UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): July 25, 2013
CRA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Massachusetts |
|
000-24049 |
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04-2372210 |
(State or other jurisdiction |
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(Commission |
|
(IRS employer |
of incorporation) |
|
file number) |
|
identification no.) |
200 Clarendon Street, Boston, Massachusetts |
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02116 |
(Address of principal executive offices) |
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(Zip code) |
Registrants telephone number, including area code: (617) 425-3000
Not Applicable |
(Former Name or Former Address, if Changed Since Last Report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On July 25, 2013, we issued a press release reporting our financial results for our second quarter ended June 29, 2013. A copy of the press release is set forth as Exhibit 99.1 and is incorporated by reference herein. On July 25, 2013, we also posted on our website supplemental financial information, including prepared CFO remarks. A copy of the supplemental financial information is set forth as Exhibit 99.2 and is incorporated by reference herein.
The information contained in Item 2.02 of this report and Exhibits 99.1 and 99.2 attached hereto shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Number |
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Title |
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99.1 |
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July 25, 2013 press release |
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99.2 |
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Supplemental financial information |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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CRA INTERNATIONAL, INC. | |
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Dated: July 25, 2013 |
By: |
/s/ Wayne D. Mackie |
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Wayne D. Mackie |
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Executive Vice President, Treasurer, and Chief Financial Officer |
EXHIBIT 99.1
Contact: |
|
|
Wayne D. Mackie |
|
Dennis Walsh |
Executive Vice President, CFO |
|
Vice President |
Charles River Associates |
|
Sharon Merrill Associates, Inc. |
617-425-3740 |
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617-542-5300 |
CHARLES RIVER ASSOCIATES (CRA) ANNOUNCES
SECOND QUARTER 2013 FINANCIAL RESULTS
Company Positioned for Stronger Second Half Fiscal 2013 Performance
BOSTON, July 25, 2013 Charles River Associates (NASDAQ: CRAI), a worldwide leader in providing management, economic and financial consulting services, today announced financial results for the fiscal second quarter ended June 29, 2013.
Revenue for the second quarter of fiscal 2013 was $65.2 million, compared with $67.8 million for the fiscal second quarter ended June 30, 2012. Non-GAAP revenue for the second quarter of fiscal 2013 was $64.1 million, compared with $66.3 million for the second quarter of fiscal 2012.
Net income for the second quarter of fiscal 2013 was $1.4 million, or $0.14 per diluted share. This compares with net income for the second quarter of fiscal 2012 of $0.7 million, or $0.07 per diluted share. Non-GAAP net income for the second quarter of fiscal 2013 was $1.5 million, or $0.15 per diluted share, compared with $2.1 million, or $0.20 per diluted share, for the second quarter of fiscal 2012.
With the recent increase in the Companys use of forgivable loans as a recruitment and retention tool for key revenue generators, cash flow measures for the Companys business have become even more relevant. Accordingly, for the first time the Company has included the calculation of Adjusted EBITDA. For the second quarter of fiscal 2013, the Adjusted EBITDA based on GAAP and non-GAAP results was $8.8 million and $8.9 million, respectively, or 13.5% and 13.8% of revenues, respectively. For the second quarter of fiscal 2012, the Adjusted EBITDA based on GAAP and non-GAAP results was $7.9 million and $7.8 million, respectively, or 11.6% and 11.8% of revenues, respectively.
A complete reconciliation between revenue, net income and net income per diluted share, and the calculation of Adjusted EBITDA, on a GAAP and non-GAAP basis, for the second quarters of fiscal 2013 and fiscal 2012 is provided in the financial tables at the end of this release.
Financial Results Comments
During the second quarter of fiscal 2013, we experienced mixed results within our portfolio, said Paul Maleh, CRAs President and Chief Executive Officer. The strong performance of some practices was offset by softness in other areas of the portfolio. The Antitrust & Competition Economics and Life Sciences practices grew sequentially and year-over-year during the second quarter. Utilization and revenue in our Antitrust & Competition Economics practice improved during the latter part of the quarter, reflecting organic growth and increasing contributions from the new senior-level consultants we welcomed to CRA in prior months. Improved performance in Life Sciences was driven by new engagements across both management consulting and litigation consulting. The Labor & Employment practice also delivered solid results during the quarter.
The gains we achieved during the quarter were partially offset by the performances from our Finance and Marakon practices. Although both practices started the quarter slowly, they experienced improvements in project backlog that have continued into the third quarter, positioning the practices for a stronger second half of fiscal 2013.
We continued to effectively manage our SG&A expenses and cost structure during the quarter. CRAs non-GAAP SG&A for the second quarter of fiscal 2013, after adjusting for commissions to non-employee experts, decreased by $2.0 million to 19.6% of revenue compared to 21.9% for the second quarter of last year.
To support CRAs focus on organic growth and the recruitment and retention of key revenue generators, during the first two quarters of 2013 we issued approximately $38.0 million in forgivable loans to employees and non-employee experts for future service. The Consolidated Statement of Cash Flows shows a use of $26.7 million in year to date cash flows from operations. This includes the $38.0 million in forgivable loans, and $26.6 million of bonus payments to employees that were paid during the first half of fiscal 2013. Excluding the forgivable loans, cash flow from operations year to date would have been approximately $11.3 million. Forgivable loan amortization in the second quarter of 2013 was approximately $3.2 million compared with approximately $1.5 million in the second quarter of 2012. The second quarter of 2013 increase in the amortization of forgivable loans has driven the increase in Adjusted EBITDA compared with the second quarter of fiscal 2012.
