Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 28, 2020 | Apr. 24, 2020 | |
Document and Entity Information | ||
Entity Registrant Name | CRA INTERNATIONAL, INC. | |
Entity Central Index Key | 0001053706 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 28, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-28 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 7,789,227 | |
Entity Shell Company | false | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 28, 2020 | Mar. 30, 2019 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | ||
Revenues | $ 126,158 | $ 105,849 |
Costs of services (exclusive of depreciation and amortization) | 90,997 | 73,635 |
Selling, general and administrative expenses | 24,123 | 22,743 |
Depreciation and amortization | 2,943 | 2,616 |
Income from operations | 8,095 | 6,855 |
Interest expense, net | (362) | (11) |
Foreign currency gains (losses), net | 1,422 | (744) |
Income before provision for income taxes | 9,155 | 6,100 |
Provision for income taxes | 2,687 | 1,435 |
Net income | $ 6,468 | $ 4,665 |
Net income per share: | ||
Basic (in dollars per share) | $ 0.83 | $ 0.58 |
Diluted (in dollars per share) | $ 0.80 | $ 0.56 |
Weighted average number of shares outstanding: | ||
Basic (in shares) | 7,805 | 8,015 |
Diluted (in shares) | 8,037 | 8,346 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2020 | Mar. 30, 2019 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) | ||
Net income | $ 6,468 | $ 4,665 |
Other comprehensive income (loss) | ||
Foreign currency translation adjustments | (2,427) | 712 |
Comprehensive income | $ 4,041 | $ 5,377 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) $ in Thousands | Mar. 28, 2020 | Dec. 28, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 15,818 | $ 25,639 |
Accounts receivable, net of allowances of $4,046 at March 28, 2020 and $3,838 at December 28, 2019 | 104,886 | 107,841 |
Unbilled services, net of allowances of $1,422 at March 28, 2020 and $1,503 at December 28, 2019 | 44,377 | 36,569 |
Prepaid expenses and other current assets | 12,181 | 7,277 |
Forgivable loans | 14,177 | 6,751 |
Total current assets | 191,439 | 184,077 |
Property and equipment, net | 66,626 | 61,295 |
Goodwill | 87,827 | 88,504 |
Intangible assets, net | 6,133 | 6,476 |
Right-of-use assets | 125,688 | 130,173 |
Deferred income taxes | 10,622 | 10,670 |
Forgivable loans, net of current portion | 57,868 | 48,390 |
Other assets | 4,005 | 3,658 |
Total assets | 550,208 | 533,243 |
Current liabilities: | ||
Accounts payable | 23,668 | 26,069 |
Accrued expenses | 77,714 | 121,301 |
Deferred revenue and other liabilities | 6,509 | 6,723 |
Current portion of lease liabilities | 12,432 | 12,847 |
Current portion of deferred compensation | 1,000 | 4,470 |
Revolving line of credit | 70,000 | |
Total current liabilities | 191,323 | 171,410 |
Non-current liabilities: | ||
Deferred compensation and other non-current liabilities | 15,911 | 15,071 |
Facility-related non-current liabilities | 2,060 | 1,956 |
Non-current portion of lease liabilities | 144,079 | 146,551 |
Deferred income taxes | 475 | 504 |
Total non-current liabilities | 162,525 | 164,082 |
Commitments and contingencies (Note 10) | ||
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; 7,756,425 and 7,814,797 shares issued and outstanding at March 28, 2020 and December 28, 2019, respectively | 5,871 | 9,265 |
Retained earnings | 204,679 | 200,249 |
Accumulated other comprehensive loss | (14,190) | (11,763) |
Total shareholders' equity | 196,360 | 197,751 |
Total liabilities and shareholders' equity | $ 550,208 | $ 533,243 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - USD ($) $ in Thousands | Mar. 28, 2020 | Dec. 28, 2019 |
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) | ||
Allowance for accounts receivable (in dollars) | $ 4,046 | $ 3,838 |
Allowance for unbilled services (in dollars) | $ 1,422 | $ 1,503 |
Preferred stock, par value (in dollars per share) | $ 0 | $ 0 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value ( in dollars per share ) | $ 0 | $ 0 |
Common stock, shares authorized | 25,000,000 | 25,000,000 |
Common stock, shares issued | 7,756,425 | 7,814,797 |
Common stock, shares outstanding | 7,756,425 | 7,814,797 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2020 | Mar. 30, 2019 | |
OPERATING ACTIVITIES: | ||
Net income | $ 6,468 | $ 4,665 |
Adjustments to reconcile net income to net cash used in operating activities: | ||
Depreciation and amortization | 2,943 | 2,616 |
Facility related liabilities | 35 | 35 |
Right-of-use asset amortization | 2,994 | 2,209 |
Deferred income taxes | 23 | 21 |
Share-based compensation expenses | 655 | 911 |
Accounts receivable allowances | 62 | 48 |
Unrealized foreign currency remeasurement gains, net | (398) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 1,388 | 5,742 |
Unbilled services, net | (8,217) | (8,666) |
Prepaid expenses and other current assets, and other assets | (5,327) | (2,162) |
Forgivable loans | (27,139) | (16,957) |
Incentive cash awards | 1,423 | 1,214 |
Accounts payable, accrued expenses, and other liabilities | (39,121) | (42,489) |
Lease liabilities | (1,164) | (3,754) |
Net cash provided by operating activities | (65,375) | (56,567) |
INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (7,949) | (774) |
Net cash used in investing activities | (7,949) | (774) |
FINANCING ACTIVITIES: | ||
Issuance of common stock, principally stock options exercises | 151 | 1,526 |
Borrowings under revolving line of credit | 70,000 | 39,000 |
Tax withholding payments reimbursed by shares | (390) | (388) |
Cash paid on dividend equivalents | (40) | (35) |
Cash dividends paid to shareholders | (1,796) | (1,616) |
Repurchases of common stock | (3,810) | (4,349) |
Net cash provided by financing activities | 64,115 | 34,138 |
Effect of foreign exchange rates on cash and cash equivalents | (612) | 133 |
Net decrease in cash and cash equivalents | (9,821) | (23,070) |
Cash and cash equivalents at beginning of period | 25,639 | 38,028 |
Cash and cash equivalents at end of period | 15,818 | 14,958 |
Noncash investing and financing activities: | ||
Purchases of property and equipment not yet paid for | 370 | 1,906 |
Asset retirement obligations | 155 | |
Right-of-use assets obtained in exchange for lease obligations | 713 | |
Right-of-use assets related to the adoption of ASC 842 | 82,329 | |
Lease liabilities related to the adoption of ASC 842 | 106,765 | |
Supplemental cash flow information: | ||
Cash paid for taxes | 695 | 298 |
Cash paid for interest | 245 | 59 |
Cash paid for amounts included in operating lease liabilities | $ 5,039 | $ 4,627 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (unaudited) - USD ($) $ in Thousands | Common Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total |
Increase (Decrease) in Shareholders' Equity | ||||
BALANCE AT DECEMBER 28, 2019 | $ 22,837 | $ 186,229 | $ (12,594) | $ 196,472 |
Balance at December 29,2019, as previously reported | 22,837 | 186,229 | (12,594) | 196,472 |
BALANCE at Dec. 29, 2018 | $ 22,837 | 186,229 | (12,594) | 196,472 |
BALANCE (in shares) at Dec. 29, 2018 | 8,010,480 | |||
Increase (Decrease) in Shareholders' Equity | ||||
BALANCE AT DECEMBER 28, 2019 | $ 20,537 | 189,235 | (11,882) | 197,890 |
Balance at December 29,2019, as previously reported | 20,537 | 189,235 | (11,882) | 197,890 |
Net income | 4,665 | 4,665 | ||
Foreign currency translation adjustment | 712 | 712 | ||
Exercise of stock options | $ 1,526 | 1,526 | ||
Exercise of stock options (in shares) | 64,700 | |||
Share-based compensation expense | $ 911 | 911 | ||
Restricted shares vesting (in shares) | 25,484 | |||
Redemption of vested employee restricted shares for tax withholding | $ (388) | (388) | ||
Redemption of vested employee restricted shares for tax withholding (in shares) | (8,157) | |||
Shares repurchased | $ (4,349) | (4,349) | ||
Shares repurchased (in shares) | (86,609) | |||
Accrued dividends on unvested shares | (8) | (8) | ||
Cash paid on dividend equivalents | (35) | (35) | ||
Cash dividends paid to shareholders (per share) | (1,616) | (1,616) | ||
BALANCE at Mar. 30, 2019 | $ 20,537 | 189,235 | (11,882) | 197,890 |
BALANCE (in shares) at Mar. 30, 2019 | 8,005,898 | |||
Increase (Decrease) in Shareholders' Equity | ||||
BALANCE AT DECEMBER 28, 2019 | $ 20,537 | 189,235 | (11,882) | 197,890 |
Balance at December 29,2019, as previously reported | 20,537 | 189,235 | (11,882) | 197,890 |
