximately $3.6 million that had been issued under the previous credit agreement, no other outstanding, borrowings existed at the time of the extension. and Term Loanscollateralized.collateralized by key person life insurance. The forgivable loans have terms that are generally between threetwo and eightsix 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 loans.incentive performance awards to certain of our employees and non-employee experts and employeesthat are payable if specific performance targets are met. The financial targets may include a measure of revenue generation, profitability, or both. The amounts of the awards to be paid under these compensation arrangements could fluctuate depending on future performance throughduring the respectiveapplicable measurement periods. Changes in the estimated awardawards are expensed prospectively over the remaining service period. We believe that we will have sufficient funds to satisfy any cash obligations related to the incentive performance awards. We expect to fund theseany cash payments if any, from existing cash resources, cash generated from operations, or borrowings available on our existing revolving credit facility.current senior loancredit agreement, will depend on several factors, including our future profitability, the levels of our debt and equity, restrictions under our existing revolving line of credit with our bank,facility, and the overall credit and equity market environments. SeeWe completed a business acquisition during the first quarter of fiscal 2022, which is further described in Note 6 Business Acquisitions to the condensed consolidated financial statements to2, "Business Acquisition” in Part I, Item I, “Financial Statements” of this Form 10-Q for further details of the C1 acquisition. On March 21, 2016, and May 3, 2017repurchasepurchase of up to an additional $20.0 million and $20.0 million, respectively, of our common stock. RepurchasesWe may repurchase shares under these programs are discretionary and we may make such repurchases under anythis program in open marketunderthrough any Rule 10b5-1 plan adopted by us) or in privately negotiated transactions in each case in accordance with applicable insider trading and other securities laws and regulations.thirdfiscal quarter ofand fiscal 2017,year-to-date period ended October 1, 2022, we repurchased and retired 165,62951,524 shares and 319,534 shares, respectively, under theseour share repurchase programsprogram at an average price per share of $36.63. Approximately $9.5$97.04 and $86.47, respectively. During the fiscal quarter and fiscal year-to-date period ended October 2, 2021, we repurchased and retired 53,012 shares and 219,564 shares, respectively, under our share repurchase program at an average price per share of $94.32 and $66.72, respectively. In addition, during the second quarter of fiscal 2021, we repurchased 337,837 shares at a purchase price of $74.00 under a modified "Dutch auction" self-tender offer, as further described in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations” of our 2021 Form 10-K. was available for future repurchases as of September 30, 2017.willplan to finance these programsfuture repurchases with available cash, cash from future operations, and available funds from our existing revolving credit facility. We expect to continue to repurchase shares under these programs.futuresuch dividends isremain subject to the discretion of our boardBoard of directors.repurchases;underfrom our bankrevolving 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.and Contractual Obligations On April 21, 2017, we entered into the first amendment of the lease with 1411 IC-SIC Property, LLC to extend the term of previously leased space of 25,261 square feet, for an additional twenty-three months to April 30, 2028 for office space located on the 35th floor, and to lease additional space of 16,587 square feet on the 25th floor expiring on the same date, of the office building located at 1411 Broadway in New York, New York. The amendment includes a base rent abatement of approximately $1.2 million, as well as a tenant improvement allowance of approximately $1.4 million. Following an initial rent abatement period, the annual base rent will be approximately $1.2 million per year, subject to annual increases of approximately 8% after five years. On May 8, 2017, we entered into the first amendment of the lease with John Hancock Life Insurance Company (U.S.A.), to extend the term of the currently leased space of 41,642 square feet, for an additional ten years ending on July 31, 2028 for office space located on the 33rd and 34th floor of the office building located at 1 South Wacker Drive in Chicago, Illinois. The amendment includes a base rent abatement of approximately $0.9 million, as well as a tenant improvement allowance of approximately $2.3 million. Following an initial rent abatement period, the annual base rent will be approximately $1.1 million per year, subject to annual increases of approximately 2.5% per year. On July 21, 2017, CRA entered into the first amendment of the San Francisco, CA lease for an additional 9,206 square feet of office space and to extend the terms for an additional eight years ending on September 30, 2025. Beginning on October 1, 2017, the annual base rent will be approximately $0.9 million per year, subject to annual increases of approximately 3.0% per year. The amendment includes a base rent abatement of approximately $0.5 million, as well as a tenant improvement allowance of approximately $1.2 million.Quarterly Report on Form 10-Q,report, as well as a description of material risks we face, are set forth below under the heading "Risk Factors"“Risk Factors” and included in Part I—I, Item 1A, “Risk Factors” of our Annual Report on2021 Form 10-K for the year ended December 31, 2016 filed with the SEC on March 15, 2017.10-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."Item 7A. QuantitativePart II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," inRisk” of our Annual Report on2021 Form 10-K for the fiscal year ended December 31, 2016.10-K.reportreport. This is done in order to provide reasonable assuranceensure that we record, process, summarize and report the information we mustare required to disclose in the reports that we fileare filed or submitsubmitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC'sSEC’s rules and forms. Based upon that evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2017, due to the material weaknesses in internalOctober 1, 2022.control over financial reporting related to the inadequate design and execution of controls over revenue and related reserve processes, compensation-related processes, and certain non-routine technical accounting processes described in Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Notwithstanding the material weaknesses, managementManagement has concluded that the condensed consolidated financial statements included in this quarterly