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): February 26, 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 Tower, 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 February 26, 2010, FTI Consulting, Inc. (“FTI”) issued its press release (the “Press Release”) reporting its financial results for the fourth quarter and year ended December 31, 2009. The full text of the Press Release (including financial tables and guidance for 2010) is set forth in Exhibit 99.1 and is incorporated by reference herein.
| ITEM 2.05. | Costs Associated with Exit or Disposal Activities |
FTI also announced in the Press Release that FTI is taking steps to realign its workforce and reduce excess real estate capacity. These actions are intended to eliminate certain redundancies resulting from acquisitions completed over the last two years, to better align capacity with expected demand, and to provide for appropriate levels of administrative support, but in a more efficient manner. These actions include the termination of approximately 150 employees and the consolidation of three office locations. The Company estimates that these actions will result in a pre-tax charge of approximately $25 million in the first quarter of fiscal 2010, ending March 31. This charge is expected to require approximately $20 million in cash with the balance relating to non-cash charges primarily resulting from terminating certain employees who are contractually entitled to employee loan forgiveness and vesting of equity compensation. The Press Release filed as Exhibit 99.1 is hereby incorporated herein by reference in response to this Item.
This Current Report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based upon management’s beliefs, as well as assumptions made by and information currently available to management. All statements other than statements of historical fact included in this Form 8-K, in particular statements regarding the estimated costs of the Company’s actions described above, as well as statements identified by words such as “approximately,” “estimates,” “expects,” “intended” and similar expressions, constitute forward looking statements. All forward-looking statements 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, actual results and the timing of events could differ materially from those anticipated in the forward-looking statements as a result of risks and uncertainties, which include, without limitation, those described in “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.
| ITEM 7.01. | Regulation FD Disclosure |
The Press Release (and financial tables) include information regarding earnings before interest, taxes, depreciation and amortization of intangible assets plus non-operating litigation settlements (“EBITDA”) for FTI. We refer to operating income excluding depreciation, amortization of other intangible assets, unallocated corporate expenses and including non-operating litigation settlement gains and losses, as “Segment EBITDA.” 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 and Segment EBITDA to evaluate and compare the operating performance of our five 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. Reconciliations of EBITDA to net income and Segment EBITDA to segment operating profit are included in the accompanying financial tables to the Press Release. In addition, our Press Release provides 2010 guidance based on earnings per share (excluding special charge), a non-GAAP measure, which is reconciled to a GAAP measure in the accompanying financial tables to the Press Release. 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.
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 9.01. | Financial Statements and Exhibits |
(c) Exhibits
| 99.1 | Press Release dated February 26, 2010 (including Financial Tables), of FTI Consulting, Inc. |
1
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: March 3, 2010 | By: | /S/ ERIC B. MILLER | ||
| Eric B. Miller Executive Vice President and General Counsel | ||||
2
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 |
Press Release dated February 26, 2010 (including Financial Tables), 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: Jack Dunn, President & CEO (561) 515-1900 |
AT FD: Investors: Gordon McCoun Media: Andy Maas (212) 850-5600 |
FOR IMMEDIATE RELEASE
FTI CONSULTING, INC. REPORTS RECORD 2009 FOURTH QUARTER AND RECORD FULL YEAR RESULTS
| • | Fourth Quarter Revenues of $342.9 Million, Net Income of $36.6 Million, EPS of $0.71 and EBITDA of $80.8 Million; All Fourth Quarter Records |
| • | Full Year Revenues of $1.4 Billion, Net Income of $143 Million, EBITDA of $317 Million, Cash Provided by Operations of $251 Million and EPS of $2.70; All Full Year Records |
| • | 2010 Guidance of Revenues from $1.47 Billion to $1.57 Billion; EPS Before Special Charges (a non-GAAP measure) Will be Between $3.00 and $3.25 |
West Palm Beach, FL, February 26, 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 fourth quarter and full year ended December 31, 2009.
For the fourth quarter of 2009, revenues increased 6.2% to $342.9 million from $322.9 million in the prior year period. Net income increased 21.3% to $36.6 million, or $0.71 per diluted common share, from $30.1 million, or $0.56 per diluted common share. EBITDA, a non-GAAP financial measure as defined below, increased 14.5% to $80.8 million, or 23.6% of revenues, from $70.6 million, or 21.9% of revenues, in the fourth quarter of 2008.
In the fourth quarter of 2009, the Company entered into a $250 million accelerated stock buyback (“ASB”). The transaction was completed on January 21, 2010 and resulted in the purchase of 5,455,591 shares, of which 4,874,807 shares were delivered in the fourth quarter of 2009.
As of December 31, 2009, cash, cash equivalents and short-term investments totaled $133.9 million after funding the $250 million ASB. Cash provided by operations for the year was $251 million, compared to $197 million in the prior year.
Commenting on the these results, Jack Dunn, FTI’s president and chief executive officer, said, “We are pleased to have produced another record quarter and year of performance as we continue to transition from a period dominated by the issues of a declining economy to one where we are beginning to see evidence of economic growth and greater willingness on the part of companies to make investments in their futures. Even as credit conditions have eased and there is improved access to capital, in the fourth quarter our restructuring and bankruptcy practice continued to perform at high levels of activity across a broad range of industries, although not at the exceptional rates of growth seen in prior quarters.