Outlook
Looking ahead, we are focused on delivering broad-based revenue growth across our portfolio. Although the market has been slow to turn around and the M&A environment remains sluggish, certain areas of our portfolio continue to perform well. CRA experienced an improvement in project activity during the latter part of the second quarter and a related pickup in utilization, including areas that experienced some softness during the quarter. We are encouraged by the quality of the new engagements we are winning across the organization. Our anticipated revenue growth, coupled with the SG&A decrease we achieved, is expected to improve our performance, concluded Maleh.
Conference Call Information and Prepared CFO Remarks
CRA will host a conference call this morning at 9:00 a.m. ET to discuss its second-quarter 2013 financial results. To listen to a live webcast of the call, please visit the Investor Relations section of the Companys website at http://www.crai.com. To listen to the call via telephone, dial (877) 709-8155 or (201) 689-8881. Interested parties unable to participate in the live call may access an archived version of the webcast on CRAs website for up to one year.
In combination with this press release, CRA is providing prepared remarks by its CFO Wayne Mackie under Conference Call Materials in the investor relations section on the Companys website at http://www.crai.com. These remarks are offered to provide the investment community with additional background on CRAs financial results prior to the start of the conference call.
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. Detailed information about Charles River Associates, a registered trade name of CRA International, Inc., is available at http://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 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 certain restructuring costs, certain non-cash expenses, and the results of the Companys NeuCo subsidiary is important to investors and management because it is more indicative of the Companys 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 expected results calculated in accordance with GAAP and reconciliations to those expected 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 second quarter of fiscal 2013, the Company has excluded NeuCos results, and for the second quarter of fiscal 2012, the Company has excluded certain restructuring costs and NeuCos results. Also, in calculating Adjusted EBITDA, the Company has excluded the following non-cash expenses: depreciation and amortization, share-based compensation expenses, and amortization of forgivable loans.
Statements in this press release concerning the future business, operating results, tax rates, and financial condition of the Company, the anticipated, expected or intended impact of the Companys key hires and expense management initiatives, and statements using the terms anticipates, believes, expects, should, prospects, target, on track, optimistic, remaining positive, hope, opportunities, positioned, or similar expressions are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based upon managements 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 performance or results to differ materially from any forward-looking statements made by the Company include, among others, the Companys restructuring costs and attributable annual cost savings, changes in the Companys effective tax rate, share dilution from the Companys stock-based compensation, dependence on key personnel, attracting, recruiting and retaining qualified consultants, dependence on outside experts, utilization rates, completing acquisitions and factors related to its completed acquisitions, including integration of personnel, clients and offices, and unanticipated expenses and liabilities, the risk of impairment write downs to the Companys intangible assets, including goodwill, if the Companys enterprise value declines below certain levels, 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 the Companys practice areas, management of new offices, the potential loss of clients, the ability of customers to terminate the Companys engagements on short notice, dependence on the growth of the Companys management consulting practice, the unpredictable nature of litigation-related projects, the ability of the Company to integrate successfully new consultants into its practice, the Companys ability to collect on forgivable loans should any become due, general economic conditions, intense competition, risks inherent in litigation, and professional liability. Further information on these and other potential factors that could affect the Companys financial results is included in the Companys periodic 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 INTERNATIONAL, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS INCLUDING A RECONCILIATION TO NON-GAAP RESULTS
FOR THE QUARTER ENDED JUNE 29, 2013 COMPARED TO THE QUARTER ENDED JUNE 30, 2012
(In thousands, except per share data)
|
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Quarter Ended June 29, 2013 |
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Quarter Ended June 30, 2012 |
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GAAP |
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Adjustments to |
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Non-GAAP |
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GAAP |
