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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission file number: 000-24049

Charles River Associates Incorporated
(Exact name of registrant as specified in its charter)

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 ý    No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý    No o

As of October 12, 2004, CRA had outstanding 9,826,630 shares of common stock.

Charles River Associates Incorporated

INDEX

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Charles River Associates Incorporated

Condensed Consolidated Statements of Income (unaudited)

(In thousands, except per share data)

See accompanying notes.

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Charles River Associates Incorporated

Condensed Consolidated Balance Sheets (unaudited)

(In thousands, except share data)

See accompanying notes.

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Charles River Associates Incorporated

Condensed Consolidated Statements of Cash Flows (unaudited)

(In thousands)

See accompanying notes.

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Charles River Associates Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.     Description of Business

Charles River Associates Incorporated ("CRA") is an economic, financial, and business consulting firm that applies advanced analytic techniques and in-depth industry knowledge to complex engagements for a broad range of clients. CRA offers two types of services: legal and regulatory consulting and business consulting. CRA operates in only one business segment, which is consulting services.

On April 30, 2004, CRA completed its acquisition of InteCap, Inc. ("InteCap"), a leading intellectual property consulting firm in the United States that specializes in economic, financial, and strategic issues related to intellectual property and complex commercial disputes.

2.     Unaudited Interim Consolidated Financial Statements and Estimates

The condensed consolidated statements of income for the sixteen and forty weeks ended September 3, 2004, and September 5, 2003, the condensed consolidated balance sheet as of September 3, 2004, and the condensed consolidated statements of cash flows for the forty weeks ended September 3, 2004, and September 5, 2003, are unaudited. The November 29, 2003 balance sheet is derived from CRA's audited financial statements included in its Annual Report on Form 10-K as of that date. In the opinion of management, these statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of CRA's consolidated financial position, results of operations, and cash flows. The consolidated statements of income include the operations of InteCap since May 1, 2004. See Note 15.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

3.     Principles of Consolidation

The consolidated financial statements include the accounts of CRA, its wholly owned subsidiaries, and NeuCo, Inc. ("NeuCo"), a company founded by CRA and an affiliate of Commonwealth Energy Systems in June 1997. As of September 3, 2004, CRA's interest in NeuCo is 58.8 percent. In March 2003, NeuCo repurchased and cancelled shares from a minority interest stockholder, which increased CRA's interest in NeuCo to 59.7 percent from 49.7 percent. This transaction has been recorded as an adjustment of capital. The portion of the results of operations of NeuCo allocable to its other owners is shown as "minority interest" on CRA's consolidated statement of income, and that amount, along with the capital contributions to NeuCo of its other owners, is shown as "minority interest" on CRA's balance sheet. All significant intercompany accounts have been eliminated.

4.     Fiscal Year

CRA's fiscal year ends on the last Saturday in November, and accordingly, its fiscal year will periodically contain 53 weeks rather than 52 weeks. Both fiscal 2004 and 2003 are 52-week years. In a 52-week year, each of CRA's first, second, and fourth quarters includes twelve weeks, and its third quarter includes sixteen weeks. In a 53-week year, the fourth quarter includes thirteen weeks.

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5.     Revenue Recognition

CRA recognizes substantially all of its revenues under written service contracts with its clients where the fee is fixed or determinable, as the services are provided, and only in those situations where collection from the client is reasonably assured. The majority of CRA's revenues are derived from time-and-materials service contracts. Revenues from time-and-materials service contracts are recognized as services are provided based upon hours worked and contractually agreed-upon hourly rates, as well as a computer services fee based upon hours worked. Some revenues are derived from fixed-price engagements, for which revenue is recognized on a proportional performance method based on the ratio of costs incurred, substantially all of which are labor-related, to the total estimated project costs. Losses are provided for at the earliest date by which they are identified. Revenues also include reimbursements, or expenses billed to clients, including travel and other out-of-pocket expenses, outside consultants, and other reimbursable expenses. These reimbursable expenses included in revenues are as follows (in thousands):

An allowance is provided for any amounts considered uncollectible. Unbilled services represent revenue recognized by CRA for services performed but not yet billed to the client. Deferred revenue represents amounts billed or collected in advance of services performed.

