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FTI Consulting, Inc. Reports 2010 First Quarter Results
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WEST PALM BEACH, Fla., May 5, 2010 /PRNewswire via COMTEX/ --FTI Consulting, Inc. (NYSE: FCN), the global business advisory firm dedicated to helping organizations protect and enhance their enterprise value, today reported its financial results for the first quarter ended March 31, 2010.
For the first quarter of 2010, revenues increased to $350.0 million from $347.8 million in the prior year period. Adjusted earnings per diluted share were $0.67 before $0.38 of special charges described below and EPS was $0.29 per diluted share. Adjusted EBITDA before $30.2 million of special charges, increased to $75.9 million, or 21.7% of revenues, compared with $74.0 million, or 21.3% of revenues, in the first quarter of 2009. Adjusted earnings per diluted share and Adjusted EBITDA are non-GAAP measures which are described below.
The Company recorded a special charge in the first quarter of $30.2 million. This charge includes $19.3 million related to the termination of 144 employees; $7.8 million of lease termination charges in connection with the consolidation of four office locations and $3.1 million of other charges. Of the $30.2 million charge, approximately $21.8 million requires the use of cash and $8.4 million is a non-cash charge. These actions were taken to eliminate redundancies resulting from acquisitions completed over the last two years, to provide for appropriate levels of administrative support and to better align capacity with expected demand.
As of March 31, 2010, the Company had $80.9 million of cash and cash equivalents.
Commenting on these results, Jack Dunn, FTI's president and chief executive officer said, "Our first quarter of 2009, with its record restructuring market and two of the largest financial fraud cases of all time, was a tough quarter to beat. It is a tribute to the great professionals at FTI and the diversified business platform that we have built, that we were able to do so. The first quarter 2010 results reflect the changing nature of the global economy. While activity is still far from robust, there appear to be signs of strength in many sectors. As anticipated, we experienced slowing results from our practices that serve companies undergoing economic challenge but the beginnings of growth from those practices that benefit in times of recovery."
"The diversity of our business across many industries and activities, our global presence, with a record 20% of our revenue in the quarter coming from outside the U.S., and the array of intellectual capital represented by our great professionals place us in a good position to advise on the ample challenges brought on by the credit crisis and the recession as well as those associated with economic expansion. We continue to be a thought leader and a sought-after advisor providing critical thinking at the critical time."
First Quarter Segment Results
Corporate Finance/Restructuring
Revenues in the Corporate Finance/Restructuring segment were $117.5 million, compared with $127.5 million in the first quarter of the prior year. Adjusted Segment EBITDA was $34.7 million, or 29.6% of segment revenues, compared with $40.7 million, or 31.9% of segment revenues, in the prior year quarter. The segment's revenue declined from last year's record levels and resulted from a slowing of new restructuring opportunities in the U.S. While robust high yield markets and improving corporate earnings slowed the volume of new cases, we expect to continue to assist clients for years to come in the aftermath of the largest economic dislocation since the Great Depression. The segment experienced strong growth in its communications/media/entertainment practice and international business. Adjusted Segment EBITDA margins declined from the 2009 level due to lower utilization. In light of the slowing demand the segment has taken steps to bring its headcount into line with current activity levels.
Forensic and Litigation Consulting
Revenues in the Forensic and Litigation Consulting segment were $78.7 million, compared with $78.4 million in the first quarter of the prior year. Adjusted Segment EBITDA was $19.8 million, or 25.1% of segment revenues, compared to $21.9 million, or 28.0% of segment revenues, in the prior year's first quarter. The segment experienced sequential quarterly revenue growth of 12%. Compared to the prior year quarter, the construction solutions and international investigations practices grew and the domestic dispute and litigation practice largely replaced revenue declines in the unprecedented financial fraud cases that arose last year and continue, but at substantially reduced levels. Recent SEC enforcement actions are beginning to produce business and may portend long anticipated government activism. Adjusted Segment EBITDA margins declined year over year due to somewhat lower utilization levels compared to record first quarter margins in 2009.
Economic Consulting
Revenues in the Economic Consulting segment increased 22.7% to a record $67.3 million from $54.8 million in the first quarter of the prior year, its fifth sequential quarterly record in revenues. Adjusted Segment EBITDA increased 31.0% to $13.5 million, or 20.1% of segment revenues, compared to $10.3 million, or 18.8% of segment revenues, in the prior year quarter. While the market for this segment has not returned to normal levels, we did open 25% more cases than in the prior year quarter, and the trend to more normal levels of demand for services appears to be continuing. We also expanded our capacity and market share with our new offices in London, New York and the West Coast. The segment was active in supporting financial disputes and experienced improving demand resulting from regulatory activity, particularly from the major government agencies. Adjusted Segment EBITDA margins improved due to higher utilization.
