Domestic and International Demand Drives 16% Revenue Growth;
Net Income Flat on Office Openings and Increased Costs
BOSTON--(BUSINESS WIRE)--Sept. 27, 2007--CRA International, Inc.
(Nasdaq: CRAI), a worldwide leader in providing economic, financial,
and management consulting services, today reported financial results
for its fiscal third quarter, the sixteen weeks ended August 31, 2007.
Revenue for the third quarter of fiscal 2007 increased 16.2
percent to $124.3 million from $107.0 million for the third quarter of
fiscal 2006. Net income for the third quarter of fiscal 2007 was $8.6
million, or $0.72 per diluted share, compared with net income of $8.7
million, or $0.71 per diluted share, in the comparable period of
fiscal 2006. Weighted average diluted shares outstanding used to
calculate earnings per share in the third quarter of fiscal 2007 were
12.0 million versus 12.3 million in the third quarter of fiscal 2006.
Revenue for the first three quarters of fiscal 2007 was $295.9
million, a 12.3 percent increase from $263.6 million in the same
period a year earlier. Net income for the first three quarters of
fiscal 2007 was $22.3 million, a 5.7 percent increase from $21.1
million in the first three quarters of fiscal 2006. Earnings per
diluted share were $1.81 in the first three quarters of fiscal 2007,
compared with $1.73 in the first three quarters of fiscal 2006.
Weighted average diluted shares outstanding used to calculate earnings
per share in the first three quarters of fiscal 2007 were 12.3
million, versus 12.2 million in the first three quarters of fiscal
2006.
Comments on the Third Quarter
"We are pleased that third-quarter revenue increased more than 16
percent led by significant contributions in several of our U.S.-led
practice areas including Competition, Transfer Pricing, and Finance,"
said James C. Burrows, CRA's president and chief executive officer.
"The growth was almost entirely organic. In particular, we were
pleased to see our overall Finance platform rebound from a challenging
second quarter. Within our business consulting group, our Energy &
Environment and Chemicals & Petroleum practices were our top
performers during the quarter, contributing to CRA's continued strong
international growth."
"Overall hiring in the quarter was successful, as we attracted a
number of industry experts in their respective fields," Burrows said.
"In conjunction with some of these hirings, we made the strategic
decision to focus on internally generated growth and to invest in
additional offices beyond our original plan for 2007. During the
quarter, CRA opened an office in Hamburg, Germany and two new domestic
offices in Tallahassee and Austin. Based on the demand for our
services, we determined that these offices, which raise our operating
costs in the near-term, were necessary investments in our long-term
growth through expanded service offerings in our Labor and Employment,
Financial Markets, and Chemicals & Petroleum practices, respectively.
Our occupancy costs increased approximately $1.8 million during the
quarter as compared to the third quarter of 2006, reflecting our new
offices, the relocation of our London facilities, which we moved into
during the quarter, and an expansion of our New York office."
"In addition to the expenses related to these office openings and
other infrastructure investments, our bottom-line was hindered by the
combination of several factors," said Burrows. "First, we incurred a
$245,000 charge related to a software write-off. Second, we recorded a
foreign exchange rate loss of approximately $225,000 in the quarter.
And lastly, our indirect travel expenses, which essentially represent
a marketing investment, increased by nearly $1 million as compared to
the third quarter of 2006. As a result of these higher costs, earnings
were flat compared to the same period of 2006."
"A 1.9 percentage point increase in client reimbursable expenses
as a percent of revenue from the third quarter of 2006 lowered our
gross margin and operating income percentages in the third quarter of
2007," Burrows said. "Client reimbursable expenses carry little to no
mark-up for the Company."
"Our utilization rate in the third quarter of 2007 showed a modest
improvement over the sequential second quarter increasing to 76
percent despite the summer holiday season," Burrows said. "We remain
on track towards our annual goal of achieving fiscal 2007 utilization
of 76 to 78 percent. We expect to be at the low end of the range based
on year-to-date utilization of 76 percent."
During the quarter, the Company bought back approximately 915,000
shares under its previously announced stock repurchase program.
Outlook and Financial Guidance
"For the fourth quarter of fiscal 2007, we expect continued strong
demand for our services across our three business platforms and a
return to more normalized margins," said Burrows. "Based on this
outlook and current market conditions, we continue to anticipate
revenue growth in the range of 10 to 12 percent for the year. We
expect to achieve the high end of this range. Our previous guidance
reflected annual net income growth in the mid to high teens percent
range, and an EPS growth rate in the range of 12 to 18 percent over
fiscal 2006. We expect to be at the low end of the range for net
income growth and the middle part of the range for EPS growth."
The Company's fiscal 2007 EPS growth estimate assumes an average
diluted share count of 12.1 million shares for the year (assuming no
further stock repurchases in 2007) and a stock price of $48.66, which
was derived from the average of the past 10 trading days. Deviations
from this stock price will cause EPS to vary based on share dilution
from CRA's stock options and convertible bonds.
Conference Call/Webcast Information
CRA International will host a conference call this morning at 9:00
a.m. ET to discuss its third-quarter fiscal 2007 financial results. To
listen to a live webcast of the conference call, please visit the
Investor Relations section of CRA's website, www.crai.com. CRA's
third-quarter fiscal 2007 conference call also can be heard live by
dialing (913) 981-5591 or (877) 502-9276 prior to the start of the
call. A replay of the call also will be available on the Company's
website.