MORE
Mr. Dunn continued, “At the same time, we are experiencing signs of improving trends in discretionary spending and capital markets activity that drive our pro-cyclical businesses. The Economic Consulting segment continued to work on an increasing number of cases in its financial economics and network industries practices which we expect to provide accelerating growth and improving margins in 2010. The number of matters opened within the Forensic and Litigation Consulting segment is also increasing. Our most economically sensitive segment – Strategic Communications – won more retainer revenues than it lost during the fourth quarter for the first time since the economic downturn began in 2008.
“Over the past several years, we have invested in businesses and professionals that provide FTI with growth drivers across the economic cycle. In 2009, we continued these investments, including expanding our brand through our first programmatic use of TV, print media and high profile branding events. We also increased our investment in research and development in our Technology segment resulting in the introduction of Acuity, our new integrated document review offering, at LegalTech on February 1, 2010.
Mr. Dunn concluded, “There is still a great deal of uncertainty regarding the direction of the world’s economies and financial markets. While certain regions and sectors are rebounding, others still face structural hurdles that will take time and resources to resolve. As a business that is positioned to advise its clients on both the upside and downside of the economic cycle, we believe there are ample opportunities across the economic and regulatory landscape to enable FTI to achieve another record year in 2010.”
Fourth Quarter Business Segment Results
Corporate Finance/Restructuring
Revenues in the Corporate Finance/Restructuring segment increased 16.5% to $124.9 million from $107.3 million in the fourth quarter of the prior year. Segment EBITDA increased 17.8% to $43.8 million, or 35.1% of segment revenues, from $37.2 million, or 34.7% of segment revenues, in the prior year quarter. Performance was driven by strong growth in the segment’s healthcare and communications/media/entertainment practices, and its international practices, notably the Canadian and Latin America practices, launched in December 2008. The segment continues to see strong activity in the financial services, real estate, insurance, entertainment and energy sectors.
Forensic and Litigation Consulting
Revenues in the Forensic and Litigation Consulting segment increased 5.5% to $61.8 million from $58.6 million in the fourth quarter of the prior year. Segment EBITDA increased to $12.8 million, or 20.6% of segment revenues, compared to $12.2 million, or 20.8% of segment revenues, in the prior year quarter. The segment performed well in an environment in which corporations are actively controlling expenses and deferring litigation, and regulatory agencies have yet to complete building out their infrastructures and staff. Continued contributions from several large financial fraud investigations and strong performances by the segment’s intellectual property, regulated industries and Latin American investigations practices were partially offset by lower revenues from its trial services practice, which was particularly impacted by the ongoing softness in litigation activity. The segment is experiencing an increasing number of active engagements, most notably in financial consulting and construction.
Economic Consulting
Revenues in the Economic Consulting segment increased 18.5% to a record $63.2 million from $53.3 million in the fourth quarter of the prior year. Segment EBITDA was $13.2 million, or 20.9% of segment revenues, compared to $16.0 million, or 30.0% of segment revenues, for the prior year quarter. The segment’s record revenue performance in the quarter reflects strong activity in its strategic mergers and acquisitions (“M&A”), financial economics and network industries practices, continued growth in the segment’s offices opened during the year in New York and Los Angeles, and acceleration in the level of work in its recently-formed European practice based in London. Margins in the segment declined relative to an outstanding performance in 2008, reflecting the cost of expansion of activities into new markets and the hiring of additional professionals to meet anticipated future demand. The segment continues to see increasing demand, particularly in its financial economics and network industries practices, as evidenced by more active engagements compared to both the prior year quarter and third quarter.
Technology
Revenues in the Technology segment were $47.7 million, compared to $52.2 million in the fourth quarter of the prior year. Segment EBITDA increased 27.6% to $17.4 million, or 36.3% of segment revenues, compared to $13.6 million, or 26.1% of segment revenues, in the prior year quarter. Revenues in the segment decreased year-over-year as the demand related to complex litigation and regulatory investigations continued to be soft. In addition, pricing for certain aspects of the Technology segment continued to be challenging. Segment margins improved due to operating efficiencies and the completion earlier in the year of the integration of the Attenex acquisition that adversely affected margins in 2008.
Strategic Communications
Revenues in the Strategic Communications segment were $45.3 million, compared to $51.6 million in the fourth quarter of the prior year. Segment EBITDA was $6.7 million, or 14.8% of segment revenues, compared to $12.2 million, or 23.6% of revenues, in the prior year quarter. The segment continued to face the challenges of a dramatically lower volume of M&A transactions and the continued impact of the global recession on discretionary spending during the quarter, which caused a decline in revenues related to M&A engagements and ongoing pressure on fees from retained clients with a resulting shift from retainer-based to project revenues. While the segment did take actions early in the year to reduce headcount in response to lower demand, certain core resources were retained to enable the segment to service the expected upturn in activity as the recession ends and capital markets activity returns to more normal levels.
