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 5, 2010
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) 515-1900
(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 5, 2010, FTI Consulting, Inc. (“FTI”) issued its press release (including financial tables) (the “Press Release”) reporting financial results for the three months and six months ended June 30, 2010. The Press Release (including financial tables) is set forth in Exhibit 99.1 and is incorporated by reference herein.
| ITEM 7.01. | Regulation FD Disclosure |
FTI defines “Adjusted EBITDA” as consolidated operating income before depreciation, amortization of intangible assets and special charges plus non-operating litigation settlements. FTI defines “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. FTI defines adjusted earnings per diluted share (“Adjusted EPS”) as earnings per diluted share excluding the per share impact of the special charges that were incurred in that year. Although Adjusted EBITDA, Adjusted Segment EBITDA and Adjusted EPS are not measures of financial condition or performance determined in accordance with generally accepted accounting principles (“GAAP”), FTI believes that these measures can be useful operating performance measures 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, 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 earnings per diluted share to Adjusted EPS are included in the accompanying financial tables to the Press Release furnished as Exhibit 99.1.
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 Exchange 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.
1
| ITEM 9.01. | Financial Statements and Exhibits |
| (d) | Exhibits |
| 99.1 | Press Release dated August 5, 2010, 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 6, 2010 | By: | /S/ ERIC B. MILLER | ||
| Eric B. Miller Executive Vice President, General Counsel and Chief Ethics Officer | ||||
3
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 | Press Release dated August 5, 2010, of FTI Consulting, Inc. | |
Exhibit 99.1
| FTI Consulting, Inc. | ||
| 777 South Flagler Drive, Suite 1500 |
||
| West Palm Beach, Florida 33401 |
||
| (561) 515-1900 |
||
| FOR FURTHER INFORMATION: | ||
| AT FTI CONSULTING: | AT FD: | |
| Jack Dunn, President & CEO |
Investors: Gordon McCoun | |
| (561) 515-1900 |
Media: Andy Maas | |
| (212) 850-5600 | ||
FOR IMMEDIATE RELEASE
FTI CONSULTING, INC. REPORTS 2010 SECOND QUARTER RESULTS
• Second Quarter Revenues of $349 Million
• EPS of $0.52; Adjusted EBITDA of $65.5 Million
• Results Consistent With Preliminary Results Announced in Early July
• Announces Agreement in Principle to Acquire Asian Financial Advisory Firm
West Palm Beach, FL, August 5, 2010 — 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 second quarter ended June 30, 2010.
For the quarter, revenues decreased to $349.0 million from $360.5 million in the prior year period. Earnings per diluted share were $0.52 compared to $0.69 in the prior year period. Adjusted EBITDA was $65.5 million, or 18.8% of revenues, compared with $84.6 million, or 23.5% of revenues, in the prior year period. Adjusted EBITDA and Adjusted earnings per diluted share (which appear in the accompanying tables) are non-GAAP measures and are described in further detail below.
For the quarter, the Company generated $49.2 million in cash from operations. As of June 30, 2010, the Company had $123.3 million of cash and cash equivalents, compared to $80.9 million as of March 31, 2010. During July 2010, the Company repurchased approximately 336 thousand shares of its common stock.
Commenting on these results, Jack Dunn, FTI’s president and chief executive officer said, “Our second quarter results were consistent with the preliminary figures we announced in early July. Across our businesses, we continue to experience the impact of an unevenly recovering economy. On the positive side, Economic Consulting and Strategic Communications each generated double digit growth in revenue and Adjusted Segment EBITDA. Forensic and Litigation Consulting also had nice growth despite a continuing soft environment for litigation. At the same time, concerns about the strength of the economic recovery, volatile financial markets and a lack of visibility into the impact of future tax and regulatory policies have undermined business confidence and dampened corporate decision making. The result has been soft demand for our pro-cyclical activities, such as capital markets and M&A, and a significant reduction in the pace of restructuring and bankruptcy activity that, while having stabilized in the quarter, is below the record levels experienced a year ago.”
In a separate press release, FTI announced reaching an agreement in principle to acquire FS Asia Advisory Limited, a leading Hong Kong based financial advisory firm.
Second Quarter Segment Results
Corporate Finance/Restructuring
Revenues in the Corporate Finance/Restructuring segment were $111.1 million, compared with a record $134.0 million in the second quarter of the prior year. Adjusted Segment EBITDA was $26.0 million, or 23.4% of segment revenues, compared with $47.4 million, or 35.4% of segment revenues, in the prior year quarter. The decline was due to lower demand for restructuring services resulting from the improvement in high yield markets and the economy, and deferral of some creditor activity pending a clearer prospect for the economy.
Forensic and Litigation Consulting
Revenues in the Forensic and Litigation Consulting segment increased 5.8% to $80.8 million from $76.3 million in the second quarter of the prior year. Adjusted Segment EBITDA was $19.3 million, or 24.0% of segment revenues, compared to $20.9 million, or 27.3% of segment revenues, in the prior year’s second quarter. The segment’s core business continues to be affected by restrained corporate litigation budgets and uncertainty regarding regulatory enforcement activity. The segment saw growth in Regulated Industries – insurance, financial services, healthcare and pharmaceuticals –, and in Trial Services and Asia Pacific investigations, while revenue from the large financial fraud cases that began early last year declined. Adjusted Segment EBITDA margins declined year over year due to increased costs associated with employee hires in anticipation of higher demand for services in litigation and regulatory matters.
Economic Consulting
Revenues in the Economic Consulting segment increased by 13.0% to $64.6 million from $57.1 million in the second quarter of the prior year. Adjusted Segment EBITDA increased to $11.5 million, or 17.7% of segment revenues, compared to $10.3 million, or 18.1% of segment revenues, in the prior year quarter. Revenue growth was driven by strong activity in the Financial Economics and Network Industries practices, and continued maturation of European operations.
Technology
Revenues in the Technology segment were $42.8 million, compared to $48.5 million in the second quarter of the prior year. Adjusted Segment EBITDA was $15.9 million, or 37.1% of segment revenues, compared to $19.2 million, or 39.5% of segment revenues, in the prior year quarter. Revenue performance in the quarter reflected a decline in M&A ‘second request’ activity and unit based pricing partially offset by higher consulting revenue, including significant litigation activity.
Strategic Communications
Revenues in the Strategic Communications segment increased 11.9% to $49.8 million from $44.6 million in the second quarter of the prior year. Organic growth in the segment was 9.1%. Adjusted Segment EBITDA was $8.6 million, or 17.3% of segment revenues, compared to $5.9 million, or 13.2% of segment revenues, in the prior year quarter. The segment experienced growth in project-based work despite the continued slow environment for discretionary corporate spending and moribund capital markets. The segment also experienced the third consecutive quarter of net annualized retainer wins. Adjusted Segment EBITDA margins improved significantly from the 2009 level due to the higher revenue levels and the positive impact of cost reduction initiatives undertaken in the second half of 2009.
Second Quarter Conference Call
FTI will hold a conference call for analysts and investors to discuss second quarter financial results at 9:00 AM Eastern Time on Thursday, August 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 3,300 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 define 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. We define Adjusted earnings per diluted share (Adjusted EPS) as earnings per diluted share excluding the per share impact of the special charges that were incurred in that year. Although Adjusted EBITDA, Adjusted Segment EBITDA and Adjusted EPS 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, 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.