About CRA International
Founded in 1965, CRA International is a leading provider of
economic and financial expertise and management consulting services.
Working with businesses, law firms, accounting firms, and governments,
CRA is a preferred consulting firm for complex assignments with
pivotal and high-stakes outcomes. The firm is distinguished by a
unique combination of credentials: deep vertical experience in a
variety of industries; broad horizontal expertise in a range of
functional disciplines; and rigorous economic, financial, and market
analysis. CRA offers a proven track record of thousands of successful
engagements in regulatory and litigation support, business strategy
and planning, market and demand forecasting, policy analysis, and
engineering and technology management. Headquartered in Boston, the
firm has sixteen offices within the United States and ten offices in
Canada, Europe, the Middle East, and the Asia Pacific region. Detailed
information about CRA is available at www.crai.com.
Statements in this press release concerning the future business,
operating results, and financial condition of the Company and
statements using the terms "anticipates," "believes," "expects,"
"should," or similar expressions, are "forward-looking" statements as
defined in the Private Securities Litigation Reform Act of 1995. These
statements are based upon management's current expectations and 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. Such factors that could cause actual results to
differ materially from any forward-looking statements made by the
Company include, among others, changes in the Company's effective tax
rate, share dilution from the Company's convertible debt offering and
stock options, the impact of Financial Accounting Standards Board
Statement No. 123R and total stock-based compensation, dependence on
key personnel, attracting and retaining qualified consultants,
dependence on outside experts, utilization rates, factors related to
its recent acquisitions, including integration of personnel, clients,
offices, and unanticipated expenses and liabilities, risks associated
with acquisitions it may make in the future, risks inherent in
international operations, the performance of NeuCo, changes in
accounting standards, rules and regulations, changes in the law that
affect our practice areas, management of new offices, the potential
loss of clients, dependence on growth of the Company's business
consulting practice, the unpredictable nature of litigation-related
projects, the ability of the Company to integrate successfully new
consultants into its practice, intense competition, risks inherent in
litigation, and professional liability. Further information on these
and other potential factors that could affect the Company's financial
results is included in the Company's filings with the Securities and
Exchange Commission. The Company cannot guarantee any future results,
levels of activity, performance or achievement. The Company undertakes
no obligation to update any of its forward-looking statements after
the date of this press release.
CRA's consolidated statements of income and consolidated balance
sheets are attached.
CRA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Sixteen Sixteen Forty Forty
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
---------- ------------ ---------- ------------
August 31, September 1, August 31, September 1,
2007 2006 2007 2006
---------- ------------ ---------- ------------
Revenues $124,301 $107,001 $295,938 $263,568
Costs of services 77,194 67,029 185,083 163,560
---------- ------------ ---------- ------------
Gross profit 47,107 39,972 110,855 100,008
Selling, general and
administrative
expenses 32,120 24,984 75,353 64,939
---------- ------------ ---------- ------------
Income from operations 14,987 14,988 35,502 35,069
Interest and other
income (expense), net 316 442 1,510 967
---------- ------------ ---------- ------------
Income before
provision for income
taxes, minority
interest, and equity
method investment
gain (loss) 15,303 15,430 37,012 36,036
Provision for income
taxes (6,519) (6,218) (14,179) (14,575)
---------- ------------ ---------- ------------
Income before minority
interest and equity
method investment
gain (loss) 8,784 9,212 22,833 21,461
Minority interest - - - 141
Equity method
investment gain
(loss), net of tax (196) (496) (528) (496)
---------- ------------ ---------- ------------
Net income $8,588 $8,716 $22,305 $21,106
========== ============ ========== ============
Net income per share:
Basic $0.77 $0.76 $1.96 $1.85
========== ============ ========== ============
Diluted $0.72 $0.71 $1.81 $1.73
========== ============ ========== ============
Weighted average
number of shares
outstanding:
Basic 11,133 11,529 11,363 11,389
========== ============ ========== ============
Diluted 11,955 12,252 12,322 12,207
========== ============ ========== ============
CRA INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
August 31, November 25,
2007 2006
---------- ------------
Assets
Cash and cash equivalents $83,982 $131,570
Accounts receivable and unbilled, net 120,733 110,480
Other current assets 16,552 17,699
---------- ------------
Total current assets 221,267 259,749
Property and equipment, net 27,480 25,055
Goodwill and intangible assets, net 158,371 149,539
Other assets 16,208 11,553
---------- ------------
Total assets $423,326 $445,896
========== ============
Liabilities and shareholders' equity
Current liabilities $80,912 $99,726
Long-term liabilities 104,937 97,394
---------- ------------
Total liabilities 185,849 197,120
Total shareholders' equity 237,477 248,776
---------- ------------
Total liabilities and shareholders' equity $423,326 $445,896
========== ============
CONTACT: CRA International
Wayne Mackie, 617-425-3740
Executive Vice President, CFO
or
Sharon Merrill Associates, Inc.
Jim Buckley, 617-542-5300
Executive Vice President
SOURCE: CRA International, Inc.