BALANCE AT DECEMBER 28, 2019 | 9,265 | 200,249 | (11,763) | 197,751 |
Balance at December 29,2019, as previously reported | 9,265 | 200,249 | (11,763) | 197,751 |
Cumulative effect of a change in accounting principle related to ASC 326 | (203) | (203) | ||
Balance at December 29,2019, as adjusted | 9,265 | 200,046 | (11,763) | 197,548 |
BALANCE at Dec. 28, 2019 | $ 9,265 | 200,249 | (11,763) | $ 197,751 |
BALANCE (in shares) at Dec. 28, 2019 | 7,814,797 | 7,814,797 | ||
Increase (Decrease) in Shareholders' Equity | ||||
BALANCE AT DECEMBER 28, 2019 | $ 5,871 | 204,679 | (14,190) | $ 196,360 |
Balance at December 29,2019, as previously reported | 5,871 | 204,679 | (14,190) | 196,360 |
Net income | 6,468 | 6,468 | ||
Foreign currency translation adjustment | (2,427) | (2,427) | ||
Exercise of stock options | $ 151 | 151 | ||
Exercise of stock options (in shares) | 8,200 | |||
Share-based compensation expense | $ 655 | 655 | ||
Restricted shares vesting (in shares) | 23,884 | |||
Redemption of vested employee restricted shares for tax withholding | $ (390) | (390) | ||
Redemption of vested employee restricted shares for tax withholding (in shares) | (7,843) | |||
Shares repurchased | $ (3,810) | (3,810) | ||
Shares repurchased (in shares) | (82,613) | |||
Accrued dividends on unvested shares | 1 | 1 | ||
Cash paid on dividend equivalents | (40) | (40) | ||
Cash dividends paid to shareholders (per share) | (1,796) | (1,796) | ||
BALANCE at Mar. 28, 2020 | $ 5,871 | 204,679 | (14,190) | $ 196,360 |
BALANCE (in shares) at Mar. 28, 2020 | 7,756,425 | 7,756,425 | ||
Increase (Decrease) in Shareholders' Equity | ||||
BALANCE AT DECEMBER 28, 2019 | $ 5,871 | 204,679 | (14,190) | $ 196,360 |
Balance at December 29,2019, as previously reported | $ 5,871 | $ 204,679 | $ (14,190) | $ 196,360 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (unaudited) (Parenthetical) - $ / shares | 3 Months Ended | |
Mar. 28, 2020 | Mar. 30, 2019 | |
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (unaudited) | ||
Cash dividends paid to shareholders (in dollars per share) | $ 0.23 | $ 0.20 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 28, 2020 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 1. Summary of Significant Accounting Policies Description of Business CRA International, Inc. (“CRA” or the “Company”) is a worldwide leading consulting services firm that applies advanced analytic techniques and in-depth industry knowledge to complex engagements for a broad range of clients. CRA offers services in two broad areas: litigation, regulatory, and financial consulting and management consulting. CRA operates in one business segment. CRA operates its business under its registered trade name, Charles River Associates. Basis of Presentation The unaudited condensed consolidated financial statements include the accounts of CRA International, Inc. and its wholly-owned subsidiaries (collectively the “Company”), which require consolidation after the elimination of intercompany accounts and transactions. These financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q. Accordingly, these financial statements do not include all the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements. In the opinion of management, these financial statements reflect all adjustments of a normal, recurring nature necessary for the fair presentation of CRA’s results of operations, financial position, cash flows, and shareholders’ equity for the interim periods presented in conformity with GAAP. Results of operations for the interim periods presented herein are not necessarily indicative of results of operations for a full year. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended December 28, 2019 included in CRA’s Annual Report on Form 10-K filed with the SEC on February 27, 2020 (the “2019 Form 10-K”). Certain prior year amounts have been reclassified to conform to current year presentation. These reclassifications had no effect on previously reported results of operations, financial position, or cash flows. Estimates The preparation of financial statements in conformity with GAAP requires management to make significant estimates and judgments that affect the reported amounts of assets and liabilities, as well as the related disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of consolidated revenues and expenses during the reporting period. Estimates in these condensed consolidated financial statements include, but are not limited to, allowances for accounts receivable and unbilled services, revenue recognition on fixed price contracts, variable consideration to be included in the transaction price of revenue contracts, depreciation of property and equipment, measurement of operating lease right-of-use (“ROU”) assets and liabilities, share-based compensation, valuation of the contingent consideration liability , 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, and certain other accrued expenses. These items are monitored and analyzed by CRA for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. CRA bases its estimates on historical experience and various other assumptions that CRA believes to be reasonable under the circumstances. Actual results may differ from those estimates if CRA’s assumptions based on past experience or other assumptions do not turn out to be substantially accurate. Common Stock and Equity Equity transactions consist primarily of the repurchase by CRA of its common stock under its share repurchase program and the recognition of compensation expense and issuance of common stock under CRA's 2006 Equity Incentive Plan. Under CRA's share repurchase program, the Company repurchases its common stock in open market purchases (including through any Rule 10b5-1 plan adopted by CRA) or in privately negotiated transactions in accordance with applicable insider trading and other securities laws and regulations. The purchase price is first charged against available paid in capital ("PIC"), and once PIC is exhausted, any future purchases will be charged to retained earnings. CRA's common stock has no par value. All shares repurchased have been retired. Recent Accounting Standards Adopted Leases (Topic 842) CRA adopted Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”), which supersedes ASC Topic 840, Leases (“ASC 840”), on December 30, 2018, using the modified retrospective transition method. The cumulative effect of the transition adjustments was recognized as of the date of adoption. CRA elected the package of practical expedients provided by ASC 842, which allowed CRA to forgo reassessing the following upon adoption of the new standard: (1) whether contracts contain leases for any expired or existing contracts, (2) the lease classification for any expired or existing leases, and (3) initial direct costs for any existing or expired leases. In addition, CRA elected an accounting policy to exclude from the consolidated balance sheets the ROU assets and lease liabilities related to short-term leases, which are those leases with an initial lease term of twelve months or less that do not include an option to purchase the underlying asset that CRA is reasonably certain to exercise. As a result of adopting the new standard, CRA recognized ROU assets of $82.3 million and lease liabilities of $106.8 million on December 30, 2018. The difference between the amount of ROU assets and lease liabilities recognized was an adjustment to deferred rent. There was no change to net deferred tax assets as a result of CRA’s adoption of ASC 842. The adoption of ASC 842 did not have a material impact on CRA’s results of operations or cash flows, nor did it have an impact on any of CRA’s existing debt covenants. Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting CRA adopted ASU No. 2018-07, Compensation – Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting (Topic 718) (“ASU 2018-07”) on December 30, 2018. ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments in this update specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used effectively to provide financing to the issuer or awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers . The new guidance requires a remeasurement of nonemployee awards at fair value as of the adoption date. The adoption of ASU 2018-07 did not have a material impact on CRA’s financial position, results of operations, cash flows, or disclosures. Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments CRA adopted ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”) on December 29, 2019. ASC 326 replaces the methodology that recognizes impairment of financial instruments when losses have been incurred with a methodology that recognizes impairment of financial instruments when losses are expected. The amendment requires entities to use a forward-looking “expected loss” model for most financial instruments, including accounts receivable, unbilled services, and loans, that is based on historical information, current information, and reasonable and supportable forecasts. As a result of adopting the new standard, CRA recognized a cumulative increase to allowances for accounts receivable and unbilled services and a reduction to the fiscal 2020 opening balance of retained earnings of $0.2 million. Comparative periods prior to the adoption of ASC 326 and their respective disclosures have not been adjusted. The adoption of ASC 326 did not have a material impact on CRA’s results of operations or cash flows on the date of transition. Fair Value Measurements (Topic 820) CRA adopted ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU No. 2018-13”) on December 29, 2019. The ASU eliminates, adds, and modifies certain disclosure requirements for fair value measurements from ASC 820. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurement. The adoption of the new standard did not have a material impact on CRA’s financial position, results of operations, cash flows, or disclosures on the date of transition. Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement CRA adopted ASU No. 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”) on December 29, 2019. ASU 2018-15 clarifies the accounting for implementation costs in a cloud computing arrangement that is a service contract and aligns the requirements for capitalizing those costs with the capitalization requirements for costs incurred to develop or obtain internal-use software. CRA adopted the ASU using the prospective transition approach, as permitted under the new guidance. The adoption of the new standard did not have a material impact on CRA’s financial position, results of operations, cash flows, or disclosures on the date of transition. Recent Accounting Standards Not Yet Adopted Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies or clarifies accounting for income taxes by changing the following current guidance: accounting for year-to-date losses in interim periods, accounting for tax law changes in interim periods, determining when a deferred tax liability is recognized for foreign subsidiaries that transition to or from being accounted for as equity method investments, application of income tax guidance to franchise taxes that are partially based on income, and making an intra-period allocation in situations where there is a loss in continuing operations and income or gain from other items. ASU 2019-12 also introduces new guidance to evaluate whether a step up in the tax basis of goodwill relates to a business combination or a separate transaction and provides a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax. ASU 2019-12 is effective for CRA for interim and annual periods beginning after December 15, 2020. Early adoption is permitted. CRA is in the process of determining the effects, if any, the adoption of the ASU may have on its financial position, results of operations, cash flows, or disclosures. CRA plans to adopt the amendments during the first fiscal quarter of 2021. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 3 Months Ended |
Mar. 28, 2020 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | 2. Fair Value of Financial Instruments The following tables show CRA’s financial instruments as of March 28, 2020 and December 28, 2019 that are measured and recorded in the condensed consolidated financial statements at fair value on a recurring basis (in thousands): March 28, 2020 Significant Quoted Prices in Active Markets Significant Other Unobservable for Identical Assets or Liabilities Observable Inputs Inputs Level 1 Level 2 Level 3 Assets: Money market mutual funds $ 150 $ — $ — Total Assets $ 150 $ — $ — Liabilities: Contingent consideration liability $ — $ — $ 12,009 Total Liabilities $ — $ — $ 12,009 December 28, 2019 Significant Quoted Prices in Active Markets Significant Other Unobservable for Identical Assets or Liabilities Observable Inputs Inputs Level 1 Level 2 Level 3 Assets: Money market mutual funds $ 150 $ — $ — Total Assets $ 150 $ — $ — Liabilities: Contingent consideration liability $ — $ — $ 11,579 Total Liabilities $ — $ — $ 11,579 The fair value of CRA’s money market mutual fund share holdings is $1.00 per share. The contingent consideration liability in the table above is for estimated future contingent consideration payments related to the acquisition of C1 Consulting, LLC, an independent consulting firm, and its wholly-owned subsidiary C1 Associates (collectively, “C1”). The fair value measurement of the liability is based on significant inputs not observed in the market and thus represents a Level 3 measurement. The significant unobservable inputs used in the fair value measurement of the contingent consideration liability are CRA’s measures of the estimated payouts based on internally generated revenue projections, expected volatility of the revenue projections, and discount rates. The fair value of the contingent consideration liability was determined using a Monte Carlo simulation. The fair value of the contingent consideration liability is 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 costs of services (exclusive of depreciation and amortization) on the condensed consolidated statements of operations. The contingent consideration is required to be paid prior to the end of the second quarter of fiscal 2021. The following table summarizes the changes in the contingent consideration liability over the fiscal quarter ended March 28, 2020 and the fiscal year ended December 28, 2019 (in thousands): Fiscal Quarter Ended Fiscal Year Ended March 28, December 28, 2020 2019 Beginning balance $ 11,579 $ 6,197 Remeasurement of acquisition-related contingent consideration 155 3,285 Accretion 275 2,097 Ending balance $ 12,009 $ 11,579 |
Revenue Recognition
Revenue Recognition | 3 Months Ended |
Mar. 28, 2020 | |
Revenue Recognition | |
Revenue Recognition | 3. Revenue Recognition The contracts CRA enters into and operates under specify whether the engagements are billed on a time-and-materials or a fixed-price basis. Time-and-materials contracts are typically used for litigation, regulatory, and financial consulting projects while fixed-price contracts are principally used for management consulting projects. In general, project costs are classified in costs of services and are based on the direct salary of CRA’s employee consultants on the engagement plus all direct expenses incurred to complete the engagement, including any amounts billed to CRA by its non-employee experts. Disaggregation of Revenue The following tables disaggregate CRA’s revenue by type of contract and geographic location (in thousands): Fiscal Quarter Ended March 28, March 30, Type of Contract 2020 2019 Consulting services revenues Fixed Price $ 28,988 $ 21,386 Time-and-materials 97,170 84,463 Total $ 126,158 $ 105,849 Fiscal Quarter Ended March 28, March 30, Geographic Breakdown 2020 2019 Consulting services revenues United States $ 100,740 $ 83,529 United Kingdom 19,066 18,507 Other 6,352 3,813 Total $ 126,158 $ 105,849 Reserves for Variable Consideration and Credit Risk Revenues from CRA's consulting services are recorded at the net transaction price, which includes estimates of variable consideration for which reserves are established. Variable consideration reserves are based on actual price concessions and those expected to be extended to CRA customers as well as CRA's historical realization rates and are recorded as a component of the allowances for accounts receivable and unbilled services. CRA’s accounts receivable and unbilled services consist of receivables from a broad range of clients in a variety of industries located through the U.S. and 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 adopted ASC 326 on December 29, 2019, which changed the method CRA estimated reserves related to credit risk. As a result of the adoption, CRA recognized a cumulative-effect adjustment of $0.2 million to retained earnings and allowances for accounts receivable and unbilled services. Comparative periods and their respective disclosures prior to the adoption of ASC 326 have not