Form 8-K

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 6, 2008

 

 

FTI CONSULTING, INC.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Maryland   001-14875   52-1261113

(State or other jurisdiction

of incorporation)

  (Commission File Number)  

(IRS Employer

Identification No.)

777 South Flagler Drive, Suite 1500, West Palm Beach, Florida 33401

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (561) 515-6078

 

500 East Pratt Street, Suite 1400, Baltimore, Maryland 21202

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


ITEM 2.02. Results of Operations and Financial Condition

On August 6, 2008, FTI Consulting, Inc. (“FTI”) issued its press release (the “Press Release”) reporting its financial results for the three months and six months ended June 30, 2008 and discussing its guidance for the fiscal year ending December 31, 2008. The full text of the Press Release (including financial tables) issued on August 6, 2008 is set forth in Exhibit 99.1 and is incorporated by reference herein.

 

ITEM 7.01. Regulation FD Disclosure

The Press Release (and financial tables) include information regarding operating income before depreciation and amortization of intangible assets plus litigation settlements (“EBITDA”) for FTI and segment EBITDA for each of its five business segments. 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. A reconciliation of EBITDA to net income is included in the accompanying tables to today’s press release. Segment EBITDA is reconciled to segment operating income. 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.

The information included herein, including Exhibit 99.1 furnished herewith, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any filing pursuant to the Securities Act of 1933, as amended, or the Exchange Act, regardless of any incorporation by reference language in any such filing, except as expressly set forth by specific reference in such filing.

 

Item 8.01. Other Events.

On August 6, 2008, FTI issued a press release (the “Tech Press Release”) relating to the planned initial public offering of FTI’s Technology business. The full text of the Tech Press Release is set forth in Exhibit 99.2, which is incorporated by reference herein.

 

1


ITEM 9.01. Financial Statements and Exhibits

 

  (d) Exhibits

 

99.1   Press Release dated August 6, 2008 (including Financial Tables) of FTI Consulting, Inc.
99.2   Press Release dated August 6, 2008 of FTI Consulting, Inc.

 

2


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, FTI has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  FTI CONSULTING, INC.
Dated: August 7, 2008   By:  

/S/ ERIC B. MILLER

   

Eric B. Miller

Executive Vice President and General Counsel

 

3


EXHIBIT INDEX

 

Exhibit No.

 

Description

99.1   Press Release dated August 6, 2008 (including Financial Tables) of FTI Consulting, Inc.
99.2   Press Release dated August 6, 2008 of FTI Consulting, Inc.
Exhibit 99.1

Exhibit 99.1

LOGO

FTI Consulting, Inc.

777 South Flagler Drive

West Palm Beach, Florida 33401

(561) 515-6078

FOR FURTHER INFORMATION:

 

AT FTI CONSULTING:   AT FD:  
Jack Dunn, President & CEO   Investors: Gordon McCoun  
(410) 951-4800   Media: Andy Maas  
  (212) 850-5600  

FOR IMMEDIATE RELEASE

FTI CONSULTING, INC. REPORTS RECORD RESULTS

Second Quarter Revenue of $337.7 Million, Operating Income of $67.3 Million, EBITDA of $77.6 Million and

Diluted EPS of $0.66 All Set New Highs

Reaffirms Guidance

West Palm Beach, FL, August 6, 2008 — FTI Consulting (NYSE: FCN), the global business advisory firm dedicated to helping organizations protect and enhance their enterprise value, today reported its financial results for the second quarter and six months ended June 30, 2008.

Second Quarter Results

For the second quarter of 2008 revenue increased 40.9 percent to a record $337.7 million compared to $239.7 million in the prior year period. Operating income increased 54.0 percent to $67.3 million compared to $43.7 million in the prior year period. Diluted earnings per common share increased 24.0 percent to $0.66 compared to $0.53 in the prior year period, despite a 23.7 percent increase in weighted average shares outstanding and the benefit from a one-time tax benefit in the prior year period that increased diluted earnings per common share by $0.03. Operating income before depreciation and amortization of intangible assets, plus litigation settlements (“EBITDA”) increased 53.0 percent to $77.6 million compared to $50.7 million in the prior year period, and the EBITDA margin improved 190 basis points to 23.0 percent of revenue compared to 21.1 percent of revenue in the prior year period.