FTI CONSULTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(in thousands, except per share data)
| Six Months Ended June 30, |
||||||||
| 2010 | 2009 | |||||||
| (unaudited) | ||||||||
| Revenues |
$ | 699,073 | $ | 708,371 | ||||
| Operating expenses |
||||||||
| Direct cost of revenues |
406,491 | 386,593 | ||||||
| Selling, general and administrative expense |
166,603 | 177,595 | ||||||
| Special charges |
30,245 | — | ||||||
| Amortization of other intangible assets |
11,943 | 12,199 | ||||||
| 615,282 | 576,387 | |||||||
| Operating income |
83,791 | 131,984 | ||||||
| Other income (expense) |
||||||||
| Interest income and other |
2,213 | 3,005 | ||||||
| Interest expense |
(22,696 | ) | (22,043 | ) | ||||
| (20,483 | ) | (19,038 | ) | |||||
| Income before income tax provision |
63,308 | 112,946 | ||||||
| Income tax provision |
24,057 | 44,049 | ||||||
| Net income |
$ | 39,251 | $ | 68,897 | ||||
| Earnings per common share - basic |
$ | 0.86 | $ | 1.37 | ||||
| Weighted average common shares outstanding - basic |
45,828 | 50,278 | ||||||
| Earnings per common share - diluted |
$ | 0.82 | $ | 1.29 | ||||
| Weighted average common shares outstanding - diluted |
48,153 | 53,424 | ||||||
FTI CONSULTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2010 AND 2009
(in thousands, except per share data)
| Three Months Ended June 30, |
||||||||
| 2010 | 2009 | |||||||
| (unaudited) | ||||||||
| Revenues |
$ | 349,033 | $ | 360,525 | ||||
| Operating expenses |
||||||||
| Direct cost of revenues |
209,031 | 194,181 | ||||||
| Selling, general and administrative expense |
82,202 | 88,842 | ||||||
| Amortization of other intangible assets |
5,852 | 6,149 | ||||||
| 297,085 | 289,172 | |||||||
| Operating income |
51,948 | 71,353 | ||||||
| Other income (expense) |
||||||||
| Interest income and other |
(141 | ) | 702 | |||||
| Interest expense |
(11,378 | ) | (11,030 | ) | ||||
| (11,519 | ) | (10,328 | ) | |||||
| Income before income tax provision |
40,429 | 61,025 | ||||||
| Income tax provision |
15,363 | 23,800 | ||||||
| Net income |
$ | 25,066 | $ | 37,225 | ||||
| Earnings per common share - basic |
$ | 0.55 | $ | 0.74 | ||||
| Weighted average common shares outstanding - basic |
45,857 | 50,384 | ||||||
| Earnings per common share - diluted |
$ | 0.52 | $ | 0.69 | ||||
| Weighted average common shares outstanding - diluted |
48,176 | 53,835 | ||||||
FTI CONSULTING, INC.
OPERATING RESULTS BY BUSINESS SEGMENT
(unaudited)
| Revenues | Adjusted EBITDA (1) |
Margin | Utilization (2) | Average Billable Rate (2) |
Revenue- Generating Headcount | |||||||||||||
| (in thousands) | ||||||||||||||||||
| Three Months Ended June 30, 2010 |
||||||||||||||||||
| Corporate Finance/Restructuring |
$ | 111,095 | $ | 25,977 | 23.4 | % | 65 | % | $ | 438 | 683 | |||||||
| Forensic and Litigation Consulting |
80,754 | 19,346 | 24.0 | % | 74 | % | $ | 337 | 784 | |||||||||
| Economic Consulting |
64,552 | 11,453 | 17.7 | % | 77 | % | $ | 472 | 286 | |||||||||
| Technology |
42,791 | 15,857 | 37.1 | % | N/M | N/M | 234 | |||||||||||
| Strategic Communications |
49,841 | 8,635 | 17.3 | % | N/M | N/M | 561 | |||||||||||
| $ | 349,033 | 81,268 | 23.3 | % | N/M | N/M | 2,548 | |||||||||||
| Corporate |
(15,810 | ) | ||||||||||||||||
| Adjusted EBITDA (1) |
$ | 65,458 | 18.8 | % | ||||||||||||||
| Six Months Ended June 30, 2010 |
||||||||||||||||||
| Corporate Finance/Restructuring |
$ | 228,562 | $ | 60,696 | 26.6 | % | 67 | % | $ | 448 | 683 | |||||||
| Forensic and Litigation Consulting |
159,432 | 39,130 | 24.5 | % | 76 | % | $ | 330 | 784 | |||||||||
| Economic Consulting |
131,859 | 24,973 | 18.9 | % | 80 | % | $ | 470 | 286 | |||||||||
| Technology |