been adjusted. Under ASC 326, CRA maintains allowances for accounts receivable and unbilled services for estimated losses resulting from clients’ failure to make required payments. CRA estimates these allowances based on historical charge-off rates, adjusted for days of sales outstanding and expected changes to clients’ financial conditions during the anticipated collection period. CRA writes off allowances when management determines the balance is uncollectible and all efforts of collection have been exhausted. Bad debt expense, net of recoveries of previously written off allowances, is reported as a component of selling, general and administrative expenses. Prior to adopting ASC 326 in fiscal 2020, CRA determined allowances for accounts receivable and unbilled services for specific customer accounts based on the financial condition of the customer and related facts and circumstances. Expenses associated with these allowances were reported as a component of selling, general and administrative expenses. Adjustments to the allowances for accounts receivable and unbilled services related to reserves for variable consideration are as follows (in thousands): Fiscal Quarter Ended March 28, March 30, 2020 2019 Additions to reserves for variable consideration $ 1,414 $ 1,443 Adjustments to the allowances for accounts receivable and unbilled services related to reserves for credit risk are as follows (in thousands): Fiscal Quarter Ended Fiscal Year Ended March 28, 2020 December 28, 2019 Beginning balance $ 370 $ 639 Cumulative effect of a change in accounting principle related to ASC 326 203 — Bad debt expense 59 173 Amounts written off (138) (442) Ending balance $ 494 $ 370 Reimbursable Expenses Revenues also include reimbursements for costs incurred by CRA in fulfilling its performance obligations, including travel and other out-of-pocket expenses, fees for outside consultants and other reimbursable expenses. CRA recovers substantially all of these costs. The following expenses are subject to reimbursement (in thousands): Fiscal Quarter Ended March 28, March 30, 2020 2019 Reimbursable expenses $ 16,430 $ 12,835 Contract Balances from Contracts with Customers CRA defines contract assets as assets for which it has recorded revenue because it determines that it is probable that it will earn a performance-based or contingent fee, but is not yet entitled to receive a fee, because certain events, such as completion of the measurement period or client approval, must occur. The contract assets balance was immaterial as of March 28, 2020 and December 28, 2019. CRA defines contract liabilities as advance payments from or billings to its clients for services that have not yet been performed or earned and retainers. These liabilities are recorded within deferred revenues and are recognized as services are provided. When consideration is received, or such consideration is unconditionally due from a customer prior to transferring consulting services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after performance obligations have been satisfied and all revenue recognition criteria have been met. The following table presents the opening and closing balances of CRA’s contract liability (in thousands): Contract Liability Fiscal Quarter Ended Fiscal Year Ended March 28, December 28, 2020 2019 Balance at the beginning of the period $ 4,007 $ 5,453 Balance at the end of the period $ 3,495 $ 4,007 During the fiscal quarter ended March 28, 2020, CRA recognized the following revenue as a result of changes in the contract liability balance or performance obligations satisfied in previous years (in thousands): Fiscal Quarter Ended March 28, 2020 Amounts included in contract liabilities at the beginning of the period $ 2,906 Performance obligations satisfied in previous periods $ 3,257 The timing of revenue recognition, billings and cash collections results in billed receivables, unbilled services and contract liabilities on the condensed consolidated balance sheets. |
Forgivable Loans
Forgivable Loans | 3 Months Ended |
Mar. 28, 2020 | |
Forgivable Loans | |
Forgivable Loans | 4. Forgivable Loans Forgivable loan activity for the fiscal quarter ended March 28, 2020 and the fiscal year ended December 28, 2019 is as follows (in thousands): Fiscal Quarter Ended Fiscal Year Ended March 28,2020 December 28,2019 Beginning balance $ 55,141 $ 40,294 Advances 33,442 35,166 Repayments — (1,173) Reclassification from accrued expenses / to other assets (9,713) (1,734) Amortization (6,285) (17,700) Effects of foreign currency translation (540) 288 Ending balance $ 72,045 $ 55,141 Current portion of forgivable loans $ 14,177 $ 6,751 Non-current portion of forgivable loans $ 57,868 $ 48,390 At March 28, 2020 and December 28, 2019, CRA had no other loans to current or former employees included in other assets on the consolidated balance sheet. The principal amount of forgivable loans and accrued interest is forgiven by CRA over the term of the loans, provided that the employee or non-employee expert continues employment or affiliation with CRA and complies with certain contractual requirements. Under ASC 326, CRA maintains an allowance for doubtful accounts for amounts not expected to be collected, which is initially assessed when the employee or non-employee fails to comply with contractual requirements or ceases employment or affiliation with CRA. The allowances are determined per specific borrower and are based on their financial condition and related facts and circumstances, including consideration of collateral. For the fiscal quarter ended March 28, 2020 and the fiscal year ended December 28, 2019, no allowances for or write-offs of these loans were recorded. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 28, 2020 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | 5. Goodwill and Intangible Assets The changes in the carrying amount of goodwill during the fiscal quarter ended March 28, 2020 and the fiscal year ended December 28, 2019, are as follows (in thousands): Balance at December 28,2019 Goodwill $ 164,921 Accumulated goodwill impairment (76,417) Goodwill, net at December 28, 2019 88,504 Foreign currency translation adjustment and other (1) (677) Balance at March 28,2020 Goodwill 159,720 Accumulated goodwill impairment (71,893) Goodwill, net at March 28, 2020 $ 87,827 (1) Intangible assets that are separable from goodwill and have determinable useful lives are valued separately and amortized over their expected useful lives. There were no impairment losses related to intangible assets during the fiscal quarter ended March 28, 2020 or during the fiscal year ended December 28, 2019. The components of acquired identifiable intangible assets are as follows (in thousands): March 28, December 28, 2020 2019 Non-competition agreements $ 324 $ 324 Customer relationships 12,120 12,120 Total cost 12,444 12,444 Accumulated amortization (6,311) (5,968) Total intangible assets, net $ 6,133 $ 6,476 |
Accrued Expenses
Accrued Expenses | 3 Months Ended |
Mar. 28, 2020 | |
Accrued Expenses | |
Accrued Expenses | 6. Accrued Expenses Accrued expenses consist of the following (in thousands): March 28, December 28, 2020 2019 Compensation and related expenses $ 63,462 $ 99,993 Income taxes payable 1,879 430 Commissions due to senior consultants 339 9,961 Other professional fees 2,230 2,077 Direct project accruals 3,820 3,201 Accrued leasehold improvements 2,189 2,166 Other 3,795 3,473 Total $ 77,714 $ 121,301 As of March 28, 2020 and December 28, 2019, approximately $37.1 million and $81.2 million, respectively, of accrued bonuses for the fiscal quarter ended March 28, 2020 and the fiscal year ended December 28, 2019 were included above in “Compensation and related expenses.” |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 28, 2020 | |
Income Taxes | |