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Adjustments to |
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Adjustments to |
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Non-GAAP |
| |||||||
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GAAP |
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% of |
|
GAAP Results |
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Non-GAAP |
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% of |
|
GAAP |
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% of |
|
GAAP Results |
|
GAAP Results |
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Non-GAAP |
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% of |
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Results |
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Revenues |
|
(NeuCo) (1) |
|
Results |
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Revenues |
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Results |
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Revenues |
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(Restructuring) (2) |
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(NeuCo) (1) |
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Results |
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Revenues |
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Revenues |
|
$ |
65,203 |
|
100.0 |
% |
$ |
1,121 |
|
$ |
64,082 |
|
100.0 |
% |
$ |
67,813 |
|
100.0 |
% |
$ |
|
|
$ |
1,493 |
|
$ |
66,320 |
|
100.0 |
% |
Costs of services |
|
45,042 |
|
69.1 |
% |
303 |
|
44,739 |
|
69.8 |
% |
45,448 |
|
67.0 |
% |
|
|
339 |
|
45,109 |
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68.0 |
% | |||||||
Gross profit |
|
20,161 |
|
30.9 |
% |
818 |
|
19,343 |
|
30.2 |
% |
22,365 |
|
33.0 |
% |
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|
1,154 |
|
21,211 |
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32.0 |
% | |||||||
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Selling, general and administrative expenses |
|
15,380 |
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23.6 |
% |
875 |
|
14,505 |
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22.6 |
% |
16,924 |
|
25.0 |
% |
226 |
|
882 |
|
15,816 |
|
23.8 |
% | |||||||
Depreciation and amortization |
|
1,611 |
|
2.5 |
% |
1 |
|
1,610 |
|
2.5 |
% |
2,633 |
|
3.9 |
% |
1,145 |
|
1 |
|
1,487 |
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2.2 |
% | |||||||
Income (loss) from operations |
|
3,170 |
|
4.9 |
% |
(58 |
) |
3,228 |
|
5.0 |
% |
2,808 |
|
4.1 |
% |
(1,371 |
) |
271 |
|
3,908 |
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5.9 |
% | |||||||
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Interest and other income (expense), net |
|
198 |
|
0.3 |
% |
(14 |
) |
212 |
|
0.3 |
% |
(113 |
) |
-0.2 |
% |
|
|
(40 |
) |
(73 |
) |
-0.1 |
% | |||||||
Income (loss) before (provision) benefit for income taxes |
|
3,368 |
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5.2 |
% |
(72 |
) |
3,440 |
|
5.4 |
% |
2,695 |
|
4.0 |
% |
(1,371 |
) |
231 |
|
3,835 |
|
5.8 |
% | |||||||
(Provision) benefit for income taxes |
|
(2,017 |
) |
-3.1 |
% |
(60 |
) |
(1,957 |
) |
-3.1 |
% |
(1,922 |
) |
-2.8 |
% |
(151 |
) |
(60 |
) |
(1,711 |
) |
-2.6 |
% | |||||||
Net income (loss) |
|
1,351 |
|
2.1 |
% |
(132 |
) |
1,483 |
|
2.3 |
% |
773 |
|
1.1 |
% |
(1,522 |
) |
171 |
|
2,124 |
|
3.2 |
% | |||||||
Net (income) loss attributable to noncontrolling interest, net of tax |
|
58 |
|
0.1 |
% |
58 |
|
|
|
0.0 |
% |
(54 |
) |
-0.1 |
% |
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(54 |
) |
|
|
0.0 |
% | |||||||
Net income (loss) attributable to CRA International, Inc. |
|
$ |
1,409 |
|
2.2 |
% |
$ |
(74 |
) |
$ |
1,483 |
|
2.3 |
% |
$ |
719 |
|
1.1 |
% |
$ |
(1,522 |
) |
$ |
117 |
|
$ |
2,124 |
|
3.2 |
% |
|
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Net income per share attributable to CRA International, Inc.: |
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Basic |
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$ |
0.14 |
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|
|
|
$ |
0.15 |
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|
|
$ |
0.07 |
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|
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$ |
0.21 |
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| |||
Diluted |
|
$ |
0.14 |
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|
|
|
$ |
0.15 |
|
|
|
$ |
0.07 |
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|
$ |
0.20 |
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| |||
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Weighted average number of shares outstanding: |
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|
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Basic |
|
10,100 |
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|
|
|
|
10,100 |
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|
|
10,242 |
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|
10,242 |
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Diluted |
|
10,188 |
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|
|
|
10,188 |
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|
|
10,381 |
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|
|
|
|
10,381 |
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|