Special Charge
The Company intends to record a special charge in the first quarter of 2010 of approximately $25 million relating to the termination of approximately 150 employees and the consolidation of three office locations. These actions are intended to eliminate certain redundancies resulting from acquisitions completed over the last two years, to better align capacity with expected demand, and to provide for appropriate levels of administrative support, but in a more efficient manner. This charge is expected to require approximately $20 million in cash with the balance relating to non-cash charges primarily resulting from terminating certain employees who are contractually entitled to employee loan forgiveness and vesting of equity compensation. The Company believes this reduction in headcount is all that will be required this year.
2010 Guidance
Based on current market conditions, the Company estimates that revenues for the year will be between $1.47 billion and $1.57 billion and EPS Before Special Charges (a non-GAAP measure) will be between $3.00 and $3.25. The Special Charge, described above, is expected to be approximately $25 million, or $0.31 cents per share.
Fourth Quarter Conference Call
FTI will hold a conference call for analysts and investors to discuss fourth quarter and full year financial results at 9:00 AM Eastern Time on Friday, February 26, 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 3,500 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 EBITDA as operating income before depreciation and amortization of intangible assets plus non-operating litigation settlements. We use EBITDA in evaluating financial performance. Although EBITDA is not a measure of financial condition or performance determined in accordance with GAAP we believe that it can be a useful operating performance measure for evaluating our results of operation as compared from period to period and as compared to our competitors. EBITDA is a common alternative measure of operating performance used by investors, financial analysts and rating agencies to value and compare the financial performance of companies in our industry. We use EBITDA to evaluate and compare the operating performance of our segments and it is one of the primary measures used to determine employee bonuses. We also use EBITDA to value the businesses we acquire or anticipate acquiring. Reconciliations of EBITDA to Net Income and segment EBITDA to segment operating profit are included in the accompanying tables to today’s press release. EBITDA is not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies unless the definition is the same. This non-GAAP measure should be considered in addition to, but not as a substitute for or superior to, the information contained in our statements of income.
Safe Harbor Statement
This press release includes “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 that involve uncertainties and risks. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues, future results and performance, expectations, plans or intentions relating to acquisitions and other matters, business trends and other information that is not historical, including statements regarding estimates of our future financial results. When used in this press release, words such as “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, estimates of our future financial results, are based upon our expectations at the time we make them and various assumptions. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and projections will result or be achieved or that actual results will not differ from expectations. The Company has experienced fluctuating revenues, operating income and cash flow in some prior periods and expects this will occur from time to time in the future. The Company’s actual results may differ from our expectations. Further, preliminary results are subject to normal year-end adjustments. Other factors that could cause such differences include the current global financial crisis and economic conditions, the crisis in and deterioration of the financial and real estate markets, the pace and timing of the consummation and integration of past and future acquisitions, the Company’s ability to realize cost savings and efficiencies, competitive and general economic conditions, retention of staff and clients and other risks described under the heading “Item 1A. Risk Factors” in the Company’s most recent Form 10-K and in the Company’s other filings with the Securities and Exchange Commission. We are under no duty to update any of the forward-looking statements to conform such statements to actual results or events and do not intend to do so.
FINANCIAL TABLES FOLLOW
FTI CONSULTING, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(in thousands, except per share data)
| Year Ended December 31, | ||||||||
| 2009 | 2008 (1) (2) | |||||||
| Revenues |
$ | 1,399,946 | $ | 1,293,145 | ||||
| Operating expenses |
||||||||
| Direct cost of revenues |
767,387 | 708,783 | ||||||
| Selling, general and administrative expense |
344,318 | 330,191 | ||||||
| Amortization of other intangible assets |
24,701 | 18,824 | ||||||
| 1,136,406 | 1,057,798 | |||||||
| Operating income |
263,540 | 235,347 | ||||||
| Other income (expense) |
||||||||
| Interest income and other |
8,158 | 8,840 | ||||||
| Interest expense |
(44,923 | ) | (45,105 | ) | ||||
| Litigation settlement gains (losses), net |
250 | (661 | ) | |||||
| (36,515 | ) | (36,926 | ) | |||||
| Income before income tax provision |
227,025 | 198,421 | ||||||
| Income tax provision |
83,999 | 77,515 | ||||||
| Net income |
$ | 143,026 | $ | 120,906 | ||||
| Earnings per common share - basic |
$ | 2.86 | $ | 2.46 | ||||
| Weighted average common shares outstanding - basic |
49,963 | 49,193 | ||||||
| Earnings per common share - diluted |
$ | 2.70 | $ | 2.26 | ||||
| Weighted average common shares outstanding - diluted |
53,044 | 53,603 | ||||||
| (1) | As of January 1, 2009 we adopted FSP APB 14-1, “Accounting for Convertible Debt Instruments that May be Settled in Cash Upon Conversion (Including Partial Cash Settlement)” (FSP APB 14-1) which addresses the accounting for convertible debt instruments that may be settled in cash upon conversion. Our 3 3/4% Convertible Senior Notes due 2012 issued in August 2005 are subject to FSP APB 14-1. The adoption of FSP APB 14-1 requires retrospective application of its effects to all previous years. The adoption of FSP APB 14-1 resulted in a $4.0 million increase in interest expense, a $1.6 million decrease in income tax provision, a $2.4 million decrease in net income and a $0.05 decrease in basic and diluted earnings per share for the year ended December 31, 2008 as compared to the amounts previously reported. |
| (2) | These amounts are revised based upon our completion of an internal re-examination of our historical practices regarding our accounting for acquisition-related earnout payments. In connection with this re-examination, we concluded that we had reported immaterial errors in prior period financial statements. Further information related to these immaterial errors can be found in the Form 10-Q for the quarterly period ended September 30, 2009 as filed by the Company with the Securities and Exchange Commission on November 5, 2009. This press release should be read in conjunction with such previously filed reports. The impact of the correction of these errors resulted in a decrease in net income of $2.1 million and a decrease in basic and diluted earnings per share of $0.04 for the year ended December 31, 2008 as compared to the amounts previously reported. |
FTI CONSULTING, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008
(in thousands, except per share data)
| Three Months Ended December 31, |
||||||||
| 2009 | 2008 (1) (2) | |||||||
| Revenues |
$ | 342,938 | $ | 322,876 | ||||
| Operating expenses |
||||||||
| Direct cost of revenues |
187,590 | 171,080 | ||||||
| Selling, general and administrative expense |
81,747 | 88,202 | ||||||
| Amortization of other intangible assets |
6,331 | 5,805 | ||||||
| 275,668 | 265,087 | |||||||
| Operating income |
67,270 | 57,789 | ||||||
| Other income (expense) |
||||||||
| Interest income and other |
2,073 | 1,304 | ||||||
| Interest expense |
(11,446 | ) | (11,257 | ) | ||||
| Litigation settlement gains, net |
— | 50 | ||||||
| (9,373 | ) | (9,903 | ) | |||||
| Income before income tax provision |
57,897 | 47,886 | ||||||
| Income tax provision |
21,324 | 17,737 | ||||||
| Net income |
$ | 36,573 | $ | 30,149 | ||||
| Earnings per common share - basic |
$ | 0.75 | $ | 0.61 | ||||
| Weighted average common shares outstanding - basic |
48,612 | 49,738 | ||||||
| Earnings per common share - diluted |
$ | 0.71 | $ | 0.56 | ||||
| Weighted average common shares outstanding - diluted |
51,433 | 53,411 | ||||||
| (1) | As of January 1, 2009 we adopted FSP APB 14-1, “Accounting for Convertible Debt Instruments that May be Settled in Cash Upon Conversion (Including Partial Cash Settlement)” (FSP APB 14-1) which addresses the accounting for convertible debt instruments that may be settled in cash upon conversion. Our 3 3/4% Convertible Senior Notes due 2012 issued in August 2005 are subject to FSP APB 14-1. The adoption of FSP APB 14-1 requires retrospective application of its effects to all previous years. The adoption of FSP APB 14-1 resulted in a $1.0 million increase in interest expense, a $0.4 million decrease in income tax provision, a $0.6 million decrease in net income and a $.01 decrease in basic and diluted earnings per share for the three months ended December 31, 2008 as compared to the amounts previously reported. |
| (2) | These amounts are revised based upon our completion of an internal re-examination of our historical practices regarding our accounting for acquisition-related earnout payments. In connection with this re-examination, we concluded that we had reported immaterial errors in prior period financial statements. Further information related to these immaterial errors can be found in the Form 10-Q for the quarterly period ended September 30, 2009 as filed by the Company with the Securities and Exchange Commission on November 5, 2009. This press release should be read in conjunction with such previously filed reports. The impact of the correction of these errors resulted in a decrease in net income of $0.4 million and a decrease in basic and diluted earnings per share of $0.01 for the three months ended December 31, 2008 as compared to the amounts previously reported. |
FTI CONSULTING, INC.
