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FTI Consulting Reports Third Quarter 2013 Results
-- Revenues of $414.6 Million, Up 7.4 Percent
-- Adjusted EPS of $0.72, Excluding Goodwill Impairment and Special Charge
-- Net Cash Provided by Operating Activities of $84.4 Million

WEST PALM BEACH, Fla., Nov. 7, 2013 /PRNewswire/ -- FTI Consulting, Inc. (NYSE: FCN), the global business advisory firm dedicated to helping organizations protect and enhance their enterprise value (the "Company"), today released its financial results for the quarter ended September 30, 2013.

For the quarter, revenues increased 7.4 percent to $414.6 million compared to $386.1 million in the prior year quarter. On a GAAP basis, the fully diluted loss per share was ($1.29) for the quarter, including a non-cash goodwill impairment charge related to the Strategic Communications segment of $83.8 million and a special charge of $10.4 million. The goodwill impairment charge has no impact on the Company's liquidity, cash flow, borrowing capability or operations. Adjusted EPS were $0.72 for the quarter compared to $0.60 in the prior year quarter which included a $2.8 million special charge. Please see the attached financial tables for a reconciliation of fully diluted loss per share and Adjusted EPS.

Adjusted EBITDA increased 16.5 percent to $72.5 million for the quarter compared to $62.3 million in the prior year quarter. This improvement was primarily due to strong performance in the Company's Economic Consulting and Forensic and Litigation Consulting segments, including the impact of a success fee in the Forensic and Litigation Consulting segment.

Adjusted EPS, Adjusted EBITDA and Adjusted Segment EBITDA are non-GAAP measures defined elsewhere in this press release and are reconciled to GAAP measures in the financial tables that accompany this press release.

Commenting on these results, Jack Dunn, FTI Consulting President and Chief Executive Officer said, "Record third quarter revenues increased 7.4 percent year-over-year, including organic growth of 3.4 percent. Economic Consulting was strong in both North America and Europe with 17.3 percent revenue growth overall, while Forensic and Litigation Consulting and its health solutions practice saw excellent results with revenue growth of 12.5 percent and 24.4 percent, respectively. In Technology, we benefited from returns on the sustained strategic investments we have made in this business with respect to our products, people and business development initiatives globally."

Cash and Capital Allocation

Net cash provided by operating activities in the quarter increased 19.0 percent to $84.4 million compared to $70.9 million in the prior year quarter due to continued strong cash collections. During the quarter, the Company used approximately $20.0 million to repurchase and retire 595,225 shares of the Company's common stock. Cash and cash equivalents were $147.9 million at September 30, 2013. The Company has spent $40.8 million on acquisitions and $48.8 million on stock repurchases year to date through September 30, 2013.

Third Quarter Segment Results

Corporate Finance/Restructuring   
Revenues in the Corporate Finance/Restructuring segment increased 1.0 percent to $94.0 million in the quarter compared to $93.1 million in the prior year quarter. The segment benefited from acquisitions which contributed revenues of $12.8 million in the quarter; however, the segment experienced a roughly equivalent decline in bankruptcy and restructuring revenues in the North America region. Adjusted Segment EBITDA was $19.4 million or 20.6 percent of segment revenues compared to $22.0 million or 23.6 percent of segment revenues in the prior year quarter reflecting continued underutilization in North America and the previously disclosed organic investment in a Europe, Middle East and Africa ("EMEA") based transaction services practice, partially offset by reductions in performance-based compensation and headcount. In that regard, the segment recorded a special charge of $6.3 million in the quarter, compared to $0.8 million in the prior year quarter, related to headcount reductions to better align capacity with demand.

Economic Consulting   
Revenues in the Economic Consulting segment increased 17.3 percent to $113.1 million in the quarter compared to $96.4 million in the prior year quarter. The increase in revenues was driven by continued strong performance for the segment's antitrust litigation services in North America and EMEA and international arbitration, regulatory and valuation practices in EMEA. Adjusted Segment EBITDA was $23.2 million or 20.5 percent of segment revenues compared to $19.1 million or 19.8 percent of segment revenues in the prior year quarter.