Commenting on the quarter, Jack Dunn, FTI’s president and chief executive officer, said, “The second quarter was another outstanding period for FTI across the key dimensions of our business. We generated record revenue and profits and higher margins compared to last year. As importantly, we made significant strides in the execution of our strategy, bringing an expanding range of capabilities to our clients on a global basis.”

Mr. Dunn continued, “Our outstanding growth and profitability in the quarter reflect a volatile economic environment that continues to be a driver of demand for our services. The impact of global credit constraints continues to spread, driving increased demand from clients to preserve their organizations’ business results, wealth and reputations and enhance their competitive positions during these challenging times. This demand, combined with the leadership positions enjoyed by our business segments, fostered organic revenue growth of 25 percent, with strong momentum in our restructuring, economic and strategic

 

MORE


communication segments. Technology once again had outstanding results, and grew over 50% in the quarter.”

Mr. Dunn added, “We are continuing to see the fruits of our investments in global markets. Approximately 20 percent of our revenue in the quarter came from outside the United States, up from approximately 15 percent a year ago as a function of continued growth in existing international operations plus contributions from the acquisitions we made this year in Europe, Asia and Latin America.”

For the first half of the year, the Company generated operating cash flow of $57.0 million, up over $75 million from the same period last year. The Company’s tax rate for the second quarter of 2008 was 39.6 percent compared to 33.3 percent a year ago when the Company recorded a benefit due to implementation of its international tax strategy. At the end of the quarter, total debt outstanding was $567.9 million and no amounts were outstanding under the Company’s line of credit.

As of June 30, 2008, total headcount was 3,144, of which 2,434 represented revenue-generating professionals. Utilization of revenue-generating personnel and average rate per hour metrics are presented in the accompanying tables for those business segments for which the metrics continue to be relevant.

Second Quarter Business Segment Results

Technology

Revenue in the Technology segment in the second quarter increased 50.3 percent to $56.3 million from $37.4 million in the prior year period. Segment EBITDA increased 49.6 percent to $21.2 million, or 37.7 percent of segment revenue, from $14.2 million, or 37.9 percent of segment revenue, in the prior year period. The strong performance in the quarter was driven by continued success of the segment’s software-as-a-service model, especially its ability to manage extremely high processing volumes. Demand continued to be strong from large matters in the pharmaceutical industry, Antitrust Second Requests and from financial services companies for interpretation of complex financial and transactional data and financial systems investigations. After the end of the quarter, the Company also completed the acquisition of Attenex Corporation, a leading eDiscovery software provider and entered into a strategic partnership with Endeca Technologies, Inc., an information access software company.

Corporate Finance/Restructuring

Revenue in the Corporate Finance/Restructuring segment increased 52.6 percent to $96.1 million from $63.0 million in the prior year period. Segment EBITDA increased 77.8 percent to $29.6 million, or 30.8 percent of segment revenue, compared to $16.7 million, or 26.4 percent of segment revenue, in the prior year period. The segment continued to experience a high level of restructuring activity in industries impacted by the global credit crisis such as the automotive, sub-prime mortgage, monoline insurer, financial institution and real estate/homebuilding/construction markets. As credit issues continue to spread, and the global economy appears to be weakening, the segment is seeing growing demand, and additional industries are being affected included consumer products and retail. The healthcare practice was also strong, especially for turnaround, consulting and restructuring services. Momentum in the segment’s UK operation continued to build. Profitability improved due to leverage from higher revenues and an increase in success fees.