(1) These adjustments include activity related to NeuCo in the Companys GAAP results.
(2) During the fiscal quarter ended June 30, 2012, the Company incurred pre-tax expenses of $1.4 million and related income tax provision of $0.2 million in connection with the surrender of a portion of its office space in London, England and adjustments related to its leased office space in Houston, TX.
CRA INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS INCLUDING A RECONCILIATION TO NON-GAAP RESULTS
FOR THE YEAR TO DATE PERIOD ENDED JUNE 29, 2013 COMPARED TO THE YEAR TO DATE PERIOD ENDED JUNE 30, 2012
(In thousands, except per share data)
|
|
Year To Date Period Ended June 29, 2013 |
|
Year To Date Period Ended June 30, 2012 |
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|
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GAAP |
|
Adjustments to |
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|
|
Non-GAAP |
|
|
|
GAAP |
|
Adjustments to |
|
Adjustments to |
|
|
|
Non-GAAP |
| |||||||
|
|
GAAP |
|
% of |
|
GAAP Results |
|
Non-GAAP |
|
% of |
|
GAAP |
|
% of |
|
GAAP Results |
|
GAAP Results |
|
Non-GAAP |
|
% of |
| |||||||
|
|
Results |
|
Revenues |
|
(NeuCo) (1) |
|
Results |
|
Revenues |
|
Results |
|
Revenues |
|
(Restructuring) (2) |
|
(NeuCo) (1) |
|
Results |
|
Revenues |
| |||||||
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Revenues |
|
$ |
128,333 |
|
100.0 |
% |
$ |
2,222 |
|
$ |
126,111 |
|
100.0 |
% |
$ |
136,945 |
|
100.0 |
% |
$ |
|
|
$ |
2,672 |
|
$ |
134,273 |
|
100.0 |
% |
Costs of services |
|
87,057 |
|
67.8 |
% |
669 |
|
86,388 |
|
68.5 |
% |
91,935 |
|
67.1 |
% |
|
|
682 |
|
91,253 |
|
68.0 |
% | |||||||
Gross profit |
|
41,276 |
|
32.2 |
% |
1,553 |
|
39,723 |
|
31.5 |
% |
45,010 |
|
32.9 |
% |
|
|
1,990 |
|
43,020 |
|
32.0 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Selling, general and administrative expenses |
|
31,180 |
|
24.3 |
% |
1,774 |
|
29,406 |
|
23.3 |
% |
34,791 |
|
25.4 |
% |
771 |
|
1,803 |
|
32,217 |
|
24.0 |
% | |||||||
Depreciation and amortization |
|
3,152 |
|
2.5 |
% |
2 |
|
3,150 |
|
2.5 |
% |
4,105 |
|
3.0 |
% |
1,145 |
|
2 |
|
2,958 |
|
2.2 |
% | |||||||
Income (loss) from operations |
|
6,944 |
|
5.4 |
% |
(223 |
) |
7,167 |
|
5.7 |
% |
6,114 |
|
4.5 |
% |
(1,916 |
) |
185 |
|
7,845 |
|
5.8 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Interest and other income (expense), net |
|
(199 |
) |
-0.2 |
% |
(34 |
) |
(165 |
) |
-0.1 |
% |
(166 |
) |
-0.1 |
% |
|
|
(82 |
) |
(84 |
) |
-0.1 |
% | |||||||
Income (loss) before (provision) benefit for income taxes and noncontrolling interest |
|
6,745 |
|
5.3 |
% |
(257 |
) |
7,002 |
|
5.6 |
% |
5,948 |
|
4.3 |
% |
(1,916 |
) |
103 |
|
7,761 |
|
5.8 |
% | |||||||
(Provision) benefit for income taxes |
|
(2,559 |
) |
-2.0 |
% |
(130 |
) |
(2,429 |
) |
-1.9 |
% |
(4,739 |
) |
-3.5 |
% |
44 |
|
(55 |
) |
(4,728 |
) |
-3.5 |
% | |||||||
Net income (loss) |
|
4,186 |
|
3.3 |
% |
(387 |
) |
4,573 |
|
3.6 |
% |
1,209 |
|
0.9 |
% |
(1,872 |
) |
48 |
|
3,033 |
|
2.3 |
% | |||||||
Net loss attributable to noncontrolling interest, net of tax |
|
192 |
|
0.1 |
% |
192 |
|
|
|
0.0 |
% |
29 |
|
0.0 |
% |
|
|
29 |
|
|
|
0.0 |
% | |||||||
Net income (loss) attributable to CRA International, Inc. |
|
$ |
4,378 |
|
3.4 |
% |
$ |
(195 |
) |
$ |
4,573 |
|
3.6 |
% |
$ |
1,238 |
|
0.9 |
% |
$ |
(1,872 |
) |
$ |
77 |
|
$ |
3,033 |
|
2.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net income per share attributable to CRA International, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Basic |
|
$ |
0.43 |
|
|
|
|
|
$ |
0.45 |
|
|
|
$ |
0.12 |
|
|
|
|
|
|
|
$ |
0.30 |
|
|
| |||
Diluted |
|
$ |
0.43 |
|
|
|
|
|
$ |
0.45 |
|
|
|
$ |
0.12 |
|
|
|
|
|
|
|
$ |
0.29 |
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Basic |
|
10,085 |
|
|
|
|
|
10,085 |
|
|
|
10,279 |
|
|
|
|
|
|
|
10,279 |
|
|
| |||||||
Diluted |
|
10,174 |
|
|
|
|
|
10,174 |
|
|
|
10,439 |
|
|
|
|
|
|
|
10,439 |
|
|
|
(1) These adjustments include activity related to NeuCo in the Companys GAAP results.
(2) During the fiscal year-to-date period ended June 30, 2012, the Company incurred pre-tax expenses of $1.9 million and related income tax benefit of $44,000 in connection with the surrender of a portion of its leased office space in London, England and adjustments related to its leased office space in Houston, TX.
CRA INTERNATIONAL, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
June 29, |
|
December 29, |
| ||
|
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Assets |
|
|
|
|
| ||
Cash and cash equivalents and short-term investments |
|
$ |
16,333 |
|
$ |
55,451 |
|
Accounts receivable and unbilled, net |
|
76,163 |
|
77,270 |
| ||
Other current assets |
|
33,582 |
|
38,956 |
| ||
Total current assets |
|
126,078 |
|
171,677 |
| ||
|
|
|
|
|
| ||
Property and equipment, net |
|
17,297 |
|
17,980 |
| ||
Goodwill and intangible assets, net |
|
80,393 |
|
72,599 |
| ||
Other assets |
|
60,319 |
|
29,754 |
| ||
Total assets |
|
$ |
284,087 |
|
$ |
292,010 |
|
|
|
|
|
|
| ||
Liabilities and shareholders equity |
|
|
|
|
| ||
Current liabilities |
|
$ |
60,865 |
|
$ |
69,210 |
|
Long-term liabilities |
|
6,749 |
|
10,566 |
| ||
Total liabilities |
|
67,614 |
|
79,776 |
| ||
|
|
|
|
|
| ||
Total shareholders equity |
|
216,473 |
|
212,234 |
| ||
Total liabilities and shareholders equity |
|
$ |
284,087 |
|
$ |
292,010 |
|
CRA INTERNATIONAL, INC.