Technology
Revenues in the Technology segment were $43.4 million, compared to $44.3 million in the first quarter of the prior year. Adjusted Segment EBITDA increased 31.8% to $17.3 million, or 39.8% of segment revenues, compared to $13.1 million, or 29.6% of segment revenues, in the prior year quarter. The Technology segment continues to be a preferred provider in large and complex situations, and had a solid performance driven by several large litigation, bankruptcy and product liability cases as well as excellent operational execution. In addition, we successfully launched Acuity, our integrated e-discovery and automated document review offering that positions FTI for the first time directly in the review space - the largest cost component of the discovery process. An increase in unit volumes in the hosting and processing business more than offset continuing price pressure as the Segment's pricing strategy and cost control measures gained traction. Adjusted Segment EBITDA margins improved due to the contribution from several significant engagements and cost control measures in selling, general and administrative expense. The segment continued to invest in research and development, with $5.4 million of cost in the quarter, unchanged from the prior year quarter.
Strategic Communications
Revenues in the Strategic Communications segment were $43.2 million, compared to $42.8 million in the first quarter of the prior year. Adjusted Segment EBITDA was $5.7 million, or 13.3% of segment revenues, compared to $5.8 million, or 13.6% of revenues, in the prior year quarter. Within an overall slow environment for discretionary corporate spending, M&A and capital markets activity, the segment is experiencing a gradual improvement in business trends as evidenced by the second consecutive quarter of net annualized retainer wins, reversing a decline that began in the fourth quarter of 2008. IPO filings have increased significantly compared to last year's first quarter and improving levels of M&A activity provide some evidence of a trend toward more normal levels of opportunity for the segment.
Segment Reclassification and Other
Effective January 1, 2010, we implemented a change in our organizational structure. The Company's Financial and Enterprise Data Analytics (FEDA) sub-practice has been moved from the Technology segment to the Forensic and Litigation Consulting segment. All discussion and presentation of results have been adjusted to set forth this change for all periods presented. Adjusted Segment EBITDA, a non-GAAP measure, excludes the impact of special charges as discussed above.
First Quarter Conference Call
FTI will hold a conference call for analysts and investors to discuss first quarter financial results at 9:00 AM Eastern Time on Wednesday, May 5, 2010. 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, 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 more than 3,400 employees located in most major business centers in the world, we work closely with clients every day to anticipate, illuminate, and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management and restructuring. More information can be found at www.fticonsulting.com.
Use of Non-GAAP Measure
Note: We define Adjusted EBITDA as consolidated operating income before depreciation, amortization of intangible assets and special charges plus non-operating litigation settlements. We defined Adjusted Segment EBITDA as the segment's share of consolidated operating income before depreciation, amortization of intangible assets and special charges plus non-operating litigation settlements. Although Adjusted EBITDA, and Adjusted Segment EBITDA are not measures of financial condition or performance determined in accordance with generally accepted accounting principles ("GAAP"), we believe that these measures can be a useful operating performance measure for evaluating our results of operations as compared from period to period and as compared to our competitors. EBITDA is a common alternative measure of operating performance used by investors, financial analysts and rating agencies to value and compare the financial performance of companies in our industry. We use Adjusted EBITDA and Adjusted Segment EBITDA to evaluate and compare the operating performance of our segments and it is one of the primary measures used to determine employee incentive compensation. We define Adjusted earnings per diluted share (Adjusted EPS) as earnings per diluted share minus the per share impact of the special charges.
Adjusted EBITDA, Adjusted Segment EBITDA and Adjusted EPS are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies unless the definition is the same. These non-GAAP measures should be considered in addition to, but not as a substitute for or superior to, the information contained in our statements of income. Reconciliations of operating profit to Adjusted EBITDA, segment operating profit to Adjusted Segment EBITDA and EPS to Adjusted EPS are included in the accompanying tables to today's press release.
Safe Harbor Statement
This press release includes "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that 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 projections will result or be achieved or that actual results will not differ from expectations. The Company has experienced fluctuating revenues, operating income and cash flow in some prior periods and expects this will occur from time to time in the future. The Company's actual results may differ from our expectations. Further, preliminary results are subject to normal year-end adjustments. Other factors that could cause such differences include the current global financial crisis and economic conditions, the crisis in and deterioration of the financial and real estate markets, 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 and in the Company's other filings with the Securities and Exchange Commission. 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.
FINANCIAL TABLES FOLLOW
FTI CONSULTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(in thousands, except per share data)
Three Months Ended
March 31,
----------
2010 2009
---- ----
(unaudited)
Revenues $350,040 $347,846
-------- --------
Operating expenses
Direct cost of revenues 197,460 192,412
Selling, general and administrative
expense 84,401 88,753
Special charges 30,245 -
Amortization of other intangible assets 6,091 6,050
318,197 287,215
------- -------
Operating income 31,843 60,631
------ ------
Other income (expense)
Interest income and other 2,354 2,303
Interest expense (11,318) (11,013)
(8,964) (8,710)
------ ------
Income before income tax provision 22,879 51,921
Income tax provision 8,694 20,249
----- ------
Net income $14,185 $31,672
======= =======
Earnings per common share - basic $0.31 $0.63
===== =====
Weighted average common shares outstanding
-basic 45,799 50,171
====== ======
Earnings per common share - diluted $0.29 $0.60
Weighted average common shares outstanding
-diluted 48,128 52,979
====== ======
FTI CONSULTING, INC.
OPERATING RESULTS BY BUSINESS SEGMENT
(Unaudited)
Revenues EBITDA (1) Margin
-------- ---------- ------
(in thousands)
--------------
Three Months Ended March
31, 2010
Corporate Finance/
Restructuring $117,467 $34,719 29.6%
Forensic and Litigation
Consulting 78,678 19,784 25.1%
Economic Consulting 67,307 13,520 20.1%
Technology 43,373 17,261 39.8%
Strategic Communications 43,215 5,742 13.3%
-----
$350,040 91,026 26.0%
========
Corporate (15,144)
-------
Adjusted EBITDA (1) $75,882 21.7%
=======
Three Months Ended March
31, 2009
Corporate Finance/
Restructuring $127,542 $40,721 31.9%
Forensic and Litigation
Consulting (3) 78,374 21,941 28.0%
Economic Consulting 54,836 10,319 18.8%
Technology (3) 44,323 13,098 29.6%
Strategic Communications 42,771 5,796 13.6%
-----
$347,846 91,875 26.4%
========
Corporate (17,912)
-------
Adjusted EBITDA (1) $73,963 21.3%
=======
Average Revenue-
Billable Generating
Utilization
(2) Rate (2) Headcount
------------ -------- ---------
Three Months Ended March
31, 2010
Corporate Finance/
Restructuring 69% $457 701
Forensic and Litigation
Consulting 78% $325 771
Economic Consulting 82% $470 302
Technology N/M N/M 242
Strategic Communications N/M N/M 569
N/M N/M 2,585
=====
Corporate
Adjusted EBITDA (1)
Three Months Ended March
31, 2009
Corporate Finance/
Restructuring 83% $418 715
Forensic and Litigation
Consulting (3) 82% $319 702
Economic Consulting 78% $454 275
Technology (3) N/M N/M 259
Strategic Communications N/M N/M 566
N/M N/M 2,517
=====
Corporate
Adjusted EBITDA (1)
(1) We define Adjusted EBITDA as consolidated operating income before
depreciation, amortization of intangible assets and special charges
plus non-operating litigation settlements. We define Adjusted
Segment EBITDA as the segments' share of consolidated operating
income before depreciation, amortization of intangible assets and
special charges plus non-operating litigation settlements. Although
Adjusted EBITDA, and Adjusted Segment EBITDA are not measures of
financial condition or performance determined in accordance with
generally accepted accounting principles ("GAAP"), we believe that
these measures can be a useful operating performance measure for
evaluating our results of operations as compared from period to
period and as compared to our competitors. EBITDA is a common
alternative measure of operating performance used by investors,
financial analysts and rating agencies to value and compare the
financial performance of companies in our industry. We use Adjusted
EBITDA and Adjusted Segment EBITDA to evaluate and compare the
operating performance of our segments and it is one of the primary
measures used to determine employee incentive compensation.
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 unless the definition
is the same. These non-GAAP measures should be considered in
addition to, but not as a substitute for or superior to, the
information contained in our statements of income. See also our
reconciliation of Non-GAAP financial measures.
(2) The majority of the Technology and Strategic Communications
segments' revenues are not generated on an hourly basis.
Accordingly,
utilization and average billable rate metrics are not presented as
they are not meaningful. Utilization where presented is based on a
2,032 hour year.
(3) Effective January 1, 2010, we implemented a change in our
organizational structure that resulted in the movement of our
Financial and Enterprise Data Analytics subpractice from our
Technology segment to our Forensic and Litigation Consulting
segment. This change has been reflected in our segment reporting for
all periods.
FTI CONSULTING, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
-------------------------------------
(unaudited)
Three Months Ended
March 31,
---------
2010 2009
---- ----
Net income $14,185 $31,672
======= =======
Earnings per common share - diluted $0.29 $0.60
===== =====
Add back: Special charges, net of taxes of
$12,176 $18,069 $-
Adjusted net income before special charges $32,254 $31,672
======= =======
Adjusted earnings per common share - diluted
before special charges (1) $0.67 $0.60
===== =====
(1) We define adjusted earnings per diluted share (Adjusted EPS)
as earnings per diluted share minus the per share impact of the
special charges.
RECONCILIATION OF OPERATING INCOME AND NET INCOME TO EARNINGS BEFORE
INTEREST, TAXES, DEPRECIATION AND AMORTIZATION AND SPECIAL CHARGES
(Unaudited)
Forensic
and
Corporate Litigation
Three Months Ended March 31, Finance / Consulting Economic
2010 Restructuring (2) Consulting
------------- ----------- ----------
Net income
Interest income and other
Interest expense
Income tax provision
Operating income $25,644 $12,400 $5,766
Depreciation 994 829 630
Amortization of other
intangible assets 1,492 995 310
Special charges 6,589 5,560 6,814
Non-operating litigation
settlements - - -
--- --- ---
Adjusted EBITDA (1) $34,719 $19,784 $13,520
======= ======= =======
Three Months Ended March 31,
2009
Net income
Interest income and other
Interest expense
Operating income $38,375 $20,597 $9,367
Depreciation 764 660 407
Amortization of other
intangible assets 1,582 684 545
Special charges - - -
Non-operating litigation
settlements - - -
--- --- ---
Adjusted EBITDA (1) $40,721 $21,941 $10,319
======= ======= =======
Strategic
Three Months Ended March 31, Technology Communi-
2010 (2) cations Corp HQ Total
---------- --------- ------- -----
Net income $14,185
Interest income and other (2,354)
Interest expense 11,318
Income tax provision 8,694
-----
Operating income $7,302 $2,347 $(21,616) 31,843
Depreciation 3,050 823 1,377 7,703
Amortization of other
intangible assets 1,982 1,312 - 6,091
Special charges 4,927 1,260 5,095 30,245
Non-operating litigation
settlements - - - -
--- --- --- ---
Adjusted EBITDA (1) $17,261 $5,742 $(15,144) $75,882
======= ====== ======== =======
Three Months Ended March 31,
2009
Net income $31,672
Interest income and other (2,303)
Interest expense 11,013
20,249
------
Operating income $8,167 $3,876 $(19,751) 60,631
Depreciation 2,860 752 1,589 7,032
Amortization of other
intangible assets 2,071 1,168 - 6,050
Special charges - - - -
Non-operating litigation
settlements - - 250 250
--- --- --- ---
Adjusted EBITDA (1) $13,098 $5,796 $(17,912) $73,963
======= ====== ======== =======
(1) We define Adjusted EBITDA as consolidated operating income before
depreciation, amortization of intangible assets and special charges
plus non-operating litigation settlements. We define Adjusted
Segment EBITDA as the segments' share of consolidated operating
income before depreciation, amortization of intangible assets and
special charges plus non-operating litigation settlements. Although
Adjusted EBITDA, and Adjusted Segment EBITDA are not measures of
financial condition or performance determined in accordance with
generally accepted accounting principles ("GAAP"), we believe that
these measures can be a useful operating performance measure for
evaluating our results of operations as compared from period to
period and as compared to our competitors. EBITDA is a common
alternative measure of operating performance used by investors,
financial analysts and rating agencies to value and compare the
financial performance of companies in our industry. We use Adjusted
EBITDA and Adjusted Segment EBITDA to evaluate and compare the
operating performance of our segments and it is one of the primary
measures used to determine employee incentive compensation.
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 unless the definition
is the same. These non-GAAP measures should be considered in
addition to, but not as a substitute for or superior to, the
information contained in our statements of income. See also our
reconciliation of Non-GAAP financial measures.
(2) Effective January 1, 2010, we implemented a change in our
organizational structure that resulted in the movement of our
Financial and Enterprise Data Analytics subpractice from our
Technology segment to our Forensic and Litigation Consulting
segment. This change has been reflected in our segment reporting for
all periods.
FTI CONSULTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(in thousands)
Three Months Ended
March 31,
---------
2010 2009
---- ----
(unaudited)
Operating activities
Net income $14,185 $31,672
Adjustments to reconcile
net income to net cash
used in operating
activities:
Depreciation 7,703 7,032
Amortization of other
intangible assets 6,091 6,050
Provision for doubtful
accounts 3,010 6,788
Non-cash share-based
compensation 7,394 6,445
Excess tax benefits from
share-based
compensation (754) (185)
Non-cash interest
expense 1,800 1,854
Other (476) (604)
Changes in operating
assets and liabilities,
net of effects from
acquisitions:
Accounts receivable,
billed and unbilled (32,291) (41,148)
Notes receivable (14,971) (3,836)
Prepaid expenses and
other assets 6,826 943
Accounts payable,
accrued expenses and
other 20,909 (2,896)
Income taxes (13,182) 9,614
Accrued compensation (31,363) (28,953)
Billings in excess of
services provided (2,144) (2,526)
Net cash (used in)
operating activities (27,263) (9,750)
------- ------
Investing activities
Payments for acquisition
of businesses,
including contingent
payments and
acquisition costs, net
of cash received (17,544) (24,526)
Purchases of property
and equipment (5,168) (4,459)
Proceeds from maturity
of short-term
investment 15,000 -
Other (2,976) 173
------ ---
Net cash (used in)
investing activities (10,688) (28,812)
------- -------
Financing activities
Borrowings under
revolving line of
credit 20,000 -
Payments of revolving
line of credit (20,000) -
Payments of long-term
debt and capital lease
obligations (527) (322)
Issuance of common stock
under equity
compensation plans 832 5,930
Excess tax benefit from
share based
compensation 754 185
Other 442 -
Net cash provided by
financing activities 1,501 5,793
----- -----
Effect of exchange rate
changes on cash and
cash equivalents (1,544) (1,378)
------ ------
Net decrease in cash and
cash equivalents (37,994) (34,147)
Cash and cash
equivalents, beginning
of period 118,872 191,842
------- -------
Cash and cash
equivalents, end of
period $80,878 $157,695
======= ========
FTI CONSULTING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2010 AND DECEMBER 31, 2009
(in thousands, except per share amounts)
December
March 31, 31,
2010 2009
---- ----
Assets (unaudited)
Current assets
Cash and cash equivalents $80,878 $118,872
Accounts receivable:
Billed 243,045 241,911
Unbilled 135,911 104,959
Allowance for doubtful accounts and
unbilled services (63,728) (59,328)
------- -------
315,228 287,542
Notes receivable 24,761 20,853
Prepaid expenses and other current
assets 32,199 52,172
Deferred income taxes 25,444 20,476
------ ------
Total current assets 478,510 499,915
Property and equipment, net of
accumulated depreciation 79,645 80,678
Goodwill 1,185,552 1,195,949
Other intangible assets, net of
amortization 168,012 175,962
Notes receivable, net of current
portion 79,407 69,213
Other assets 54,496 55,621
------ ------
Total assets $2,045,622 $2,077,338
========== ==========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable, accrued expenses and
other $74,468 $81,193
Accrued compensation 101,164 152,807
Current portion of long-term debt and
capital lease obligations 143,613 138,101
Billings in excess of services
provided 31,743 34,101
------ ------
Total current liabilities 350,988 406,202
Long-term debt and capital lease
obligations, net of current portion 417,260 417,397
Deferred income taxes 99,954 95,704
Other liabilities 58,768 53,821
------ ------
Total liabilities 926,970 973,124
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 470 470
outstanding - 46,967 (2010) and
46,985 (2009)
Additional paid-in capital 552,198 535,754
Retained earnings 629,714 615,529
Accumulated other comprehensive loss (63,730) (47,539)
Total stockholders' equity 1,118,652 1,104,214
--------- ---------
Total liabilities and stockholders'
equity $2,045,622 $2,077,338
========== ==========
SOURCE FTI Consulting, Inc.