86,164 | 33,118 | 38.4 | % | N/M | N/M | 234 | |||||||||||
| Strategic Communications |
93,056 | 14,377 | 15.4 | % | N/M | N/M | 561 | |||||||||||
| $ | 699,073 | 172,294 | 24.6 | % | N/M | N/M | 2,548 | |||||||||||
| Corporate |
(30,954 | ) | ||||||||||||||||
| Adjusted EBITDA (1) |
$ | 141,340 | 20.2 | % | ||||||||||||||
| Three Months Ended June 30, 2009 |
||||||||||||||||||
| Corporate Finance/Restructuring |
$ | 133,970 | $ | 47,445 | 35.4 | % | 76 | % | $ | 437 | 736 | |||||||
| Forensic and Litigation Consulting (3) |
76,346 | 20,856 | 27.3 | % | 76 | % | $ | 325 | 704 | |||||||||
| Economic Consulting |
57,123 | 10,345 | 18.1 | % | 75 | % | $ | 456 | 290 | |||||||||
| Technology (3) |
48,536 | 19,186 | 39.5 | % | N/M | N/M | 262 | |||||||||||
| Strategic Communications |
44,550 | 5,879 | 13.2 | % | N/M | N/M | 580 | |||||||||||
| $ | 360,525 | 103,711 | 28.8 | % | N/M | N/M | 2,572 | |||||||||||
| Corporate |
(19,132 | ) | ||||||||||||||||
| Adjusted EBITDA (1) |
$ | 84,579 | 23.5 | % | ||||||||||||||
| Six Months Ended June 30, 2009 |
||||||||||||||||||
| Corporate Finance/Restructuring |
$ | 261,512 | $ | 88,166 | 33.7 | % | 80 | % | $ | 425 | 736 | |||||||
| Forensic and Litigation Consulting (3) |
154,720 | 42,797 | 27.7 | % | 79 | % | $ | 324 | 704 | |||||||||
| Economic Consulting |
111,959 | 20,664 | 18.5 | % | 76 | % | $ | 455 | 290 | |||||||||
| Technology (3) |
92,859 | 32,284 | 34.8 | % | N/M | N/M | 262 | |||||||||||
| Strategic Communications |
87,321 | 11,675 | 13.4 | % | N/M | N/M | 580 | |||||||||||
| $ | 708,371 | 195,586 | 27.6 | % | N/M | N/M | 2,572 | |||||||||||
| Corporate |
(37,044 | ) | ||||||||||||||||
| Adjusted EBITDA (1) |
$ | 158,542 | 22.4 | % | ||||||||||||||
| (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 June 30, |
Six Months Ended June 30, | |||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||
| Net income |
$ | 25,066 | $ | 37,225 | $ | 39,251 | $ | 68,897 | ||||
| Earnings per common share - diluted |
$ | 0.52 | $ | 0.69 | $ | 0.82 | $ | 1.29 | ||||
| Add back: Special charges, net of taxes of $12,176 |
$ | — | $ | — | $ | 18,069 | $ | — | ||||
| Adjusted net income before special charges |
$ | 25,066 | $ | 37,225 | $ | 57,320 | $ | 68,897 | ||||
| Adjusted earnings per common share - diluted before special charges (1) |
$ | 0.52 | $ | 0.69 | $ | 1.19 | $ | 1.29 | ||||
| (1) | We define adjusted earnings per diluted share (“Adjusted EPS”) as earnings per diluted share excluding the per share impact of the special charges. |
RECONCILIATION OF OPERATING INCOME AND NET INCOME TO EARNINGS BEFORE
INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
(in thousands)
(unaudited)
| Corporate Finance / Restructuring |
Forensic
and Litigation Consulting (2) |
Economic Consulting |
Technology (2) | Strategic Communications |
Corp HQ | Total | |||||||||||||||||
| Three Months Ended June 30, 2010 |
|||||||||||||||||||||||
| Net income |
$ | 25,066 | |||||||||||||||||||||
| Interest income and other |
141 | ||||||||||||||||||||||
| Interest expense |
11,378 | ||||||||||||||||||||||
| Income tax provision |
15,363 | ||||||||||||||||||||||
| Operating income |
$ | 23,567 | $ | 17,537 | $ | 10,459 | $ | 10,991 | $ | 6,550 | $ | (17,156 | ) | 51,948 | |||||||||
| Depreciation |
927 | 843 | 684 | 3,033 | 825 | 1,346 | 7,658 | ||||||||||||||||
| Amortization of other intangible assets |
1,483 | 966 | 310 | 1,833 | 1,260 | — | 5,852 | ||||||||||||||||
| Special charges |
— | — | — | — | — | — | — | ||||||||||||||||
| Non-operating litigation settlements |
— | — | — | — | — | — | — | ||||||||||||||||
| Adjusted EBITDA (1) |
25,977 | 19,346 | 11,453 | 15,857 | 8,635 | (15,810 | ) | 65,458 | |||||||||||||||