Income Taxes | 7. Income Taxes CRA’s effective income tax rates were 29.4% and 23.5% for the fiscal quarters ended March 28, 2020 and March 30, 2019, respectively. The effective tax rate for the first quarter of fiscal 2020 was higher than the prior year primarily due to a decrease in the tax benefit related to the accounting for stock-based compensation, partially offset by a decrease in meals and entertainment. The effective tax rate for the first quarter of fiscal 2020 was higher than the combined federal and state statutory tax rate primarily due to non-deductible items resulting from limitations on the deductibility of compensation paid to executive officers and the deductibility of meals and entertainment. The effective tax rate for the first quarter of fiscal 2019 was lower than the combined federal and state statutory tax rate primarily due to the tax benefit related to the accounting for stock-based compensation, partially offset by non-deductible items resulting from limitations on the deductibility of compensation paid to executive officers and the deductibility of meals and entertainment. CRA has not provided for deferred income taxes or foreign withholding taxes on undistributed earnings and other basis differences that may exist from its foreign subsidiaries as of March 28, 2020, because such earnings are considered to be indefinitely reinvested. CRA does not rely on these unremitted earnings as a source of funds for its domestic business as it expects to have sufficient cash flow in the U.S. to fund its U.S. operational and strategic needs. If CRA were to repatriate its foreign earnings that are indefinitely reinvested, it would accrue substantially no additional tax expense. |
Net Income Per Share
Net Income Per Share | 3 Months Ended |
Mar. 28, 2020 | |
Net Income Per Share | |
Net Income Per Share | 8. Net Income Per Share CRA calculates basic and diluted earnings per common share using the two-class method. Under the two-class method, net earnings are allocated to each class of common stock and participating security as if all of the net earnings for the period had been distributed. CRA’s participating securities consist of unvested share-based payment awards that contain a nonforfeitable right to receive dividends and therefore are considered to participate in undistributed earnings with common shareholders. 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 outstanding for the period, as adjusted for the potential dilutive effect of non-participating share-based awards. Net earnings allocable to participating securities were not material for the first quarter of fiscal 2020 or the first quarter of fiscal 2019. The following table presents a reconciliation from net income to the net income available to common shareholders (in thousands): Fiscal Quarter Ended March 28, March 30, 2020 2019 Net income, as reported $ 6,468 $ 4,665 Less: net income attributable to participating shares 26 16 Net income available to common shareholders $ 6,442 $ 4,649 The following table presents a reconciliation of basic to diluted weighted average shares of common stock outstanding (in thousands): March 28, March 30, 2020 2019 Basic weighted average shares outstanding 7,805 8,015 Dilutive stock options and restricted stock units 232 331 Diluted weighted average shares outstanding 8,037 8,346 For the fiscal quarter ended March 28, 2020, the anti-dilutive share-based awards that were excluded from the calculation of common stock equivalents for purposes of computing diluted weighted average shares outstanding amounted to 73,647 shares. For the fiscal quarter ended March 30, 2019, the anti-dilutive share-based awards that were excluded from the calculation of common stock equivalents for purposes of computing diluted weighted average shares outstanding amounted to 20,078 shares. These share-based awards each period were anti-dilutive because their exercise price exceeded the average market price over the respective period. |
Credit Agreement
Credit Agreement | 3 Months Ended |
Mar. 28, 2020 | |
Credit Agreement | |
Credit Agreement | 9. Credit Agreement CRA is party to a credit agreement that provides CRA with a $125.0 million revolving credit facility and a $15.0 million sublimit for the 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 any borrowings must be repaid no later than October 24, 2022. There were $70.0 million in borrowings outstanding under this revolving credit facility as of March 28, 2020. There were no outstanding borrowings under this facility as of December 28, 2019. As of March 28, 2020, the amount available under this revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $4.4 million. 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 March 28, 2020 and December 28, 2019, CRA was in compliance with the covenants of its credit agreement. |
Contingencies
Contingencies | 3 Months Ended |
Mar. 28, 2020 | |
Contingencies | |
Contingencies | 10. Contingencies CRA is subject to legal actions arising in the ordinary course of business. In management’s opinion, based on current knowledge, CRA has adequate legal defenses and/or insurance coverage with respect to the eventuality of such actions. CRA does not believe any settlement or judgment relating to any pending legal action would materially affect its financial position or results of operations . However, the outcome of such legal actions is inherently unpredictable and subject to inherent uncertainties. While CRA has not experienced a material adverse impact to its business, financial condition or results of operations from the COVID-19 pandemic to date, there is uncertainty about client demand for the Company’s services, the worldwide economy and consequently, the financial results for the current quarter may not be indicative of the results to be expected for the full fiscal year. The timing of ongoing projects and new project originations may be delayed or otherwise disrupted due to the length and severity of current business closures and other restrictions implemented in response to COVID-19, which may impact the timing and amount of future revenues. The magnitude of any impact on CRA's business and its duration is uncertain and cannot currently be reasonably estimated at this time. CRA is not aware of any specific events or circumstances that would require an update to its estimates or adjustments to the carrying value of its assets and liabilities as of April 30, 2020, the issuance date of this Quarterly Report on Form 10-Q. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 28, 2020 | |
Subsequent Events | |
Subsequent Events | 11. Subsequent Events On April 30, 2020, CRA announced that its Board of Directors declared a quarterly cash dividend of $0.23 per common share, payable on June 12, 2020 to shareholders of record as of May 26, 2020. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 28, 2020 | |
Summary of Significant Accounting Policies | |
Description of Business | Description of Business CRA International, Inc. (“CRA” or the “Company”) is a worldwide leading consulting services firm that applies advanced analytic techniques and in-depth industry knowledge to complex engagements for a broad range of clients. CRA offers services in two broad areas: litigation, regulatory, and financial consulting and management consulting. CRA operates in one business segment. CRA operates its business under its registered trade name, Charles River Associates. |
Basis of Presentation | Basis of Presentation The unaudited condensed consolidated financial statements include the accounts of CRA International, Inc. and its wholly-owned subsidiaries (collectively the “Company”), which require consolidation after the elimination of intercompany accounts and transactions. These financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q. Accordingly, these financial statements do not include all the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements. In the opinion of management, these financial statements reflect all adjustments of a normal, recurring nature necessary for the fair presentation of CRA’s results of operations, financial position, cash flows, and shareholders’ equity for the interim periods presented in conformity with GAAP. Results of operations for the interim periods presented herein are not necessarily indicative of results of operations for a full year. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended December 28, 2019 included in CRA’s Annual Report on Form 10-K filed with the SEC on February 27, 2020 (the “2019 Form 10-K”). Certain prior year amounts have been reclassified to conform to current year presentation. These reclassifications had no effect on previously reported results of operations, financial position, or cash flows. |