report on Form 10-Q present fairly, in all material aspects, our financial position at the end of, and the results of operations and cash flows for, the periods presented in conformity with accounting principles generally accepted in the United States.2017. Other than changes effected in accordance with the ongoing remediation, as further described below, of the material weaknesses in internal controls over financial reporting related to inadequate design and execution of controls over revenue and related reserve processes, compensation-related processes, and certain non-routine technical accounting processes in the financial statement close process pursuant to the plan described in Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, there2022. There were no changes in our internal control over financial reporting identified in connection with the above evaluation that occurred during the third quarter of fiscal 20172022 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.Plan for Remediation cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.in anyto these risk factors previously disclosed in our Annual Report on Form 10-K forduring the yearquarter ended December 31, 2016 filed with the SEC on March 15, 2017. See "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for a complete description of the material risks we face.October 1, 2022. table provides information about our repurchases of shares of our common stock during the fiscal quarter ended September 30, 2017.October 1, 2022. During that period, we did not act in concert with any affiliate or any other person to acquire any of our common stock and, accordingly, we do not believe that purchases by any such affiliate or other person (if any) are reportable in the following table. For purposes of this table, we have divided the fiscal quarter into three periods of four weeks, four weeks, and five weeks, respectively, to coincide with our reporting periods during the third quarter of fiscal 2017.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 (a)
Total Number of
Shares
Purchased(1) (b)
Average Price
Paid per Share (c)
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs(1) (d)
Maximum Number
(or Approximate
Dollar Value) of
Shares that May Yet
Be Purchased
Under the Plans
or Programs(1) 40,629 $ 36.22 per share 40,629 $ 15,560,261 — — — $ 14,087,417 125,000 $ 36.75 per share 125,000 $ 9,493,667 (1)March 21, 2016 and May 3, 2017, we announced thatFebruary 7, 2022 our Board of Directors approvedauthorized an expansion to our existing share repurchase programsprogram of up to an additional $20.0 million and $20.0 million, respectively,of outstanding shares of our common stock. We may repurchase shares under these programsthis program in open market purchases (including underthrough 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 four weeks ended July 29, 2017,August 27, 2022, we repurchased and retired 40,62951,524 shares under these programsthis program at an average price per share of $36.22. During the five weeks ended September 30, 2017, we repurchased and retired 125,000 shares under these programs at an average price per share$97.04.$9.5$22.9 million was available for future repurchases under these programsthis program as of September 30, 2017.October 1, 2022. We expect to continue to repurchase shares under these programs.this program. On July 21, 2017, CRA amended its lease with Columbia REIT—221 Main, LLC, as landlord, for CRA's office space located at 221 Main Street, San Francisco, California. Under the amendment, CRA will lease an additional 9,206 square feet of office space and relocate to the building's 16th floor. The amendment extends the base term of the lease for an additional eight years ending on September 30, 2025. Beginning on October 1, 2017, the annual base rent for the new office space through the new end of the lease's base term, exclusive of customary operating costs and expenses, will be approximately $0.9 million per year, subject to annual increases of approximately 3.0% per year. The amendment includes a base rent abatement of approximately $0.5 million, as well as a tenant improvement allowance of approximately $1.2 million. The amendment gives CRA a right of first offer to rent certain additional office space in the building if it becomes available. If CRA expands the leased office space and is leasing the entire 16th floor of the building, subject to certain conditions, the new base term of the lease will be extendible by CRA for one five-year period. A copy of the lease amendment is attached as Exhibit 10.2 to this quarterly report on Form 10-Q and is incorporated herein by reference.
None.EXHIBIT INDEXItem No. Filed with this Form 10-Q Description 3.1 10.13.2
10.110.2Office LeaseCredit Agreement, dated April 2, 2013as of August 19, 2022, by and between C1 Consulting Limited Liability Company and 221 Main Property Owner LLC, as amended by First Amendment to Lease dated July 21, 2017 by and betweenamong CRA International, Inc. (as successor, 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 C1 Consulting Limited Liability Company) and Columbia REIT—221 Main, LLC (as successorExhibit 10.1 to 221 Main Property Owner LLC)the Current Report on Form 8-K filed on August 23, 2022).
31.110.3X31.1
Rule 13a-14(a)/15d-14(a) certification, as adopted pursuant to Section 302 of principal executive officerthe Sarbanes-Oxley Act of 2002.
31.231.2X
32.132.1X
32.2101X101 X 's’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2017,October 1, 2022, formatted in Inline XBRL (eXtensible Business Reporting Language), as follows: (i) Condensed Consolidated Income Statements of Operations (unaudited) for the fiscal quarters and the fiscal year-to-date periods ended September 30, 2017October 1, 2022 and October 1, 2016,2, 2021, (ii) Condensed Consolidated Statements of Comprehensive Income (unaudited) for the fiscal quarters and the fiscal year-to-date periods ended September 30, 2017October 1, 2022 and October 1, 2016,2, 2021, (iii) Condensed Consolidated Balance Sheets (unaudited) as at September 30, 2017October 1, 2022 and December 31, 2016,January 1, 2022, (iv) Condensed Consolidated Statements of Cash Flows (unaudited) for the fiscal year-to-date periods ended September 30, 2017October 1, 2022 and October 1, 2016,2, 2021, (v) Condensed Consolidated Statement of Shareholders'Shareholders’ Equity (unaudited) for the fiscal year-to-date periodperiods ended September 30, 2017,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). *Management contract or compensatory planCRA INTERNATIONAL, INC. Date: October 31, 2017November 3, 2022
By:By:
/s/ PAUL A. MALEHPaul A. Maleh President and Chief Executive Officer Date: October 31, 2017November 3, 2022
By:By:
/s/ CHAD M. HOLMESChad M. Holmes
DANIEL K. MAHONEYDaniel K. Mahoney Chief Financial Officer, Executive Vice President
and TreasurerDate: October 31, 2017By:/s/ DOUGLAS C. MILLERDouglas C. MillerVice President and Chief Accounting Officer