OPERATING RESULTS BY BUSINESS SEGMENT
| Revenues | EBITDA (1) | Margin | Utilization (3) | Average Billable Rate (3) |
Revenue- Generating Headcount | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Three Months Ended December 31, 2009 |
||||||||||||||||||||||||
| Corporate Finance/Restructuring |
$124,940 | $43,801 | 35.1% | 64 | % | $ | 453 | 758 | ||||||||||||||||
| Forensic and Litigation Consulting |
61,812 | 12,763 | 20.6% | 67 | % | $ | 328 | 667 | ||||||||||||||||
| Economic Consulting |
63,176 | 13,224 | 20.9% | 78 | % | $ | 453 | 302 | ||||||||||||||||
| Technology |
47,745 | 17,355 | 36.3% | N/M | N/M | 338 | ||||||||||||||||||
| Strategic Communications |
45,265 | 6,709 | 14.8% | N/M | N/M | 573 | ||||||||||||||||||
| $342,938 | 93,852 | 27.4% | N/M | N/M | 2,638 | |||||||||||||||||||
| Corporate |
(13,010) | |||||||||||||||||||||||
| EBITDA (1) |
$80,842 | 23.6% | ||||||||||||||||||||||
| Year Ended December 31, 2009 |
||||||||||||||||||||||||
| Corporate Finance/Restructuring |
$514,260 | $175,551 | 34.1% | 73 | % | $ | 439 | 758 | ||||||||||||||||
| Forensic and Litigation Consulting |
259,204 | 59,581 | 23.0% | 73 | % | $ | 333 | 667 | ||||||||||||||||
| Economic Consulting |
234,723 | 47,845 | 20.4% | 76 | % | $ | 456 | 302 | ||||||||||||||||
| Technology |
211,680 | 75,715 | 35.8% | N/M | N/M | 338 | ||||||||||||||||||
| Strategic Communications |
180,079 | 24,941 | 13.9% | N/M | N/M | 573 | ||||||||||||||||||
| $1,399,946 | 383,633 | 27.4% | N/M | N/M | 2,638 | |||||||||||||||||||
| Corporate |
(66,378) | |||||||||||||||||||||||
| EBITDA (1) |
$317,255 | 22.7% | ||||||||||||||||||||||
| Three Months Ended December 31, 2008 |
||||||||||||||||||||||||
| Corporate Finance/Restructuring |
$107,280 | $37,181 | 34.7% | 73 | % | $ | 451 | 669 | ||||||||||||||||
| Forensic and Litigation Consulting |
58,567 | 12,188 | 20.8% | 65 | % | $ | 332 | 639 | ||||||||||||||||
| Economic Consulting |
53,294 | 15,966 | 30.0% | 76 | % | $ | 456 | 264 | ||||||||||||||||
| Technology |
52,164 | 13,600 | 26.1% | N/M | N/M | 357 | ||||||||||||||||||
| Strategic Communications |
51,571 | 12,179 | 23.6% | N/M | N/M | 592 | ||||||||||||||||||
| $322,876 | 91,114 | 28.2% | N/M | N/M | 2,521 | |||||||||||||||||||
| Corporate |
(20,532) | |||||||||||||||||||||||
| EBITDA (1) (2) |
$70,582 | 21.9% | ||||||||||||||||||||||
| Year Ended December 31, 2008 |
||||||||||||||||||||||||
| Corporate Finance/Restructuring |
$ | 374,504 | $ | 114,178 | 30.5 | % | 75 | % | $ | 438 | 669 | |||||||||||||
| Forensic and Litigation Consulting |
253,918 | 57,493 | 22.6 | % | 70 | % | $ | 330 | 639 | |||||||||||||||
| Economic Consulting |
219,883 | 59,020 | 26.8 | % | 83 | % | $ | 446 | 264 | |||||||||||||||
| Technology |
220,359 | 73,506 | 33.4 | % | N/M | N/M | 357 | |||||||||||||||||
| Strategic Communications |
224,481 | 51,853 | 23.1 | % | N/M | N/M | 592 | |||||||||||||||||
| $ | 1,293,145 | 356,050 | 27.5 | % | N/M | N/M | 2,521 | |||||||||||||||||
| Corporate |
(76,503 | ) | ||||||||||||||||||||||
| EBITDA (1) (2) |
$ | 279,547 | 21.6 | % | ||||||||||||||||||||
| (1) | We define EBITDA as operating income before depreciation and amortization of intangible assets plus non-operating litigation settlements. Although EBITDA is not a measure of financial condition or performance determined in accordance with generally accepted accounting principles (GAAP), we believe that it can be a useful operating performance measure for evaluating our results of operations as compared from period to period and as compared to our competitors. EBITDA is a common alternative measure of operating performance used by investors, financial analysts and credit rating agencies to value and compare the financial performance of companies in our industry. We use EBITDA to evaluate and compare the operating performance of our segments and it is one of the primary measures used to determine employee bonuses. We also use EBITDA to value the businesses we acquire or anticipate acquiring. EBITDA is not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies unless the definition is the same. This non-GAAP measure should be considered in addition to, but not as a substitute for or superior to, the information contained in our statements of income. See also our reconciliation of Non-GAAP financial measures. |
| (2) | These amounts are revised based upon our completion of an internal re-examination of our historical practices regarding our accounting for acquisition-related earnout payments. In connection with this re-examination, we concluded that we had reported immaterial errors in prior period financial statements. Further information related to these immaterial errors can be found in the Form 10-Q for the quarterly period ended September 30, 2009 as filed by the Company with the Securities and Exchange Commission on November 5, 2009. This press release should be read in conjunction with such previously filed reports. |