Estimates | Estimates The preparation of financial statements in conformity with GAAP requires management to make significant estimates and judgments that affect the reported amounts of assets and liabilities, as well as the related disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of consolidated revenues and expenses during the reporting period. Estimates in these condensed consolidated financial statements include, but are not limited to, allowances for accounts receivable and unbilled services, revenue recognition on fixed price contracts, variable consideration to be included in the transaction price of revenue contracts, depreciation of property and equipment, measurement of operating lease right-of-use (“ROU”) assets and liabilities, share-based compensation, valuation of the contingent consideration liability , 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, and certain other accrued expenses. These items are monitored and analyzed by CRA for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. CRA bases its estimates on historical experience and various other assumptions that CRA believes to be reasonable under the circumstances. Actual results may differ from those estimates if CRA’s assumptions based on past experience or other assumptions do not turn out to be substantially accurate. Common Stock and Equity Equity transactions consist primarily of the repurchase by CRA of its common stock under its share repurchase program and the recognition of compensation expense and issuance of common stock under CRA's 2006 Equity Incentive Plan. Under CRA's share repurchase program, the Company repurchases its common stock in open market purchases (including through any Rule 10b5-1 plan adopted by CRA) or in privately negotiated transactions in accordance with applicable insider trading and other securities laws and regulations. The purchase price is first charged against available paid in capital ("PIC"), and once PIC is exhausted, any future purchases will be charged to retained earnings. CRA's common stock has no par value. All shares repurchased have been retired. |
Common Stock and Equity | Common Stock and Equity Equity transactions consist primarily of the repurchase by CRA of its common stock under its share repurchase program and the recognition of compensation expense and issuance of common stock under CRA's 2006 Equity Incentive Plan. Under CRA's share repurchase program, the Company repurchases its common stock in open market purchases (including through any Rule 10b5-1 plan adopted by CRA) or in privately negotiated transactions in accordance with applicable insider trading and other securities laws and regulations. The purchase price is first charged against available paid in capital ("PIC"), and once PIC is exhausted, any future purchases will be charged to retained earnings. CRA's common stock has no par value. All shares repurchased have been retired. |
Recent Accounting Standards Adopted and Not Yet Adopted | Recent Accounting Standards Adopted Leases (Topic 842) CRA adopted Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”), which supersedes ASC Topic 840, Leases (“ASC 840”), on December 30, 2018, using the modified retrospective transition method. The cumulative effect of the transition adjustments was recognized as of the date of adoption. CRA elected the package of practical expedients provided by ASC 842, which allowed CRA to forgo reassessing the following upon adoption of the new standard: (1) whether contracts contain leases for any expired or existing contracts, (2) the lease classification for any expired or existing leases, and (3) initial direct costs for any existing or expired leases. In addition, CRA elected an accounting policy to exclude from the consolidated balance sheets the ROU assets and lease liabilities related to short-term leases, which are those leases with an initial lease term of twelve months or less that do not include an option to purchase the underlying asset that CRA is reasonably certain to exercise. As a result of adopting the new standard, CRA recognized ROU assets of $82.3 million and lease liabilities of $106.8 million on December 30, 2018. The difference between the amount of ROU assets and lease liabilities recognized was an adjustment to deferred rent. There was no change to net deferred tax assets as a result of CRA’s adoption of ASC 842. The adoption of ASC 842 did not have a material impact on CRA’s results of operations or cash flows, nor did it have an impact on any of CRA’s existing debt covenants. Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting CRA adopted ASU No. 2018-07, Compensation – Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting (Topic 718) (“ASU 2018-07”) on December 30, 2018. ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments in this update specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used effectively to provide financing to the issuer or awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers . The new guidance requires a remeasurement of nonemployee awards at fair value as of the adoption date. The adoption of ASU 2018-07 did not have a material impact on CRA’s financial position, results of operations, cash flows, or disclosures. Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments CRA adopted ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”) on December 29, 2019. ASC 326 replaces the methodology that recognizes impairment of financial instruments when losses have been incurred with a methodology that recognizes impairment of financial instruments when losses are expected. The amendment requires entities to use a forward-looking “expected loss” model for most financial instruments, including accounts receivable, unbilled services, and loans, that is based on historical information, current information, and reasonable and supportable forecasts. As a result of adopting the new standard, CRA recognized a cumulative increase to allowances for accounts receivable and unbilled services and a reduction to the fiscal 2020 opening balance of retained earnings of $0.2 million. Comparative periods prior to the adoption of ASC 326 and their respective disclosures have not been adjusted. The adoption of ASC 326 did not have a material impact on CRA’s results of operations or cash flows on the date of transition. Fair Value Measurements (Topic 820) CRA adopted ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU No. 2018-13”) on December 29, 2019. The ASU eliminates, adds, and modifies certain disclosure requirements for fair value measurements from ASC 820. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurement. The adoption of the new standard did not have a material impact on CRA’s financial position, results of operations, cash flows, or disclosures on the date of transition. Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement CRA adopted ASU No. 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”) on December 29, 2019. ASU 2018-15 clarifies the accounting for implementation costs in a cloud computing arrangement that is a service contract and aligns the requirements for capitalizing those costs with the capitalization requirements for costs incurred to develop or obtain internal-use software. CRA adopted the ASU using the prospective transition approach, as permitted under the new guidance. The adoption of the new standard did not have a material impact on CRA’s financial position, results of operations, cash flows, or disclosures on the date of transition. Recent Accounting Standards Not Yet Adopted Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies or clarifies accounting for income taxes by changing the following current guidance: accounting for year-to-date losses in interim periods, accounting for tax law changes in interim periods, determining when a deferred tax liability is recognized for foreign subsidiaries that transition to or from being accounted for as equity method investments, application of income tax guidance to franchise taxes that are partially based on income, and making an intra-period allocation in situations where there is a loss in continuing operations and income or gain from other items. ASU 2019-12 also introduces new guidance to evaluate whether a step up in the tax basis of goodwill relates to a business combination or a separate transaction and provides a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax. ASU 2019-12 is effective for CRA for interim and annual periods beginning after December 15, 2020. Early adoption is permitted. CRA is in the process of determining the effects, if any, the adoption of the ASU may have on its financial position, results of operations, cash flows, or disclosures. CRA plans to adopt the amendments during the first fiscal quarter of 2021. |
Fair value of Financial Instr_2
Fair value of Financial Instruments (Tables) | 3 Months Ended |
Mar. 28, 2020 | |