Economic Consulting

Revenue in the Economic Consulting segment increased 22.2 percent to $53.8 million from $44.0 million in the prior year period. Segment EBITDA increased 7.1 percent to $14.0 million, or 26.0 percent of segment revenue, from $13.1 million, or 29.7 percent of segment revenue, in the prior year period. The market for strategic M&A was strong across financial services, hospitals, airlines and industrial companies.


In addition, the segment began to see an increasing number of engagements related to the sub-prime and credit crisis, and the Network Industries Strategies practice experienced an increase in railroad commercial litigation and regulatory work as a result of a more predictable regulatory environment.

Strategic Communications

Revenue in the Strategic Communications segment increased 48.0 percent to $62.2 million from $42.0 million in the prior year period. Segment EBITDA increased 50.0 percent to $16.4 million, or 26.4 percent of segment revenue, from $11.0 million, or 26.1 percent of revenue, in the prior year period. The revenue increase was due to businesses acquired over the past year and strong organic growth. While equity capital market activity was slow, solid growth in the core U.K. and U.S. businesses was driven by M&A and crisis and issues management projects with both retained and new clients. This growth was augmented by excellent performances in Asia, Australia and the Middle East as well as rising momentum in acquired businesses and significant M&A completion fees.

Forensic and Litigation Consulting

Revenue in the Forensic and Litigation Consulting segment increased 30.1 percent to $69.3 million from $53.3 million in the prior year period. Segment EBITDA increased 18.5 percent to $15.7 million, or 22.7 percent of segment revenue, from $13.3 million, or 24.9 percent of segment revenue, in the prior year period. Revenue increased in the quarter due to contributions from acquisitions, sustained activity in Foreign Corrupt Practices Act investigations, strong activity in regulated industries such as insurance, healthcare and pharmaceuticals, and an accelerating number of cases in the segment’s intellectual property practice. Margins in the quarter were affected by somewhat lower utilization as well as integration costs from the two U.K. acquisitions.

2008 Guidance Update

Based on current market conditions, the Company is maintaining its previously announced revenue guidance of $1.30 billion to $1.375 billion. Diluted earnings per share are also expected to be in the range previously provided of $2.50 to $2.63. Third quarter earnings are expected to be reduced by $0.02 to $0.04 due to certain acquisition and amortization expenses. In addition, the costs, time and effort resulting from a contemplated transaction separately announced today relating to the Company’s technology practice may have some effect on second half earnings.

Second Quarter Conference Call

FTI will hold a conference call for analysts and investors to discuss second quarter financial results at 9:00 a.m. Eastern time on Wednesday, August 6, 2008. 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 3,000 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.

Note: We define EBITDA as operating income before depreciation and amortization of intangible assets plus 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. A reconciliation of EBITDA to Net Income is included in the accompanying tables to today’s press release. Segment EBITDA is reconciled to segment operating income. 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 including statements related our future financial results. There can be no assurance that actual results will not differ from the company’s expectations. The Company has experienced fluctuating revenue, operating income and cash flow in some prior periods and expects this will occur from time to time in the future. As a result of these possible fluctuations, the Company’s actual results may differ from our projections. Further, preliminary results are subject to normal year-end adjustments. Other factors that could cause such differences include 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 SIX MONTHS ENDED JUNE 30, 2008 AND 2007

(in thousands, except per share data)

 

     Six Months Ended
June 30,
 
     2008     2007  
     (unaudited)  

Revenues

   $ 644,772     $ 467,417  
                

Operating expenses

    

Direct cost of revenues

     360,687       257,530  

Selling, general and administrative expense

     150,345       122,268  

Amortization of other intangible assets

     7,355       5,485  
                
     518,387       385,283  
                

Operating income

     126,385       82,134  
                

Other income (expense)

    

Interest income

     4,947       2,320  

Interest expense and other

     (20,468 )     (21,701 )

Litigation settlement losses, net

     (436 )     (908 )
                
     (15,957 )     (20,289 )
                