| (3) | The majority of the Technology and Strategic Communications segments’ revenues are not generated on an hourly basis. Accordingly, utilization and average billable rate metrics are not presented as they are not meaningful. Utilization where presented is based on a 2,032 hour year. |
RECONCILIATION OF OPERATING INCOME AND NET INCOME TO EARNINGS BEFORE
INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
(in thousands)
| Three Months Ended December 31, 2009 | Corporate Finance / Restructuring |
Forensic and Litigation Consulting |
Economic Consulting |
Technology | Strategic Communications |
Corp HQ | Total | ||||||||||||||||||
| Net income |
$ | 36,573 | |||||||||||||||||||||||
| Interest income and other |
(2,073 | ) | |||||||||||||||||||||||
| Interest expense |
11,446 | ||||||||||||||||||||||||
| Litigation settlement losses |
— | ||||||||||||||||||||||||
| Income tax provision |
21,324 | ||||||||||||||||||||||||
| Operating income |
$ | 41,282 | $ | 11,292 | $ | 12,263 | $ | 12,309 | $ | 4,570 | $ | (14,446 | ) | 67,270 | |||||||||||
| Depreciation |
949 | 591 | 490 | 2,989 | 786 | 1,436 | 7,241 | ||||||||||||||||||
| Amortization of other intangible assets |
1,570 | 880 | 471 | 2,057 | 1,353 | — | 6,331 | ||||||||||||||||||
| Litigation settlement gains |
— | — | — | — | — | — | — | ||||||||||||||||||
| EBITDA (1) |
43,801 | 12,763 | 13,224 | 17,355 | 6,709 | (13,010 | ) | 80,842 | |||||||||||||||||
| Year Ended December 31, 2009 |
|||||||||||||||||||||||||
| Net income |
$ | 143,026 | |||||||||||||||||||||||
| Interest income and other |
(8,158 | ) | |||||||||||||||||||||||
| Interest expense |
44,923 | ||||||||||||||||||||||||
| Litigation settlement losses |
(250 | ) | |||||||||||||||||||||||
| Income tax provision |
83,999 | ||||||||||||||||||||||||
| Operating income |
$ | 165,757 | $ | 54,456 | $ | 43,928 | $ | 55,599 | $ | 16,455 | $ | (72,655 | ) | 263,540 | |||||||||||
| Depreciation |
3,462 | 2,319 | 1,798 | 11,873 | 3,285 | 6,027 | 28,764 | ||||||||||||||||||
| Amortization of other intangible assets |
6,332 | 2,806 | 2,119 | 8,243 | 5,201 | — | 24,701 | ||||||||||||||||||
| Litigation settlement gains |
— | — | — | — | — | 250 | 250 | ||||||||||||||||||
| EBITDA (1) |
175,551 | 59,581 | 47,845 | 75,715 | 24,941 | (66,378 | ) | 317,255 | |||||||||||||||||
| Three Months Ended December 31, 2008 (2) (3) |
|||||||||||||||||||||||||
| Net income |
$ | 30,149 | |||||||||||||||||||||||
| Interest income and other |
(1,304 | ) | |||||||||||||||||||||||
| Interest expense |
11,257 | ||||||||||||||||||||||||
| Litigation settlement losses |
(50 | ) | |||||||||||||||||||||||
| Income tax provision |
17,737 | ||||||||||||||||||||||||
| Operating income |
$ | 35,268 | $ | 10,800 | $ | 15,027 | $ | 8,434 | $ | 10,273 | $ | (22,013 | ) | 57,789 | |||||||||||
| Depreciation |
723 | 597 | 369 | 3,067 | 701 | 1,481 | 6,938 | ||||||||||||||||||
| Amortization of other intangible assets |
1,190 | 791 | 570 | 2,099 | 1,155 | — | 5,805 | ||||||||||||||||||
| Litigation settlement losses |
— | — | — | — | 50 | — | 50 | ||||||||||||||||||
| EBITDA (1) |
37,181 | 12,188 | 15,966 | 13,600 | 12,179 | (20,532 | ) | 70,582 | |||||||||||||||||
| Year Ended December 31, 2008 (2) (3) |
|||||||||||||||||||||||||
| Net income (loss) |
$ | 120,906 | |||||||||||||||||||||||
| Interest income and other |
(8,840 | ) | |||||||||||||||||||||||
| Interest expense |
45,105 | ||||||||||||||||||||||||
| Litigation settlement losses |
661 | ||||||||||||||||||||||||
| Income tax provision |
77,515 | ||||||||||||||||||||||||
| Operating income |
$ | 108,013 | $ | 52,118 | $ | 55,123 | $ | 58,090 | $ | 43,976 | $ | (81,973 | ) | 235,347 | |||||||||||
| Depreciation |
2,603 | 2,482 | 1,616 | 10,627 | 3,014 | 5,695 | 26,037 | ||||||||||||||||||
| Amortization of other intangible assets |
3,562 | 2,893 | 2,281 | 5,024 | 5,064 | — | 18,824 | ||||||||||||||||||
| Litigation settlement losses |
— | — | — | (235 | ) | (201 | ) | (225 | ) | (661 | ) | ||||||||||||||
| EBITDA (1) |
114,178 | 57,493 | 59,020 | 73,506 | 51,853 | (76,503 | ) | 279,547 | |||||||||||||||||
| (1) | We define EBITDA as operating income before depreciation and amortization of intangible assets plus non-operating litigation settlements. Although EBITDA is not a measure of financial condition or performance determined in accordance with generally accepted accounting principles (GAAP), we believe that it can be a useful operating performance measure for evaluating our results of operations as compared from period to period and as compared to our competitors. EBITDA is a common alternative measure of operating performance used by investors, financial analysts and credit rating agencies to value and compare the financial performance of companies in our industry. We use EBITDA to evaluate and compare the operating performance of our segments and it is one of the primary measures used to determine employee bonuses. We also use EBITDA to value the businesses we acquire or anticipate acquiring. EBITDA is not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies unless the definition is the same. This non-GAAP measure should be considered in addition to, but not as a substitute for or superior to, the information contained in our statements of income. |