| Six Months Ended June 30, 2010 |
|||||||||||||||||||||||
| Net income |
$ | 39,251 | |||||||||||||||||||||
| Interest income and other |
(2,213 | ) | |||||||||||||||||||||
| Interest expense |
22,696 | ||||||||||||||||||||||
| Income tax provision |
24,057 | ||||||||||||||||||||||
| Operating income |
$ | 49,211 | $ | 29,937 | $ | 16,225 | $ | 18,293 | $ | 8,897 | $ | (38,772 | ) | 83,791 | |||||||||
| Depreciation |
1,921 | 1,672 | 1,314 | 6,083 | 1,648 | 2,723 | 15,361 | ||||||||||||||||
| Amortization of other intangible assets |
2,975 | 1,961 | 620 | 3,815 | 2,572 | — | 11,943 | ||||||||||||||||
| Special charges |
6,589 | 5,560 | 6,814 | 4,927 | 1,260 | 5,095 | 30,245 | ||||||||||||||||
| Non-operating litigation settlements |
— | — | — | — | — | — | — | ||||||||||||||||
| Adjusted EBITDA (1) |
60,696 | 39,130 | 24,973 | 33,118 | 14,377 | (30,954 | ) | 141,340 | |||||||||||||||
| Three Months Ended June 30, 2009 |
|||||||||||||||||||||||
| Net income |
$ | 37,225 | |||||||||||||||||||||
| Interest income and other |
(702 | ) | |||||||||||||||||||||
| Interest expense |
11,030 | ||||||||||||||||||||||
| Income tax provision |
23,800 | ||||||||||||||||||||||
| Operating income |
$ | 45,042 | $ | 19,572 | $ | 9,373 | $ | 14,283 | $ | 3,742 | $ | (20,659 | ) | 71,353 | |||||||||
| Depreciation |
815 | 671 | 420 | 2,846 | 798 | 1,527 | 7,077 | ||||||||||||||||
| Amortization of other intangible assets |
1,588 | 613 | 552 | 2,057 | 1,339 | — | 6,149 | ||||||||||||||||
| Special charges |
— | — | — | — | — | — | — | ||||||||||||||||
| Non-operating litigation settlements |
— | — | — | — | — | — | — | ||||||||||||||||
| Adjusted EBITDA (1) |
47,445 | 20,856 | 10,345 | 19,186 | 5,879 | (19,132 | ) | 84,579 | |||||||||||||||
| Six Months Ended June 30, 2009 |
|||||||||||||||||||||||
| Net income |
$ | 68,897 | |||||||||||||||||||||
| Interest income and other |
(3,005 | ) | |||||||||||||||||||||
| Interest expense |
22,043 | ||||||||||||||||||||||
| Income tax provision |
44,049 | ||||||||||||||||||||||
| Operating income |
$ | 83,417 | $ | 40,169 | $ | 18,740 | $ | 22,450 | $ | 7,618 | $ | (40,410 | ) | 131,984 | |||||||||
| Depreciation |
1,579 | 1,331 | 827 | 5,706 | 1,550 | 3,116 | 14,109 | ||||||||||||||||
| Amortization of other intangible assets |
3,170 | 1,297 | 1,097 | 4,128 | 2,507 | — | 12,199 | ||||||||||||||||
| Special charges |
— | — | — | — | — | — | — | ||||||||||||||||
| Non-operating litigation settlements |
— | — | — | — | — | 250 | 250 | ||||||||||||||||
| Adjusted EBITDA (1) |
88,166 | 42,797 | 20,664 | 32,284 | 11,675 | (37,044 | ) | 158,542 | |||||||||||||||
| (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 SIX MONTHS ENDED JUNE 30, 2010 and 2009
(in thousands)
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2010 | 2009 | |||||||
| (unaudited) | ||||||||
| Operating activities |
||||||||
| Net income |
$ | 39,251 | $ | 68,897 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
15,361 | 14,109 | ||||||
| Amortization of other intangible assets |
11,943 | 12,199 | ||||||
| Provision for doubtful accounts |
4,618 | 12,212 | ||||||
| Non-cash share-based compensation |
14,651 | 13,349 | ||||||
| Excess tax benefits from share-based compensation |
(625 | ) | (2,761 | ) | ||||
| Non-cash interest expense |
3,599 | 3,698 | ||||||
| Other |
(315 | ) | 1,308 | |||||
| Changes in operating assets and liabilities, net of effects from acquisitions: |
||||||||
| Accounts receivable, billed and unbilled |
(34,895 | ) | (47,807 | ) | ||||
| Notes receivable |
(17,789 | ) | (19,511 | ) | ||||
| Prepaid expenses and other assets |
(2,240 | ) | 2,976 | |||||
| Accounts payable, accrued expenses and other |