Fair Value of Financial Instruments | |
Schedule of financial instruments that are measured and recorded at fair value on a recurring basis | The following tables show CRA’s financial instruments as of March 28, 2020 and December 28, 2019 that are measured and recorded in the condensed consolidated financial statements at fair value on a recurring basis (in thousands): March 28, 2020 Significant Quoted Prices in Active Markets Significant Other Unobservable for Identical Assets or Liabilities Observable Inputs Inputs Level 1 Level 2 Level 3 Assets: Money market mutual funds $ 150 $ — $ — Total Assets $ 150 $ — $ — Liabilities: Contingent consideration liability $ — $ — $ 12,009 Total Liabilities $ — $ — $ 12,009 December 28, 2019 Significant Quoted Prices in Active Markets Significant Other Unobservable for Identical Assets or Liabilities Observable Inputs Inputs Level 1 Level 2 Level 3 Assets: Money market mutual funds $ 150 $ — $ — Total Assets $ 150 $ — $ — Liabilities: Contingent consideration liability $ — $ — $ 11,579 Total Liabilities $ — $ — $ 11,579 |
Summary of the changes in the contingent consideration liability | The following table summarizes the changes in the contingent consideration liability over the fiscal quarter ended March 28, 2020 and the fiscal year ended December 28, 2019 (in thousands): Fiscal Quarter Ended Fiscal Year Ended March 28, December 28, 2020 2019 Beginning balance $ 11,579 $ 6,197 Remeasurement of acquisition-related contingent consideration 155 3,285 Accretion 275 2,097 Ending balance $ 12,009 $ 11,579 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 3 Months Ended |
Mar. 28, 2020 | |
Revenue Recognition | |
Schedule of disaggregate CRA's revenue by type of contract and geographic location | The following tables disaggregate CRA’s revenue by type of contract and geographic location (in thousands): Fiscal Quarter Ended March 28, March 30, Type of Contract 2020 2019 Consulting services revenues Fixed Price $ 28,988 $ 21,386 Time-and-materials 97,170 84,463 Total $ 126,158 $ 105,849 Fiscal Quarter Ended March 28, March 30, Geographic Breakdown 2020 2019 Consulting services revenues United States $ 100,740 $ 83,529 United Kingdom 19,066 18,507 Other 6,352 3,813 Total $ 126,158 $ 105,849 |
Schedule of adjustments to the allowances for accounts receivable and unbilled services related to reserves for variable consideration | Adjustments to the allowances for accounts receivable and unbilled services related to reserves for variable consideration are as follows (in thousands): Fiscal Quarter Ended March 28, March 30, 2020 2019 Additions to reserves for variable consideration $ 1,414 $ 1,443 |
Schedule of adjustments to allowances for accounts receivable and unbilled services related to reserves for credit risk | Adjustments to the allowances for accounts receivable and unbilled services related to reserves for credit risk are as follows (in thousands): Fiscal Quarter Ended Fiscal Year Ended March 28, 2020 December 28, 2019 Beginning balance $ 370 $ 639 Cumulative effect of a change in accounting principle related to ASC 326 203 — Bad debt expense 59 173 Amounts written off (138) (442) Ending balance $ 494 $ 370 |
Schedule of expenses are subject to reimbursement | The following expenses are subject to reimbursement (in thousands): Fiscal Quarter Ended March 28, March 30, 2020 2019 Reimbursable expenses $ 16,430 $ 12,835 |
Schedule of opening and closing balances and result of changes in contract liability balance (in thousands) | The following table presents the opening and closing balances of CRA’s contract liability (in thousands): Contract Liability Fiscal Quarter Ended Fiscal Year Ended March 28, December 28, 2020 2019 Balance at the beginning of the period $ 4,007 $ 5,453 Balance at the end of the period $ 3,495 $ 4,007 During the fiscal quarter ended March 28, 2020, CRA recognized the following revenue as a result of changes in the contract liability balance or performance obligations satisfied in previous years (in thousands): Fiscal Quarter Ended March 28, 2020 Amounts included in contract liabilities at the beginning of the period $ 2,906 Performance obligations satisfied in previous periods $ 3,257 |
Forgivable Loans (Tables)
Forgivable Loans (Tables) | 3 Months Ended |
Mar. 28, 2020 | |
Forgivable Loans | |
Schedule of forgivable loan activity | Forgivable loan activity for the fiscal quarter ended March 28, 2020 and the fiscal year ended December 28, 2019 is as follows (in thousands): Fiscal Quarter Ended Fiscal Year Ended March 28,2020 December 28,2019 Beginning balance $ 55,141 $ 40,294 Advances 33,442 35,166 Repayments — (1,173) Reclassification from accrued expenses / to other assets (9,713) (1,734) Amortization (6,285) (17,700) Effects of foreign currency translation (540) 288 Ending balance $ 72,045 $ 55,141 Current portion of forgivable loans $ 14,177 $ 6,751 Non-current portion of forgivable loans $ 57,868 $ 48,390 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Mar. 28, 2020 | |
Goodwill and Intangible Assets | |
Schedule of changes in the carrying amount of goodwill | The changes in the carrying amount of goodwill during the fiscal quarter ended March 28, 2020 and the fiscal year ended December 28, 2019, are as follows (in thousands): Balance at December 28,2019 Goodwill $ 164,921 Accumulated goodwill impairment (76,417) Goodwill, net at December 28, 2019 88,504 Foreign currency translation adjustment and other (1) (677) Balance at March 28,2020 Goodwill 159,720 Accumulated goodwill impairment (71,893) Goodwill, net at March 28, 2020 $ 87,827 (1) |
Schedule of components of acquired identifiable intangible assets | The components of acquired identifiable intangible assets are as follows (in thousands): March 28, December 28, 2020 2019 Non-competition agreements $ 324 $ 324 Customer relationships 12,120 12,120 Total cost 12,444 12,444 Accumulated amortization (6,311) (5,968) Total intangible assets, net $ 6,133 $ 6,476 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 3 Months Ended |
Mar. 28, 2020 | |
Accrued Expenses | |
Schedule of accrued expenses | Accrued expenses consist of the following (in thousands): March 28, December 28, 2020 2019 Compensation and related expenses $ 63,462 $ 99,993 Income taxes payable 1,879 430 Commissions due to senior consultants 339 9,961 Other professional fees 2,230 2,077 Direct project accruals 3,820 3,201 Accrued leasehold improvements 2,189 2,166 Other 3,795 3,473 Total $ 77,714 $ 121,301 |
Net Income Per Share (Tables)
Net Income Per Share (Tables) | 3 Months Ended |
Mar. 28, 2020 | |
Net Income Per Share | |
Schedule of reconciliation from net income to the net income available to common shareholders | The following table presents a reconciliation from net income to the net income available to common shareholders (in thousands): Fiscal Quarter Ended March 28, March 30, 2020 2019 Net income, as reported $ 6,468 $ 4,665 Less: net income attributable to participating shares 26 16 Net income available to common shareholders $ 6,442 $ 4,649 |
Schedule of reconciliation of basic to diluted weighted average shares of common stock outstanding | The following table presents a reconciliation of basic to diluted weighted average shares of common stock outstanding (in thousands): March 28, March 30, 2020 2019 Basic weighted average shares outstanding 7,805 8,015 Dilutive stock options and restricted stock units 232 331 Diluted weighted average shares outstanding 8,037 8,346 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Description of Business and Fiscal Year (Details) | 3 Months Ended |
Mar. 28, 2020segmentitem | |
Description of Business | |
Number of broad areas of consulting services | item | 2 |
Number of business segment | segment | 1 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Recent Accounting Standards Not Yet Adopted (Details) - USD ($) $ in Thousands | 3 Months Ended | ||||
Mar. 28, 2020 | Dec. 29, 2019 | Dec. 28, 2019 | Dec. 30, 2018 | Dec. 29, 2018 | |
Recent Accounting Standards | |||||
CRA elected package of practical expedients | true | ||||
Operating lease right-of-use assets | $ 125,688 | $ 130,173 | |||
Cumulative-effect adjustment to allowances for accounts receivable | 494 | 370 | $ 639 | ||
Cumulative-effect adjustment to retained earnings | 204,679 | 200,249 | |||
Cumulative-effect adjustment to unbilled services | $ 44,377 | $ 36,569 | |||
ASU 2016-02 | |||||
Recent Accounting Standards | |||||
Operating lease right-of-use assets | $ 82,300 | ||||