Forensic and Litigation Consulting  
Revenues in the Forensic and Litigation Consulting segment increased 12.5 percent to $113.1 million in the quarter compared to $100.5 million in the prior year quarter, primarily due to a success fee in the North America investigations practice and increased demand in the health solutions practice. Adjusted Segment EBITDA was $25.4 million or 22.4 percent of segment revenues compared to $16.3 million or 16.2 percent of segment revenues in the prior year quarter. The increase in Adjusted Segment EBITDA margin was due to a high margin success fee, improved utilization in the North America financial and enterprise data analytics practice and a reduction of performance-based compensation expense. The segment recorded a special charge of $1.9 million compared to $0.5 million in the prior year quarter, related to headcount reductions taken to better align capacity with demand.

Technology  
Revenues in the Technology segment increased 1.8 percent to $51.2 million in the quarter compared to $50.3 million in the prior year quarter. The increase in revenues was due to higher services revenues primarily for investigations involving the Foreign Corrupt Practices Act and interest rate setting process concerning the London Interbank Offered Rate ("LIBOR"), as the segment still felt the impact of the decline of a large litigation-related matter which was very active last year. Adjusted Segment EBITDA was $15.4 million or 30.0 percent of segment revenues compared to $15.7 million or 31.2 percent of segment revenues in the prior year quarter.

Strategic Communications   
Revenues in the Strategic Communications segment decreased 5.4 percent to $43.3 million in the quarter compared to $45.8 million in the prior year quarter. Revenues were lower due to reduced pass-through revenues for certain EMEA and North America retained engagements and weak mergers and acquisitions activity in the Asia Pacific region. This segment benefitted from $1.6 million of revenues from the acquisition of a U.S. public policy group completed in March 2013. Adjusted Segment EBITDA was $4.0 million or 9.3 percent of segment revenues compared to $6.8 million or 14.8 percent of segment revenues in the prior year quarter. Adjusted Segment EBITDA margin was adversely impacted by reduced project fees in the Asia Pacific region and lower retained fees in the North America region. A goodwill impairment charge of $83.8 million was recorded in this segment during the quarter.

Third Quarter Conference Call   
FTI Consulting will hold a conference call for analysts and investors to discuss third quarter financial results at 9:00 a.m. Eastern Time on November 7, 2013. The call can be accessed live and will be available for replay over the Internet for 90 days by logging onto the Company's website at www.fticonsulting.com.

About FTI Consulting  
FTI Consulting, Inc. is a global business advisory firm dedicated to helping organizations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. With over 4,100 employees located in 25 countries, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management, strategic communications and restructuring. The Company generated $1.58 billion in revenues during fiscal year 2012. More information can be found at www.fticonsulting.com.

Use of Non-GAAP Measures   
Note: We define Segment Operating Income as a segment's share of consolidated operating income. We define Total Segment Operating Income as the total of Segment Operating Income for all segments, which excludes unallocated corporate expenses. We use Segment Operating Income for the purpose of calculating Adjusted Segment EBITDA. We define Adjusted EBITDA as consolidated net income before income tax provision, other non-operating income (expense), depreciation, amortization of intangible assets, special charges and goodwill impairment charges. We define Adjusted Segment EBITDA as a segment's share of consolidated operating income before depreciation, amortization of intangible assets, special charges and goodwill impairment charges. We define Total Adjusted Segment EBITDA as the total of Adjusted Segment EBITDA for all segments, which excludes unallocated corporate expenses. We use Adjusted Segment EBITDA to internally evaluate the financial performance of our segments because we believe it is a useful supplemental measure which reflects current core operating performance and provides an indicator of the segment's ability to generate cash. We also believe that these measures, when considered together with our GAAP financial results, provide management and investors with a more complete understanding of our operating results, including underlying trends, by excluding the effects of special charges and goodwill impairment charges. In addition, EBITDA is a common alternative measure of operating performance used by many of our competitors. It is used by investors, financial analysts, rating agencies and others to value and compare the financial performance of companies in our industry. Therefore, we also believe that these measures, considered along with corresponding GAAP measures, provide management and investors with additional information for comparison of our operating results to the operating results of other companies.

We define Adjusted Net Income and Adjusted Earnings per Diluted Share ("Adjusted EPS") as net income and earnings per diluted share, respectively, excluding the impact of special charges, goodwill impairment charges and losses on early extinguishment of debt. We use Adjusted Net Income for the purpose of calculating Adjusted Earnings per Diluted Share. Management uses Adjusted Earnings per Diluted Share to assess total Company operating performance on a consistent basis. We believe that this measure, when considered together with our GAAP financial results, provides management and investors with a more complete understanding of our business operating results, including underlying trends, by excluding the effects of special charges, goodwill impairment charges and losses on early extinguishment of debt. Non-GAAP financial measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, the information contained in our Consolidated Statements of Comprehensive Income. Reconciliations of GAAP to non-GAAP financial measures are included elsewhere in this press release.