6.     Cash Equivalents and Investments

Cash equivalents consist principally of money market funds, commercial paper, bankers' acceptances, and certificates of deposit with maturities when purchased of 90 days or less. Short-term investments generally consist of government bonds with maturities when purchased of more than 90 days but less than one year. Long-term investments, which are intended to be held to maturity, generally consist of government bonds with maturities when purchased of more than one year but less than two years. Held-to-maturity securities are stated at amortized cost, which approximates fair value.

7.     Goodwill and Other Intangible Assets

Goodwill represents the cost in excess of fair market value of net assets of acquired businesses. In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142), which revised the accounting for goodwill and other intangible assets. Specifically, goodwill and intangible assets with indefinite lives are no longer subject to amortization, but are monitored annually for impairment, or more frequently if there are indicators of impairment. Any impairment would be measured based upon the fair value of the related asset based on the provisions of SFAS No. 142. If CRA determines through the impairment review process that goodwill has been impaired, it would record the impairment charge in its statement of income. There were no impairment losses related to goodwill due to the application of SFAS No. 142 in fiscal 2003, nor were there any indications of impairment in the forty weeks ended September 3, 2004.

Other intangible assets consist principally of costs allocated to non-compete agreements, which are amortized on a straight-line basis over the related terms of the agreements (seven to ten years), as well

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as customer relationships, trade names, and property leases which are amortized on a straight-line basis over their remaining useful lives (two to ten years). The weighted average useful life is seven years.

8.     Impairment of Long-Lived Assets

CRA reviews the carrying value of its long-lived assets (primarily property and equipment and intangible assets) to assess the recoverability of these assets whenever events indicate that impairment may have occurred. As part of this assessment, CRA reviews the future undiscounted operating cash flows expected to be generated by those assets. If impairment is indicated through this review, the carrying amount of the asset would be reduced to its estimated fair value.

9.     Property and Equipment

Property and equipment are recorded at cost. CRA provides for depreciation of equipment using the straight-line method over its estimated useful life, generally three to ten years. Amortization of leasehold improvements is provided using the straight-line method over the shorter of the lease term or the estimated useful life of the leasehold improvements. Expenditures for maintenance and repairs are expensed as incurred. Expenses for renewals and betterments are capitalized.

10.   Stockholders' Equity

In June 2004, CRA repurchased 622,200 shares of its common stock for $20.0 million with proceeds from the debenture offering. See Note 17. In addition, 86,647 and 166,303 options were exercised for $1.4 million and $2.5 million of proceeds during the sixteen and forty weeks ended September 3, 2004, respectively.

11.   Net Income per Share

Basic net income per share represents net income divided by the weighted average shares of common stock outstanding during the period. Diluted net income per share represents net income divided by the weighted average shares of common stock and common stock equivalents outstanding during the period. Weighted average shares used in diluted earnings per share include common stock equivalents arising from stock options using the treasury stock method. Reconciliation of basic to diluted weighted average shares of common stock outstanding is as follows (in thousands):

In accordance with SFAS No. 128, "Earnings per Share," the basic and diluted weighted average shares outstanding (and therefore the calculation of basic and diluted earnings per share on the consolidated statements of income) for the sixteen and forty weeks ended September 3, 2004, exclude the potential common shares underlying the $90 million of convertible senior subordinated debentures issued during

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the third quarter of fiscal 2004. There was no dilutive effect from the debentures because none of the contingencies has been met as of September 3, 2004. See Note 16 for further discussion of the potential impact from the debentures on CRA's diluted weighted average shares outstanding. See Note 17 for further discussion of the offering of convertible senior subordinated debentures.

12.   Stock-Based Compensation

CRA has elected to follow Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for its stock-based compensation plans rather than the alternative fair value accounting method provided for under SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123), as amended by SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure" (collectively, SFAS No. 148). Per APB 25, compensation expense is recognized for stock options to the extent the fair value of CRA common stock exceeds the stock option exercise price at the measurement date. CRA has issued stock options with exercise prices at the fair value of CRA's common stock at the date of grant; therefore, no compensation expense has been recorded for the sixteen or forty weeks ended September 3, 2004, and September 5, 2003.

CRA has also elected the disclosure-only alternative under SFAS No. 123. The following table illustrates the effect on net income and earnings per share if CRA had applied the fair value recognition provisions of SFAS No. 123 (in thousands, except for net income per share information):

For purposes of this disclosure under SFAS No. 123, the estimated fair value of the options is amortized over the options' respective vesting periods. The effect on pro forma net income and net income per share is not necessarily representative of the effects on reported results for future years.

