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FTI Consulting, Inc. Reports First Quarter Results
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- Revenues Increase 13% to All-Time High
- Net Income of
First Quarter Results
Revenues for the first quarter of 2009 were
Commenting on the quarter,
"Our growth in the quarter was led by continuing unprecedented levels of restructuring activity. The rapid rate of new case openings has continued unabated through the first quarter and up to the present, as we opened 214 new matters in the first quarter alone. While the headlines were dominated by the automotive, retail, and financial industries, no sector was immune, as we saw significant activity across the board, including the construction, media, telecom, leisure, gaming, and, more recently, healthcare and commercial real estate sectors. In addition to the private sector, we saw sovereign governments engage our services as they sought to deal with their countries' rapidly deteriorating financial conditions.
"On the investigations and enforcement side, as we have noted, calls for investigation, enforcement, and regulation began to grow in volume and intensity. Again, the depth of our experience and expertise, from technology to investigation, to analysis, to communication, together with our global platform, differentiated our company, again making FTI the right choice to assist in many of these matters - including some of the largest and highest profile investigations of all time. If this cycle runs true to form, we would expect this activism to result in increasing dispute, enforcement, regulatory, and litigation activity later in the year and into the future, with a positive effect on all of our segments.
"This quarter continues to illustrate FTI's growing leadership in our industry and demonstrates that FTI's model is built to perform well in both up cycles and down cycles. Our cash position is strong, and we intend to continue aggressively investing in our brand and funding research efforts that are intended to further enhance our leading electronic discovery capabilities. More importantly, we intend to use the strength and breadth of our practices and our strong financial condition to attract the best professionals to FTI at a time when many other firms are financially weakened or strategically challenged."
First Quarter Business Segment Results
Corporate Finance/Restructuring
Revenues in the Corporate Finance/Restructuring segment increased to
Forensic and Litigation Consulting
Revenues in the Forensic and Litigation Consulting segment increased 10.9% to
Technology
Revenues in the Technology segment were
Economic Consulting
Revenues in the Economic Consulting segment were
Revenues in the
First Quarter Conference Call
FTI will hold a conference call for analysts and investors to discuss first quarter financial results at
About
Use of Non-GAAP Measure
Note: We define EBITDA as operating income before depreciation and amortization of intangible assets plus non-operating litigation settlements. We use EBITDA in evaluating financial performance. Although EBITDA is not a measure of financial condition or performance determined in accordance with GAAP we believe that it can be a useful operating performance measure for evaluating our results of operation 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 EBITDA to evaluate and compare the operating performance of our segments and it is one of the primary measures used to determine employee bonuses. We also use EBITDA to value the businesses we acquire or anticipate acquiring. Reconciliations of EBITDA to Net Income and Segment EBITDA to segment operating profit are included in the accompanying tables to today's press release. EBITDA is 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. This non-GAAP measure should be considered in addition to, but not as a substitute for or superior to, the information contained in our statements of income.
Safe Harbor Statement
This press release includes "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 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, a continuing deterioration of global 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
FTI CONSULTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
(in thousands, except per share data)
-------------------------------------
Three Months Ended
March 31,
----------
2009 2008 (1)
---- --------
(unaudited)
Revenues $347,846 $307,102
-------- --------
Operating expenses
Direct cost of revenues 192,412 172,521
Selling, general and administrative expense 88,753 72,572
Amortization of other intangible assets 6,050 2,898
----- -----
287,215 247,991
------- -------
Operating income 60,631 59,111
------ ------
Other income (expense)
Interest income and other 2,053 3,311
Interest expense (11,013) (11,599)
Litigation settlement gains (losses), net 250 (1)
--- --
(8,710) (8,289)
------ ------
Income before income tax provision 51,921 50,822
Income tax provision 20,249 20,122
------ ------
Net income $31,672 $30,700
======= =======
Earnings per common share - basic $0.63 $0.64
===== =====
Weighted average common shares outstanding - basic 50,171 48,325
====== ======
Earnings per common share - diluted $0.60 $0.58
===== =====
Weighted average common shares outstanding - diluted 52,979 52,717
====== ======
(1) As of January 1, 2009 we adopted FSP APB 14-1, "Accounting for
Convertible Debt Instruments that May be Settled in Cash Upon
Conversion (Including Partial Cash Settlement)" (FSP APB 14-1) which
addresses the accounting for convertible debt instruments that may be
settled in cash upon conversion. Our 3 3/4% Convertible Senior Notes
due 2012 issued in August 2005 are subject to FSP APB 14-1. The
adoption of FSP APB 14-1 requires retrospective application of its
effects to all previous years. The adoption of FSP APB 14-1 resulted
in a $1.0 million increase in interest expense, a $0.4 decrease in
income tax provision, a $0.6 million decrease in net income and a $.01
decrease in basic and fully diluted earnings per share for the quarter
ended March 31, 2008 as compared to the amounts previously reported.