Income before income tax provision

     110,428       61,845  

Income tax provision

     43,729       23,501  
                

Net income

   $ 66,699     $ 38,344  
                

Earnings per common share - basic

   $ 1.37     $ 0.92  
                

Weighted average common shares outstanding - basic

     48,740       41,537  
                

Earnings per common share - diluted

   $ 1.25     $ 0.89  
                

Weighted average common shares outstanding - diluted

     53,212       43,082  
                


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED JUNE 30, 2008 AND 2007

(in thousands, except per share data)

 

     Three Months Ended
June 30,
 
     2008     2007  
     (unaudited)  

Revenues

   $ 337,670     $ 239,692  
                

Operating expenses

    

Direct cost of revenues

     188,166       131,349  

Selling, general and administrative expense

     77,773       61,910  

Amortization of other intangible assets

     4,457       2,748  
                
     270,396       196,007  
                

Operating income

     67,274       43,685  
                

Other income (expense)

    

Interest income

     1,866       1,824  

Interest expense and other

     (10,080 )     (10,737 )

Litigation settlement losses, net

     (435 )     (167 )
                
     (8,649 )     (9,080 )
                

Income before income tax provision

     58,625       34,605  

Income tax provision

     23,215       11,523  
                

Net income

   $ 35,410     $ 23,082  
                

Earnings per common share - basic

   $ 0.72     $ 0.56  
                

Weighted average common shares outstanding - basic

     49,155       41,333  
                

Earnings per common share - diluted

   $ 0.66     $ 0.53  
                

Weighted average common shares outstanding - diluted

     53,700       43,412  
                


FTI CONSULTING, INC.

OPERATING RESULTS BY BUSINESS SEGMENT

(Unaudited)

 

     Revenues    EBITDA (1)     Margin     Utilization (2)     Average
Billable
Rate (2)
   Revenue-
Generating
Headcount
     (in thousands)                       

Three Months Ended June 30, 2008

              

Technology

   $ 56,275    $ 21,213     37.7 %   N/M       N/M    402

Corporate Finance/Restructuring

     96,123      29,624     30.8 %   75 %   $ 464    599

Economic Consulting

     53,765      13,987     26.0 %   83 %   $ 450    243

Strategic Communications

     62,197      16,428     26.4 %   N/M       N/M    563

Forensic and Litigation Consulting

     69,310      15,717     22.7 %   73 %   $ 343    627
                          
   $ 337,670      96,969     28.7 %        2,434
                    

Corporate

        (19,413 )         
                    

EBITDA (1)

      $ 77,556     23.0 %       
                    

Six Months Ended June 30, 2008

              

Technology

   $ 112,810    $ 44,535     39.5 %   N/M       N/M    402

Corporate Finance/Restructuring

     175,406      51,534     29.4 %   78 %   $ 452    599

Economic Consulting

     110,180      27,303     24.8 %   86 %   $ 449    243

Strategic Communications

     116,811      29,107     24.9 %   N/M       N/M    563

Forensic and Litigation Consulting

     129,565      30,373     23.4 %   74 %   $ 339    627
                          
   $ 644,772      182,852     28.4 %   N/M       N/M    2,434
                    

Corporate

        (37,262 )         
                    

EBITDA (1)

      $ 145,590     22.6 %       
                    

Three Months Ended June 30, 2007

              

Technology

   $ 37,432    $ 14,178     37.9 %   N/M       N/M    296

Corporate Finance/Restructuring

     63,005      16,661     26.4 %   77 %   $ 438    360

Economic Consulting

     43,983      13,059     29.7 %   89 %   $ 410    213

Strategic Communications

     42,013      10,955     26.1 %   N/M       N/M    407

Forensic and Litigation Consulting

     53,259      13,264     24.9 %   75 %   $ 319    410
                          
   $ 239,692      68,117     28.4 %        1,686
                    

Corporate

        (17,425 )         
                    

EBITDA (1)

