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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Commission File No. 0-28830

Navigant Consulting, Inc.

(Exact name of Registrant as specified in its charter)

615 North Wabash Avenue, Chicago, Illinois 60611

(Address of principal executive offices, including zip code)

(312) 573-5600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.  YES  x         NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in a definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).  YES  x         NO  ¨

As of March 10, 2005, approximately 51.2 million shares of the Registrant’s common stock, par value $0.001 per share (“Common Stock”), were outstanding. The aggregate market value of shares of Common Stock held by non-affiliates, based upon the closing sale price of the stock on the New York Stock Exchange on March 7, 2005, was approximately $1.4 billion. The Registrant’s Proxy Statement for the Annual Meeting of Stockholders, scheduled to be held on May 4, 2005, is incorporated by reference into Part III of this Annual Report on Form 10-K.

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NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

FORM 10-K

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2004

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PART I

Statements included in this report are intended to be, and are hereby identified as “forward-looking statements” for purposes of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this report, including, without limitation, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” When used in this report, the words “anticipate,” “believe,” “intend,” “estimate,” “expect,” and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. The Company cautions readers that forward-looking statements, including without limitation those relating to the Company’s future business prospects, revenues, working capital, liquidity and income, are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements, due to several important factors herein identified, among others, and other risks and factors identified from time to time in the Company’s reports filed with the SEC. The Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect current or future events or circumstances.

Item 1.    Business.

General

Navigant Consulting, Inc. (the “Company” or “NCI”) is a specialized independent consulting firm providing litigation, financial services, healthcare, energy and operational consulting services to government agencies, legal counsel, and large companies facing the challenges of uncertainty, risk, distress and significant change. The Company focuses on industries undergoing substantial regulatory or structural change and on the issues driving these transformations.

The Company is a Delaware corporation headquartered in Chicago, Illinois. The Company’s executive office is located at 615 North Wabash Avenue, Chicago, Illinois 60611. Its telephone number is (312) 573-5600. The Company’s common stock is traded on the New York Stock Exchange under the symbol “NCI”.

“Navigant” is a service mark of Navigant International, Inc. NCI is not affiliated, associated, or in any way connected with Navigant International, Inc. and NCI’s use of “Navigant” is made under license from Navigant International, Inc.

(a) General Development of Business

The Company had its initial public offering in 1996 and three subsequent public offerings, one in 1997 and two in 1998. The Company’s current management team was installed in 2000. From 2001 to 2004, the Company acquired twelve consulting firms that were complementary to its current businesses. The most significant acquisitions during this period were Hunter & Associates Management Services, Inc. (“Hunter”), which occurred in 2002, and Tucker Alan, Inc. (“Tucker”), which occurred in 2004. The Company is required to furnish pro forma financial information relating to the Hunter and Tucker acquisitions, which has been included in the notes to the Company’s consolidated financial statements.

The Company’s business structure consists of two business segments: Financial & Claims Consulting and Energy Consulting. Each business segment has direct responsibility and accountability for its decisions, costs, and profits. The Company’s consultants have the autonomy and authority to seek, engage and complete assignments. This business model and the Company’s experience, reputation and industry focus enable it to compete effectively in the business and professional services consulting marketplace.

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(b) Financial Information about Business Segments

Segment operating revenues and segment operating profits (together with a reconciliation to operating income) attributable to each segment for each of the last three years are set forth in Note 4 in the notes to the Company’s consolidated financial statements.

The relative percentages of operating revenue attributable to each segment were as follows:

The relative percentages of operating profits attributable to each segment were as follows:

Segment operating profits as a percentage of segment revenue were as follows:

The information presented above does not necessarily reflect the results of segment operations that would have occurred had the segments been stand-alone businesses. Certain operating expenses, which relate to general corporate costs, were allocated to operating segments based on consulting fee revenues. Certain operating expenses, which primarily relate to operating segments, have been excluded for comparative purposes from the segment operating profit amounts.

(c) Narrative Description of Business

Overview

The Company markets its services directly to senior and mid-level executives. A variety of business development and marketing channels are used to communicate directly with current and prospective clients, including on-site presentations, industry seminars, and industry-specific articles. New engagements are sought and won by the Company’s senior and mid-level consultants. Future performance will continue to depend on the consultants’ ability to win new engagements.

A significant portion of new business arises from prior client engagements. In addition, the Company seeks to leverage the client relationships in one business segment to cross sell existing services provided by the other segment. Clients frequently expand the scope of engagements during delivery to include follow-on, complementary activities. In addition, on-site presence affords the Company’s consultants the opportunity to become aware of, and to help define, additional project opportunities as they are identified.

The Company derives its revenues from fees for professional services. Over the last three years, a substantial majority of the Company’s revenues has been generated under hourly rates billed on a time and expense basis. Clients are typically invoiced on a monthly basis, with revenue recognized as the services are provided. There are also client engagements where the Company is paid a fixed amount for its services, often referred to as fixed fee billings. This may be one single amount covering the whole engagement or several amounts for various phases or functions. From time to time, the Company earns incremental revenues, in

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addition to hourly or fixed fee billing, which are contingent on the attainment of certain contractual milestones or objectives. Such incremental revenues may cause variations in quarterly revenues and operating results if all other revenues and expenses during the quarters remain the same.

The Company’s most significant expense is cost of services before reimbursable expenses, which generally relates to costs associated with generating revenues, and includes consultant compensation and benefits, sales and marketing expenses, and the direct costs of training and recruiting the consulting staff. Consultant compensation consists of salaries and incentive compensation. The consultants’ total compensation is competitive with industry standards. Incentive compensation is structured to reward consultants based on business performance.

The Company’s most significant overhead expenses include administrative compensation and benefits, and office related expenses. Administrative compensation includes payroll costs for corporate management and administrative personnel, which are used to indirectly support client projects. Office related expenses include primarily office rent for the Company’s 35 locations.

Service Offerings

The Company provides wide and varied service offerings to its broad client base. The Company considers the following to be the Company’s key service offerings: litigation support and investigative services, claims management and analysis, corporate finance services, discovery services, government contracting services, and operations advisory and management process outsourcing services.

Industry Sectors

The Company provides services to and focuses on industries undergoing substantial regulatory or structural change. The Company’s service offerings are relevant to most industries and the public sector. However, the Company has significant industry-specific knowledge and a robust client base in the construction, energy, financial services and healthcare industries. Additionally, the Company has a strong client presence in the public sector, including federal, state and local governmental agencies. The Company has a long history of work for defendants, insurers and reinsurers in the asbestos and other product liability fields. Many of the Company’s engagements involve working in conjunction with the legal counsel of its clients.

Human Capital

As of December 31, 2004, the Company had 2,060 employees, including 1,556 consultants. Revenues are primarily generated from services performed by the Company’s consultants; therefore, success depends in large part on attracting, retaining and motivating talented, creative and experienced professionals at all levels. In connection with recruiting, the Company employs internal recruiters, retains executive search firms, and utilizes personal and business contacts to recruit professionals with significant industry-specific consulting experience. Consultants are drawn from the industries the Company serves, accounting and other consulting organizations, and top rated colleges and universities. The Company seeks to retain its consultants by offering competitive packages of base and incentive compensation, equity ownership, and benefits.

Independent contractors at times supplement the Company’s consultants on certain engagements. The Company has found that the practice of retaining independent contractors on a per-engagement basis provides flexibility in adjusting professional personnel levels in response to changes in demand for the Company’s professional services.

In addition to the employees and independent contractors discussed above, the Company has acquired and seeks to acquire consulting businesses to both add highly skilled professionals and enhance the services offered by the Company. Some of the acquired businesses were direct competitors to the Company, while others had been retained as independent contractors to supplement certain engagements. The Company believes that the

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strategy of selectively acquiring consulting businesses and consulting capabilities strengthens its platform, market share, and overall operating results.

In connection with recruiting activities and business acquisitions, the Company’s policy is to obtain non-solicitation covenants from senior and mid-level consultants. Most of these covenants have restrictions that extend 12 months beyond the cessation of employment. The Company utilizes these contractual agreements to reduce the risk of attrition and to safeguard the Company’s existing clients, staff and projects.

The Company continually monitors and adjusts, if needed, the consultants’ total compensation, which includes salaries, annual cash incentive compensation, and other cash and equity incentives from certain Company programs, to ensure both that the consultants’ compensation is competitive within the industry and that the Company has the opportunity to achieve target profitability levels. Material changes to the Company’s compensation structure are made with the requisite approval of the Compensation Committee of the Company’s Board of Directors. The Company’s bill rates to clients are tiered in accordance with the experience and levels of the consulting staff. The Company monitors and adjusts those bill rates according to the supply and demand of the then-current market conditions within the various industry segments served by the Company.

In addition, the Company’s compensation program requires certain senior consulting leaders to receive payment of a portion of their compensation in restricted stock instead of cash, and the Company also establishes certain equity ownership requirements of its senior level employees.

Competition

The market for consulting services is intensely competitive, highly fragmented and subject to rapid change. The market includes a large number of participants with a variety of skills and industry expertise, including general management and information technology consulting firms, as well as the national accounting firms, and other local, regional, national, and international firms. Many of these companies are global in scope and have greater personnel, financial, technical, and marketing resources than the Company. The Company believes that its independence, experience, reputation, industry focus, and broad range of professional services will enable it to compete effectively in the consulting marketplace.

(d) Other Matters

Concentration of Revenues

Revenues earned from the Company’s top 20 clients amounted to 33 percent, 36 percent and 39 percent of total revenues for the years ended December 31, 2004, 2003 and 2002, respectively. The Company had one client from its Financial & Claims Consulting segment that accounted for more than 5 percent of its total revenues for the year ended December 31, 2004 and one client from the Energy Consulting segment that accounted for more than 5 percent of its total revenues for the year ended December 31, 2002. There were no clients that accounted for more than 5 percent of the Company’s total revenues for the year ended December 31, 2003. The mix of the Company’s largest clients may change from year to year.

Business Risks

In addition to other information contained in this Annual Report on Form 10-K and in the documents incorporated by reference herein, the following risk factors should be considered carefully in evaluating the Company and its business. Such factors could have a significant impact on the Company’s business, operating results, and financial condition.

The Company relies heavily on its consulting staff and management team. The Company’s inability to retain highly skilled professionals, coupled with departures of a significant number of senior employees, could have a material adverse effect on the Company.

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The Company’s common stock price may fall and any investment in the Company may be materially affected. Any long-term decline in the common stock would impair the Company’s ability to use equity-based compensation to attract, retain and motivate key employees.

The Company uses equity-based compensation as a portion of senior and mid-level consultants’ overall compensation packages. Equity-based compensation is used to help align the interests of its employees and stockholders, but complete alignment is difficult to achieve. Compensation and retention related issues represent a continuing challenge for the Company.

Specialized systems and processes have been developed by the Company and provide a competitive advantage in serving current clients and obtaining new clients. This intellectual capital is the property of the Company and the unauthorized use could have a materially adverse impact on the Company’s business. Additionally, many of the Company’s service offerings rely on technology that is subject to rapid change.

The Company’s intellectual capital, in certain service offerings, may be rendered obsolete due to new governmental regulation. A new governmental regulation could allow a competitor a significant advantage before the Company is able to adapt to newly updated service demands.

The Company must manage growth from both organically expanding services and the acquisition of complementary consulting firms. This growth and integration of acquisitions may cause strain on the Company’s management team and the Company’s systems. Excessively rapid growth or unsuccessful integration of these businesses could have a material adverse effect on the future profitability of the Company.

The Company may not earn an adequate return on capital or may fail to achieve a return of its capital on certain business acquisitions. The Company also may pay a substantial premium on certain business acquisitions. The financing of these acquisitions through cash, borrowings or common stock could impair liquidity or cause significant stock dilution.

The Company’s engagements are usually relatively short-term in comparison to its office-related expenses and other infrastructure commitments. The Company’s inability to continually replace a significant portion of current engagements with new engagements would have an adverse effect on the Company’s ability to meet its current and future commitments.

The Company maintains a revolving line of credit agreement to assist in funding short-term and long-term cash requirements from normal operations. This agreement contains certain covenants requiring, among other things, a minimum level of earnings. Poor performance of the Company could cause the Company to be in default of these existing covenants. Additionally, the Company cannot be certain that it will be able to raise capital or obtain debt financing to execute future acquisitions or to meet required working capital needs.

If the financial condition of the Company’s clients were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances for uncollectability would likely be required.

The professional reputation of the Company and its consultants is critical to the Company’s ability to successfully compete for new client engagements and attract or retain professionals. Any factors that damage the Company’s professional reputation could have a material adverse effect on the Company’s business.

The Company is subject to the risk of professional liability. The Company’s consultants engage in complex analyses in which the exercise of professional judgment is critical. If services are not performed to the client’s satisfaction, a client may threaten or bring a lawsuit against the Company, claiming the Company performed negligently or breached its obligation to the client. In certain cases, there is potential that persons other than clients may bring claims against the Company. A claim against the Company could exceed the limits of the Company’s insurance coverage and could damage the Company’s reputation.

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Legislative changes affecting the Company’s clients, competitors, or staff could have an impact on business. An example of this is The Sarbanes-Oxley Act of 2002, which limits the services that public accounting firms are permitted to provide to their audit clients. The Company is not a public accounting firm and therefore is not subject to such restrictions. Changes to The Sarbanes-Oxley Act or rules promulgated thereunder, as well as other legislation, could have an impact on the Company’s business.

International Operations

The Company has an international presence with offices in the United Kingdom, the Czech Republic, and Canada. In addition, the Company has clients based in the United States of America that have international operations. No country, other than the United States of America, accounted for more than 5 percent of the Company’s total revenues in any of the three years ended December 31, 2004.

Available Information

The Company maintains an Internet website at http://www.navigantconsulting.com, that includes a hypertext link to a website maintained by a third-party, where the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports are available without charge as soon as reasonably practicable following the time that they are filed with or furnished to the SEC.

Item 2.    Properties.

The Company owns a 16,500 square foot building located in Chicago, Illinois, which is used as the Company’s executive offices. In addition to the executive offices, the Company has 52 operating leases for office facilities, principally in the United States. Additional space may be required as the business expands geographically, but the Company believes it will be able to obtain suitable space as needed. Following are the Company’s 32 principal locations in the United States with the indicated cities, alphabetized by state:

Item 3.    Legal Proceedings.

As previously disclosed, in November 2001 the Company was informed that the SEC had initiated a private investigation, through the Chicago office of its Division of Enforcement, as to whether there may have been violations of the securities laws at the Company during 1998 and 1999. The Company cooperated fully with the SEC. In November 2004 the Company was advised by the Division of Enforcement that its inquiry had been terminated and that no enforcement action had been recommended to the SEC.

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From time to time the Company is party to various lawsuits and claims in the ordinary course of business. While the outcome of those lawsuits or claims cannot be predicted with certainty, the Company does not believe that any of those lawsuits or claims will have a material adverse effect on the Company.

Item 4.    Submission of Matters to a Vote of Security Holders.

Not Applicable.

Executive Officers of the Registrant

The following are the executive officers of the Company as of March 10, 2005:

William M. Goodyear, 56, has served as Chairman of the Board and Chief Executive Officer of the Company since May 2000. He has served as a director since December 15, 1999. Prior to December 1999, he served as Chairman and Chief Executive Officer of Bank of America, Illinois. From 1972 to 1999, Mr. Goodyear held a variety of assignments with Continental Bank, subsequently Bank of America, including corporate finance, corporate lending, trading, and distribution. During this 28-year period, Mr. Goodyear was stationed in London for 5 years (1986 to 1991) to manage Continental Bank’s European and Asian Operations. He was Vice Chairman and a member of the Board of Directors of Continental Bank prior to the 1994 merger between Continental Bank Corporation and BankAmerica Corporation. He was President of the Bank of America’s Global Private Bank until January 1999. Mr. Goodyear received his Master’s degree in Business Administration, with Honors, from the Amos Tuck School of Business at Dartmouth College, and his Bachelor’s degree in Business Administration, with Honors, from the University of Notre Dame. He holds the Certified Public Accountant designation.

Julie M. Howard, 42, has served as Executive Vice President and Chief Operating Officer since 2003. Prior to this current role, Ms. Howard was Vice President and Human Capital Officer. Since 1986, Ms. Howard has held a variety of consulting and operational positions within the Company and formerly Peterson Consulting, which was acquired by the Company in 1998. Ms. Howard is a graduate of the University of Wisconsin, with a Bachelor of Science degree in Finance. She has also completed several post-graduate courses within the Harvard Business School Executive Education program, focusing in Finance and Management.

Ben W. Perks, 63, has served as Executive Vice President and Chief Financial Officer since May 2000. Prior to joining the Company, Mr. Perks was a senior Chicago partner in the Financial Advisory Services Group with PricewaterhouseCoopers LLP. With PricewaterhouseCoopers and Price Waterhouse LLP, he had more than 32 years of professional services experience, including 22 years as an audit and consulting partner, providing financial reporting, accounting, auditing, tax, economic, and litigation consulting services to clients. Mr. Perks received his Professional Accounting Program degree from Northwestern University’s J.L. Kellogg Graduate School of Management, his Juris Doctor (law) degree and Master’s degree in Business Administration from the University of Cincinnati, and his Bachelor’s degree from Denison University. He is a Certified Public Accountant, licensed in the states of Illinois, California and Arizona, a Certified Fraud Examiner, and a member of the American Institute of Certified Public Accountants and the American Bar Association.

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Philip P. Steptoe, 53, has served as Vice President, General Counsel and Secretary since February 2000. Previously, Mr. Steptoe was a partner with the national law firm of Sidley & Austin (now Sidley, Austin, Brown & Wood). