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Charles River Associates (CRA) Announces Adjustment to Share-Based Compensation Expense that Increases Previously Reported 2014 Fourth Quarter Net Income

BOSTON--(BUSINESS WIRE)--Mar. 17, 2015-- Charles River Associates (NASDAQ: CRAI), a worldwide leader in providing economic, financial, and management consulting services, today announced an adjustment to its financial results for the fourth quarter ended January 3, 2015 that increases previously reported 2014 fourth quarter net income.

Subsequent to the Company’s fiscal 2014 fourth quarter and full year earnings announcement on February 19, 2015, a required adjustment to share-based compensation expense associated with performance-vesting restricted stock units was identified. The impact of adjustments to the fourth quarter, fiscal 2014, or any prior quarter or year relating to such share-based compensation expense would not have been material. The cumulative adjustment was recorded in the fourth quarter of 2014. This results in a pretax reduction to share-based compensation expense of $643,000 and, after adjusting for taxes, an increase to net income of $419,000, or $0.04 per diluted share, in the Company’s fiscal 2014 fourth quarter on both a GAAP and non-GAAP basis.

This adjustment has no effect on revenue, cash, cash flow from operations, or “Adjusted EBITDA” as previously reported on February 19, 2015 or in any previously filed financial schedules. This adjustment also has no effect on the Company’s previously announced revenue and Adjusted EBITDA guidance for fiscal 2015.

Attached to this release are financial schedules for the 2014 fiscal fourth quarter and full year that reflect the share-based compensation expense adjustment discussed above, on a GAAP and non-GAAP basis, including a complete reconciliation of non-GAAP items to their GAAP equivalents, as well as the calculation of Adjusted EBITDA based on GAAP and non-GAAP results.

The Company’s Annual Report on Form 10-K for fiscal 2014, which is being filed today with the U.S. Securities and Exchange Commission, will reflect this adjustment.

About Charles River Associates (CRA)

Charles River Associates® is a global consulting firm specializing in litigation, regulatory, and financial consulting, and management consulting. CRA advises clients on economic and financial matters pertaining to litigation and regulatory proceedings, and guides corporations through critical business strategy and performance-related issues. Since 1965, clients have engaged CRA for its unique combination of functional expertise and industry knowledge, and for its objective solutions to complex problems. Headquartered in Boston, CRA has offices throughout the world and is celebrating its 50th year anniversary in 2015. Detailed information about Charles River Associates, a registered trade name of CRA International, Inc., is available at www.crai.com.

Non-GAAP Financial Measures

In addition to reporting its financial results in accordance with U.S. generally accepted accounting principles, or GAAP, the Company has also provided in this release non-GAAP financial information. The Company believes that the use of non-GAAP measures in addition to GAAP measures is an additional useful method of evaluating its results of operations. The Company believes that presenting its financial results excluding the results of the Company’s NeuCo subsidiary and including a presentation of Adjusted EBITDA, is important to investors and management because it is more indicative of the Company’s ongoing operating results and financial condition. These non-GAAP financial measures should be considered in conjunction with, but not as a substitute for, the financial information presented in accordance with GAAP, and the results calculated in accordance with GAAP and reconciliations to those results should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Specifically, for the fourth quarters of fiscal 2014 and fiscal 2013, for the full 2014 and 2013 fiscal years, and for the full 2015 fiscal year financial guidance referred to herein, the Company has excluded NeuCo’s results. Also, in calculating “Adjusted EBITDA” from income (loss) from operations, the Company has excluded the following non-cash expenses: depreciation and amortization, share-based compensation expenses, and amortization of forgivable loans.

Safe Harbor Statement

Statements in this press release concerning our future business, operating results and financial condition, including statements containing any guidance regarding our future revenues, profits or other financial measures, and statements using the terms “expect” or similar expressions, are “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based upon our current expectations and various underlying assumptions. Although we believe there is a reasonable basis for these statements and assumptions, and these statements are expressed in good faith, these statements are subject to a number of factors and uncertainties. Information contained in these forward-looking statements is inherently uncertain, and actual performance and results may differ materially due to many important factors. Our actual non-GAAP revenue and non-GAAP Adjusted EBITDA margin in 2015 could differ materially from the guidance referred to herein as a result of, among other things, the loss of key employee consultants or non-employee experts; their failure to generate engagements for us; our inability to attract or hire qualified consultants or to utilize existing consultants; the unpredictable nature of litigation-related projects; dependence on the growth of our management consulting practice; the potential loss of clients; changes in the law that affect our practice areas; the demand environment; global economic conditions; intense competition; and the timing of and amount of new hires. In addition to these factors, other factors that could cause actual performance or results to differ materially from any forward-looking statements include, among others, our restructuring costs and attributable annual cost savings, changes in our effective tax rate, share dilution from our stock-based compensation, completing acquisitions and factors related to our completed acquisitions, including integration of personnel, clients and offices and unanticipated expenses and liabilities, the risk of impairment write downs to our intangible assets, including goodwill, if our enterprise value declines below certain levels, risks associated with acquisitions we may make in the future, risks inherent in international operations, the performance of our NeuCo subsidiary, changes in accounting standards, rules and regulations, management of new offices, the ability of customers to terminate engagements with us on short notice, our ability to integrate successfully new consultants into our practice, our ability to collect on forgivable loans should any become due, general economic conditions, foreign exchange rate fluctuations, risks inherent in litigation, and professional liability. Further information on these and other potential factors that could affect our financial results is included in our periodic filings with the Securities and Exchange Commission, including risks under the heading “Risk Factors.” We cannot guarantee any future results, levels of activity, performance or achievement. We undertake no obligation to update any forward-looking statements after the date of this press release, and we do not intend to do so.