Safe Harbor Statement  
This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which involve uncertainties and risks. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues, future results and performance, expectations, plans or intentions relating to acquisitions and other matters, business trends and other information that is not historical, including statements regarding estimates of our future financial results. When used in this press release, words such as "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts" and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, estimates of our future financial results, are based upon our expectations at the time we make them and various assumptions. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs and estimates will be achieved, and the Company's actual results may differ materially from our expectations, beliefs and estimates. Further, preliminary results are subject to normal year-end adjustments. The Company has experienced fluctuating revenues, operating income and cash flow in prior periods and expects that this will occur from time to time in the future. Other factors that could cause such differences include declines in demand for, or changes in, the mix of services and products that we offer, the mix of the geographic locations where our clients are located or where services are performed, adverse financial, real estate or other market and general economic conditions, which could impact each of our segments differently, the pace and timing of the consummation and integration of past and future acquisitions, the Company's ability to realize cost savings and efficiencies, competitive and general economic conditions, retention of staff and clients and other risks described under the heading "Item 1A Risk Factors" in the Company's most recent Form 10-K filed with the SEC on February 28, 2013, the Current Report on Form 8-K dated May 21, 2013 and in the Company's other filings with the Securities and Exchange Commission, including the risks set forth under "Risks Related to Our Operating Segments" and "Risks Related to Our Operations". We are under no duty to update any of the forward looking statements to conform such statements to actual results or events and do not intend to do so.

Investor & Media Contact:   
Mollie Hawkes  
+1.617.747.1791 
mollie.hawkes@fticonsulting.com  

FINANCIAL TABLES FOLLOW

 

FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(in thousands, except per share data)

(unaudited)

       
 

Nine Months Ended

 

September 30,

 

2013

 

2012

       

Revenues

$            1,236,434

 

$           1,177,526

       

Operating expenses

     

Direct cost of revenues

773,160

 

735,452

Selling, general and administrative expense

287,485

 

283,958

Special charges

10,846

 

29,557

Acquisition-related contingent consideration

(6,091)

 

(2,581)

Amortization of other intangible assets

17,293

 

16,773

Goodwill impairment charge

83,752

 

-

 

1,166,445

 

1,063,159

       

Operating income

69,989

 

114,367

       

Other income (expense)

     

Interest income and other

1,702

 

4,503

Interest expense

(38,600)

 

(43,607)

 

(36,898)

 

(39,104)

       

Income before income tax provision

33,091

 

75,263

       

Income tax provision

36,546

 

26,372

       

Net income (loss)

$                 (3,455)

 

$                48,891

       

Earnings (loss) per common share - basic

$                   (0.09)

 

$                    1.21

Weighted average common shares outstanding - basic

39,212

 

40,446

       

Earnings (loss) per common share - diluted

$                   (0.09)

 

$                    1.17

Weighted average common shares outstanding - diluted

39,212

 

41,882

       

Other comprehensive income (loss), net of tax:

     

Foreign currency translation adjustments, net of tax of $0

$               (10,108)

 

$                14,620

Other comprehensive income (loss), net of tax

(10,108)

 

14,620

Comprehensive income (loss)

$               (13,563)

 

$                63,511

 

FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(in thousands, except per share data)

(unaudited)

       
 

Three Months Ended

 

September 30,

 

2013

 

2012

       

Revenues

$               414,643

 

$              386,055

       

Operating expenses

     

Direct cost of revenues

255,152

 

241,614

Selling, general and administrative expense

94,513

 

88,909

Special charges

10,419

 

2,775

Acquisition-related contingent consideration

630

 

403

Amortization of other intangible assets

5,776

 

5,766

Goodwill impairment charge

83,752

 

-

 

450,242

 

339,467

       

Operating income (loss)

(35,599)

 

46,588

       

Other income (expense)

     

Interest income and other

1,152

 

1,584

Interest expense

(12,814)

 

(13,208)

 

(11,662)

 

(11,624)

       

Income (loss) before income tax provision

(47,261)

 

34,964

       

Income tax provision

3,360

 

12,251

       

Net income (loss)

$               (50,621)

 

$                22,713

       

Earnings (loss) per common share - basic

$                   (1.29)

 

$                    0.56

Weighted average common shares outstanding - basic

39,094

 

40,387

       

Earnings (loss) per common share - diluted

$                   (1.29)

 

$                    0.55

Weighted average common shares outstanding - diluted

39,094

 

41,102

       

Other comprehensive income, net of tax:

     

Foreign currency translation adjustments, net of tax of $0

$                 17,115

 

$                12,731

Other comprehensive income, net of tax

17,115

 

12,731

Comprehensive income (loss)

$               (33,506)

 

$                35,444

 

FTI CONSULTING, INC.