FTI CONSULTING, INC.
OPERATING RESULTS BY BUSINESS SEGMENT
(Unaudited)
-----------
Revenue-
Utiliz- Average Gener-
EBITDA ation Billable ating
Revenues (1) Margin (2) Rate (2) Headcount
-------- ------ ------ ------- -------- ---------
(in thousands)
------------------
Three Months Ended
March 31, 2009
Corporate
Finance/
Restructuring $127,542 $40,721 31.9% 83% $426 715
Forensic and
Litigation
Consulting 66,850 15,713 23.5% 77% $337 624
Strategic
Communications 42,771 5,796 13.6% N/M N/M 566
Technology 55,847 19,326 34.6% N/M N/M 337
Economic
Consulting 54,836 10,319 18.8% 78% $454 275
------ ------ ---
$347,846 91,875 26.4% N/M N/M 2,517
======== =====
Corporate (17,912)
-------
EBITDA (1) $73,963 21.3%
=======
Three Months Ended
March 31, 2008
Corporate
Finance/
Restructuring $79,283 $21,910 27.6% 83% $440 427
Forensic and
Litigation
Consulting 60,255 14,656 24.3% 75% $334 597
Strategic
Communications 54,614 12,679 23.2% N/M N/M 571
Technology 56,535 23,322 41.3% N/M N/M 375
Economic
Consulting 56,415 13,316 23.6% 90% $442 234
------ ------ ---
$307,102 85,883 28.0% N/M N/M 2,204
======== =====
Corporate (17,849)
-------
EBITDA (1) $68,034 22.2%
=======
(1) We define EBITDA as operating income before depreciation and
amortization of intangible assets plus non-operating litigation
settlements. Although EBITDA is not a measure of financial condition
or performance determined in accordance with generally accepted
accounting principles (GAAP), we believe that it 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 credit rating agencies to value
and compare the financial performance of companies in our industry. We
use EBITDA to evaluate and compare the operating performance of our
segments and it is one of the primary measures used to determine
employee bonuses. We also use EBITDA to value the businesses we
acquire or anticipate acquiring. EBITDA is 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.
This non-GAAP measure 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.
