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 12, 2013
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)
Registrants telephone number, including area code: (561) 515-1900
Not Applicable
(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 240.14a-12) |
¨ | 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 7.01 Regulation FD Disclosure.
FTI Consulting, Inc. (FTI Consulting) intends to use a presentation from time to time in its discussions with investors (the Presentation). Among other things, the Presentation addresses FTI Consultings financial results for the three months and six months ended June 30, 2013, operating data and past, present and future business drivers. A copy of the Presentation is furnished as Exhibit 99.1 and has been posted to the FTI Consulting website at www.fticonsulting.com.
The Presentation includes information regarding Segment Operating Income, Total Segment Operating Income, Adjusted EBITDA, Adjusted Segment EBITDA, Total Adjusted Segment EBITDA, Adjusted Net Income and Adjusted Earnings per Share.
FTI Consulting defines Segment Operating Income as a segments share of consolidated operating income. FTI Consulting defines Total Segment Operating Income as the total of Segment Operating Income for all segments, which excludes unallocated corporate expenses. FTI Consulting uses Segment Operating Income and Total Segment Operating Income for the purposes of calculating Adjusted Segment EBITDA (as defined below) and Total Adjusted Segment EBITDA (as defined below), respectively. FTI Consulting defines Adjusted EBITDA as consolidated net income before income tax provision, other non-operating income (expense), depreciation, amortization of intangible assets, special charges and goodwill impairment charges, and Adjusted Segment EBITDA as a segments share of consolidated operating income before depreciation, amortization of intangible assets, special charges and goodwill impairment charges. FTI Consulting defines Total Adjusted Segment EBITDA as the total of Adjusted Segment EBITDA for all segments, which excludes unallocated corporate expenses. FTI Consulting uses Adjusted Segment EBITDA to internally evaluate the financial performance of its segments because it believes it is a useful supplemental measure, which reflects current core operating performance and provides an indicator of the segments ability to generate cash. FTI Consulting also believes that Adjusted EBITDA, Adjusted Segment EBITDA and Total Adjusted Segment EBITDA, when considered together with the financial results under U.S. generally accepted accounting principles (GAAP), provide management and investors with a more complete understanding of its operating results, including underlying trends, by excluding the effects of special charges and goodwill impairment charges. In addition, EBITDA, which FTI Consulting defines as consolidated net income before income tax provision, other non-operating income (expense), depreciation and amortization of intangible assets, is a common alternative measure of operating performance used by many of its competitors. EBITDA is also used by investors, financial analysts, rating agencies and others to value and compare the financial performance of companies in FTI Consultings industry. Therefore, FTI Consulting also believes that these measures, considered along with the corresponding GAAP measures, provide management and investors with additional information for comparison of its operating results to the operating results of other companies.
FTI Consulting defines Adjusted Net Income and Adjusted Earnings per Diluted Share as net income and earnings per diluted share, respectively, excluding the impact of special charges, goodwill impairment charges and losses on early extinguishment of debt. FTI Consulting uses Adjusted Net Income for the purpose of calculating Adjusted Earnings per Diluted Share. FTI Consulting uses Adjusted Earnings per Diluted Share to assess total FTI Consulting operating performance on a consistent basis. FTI Consulting believes that Adjusted
1
Earnings per Diluted Share, when considered together with its GAAP financial results, provides management and investors with a more complete understanding of its business operating results, including underlying trends, by excluding the effects of special charges, goodwill impairment charges and losses on early extinguishment of debt.
Non-GAAP financial measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, the information contained in FTI Consultings Consolidated Statements of Comprehensive Income (Loss). Reconciliations of GAAP to Non-GAAP financial measures are included in the Presentation.
The Presentation contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are necessarily based on certain assumptions as of the date such forward-looking statements were made and are subject to significant risks and uncertainties. FTI Consulting does not undertake any responsibility for the adequacy, accuracy or completeness or to update any of these statements in the future. Actual future performance and results could differ from that contained in or suggested by the forward-looking statements.
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.
2
ITEM 9.01. Financial Statements and Exhibits
(d) | Exhibits. |
99.1 August 2013 Investor Presentation of FTI Consulting, Inc.
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, FTI Consulting, Inc. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FTI CONSULTING, INC. | ||||||
Dated: August 14, 2013 | By: | /S/ ERIC B. MILLER | ||||
Eric B. Miller | ||||||
Executive Vice President, General Counsel and Chief Risk Officer |
4
EXHIBIT INDEX
Exhibit No. |
Description | |
99.1 | August 2013 Investor Presentation of FTI Consulting, Inc. |
1
FTI Consulting
Investor Presentation
August 2013
Exhibit 99.1 |
Cautionary Note About
Forward-Looking Statements
This
presentation
includes
"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, which 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
presentation,
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
managements
expectations,
beliefs
and
estimates
will
be
achieved,
and
the
Companys
actual
results
may
differ
materially
from
our
expectations,
beliefs
and
estimates.