      $ 50,692     21.1 %       
                    

Six Months Ended June 30, 2007

              

Technology

   $ 70,482    $ 24,785     35.2 %   N/M       N/M    296

Corporate Finance/Restructuring

     125,107      31,589     25.2 %   81 %   $ 426    360

Economic Consulting

     83,980      24,167     28.8 %   87 %   $ 404    213

Strategic Communications

     80,226      20,926     26.1 %   N/M       N/M    407

Forensic and Litigation Consulting

     107,622      27,369     25.4 %   76 %   $ 322    410
                          
   $ 467,417      128,836     27.6 %        1,686
                    

Corporate

        (33,741 )         
                    

EBITDA (1)

      $ 95,095     20.3 %       
                    

 

(1) We define EBITDA as operating income before depreciation and amortization of intangible assets plus litigation settlements. Although EBITDA is not a measure of financial condition or performance determined in accordance with accounting principles generally accepted in the United States (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 performance measure used by investors, financial analysts and credit rating agencies to value and compare the financial performance of companies within 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 ADJUSTED EARNINGS BEFORE

INTEREST, TAXES, DEPRECIATION AND AMORTIZATION AND SPECIAL CHARGES

(unaudited)

 

     Technology     Corporate
Finance
    Economic
Consulting
   Strategic
Communi-
cations
    Forensic and
Litigation
Consulting
    Corp HQ     Total  

Three Months Ended June 30, 2008

               

Net income

                $ 35,410  

Interest income

                  (1,866 )

Interest expense and other

                  10,080  

Litigation settlement losses

                  435  

Income tax provision

                  23,215  
                     

Operating income

   $ 18,720     $ 27,492     $ 13,035    $ 14,572     $ 14,278     $ (20,823 )     67,274  

Depreciation

     2,466       666       382      696       640       1,410       6,260  

Amortization of other intangible assets

     262       1,466       570      1,360       799       —         4,457  

Litigation settlement losses

     (235 )     —         —        (200 )     —         —         (435 )
                                                       

EBITDA (1)

     21,213       29,624       13,987      16,428       15,717       (19,413 )     77,556  
                                                       

Six Months Ended June 30, 2008

               

Net income (loss)

                $ 66,699  

Interest income

                  (4,947 )

Interest expense and other

                  20,468  

Litigation settlement losses

                  436  

Income tax provision

                  43,729  
                     

Operating income

   $ 39,137     $ 48,841     $ 25,298    $ 25,378     $ 27,797     $ (40,066 )     126,385  

Depreciation

     4,808       1,187       865      1,358       1,264       2,804       12,286  

Amortization of other intangible assets

     825       1,506       1,140      2,572       1,312       —         7,355  

Litigation settlement losses

     (235 )     —         —        (201 )     —         —         (436 )
                                                       

EBITDA (1)

     44,535       51,534       27,303      29,107       30,373       (37,262 )     145,590  
                                                       

Three Months Ended June 30, 2007

               

Net income

                $ 23,082  

Interest income

                  (1,824 )

Interest expense and other

                  10,737  

Litigation settlement losses

                  167  

Income tax provision

                  11,523  
                     

Operating income

   $ 12,399     $ 16,254     $ 11,468    $ 9,702     $ 12,440     $ (18,578 )     43,685  

Depreciation

     1,462       354       437      521       499       1,153       4,426  

Amortization of other intangible assets

     317       40       1,154      737       500       —         2,748  

Litigation settlement losses

     —         13       —        (5 )     (175 )     —         (167 )
                                                       

EBITDA (1)

   $ 14,178     $ 16,661     $ 13,059    $ 10,955     $ 13,264     $ (17,425 )   $ 50,692  
                                                       

Six Months Ended June 30, 2007

               

Net income (loss)

                $ 38,344  

Interest income

                  (2,320 )

Interest expense and other

                  21,701  

Litigation settlement losses

                  908  

Income tax provision

                  23,501  
                     

Operating income

   $ 21,328     $ 31,390     $ 21,078    $ 18,439     $ 25,597     $ (35,698 )     82,134  