RECONCILIATION OF OPERATING INCOME AND NET INCOME TO EARNINGS BEFORE
INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
(Unaudited)
-----------
Three Months Corporate Forensic and Strategic
Ended March 31, Finance / Litigation Communi-
2009 Restructuring Consulting cations Technology
-------------- ------------ ---------- ----------
Net income
Interest income
and other
Interest expense
Litigation
settlement losses
Income tax provision
Operating income $38,375 $14,458 $3,876 $14,306
Depreciation 764 571 752 2,949
Amortization of other
intangible assets 1,582 684 1,168 2,071
Litigation
settlement gains - - - -
- - - -
EBITDA (1) 40,721 15,713 5,796 19,326
====== ====== ===== ======
Three Months
Ended March 31,
2008 (2)
Net income
Interest income
and other
Interest expense
Litigation
settlement losses
Income tax provision
Operating income $21,349 $13,519 $10,806 $20,417
Depreciation 521 624 662 2,342
Amortization of other
intangible assets 40 513 1,212 563
Litigation
settlement losses - - (1) -
- - -- -
EBITDA (1) 21,910 14,656 12,679 23,322
====== ====== ====== ======
Three Months
Ended March 31, Economic
2009 Consulting Corp HQ Total
----------- ------- -----
Net income $31,672
Interest income
and other (2,053)
Interest expense 11,013
Litigation
settlement losses (250)
Income tax provision 20,249
------
Operating income $9,367 $(19,751) 60,631
Depreciation 407 1,589 7,032
Amortization of other
intangible assets 545 - 6,050
Litigation
settlement gains - 250 250
- --- ---
EBITDA (1) 10,319 (17,912) 73,963
====== ======= ======
Three Months
Ended March 31,
2008 (2)
Net income $30,700
Interest income
and other (3,311)
Interest expense 11,599
Litigation
settlement losses 1
Income tax provision 20,122
------
Operating income $12,263 $(19,243) 59,111
Depreciation 483 1,394 6,026
Amortization of other
intangible assets 570 - 2,898
Litigation
settlement losses - - (1)
- - --
EBITDA (1) 13,316 (17,849) 68,034
====== ======= ======
(1) We define EBITDA as operating income before depreciation and
amortization of intangible assets plus non-operating litigation
settlements. Although EBITDA is not a measure of financial condition
or performance determined in accordance with generally accepted
accounting principles (GAAP), we believe that it 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 credit rating agencies to value
and compare the financial performance of companies in our industry. We
use EBITDA to evaluate and compare the operating performance of our
segments and it is one of the primary measures used to determine
employee bonuses. We also use EBITDA to value the businesses we
acquire or anticipate acquiring. EBITDA is 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.
This non-GAAP measure should be considered in addition to, but not as
a substitute for or superior to, the information contained in our
statements of income.
(2) As of January 1, 2009 we adopted FSP No. APB 14-1, "Accounting for
Convertible Debt Instruments that May be Settled in Cash upon
Conversion (Including Partial Cash Settlement)" (FSP APB 14-1) which
addresses the accounting for convertible debt that may be settled in
cash upon conversion. Our 3 3/4% Convertible Senior Subordinated Notes
due 2012 issued in August 2005 are subject to FSP APB 14-1. The
adoption of FSP APB 14-1 requires retrospective application of its
effects to all previous years. The adoption of FSP APB 14-1 resulted
in a $1.0 million increase in interest expense, a $0.4 million
decrease in income tax provision, and a $0.6 million decrease in net
income for the quarter ended March 31, 2008 as compared to the amounts
previously reported.
FTI CONSULTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
(in thousands)
--------------
Three Months Ended
March 31,
-----------
2009 2008 (1)
---- --------
(unaudited)
Operating activities
Net income $31,672 $30,700
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation 7,032 6,026
Amortization of other intangible assets 6,050 2,898
Provision for doubtful accounts 6,788 4,546
Non-cash share-based compensation 6,445 6,706
Excess tax benefits from share-based compensation (185) (2,642)
Non-cash interest expense 1,854 1,749
Other 62 (184)
Changes in operating assets and liabilities, net
of effects from acquisitions:
Accounts receivable, billed and unbilled (41,148) (59,084)
Notes receivable (3,836) 1,655
Prepaid expenses and other assets 943 (1,974)
Accounts payable, accrued expenses and other (2,896) 1,006
Income taxes 9,614 17,395
Accrued compensation (28,403) (18,077)
Billings in excess of services provided (2,526) (830)
------ ----
Net cash (used in)
operating activities (8,534) (10,110)
------ -------
Investing activities
Payments for acquisition of businesses, including
contingent payments and acquisition costs, net
of cash received (25,742) (93,636)
Purchases of property and equipment (4,459) (7,525)
Other 173 (27,371)
--- -------
Net cash (used in)
investing activities (30,028) (128,532)
------- --------
Financing activities
Borrowings under revolving line of credit - -
Payments of revolving line of credit - -
Payments of long-term debt and capital lease
obligations (322) (6,335)
Issuance of common stock under equity
compensation plans 5,930 8,582
Excess tax benefit from share based compensation 185 2,642
--- -----
Net cash provided by
financing activities 5,793 4,889
----- -----
Effect of exchange rate changes and fair value
adjustments on cash and cash equivalents (1,378) 358
------ ---
Net decrease in cash and cash equivalents (34,147) (133,395)
Cash and cash equivalents, beginning of period 191,842 360,463
------- -------
Cash and cash equivalents, end of period $157,695 $227,068
======== ========
(1) As of January 1, 2009 we adopted FSP APB 14-1, "Accounting for
Convertible Debt Instruments that May be Settled in Cash Upon
Conversion (Including Partial Cash Settlement)" (FSP APB 14-1) which
addresses the accounting for convertible debt instruments that may
be settled in cash upon conversion. Our 3 3/4% Convertible Senior
Notes due 2012 issued in August 2005 are subject to FSP APB 14-1. The
adoption of FSP APB 14-1 requires retrospective application of its
effects to all previous years.