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13.   Comprehensive Income

Comprehensive income represents net income reported in the accompanying consolidated statements of income adjusted for changes in CRA's foreign currency translation account. A reconciliation of comprehensive income is as follows (in thousands):

14.   Foreign Currency Translation

In accordance with SFAS No. 52, "Foreign Currency Translation," balance sheet accounts of CRA's foreign subsidiaries are translated into United States dollars at period-end exchange rates. Operating accounts are translated at average exchange rates for each reporting period. The net gain or loss resulting from the changes in exchange rates during the forty weeks ended September 3, 2004, and September 5, 2003 has been reported in comprehensive income. Transaction gains and losses are recorded in other expense in the consolidated statements of income.

15.   Business Acquisition

On April 30, 2004, CRA completed its acquisition of InteCap, Inc., a leading intellectual property consulting firm in the United States that specializes in economic, financial, and strategic issues related to intellectual property and complex commercial disputes. CRA purchased InteCap from InteCap's institutional investor, GTCR Golder Rauner, LLC, members of InteCap's management, and other shareholders for approximately $79.3 million (after deducting cash acquired, and adding acquisition costs and transaction fees paid or accrued). CRA funded the purchase price from existing cash resources and borrowings of $39.6 million under its $40.0 million line of credit. In connection with the acquisition, certain InteCap employees purchased an aggregate of 87,316 shares of common stock in exchange for full recourse notes totaling approximately $2.9 million. The notes mature in June 2007, and bear interest at 1.47% per annum.

The acquisition added approximately 130 consulting professionals to CRA. The addition of InteCap expanded CRA's geographic footprint into key markets such as Chicago and New York, and strengthened its presence in Houston, Silicon Valley, Boston and Washington, D.C. InteCap's operating results have been included in the accompanying statements of income beginning May 1, 2004.

The following is a preliminary allocation of the purchase price to the estimated fair value of assets acquired and liabilities assumed. This preliminary allocation is based upon management's estimates and the valuation of the intangible assets by a third-party appraiser. CRA will finalize the purchase price allocation as it receives other relevant information relating to the acquisition, including an analysis of approximately $17 million of net deferred tax assets that were fully reserved at the time of the acquisition. If CRA determines that the reserve on these tax assets is not needed, the allocation of the purchase price will be adjusted in future periods. CRA is in the process of completing the allocation of the purchase price associated with these assets. The final purchase price allocation may be different

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from the preliminary estimate presented below. The impact of any adjustments to the final purchase price allocation is not expected to be material to CRA's results of operations for this period.

Intangible assets acquired consist principally of non-competition agreements, the InteCap trade name, and property leases. These assets, which have determinable useful lives, are amortized on a straight-line basis over their remaining useful lives, which range from two to ten years. The weighted average useful life is 6.8 years. Goodwill is not expected to be deductible for income tax purposes.

In connection with the acquisition, CRA incurred $0.8 million of restructuring costs as a result of the elimination of duplicate offices and employee termination benefit payments. Such costs have been recognized by CRA as a liability assumed as of the acquisition date, resulting in additional goodwill. These restructuring costs consisted of $0.7 million of lease obligations related to the closed facilities and $0.1 million of payments for three terminated employees. As of September 3, 2004, $0.1 million in payments to terminated employees and $0.1 million in lease obligations have been paid. The remaining restructuring reserve balance as of September 3, 2004, is $0.6 million, and includes lease obligations that will be paid through September 2006.

The following unaudited pro forma financial information reflects consolidated results of operations of CRA as if the acquisition of InteCap had taken place on December 1, 2002, the beginning of CRA's 2003 fiscal year. The pro forma adjustments include elimination of transaction-related compensation and other costs of approximately $18.1 million, which were incurred by InteCap, additional interest expense related to the line of credit borrowings used to finance the acquisition, a reduction of interest expense for InteCap's debt prior to the acquisition, additional intangible amortization related to the estimated intangible assets acquired, a reduction of InteCap's intangible amortization prior to the acquisition, and the related income tax effects of these adjustments. The pro forma financial information is not necessarily indicative of the results of operations that would have occurred if the

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InteCap acquisition had been completed on December 1, 2002, nor are they necessarily indicative of future operating results.