| (2) | As of January 1, 2009 we adopted FSP No. APB 14-1, “Accounting for Convertible Debt Instruments that May be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (FSP APB 14-1) which addresses the accounting for convertible debt that may be settled in cash upon conversion. Our 3 3/4% Convertible Senior Subordinated Notes due 2012 issued in August 2005 are subject to FSP APB 14-1. The adoption of FSP APB 14-1 requires retrospective application of its effects to all previous years. The adoption of FSP APB 14-1 resulted in a $1.0 million increase in interest expense, a $0.4 million decrease in income tax provision, and a $0.6 million decrease in net income for the three months ended December 31, 2008 as compared to the amounts previously reported. For the year ended December 31, 2008, the adoption of FSP APB 14-1 resulted in a $4.0 million increase in interest expense, a $1.6 million decrease in income tax provision, and a $2.4 million decrease in net income as compared to the amounts previously reported. |
| (3) | These amounts are revised based upon our completion of an internal re-examination of our historical practices regarding our accounting for acquisition-related earnout payments. In connection with this re-examination, we concluded that we had reported immaterial errors in prior period financial statements. Further information related to these immaterial errors can be found in the Form 10-Q for the quarterly period ended September 30, 2009 as filed by the Company with the Securities and Exchange Commission on November 5, 2009. This press release should be read in conjunction with such previously filed reports. |
RECONCILIATION OF FULLY DILUTED EARNINGS PER SHARE TO
EPS BEFORE SPECIAL CHARGES
In our press release hereof, we provide 2010 guidance based on GAAP and non-GAAP measures. The following table provides a reconciliation between 2010 guidance based on non-GAAP measures to the most directly comparable GAAP measure
| EPS Before Special Charges |
$ | 3.00-3.25 | |
| Less: Special Charges |
$ | 0.31-0.31 | |
| Earnings per common share - diluted |
$ | 2.69-2.94 | |
FTI CONSULTING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(in thousands)
| Year Ended December 31, | ||||||||
| 2009 | 2008 (1) (2) | |||||||
| Operating activities |
||||||||
| Net income |
$ | 143,026 | $ | 120,906 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation |
28,765 | 26,037 | ||||||
| Amortization of other intangible assets |
24,702 | 18,824 | ||||||
| Provision for doubtful accounts |
19,866 | 22,474 | ||||||
| Non-cash share-based compensation |
25,631 | 26,381 | ||||||
| Excess tax benefits from share-based compensation |
(5,193 | ) | (10,820 | ) | ||||
| Non-cash interest expense |
7,214 | 7,124 | ||||||
| Other |
(1,604 | ) | 3,407 | |||||
| Changes in operating assets and liabilities, net of effects from acquisitions: |
||||||||
| Accounts receivable, billed and unbilled |
(13,314 | ) | (49,251 | ) | ||||
| Notes receivable |
(18,364 | ) | (9,377 | ) | ||||
| Prepaid expenses and other assets |
1,334 | (11,577 | ) | |||||
| Accounts payable, accrued expenses and other |
(14,179 | ) | (3,382 | ) | ||||
| Income taxes |
29,877 | 12,990 | ||||||
| Accrued compensation |
20,090 | 32,836 | ||||||
| Billings in excess of services provided |
2,918 | 10,908 | ||||||
| Net cash provided by operating activities |
250,769 | 197,480 | ||||||
| Investing activities |
||||||||
| Payments for acquisition of businesses, including contingent payments and acquisition costs, net of cash received |
(46,710 | ) | (343,169 | ) | ||||
| Purchases of property and equipment |
(28,557 | ) | (35,674 | ) | ||||
| Purchases of short-term investments |
(35,717 | ) | — | |||||
| Proceeds from sale of short-term investments |
20,576 | — | ||||||
| Other |
520 | 4,703 | ||||||
| Net cash used in investing activities |
(89,888 | ) | (374,140 | ) | ||||
| Financing activities |
||||||||
| Payments of short-term borrowings of acquired subsidiary |
— | (2,275 | ) | |||||
| Payments of long-term debt and capital lease obligations |
(13,761 | ) | (8,744 | ) | ||||
| Cash received for settlement of interest rate swaps |
2,288 | — | ||||||
| Purchase and retirement of common stock |
(250,000 | ) | — | |||||
| Net issuance of common stock under equity compensation plans |
15,699 | 20,562 | ||||||
| Excess of tax benefits from share based compensation |
5,193 | 10,820 | ||||||
| Other |
303 | (112 | ) | |||||
| Net cash (used in) provided by financing activities |
(240,278 | ) | 20,251 | |||||
| Effect of exchange rate changes and fair value adjustments on cash and cash equivalents |
6,427 | (12,212 | ) | |||||
| Net decrease in cash and cash equivalents |
(72,970 | ) | (168,621 | ) | ||||
| Cash and cash equivalents, beginning of period |
191,842 | 360,463 | ||||||
| Cash and cash equivalents, end of period |
$ | 118,872 | $ | 191,842 | ||||