ADJUSTED EBITDA INCLUDING A RECONCILIATION TO NON-GAAP ADJUSTED EBITDA
FOR THE QUARTER AND YEAR TO DATE PERIOD ENDED JUNE 29, 2013 COMPARED TO THE QUARTER AND YEAR TO DATE PERIOD ENDED JUNE 30, 2012
(In thousands)
|
|
GAAP |
|
GAAP |
|
Adjustments to |
|
Non-GAAP |
|
Non-GAAP |
|
GAAP |
|
GAAP |
|
Adjustments to |
|
Adjustments to |
|
Non-GAAP |
|
Non-GAAP |
| |||||||
|
|
Quarter Ended |
|
% of |
|
GAAP Results |
|
Quarter Ended |
|
% of |
|
Quarter Ended |
|
% of |
|
GAAP Results |
|
GAAP Results |
|
Quarter Ended |
|
% of |
| |||||||
|
|
June 29, 2013 |
|
Revenues |
|
NeuCo (1) |
|
June 29, 2013 |
|
Revenues |
|
June 30, 2012 |
|
Revenues |
|
Restructuring (2) |
|
NeuCo (1) |
|
June 30, 2012 |
|
Revenues |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Income (loss) from operations |
|
$ |
3,170 |
|
4.9 |
% |
$ |
(58 |
) |
$ |
3,228 |
|
5.0 |
% |
$ |
2,808 |
|
4.1 |
% |
$ |
(1,371 |
) |
$ |
271 |
|
$ |
3,908 |
|
5.9 |
% |
Depreciation and amortization |
|
1,611 |
|
2.5 |
% |
1 |
|
1,610 |
|
2.5 |
% |
2,633 |
|
3.9 |
% |
1,145 |
|
1 |
|
1,487 |
|
2.2 |
% | |||||||
EBITDA |
|
4,781 |
|
7.3 |
% |
(57 |
) |
4,838 |
|
7.5 |
% |
5,441 |
|
8.0 |
% |
(226 |
) |
272 |
|
5,395 |
|
8.1 |
% | |||||||
Share-based compensation expenses |
|
841 |
|
1.3 |
% |
|
|
841 |
|
1.3 |
% |
952 |
|
1.4 |
% |
|
|
|
|
952 |
|
1.4 |
% | |||||||
Amortization of forgivable loans |
|
3,189 |
|
4.9 |
% |
|
|
3,189 |
|
5.0 |
% |
1,495 |
|
2.2 |
% |
|
|
|
|
1,495 |
|
2.3 |
% | |||||||
Adjusted EBITDA |
|
$ |
8,811 |
|
13.5 |
% |
$ |
(57 |
) |
$ |
8,868 |
|
13.8 |
% |
$ |
7,888 |
|
11.6 |
% |
$ |
(226 |
) |
$ |
272 |
|
$ |
7,842 |
|
11.8 |
% |
|
|
GAAP |
|
|
|
|
|
Non-GAAP |
|
|
|
GAAP |
|
|
|
|
|
|
|
Non-GAAP |
|
|
| |||||||
|
|
Year to Date |
|
GAAP |
|
Adjustments to |
|
Year to Date |
|
Non-GAAP |
|
Year to Date |
|
GAAP |
|
Adjustments to |
|
Adjustments to |
|
Year to Date |
|
Non-GAAP |
| |||||||
|
|
Period Ended |
|
% of |
|
GAAP Results |
|
Period Ended |
|
% of |
|
Period Ended |
|
% of |
|
GAAP Results |
|
GAAP Results |
|
Period Ended |
|
% of |
| |||||||
|
|
June 29, 2013 |
|
Revenues |
|
NeuCo (1) |
|
June 29, 2013 |
|
Revenues |
|
June 30, 2012 |
|
Revenues |
|
Restructuring (3) |
|
NeuCo (1) |
|
June 30, 2012 |
|
Revenues |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Income (loss) from operations |
|
$ |
6,944 |
|
5.4 |
% |
$ |
(223 |
) |
$ |
7,167 |
|
5.7 |
% |
$ |
6,114 |
|
4.5 |
% |
$ |
(1,916 |
) |
$ |
185 |
|
$ |
7,845 |
|
5.8 |
% |
Depreciation and amortization |
|
3,152 |
|
2.5 |
% |
2 |
|
3,150 |
|
2.5 |
% |
4,105 |
|
3.0 |
% |
1,145 |
|
2 |
|
2,958 |
|
2.2 |
% | |||||||
EBITDA |
|
10,096 |
|
7.9 |
% |
(221 |
) |
10,317 |
|
8.2 |
% |
10,219 |
|
7.5 |
% |
(771 |
) |
187 |
|
10,803 |
|
8.0 |
% | |||||||
Share-based compensation expenses |
|
1,321 |
|
1.0 |
% |
|
|
1,321 |
|
1.0 |
% |
2,479 |
|
1.8 |
% |
|
|
|
|
2,479 |
|
1.8 |
% | |||||||
Amortization of forgivable loans |
|
5,959 |
|
4.6 |
% |
|
|
5,959 |
|
4.7 |
% |
2,923 |
|
2.1 |
% |
|
|
|
|
2,923 |
|
2.2 |
% | |||||||
Adjusted EBITDA |
|
$ |
17,376 |
|
13.5 |
% |
$ |
(221 |
) |
$ |
17,597 |
|
14.0 |
% |
$ |
15,621 |
|
11.4 |
% |
$ |
(771 |
) |
$ |
187 |
|
$ |
16,205 |
|
12.1 |
% |
(1) These adjustments include activity related to NeuCo in the Companys GAAP results.