11,262 | (15,836 | ) | |||||
| Income taxes |
(4,339 | ) | 14,151 | |||||
| Accrued compensation |
(18,671 | ) | (12,625 | ) | ||||
| Billings in excess of services provided |
144 | (679 | ) | |||||
| Net cash provided by operating activities |
21,955 | 43,680 | ||||||
| Investing activities |
||||||||
| Payments for acquisition of businesses, including contingent payments, net of cash received |
(22,834 | ) | (34,580 | ) | ||||
| Purchases of property and equipment |
(11,632 | ) | (11,687 | ) | ||||
| Proceeds from maturity of short-term investment |
15,000 | — | ||||||
| Other |
(475 | ) | 307 | |||||
| Net cash used in investing activities |
(19,941 | ) | (45,960 | ) | ||||
| 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 |
(465 | ) | (551 | ) | ||||
| Cash received for settlement of interest rate swaps |
— | 2,288 | ||||||
| Issuance of common stock under equity compensation plans |
4,235 | 13,098 | ||||||
| Excess of tax benefits from share-based compensation |
625 | 2,761 | ||||||
| Other |
442 | — | ||||||
| Net cash provided by financing activities |
4,837 | 17,596 | ||||||
| Effect of exchange rate changes on cash and cash equivalents |
(2,469 | ) | 5,934 | |||||
| Net increase in cash and cash equivalents |
4,382 | 21,250 | ||||||
| Cash and cash equivalents, beginning of period |
118,872 | 191,842 | ||||||
| Cash and cash equivalents, end of period |
$ | 123,254 | $ | 213,092 | ||||
FTI CONSULTING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2010 AND DECEMBER 31, 2009
(in thousands, except per share amounts)
| June 30, 2010 |
December 31, 2009 |
|||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 123,254 | $ | 118,872 | ||||
| Accounts receivable: |
||||||||
| Billed receivables |
249,511 | 241,911 | ||||||
| Unbilled receivables |
129,061 | 104,959 | ||||||
| Allowance for doubtful accounts and unbilled services |
(62,926 | ) | (59,328 | ) | ||||
| Accounts receivable, net |
315,646 | 287,542 | ||||||
| Notes receivable |
24,945 | 20,853 | ||||||
| Prepaid expenses and other current assets |
33,158 | 45,157 | ||||||
| Income taxes receivable |
31,192 | 7,015 | ||||||
| Deferred income taxes |
4,476 | 20,476 | ||||||
| Total current assets |
532,671 | 499,915 | ||||||
| Property and equipment, net of accumulated depreciation |
77,744 | 80,678 | ||||||
| Goodwill |
1,197,763 | 1,195,949 | ||||||
| Other intangible assets, net of amortization |
161,254 | 175,962 | ||||||
| Notes receivable, net of current portion |
81,669 | 69,213 | ||||||
| Other assets |
53,639 | 55,621 | ||||||
| Total assets |
$ | 2,104,740 | $ | 2,077,338 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities |
||||||||
| Accounts payable, accrued expenses and other |
$ | 71,239 | $ | 81,193 | ||||
| Accrued compensation |
116,480 | 152,807 | ||||||
| Current portion of long-term debt and capital lease obligations |
144,705 | 138,101 | ||||||
| Billings in excess of services provided |
33,995 | 34,101 | ||||||
| Total current liabilities |
366,419 | 406,202 | ||||||
| Long-term debt and capital lease obligations, net of current portion |
417,124 | 417,397 | ||||||
| Deferred income taxes |
112,261 | 95,704 | ||||||
| Other liabilities |
61,017 | 53,821 | ||||||
| Total liabilities |
956,821 | 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 outstanding — 47,150 (2010) and 46,985 (2009) |
472 | 470 | ||||||
| Additional paid-in capital |
559,244 | 535,754 | ||||||
| Retained earnings |
654,780 | 615,529 | ||||||
| Accumulated other comprehensive loss |
(66,577 | ) | (47,539 | ) | ||||
| Total stockholders’ equity |
1,147,919 | 1,104,214 | ||||||
| Total liabilities and stockholders’ equity |
$ | 2,104,740 | $ | 2,077,338 | ||||