| (1) | As of January 1, 2009 we adopted FSP APB 14-1, “Accounting for Convertible Debt Instruments that May be Settled in Cash Upon Conversion (Including Partial Cash Settlement)” (FSP APB 14-1) which addresses the accounting for convertible debt instruments that may be settled in cash upon conversion. Our 3 3/4% Convertible Senior Notes due 2012 issued in August 2005 are subject to FSP APB 14-1. The adoption of FSP APB 14-1 requires retrospective application of its effects to all previous years. |
| (2) | These amounts are revised based upon our completion of an internal re-examination of our historical practices regarding our accounting for acquisition-related earnout payments. In connection with this re-examination, we concluded that we had reported immaterial errors in prior period financial statements. Further information related to these immaterial errors can be found in the Form 10-Q for the quarterly period ended September 30, 2009 as filed by the Company with the Securities and Exchange Commission on November 5, 2009. This press release should be read in conjunction with such previously filed reports. |
FTI CONSULTING, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2009 AND 2008
(in thousands, except per share amounts)
| December 31, 2009 |
December 31, 2008 (1) (2) |
|||||||
| Assets | ||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 118,872 | $ | 191,842 | ||||
| Accounts receivable: |
||||||||
| Billed receivables |
241,911 | 237,009 | ||||||
| Unbilled receivables |
104,959 | 98,340 | ||||||
| Allowance for doubtful accounts and unbilled services |
(59,328 | ) | (45,309 | ) | ||||
| Accounts receivable, net |
287,542 | 290,040 | ||||||
| Notes receivable |
20,853 | 15,145 | ||||||
| Prepaid expenses and other current assets |
52,172 | 34,989 | ||||||
| Deferred income taxes |
20,476 | 24,372 | ||||||
| Total current assets |
499,915 | 556,388 | ||||||
| Property and equipment, net of accumulated depreciation |
80,678 | 78,575 | ||||||
| Goodwill |
1,195,949 | 1,143,461 | ||||||
| Other intangible assets, net of amortization |
175,962 | 189,304 | ||||||
| Notes receivable, net of current portion |
69,213 | 56,500 | ||||||
| Other assets |
55,621 | 59,349 | ||||||
| Total assets |
$ | 2,077,338 | $ | 2,083,577 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities |
||||||||
| Accounts payable, accrued expenses and other |
$ | 81,193 | $ | 108,905 | ||||
| Accrued compensation |
152,807 | 135,922 | ||||||
| Current portion of long-term debt and capital lease obligations |
138,101 | 132,915 | ||||||
| Billings in excess of services provided |
34,101 | 30,872 | ||||||
| Total current liabilities |
406,202 | 408,614 | ||||||
| Long-term debt and capital lease obligations, net of current portion |
417,397 | 418,592 | ||||||
| Deferred income taxes |
95,704 | 83,777 | ||||||
| Other liabilities |
53,821 | 45,037 | ||||||
| Total liabilities |
973,124 | 956,020 | ||||||
| Stockholders’ equity |
||||||||
| Preferred stock, $0.01 par value; 5,000 shares authorized, none outstanding |
— | — | ||||||
| Common stock, $0.01 par value; 75,000 shares authorized; 75,000 shares issued and outstanding — 46,985 (2009) and 50,903 (2008) |
470 | 509 | ||||||
| Additional paid-in capital |
535,754 | 733,520 | ||||||
| Retained earnings |
615,529 | 472,503 | ||||||
| Accumulated other comprehensive loss |
(47,539 | ) | (78,975 | ) | ||||
| Total stockholders’ equity |
1,104,214 | 1,127,557 | ||||||
| Total liabilities and stockholders’ equity |
$ | 2,077,338 | $ | 2,083,577 | ||||
| (1) | As of January 1, 2009 we adopted FSP APB 14-1, “Accounting for Convertible Debt Instruments that May be Settled in Cash Upon Conversion (Including Partial Cash Settlement)” (FSP APB 14-1) which addresses the accounting for convertible debt instruments that may be settled in cash upon conversion. Our 3 3/4% Convertible Senior Notes due 2012 issued in August 2005 are subject to FSP APB 14-1. The adoption of FSP APB 14-1 requires retrospective application of its effects to all previous years. The adoption of this FSP resulted in a $0.6 million decrease in other assets, a $18.0 million decrease in the current portion of long-term debt, a $7.0 million increase in deferred income taxes, an $18.0 million increase in additional paid in capital and a $7.6 million decrease in retained earnings from the amounts previously reported at December 31, 2008. |
| (2) | These amounts are revised based upon our completion of an internal re-examination of our historical practices regarding our accounting for acquisition-related earnout payments. In connection with this re-examination, we concluded that we had reported immaterial errors in prior period financial statements. Further information related to these immaterial errors can be found in the Form 10-Q for the quarterly period ended September 30, 2009 as filed by the Company with the Securities and Exchange Commission on November 5, 2009. This press release should be read in conjunction with such previously filed reports. |