 

CRA INTERNATIONAL, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS INCLUDING A RECONCILIATION TO NON-GAAP RESULTS
FOR THE QUARTER ENDED JANUARY 3, 2015 COMPARED TO THE QUARTER ENDED DECEMBER 28, 2013
(In thousands, except per share data)

                       
Quarter Ended January 3, 2015 (1) Quarter Ended December 28, 2013 (1)
GAAP
Results

GAAP
% of
Revenues

Adjustments to
GAAP Results
(NeuCo) (2)

Non-GAAP
Results
Non-GAAP
% of
Revenues
GAAP
Results
GAAP
% of
Revenues
Adjustments to
GAAP Results
(NeuCo) (2)

Non-GAAP
Results

Non-GAAP
% of
Revenues

 
 
Revenues $ 78,459 100.0 % $ 1,033 $ 77,426 100.0 % $ 75,672 100.0 % $ 1,347 $ 74,325 100.0 %
Costs of services   52,861   67.4 %   319     52,542   67.9 %   51,628   68.2 %   339     51,289   69.0 %
Gross profit 25,598 32.6 % 714 24,884 32.1 % 24,044 31.8 % 1,008 23,036 31.0 %
 
Selling, general and administrative expenses 17,777 22.7 % 831 16,946 21.9 % 16,966 22.4 % 942 16,024 21.6 %
Depreciation and amortization   1,697   2.2 %   -     1,697   2.2 %   1,619   2.1 %   -     1,619   2.2 %
Income (loss) from operations 6,124 7.8 % (117 ) 6,241 8.1 % 5,459 7.2 % 66 5,393 7.3 %
 
Interest and other expense, net   (102 ) -0.1 %   -     (102 ) -0.1 %   (238 ) -0.3 %   (17 )   (221 ) -0.3 %
Income (loss) before provision for income taxes and
noncontrolling interest 6,022 7.7 % (117 ) 6,139 7.9 % 5,221 6.9 % 49 5,172 7.0 %
Provision for income taxes   (2,279 ) -2.9 %   (50 )   (2,229 ) -2.9 %   (1,505 ) -2.0 %   (63 )   (1,442 ) -1.9 %
Net income (loss) 3,743 4.8 % (167 ) 3,910 5.0 % 3,716 4.9 % (14 ) 3,730 5.0 %
Net loss attributable to noncontrolling interest, net of tax   73   0.1 %   73     -   0.0 %   6   0.0 %   6     -   0.0 %
Net income (loss) attributable to CRA International, Inc. $ 3,816   4.9 % $ (94 ) $ 3,910   5.0 % $ 3,722   4.9 % $ (8 ) $ 3,730   5.0 %
 
Net income per share attributable to CRA International, Inc.:
Basic $ 0.41   $ 0.42   $ 0.37   $ 0.37  
Diluted $ 0.40   $ 0.41   $ 0.37   $ 0.37  
 
Weighted average number of shares outstanding:
Basic   9,344     9,344     10,071     10,071  
Diluted   9,560     9,560     10,148     10,148  
 
 
 

(1) The fiscal quarter ended January 3, 2015 includes fourteen weeks of operating results and the fiscal quarter ended December 28, 2013 includes thirteen weeks of operating results.

(2) These adjustments include activity related to NeuCo in the Company's GAAP results.

                       
CRA INTERNATIONAL, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS INCLUDING A RECONCILIATION TO NON-GAAP RESULTS
FOR THE FISCAL YEAR ENDED JANUARY 3, 2015 COMPARED TO THE FISCAL YEAR ENDED DECEMBER 28, 2013
(In thousands, except per share data)
 
Fiscal Year Ended January 3, 2015 (1) Fiscal Year Ended December 28, 2013 (1)
GAAP
Results
GAAP
% of
Revenues
Adjustments to
GAAP Results
(NeuCo) (2)
Non-GAAP
Results
Non-GAAP
% of
Revenues
GAAP
Results
GAAP
% of
Revenues
Adjustments to
GAAP Results
(NeuCo) (2)
Non-GAAP
Results
Non-GAAP
% of
Revenues
 
 
Revenues $ 306,371 100.0 % $ 4,771 $ 301,600 100.0 % $ 278,432 100.0 % $ 5,050 $ 273,382 100.0 %
Costs of services   206,813   67.5 %   1,475     205,338   68.1 %   189,262   68.0 %   1,365     187,897   68.7 %
Gross profit 99,558 32.5 % 3,296 96,262 31.9 % 89,170 32.0 % 3,685 85,485 31.3 %
 
Selling, general and administrative expenses 69,074 22.5 % 3,592 65,482 21.7 % 64,242 23.1 % 3,608 60,634 22.2 %
Depreciation and amortization   6,443   2.1 %   -     6,443   2.1 %   6,411   2.3 %   3     6,408   2.3 %
Income (loss) from operations 24,041 7.8 % (296 ) 24,337 8.1 % 18,517 6.7 % 74 18,443 6.7 %
 
Interest and other expense, net   (726 ) -0.2 %   (23 )   (703 ) -0.2 %   (599 ) -0.2 %   (87 )   (512 ) -0.2 %
Income (loss) before provision for income taxes
and noncontrolling interest 23,315 7.6 % (319 ) 23,634 7.8 % 17,918 6.4 % (13 ) 17,931 6.6 %
Provision for income taxes   (9,908 ) -3.2 %   (205 )   (9,703 ) -3.2 %   (6,683 ) -2.4 %   (244 )   (6,439 ) -2.4 %
Net income (loss) 13,407 4.4 % (524 ) 13,931 4.6 % 11,235 4.0 % (257 ) 11,492 4.2 %
Net loss attributable to noncontrolling interest, net of tax   231   0.1 %   231     -   0.0 %   135   0.0 %   135     -   0.0 %
Net income (loss) attributable to CRA International, Inc. $ 13,638   4.5 % $ (293 ) $ 13,931   4.6 % $ 11,370   4.1 % $ (122 ) $ 11,492   4.2 %
 
Net income per share attributable to CRA International, Inc.:
Basic $ 1.40   $ 1.43   $ 1.13   $ 1.14  
Diluted $ 1.38   $ 1.41   $ 1.12   $ 1.13  
 
Weighted average number of shares outstanding:
Basic   9,747     9,747     10,084     10,084  
Diluted   9,897     9,897     10,173     10,173  
 
 
 

(1) The fiscal year ended January 3, 2015 includes fifty-three weeks of operating results and the fiscal year ended December 28, 2013 includes fifty-two weeks of operating results.

(2) These adjustments include activity related to NeuCo in the Company's GAAP results.

                       
CRA INTERNATIONAL, INC.
UNAUDITED ADJUSTED EBITDA INCLUDING A RECONCILIATION TO NON-GAAP ADJUSTED EBITDA
FOR THE FISCAL QUARTER AND YEAR ENDED JANUARY 3, 2015 COMPARED TO THE FISCAL QUARTER AND YEAR ENDED DECEMBER 28, 2013
(In thousands)
 
 
Quarter Ended January 3, 2015 (1) Quarter Ended December 28, 2013 (1)
 
GAAP
Quarter Ended
January 3, 2015
GAAP
% of
Revenues
Adjustments to
GAAP Results
NeuCo (3)
Non-GAAP
Quarter Ended
January 3, 2015
Non-GAAP
% of
Revenues
GAAP
Quarter Ended
December 28, 2013
GAAP
% of
Revenues
Adjustments to
GAAP Results
NeuCo (3)
Non-GAAP
Quarter Ended
December 28, 2013
Non-GAAP
% of
Revenues
 
Income (loss) from operations $ 6,124 7.8 % $ (117 ) $ 6,241 8.1 % $ 5,459 7.2 % $ 66 $ 5,393 7.3 %
Depreciation and amortization   1,697 2.2 %   -       1,697 2.2 %   1,619   2.1 %   -   1,619 2.2 %
EBITDA 7,821 10.0 % (117 ) 7,938 10.3 % 7,078 9.4 % 66 7,012 9.4 %
Share-based compensation expenses 1,496 1.9 % - 1,496 1.9 % 882 1.2 % - 882 1.2 %
Amortization of forgivable loans   3,203 4.1 %   -     3,203 4.1 %   3,971 5.2 %   -   3,971 5.3 %
Adjusted EBITDA $ 12,520 16.0 % $ (117 ) $ 12,637 16.3 % $ 11,931 15.8 % $ 66 $ 11,865 16.0 %
 