Depreciation

     2,823       655       782      1,018       958       2,148       8,384  

Amortization of other intangible assets

     634       81       2,307      1,474       989       —         5,485  

Litigation settlement losses

     —         (537 )     —        (5 )     (175 )     (191 )     (908 )
                                                       

EBITDA (1)

   $ 24,785     $ 31,589     $ 24,167    $ 20,926     $ 27,369     $ (33,741 )   $ 95,095  
                                                       

 

(1) We define EBITDA as operating income before depreciation and amortization of intangible assets plus litigation settlements. Although EBITDA is not a measure of financial condition or performance determined in accordance with accounting principles generally accepted in the United States (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 performance measure used by investors, financial analysts and credit rating agencies to value and compare the financial performance of companies within 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.


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -DRAFT

FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007

(in thousands)

 

     Six Months Ended
June 30,
 
     2008     2007  
     (unaudited)  

Operating activities

  

Net income

   $ 66,699     $ 38,344  

Adjustments to reconcile net income to net cash used in operating activities:

    

Depreciation

     12,286       8,384  

Amortization of other intangible assets

     7,355       5,485  

Provision for doubtful accounts

     8,564       3,804  

Non-cash share-based compensation

     14,172       11,034  

Excess tax benefits from share-based compensation

     (4,682 )     (2,854 )

Non-cash interest expense

     1,509       1,632  

Other

     (165 )     (284 )

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

    

Accounts receivable, billed and unbilled

     (63,513 )     (51,418 )

Notes receivable

     (7,158 )     (25,659 )

Prepaid expenses and other assets

     (9,555 )     (1,156 )

Accounts payable, accrued expenses and other

     6,702       10,943  

Accrued special charges

     (2,280 )     (5,943 )

Income taxes

     28,434       (3,175 )

Accrued compensation

     (493 )     (11,074 )

Billings in excess of services provided

     (911 )     1,424  
                

Net cash provided by (used in) operating activities

     56,964       (20,513 )
                

Investing activities

    

Payments for acquisition of businesses, including contingent payments and acquisition costs, net of cash received

     (225,183 )     (20,476 )

Purchases of property and equipment

     (17,843 )     (22,253 )

Other

     (1,059 )     386  
                

Net cash (used in) investing activities

     (244,085 )     (42,343 )
                

Financing activities

    

Borrowings under revolving line of credit

     —         25,000  

Payments of revolving line of credit

     —         (25,000 )

Payments of long-term debt

     (7,239 )     (9 )

Purchase and retirement of common stock

     —         (18,116 )

Net issuance of common stock under equity compensation plans

     12,006       14,751  

Excess tax benefits from share-based compensation

     4,682       2,854  
                

Net cash provided by (used in) financing activities

     9,449       (520 )
                

Effect of exchange rate changes and fair value adjustments on cash and cash equivalents

     (217 )     1,708  
                

Net decrease in cash and cash equivalents

     (177,889 )     (61,668 )

Cash and cash equivalents, beginning of period

     360,463       91,923  
                

Cash and cash equivalents, end of period

   $ 182,574     $ 30,255  
                


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2008 AND DECEMBER 31, 2007

(in thousands, except per share amounts)

 

     June 30,
2008
    December 31,
2007
 
     (unaudited)        

Assets

  

Current assets

    

Cash and cash equivalents

   $ 182,574     $ 360,463  

Accounts Receivable

    

Billed receivables

     250,485       190,900  

Unbilled receivables

     115,264       84,743  

Allowance for doubtful accounts and unbilled services

     (42,381 )     (30,467 )
                
