crai-20211002

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 2, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-24049

________________________________________________________________________________________

CRA International, Inc.

(Exact name of registrant as specified in its charter)


Massachusetts			04-2372210
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
200 Clarendon Street, Boston, MA			02116-5092
(Address of principal executive offices)			(Zip Code)

(617) 425-3000

(Registrant’s telephone number, including area code)

________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, no par value

CRAI

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically 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 such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

Outstanding at October 29, 2021

Common Stock, no par value per share

7,427,079 shares

Table of Contents

CRA International, Inc.

INDEX


PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements	3
	Condensed Consolidated Statements of Operations (unaudited)—Fiscal Quarters and Fiscal Year-to-Date Periods Ended October 2, 2021 and September 26, 2020	3
	Condensed Consolidated Statements of Comprehensive Income (unaudited)—Fiscal Quarters and Fiscal Year-to-Date Periods Ended October 2, 2021 and September 26, 2020	4
	Condensed Consolidated Balance Sheets (unaudited)—October 2, 2021 and January 2, 2021	5
	Condensed Consolidated Statements of Cash Flows (unaudited)—Fiscal Year-to-Date Periods Ended October 2, 2021 and September 26, 2020	6
	Condensed Consolidated Statements of Shareholders’ Equity (unaudited)—Fiscal Year-to-Date Periods Ended October 2, 2021 and September 26, 2020	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	23
ITEM 4.	Controls and Procedures	24

PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	24
ITEM 1A.	Risk Factors	24
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
ITEM 3.	Defaults Upon Senior Securities	25
ITEM 4.	Mine Safety Disclosures	25
ITEM 5.	Other Information	25
ITEM 6.	Exhibits	26
Signatures		27

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

CRA INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except per share data)


	Fiscal Quarter Ended				Fiscal Year-to-Date Period Ended
	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Revenues	$	136,412	$	121,762	$	431,167	$	370,951
Costs of services (exclusive of depreciation and amortization)	95,980		88,304		306,396		269,462
Selling, general and administrative expenses	24,490		22,194		71,740		67,742
Depreciation and amortization	3,141		3,244		9,657		9,293
Income from operations	12,801		8,020		43,374		24,454
Interest expense, net	(183)		(277)		(791)		(1,011)
Foreign currency gains (losses), net	235		(217)		(253)		1,103
Income before provision for income taxes	12,853		7,526		42,330		24,546
Provision for income taxes	1,908		2,123		9,318		6,744
Net income	$	10,945	$	5,403	$	33,012	$	17,802
Net income per share:
Basic	$	1.48	$	0.69	$	4.42	$	2.28
Diluted	$	1.44	$	0.68	$	4.31	$	2.23
Weighted average number of shares outstanding:
Basic	7,375		7,771		7,440		7,780
Diluted	7,560		7,934		7,643		7,964

See accompanying notes to the condensed consolidated financial statements.

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CRA INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

(in thousands)


	Fiscal Quarter Ended				Fiscal Year-to-Date Period Ended
	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Net income	$	10,945	$	5,403	$	33,012	$	17,802
Other comprehensive income (loss)
Foreign currency translation adjustments, net of tax	(1,028)		1,589		(1,275)		(302)
Comprehensive income	$	9,917	$	6,992	$	31,737	$	17,500

See accompanying notes to the condensed consolidated financial statements.

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CRA INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands, except share data)


	October 2, 2021		January 2, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	19,665	$	45,677
Accounts receivable, net of allowances of $3,915 at October 2, 2021 and $3,595 at January 2, 2021	108,035		111,595
Unbilled services, net of allowances of $1,204 at October 2, 2021 and $1,000 at January 2, 2021	65,799		40,881
Prepaid expenses and other current assets	10,740		7,068
Forgivable loans	9,662		14,749
Total current assets	213,901		219,970
Property and equipment, net	55,577		62,878
Goodwill	88,966		89,187
Intangible assets, net	4,400		5,108
Right-of-use assets	113,759		122,144
Deferred income taxes	11,125		9,667
Forgivable loans, net of current portion	40,387		46,864
Other assets	1,792		2,692
Total assets	$	529,907	$	558,510
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	22,916	$	19,430
Accrued expenses	128,701		136,376
Deferred revenue and other liabilities	5,826		9,866
Current portion of lease liabilities	14,188		13,557
Current portion of deferred compensation	4,439		20,902
Revolving line of credit	6,000		—
Total current liabilities	182,070		200,131
Non-current liabilities:
Deferred compensation and other non-current liabilities	14,074		9,188
Non-current portion of lease liabilities	128,565		139,447
Deferred income taxes	913		725
Total non-current liabilities	143,552		149,360
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; 7,396,296 and 7,693,497 shares issued and outstanding at October 2, 2021 and January 2, 2021, respectively	676		503
Retained earnings	213,367		216,999
Accumulated other comprehensive loss	(9,758)		(8,483)
Total shareholders’ equity	204,285		209,019
Total liabilities and shareholders’ equity	$	529,907	$	558,510