 
 
Year to Date Period Ended January 3, 2015 (2) Year to Date Period Ended December 28, 2013 (2)

GAAP
Year to Date
Period Ended
January 3, 2015

GAAP
% of
Revenues
Adjustments to
GAAP Results
NeuCo (3)
Non-GAAP
Year to Date
Period Ended
January 3, 2015
Non-GAAP
% of
Revenues
GAAP
Year to Date
Period Ended
December 28, 2013
GAAP
% of
Revenues
Adjustments to
GAAP Results
NeuCo (3)
Non-GAAP
Year to Date
Period Ended
December 28, 2013
Non-GAAP
% of
Revenues
 
Income (loss) from operations $ 24,041 7.8 % $ (296 ) $ 24,337 8.1 % $ 18,517 6.7 % $ 74 $ 18,443 6.7 %
Depreciation and amortization   6,443 2.1 %   -     6,443 2.1 %   6,411 2.3 %   3   6,408 2.3 %
EBITDA 30,484 10.0 % (296 ) 30,780 10.2 % 24,928 9.0 % 77 24,851 9.1 %
Share-based compensation expenses 5,619 1.8 % - 5,619 1.9 % 3,035 1.1 % - 3,035 1.1 %
Amortization of forgivable loans   13,465 4.4 %   -     13,465 4.5 %   14,194 5.1 %   -   14,194 5.2 %
Adjusted EBITDA $ 49,568 16.2 % $ (296 ) $ 49,864 16.5 % $ 42,157 15.1 % $ 77 $ 42,080 15.4 %
 
 
 

(1) The fiscal quarter ended January 3, 2015 includes fourteen weeks of operating results and the fiscal quarter ended December 28, 2013 includes thirteen weeks of operating results.

(2) The fiscal year ended January 3, 2015 includes fifty-three weeks of operating results and the fiscal year ended December 28, 2013 includes fifty-two weeks of operating results.

(3) These adjustments include activity related to NeuCo in the Company's GAAP results.

     
CRA INTERNATIONAL, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 
January 3,
2015
December 28,
2013
 
Assets
Cash and cash equivalents $ 48,199 $ 51,251
Accounts receivable and unbilled, net 83,165 82,131
Other current assets   33,803   29,581
Total current assets 165,167 162,963
 
Property and equipment, net 14,696 15,655
Goodwill and intangible assets, net 87,060 86,110
Other assets   48,089   55,576
Total assets $ 315,012 $ 320,304
 
Liabilities and shareholders’ equity
Current liabilities $ 88,394 $ 87,960
Long-term liabilities   11,914   7,707
Total liabilities 100,308 95,667
 
Total shareholders’ equity   214,704   224,637
Total liabilities and shareholders’ equity $ 315,012 $ 320,304
 
CRA INTERNATIONAL, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
       
Fiscal Year Ended     Fiscal Year Ended
January 3,
2015
December 28,
2013
Operating activities:
Net income $ 13,407 $ 11,235
Adjustments to reconcile net income
to net cash provided by operating activities,
net of effect of acquired businesses:
Non-cash items, net 7,486 9,339
Accounts receivable and unbilled services 1,191 6,920
Working capital items, net   8,066       (9,046 )
Net cash provided by operating activities 30,150 18,448
 
Investing activities:
Consideration relating to acquisitions, net (1,784 ) (15,591 )
Purchase of property and equipment (4,192 ) (2,816 )
Collections on notes receivable 114 14
   
Net cash used in investing activities (5,862 ) (18,393 )
 
Financing activities:
Issuance of common stock, principally stock option exercises 469 207
Payments on notes payable (26 ) (700 )
Borrowings under line of credit - 17,320
Repayments under line of credit - (17,320 )
Tax withholding payments reimbursed by restricted shares (1,222 ) (730 )
Excess tax benefits from share-based compensation 392 7
Repurchase of common stock (25,492 ) (2,190 )
Debt issuance costs - (1,120 )
   
Net cash used in financing activities (25,879 ) (4,526 )
 
Effect of foreign exchange rates on cash and cash equivalents   (1,461 )   271  
 
Net decrease in cash and cash equivalents (3,052 ) (4,200 )
Cash and cash equivalents at beginning of period   51,251     55,451  
 
Cash and cash equivalents at end of period $ 48,199   $ 51,251  
 
Supplemental cash flow information:
 
Cash paid for income taxes $ 15,580   $ 2,887  
Cash paid for interest $ 443   $ 339  
Common stock issued for acquired business $ 427   $ -  
 

Source: Charles River Associates

Charles River Associates
Chad Holmes, 312-377-2322
Chief Financial Officer
or
Sharon Merrill Associates, Inc.
Jamie Bernard, 617-542-5300
Senior Associate



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