OPERATING RESULTS BY BUSINESS SEGMENT

 
                   

  Average  

 

Revenue-

       

Adjusted

 

As a percent

     

 Billable 

 

Generating

   

Revenues

 

EBITDA (1)

 

of revenues

 

Utilization (4)

 

Rate (4)

 

Headcount

   

  (in thousands)  

             

(at period end)

Three Months Ended September 30, 2013

                       

Corporate Finance/Restructuring (3)

 

$                   93,981

 

$                        19,402

 

20.6%

 

64%

 

$          396

 

732

Forensic and Litigation Consulting (3)

 

113,068

 

25,362

 

22.4%

 

67%

 

$          324

 

999

Economic Consulting

 

113,069

 

23,225

 

20.5%

 

79%

 

$          512

 

528

Technology  (2)

 

51,201

 

15,381

 

30.0%

 

N/M

 

N/M

 

297

Strategic Communications  (2)

 

43,324

 

4,036

 

9.3%

 

N/M

 

N/M

 

617

   

$                 414,643

 

87,406

 

21.1%

         

3,173

   Unallocated Corporate Expenses

     

(14,862)

               

Adjusted EBITDA(1)

     

$                        72,544

 

17.5%

           
                         

Nine Months Ended September 30, 2013

                       

Corporate Finance/Restructuring (3)

 

$                 289,775

 

$                        62,610

 

21.6%

 

66%

 

$          407

 

732

Forensic and Litigation Consulting (3)

 

318,912

 

58,866

 

18.5%

 

68%

 

$          315

 

999

Economic Consulting

 

339,277

 

70,222

 

20.7%

 

84%

 

$          509

 

528

Technology  (2)

 

149,101

 

45,985

 

30.8%

 

N/M

 

N/M

 

297

Strategic Communications  (2)

 

139,369

 

12,809

 

9.2%

 

N/M

 

N/M

 

617

   

$              1,236,434

 

250,492

 

20.3%

         

3,173

   Unallocated Corporate Expenses

     

(44,394)

               

Adjusted EBITDA(1)

     

$                      206,098

 

16.7%

           
                         

Three Months Ended September 30, 2012

                       

Corporate Finance/Restructuring (3)

 

$                   93,123

 

$                        21,951

 

23.6%

 

72%

 

$          402

 

621

Forensic and Litigation Consulting (3)

 

100,460

 

16,289

 

16.2%

 

63%

 

$          328

 

939

Economic Consulting

 

96,375

 

19,087

 

19.8%

 

79%

 

$          495

 

467

Technology  (2)

 

50,286

 

15,675

 

31.2%

 

N/M

 

N/M

 

283

Strategic Communications  (2)

 

45,811

 

6,778

 

14.8%

 

N/M

 

N/M

 

597

   

$                 386,055

 

79,780

 

20.7%

         

2,907

   Unallocated Corporate Expenses

     

(17,499)

               

Adjusted EBITDA(1)

     

$                        62,281

 

16.1%

           
                         

Nine Months Ended September 30, 2012

                       

Corporate Finance/Restructuring (3)

 

$                 286,184

 

$                        73,419

 

25.7%

 

75%

 

$          409

 

621

Forensic and Litigation Consulting (3)

 

310,351

 

50,500

 

16.3%

 

65%

 

$          323

 

939

Economic Consulting

 

295,882

 

56,002

 

18.9%

 

82%

 

$          493

 

467

Technology  (2)

 

147,643

 

41,739

 

28.3%

 

N/M

 

N/M

 

283

Strategic Communications  (2)

 

137,466

 

16,277

 

11.8%

 

N/M

 

N/M

 

597

   

$              1,177,526

 

237,937

 

20.2%

         

2,907

   Unallocated Corporate Expenses

     

(55,080)

               

Adjusted EBITDA(1)

     

$                      182,857

 

15.5%

           
                         

 

(1) We define Adjusted EBITDA as consolidated net income before income tax provision, other non-operating income (expense), depreciation, amortization of intangible assets, special charges and goodwill impairment charges. Amounts presented in the Adjusted EBITDA column for each segment reflect the segments' respective Adjusted Segment EBITDA. We define Adjusted Segment EBITDA as a segment's share of consolidated operating income before depreciation, amortization of intangible assets, special charges and goodwill impairment charges. We use Adjusted Segment EBITDA to internally evaluate the financial performance of our segments because we believe it is a useful supplemental measure which reflects current core operating performance and provides an indicator of the segment's ability to generate cash. We also believe that these measures, when considered together with our GAAP financial results, provide management and investors with a more complete understanding of our operating results, including underlying trends, by excluding the effects of special charges and goodwill impairment charges. In addition, EBITDA is a common alternative measure of operating performance used by many of our competitors. It is used by investors, financial analysts, rating agencies and others to value and compare the financial performance of companies in our industry. Therefore, we also believe that these measures, considered along with corresponding GAAP measures, provide management and investors with additional information for comparison of our operating results to the operating results of other companies. Adjusted EBITDA and Adjusted Segment EBITDA are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies.  These non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, the information contained in our Condensed Consolidated Statements of Comprehensive Income (Loss).  See also our reconciliation of GAAP to non-GAAP financial measures.

 

(2)The majority of the Technology and Strategic Communications segments' revenues are not generated based on billable hours.  Accordingly, utilization and average billable rate metrics are not presented as they are not meaningful as a segment-wide metric.

 

(3)  Effective in the first quarter of 2013, we modified our reportable segments to reflect changes in how we operate our business and the related internal management reporting. The Company's healthcare and life sciences practices from both our Corporate Finance/Restructuring segment and our Forensic and Litigation Consulting segment have been combined under a single organizational structure. This single integrated practice, our health solutions practice, is now aggregated in its entirety within the Forensic and Litigation Consulting reportable segment. Prior period Corporate Finance/Restructuring and Forensic and Litigation Consulting segment information has been reclassified to conform to the current period presentation.

 

(4) 2013 and 2012 utilization and average bill rate calculations for our Corporate Finance/Restructuring, Forensic and Litigation Consulting, and Economic Consulting segments were updated to reflect the realignment of certain practices as well as information related to non-U.S. operations that was not previously available.

 

FTI CONSULTING, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(in thousands, except per share data)

 
                       
         

Three Months Ended

 

Nine Months Ended

         

September 30,

 

September 30,

         

2013

 

2012

 

2013

 

2012

                       

Net income (loss)

     

$           (50,621)

 

$             22,713

 

$             (3,455)

 

$             48,891

Add back:

                     

    Special charges, net of tax effect (1)

 

6,847

 

1,794

 

7,100

 

19,115

    Goodwill impairment charges (2)

   

83,752

 

-

 

83,752

 

-

Less:

                     

    Interim period impact of including goodwill impairment charges
    in the annual effective tax rate

 

(10,805)

 

-

 

(10,805)

 

-

Adjusted Net Income (4)

     

$             29,173

 

$             24,507

 

$             76,592

 

$             68,006

                       

Earnings (loss) per common share - diluted

 

$               (1.29)

 

$                 0.55

 

$               (0.09)

 

$                 1.17

Add back:

                     

    Special charges, net of tax effect (1)

 

0.18

 

0.05

 

0.18

 

0.45

    Goodwill impairment charges (2)

   

2.14

 

-

 

2.14

 

-

Less:

                     

    Interim period impact of including goodwill impairment charges
    in the annual effective tax rate

 

(0.27)

 

-

 

(0.28)

 

-

Impact of denominator for diluted earnings per common share (3)

 

(0.04)

 

-

 

(0.05)

 

-

Adjusted EPS (4)

     

$                 0.72

 

$                 0.60

 

$                 1.90

 

$                 1.62

                       

Weighted average number of common shares outstanding - diluted (3)

 

40,244

 

41,102

 

40,385

 

41,882

                       

(1)The tax effect takes into account the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). As a result, the effective tax rates related to the special charges for the three and nine months ended September 30, 2013 were 34.3% and 34.5%, respectively, and 35.3% for both of the three and nine months ended September 30, 2012. The tax expense related to the special charges for the three and nine months ended September 30, 2013 was $3.6 million or $0.09 impact on diluted earnings per common share and $3.7 million or $0.10 impact on diluted earnings per common share, respectively. The tax expense related to the special charges for the three and nine months ended September 30, 2012 was $1.0 million or $0.02 impact on diluted earnings per common share and $10.4 million or $0.25 impact on diluted earnings per common share, respectively.

                       

(2)The goodwill impairment charge is non-deductible for income tax purposes and will result in no tax benefit for the year ending December 31, 2013.

                       

(3)For the three and nine months ended September 30, 2013, the Company reported a net loss. For those periods, the basic weighted average common shares outstanding equals the diluted weighted average common shares outstanding for purposes of calculating U.S. GAAP earnings per share because potentially dilutive securities would be antidilutive. For non-GAAP purposes, the per share and share amounts presented herein reflect the impact of the inclusion of share-based awards and convertible notes that are considered dilutive based on the impact of the add backs included in Adjusted Net Income above. 

                       

(4)  We define Adjusted Net Income and Adjusted Earnings per Diluted Share as net income and earnings per diluted share, respectively, excluding the impact of special charges, goodwill impairment charges and losses on early extinguishment of debt. We use Adjusted Net Income for the purpose of calculating Adjusted Earnings per Diluted Share. Management uses Adjusted Earnings per Diluted Share to assess total company operating performance on a consistent basis. We believe that this measure, when considered together with our GAAP financial results, provides management and investors with a more complete understanding of our business operating results, including underlying trends, by excluding the effects of special charges, goodwill impairment charges and losses on early extinguishment of debt.

                       

 

RECONCILIATION OF NET INCOME (LOSS) AND OPERATING INCOME (LOSS) TO ADJUSTED EBITDA

(in thousands)

 
                                     

Three Months Ended September 30, 2013

 

Corporate
Finance /
Restructuring (3)

 

Forensic and
Litigation
Consulting (3)

 

Economic Consulting

 

Technology 

 

Strategic
Communi-
cations

 

Unallocated
Corporate
Expenses

 

Total

 
                                     

Net income (loss)

                             

$           (50,621)

 
 

Interest income and other

                         

(1,152)

 
 

Interest expense

                           

12,814

 
 

Income tax provision

                           

3,360

 

Operating income (loss) (1)

   

$                  10,590

 

$             21,915

 

$             21,708

 

$               9,755

 

$           (81,490)

 

$           (18,077)

 

$           (35,599)

 
 

Depreciation and amortization

 

919

 

997

 

979

 

3,642

 

575

 

1,084

 

8,196

 
 

Amortization of other intangible assets

1,562

 

512

 

523

 

1,982

 

1,197

 

-

 

5,776

 
 

Special Charges

   

6,331

 

1,938

 

15

 

2

 

2

 

2,131

 

10,419

 
 

Goodwill impairment charge

 

-

 

-

 

-

 

-

 

83,752

 

-

 

83,752

 

Adjusted EBITDA (2)

     

$                  19,402

 

$             25,362

 

$             23,225

 

$             15,381

 

$               4,036

 

$           (14,862)

 

$             72,544

 
                                     
                                     

Nine Months Ended September 30, 2013

                             
                                     

Net income (loss)

                             

$             (3,455)

 
 

Interest income and other

                         

(1,702)

 
 

Interest expense

                           

38,600

 
 

Income tax provision

                           

36,546

 

Operating income (loss) (1)

   

$                  48,725

 

$             52,194

 

$             66,233

 

$             29,129

 

$           (76,369)

 

$           (49,923)

 

69,989

 
 

Depreciation and amortization

 

2,541

 

2,958

 

2,647

 

10,888

 

1,898

 

3,286

 

24,218

 
 

Amortization of other intangible assets

     

4,945

 

1,603

 

1,331

 

5,952

 

3,462

 

-

 

17,293

 
 

Special charges

     

6,399

 

2,111

 

11

 

16

 

66

 

2,243

 

10,846

 
 

Goodwill impairment charge

     

-

 

-

 

-

 

-

 

83,752

 

-

 

83,752

 

Adjusted EBITDA (2)

     

62,610

 

58,866

 

70,222

 

45,985

 

12,809

 

(44,394)

 

206,098

 
                                     

Three Months Ended September 30, 2012

 

Corporate Finance / Restructuring (3)

 

Forensic and Litigation Consulting (3)

 

Economic Consulting

 

Technology 

 

Strategic Communi- cations

 

Unallocated Corporate Expenses

 

Total

 
                                     

Net income 

                             

$             22,713

 
 

Interest income and other

                         

(1,584)

 
 

Interest expense

                           

13,208

 
 

Income tax provision

                           

12,251

 

Operating income (1)

     

$                  19,024

 

$             14,062

 

$             17,810

 

$             10,445

 

$               4,874

 

$           (19,627)

 

$             46,588

 
 

Depreciation and amortization

 

713

 

981

 

702

 

3,098

 

544

 

1,114

 

7,152

 
 

Amortization of other intangible assets

1,443

 

778

 

402

 

1,984

 

1,159

 

-

 

5,766

 
 

Special charges

   

771

 

468

 

173

 

148

 

201

 

1,014

 

2,775

 

Adjusted EBITDA (1)

     

$                  21,951

 

$             16,289

 

$             19,087

 

$             15,675

 

$               6,778

 

$           (17,499)

 

$             62,281

 
                                     
                                     

Nine Months Ended September 30, 2012

                             
                                     

Net income 

                             

$             48,891

 
 

Interest income and other

                         

(4,503)

 
 

Interest expense

                           

43,607

 
 

Income tax provision

                           

26,372

 

Operating income (1)

     

$                  55,488

 

$             37,360

 

$             51,681

 

$             23,403

 

$               6,161

 

$           (59,726)

 

114,367

 
 

Depreciation and amortization

 

2,278

 

3,062

 

2,131

 

9,262

 

1,913

 

3,514

 

22,160

 
 

Amortization of other intangible assets

     

4,321

 

1,802

 

1,199

 

5,960

 

3,491

 

-

 

16,773

 
 

Special charges

     

11,332

 

8,276

 

991

 

3,114

 

4,712

 

1,132

 

29,557

 

Adjusted EBITDA (2)

     

73,419

 

50,500

 

56,002

 

41,739

 

16,277

 

(55,080)

 

182,857

 
                                     
                                     

 

(1) We define Segment Operating Income as a segment's share of consolidated operating income. We define Total Segment Operating Income as the total of Segment Operating Income for all segments, which excludes unallocated corporate expenses. We use Segment Operating Income for the purpose of calculating Adjusted Segment EBITDA.

 

(2) We define Adjusted EBITDA as consolidated net income before income tax provision, other non-operating income (expense), depreciation, amortization of intangible assets, special charges and goodwill impairment charges. Amounts presented in the Adjusted EBITDA row for each segment reflect the segments' respective Adjusted Segment EBITDA. We define Adjusted Segment EBITDA as a segment's share of consolidated operating income before depreciation, amortization of intangible assets, special charges and goodwill impairment charges. We use Adjusted Segment EBITDA to internally evaluate the financial performance of our segments because we believe it is a useful supplemental measure which reflects current core operating performance and provides an indicator of the segment's ability to generate cash. We also believe that these measures, when considered together with our GAAP financial results, provide management and investors with a more complete understanding of our operating results, including underlying trends, by excluding the effects of special charges and goodwill impairment charges. In addition, EBITDA is a common alternative measure of operating performance used by many of our competitors. It is used by investors, financial analysts, rating agencies and others to value and compare the financial performance of companies in our industry. Therefore, we also believe that these measures, considered along with corresponding GAAP measures, provide management and investors with additional information for comparison of our operating results to the operating results of other companies. Adjusted EBITDA and Adjusted Segment EBITDA are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies.  These non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, the information contained in our Condensed Consolidated Statements of Comprehensive Income (Loss).  See also our reconciliation of GAAP to non-GAAP financial measures.

 

(3)  Effective in the first quarter of 2013, we modified our reportable segments to reflect changes in how we operate our business and the related internal management reporting. The Company's healthcare and life sciences practices from both our Corporate Finance/Restructuring segment and our Forensic and Litigation Consulting segment have been combined under a single organizational structure. This single integrated practice, our health solutions practice, is now aggregated in its entirety within the Forensic and Litigation Consulting reportable segment. Prior period Corporate Finance/Restructuring and Forensic and Litigation Consulting segment information has been reclassified to conform to the current period presentation. Adjusted EBITDA and Adjusted Segment EBITDA are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies.  These non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, the information contained in our Condensed Consolidated Statements of Comprehensive Income (Loss). 

 

FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(in thousands)

(unaudited)

       
 

Nine Months Ended 

 

September 30,

 

2013

 

2012

Operating activities

     

Net income (loss)

$            (3,455)

 

$           48,891

Adjustments to reconcile net income to net cash provided by operating activities:

     

Depreciation and amortization

24,218

 

26,475

Amortization of other intangible assets

17,293

 

16,948

Goodwill impairment charge

83,752

 

-

Acquisition-related contingent consideration

(6,091)

 

(2,581)

Provision for doubtful accounts 

10,404

 

9,387

Non-cash share-based compensation 

22,544

 

24,465

Non-cash interest expense

2,024

 

4,505

Other

(286)

 

10

Changes in operating assets and liabilities, net of effects from acquisitions:

     

Accounts receivable, billed and unbilled

(72,266)

 

(62,466)

Notes receivable

(9,644)

 

(20,732)

Prepaid expenses and other assets

(2,313)

 

(3,701)

Accounts payable, accrued expenses and other

16,822

 

5,608

Income taxes 

12,989

 

(5,595)

Accrued compensation

13,198

 

(33,734)

Billings in excess of services provided

(5,383)

 

6,144

                           Net cash provided by operating activities

103,806

 

13,624

       

Investing activities

     

Payments for acquisition of businesses, net of cash received 

(40,766)

 

(26,453)

Purchases of property and equipment

(22,994)

 

(20,534)

Other

24

 

(1,105)

                          Net cash used in investing activities

(63,736)

 

(48,092)

       

Financing activities

     

Borrowings under revolving line of credit

-

 

75,000

Payments of long-term debt

(6,000)

 

(156,487)

Purchase and retirement of common stock

(48,769)

 

(20,013)

Net issuance of common stock under equity compensation plans

6,208

 

523

Other

(800)

 

(1,982)

                          Net cash used in financing activities

(49,361)

 

(102,959)

       

Effect of exchange rate changes on cash and cash equivalents

432

 

(68)

       

Net decrease in cash and cash equivalents

(8,859)

 

(137,495)

Cash and cash equivalents, beginning of period

156,785

 

264,423

Cash and cash equivalents, end of period

$         147,926

 

$         126,928

 

FTI CONSULTING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AT SEPTEMBER 30, 2013 AND DECEMBER 31, 2012

(in thousands, except per share amounts)

       
 

September 30,

 

December 31,

 

2013

 

2012

Assets

(unaudited)

   

Current assets

     

   Cash and cash equivalents

$          147,926

 

$          156,785

   Restricted cash

-

 

1,190

   Accounts receivable:

     

       Billed receivables

345,407

 

314,491

       Unbilled receivables

260,211

 

208,797

       Allowance for doubtful accounts and unbilled services

(110,708)

 

(94,048)

          Accounts receivable, net

494,910

 

429,240

   Current portion of notes receivable

32,112

 

33,194

   Prepaid expenses and other current assets

40,334

 

50,351

   Current portion of deferred tax assets

31,628

 

3,615

Total current assets

746,910

 

674,375

Property and equipment, net of accumulated depreciation

66,300

 

68,192

Goodwill

1,194,414

 

1,260,035

Other intangible assets, net of amortization

92,738

 

104,181

Notes receivable, net of current portion

112,194

 

101,623

Other assets

64,986

 

67,046

Total assets

$       2,277,542

 

$       2,275,452

       

Liabilities and Stockholders' Equity

     

Current liabilities

     

    Accounts payable, accrued expenses and other

$          107,363

 

$            98,109

    Accrued compensation

164,585

 

168,392

    Current portion of long-term debt

6,000

 

6,021

    Billings in excess of services provided

26,186

 

31,675

Total current liabilities

304,134

 

304,197

Long-term debt, net of current portion

711,000

 

717,024

Deferred income taxes

140,746

 

105,751

Other liabilities

85,561

 

80,248

Total liabilities

1,241,441

 

1,207,220

       

Stockholders' equity

     

Preferred stock, $0.01 par value; shares authorized ―5,000; none outstanding

-

 

-

Common stock, $0.01 par value; shares authorized ―75,000; shares issued and
     outstanding ―40,089 (2013) and 40,755 (2012)

401

 

408

Additional paid-in capital

349,417

 

367,978

Retained earnings

737,760

 

741,215

Accumulated other comprehensive loss

(51,477)

 

(41,369)

Total stockholders' equity

1,036,101

 

1,068,232

Total liabilities and stockholders' equity

$       2,277,542

 

$       2,275,452

       

 

SOURCE FTI Consulting, Inc.

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Investor Relations Contacts

Mollie Hawkes

Vice President, Investor Relations & Communications

+1 617.747.1791

Megan McLaughlin Hawkins

Manager of Investor Relations & Corporate Citizenship

+1 617.747.1740