See accompanying notes to the condensed consolidated financial statements.

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CRA INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)


	Fiscal Year-to-Date Period Ended
	October 2, 2021		September 26, 2020
OPERATING ACTIVITIES:
Net income	$	33,012	$	17,802
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	9,657		9,293
Right-of-use asset amortization	9,711		8,900
Deferred income taxes	(1,357)		496
Share-based compensation expense	2,830		2,357
Accounts receivable allowances	327		(894)
Unrealized foreign currency remeasurement (gains) losses, net	(220)		129
Changes in operating assets and liabilities:
Accounts receivable	2,889		1,952
Unbilled services, net	(25,213)		(14,994)
Prepaid expenses and other current assets, and other assets	(2,850)		(979)
Forgivable loans	9,304		(18,963)
Incentive cash awards	5,030		4,862
Accounts payable, accrued expenses, and other liabilities	(17,668)		(15,087)
Lease liabilities	(11,549)		(5,526)
Net cash provided by (used in) operating activities	13,903		(10,652)
INVESTING ACTIVITIES:
Purchases of property and equipment	(1,730)		(15,742)
Net cash used in investing activities	(1,730)		(15,742)
FINANCING ACTIVITIES:
Issuance of common stock, principally stock option exercises	5,005		1,667
Borrowings under revolving line of credit	72,000		77,000
Repayments under revolving line of credit	(66,000)		(39,000)
Tax withholding payments reimbursed by shares	(588)		(390)
Cash paid for contingent consideration	(2,357)		—
Cash dividends paid	(5,903)		(5,412)
Repurchase of common stock	(39,977)		(8,807)
Net cash provided by (used in) financing activities	(37,820)		25,058
Effect of foreign exchange rates on cash and cash equivalents	(365)		(195)
Net decrease in cash and cash equivalents	(26,012)		(1,531)
Cash and cash equivalents at beginning of period	45,677		25,639
Cash and cash equivalents at end of period	$	19,665	$	24,108
Noncash investing and financing activities:
Purchases of property and equipment not yet paid for	$	7	$	3,923
Asset retirement obligations	$	—	$	155
Right-of-use assets obtained in exchange for lease obligations	$	1,751	$	2,601
Restricted common stock issued for contingent consideration	$	2,250	$	—
Supplemental cash flow information:
Cash paid for taxes	$	12,484	$	5,933
Cash paid for interest	$	528	$	932
Cash paid for amounts included in operating lease liabilities	$	15,556	$	13,736

See accompanying notes to the condensed consolidated financial statements.

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CRA INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE FISCAL YEAR-TO-DATE PERIOD ENDED OCTOBER 2, 2021 (unaudited)

(in thousands, except share data)


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
	Shares Issued	Amount
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 vestings	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 vestings	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 vestings	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

See accompanying notes to the condensed consolidated financial statements.

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CRA INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE FISCAL YEAR-TO-DATE PERIOD ENDED SEPTEMBER 26, 2020 (unaudited)

(in thousands, except share data)


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
	Shares Issued	Amount
BALANCE AT DECEMBER 28, 2019	7,814,797	$	9,265	$	200,249	$	(11,763)	$	197,751
Balance at December 29, 2019, as previously reported	7,814,797	$	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	7,814,797	$	9,265	$	200,046	$	(11,763)	$	197,548
Net income	—	—		6,468		—		6,468
Foreign currency translation adjustment	—	—		—

SEC Form 10-Q filed by CRA International,Inc.