(2) During the fiscal quarter ended June 30, 2012, the Company incurred pre-tax expenses of $1.4 million and related income tax provision of $0.2 million in connection with the surrender of a portion of its office space in London, England and adjustments related to its leased office space in Houston, TX.
(3) During the fiscal year-to-date period ended June 30, 2012, the Company incurred pre-tax expenses of $1.9 million and related income tax benefit of $44,000 in connection with the surrender of a portion of its office space in London, England and adjustments related to its leased office space in Houston, TX.
CRA INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
Fiscal Year to |
|
Fiscal Year to |
| ||
|
|
June 29, |
|
June 30, |
| ||
|
|
2013 |
|
2012 |
| ||
Operating activities: |
|
|
|
|
| ||
Net income |
|
$ |
4,186 |
|
$ |
1,209 |
|
Adjustments to reconcile net income to net cash used in operating activities, net of effect of acquired businesses: |
|
|
|
|
| ||
Depreciation and amortization |
|
3,201 |
|
2,821 |
| ||
Loss on disposal of property and equipment |
|
|
|
1,160 |
| ||
Deferred rent |
|
(1,193 |
) |
(1,920 |
) | ||
Deferred income taxes |
|
309 |
|
266 |
| ||
Share-based compensation expenses |
|
1,321 |
|
2,479 |
| ||
Excess tax benefits from share-based compensation |
|
(5 |
) |
(38 |
) | ||
Changes in operating assets and liabilities: |
|
|
|
|
| ||
Accounts receivable |
|
17,410 |
|
13,673 |
| ||
Unbilled services |
|
(8,160 |
) |
(16,948 |
) | ||
Prepaid expenses and other assets |
|
(26,488 |
) |
(2,847 |
) | ||
Accounts payable, accrued expenses and other liabilities |
|
(17,321 |
) |
(26,862 |
) | ||
Net cash used in operating activities |
|
(26,740 |
) |
(27,007 |
) | ||
|
|
|
|
|
| ||
Investing activities: |
|
|
|
|
| ||
Consideration relating to acquisitions, net |
|
(15,591 |
) |
|
| ||
Purchase of property and equipment |
|
(1,971 |
) |
(1,504 |
) | ||
Purchase of investments |
|
|
|
(9,494 |
) | ||
Sale of investments |
|
|
|
18,994 |
| ||
Collections on notes receivable |
|
14 |
|
14 |
| ||
|
|
|
|
|
| ||
Net cash provided by (used in) investing activities |
|
(17,548 |
) |
8,010 |
| ||
|
|
|
|
|
| ||
Financing activities: |
|
|
|
|
| ||
Issuance of common stock, principally stock option exercises |
|
207 |
|
575 |
| ||
Borrowings under line of credit |
|
17,320 |
|
|
| ||
Repayments under line of credit |
|
(12,177 |
) |
|
| ||
Tax withholding payments reimbursed by restricted shares |
|
(214 |
) |
(732 |
) | ||
Excess tax benefits from share-based compensation |
|
5 |
|
38 |
| ||
Repurchase of common stock |
|
|
|
(5,620 |
) | ||
|
|
|
|
|
| ||
Net cash provided by (used in) financing activities |
|
5,141 |
|
(5,739 |
) | ||
|
|
|
|
|
| ||
Effect of foreign exchange rates on cash and cash equivalents |
|
29 |
|
(63 |
) | ||
|
|
|
|
|
| ||
Net decrease in cash and cash equivalents |
|
(39,118 |
) |
(24,799 |
) | ||
Cash and cash equivalents at beginning of period |
|
55,451 |
|
61,587 |
| ||
|
|
|
|
|
| ||
Cash and cash equivalents at end of period |
|
$ |
16,333 |
|
$ |
36,788 |
|
|
|
|
|
|
| ||
Supplemental cash flow information: |
|
|
|
|
| ||
|
|
|
|
|
| ||
Cash paid for income taxes |
|
$ |
1,287 |
|
$ |
8,686 |
|
Cash paid for interest |
|
$ |
137 |
|
$ |
111 |
|
EXHIBIT 99.2
CHARLES RIVER ASSOCIATES (CRA)
SECOND QUARTER FISCAL YEAR 2013
EARNINGS ANNOUNCEMENT
PREPARED CFO REMARKS
CRA is providing a copy of prepared remarks by CFO Wayne Mackie in combination with its press release. These remarks are offered to provide the investment community with additional information on CRAs financial results prior to the start of the conference call. As previously announced, the conference call will begin today, July 25, 2013, at 9:00 am ET. These prepared remarks will not be read on the call.
Q2 2013 Summary (Quarter ended June 29, 2013)
· Non-GAAP Revenue: $64.1 million
· Non-GAAP Net Income: $1.5 million, or $0.15 per diluted share
· Non-GAAP Operating Margin: 5.0%
· Non-GAAP Effective Tax Rate: 56.9%
· Utilization: 67%
· Cash and Cash Equivalents: $16.3 million at June 29, 2013
· Non-GAAP Adjusted EBITDA: $8.9 million, or 13.8% of non-GAAP revenue
Revenue
In todays press release, we reported GAAP revenue of $65.2 million for Q2 of fiscal 2013, compared with GAAP revenue of $67.8 million for Q2 of fiscal 2012. GAAP revenue for Q2 of fiscal 2013 included $1.1 million from our NeuCo subsidiary. GAAP revenue for Q2 of fiscal 2012 included $1.5 million from NeuCo.
Excluding NeuCo revenue from all periods, non-GAAP revenue was $64.1 million for Q2 of fiscal 2013, compared with $66.3 million for Q2 of fiscal 2012.
During Q2 of fiscal 2013, we experienced mixed results within our portfolio. The strong performance of some practices was offset by softness in other areas of the portfolio. The Antitrust & Competition Economics and Life Sciences practices grew both sequentially and year-over-year during the second fiscal quarter. The Labor & Employment practice also delivered solid results during the quarter. The Q2 year-over-year decline in non-GAAP
revenue is largely related to gains during the quarter being partially offset by the performances from our Finance and Marakon practices. Although both practices started the quarter slowly, they experienced improvements in project backlog that have continued into the third quarter, positioning the practices for a stronger second half of fiscal 2013.
Utilization
Utilization on a firm-wide basis in the second quarter of fiscal 2013 was 67%, flat with the sequential Q1 of fiscal 2013. This compares with 70% in Q2 of fiscal 2012.
Gross Margin
GAAP gross margin in Q2 of fiscal 2013 was 30.9%, compared with 33.0% in Q2 of fiscal 2012. Non-GAAP gross margin for Q2 of fiscal 2013 was 30.2%, compared with non-GAAP gross margin of 32.0% in Q2 of fiscal 2012. Client reimbursable expenses, on a non-GAAP basis, were 15.3% of revenue in Q2 of fiscal 2013, compared with 13.2% in Q2 of fiscal 2012.
The reduction in gross margin percentage in Q2 of fiscal 2013 compared with Q2 of fiscal 2012 is due principally to a two percentage point increase in reimbursable expenses. The increase in reimbursable expenses results from the recent addition of several senior consulting staff as non-employee experts whose compensation is classified as a reimbursable expense and who generate no incremental margin, as opposed to employees whose compensation is recorded as research labor and provide incremental margin. This, combined with revenue shortfalls in certain practice areas, results in the gross margin compression we experienced. Cost of services for Q2 of fiscal 2013 includes approximately $0.5 million of share-based compensation expense and $3.2 million in amortization of forgivable loans, or a total of approximately $3.7 million of these non-cash expenses.
SG&A Expenses
For Q2 of fiscal 2013, we reduced our GAAP SG&A expenses to $15.4 million, or 23.6% of revenue, compared with GAAP SG&A expenses of $16.9 million, or 25.0% of revenue, in Q2 of fiscal 2012.
Non-GAAP SG&A expenses were $14.5 million, or 22.6% of revenue, in Q2 of fiscal 2013, compared with $15.8 million, or 23.8% of revenue, in Q2 of fiscal 2012. Lower non-GAAP SG&A costs in Q2 of fiscal 2013 compared to Q2 of fiscal 2012 reflect our commitment to strict expense management.
Commissions to non-employee experts are included in non-GAAP SG&A. Those commissions represented 3.1% of non-GAAP revenue in Q2 of fiscal 2013 compared with 1.9% of non-GAAP revenue in Q2 of fiscal 2012. Excluding these commissions, non-GAAP SG&A expenses were 19.6% and 21.9% of revenue in Q2 of fiscal 2013 and in Q2 of fiscal 2012, respectively.
Depreciation & Amortization
On a non-GAAP basis, depreciation and amortization expense was $1.6 million for Q2 of fiscal 2013, compared with $1.5 million for Q2 of fiscal 2012.
Share-Based Compensation Expense
Share-based compensation expense was approximately $0.8 million for Q2 of fiscal 2013, compared with $1.0 million for Q2 of fiscal 2012.
Operating Income
On a GAAP basis, operating income was $3.2 million, or 4.9% of revenue, in Q2 of fiscal 2013, compared with operating income of $2.8 million, or 4.1% or revenue, in Q2 of fiscal 2012. Non-GAAP operating income was $3.2 million, or 5.0% of revenue, for Q2 of fiscal 2013, compared with $3.9 million, or 5.9% of revenue, for Q2 of fiscal 2012.
Interest and Other Income (Expense), net
In Q2 of fiscal 2013, interest and other income was $198,000 on a GAAP basis and $212,000 on a non-GAAP basis. This compares with interest and other expense of $113,000 on a GAAP basis and $73,000 on a non-GAAP basis for Q2 of fiscal 2012.
Income Taxes
The following table outlines our income tax provision recorded and the resulting effective tax rates (in $000):
|
|
GAAP |
|
NON-GAAP |
| ||||||||
|
|
Q2 |
|
Q2 |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
Tax Provision |
|
$ |
2,017 |
|
$ |
1,922 |
|
$ |
1,957 |
|
$ |
1,711 |
|
Effective Tax Rate |
|
59.9 |
% |
71.3 |
% |
56.9 |
% |
44.6 |
% | ||||
The higher non-GAAP effective tax rate for Q2 of fiscal 2013 compared with Q2 of fiscal 2012 reflects losses outside of the U.S. during the quarter and we do not receive a benefit on those losses. In addition, during Q2 of fiscal 2013 we incurred a one-time tax adjustment of $280,000 related to a change in the allocation of compensation between countries. The adjustment had no effect on consolidated compensation expense.