Recognize lease liabilities | $ 106,800 | ||||
ASU 2016-13 Financial Instruments-Credit Losses Topic 326 | Restatement adjustment | |||||
Recent Accounting Standards | |||||
Cumulative-effect adjustment to allowances for accounts receivable | $ 200 | ||||
Cumulative-effect adjustment to retained earnings | 200 | ||||
Cumulative-effect adjustment to unbilled services | $ 200 |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 28, 2020 | Dec. 28, 2019 | Mar. 28, 2020 | Dec. 28, 2019 | |
Money market mutual funds | ||||
Fair Value of Financial Instruments | ||||
Fair value per share of CRA's money market mutual fund share holdings | $ 1 | |||
Recurring | Level 1 | ||||
Fair Value of Financial Instruments | ||||
Total Assets | $ 150 | $ 150 | ||
Recurring | Level 1 | Money market mutual funds | ||||
Fair Value of Financial Instruments | ||||
Cash and cash equivalents | 150 | 150 | ||
Recurring | Level 3 | ||||
Fair Value of Financial Instruments | ||||
Contingent consideration liability | $ 12,009 | $ 11,579 | 12,009 | 11,579 |
Total Liabilities | $ 12,009 | $ 11,579 | ||
Summary of changes in contingent consideration liability | ||||
Beginning balance | 11,579 | 6,197 | ||
Remeasurement of acquisition-related contingent consideration | 155 | 3,285 | ||
Accretion | 275 | 2,097 | ||
Ending balance | $ 12,009 | $ 11,579 |
Revenue Recognition - Disaggreg
Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | ||||
Mar. 28, 2020 | Mar. 30, 2019 | Dec. 29, 2019 | Dec. 28, 2019 | Dec. 29, 2018 | |
Disaggregation of Revenue | |||||
Consulting services revenues | $ 126,158 | $ 105,849 | |||
Cumulative-effect adjustment to retained earnings | 204,679 | $ 200,249 | |||
Cumulative-effect adjustment to allowances for accounts receivable | 494 | 370 | $ 639 | ||
Cumulative-effect adjustment to unbilled services | 44,377 | $ 36,569 | |||
ASU 2016-13 Financial Instruments-Credit Losses Topic 326 | Restatement adjustment | |||||
Disaggregation of Revenue | |||||
Cumulative-effect adjustment to retained earnings | $ 200 | ||||
Cumulative-effect adjustment to allowances for accounts receivable | 200 | ||||
Cumulative-effect adjustment to unbilled services | $ 200 | ||||
United States | |||||
Disaggregation of Revenue | |||||
Consulting services revenues | 100,740 | 83,529 | |||
United Kingdom | |||||
Disaggregation of Revenue | |||||
Consulting services revenues | 19,066 | 18,507 | |||
Other | |||||
Disaggregation of Revenue | |||||
Consulting services revenues | 6,352 | 3,813 | |||
Fixed Price | |||||
Disaggregation of Revenue | |||||
Consulting services revenues | 28,988 | 21,386 | |||
Time-and-materials | |||||
Disaggregation of Revenue | |||||
Consulting services revenues | $ 97,170 | $ 84,463 |
Revenue Recognition - Reserves
Revenue Recognition - Reserves for Variable Consideration and Credit Risk (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 28, 2020 | Mar. 30, 2019 | Dec. 28, 2019 | |
Adjustments to Allowances for Accounts Receivable and Unbilled Services Related to Reserves for Credit Risk | |||
Balance at, beginning of year | $ 370 | $ 639 | $ 639 |
Cumulative effect of a change in accounting principle related to ASC 326 | 203 | ||
Bad debt expense | 59 | 173 | |
Amounts written off | (138) | (442) | |
Balance at, end of year | 494 | $ 370 | |
Roll forward of the variable consideration and allowances for unbilled services | |||
Additions to reserves for variable consideration | 1,414 | 1,443 | |
Reimbursable expenses | $ 16,430 | $ 12,835 |
Revenue Recognition - Contract
Revenue Recognition - Contract Balances from Contracts with Customers (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 28, 2020 | Dec. 28, 2019 | Dec. 29, 2018 | |
Contract liabilities: | |||
Contract liability | $ 3,495 | $ 4,007 | $ 5,453 |
Revenue recognized from: | |||
Amounts included in contract liabilities at the beginning of the period | 2,906 | ||
Performance obligations satisfied in previous years | $ 3,257 |
Forgivable Loans (Details)
Forgivable Loans (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 28, 2020 | Dec. 28, 2019 | |
Forgivable Loans | ||
Allowances for forgivable loans | $ 0 | $ 0 |
Amount of forgivable loans written-off | 0 | 0 |
Forgivable loan activity | ||
Beginning balance | 55,141 | 40,294 |
Advances | 33,442 | 35,166 |
Repayments | (1,173) | |
Reclassification from accrued expenses / to other assets | (9,713) | (1,734) |
Amortization | (6,285) | (17,700) |
Effects of foreign currency translation | (540) | 288 |
Ending balance | 72,045 | 55,141 |
Current portion of forgivable loans | 14,177 | 6,751 |
Non-current portion of forgivable loans | $ 57,868 | $ 48,390 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2020 | Dec. 28, 2019 | |
Changes in the carrying amount of goodwill | ||
Balance at the beginning of the period, Goodwill gross | $ 164,921 | |
Foreign currency translation adjustment and other (1) | (677) | |
Balance at the end of the period, Goodwill gross | 159,720 | |
Balance at the beginning of the period, Accumulated goodwill impairment | (76,417) | |
Goodwill, net | 87,827 | $ 88,504 |
Balance at the end of the period, Accumulated goodwill impairment | (71,893) | |
Balance at the end of the period, Goodwill, net | 87,827 | |
Decrease to goodwill from dissolution and final liquidation of GNU123 Liquidating Corporation | 4,500 | |
Decrease to accumulated impairment loss on goodwill from dissolution and final liquidation of GNU123 Liquidating Corporation | $ 4,500 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Acquired and Amortization (Details) - USD ($) $ in Thousands | Mar. 28, 2020 | Dec. 28, 2019 |
Acquired identifiable intangible assets | ||
Total cost | $ 12,444 | $ 12,444 |
Accumulated amortization | (6,311) | (5,968) |
Total intangible assets, net | 6,133 | 6,476 |
Non-competition agreements | ||
Acquired identifiable intangible assets | ||
Total cost | 324 | 324 |
Customer relationships | ||
Acquired identifiable intangible assets | ||
Total cost | $ 12,120 | $ 12,120 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Mar. 28, 2020 | Dec. 28, 2019 |
Accrued Expenses | ||
Compensation and related expenses | $ 63,462 | $ 99,993 |
Income taxes payable | 1,879 | 430 |
Commissions due to senior consultants | 339 | 9,961 |
Other professional fees | 2,230 | 2,077 |
Direct project accruals | 3,820 | 3,201 |
Accrued leasehold improvements | 2,189 | 2,166 |
Other | 3,795 | 3,473 |
Total | 77,714 | 121,301 |
Compensation and related expenses | ||
Accrued bonuses | $ 37,100 | $ 81,200 |
Income Taxes (Details)
Income Taxes (Details) | 3 Months Ended | |
Mar. 28, 2020 | Mar. 30, 2019 | |
Income Taxes | ||
Effective tax rate (as a percent) | 29.40% | 23.50% |
Net Income Per Share (Details)
Net Income Per Share (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2020 | Mar. 30, 2019 | |
Net income available to common shareholders | ||
Net income attributable to CRA as reported | $ 6,468 | $ 4,665 |
Less: net income attributable to participating shares | 26 | 16 |
Net income available to common shareholders | $ 6,442 | $ 4,649 |
Reconciliation of basic to diluted weighted average shares of common stock outstanding | ||
Basic weighted average shares outstanding | 7,805,000 | 8,015,000 |
Dilutive stock options and restricted stock units | 232,000 | 331,000 |
Diluted weighted average shares outstanding | 8,037,000 | 8,346,000 |
Calculation of common stock equivalents for purposes of computing diluted weighted average shares outstanding | ||
Anti-dilutive securities excluded from EPS computation (in shares) | 73,647 | 20,078 |
Credit Agreement (Details)
Credit Agreement (Details) - USD ($) $ in Thousands | Mar. 28, 2020 | Dec. 28, 2019 |
Senior Loan Agreement | ||
Borrowings on revolving line of credit outstanding | $ 70,000 | |
Revolving credit facility | ||
Senior Loan Agreement | ||
Revolving credit facility, maximum capacity | 125,000 | |
Borrowings on revolving line of credit outstanding | 70,000 | $ 0 |
Secured by letters of credit | ||
Senior Loan Agreement | ||
Revolving credit facility, maximum capacity | 15,000 | |
Amount available under revolving credit facility reduced | $ 4,400 |
Subsequent Events (Details)
Subsequent Events (Details) - $ / shares | Apr. 30, 2020 | Mar. 28, 2020 | Mar. 30, 2019 |
Subsequent Events | |||
Common share quarterly cash dividend declared (in dollars per share) | $ 0.23 | $ 0.20 | |
Subsequent Events | |||
Subsequent Events | |||
Common share quarterly cash dividend declared (in dollars per share) | $ 0.23 |