Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to                    
Commission file number 001-14875
 
 
FTI CONSULTING, INC.
(Exact Name of Registrant as Specified in its Charter)
 
 
 
 
Maryland
52-1261113
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
 
 
555 12th Street NW
Washington, D.C.
20004
(Address of Principal Executive Offices)
(Zip Code)
(202) 312-9100
(Registrant’s telephone number, including area code)
 
  
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  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
Accelerated filer
 
 
 
 
Non-accelerated filer
☐  
Smaller reporting company
 
 
 
 
Emerging growth company
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 
Class
Outstanding at October 18, 2018
Common stock, par value $0.01 per share
38,387,013
 



FTI CONSULTING, INC. AND SUBSIDIARIES
INDEX
 
 
 
Page 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2


PART I—FINANCIAL INFORMATION
FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
Item 1.
Financial Statements
 
 
September 30,
 
December 31,
 
2018
 
2017
Assets
(Unaudited)
 
 
Current assets
 

 
 

Cash and cash equivalents
$
505,867

 
$
189,961

Accounts receivable:
 
 
 
Billed receivables
477,408

 
390,996

Unbilled receivables
366,997

 
312,569

Allowance for doubtful accounts and unbilled services
(221,008
)
 
(180,687
)
Accounts receivable, net
623,397

 
522,878

Current portion of notes receivable
31,318

 
25,691

Prepaid expenses and other current assets
45,931

 
55,649

Total current assets
1,206,513

 
794,179

Property and equipment, net
82,476

 
75,075

Goodwill
1,175,929

 
1,204,803

Other intangible assets, net
36,729

 
44,150

Notes receivable, net
89,342

 
98,105

Other assets
37,849

 
40,929

Total assets
$
2,628,838

 
$
2,257,241

Liabilities and Stockholders' Equity
 
 
 
Current liabilities
 
 
 
Accounts payable, accrued expenses and other
$
116,222

 
$
94,873

Accrued compensation
286,149

 
268,513

Billings in excess of services provided
38,178

 
46,942

Current portion of long-term debt, net
296,851

 

Total current liabilities
737,400

 
410,328

Long-term debt, net
263,317

 
396,284

Deferred income taxes
153,045

 
124,471

Other liabilities
123,601

 
134,187

Total liabilities
1,277,363

 
1,065,270

Commitments and contingent liabilities (Note 11)


 


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 — 38,356 (2018) and 37,729 (2017)
384

 
377

Additional paid-in capital
315,720

 
266,035

Retained earnings
1,173,003

 
1,045,774

Accumulated other comprehensive loss
(137,632
)
 
(120,215
)
Total stockholders' equity
1,351,475

 
1,191,971

Total liabilities and stockholders' equity
$
2,628,838

 
$
2,257,241

 
See accompanying notes to condensed consolidated financial statements

3


FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(in thousands, except per share data)
(Unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Revenues
$
513,012

 
$
448,962

 
$
1,522,884

 
$
1,340,021

Operating expenses
 
 
 
 
 
 
 
Direct cost of revenues
336,477

 
294,851

 
987,912

 
907,994

Selling, general and administrative expenses
117,448

 
104,161

 
347,473

 
319,970

Special charges

 

 

 
30,074

Amortization of other intangible assets
1,975

 
2,882

 
6,297

 
7,797

 
455,900

 
401,894

 
1,341,682

 
1,265,835

Operating income
57,112

 
47,068

 
181,202

 
74,186

Other income (expense)
 

 
 

 
 

 
 

Interest income and other
1,400

 
1,103

 
2,074

 
3,300

Interest expense
(7,246
)
 
(6,760
)
 
(20,073
)
 
(18,811
)
Gain on sale of business
13,031

 

 
13,031

 

 
7,185

 
(5,657
)
 
(4,968
)
 
(15,511
)
Income before income tax provision
64,297

 
41,411

 
176,234

 
58,675

Income tax provision
19,964

 
9,197

 
49,347

 
17,601

Net income
$
44,333

 
$
32,214

 
$
126,887

 
$
41,074

Earnings per common share — basic
$
1.19

 
$
0.86

 
$
3.43

 
$
1.05

Earnings per common share — diluted
$
1.14

 
$
0.85

 
$
3.32

 
$
1.03

Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of tax
   expense of $373, $, $373 and $
$
(4,180
)
 
$
11,234

 
$
(17,417
)
 
$
28,778

Total other comprehensive income (loss), net of tax
(4,180
)
 
11,234

 
(17,417
)
 
28,778

Comprehensive income
$
40,153

 
$
43,448

 
$
109,470

 
$
69,852

 
See accompanying notes to condensed consolidated financial statements

4


FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders’ Equity
(in thousands)
(Unaudited)
 
 
Common Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
 
 
Shares
 
Amount
 
 
 
 
Total
Balance at December 31, 2017
37,729

 
$
377

 
$
266,035

 
$
1,045,774

 
$
(120,215
)
 
$
1,191,971

Net income

 
$

 
$

 
$
126,887

 
$

 
$
126,887

Other comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
Cumulative translation adjustment

 

 

 

 
(17,417
)
 
(17,417
)
Issuance of common stock in
  connection with:
 
 
 
 
 
 
 
 
 
 
 
Exercise of options
853

 
9

 
34,160

 

 

 
34,169

           Restricted share grants, less net
             settled shares of 51
307

 
3

 
(2,669
)
 

 

 
(2,666
)
           Stock units issued under incentive
             compensation plan

 

 
1,059

 

 

 
1,059

Purchase and retirement of common
   stock
(533
)
 
(5
)
 
(29,215
)
 

 

 
(29,220
)
     Cumulative effect due to adoption of
        new accounting standard

 

 

 
342

 

 
342

Conversion feature of convertible
   senior notes due 2023, net

 

 
34,131

 

 

 
34,131

Share-based compensation

 

 
12,219

 

 

 
12,219

Balance at September 30, 2018
38,356

 
$
384

 
$
315,720

 
$
1,173,003

 
$
(137,632
)
 
$
1,351,475

 
See accompanying notes to condensed consolidated financial statements

5


FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 
 
Nine Months Ended September 30,
Operating activities
2018
 
2017
Net income
$
126,887

 
$
41,074

Adjustments to reconcile net income to net cash provided by operating
   activities:
 
 
 
Depreciation and amortization
24,548

 
23,768

Amortization and impairment of other intangible assets
6,297

 
7,797

Acquisition-related contingent consideration
355

 
1,547

Provision for doubtful accounts
11,951

 
10,510

Non-cash share-based compensation
12,219

 
12,888

Gain on sale of business
(13,031
)
 

Amortization of debt discount and issuance costs
2,604

 
1,489

Other
751

 
297

Changes in operating assets and liabilities, net of effects from
   acquisitions:
 
 
 
Accounts receivable, billed and unbilled
(130,369
)
 
(72,640
)
Notes receivable
2,659

 
8,449

Prepaid expenses and other assets
(174
)
 
935

Accounts payable, accrued expenses and other
16,150

 
16,823

Income taxes
28,922

 
8,876

Accrued compensation
7,207

 
(34,123
)
Billings in excess of services provided
(10,704
)
 
(3,657
)
Net cash provided by operating activities
86,272

 
24,033

Investing activities
 
 
 
Proceeds from sale of business
50,283

 

Payments for acquisition of businesses, net of cash received

 
(8,929
)
Purchases of property and equipment
(27,841
)
 
(20,021
)
Other
741

 
74

Net cash provided by (used in) investing activities
23,183

 
(28,876
)
Financing activities
 
 
 
Borrowings (repayments) under revolving line of credit, net
(100,000
)
 
95,000

Proceeds from issuance of convertible notes
316,250

 

Payments of debt issue costs
(8,048
)
 

Deposits
2,327

 
3,585

Purchase and retirement of common stock
(29,220
)
 
(155,285
)
Net issuance of common stock under equity compensation plans
31,241

 
(2,354
)
Payments for acquisition-related contingent consideration
(3,029
)
 
(79
)
Net cash provided by (used in) financing activities
209,521

 
(59,133
)
Effect of exchange rate changes on cash and cash equivalents
(3,070
)
 
5,779

Net increase (decrease) in cash and cash equivalents
315,906

 
(58,197
)
Cash and cash equivalents, beginning of period
189,961

 
216,158

Cash and cash equivalents, end of period
$
505,867

 
$
157,961

Supplemental cash flow disclosures
 
 
 
Cash paid for interest
$
13,428

 
$
12,424

Cash paid for income taxes, net of refunds
$
20,324

 
$
8,742

Non-cash investing and financing activities:
 
 
 
Issuance of stock units under incentive compensation plans
$
1,059

 
$
1,547

 
See accompanying notes to condensed consolidated financial statements

6


FTI Consulting, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(dollar and share amounts in tables in thousands, except per share data)
(Unaudited)
 
1. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements of FTI Consulting, Inc., including its consolidated subsidiaries (collectively, the “Company,” “we,” “our” or “FTI Consulting”), presented herein, have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and under the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Some of the information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to those rules and regulations. Certain prior period amounts have been reclassified to conform to the current period presentation. In management’s opinion, the interim financial statements reflect all adjustments that are necessary for a fair presentation of the results for the interim periods presented. All adjustments made were normal recurring accruals. Results of operations for the interim periods presented herein are not necessarily indicative of results of operations for a full year. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC.  
Revenue Recognition
As of January 1, 2018, we adopted Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers ("ASC 606"), which impacts the timing of when certain types of revenue will be recognized. Revenues are recognized when we satisfy a performance obligation by transferring goods or services promised in a contract to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those goods and services. Performance obligations in our contracts represent distinct or separate service streams that we provide to our customers.
We evaluate our revenue contracts with customers based on the five-step model under ASC 606: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to separate performance obligations; and (5) recognize revenues when (or as) each performance obligation is satisfied. If, at the outset of an arrangement, we determine that a contract with enforceable rights and obligations does not exist, revenues are deferred until all criteria for an enforceable contract are met.
We generate the majority of our revenues by providing consulting services to our clients. Most of our consulting service contracts are based on one of the following types of arrangements:
Time and expense arrangements require the client to pay us based on the number of hours worked at contractually agreed-upon rates. We recognize revenues for these arrangements based on hours incurred and contracted rates utilizing a right-to-invoice practical expedient, because we have a right to consideration for services completed to date. When a time and expense arrangement has a not-to-exceed or "cap" amount and we expect to perform work in excess of the cap, we recognize up to the cap amount specified by the client, based on the efforts or hours incurred as a percentage of total efforts or hours expected to be incurred (e.g. proportional performance method). Certain time and materials arrangements may be subject to third party approval, e.g. a court or other regulatory institution, with interim billing and payments made and received based upon preliminarily agreed upon rates. We record revenues for the portion of our services based on our assessment of the expected probability of amounts ultimately to be agreed upon by the court or regulator. These assessments are made on a case-by-case basis depending on the nature of the engagement, client economics, historical experience and other appropriate factors.
Fixed fee arrangements require the client to pay a pre-established fee in exchange for a predetermined set of professional services. We recognize revenues for these arrangements based on the proportional performance related to individual performance obligations within each arrangement, however, these arrangements generally have one performance obligation.

7


Performance based or contingent arrangements represent forms of variable consideration. In these arrangements, our fees are based on the attainment of contractually defined objectives with our client, such as completing a business transaction or assisting the client in achieving a specific business objective. When our performance obligation(s) are satisfied over time, we determine the transaction price based on the expected probability of achieving the agreed-upon outcome and recognize revenues earned to date by applying the proportional performance method. These arrangements include conditional payments, commonly referred to as success fees, which were previously recognized when the cash was collected.
In addition, we generate certain revenues from our Technology segment that are based on units of data stored or processed. Unit based revenues are recognized as services are provided, based on either the amount of data stored or processed, the number of concurrent users accessing the information, or the number of pages or images processed for a client, and agreed-upon per unit rates. We also generate revenues from our on-premise software licenses. Software license revenues are generally recognized at a point in time when the customer acceptance occurs, in accordance with the provision of the arrangements.
Certain of our time and expense and fixed fee billing arrangements may include client incentives in the form of volume-based discounts, where if certain fee levels are reached, the client can receive future services at a discounted hourly rate. Contracts with customers that have a prospective discounted pricing option based on predetermined volume thresholds are evaluated to determine whether they include a material right, which is an option that provides a customer the right to acquire free or discounted goods or services in the future. If the option provides a material right to the customer, we allocate a portion of the transaction price to the material right and defer revenues during the pre-discount period, compared to our previous practice of recognizing the reduction in revenues when customers became eligible to receive the volume discount.
Reimbursable expenses, including those relating to travel, out-of-pocket expenses, outside consultants and other outside service costs, are generally included in revenues, and an equivalent amount of reimbursable expenses is included in costs of services in the period in which the expense is incurred.
2023 Convertible Notes
On August 20, 2018, we issued 2.0% convertible senior notes due 2023 ("2023 Convertible Notes") with an aggregate principal amount of $316.3 million, payable semiannually in arrears on February 15th and August 15th of each year, beginning on February 15, 2019. The 2023 Convertible Notes will mature on August 15, 2023, unless earlier converted or repurchased. Upon conversion, the 2023 Convertible Notes may be settled, at our election in cash, shares of our common stock or a combination of cash and shares of our common stock.
We separately recorded the liability and equity components of the 2023 Convertible Notes. The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2023 Convertible Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. The excess of the principal amount of the liability component over its carrying amount ("debt discount") is amortized to interest expense over the term of the 2023 Convertible Notes using the effective interest rate method.
We record debt issuance costs as an adjustment to the carrying amount of the related liability and equity components of our 2023 Convertible Notes. We amortize the debt discount and debt issuance costs on the liability component using the effective interest rate method over the expected life of the debt instrument.
2. Earnings Per Common Share
Basic earnings per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share adjusts basic earnings per common share for the effects of potentially dilutive common shares. Potentially dilutive common shares include the dilutive effects of shares issuable under our equity compensation plans, including stock options and restricted shares, each using the treasury stock method.
Because we expect to settle the principal amount of the outstanding 2023 Convertible Notes in cash, we use the treasury stock method for calculating the potential dilutive effect of the conversion feature on earnings per common share, if applicable. The conversion feature will have a dilutive impact on earnings per common share when the average market price of our common stock for a given period exceeds the conversion price of $101.38 per share. As we did not meet this threshold during the three and nine months ended September 30, 2018, any shares of common stock potentially issuable upon conversion of the 2023 Convertible Notes are excluded from the calculation of diluted earnings per share.

8


 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Numerator — basic and diluted
 
 
 
 
 
 
 
Net income
$
44,333

 
$
32,214

 
$
126,887

 
$
41,074

Denominator
 
 
 
 
 
 
 
Weighted average number of common shares
   outstanding — basic
37,318

 
37,431

 
37,008

 
39,301

Effect of dilutive stock options
639

 
31

 
500

 
96

Effect of dilutive restricted shares
799

 
284

 
706

 
318

Weighted average number of
   common shares outstanding — diluted
38,756

 
37,746

 
38,214

 
39,715

Earnings per common share — basic
$
1.19

 
$
0.86

 
$
3.43

 
$
1.05

Earnings per common share — diluted
$
1.14

 
$
0.85

 
$
3.32

 
$
1.03

Antidilutive stock options and restricted shares
4

 
2,328

 
221

 
1,755

3. New Accounting Standards
 Adopted Accounting Standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers. On January 1, 2018, we adopted ASC 606 using the modified retrospective method and recorded an immaterial cumulative effect adjustment to the beginning balance of retained earnings for revenue contracts that existed at the adoption date. Under the modified retrospective method, prior year information has not been adjusted and continues to be reported under the accounting standards in effect for periods prior to the adoption date. We have not retroactively restated the existing contracts for modifications that occurred before January 1, 2018.
See Note 1, "Basis of Presentation and Significant Accounting Policies" in Part I, Item 1, of this Quarterly Report on Form 10-Q for a description of the significant accounting policies and methods used in preparation of the Condensed Consolidated Financial Statements. See Note 4, “Revenues” in Part I, Item 1, of this Quarterly Report on Form 10-Q for the disclosures required under ASC 606. The adoption of ASC 606 had an immaterial impact on our Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Balance Sheets and had no impact on our Condensed Consolidated Statements of Cash Flows.
In March 2018, the FASB issued ASU 2018-05, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update), Income Taxes (Topic 740). ASU 2018-05 provides guidance regarding the recording of tax impacts where uncertainty exists, in the period of adoption of the 2017 U.S. Tax Cuts and Jobs Act (the “2017 Tax Act”), which allowed companies to reflect provisional amounts for those specific income tax effects of the 2017 Tax Act for which the accounting under ASC Topic 740 is incomplete but for which a reasonable estimate could be determined. During the nine months ended September 30, 2018, the Company has not recognized any material changes to the provisional amounts recorded in our 2017 Annual Report on Form 10-K in connection with the 2017 Tax Act. The accounting for the tax effects of the 2017 Tax Act will be finalized by the end of 2018 as we complete our federal and state tax returns and incorporate any additional guidance that may be issued by the U.S. tax authorities.
Accounting Standards Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, amended in some respects by subsequent ASU's (collectively “ASC 842”), which supersedes existing lease guidance. Under ASC 842, we will be required to record right-of-use assets and corresponding lease liabilities on the balance sheet, as well as to disclose key quantitative and qualitative information about leasing arrangements. This guidance is effective on a modified retrospective basis for reporting periods beginning after December 15, 2018, with early adoption permitted. We expect to adopt ASC 842 using a modified transition approach, effective January 1, 2019, under which we will recognize a cumulative-effect adjustment to retained earnings on the date of adoption. As permitted by the guidance, prior comparative periods will not be adjusted under this method. In addition, we will elect the package of practical expedients available under the guidance that allows us not to reassess whether a contract contains a lease, lease classification or initial direct costs.
The Company's implementation plan is under way and includes an information system and business process change to accumulate the appropriate data in order to calculate and record the recognition of right-of-use assets, lease liabilities and the related expense recognition. We are creating an inventory of our existing portfolio of leases and continue to review other

9


contracts to determine if they contain leases as defined by ASC 842. Our existing portfolio of leases is primarily composed of operating leases related to our offices. While this assessment continues, we are evaluating the effect of ASC 842 on our Condensed Consolidated Balance Sheets and related disclosures. We do not currently expect that the adoption of ASC 842 will have a material impact on our results of operations or cash flow presentation.
In August 2018, the FASB issued ASU 2018-15, Internal-Use Software (Subtopic 350-40): Customer's accounting for implementation costs incurred in a cloud computing arrangement that is a service contract, which requires the Company to capitalize implementation costs of a hosting arrangement that is a service contract and expense those costs over the term of the hosting arrangement. The guidance is effective for annual and interim periods beginning after December 15, 2019 although early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements.
4. Revenues
Revenues recognized during the current period may include revenues recognized from performance obligations satisfied or partially satisfied in previous periods. This primarily occurs when the estimated transaction price has changed based on a re-assessment of the expected probability of achieving the agreed-upon outcome for our performance based and contingent arrangements, resulting in a catch-up adjustment for service provided in previous periods. The aggregate amount of revenues recognized related to the catch-up adjustment due to a change in the transaction price during the three and nine months ended September 30, 2018 was $8.7 million and $12.9 million, respectively.
Unfulfilled performance obligations represent the remaining contract transaction prices allocated to the performance obligations that are unsatisfied, or partially unsatisfied, and therefore revenues have not yet been recorded. Unfulfilled performance obligations primarily consist of the remaining fees not yet recognized under our proportional performance method for both our fixed fee arrangements, and the portion of performance-based and contingent arrangements that we have deemed probable. As of September 30, 2018, the aggregate amount of the transaction price allocated to unfulfilled performance obligations was $11.1 million, and we expect to recognize the majority of the related revenues over the next 18 months. We elected to utilize the optional exemption to exclude from this disclosure fixed fee and performance-based and contingent arrangements with an original expected duration of one year or less, and to exclude our time and expense arrangements for which revenues are recognized using the right to invoice practical expedient.
Contract assets are defined as assets for which we have recorded revenue because we determined that it is probable that we will earn a performance based or contingent fee, but we are not yet entitled to receive our fees because certain events, such as completion of the measurement period or client approval, must occur. The contract asset balance was $2.9 million as of September 30, 2018 and immaterial as of December 31, 2017.
Contract liabilities are defined as liabilities incurred when we have received consideration from a client but have not yet performed the agreed upon services. This may occur when we receive advance billings before delivery and acceptance of software licenses in our Technology segment and when clients pay us upfront fees before we begin work for them. The contract liability balance was immaterial as of September 30, 2018 and December 31, 2017.
5. Accounts Receivable and Allowance for Doubtful Accounts
Timing of revenue recognition often differs from the timing of billing to our customers. Generally, we transfer goods or services to a customer before the customer pays consideration or payment is due. If we have an unconditional right to invoice and receive payment for goods or services already provided, we record billed and unbilled receivables on our Condensed Consolidated Balance Sheets. Payment terms and conditions vary depending on the jurisdiction, market and type of service and whether regulatory or other third-party approvals are required. In addition, contracts may be negotiated per the client’s request, or at times we are asked to execute contracts in a form provided by customers that might include different terms. Our standard contract terms generally include a requirement of payment within 30 days where no contingencies exist.
We record adjustments to the allowance for doubtful accounts and unbilled services as a reduction in revenues when there are changes in estimates of fee reductions, such as those fee reductions imposed by bankruptcy courts and other regulatory institutions for both billed and unbilled receivables. The allowance for doubtful accounts and unbilled services is also adjusted after the related work has been billed to the client and we discover that collectability is not reasonably assured. These adjustments are recorded to “Selling, general and administrative expenses” on the Condensed Consolidated Statements of Comprehensive Income. Our bad debt expense totaled $3.2 million and $12.0 million for the three and nine months ended September 30, 2018, respectively, and $4.5 million and $10.5 million for the three and nine months ended September 30, 2017, respectively.

10


6. Special Charges
There were no special charges recorded during the three and nine months ended September 30, 2018 and the three months ended September 30, 2017.
During the nine months ended September 30, 2017, we recorded a special charge of $30.1 million. The charge includes the impact of certain targeted reductions in areas of each segment where we needed to realign our workforce with then-current business demand and in certain corporate departments where we were able to streamline support activities. In addition, certain strategic actions were taken to reduce our future real estate costs. The special charge included the following components:
$16.1 million of employee severance and other employee-related costs.
$12.4 million of exit costs associated with the curtailment of our lease on our executive office in Washington, D.C.
$1.6 million of other expenses, including costs related to disposing or closing several small international offices.
The following table details the special charges by segment for the nine months ended September 30, 2018 and 2017:
 
 
Nine Months Ended September 30,
Special Charges by Segment
 
2018
 
2017
Corporate Finance & Restructuring
 
$

 
$
3,049

Forensic and Litigation Consulting
 

 
10,445

Economic Consulting
 

 
5,910

Technology
 

 
3,827

Strategic Communications
 

 
3,599

 
 

 
26,830

Unallocated Corporate
 

 
3,244

Total
 
$

 
$
30,074

7. Research and Development Costs
Research and development costs related to software development in our Technology segment totaled $2.0 million and $7.9 million for the three and nine months ended September 30, 2018, respectively, and $3.3 million and $11.8 million for the three and nine months ended September 30, 2017, respectively. Research and development costs are included in “Selling, general and administrative expenses” on the Condensed Consolidated Statements of Comprehensive Income.  

11


8. Financial Instruments
The following table presents the carrying amounts and estimated fair values of our financial instruments by hierarchy level as of September 30, 2018 and December 31, 2017.
 
September 30, 2018
 
 
 
Hierarchy Level
 
Carrying
Amount
 
Level 1
 
Level 2
 
Level 3
Liabilities
 
 
 
 
 
 
 
Acquisition-related contingent consideration, including
current portion (1)
$
2,960

 
$

 
$

 
$
2,960

Current portion of long-term debt
300,000

 

 
306,375

 

Long-term debt
316,250

 

 
307,525

 

Total
$
619,210

 
$

 
$
613,900

 
$
2,960

 
December 31, 2017
 
 
 
Hierarchy Level
 
Carrying
Amount
 
Level 1
 
Level 2
 
Level 3
Liabilities
 
 
 
 
 
 
 
Acquisition-related contingent consideration, including
current portion (1)
$
3,750

 
$

 
$

 
$
3,750

Long-term debt
400,000

 

 
409,000

 

Total
$
403,750

 
$

 
$
409,000

 
$
3,750

 
(1) 
The short-term portion is included in “Accounts payable, accrued expenses and other,” and the long-term portion is included in “Other liabilities” on the Condensed Consolidated Balance Sheets.  
The fair values of financial instruments not included in this table are estimated to be equal to their carrying values as of September 30, 2018 and December 31, 2017.
We determine the fair value of our 6% senior notes due 2022 ("2022 Notes") primarily based on quoted market prices as of September 30, 2018 and December 31, 2017. The fair value of our borrowings on our senior secured bank revolving credit facility (“Credit Facility”) approximates the carrying amount. We estimate the fair value of our 2023 Convertible Notes based on their last actively traded prices. The fair value of our debt is classified within Level 2 of the fair value hierarchy because it is traded in less active markets.
We estimate the fair value of acquisition-related contingent consideration using a probability-weighted discounted cash flow model. This fair value estimate represents a Level 3 measurement as it is based on significant inputs not observed in the market and reflect our own assumptions. The significant unobservable inputs used in the fair value measurements of our acquisition-related contingent consideration are our measures of the future profitability and related cash flows and discount rates. The fair value of the contingent consideration is reassessed at each reporting period by the Company based on additional information as it becomes available.
Any change in the fair value of an acquisition’s contingent consideration liability results in a remeasurement gain or loss that is recorded in “Selling, general and administrative expenses” on the Condensed Consolidated Statements of Comprehensive Income. During the nine months ended September 30, 2018 there was no change in the estimated fair value of future expected contingent consideration payments. During the nine months ended September 30, 2017, we recorded a remeasurement loss of $0.7 million.

12


9. Goodwill and Other Intangible Assets
Goodwill
The table below summarizes the changes in the carrying amount of goodwill by reportable segment:   
 
Corporate
Finance &
Restructuring
 
Forensic and
Litigation
Consulting
 
Economic
Consulting
 
Technology
 
Strategic
Communications
 
Total
Balance at December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Goodwill
$
454,816

 
$
233,719

 
$
268,995

 
$
117,740

 
$
323,672

 
$
1,398,942

Accumulated goodwill impairment

 

 

 

 
(194,139
)
 
(194,139
)
Goodwill, net at December 31, 2017
454,816


233,719


268,995


117,740


129,533


1,204,803

Sale of business (1)

 

 

 
(20,928
)
 

 
(20,928
)
Foreign currency translation adjustment and other
(3,060
)
 
(1,515
)
 
(276
)
 
(52
)
 
(3,043
)
 
(7,946
)
Balance at September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
Goodwill
451,756


232,204


268,719


96,760

 
320,629

 
1,370,068

Accumulated goodwill impairment

 

 

 

 
(194,139
)
 
(194,139
)
Goodwill, net at September 30, 2018
$
451,756


$
232,204


$
268,719


$
96,760


$
126,490


$
1,175,929


(1) 
During the three months ended September 30, 2018, we sold a business within our Technology segment for proceeds of $50.3 million. We wrote off $20.9 million in goodwill as a result of the sale.
Other Intangible Assets
Other intangible assets with finite lives, comprised primarily of customer relationships, are amortized over their estimated useful lives. We recorded amortization expense of $2.0 million and $6.3 million for the three and nine months ended September 30, 2018, respectively, and $2.9 million and $7.8 million for the three and nine months ended September 30, 2017, respectively.
We estimate our future amortization expense for our intangible assets with finite lives to be as follows: 
Year
As of
September 30, 2018(1)
2018 (remaining)
$
1,876

2019
7,356

2020
7,240

2021
6,711

2022
4,933

Thereafter
3,513

 
$
31,629


(1) 
Actual amortization expense to be reported in future periods could differ from these estimates because of new intangible asset acquisitions, changes in useful lives or other relevant factors or changes.

13


10. Debt
The table below summarizes the components of the Company’s debt. 
 
September 30, 2018
 
December 31, 2017
2022 Notes
$
300,000

 
$
300,000

2023 Convertible Notes
316,250

 

Credit Facility

 
100,000

Total debt
616,250

 
400,000

Less: current portion of long-term debt, net
(296,851
)
 

Less: deferred debt discount
(46,078
)
 

Less: deferred debt issue costs
(10,004
)
 
(3,716
)
Long-term debt, net
$
263,317

 
$
396,284

Additional paid-in capital
$
35,306

 
$

Discount attribution to equity
(1,175
)
 

Equity component, net
$
34,131

 
$

2023 Convertible Notes
On August 20, 2018, we issued $316.3 million aggregate principal amount of the 2023 Convertible Notes, which includes the notes issued pursuant to an option granted to the initial purchasers of the 2023 Convertible Notes to purchase additional notes. The 2023 Convertible Notes bear interest at a fixed rate of 2.0% per year, payable semiannually in arrears on February 15th and August 15th of each year, beginning on February 15, 2019. The 2023 Convertible Notes will mature on August 15, 2023, unless earlier converted or repurchased.
The 2023 Convertible Notes are senior unsecured obligations of the Company and will rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the 2023 Convertible Notes; equal in right of payment to any of our unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness (including all amounts outstanding, from time to time, under the Credit Facility) to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.
The 2023 Convertible Notes are convertible at an initial conversion rate of 9.8643 shares of our common stock per $1,000 principal amount of the 2023 Convertible Notes (equivalent to an initial conversion price of approximately $101.38 per share of common stock). Holders may convert their 2023 Convertible Notes at any time prior to the close of business on the business day immediately preceding May 15, 2023. The 2023 Convertible Notes may be converted only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2018 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “Measurement Period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the 2023 Convertible Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate in effect on each such trading day; or (3) upon the occurrence of specified corporate events. On or after May 15, 2023, until the close of business on the business day immediately preceding the maturity date of August 15, 2023, holders may convert their 2023 Convertible Notes at any time, regardless of the foregoing circumstances. The circumstances required to allow the holders to convert their 2023 Convertible Notes were not met as of September 30, 2018.
If we undergo a fundamental change (as defined in the Indenture), subject to certain conditions, holders may require us to repurchase for cash all or part of their 2023 Convertible Notes.
Debt issuance costs of $8.2 million related to the 2023 Convertible Notes were comprised primarily of discounts and commissions payable to the initial purchasers. We allocated the total amount incurred to the liability and equity components of the 2023 Convertible Notes based on their relative values. Issuance costs attributable to the liability component were $7.0 million and will be amortized to interest expense using the effective interest rate method over the expected life of the 2023

14


Convertible Notes. Issuance costs attributable to the equity component were netted with the equity component in stockholders' equity.
The table below summarizes the amount of interest cost recognized by us for both the contractual interest expense and amortization of the debt discount and issuance costs for the 2023 Convertible Notes:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
 
(in thousands)
Contractual interest expense
$
720

 
$

 
$
720

 
$

Amortization of debt discount and issuance costs(1)
938

 

 
938

 

Total
$
1,658

 
$

 
$
1,658

 
$

 
(1) 
The effective interest rate of the liability component was 5.45% as of September 30, 2018. 
2022 Notes
On October 15, 2018, we delivered a notice of redemption to the holders of our 2022 Notes for the outstanding $300.0 million aggregate principal amount of the 2022 Notes. It is our intention to redeem the notes and the notice is irrevocable and creates a legal obligation to redeem the 2022 Notes. As such, we reclassified the 2022 Notes to current in the accompanying Condensed Consolidated Balance Sheets as of September 30, 2018.
Credit Facility
We have classified the borrowings under the Credit Facility as long-term debt in the accompanying Condensed Consolidated Balance Sheets, as amounts due under the credit agreement entered into on June 26, 2015, which expires on June 26, 2020, are not contractually required or expected to be liquidated for more than one year from the applicable balance sheet date. Additionally, $1.0 million of the borrowing limit under the Credit Facility was utilized for letters of credit as of September 30, 2018. 
11. Commitments and Contingencies
We are subject to legal actions arising in the ordinary course of business. In management’s opinion, we believe we have adequate legal defenses and/or insurance coverage with respect to the eventuality of such actions. We do not believe any settlement or judgment relating to any pending legal action would materially affect our financial position or results of operations.  
12. Share-Based Compensation
During the nine months ended September 30, 2018, we granted 248,246 restricted stock awards, 32,374 restricted stock units and 91,370 performance-based restricted stock units. These awards are recorded as equity on the Condensed Consolidated Balance Sheets. During the nine months ended September 30, 2018, stock options exercisable for up to 211,547 shares and 16,371 shares of restricted stock awards were forfeited prior to the completion of the applicable vesting requirements.
Total share-based compensation expense, net of forfeitures, for the three and nine months ended September 30, 2018 and 2017 is detailed in the following table:   
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Income Statement Classification
2018
 
2017
 
2018
 
2017
Direct cost of revenues
$
2,459

 
$
1,350

 
$
8,665

 
$
8,371

Selling, general and administrative expenses
2,939

 
1,781

 
8,286

 
3,833

Special charges

 

 

 
96

Total share-based compensation expense
$
5,398


$
3,131


$
16,951


$
12,300


15


13. Stockholders’ Equity
On June 2, 2016, our Board of Directors authorized a stock repurchase program of up to $100.0 million (the “Repurchase Program”). On each of May 18, 2017 and December 1, 2017, our Board of Directors authorized an additional $100.0 million increasing the Repurchase Program to an aggregate authorization of $300.0 million. No time limit has been established for the completion of the Repurchase Program, and the Repurchase Program may be suspended, discontinued or replaced by the Board of Directors at any time without prior notice. As of September 30, 2018, we have $99.1 million available under the Repurchase Program to repurchase additional shares.
The following table details our stock repurchases under the Repurchase Program: 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Shares of common stock repurchased and retired

 
1,599

 
337

 
4,366

Average price paid per share
$

 
$
32.98

 
$
42.17

 
$
35.55

Total cost
$

 
$
52,741

 
$
14,213

 
$
155,198

  
On August 13, 2018, our Board of Directors authorized the use of a portion of the proceeds from the issuance of the 2023 Convertible Notes to repurchase up to $25.0 million of common stock. On August 16, 2018, 196,050 shares of our common stock were repurchased at $76.51 per share for a total cost of $15.0 million. This is a separate repurchase transaction outside of the Repurchase Program.
14. Segment Reporting
We manage our business in five reportable segments: Corporate Finance & Restructuring ("Corporate Finance"), Forensic and Litigation Consulting ("FLC"), Economic Consulting, Technology and Strategic Communications.
Our Corporate Finance segment focuses on the strategic, operational, financial and capital needs of our clients around the world and delivers a wide range of service offerings related to restructuring, business transformation and transaction support. Our restructuring practice includes corporate restructuring, including bankruptcy and interim management services. Our business transformation and transaction practices include financings, mergers and acquisitions (“M&A”), M&A integration, valuations and tax advice, as well as financial, operational and performance improvement services.
Our FLC segment provides law firms, companies, government clients and other interested parties with multidisciplinary, independent dispute advisory, investigations, data analytics, forensic accounting, business intelligence and risk mitigation services, as well as interim management and performance improvement services for our health solutions practice clients.
Our Economic Consulting segment provides law firms, companies, government entities and other interested parties with analysis of complex economic issues for use in legal, regulatory and international arbitration proceedings, strategic decision making and public policy debates in the U.S. and around the world.
Our Technology segment provides corporations and law firms with a comprehensive and global portfolio of consulting and services for information governance, privacy and security, electronic discovery ("e-discovery") and insight analytics. Our consulting expertise enables clients to more confidently govern, secure, find, analyze and rapidly understand their data in the context of compliance and risk.
Our Strategic Communications segment designs and executes communications strategies for management teams and boards of directors to help them seize opportunities, manage financial, regulatory and reputational challenges, navigate market disruptions, articulate their brand, stake a competitive position and preserve and grow their operations.
We evaluate the performance of our operating segments based on Adjusted Segment EBITDA, a GAAP financial measure. We define Adjusted Segment EBITDA as a segment’s share of consolidated operating income before depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges. We define Total Adjusted Segment EBITDA, a non-GAAP financial measure, 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 reflects current core operating performance and provides an indicator of the segment’s ability to generate cash.

16


The table below presents revenues and Adjusted Segment EBITDA for our reportable segments:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Revenues
 
 
 
 
 
 
 
Corporate Finance & Restructuring
$
135,418

 
$
128,121

 
$
419,695

 
$
351,509

Forensic and Litigation Consulting
126,684

 
118,639

 
388,250

 
341,455

Economic Consulting
139,166

 
111,753

 
405,583

 
374,978

Technology
56,692

 
42,282

 
144,035

 
133,935

Strategic Communications
55,052

 
48,167

 
165,321

 
138,144

Total revenues
$
513,012


$
448,962


$
1,522,884


$
1,340,021

Adjusted Segment EBITDA
 
 
 
 
 
 
 
Corporate Finance & Restructuring
$
26,798

 
$
26,734

 
$
97,379

 
$
57,107

Forensic and Litigation Consulting
21,970

 
22,539

 
75,342

 
49,092

Economic Consulting
23,238

 
12,061

 
57,846

 
47,680

Technology
11,473

 
5,973

 
24,713

 
19,198

Strategic Communications
10,802

 
8,073

 
31,621

 
17,206

Total Adjusted Segment EBITDA
$
94,281


$
75,380


$
286,901


$
190,283

The table below reconciles net income to Total Adjusted Segment EBITDA: 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
44,333

 
$
32,214

 
$
126,887

 
$
41,074

Add back:
 
 
 
 
 
 
 
Income tax provision
19,964

 
9,197

 
49,347

 
17,601

Interest income and other
(1,400
)
 
(1,103
)
 
(2,074
)
 
(3,300
)
Gain on sale of business
(13,031
)
 

 
(13,031
)
 

Interest expense
7,246

 
6,760

 
20,073

 
18,811

Unallocated corporate expenses (1)
27,806

 
18,827

 
77,576

 
60,166

Segment depreciation expense
7,388

 
6,603

 
21,826

 
20,602

Amortization of intangible assets
1,975

 
2,882

 
6,297

 
7,797

Segment special charges

 

 

 
26,830

Remeasurement of acquisition-related contingent
   consideration

 

 

 
702

Total Adjusted Segment EBITDA
$
94,281


$
75,380


$
286,901


$
190,283

 
(1) 
Includes $3.2 million in special charges for corporate for the nine months ended September 30, 2017. See Note 6, "Special Charges" in Part I, Item 1, of this Quarterly Report on Form 10-Q.
15. Supplemental Condensed Consolidating Guarantor and Non-Guarantor Financial Information
Substantially all domestic subsidiaries are guarantors of borrowings under our Credit Facility and 2022 Notes. The guarantees are full and unconditional and joint and several. Our guarantors are wholly owned, direct or indirect, subsidiaries.
The following financial information presents condensed consolidating balance sheets, statements of comprehensive income and statements of cash flows for FTI Consulting, all the guarantor subsidiaries, all the non-guarantor subsidiaries and the eliminations necessary to arrive at the consolidated information for FTI Consulting and its subsidiaries. For purposes of this presentation, we have accounted for our investments in our subsidiaries using the equity method of accounting. The principal eliminating entries eliminate investment in subsidiary and intercompany balances and transactions.

17


Condensed Consolidating Balance Sheet as of September 30, 2018  
 
FTI
Consulting
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Assets
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
366,539

 
$
153

 
$
139,175

 
$

 
$
505,867

Accounts receivable, net
199,360

 
198,410

 
225,627

 

 
623,397

Intercompany receivables

 
1,202,019

 

 
(1,202,019
)
 

Other current assets
28,787

 
23,660

 
24,802

 

 
77,249

Total current assets
594,686

 
1,424,242

 
389,604

 
(1,202,019
)
 
1,206,513

Property and equipment, net
40,220

 
17,040

 
25,216

 

 
82,476

Goodwill
549,948

 
416,053

 
209,928

 

 
1,175,929

Other intangible assets, net
15,803

 
9,677

 
11,249

 

 
36,729

Investments in subsidiaries
2,238,436

 
508,895

 

 
(2,747,331
)
 

Other assets
36,861

 
44,749

 
45,581

 

 
127,191

Total assets
$
3,475,954

 
$
2,420,656

 
$
681,578

 
$
(3,949,350
)
 
$
2,628,838

Liabilities
 
 
 
 
 
 
 
 
 
Intercompany payables
$
1,201,765

 
$

 
$
254

 
$
(1,202,019
)
 
$

Current portion of long-term debt, net
296,851

 

 

 

 
296,851

Other current liabilities
135,680

 
177,554

 
127,315

 

 
440,549

Total current liabilities
1,634,296

 
177,554

 
127,569

 
(1,202,019
)
 
737,400

Long-term debt, net
263,317

 

 

 

 
263,317

Other liabilities
226,866

 
15,032

 
34,748

 

 
276,646

Total liabilities
2,124,479

 
192,586

 
162,317

 
(1,202,019
)
 
1,277,363

Stockholders' equity
1,351,475

 
2,228,070

 
519,261

 
(2,747,331
)
 
1,351,475

Total liabilities and stockholders' equity
$
3,475,954

 
$
2,420,656

 
$
681,578

 
$
(3,949,350
)
 
$
2,628,838


18


Condensed Consolidating Balance Sheet as of December 31, 2017  
 
FTI
Consulting
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
10,186

 
$
159

 
$
179,616

 
$

 
$
189,961

Accounts receivable, net
155,124

 
156,859

 
210,895

 

 
522,878

Intercompany receivables

 
1,093,211

 
32,695

 
(1,125,906
)
 

Other current assets
31,933

 
21,840

 
27,567

 

 
81,340

Total current assets
197,243

 
1,272,069

 
450,773

 
(1,125,906
)
 
794,179

Property and equipment, net
39,137

 
13,572

 
22,366

 

 
75,075

Goodwill
570,876

 
416,053

 
217,874

 

 
1,204,803

Other intangible assets, net
18,426

 
11,251

 
29,441

 
(14,968
)
 
44,150

Investments in subsidiaries
2,175,362

 
566,911

 

 
(2,742,273
)
 

Other assets
34,454

 
60,566

 
44,014

 

 
139,034

Total assets
$
3,035,498

 
$
2,340,422

 
$
764,468

 
$
(3,883,147
)
 
$
2,257,241

Liabilities
 
 
 
 
 
 
 
 
 
Intercompany payables
$
1,125,906

 
$

 
$

 
$
(1,125,906
)
 
$

Other current liabilities
127,295

 
144,474

 
138,559

 

 
410,328

Total current liabilities
1,253,201

 
144,474

 
138,559

 
(1,125,906
)
 
410,328

Long-term debt, net
396,284

 

 

 

 
396,284

Other liabilities
194,042

 
14,753

 
49,863

 

 
258,658

Total liabilities
1,843,527

 
159,227

 
188,422

 
(1,125,906
)
 
1,065,270

Stockholders' equity
1,191,971

 
2,181,195

 
576,046

 
(2,757,241
)
 
1,191,971

Total liabilities and stockholders' equity
$
3,035,498

 
$
2,340,422

 
$
764,468

 
$
(3,883,147
)
 
$
2,257,241

 

19


Condensed Consolidating Statement of Comprehensive Income for the Three Months Ended September 30, 2018  
 
FTI
Consulting
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Revenues
$
177,547

 
$
169,236

 
$
167,855

 
$
(1,626
)
 
$
513,012

Operating expenses
 
 
 
 
 
 
 
 
 
Direct cost of revenues
113,645

 
118,795

 
105,639

 
(1,602
)
 
336,477

Selling, general and administrative expenses
56,586

 
28,949

 
31,937

 
(24
)
 
117,448

Amortization of other intangible assets
874

 
267

 
1,587

 
(753
)
 
1,975

 
171,105

 
148,011

 
139,163

 
(2,379
)
 
455,900

Operating income
6,442

 
21,225

 
28,692

 
753

 
57,112

Other income (expense)
(26,239
)
 
17,522

 
6,287

 
9,615

 
7,185

Income before income tax provision
(19,797
)
 
38,747

 
34,979

 
10,368

 
64,297

Income tax provision (benefit)
(2,439
)
 
15,057

 
7,346

 

 
19,964

Equity in net earnings of subsidiaries
61,691

 
17,755

 

 
(79,446
)
 

Net income
$
44,333

 
$
41,445

 
$
27,633

 
$
(69,078
)
 
$
44,333

Other comprehensive loss, net of tax:
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of
   tax expense of $373
$

 
$

 
$
(4,180
)
 
$

 
$
(4,180
)
Other comprehensive loss, net of tax

 

 
(4,180
)
 

 
(4,180
)
Comprehensive income
$
44,333

 
$
41,445

 
$
23,453

 
$
(69,078
)
 
$
40,153


Condensed Consolidating Statement of Comprehensive Income for the Three Months Ended September 30, 2017  
 
FTI
Consulting
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Revenues
$
163,311

 
$
136,827

 
$
151,197

 
$
(2,373
)
 
$
448,962

Operating expenses
 
 
 
 
 
 
 
 
 
Direct cost of revenues
105,857

 
95,432

 
95,874

 
(2,312
)
 
294,851

Selling, general and administrative expenses
44,781

 
30,532

 
28,909

 
(61
)
 
104,161

Amortization of other intangible assets
1,304

 
541

 
1,795

 
(758
)
 
2,882

 
151,942


126,505


126,578


(3,131
)

401,894

Operating income
11,369

 
10,322

 
24,619

 
758

 
47,068

Other income (expense)
(5,912
)
 
(4,548
)
 
4,803

 

 
(5,657
)
Income before income tax provision
5,457

 
5,774


29,422


758


41,411

Income tax provision
4,438

 
2,260

 
2,499

 

 
9,197

Equity in net earnings of subsidiaries
31,195

 
21,731

 

 
(52,926
)
 

Net income
$
32,214


$
25,245


$
26,923


$
(52,168
)

$
32,214

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of
   tax expense of $0
$

 
$

 
$
11,234

 
$

 
$
11,234

Other comprehensive income, net of tax

 

 
11,234

 

 
11,234

Comprehensive income
$
32,214


$
25,245


$
38,157


$
(52,168
)

$
43,448



20


Condensed Consolidating Statement of Comprehensive Income for the Nine Months Ended September 30, 2018  
 
FTI
Consulting
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Revenues
$
550,437

 
$
485,653

 
$
492,130

 
$
(5,336
)
 
$
1,522,884

Operating expenses
 
 
 
 
 
 
 
 
 
Direct cost of revenues
344,856

 
338,858

 
309,570

 
(5,372
)
 
987,912

Selling, general and administrative expenses
160,739

 
88,423

 
98,311

 

 
347,473

Amortization of other intangible assets
2,622

 
994

 
5,014

 
(2,333
)
 
6,297

 
508,217

 
428,275

 
412,895

 
(7,705
)
 
1,341,682

Operating income
42,220

 
57,378

 
79,235

 
2,369

 
181,202

Other income (expense)
(18,488
)
 
16,641

 
10,264

 
(13,385
)
 
(4,968
)
Income before income tax provision
23,732

 
74,019

 
89,499

 
(11,016
)
 
176,234

Income tax provision
4,478

 
26,074

 
18,795

 

 
49,347

Equity in net earnings of subsidiaries
107,633

 
85,322

 

 
(192,955
)
 

Net income
$
126,887

 
$
133,267

 
$
70,704

 
$
(203,971
)
 
$
126,887

Other comprehensive loss, net of tax:
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of
   tax expense of $373
$

 
$

 
$
(17,417
)
 
$

 
$
(17,417
)
Other comprehensive loss, net of tax

 

 
(17,417
)
 

 
(17,417
)
Comprehensive income
$
126,887

 
$
133,267

 
$
53,287

 
$
(203,971
)
 
$
109,470


Condensed Consolidating Statement of Comprehensive Income for the Nine Months Ended September 30, 2017  
 
FTI
Consulting
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Revenues
$
478,767

 
$
459,569

 
$
408,780

 
$
(7,095
)
 
$
1,340,021

Operating expenses
 
 
 
 
 
 
 
 
 
Direct cost of revenues
325,560

 
321,606

 
267,742

 
(6,914
)
 
907,994