FTI CONSULTING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2009 AND DECEMBER 31, 2008
(in thousands, except per share amounts)
----------------------------------------
March 31, December 31,
2009 2008 (1)
---- --------
Assets (unaudited)
Current assets
Cash and cash equivalents $157,695 $191,842
Accounts Receivable
Billed 255,071 237,009
Unbilled 127,241 98,340
Allowance for doubtful accounts and
unbilled services (58,641) (45,309)
------- -------
323,671 290,040
Notes receivable 17,043 15,145
Prepaid expenses and other current assets 27,647 31,055
Deferred income taxes 24,372 24,372
------ ------
Total current assets 550,428 552,454
Property and equipment, net 76,265 78,575
Goodwill 1,143,689 1,151,388
Other intangible assets, net 184,137 189,304
Notes receivable, net of current portion 58,176 56,500
Other assets 58,515 59,349
------ ------
Total assets $2,071,210 $2,087,570
========== ==========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable, accrued expenses and
other $67,869 $109,036
Accrued compensation 97,654 133,103
Current portion of long-term debt and
capital lease obligations 146,331 132,915
Billings in excess of services provided 28,267 30,872
------ ------
Total current liabilities 340,121 405,926
Long-term debt and capital lease obligations,
net of current portion 418,572 418,592
Deferred income taxes 88,067 83,777
Other liabilities 47,722 45,037
------ ------
Total liabilities 894,482 953,332
Stockholders' equity
Preferred stock, $0.01 par value; 5,000
shares authorized, none outstanding - -
Common stock, $0.01 par value; 75,000
shares authorized; 75,000 shares issued and
outstanding - 51,326 (2009) and 50,934
(2008) 513 509
Additional paid-in capital 752,059 735,180
Retained earnings 510,554 478,882
Accumulated other comprehensive income (86,398) (80,333)
------- -------
Total stockholders' equity 1,176,728 1,134,238
--------- ---------
Total liabilities and stockholders'
equity $2,071,210 $2,087,570
========== ==========
(1) As of January 1, 2009 we adopted FSP APB 14-1, "Accounting for
Convertible Debt Instruments that May be Settled in Cash Upon
Conversion (Including Partial Cash Settlement)" (FSP APB 14-1) which
addresses the accounting for convertible debt instruments that may be
settled in cash upon conversion. Our 3 3/4% Convertible Senior Notes
due 2012 issued in August 2005 are subject to FSP APB 14-1. The
adoption of FSP APB 14-1 requires retrospective application of its
effects to all previous years. The adoption of this FSP resulted in a
$0.6 million decrease in other assets, a $18.0 decrease in the current
portion of long-term debt, a $7.0 million increase in deferred income
taxes, an $18.0 million increase in additional paid in capital
and a $7.6 million decrease in retained earnings from the amounts
previously reported at December 31, 2008 .
SOURCE
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