The
Company
has
experienced
fluctuating
revenues,
operating
income
and
cash
flow
in
prior
periods
and expects that this will occur from time to time in the future. Other factors
that could cause such differences include declines in demand for, or
changes in, the mix of services and products that we offer, the mix of the geographic locations where our clients are located or where
services are performed, adverse financial, real estate or other market and
general economic conditions, which could impact each of our segments
differently, 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
Companys
most
recent
Form
10-K,
our
Current
Report
on
Form
8-K
dated
May
21,
2013
and in the Company's other filings with the Securities and Exchange Commission,
including the risks set forth under Risks Related to Our Operating
Segments and Risks Related to Our Operations. 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. 2 |
Investment Thesis
Scalable business model
Flexible and attractive business model with the opportunity to leverage
cross-segment engagements Well positioned to benefit from key
trends Global regulatory activism, overhaul of financial and credit
regulatory markets and the overall complexity of doing business globally
Strong competitive position to capture market share in global
investigations Mortgage backed securities, FCPA investigations,
whistleblower investigations and trading probes Executable growth
strategy Adding scale to established global infrastructure should yield
higher incremental margins Balanced approach to enhanced stockholder
value Capital deployment focused on value-enhancing initiatives
$250
million
stock
buyback
program
approved
in
June
2012
-
repurchased
approximately
$78.8
million
of
stock
since
June
2012
Healthy balance sheet, strong cash flows and access to capital
FTI Consulting is
a global
business
advisory firm
dedicated to
helping
organizations
protect and
enhance their
enterprise value
in an
increasingly
complex legal,
regulatory and
economic
environment
3 |
Global Business with Diverse Event-Driven Offerings
FTI Consulting
has built a
balanced
portfolio of
global
businesses that
offer event-
driven services
and solutions
Technology
Strategic Communications
Forensic & Litigation Consulting
Economic Consulting
Corporate Finance/Restructuring
North America
Rest of World
Second Quarter 2013 Segment Revenues
Second Quarter 2013 Geographic Revenues
Corporate Finance/Restructuring
Economic Consulting
Forensic & Litigation Consulting
Technology
Strategic Communications
4
Restructuring/Turnaround Services
Transaction Advisory Services
Interim Management
Investment Banking
Bankruptcy Support Services
Private Equity
Performance Improvement
Valuation & Financial Advisory Services
Antitrust & Competition Economics
Securities Litigation & Risk Management
Intellectual Property
International Arbitration
Labor & Employment
Public Policy
Regulated Industries
Business Valuation
Forensic Accounting & Advisory Services
Global Risk & Investigations
Compliance, Monitoring & Receivership
Intellectual Property
Dispute Advisory Services
Trial Services
Financial & Enterprise Data Analytics
Health Solutions
Ringtail®
E-discovery Software
E-discovery Management
Managed Review
Predictive Discovery
Collections & Computer Forensics
Information Governance
Financial Communications
Corporate Communications
Strategy Consulting & Research
Crisis Communications
Public Affairs
Creative Engagement |
The Globalization of FTI Consulting
North America
Strong demand for health solutions, energy, telecommunications, media
and technology, financial services and insurance industry services
Opportunity to enhance client relationships through cross-segment
engagements
Europe, Middle East and Africa (EMEA)
Depressed valuations present M&A opportunities
Continue
to
invest
based
on
pockets
of
demand
global
risk
and
investigations practice (GRIP), restructuring, anticorruption, compliance,
valuation and remediation
Asia Pacific and Latin America
Continue to build-out geographic presence and capabilities
FTI Consulting
will continue to
add scale and
expertise to the
Companys
global platform
The increasingly
aggressive
regulatory and
enforcement
environment
should bode
very well for
large consulting
firms with global
reach and
reputations like
FTI Consulting
5 |
The FTI Consulting Matrix
FTI Consultings
matrix
organizational
structure
appropriately
emphasizes the
segment,
geographic and
industry drivers
of our
businesses,
allowing for
improved
understanding
and response to
our clients
needs and
increased
leverage of
resources,
knowledge and
solutions in our
rapidly growing
markets
Grow & Develop
Segment:
Continue
to
build-out
diverse
platform
of
practices
and
solutions
Geography:
Replicate
segment
and
practice
offerings
across
existing
global platform
Industry:
Develop
integrated
industry-focused solutions
Industry
Segment
Geography
6
Three strategies that drive our
business: |
Our People
FTI Consultings most valuable asset is its people
Over 4,000 employees in 101 offices across 24 countries
426
Senior
Managing
Directors,
470
Managing
Directors
and
access
to
three Nobel Laureates
FTI Consulting is a global company with global leaders and
advisors
The FTI Consulting matrix establishes global leadership
Board of Directors offer global insights, extensive experience and tenured
leadership
Our collective expertise spans a wide range of geographies and
industries and fuels our ability to address even the most
complex challenges
We hire the best talent and continue to invest in their ongoing
development
FTI Consulting employees are supported throughout their career
development through our educational and thought leadership initiatives:
New Hire Orientation, New Managing Director School, FTI Consulting
University and Executive Leadership Forums
FTI Consultings
unique
integrated
approach to
protecting and
enhancing
enterprise value
requires
exceptional
talent
7 |
Corporate Finance/Restructuring is a renowned leader in restructuring and