     323,368       245,176  

Notes receivable

     15,512       11,687  

Prepaid expenses and other current assets

     25,436       33,657  

Deferred income taxes

     10,475       10,544  
                

Total current assets

     557,365       661,527  

Property and equipment, net of accumulated depreciation

     75,624       67,843  

Goodwill

     1,079,078       940,878  

Other intangible assets, net of amortization

     154,335       84,673  

Notes receivable, net of current portion

     55,463       52,374  

Other assets

     58,416       51,329  
                

Total assets

   $ 1,980,281     $ 1,858,624  
                

Liabilities and Stockholders’ Equity

    

Current liabilities

    

Accounts payable, accrued expenses and other

   $ 70,322     $ 103,410  

Accrued compensation

     98,344       102,054  

Current portion of long-term debt

     151,704       157,772  

Billings in excess of services provided

     18,223       17,826  
                

Total current liabilities

     338,593       381,062  

Long-term debt, net of current portion

     416,217       415,653  

Deferred income taxes

     60,467       49,113  

Other liabilities

     45,075       40,546  

Stockholders’ equity

    

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

     —         —    

Common stock, $0.01 par value; share authorized -75,000; shares issued and outstanding — 50,394 (2008) and 48,979 (2007)

     504       490  

Additional paid-in capital

     681,838       601,637  

Retained earnings

     427,757       361,058  

Accumulated other comprehensive income

     9,830       9,065  
                

Total stockholders’ equity

     1,119,929       972,250  
                

Total liabilities and stockholders’ equity

   $ 1,980,281     $ 1,858,624  
                
Exhibit 99.2

Exhibit 99.2

LOGO

FTI Consulting, Inc.

777 South Flagler Drive

West Palm Beach, FL 33401

FOR FURTHER INFORMATION:

 

AT FTI CONSULTING:   AT FD:   
Jack Dunn, President & CEO   Investors: Gordon McCoun   
(410) 951-4800   Media: Andy Maas   
  (212) 850-5600   

FTI CONSULTING, INC. ANNOUNCES INTENTION TO FILE AN INITIAL

PUBLIC OFFERING FOR ITS TECHNOLOGY BUSINESS

WEST PALM BEACH, FLORIDA, August 6, 2008 — FTI Consulting, Inc. (NYSE: FCN) announced today its intention to sell a minority interest in its Technology business in an initial public offering (IPO). The Company expects to receive between $600 million and $700 million from such sale. The proceeds from the offering will be used primarily to retire existing indebtedness of FTI. A portion of the proceeds may also be retained by the Technology business to be used for general corporate purposes.

If the IPO is consummated, the Company’s present intention is to distribute its remaining interest in the Technology business to FTI’s stockholders through a spinoff, splitoff or a combination of these transactions within twelve months after the completion of the IPO. The Company’s present intention is to file a registration statement for the IPO by the end of the year.

A registration statement relating to the common shares to be sold in the IPO is expected to be filed with the Securities and Exchange Commission, but has not been filed or become effective. The common shares may not be sold and offers may not be accepted prior to the time the registration statement becomes effective.

This release does not constitute an offer to sell or the solicitation of any offer to buy, and there shall not be any sale of the common shares in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state.

FTI can give no assurances that the aforementioned IPO or any related transactions will be consummated. Prior to consummating the IPO, FTI and the Technology practice will need to complete the negotiation of the financial and other terms, including the initial public offering price. In addition, consummation of the IPO is subject to market conditions.

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 including statements regarding the Company’s intention to conduct an IPO of an interest in its Technology business. There can be no assurance that actual results will not differ from the company’s expectations. These statements contain words such as “intend”, “will”, and “expect” and can be impacted by numerous factors including, the risk that the IPO of the technology practice may not occur in its


expected timeframe or at all, the securities market generally, the market for the technology practice’s business, changes in laws including with respect to tax, and the impact of the separation of the technology practice from FTI and other risks described under the heading “Item 1A. Risk Factors” in the Company’s most recent Form 10-K, “Part II, Item 1A Risk Factors” in the Company’s Form 10-Q for the quarter ended June 30, 2008 and in FTI’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 after the date of this release and do not intend to do so.

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