Net Income
GAAP net income for Q2 of fiscal 2013 was $1.4 million, or $0.14 per diluted share, compared with GAAP net income of $0.7 million, or $0.07 per diluted share, for Q2 of fiscal 2012. Non-GAAP net income for Q2 of fiscal 2013 was $1.5 million, or $0.15 per diluted share, compared with $2.1 million, or $0.20 per diluted share, for Q2 of fiscal 2012.
Key Balance Sheet Metrics
Turning to the balance sheet, billed and unbilled receivables at June 29, 2013 were $76.2 million, compared with $79.1 million at March 30, 2013. Current liabilities at June 29, 2013 were $60.9 million, compared with $82.4 million at March 30, 2013.
Total DSOs in Q2 of fiscal 2013 were 98 days consisting of 57 days of billed and 41 days of unbilled. This is down from the 102 days we reported in Q1 of fiscal 2013 consisting of 66 days of billed and 36 days of unbilled. We continue to target a DSO level of 100 days or less.
Cash and Cash Flow
Cash and cash equivalents decreased to $16.3 million at June 29, 2013, compared with $30.6 million at March 30, 2013.
We paid $6.6 million in 2012 bonuses during Q2 of fiscal 2013. To support CRAs focus on organic growth and the recruitment and retention of key revenue generators, during Q2 of fiscal 2013 the Company issued approximately $28.0 million in forgivable loans to employees and non-employee experts for future service. The Statement of Cash Flows shows a use of $26.7 million in year to date cash flows from operations. This includes $38.0 million in forgivable loans, and $26.6 million of bonus payments to employees that were paid during the first half of fiscal 2013. Excluding the approximately $38.0 million in forgivable loans we issued this year, we would have generated approximately $11.3 million in cash from operations year to date. Forgivable loan amortization in Q2 of fiscal 2013 was approximately $3.2 million compared with approximately $1.5 million in Q2 of fiscal 2012.
The recent increase in our use of forgivable loans raises the relevance of cash flow measures for our business. Accordingly, for the first time we have included the calculation of Adjusted EBITDA. For Q2 of fiscal 2013, Adjusted EBITDA based on GAAP and non-GAAP results was $8.8 million and $8.9 million, respectively, or 13.5% and 13.8% of revenues, respectively. For Q2 of fiscal 2012, Adjusted EBITDA based on GAAP and non-GAAP results was $7.9 million and $7.8 million, respectively, or 11.6% and 11.8% of revenues, respectively. The Q2 of fiscal 2013 increase in the amortization of forgivable loans has driven the increase in Adjusted EBITDA compared with Q2 of fiscal 2012.
Our capital expenditures totaled approximately $0.8 million in Q2 of fiscal 2013, compared with $0.8 million in Q2 of fiscal 2012.
There were no repurchases of our common stock this quarter.
As expected, early in Q2 of fiscal 2013 we tapped into our line of credit for $17.3 million. By the end of the second quarter, we had paid the line of credit down to a balance of $5.1 million. Subsequent to quarter-end, we paid the line down to a balance of £750,000 or approximately $1.1 million. The £750,000 was borrowed by our UK subsidiary and is being maintained as a currency hedge.
This concludes the prepared CFO remarks.
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 these remarks non-GAAP revenue, non-GAAP gross margin, non-GAAP SG&A expenses, non-GAAP depreciation and amortization, non-GAAP operating income, non-GAAP interest and other income (expense), net, non-GAAP tax provision, non-GAAP net income, non-GAAP net income per diluted share, and EBITDA and Adjusted EBITDA on a GAAP and non-GAAP basis. The Company believes the use of non-GAAP measures in addition to GAAP measures is an additional useful method for evaluating its results of operations. The
Company believes that presenting its financial results excluding certain restructuring costs, certain non-cash expenses, and NeuCos results is important to investors and management because it is more indicative of its 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 expected results calculated in accordance with GAAP and reconciliations to those expected 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 second quarter of fiscal 2013, the Company has excluded NeuCos results, and for the second quarter of fiscal 2012, the Company has excluded certain restructuring costs and NeuCos results. Also, in calculating Adjusted EBITDA, 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 these prepared CFO remarks concerning the future business, operating results, tax rates, and financial condition of the Company, the anticipated, expected or intended impact of the Companys key hires and expense management initiatives, and statements using the terms anticipates, believes, expects, should, prospects, target, on track, optimistic, remaining positive, hope, opportunities, positioned, or similar expressions are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based upon managements 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 performance or results to differ materially from any forward-looking statements made by the Company include, among others, the Companys restructuring costs and attributable annual cost savings, changes in the Companys effective tax rate, share dilution from the Companys stock-based compensation, dependence on key personnel, attracting, recruiting and retaining qualified consultants, dependence on outside experts, utilization rates, completing acquisitions and factors related to its completed acquisitions, including integration of personnel, clients and offices, and unanticipated expenses and liabilities, the risk of impairment write downs to the Companys intangible assets, including goodwill, if the Companys enterprise value declines below certain levels, 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 the Companys practice areas, management of new offices, the potential loss of clients, the ability of customers to terminate the Companys engagements on short notice, dependence on the growth of the Companys management consulting practice, the unpredictable nature of litigation-related projects, the ability of the Company to integrate successfully new consultants into its practice, the Companys ability to collect on forgivable loans should any become due, general economic conditions, intense competition, risks inherent in litigation, and professional liability. Further information on these and other
potential factors that could affect the Companys financial results is included in the Companys 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 these remarks.