crisis management Economic
Consulting
is
the
global
leader
in
antitrust
reputation
and
expertise
Forensic & Litigation Consulting is the global leader in commercial
arbitration and has a market-leading global risk and investigations
practice Technology is a leading provider of e-discovery software
and services Strategic Communications is a global leader in strategic
business communications Market-Leading Business Segments
8
FTI Consulting is
an advisor to 92
of the worlds top
100 law firms, 51
of the
worlds 100
largest
companies and 7
of the worlds top
10 bank holding
companies
#1 crisis management firm in The Deal league tables of crisis
management firms for six consecutive years (2007-2012) Honored by
the Global M&A Network with six Turnaround Atlas Awards for excellence and outstanding achievements in the global
restructuring, special situation merger and acquisition (M&A) and
turnaround markets in July 2013 Named Leading Antitrust Economics Firm
and 1 of the 20 Best Economics Firms in the World by Global Competition Review
for eight
consecutive years (2005-2012)
#1 on Whos Who Legal List of most highly regarded firms for Commercial
Arbitration for four consecutive years (2010-2013) #1 on Whos
Who Legal List of most highly regarded firms for Commercial Arbitration for four consecutive years (2010-2013)
Member of the Leaders" Quadrant in Gartner's "Magic Quadrant for
e-Discovery Software" Report for 2013 Recognized as an industry
leader in legal software and service offerings in the 2013 National Law Journal reader rankings
Named
to
KMWorld
magazines
100
Companies
That
Matter
in
Knowledge
Management
list
in
March
2013
#1
Communications
Advisor
in
Mergermarket
League
Tables
of
PR
Advisers
in
Global
M&A
by
deal
volume
as
of
June
30,
2013
Named
Corporate
Agency
of
the
Year
by
The
Holmes
Report
in
April
2012 |
2013 Growth Catalysts
Uptick in the pace of M&A activity
Currently have strong levels of M&A-related first
look and second request
retentions
M&A
touches
every
business
segment
--
resulting
in
opportunities
for
material
revenue
increases
Restructuring and investigations opportunities in Europe and Asia Pacific
Investments made to enhance our restructuring, global risk and investigations,
anticorruption, compliance, valuation and remediation practices
Opportunities for Corporate Finance/Restructuring services in Australia
Attractive macro drivers in Asia Pacific and Latin America
China's new leadership plans to boost spending to support economic
recovery Opportunities for our construction solutions offering in Brazil
ahead of the 2014 World Cup and 2016 Olympic Games FTI Consulting is
focused on industries facing disruption or change Need for business
advisory services in the ever-changing healthcare industry Demand
globally for energy services irrespective of macroeconomic backdrop
Insurance industry undergoing transformative changes resulting from new and
emerging risks and opportunities Regulatory change is creating
opportunities with financial institutions Demand for FTI
Consultings
services and
expertise is
expected to be
driven by
multiple
catalysts in
2013
9 |
FTI Consultings Financial Position is Strong
Significant cash flow generation
$92.6 million in cash and cash equivalents on the balance sheet as of June 30,
2013 Leverage
as
of
June
30,
2013
less
than
3:1
Balanced capital deployment aimed at value enhancing initiatives
for stockholders
Maintain
market
leadership
positions,
impressive
credentials
and
established
reputation
by
investing
in
talent
Investments in R&D and innovation should drive organic growth
Acquisition
strategy
focused
on
building
attractive,
sustainable
businesses
Analyzing infrastructure to identify cost saving opportunities
$250 million stock buyback program authorized in June 2012
Completed debt refinancing transactions in November 2012 resulting in decreased
interest rate, longer maturity profile and increased access to
capital Portfolio
investments,
coupled with
continued cash
generation and
operational
discipline --
demonstrated in
financial results
10 |
Case Study: M&A Lifecycle and
FTI Consultings Integrated Service Offering
Working Capital Improvement
Dashboard & Financial Performance Management
Testing, Design & Implementation of Internal Controls
Employee Outreach & Engagement
M&A Digital/Social Media Strategies
Media Relations
Investor Relations
First Look Services
Antitrust & Competition Economics
Investment Thesis Development
Investigative Due Diligence & Integrity Investigations
Emerging Market Entry Analysis, Political & Corruption Index
Assessments Merger Integration Services
Interim Management
Performance Improvement Services
Post-Acquisition Disputes
Purchase Price Dispute Services
Global Risk & Investigation Services
Compliance Monitoring & Remediation Services
Post-Merger Communication Implementation
Change Management Communications
Valuation Services
Buyer Services
Seller Services
Lender Services
M&A Fraud Services
Intellectual Property Valuation & Protection
Transactional Due Diligence
System Audits/IT Due Diligence
Compliance & Accounting Internal Controls Reviews
Foreign Bribery & Corruption Risk Assessments
Subsidiary, Joint Venture & Controlled Entity Investigations
E-discovery
Carve-Out Assistance
Event Readiness
Tax Services
Second Requests
M&A Communications
Proxy Communications
Corporate Finance/Restructuring
Economic Consulting
Technology
Strategic Communications
Forensic Litigation and Consulting
11 |
Case Study: CrossSegment Engagements
FTI Consulting has established a global platform with deep expertise and broad
capabilities FTI Consulting leverages this platform by presenting
integrated solutions to current and potential clients as one firm
Cross-segment engagements demonstrate a more robust, solutions-based
go-to-market strategy Our clients
problems, more often than not, require services provided by more than one of our
business segments
Clients that face the most complex and critical situations want an integrated
FTI Consulting team, a team that has the right combination of skills to
solve multiple problems FTI Consultings biggest and most profitable
projects are cross-segment engagements In 2012, all of FTI
Consultings top ten engagements were cross-segment engagements, with many of them involving three or more
business segments
Our top ten clients represent multiple industries and include Fortune 500
companies, the worlds most prestigious law firms and the
worlds top bank holding companies
Expect cross-
segment
engagements to
bolster FTI
Consultings
organic growth,
brand visibility
and reputation
12 |
Financials
*
*
*
*
*
*
*
* |
Second Quarter 2013 Results
Quarter Ended June 30,
2013 (unaudited)
2012 (unaudited)
Revenues
$414,613
$396,243
Direct cost of revenues
259,528
248,220
Selling, general & administrative expense
96,325
92,460
Special charges
-
26,782
Acquisition-related contingent consideration
(7,452)
(3,541)
Amortization of other intangible assets
5,953
5,490
354,354
369,411
Operating income
60,259
26,832
Other income (expense)
Interest income & other
(387)
(363)
Interest expense
(13,071)
(15,195)
(13,458)
(15,558)
Income before income tax provision
46,801
11,274
Income tax provision
23,315
3,527
Net income
$23,486
$7,747
Earnings per common share
basic
$0.60
$0.19
Weighted average common shares outstanding
basic
39,413
40,592
Earnings per common share
diluted
$0.58
$0.18
Weighted average common shares outstanding
diluted
40,293
42,074
Other Comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax $0
(11,714)
(10,960)
Other comprehensive income (loss), net of tax
(11,714)
(10,960)
Comprehensive income (loss)
$11,772
($3,213)
($ in thousands, except per share data)
14 |
Year To Date 2013 Results
Six Months Ended June 30,
2013 (unaudited)
2012 (unaudited)
Revenues
$821,791
$791,471
Direct cost of revenues
518,008
493,838
Selling, general & administrative expense
192,972
195,049
Special charges
427
26,782
Acquisition-related contingent consideration
(6,721)
(2,984)
Amortization of other intangible assets
11,517
11,007
716,203
723,692
Operating income
105,588
67,779
Other income (expense)
Interest income & other
550
2,919
Interest expense
(25,786)
(30,399)
(25,236)
(27,480)
Income before income tax provision
80,352
40,299
Income tax provision
33,186
14,121
Net income
$47,166
$26,178
Earnings per common share
basic
$1.20
$0.65
Weighted average common shares outstanding
basic
39,272
40,475
Earnings per common share
diluted
$1.17
$0.61
Weighted average common shares outstanding
diluted
40,456
42,672
Other Comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax $0
(27,223)
1,889
Other comprehensive income (loss), net of tax
(27,233)
1,889
Comprehensive income (loss)
$19,943
$28,067
($ in thousands, except per share data)
15 |
Second Quarter 2013 Results: Segment Performance
($ in thousands, except headcount data)
Quarter Ended June 30, 2013
Revenues
Adjusted
EBITDA
(1)
Adjusted
EBITDA
(1)
as a % of
Revenue
Utilization
(4)
Average
Billable
Rate
(4)
Revenue-
Generating
Headcount
Corporate Finance/Restructuring
(3)
$96,714
$24,123
24.9%
62%
$416
718
Forensic & Litigation Consulting
(3)
105,120
20,693
19.7%
67%
$307
969
Economic Consulting
111,014
20,803
18.7%
82%
$505
499
Technology
(2)
51,196
16,888
33.0%
N/M
N/M
285
Strategic Communications
(2)
50,569
5,219
10.3%
N/M
N/M
611
Total
$414,613
$87,726
21.2%
3,082
Unallocated Corporate Expenses
(13,498)
Adjusted EBITDA
(1)
$74,228
17.9%
Quarter Ended June 30, 2012
Revenues
Adjusted
EBITDA
(1)
Adjusted
EBITDA
(1)
as a % of
Revenue
Utilization
(4)
Average
Billable
Rate
(4)
Revenue-
Generating
Headcount
Corporate Finance/Restructuring
(3)
$96,187
$27,296
28.4%
75%
$413
596
Forensic & Litigation Consulting
(3)
106,256
19,542
18.4%
68%
$306
930
Economic Consulting
99,455
18,491
18.6%
80%
$496
467
Technology
(2)
47,697
12,849
26.9%
N/M
N/M
311
Strategic Communications
(2)
46,648
4,970
10.7%
N/M
N/M
599
Total
$396,243
$83,148
21.0%
2,903
Unallocated Corporate Expenses
(16,532)
Adjusted EBITDA
(1)
$66,616
16.8%
16
(1) We define Adjusted EBITDA as consolidated net income before income tax
provision, other non-operating income (expense), depreciation, amortization of intangible assets, special charges and goodwill impairment charges. Amounts presented in the Adjusted EBITDA column for each segment reflect
the segments' respective Adjusted Segment EBITDA. We define Adjusted Segment
EBITDA as a segments share of consolidated operating income before depreciation, amortization of intangible assets, special charges and goodwill impairment charges. We use Adjusted Segment EBITDA to internally
evaluate the financial performance of our segments because we believe it is a
useful supplemental measure which reflects current core operating performance and provides an indicator of the segments ability to generate cash. We also believe that these measures, when considered together with our
GAAP financial results, provide management and investors with a more complete
understanding of our operating results, including underlying trends, by excluding the effects of special charges and goodwill impairment charges. In addition, EBITDA is a common alternative measure of operating
performance used by many of our competitors. It is used by investors,
financial analysts, rating agencies and others to value and compare the financial performance of companies in our industry. Therefore, we also believe that these measures, considered along with corresponding GAAP measures,
provide management and investors with additional information for comparison
of our operating results to the operating results of other companies. 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. These non-GAAP financial measures
should be considered in addition to, but not as a substitute for or superior to, the information contained in our Condensed Consolidated Statements of Comprehensive Income (Loss). See also our reconciliation of GAAP to non-GAAP
financial measures.
(2)The majority of the Technology and Strategic Communications segments'
revenues are not generated based on billable hours. Accordingly, utilization and average billable rate metrics are not presented as they are not meaningful as a segment-wide metric.
(3) Effective in the first quarter of 2013, we modified our reportable
segments to reflect changes in how we operate our business and the related internal management reporting. The Companys healthcare and life sciences practices from both our Corporate Finance/Restructuring segment and our
Forensic and Litigation Consulting segment have been combined under a single
organizational structure. This single integrated practice, our health solutions practice, is now aggregated in its entirety within the Forensic and Litigation Consulting reportable segment. Prior period Corporate
Finance/Restructuring and Forensic and Litigation Consulting segment
information has been reclassified to conform to the current period presentation.
(4) 2013 and 2012 utilization and average bill rate calculations for our
Corporate Finance/Restructuring, Forensic and Litigation Consulting, and Economic Consulting segments were updated to reflect the realignment of certain practices as well as information related to non-U.S. operations that was not
previously available. |
Year To Date 2013 Results: Segment Performance
($ in thousands, except headcount data)
Six Months Ended June 30, 2013
Revenues
Adjusted
EBITDA
(1)
Adjusted
EBITDA
(1)
as a % of
Revenue
Utilization
(4)
Average
Billable
Rate
(4)
Revenue-
Generating
Headcount
Corporate Finance/Restructuring
(3)
$195,794
$43,208
22.1%
66%
$412
718
Forensic & Litigation Consulting
(3)
205,844
33,504
16.3%
65%
$314
969
Economic Consulting
226,208
46,997
20.8%
86%
$501
499
Technology
(2)
97,900
30,604
31.3%
N/M
N/M
285
Strategic Communications
(2)
96,045
8,773
9.1%
N/M
N/M
611
Total
$821,791
$163,086
19.8%
3,082
Unallocated Corporate Expenses
(29,532)
Adjusted EBITDA
(1)
$133,554
16.3%
Six Months Ended June 30, 2012
Revenues
Adjusted
EBITDA
(1)
Adjusted
EBITDA
(1)
as a % of
Revenue
Utilization
(4)
Average
Billable
Rate
(4)
Revenue-
Generating
Headcount
Corporate Finance/Restructuring
(3)
$193,061
$51,468
26.7%
77%
$413
596
Forensic & Litigation Consulting
(3)
209,891
34,211
16.3%
74%
$304
930
Economic Consulting
199,507
36,915
18.5%
83%
$483
467
Technology
(2)
97,357
26,064
26.8%
N/M
N/M
311
Strategic Communications
(2)
91,655
9,499
10.4%
N/M
N/M
599
Total
$791,471
$158,157
20.0%
2,903
Unallocated Corporate Expenses
(37,581)
Adjusted EBITDA
(1)
$120,576
15.2%
17
(1) We define Adjusted EBITDA as consolidated net income before income tax
provision, other non-operating income (expense), depreciation, amortization of intangible assets, special charges and goodwill impairment charges. Amounts presented in the Adjusted
EBITDA column for each segment reflect the segments' respective Adjusted
Segment EBITDA. We define Adjusted Segment EBITDA as a segments share of consolidated operating income before depreciation, amortization of intangible assets, special charges and
goodwill impairment charges. We use Adjusted Segment EBITDA to internally
evaluate the financial performance of our segments because we believe it is a useful supplemental measure which reflects current core operating performance and provides an indicator of
the
segmentsability
to
generate
cash.We
alsobelieve
that
thesemeasures,
when
considered
togetherwith
ourGAAP
financial
results,provide
managementand
investorswitha
more
complete
understanding
of
our
operating
results,
including
underlying
trends,
by
excluding
the
effects
of
special
charges
and
goodwill
impairment
charges.
In
addition,
EBITDA
isa
common
alternativemeasureofoperating
performance
usedbymanyofour
competitors.It
is
used
by
investors,
financialanalysts,
rating
agencies
andothers
to
value
and compare the financial performance of companies in our industry. Therefore,
we also believe that these measures, considered along with corresponding GAAP measures, provide management and investors with additional information for comparison of our operating
results to the operating results of other companies. 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. These non-GAAP financial
measures should be considered in addition to, but not as a substitute for or
superior to, the information contained in our Condensed Consolidated Statements of Comprehensive Income (Loss). See also our reconciliation of GAAP to non-GAAP financial measures.
(2)The majority of the Technology and Strategic Communications segments'
revenues are not generated based on billable hours. Accordingly, utilization and average billable rate metrics are notpresented as they are not meaningful as a segment-wide metric.
(3) Effective in the first quarter of 2013, we modified our reportable
segments to reflect changes in how we operate our business and the related internal management reporting. The Companys healthcare and life sciences practices from both our Corporate
Finance/Restructuring segment and our Forensic and Litigation Consulting
segment have been combined under a single organizational structure. This single integrated practice, our health solutions practice, is now aggregated in its entirety within the Forensic and
Litigation Consulting reportable segment. Prior period
CorporateFinance/Restructuring and Forensic and Litigation Consulting segment information has been reclassified to conform to the current period presentation.
(4)
2013
and
2012
utilizationand
average
bill
rate
calculations
forour
CorporateFinance/Restructuring,Forensicand
LitigationConsulting,and
EconomicConsulting
segmentswere
updated
to
reflect
the
realignment
of
certain
practicesas
wellas
information
related
to non-U.S. operations that was not previously available.
|
Appendix |
Second Quarter 2013: Reconciliation of non-GAAP Financial
Measures
($ in thousands, except per share data)
Quarter Ended June 30,
2013
2012
Net Income
$23,486
$7,747
Add back:
Special charges, net of tax effect
(1)
-
$17,320
Adjusted
Net
Income
(2)
$23,486
$25,067
Earnings per common share
diluted
$0.58
$0.18
Add back:
Special charges, net of tax effect
(1)
-
$0.42
Adjusted
earnings
per
common
share
diluted
(2)
$0.58
$0.60
Weighted
average
number
of
common
shares
outstanding
diluted
40,293
42,074
19
(1) The tax effect takes into account the tax treatment and related tax
rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). As a result, the effective tax rates for the adjustments for the three
months ended June 30, 2013 was 40.7%, and the adjustment was 35.3% for the
three June 30, 2012. The tax expense related to the adjustments for the three months ended June 30, 2013 was $0.2 million
with no impact on diluted earnings per share. The tax expense for the three
months ended June 30, 2012 was $9.5 million or $0.22 impact on diluted earnings per share.
(2) We define Adjusted Net Income and Adjusted Earnings per Diluted
Share as net income and earnings per diluted share, respectively, excluding the impact of special charges, goodwill impairment charges
and losses on early extinguishment of debt. We use Adjusted Net Income for
the purpose of calculating Adjusted Earnings per Diluted Share. Management uses Adjusted Earnings per Diluted Share to assess
total company operating performance on a consistent basis. We believe that
this measure, when considered together with our GAAP financial results, provides management and investors with a more complete
understanding of our business operating results, including underlying trends,
by excluding the effects of special charges, goodwill impairment charges and losses on early extinguishment of debt. Adjusted
EBITDA and Adjusted Segment EBITDA are not defined in the same manner by all
companies and may not be comparable to other similarly titled measures of other companies. These non-GAAP financial
measures should be considered in addition to, but not as a substitute for or
superior to, the information contained in our Condensed Consolidated Statements of Comprehensive Income (Loss). See also our
reconciliation of GAAP to non-GAAP financial measures.
|
Year To Date 2013: Reconciliation of non-GAAP Financial
Measures
($ in thousands, except per share data)
Six Months Ended June 30,
2013
2012
Net Income
$47,166
$26,178
Add back:
Special
charges,
net
of
tax
effect
(1)
$253
$17,320
Adjusted
Net
Income
(2)
$47,419
$43,498
Earnings
per
common
share
diluted
$1.17
$0.61
Add back:
Special charges, net of tax effect
(1)
-
$0.41
Adjusted
earnings
per
common
share
diluted
(2)
$1.17
$1.02
Weighted
average
number
of
common
shares
outstanding
diluted
40,456
42,672
20
(1) The tax effect takes into account the tax treatment and related tax
rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). As a result, the effective tax rates for
the adjustments for the six months ended June 30, 2013 was 40.7%, and the
adjustment was 35.3% for the six months ended June 30, 2012. The tax expense related to the
adjustments for the six months ended June 30, 2013 was $0.2 million with no
impact on diluted earnings per share. The tax expense for the six months ended June 30, 2012 was
$9.5 million or $0.22 impact on diluted earnings per share.
(2) We define Adjusted Net Income and Adjusted Earnings per Diluted
Share as net income and earnings per diluted share, respectively, excluding the impact of special charges,
goodwill impairment charges and losses on early extinguishment of debt. We
use Adjusted Net Income for the purpose of calculating Adjusted Earnings per Diluted Share.
Management uses Adjusted Earnings per Diluted Share to assess total company
operating performance on a consistent basis. We believe that this measure, when considered
together with our GAAP financial results, provides management and investors
with a more complete understanding of our business operating results, including underlying trends, by
excluding the effects of special charges, goodwill impairment charges and
losses on early extinguishment of debt. Adjusted EBITDA and Adjusted Segment EBITDA are not defined in
the same manner by all companies and may not be comparable to other similarly
titled measures of other companies. These non-GAAP financial measures should be considered in
addition to, but not as a substitute for or superior to, the information
contained in our Condensed Consolidated Statements of Comprehensive Income (Loss). See also our
reconciliation of GAAP to non-GAAP financial measures.
|
Second Quarter 2013: Reconciliation of Net Income and
Operating Income to Adjusted EBITDA
($ in thousands)
Quarter Ended June 30, 2013
Corporate
Finance /
Restructuring
(3)
Forensic and
Litigation
Consulting
(3)
Economic
Consulting
Technology
Strategic
Communications
Unallocated
Corporate
Expenses
Total
Net Income
$23,486
Interest Income and other
Interest expense
Income tax provision
387
13,071
23,315
Operating
Income
(loss)
(1)
$21,436
$19,177
$19,530
$11,292
$3,394
($14,570)
60,259
Depreciation and amortization
Amortization of other intangible assets
855
1,832
937
579
863
410
3,611
1,985
678
1,147
1,072
0
8,016
5,953
Adjusted
EBITDA
(2)
$24,123
$20,693
$20,803
$16,888
$5,219
($13,498)
$74,228
21
Quarter Ended June 30, 2012
Corporate
Finance /
Restructuring
(3)
Forensic and
Litigation
Consulting
(3)
Economic
Consulting
Technology
Strategic
Communications
Unallocated
Corporate
Expenses
Total
Net Income
$7,747
Interest Income and other
Interest expense
Income tax provision
363
15,195
3,527
Operating
Income
(loss)
(1)
$14,520
$10,201
$16,551
$4,757
($1,370)
($17,827)
26,832
Depreciation and amortization
Amortization of other intangible assets
Special charges
775
1,440
10,561
1,025
508
7,808
724
398
818
3,142
1,984
2,966
669
1,160
4,511
1,177
0
118
7,512
5,490
26,782
Adjusted
EBITDA
(2)
$27,296
$19,542
$18,491
$12,849
$4,970
($16,532)
$66,616
(1)
We
define
Segment
Operating
Income
as
a
segments
share
of
consolidated
operating
income.
We
define
Total
Segment
Operating
Income
as
the
total
of
Segment
Operating
Income
for
all
segments,
which
excludes
unallocated
corporate
expenses.
We
use
Segment
Operating
Income
for
the
purpose
of
calculating
Adjusted
Segment
EBITDA.
(2)
We
define
Adjusted
EBITDA
as
consolidated
net
income
before
income
tax
provision,
other
non-operating
income
(expense),
depreciation,
amortization
of
intangible
assets,
special
charges
and
goodwill
impairment
charges.
Amounts
presented
in
the
Adjusted
EBITDA
row
for
each
segment
reflect
the
segments'
respective
Adjusted
Segment
EBITDA.
We
define
Adjusted
Segment
EBITDA
as
a
segments
share
of
consolidated
operating
income
before
depreciation,
amortization
of
intangible
assets,
special
charges
and
goodwill
impairment
charges.
We
use
Adjusted
Segment
EBITDA
to
internally
evaluate
the
financial
performance
of
our
segments
because
we
believe
it
is
a
useful
supplemental
measure
which
reflects
current
core
operating
performance
and
provides
an
indicator
of
the
segments
ability
to
generate
cash.
We
also
believe
that
these
measures,
when
considered
together
with
our
GAA
P financial
results,
provide
management
and
investors
with
a
more
complete
understanding
of
our
operating
results,
including
underlying
trends,
by
excluding
the
effects
of
special
charges
and
goodwill
impairment
charges.
In
addition,
EBITDA
is
a
common
alternative
measure
of
operating
performance
used
by
many
of
our
competitors.
It
is
used
by
investors,
financial
analysts,
rating
agencies
and
others
to
value
and
compare
the
financial
performance
of
companies
in
our
industry.
Therefore,
we
also
believe
that
these
measures,
considered
along
with
corresponding
GAAP
measures,
provide
management
and
investors
with
additional
information
for
comparison
of
our
operating
results
to
the
operating
results
of
other
companies.
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.
These
non-GAAP
financial
measures
should
be
considered
in
addition
to,
but
not
as
a
substitute
for
or
superior
to,
the
information
contained
in
our
Condensed
Consolidated
Statements
of
Comprehensive
Income
(Loss).
See
also
our
reconciliation
of
GAAP
to
non-GAAP
financial
measures.
(3)
Effective
in
the
first
quarter
of
2013,
we
modified
our
reportable
segments
to
reflect
changes
in
how
we
operate
our
business
and
the
related
internal
management
reporting.
The
Companys
healthcare
and
life
sciences
practices
from
both
our
Corporate
Finance/Restructuring
segment
and
our
Forensic
and
Litigation
Consulting
segment
have
been
combined
under
a
single
organizational
structure.
This
single
integrated
practice,
our
health
solutions
practice,
is
now
aggregated
in
its
entirety
within
the
Forensic
and
Litigation
Consulting
reportable
segment.
Prior
period
Corporate
Finance/Restructuring
and
Forensic
and
Litigation
Consulting
segment
information
has
been
reclassified
to
conform
to
the
current
period
presentation.
. |
Year To Date 2013: Reconciliation of Net Income and
Operating Income to Adjusted EBITDA
($ in thousands)
Six Months Ended June 30, 2012
Corporate
Finance /
Restructuring
(3)
Forensic and
Litigation
Consulting
(3)
Economic
Consulting
Technology
Strategic
Communications
Unallocated
Corporate
Expenses
Total
Net Income
$26,178
Interest Income and other
Interest expense
Income tax provision
(2,919)
30,399
14,121
Operating
Income
(loss)
(1)
$36,464
$23,298
$33,871
$12,958
$1,287
($40,099)
67,779
Depreciation and amortization
Amortization of other intangible assets
Special charges
1,565
2,878
10,561
2,081
1,024
7,808
1,429
797
818
6,164
3,976
2,966
1,369
2,332
4,511
2,400
0
118
15,008
11,007
26,782
Adjusted
EBITDA
(2)
$51,468
$34,211
$36,915
$26,064
$9,499
($37,581)
$120,576
Six Months Ended June 30, 2013
Corporate
Finance /
Restructuring
(3)
Forensic and
Litigation
Consulting
(3)
Economic
Consulting
Technology
Strategic
Communications
Unallocated
Corporate
Expenses
Total
Net Income
$47,166
Interest Income and other
Interest expense
Income tax provision
(550)
25,786
33,186
Operating
Income
(loss)
(1)
$38,135
$30,279
$44,525
$19,374
$5,121
($31,846)
105,588
Depreciation and amortization
Amortization of other intangible assets
Special charges
1,622
3,383
68
1,961
1,091
173
1,668
808
(4)
7,246
3,970
14
1,323
2,265
64
2,202
0
112
16,022
11,517
427
Adjusted
EBITDA
(
2)
$43,208
$33,504
$46,997
$30,604
$8,773
($29,532)
$133,554
22
(1)
We
defineSegment
OperatingIncome
asa
segments
shareof
consolidatedoperating
income.
We
define
Total
Segment
OperatingIncome
as
the
totalof
Segment
Operating
Income
forall
segments,
which
excludes
unallocated
corporate
expenses.
We
use
Segment
Operating
Income
for
thepurpose
of
calculatingAdjusted
Segment
EBITDA.
(2)
We
defineAdjusted
EBITDAas
consolidated
net
incomebefore
income
taxprovision,other
non-operating
income
(expense),depreciation,
amortizationof
intangible
assets,
special
chargesand
goodwill
impairment
charges.Amounts
presentedin
the
AdjustedEBITDA
row
foreach
segment
reflect
the
segments'
respective
Adjusted
SegmentEBITDA.
We
defineAdjusted
Segment
EBITDAas
a
segments
share
of
consolidated
operating
income
before
depreciation,amortizationofintangible
assets,
special
chargesand
goodwillimpairment
charges.We
use
AdjustedSegmentEBITDA
tointernally
evaluate
the
financialperformance
ofour
segments
because
webelieve
it
isa
useful
supplemental
measurewhich
reflects
current
coreoperating
performanceand
provides
anindicator
of
the
segments
ability
to
generate
cash.
Wealso
believe
that
these
measures,when
considered
together
withourGAAP
financial
results,
providemanagement
andinvestors
with
amore
completeunderstandingofouroperating
results,including
underlying
trends,byexcluding
theeffectsof
special
chargesand
goodwill
impairment
charges.Inaddition,
EBITDA
is
a
common
alternativemeasure
of
operatingperformanceused
by
many
ofour
competitors.
Itis
usedbyinvestors,
financial
analysts,
ratingagenciesand
others
to
value
and
compare
the
financialperformanceof
companiesin
our
industry.
Therefore,wealsobelieve
that
thesemeasures,
consideredalongwith
corresponding
GAAPmeasures,
providemanagement
andinvestors
with
additional
information
for
comparison
of
our
operating
results
to
theoperating
resultsofother
companies.Adjusted
EBITDA
andAdjusted
Segment
EBITDAarenotdefinedin
the
samemanner
by
all
companies
andmay
not
be
comparable
to
other
similarly
titled
measures
of
other
companies.
These
non-GAAP
financial
measures
shouldbe
consideredinaddition
to,
but
notas
a
substitute
for
or
superior
to,
the
information
contained
in
our
Condensed
Consolidated
Statementsof
ComprehensiveIncome
(Loss).
Seealso
our
reconciliationofGAAP
tonon-GAAP
financialmeasures.
(3)
Effective
in
the
first
quarter
of2013,
wemodified
our
reportable
segments
to
reflect
changesinhowweoperateourbusinessand
the
relatedinternalmanagement
reporting.
The
Companyshealthcareand
life
sciences
practices
from
both
our
Corporate
Finance/Restructuring
segmentand
our
Forensic
and
Litigation
Consulting
segment
have
been
combinedunder
a
singleorganizational
structure.
This
single
integratedpractice,ourhealth
solutions
practice,
is
nowaggregated
in
its
entirety
within
theForensic
and
Litigation
Consulting
reportable
segment.
Priorperiod
CorporateFinance/Restructuringand
Forensic
and
Litigation
Consulting
segmentinformation
hasbeen
reclassified
to
conform
to
the
current
periodpresentation. |
Critical Thinking at the Critical Time |