| View printer-friendly version |
| Back |
 |
|
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, Fla., Aug. 6 /PRNewswire-FirstCall/ -- 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 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.
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)
Average
Utiliz- Bill- Revenue
ation able Generating
Revenues EBITDA(1) Margin (2) Rate(2) 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)
Strategic
Three Months Ended June 30, 2008 Corporate Economic Communi-
Technology Finance Consulting cations
Net income
Interest income
Interest expense and other
Litigation settlement losses
Income tax provision
Operating income $18,720 $27,492 $13,035 $14,572
Depreciation 2,466 666 382 696
Amortization of other
intangible assets 262 1,466 570 1,360
Litigation settlement losses (235) - - (200)
EBITDA (1) 21,213 29,624 13,987 16,428
Six Months Ended June 30, 2008
Net income (loss)
Interest income
Interest expense and other
Litigation settlement losses
Income tax provision
Operating income $39,137 $48,841 $25,298 $25,378
Depreciation 4,808 1,187 865 1,358
Amortization of other
intangible assets 825 1,506 1,140 2,572
Litigation settlement losses (235) - - (201)
EBITDA (1) 44,535 51,534 27,303 29,107
Three Months Ended June 30, 2007
Net income
Interest income
Interest expense and other
Litigation settlement losses
Income tax provision
Operating income $12,399 $16,254 $11,468 $9,702
Depreciation 1,462 354 437 521
Amortization of other
intangible assets 317 40 1,154 737
Litigation settlement losses - 13 - (5)
EBITDA (1) 14,178 $16,661 $13,059 $10,955
Six Months Ended June 30, 2007
Net income (loss)
Interest income
Interest expense and other
Litigation settlement losses
Income tax provision
Operating income $21,328 $31,390 $21,078 $18,439
Depreciation 2,823 655 782 1,018
Amortization of other
intangible assets 634 81 2,307 1,474
Litigation settlement losses - (537) - (5)
EBITDA (1) $24,785 $31,589 $24,167 $20,926
Forensic and
Litigation
Three Months Ended June 30, 2008 Consulting Corp HQ Total
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 $14,278 $(20,823) 67,274
Depreciation 640 1,410 6,260
Amortization of other
intangible assets 799 - 4,457
Litigation settlement losses - - (435)
EBITDA (1) 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 $27,797 $(40,066) 126,385
Depreciation 1,264 2,804 12,286
Amortization of other
intangible assets 1,312 - 7,355
Litigation settlement losses - - (436)
EBITDA (1) 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 $12,440 $(18,578) 43,685
Depreciation 499 1,153 4,426
Amortization of other
intangible assets 500 - 2,748
Litigation settlement losses (175) - (167)
EBITDA (1) $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 $25,597 $(35,698) 82,134
Depreciation 958 2,148 8,384
Amortization of other
intangible assets 989 - 5,485
Litigation settlement losses (175) (191) (908)
EBITDA (1) $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
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, Dec. 31,
2008 2007
Assets (unaudited)
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
SOURCE FTI Consulting, Inc.
-0- 08/06/2008
/CONTACT: Jack Dunn, President & CEO of FTI Consulting, +1-410-951-4800;
or Investors, Gordon McCoun, or Media, Andy Maas, both of FD for FTI
Consulting, +1-212-850-5600/
/Web site: http://www.fticonsulting.com /
(FCN)
CO: FTI Consulting, Inc.
ST: Florida
IN: FIN
SU: ERN CCA
TY-CF
-- NYW042A --
5336 08/06/2008 06:00 EDT http://www.prnewswire.com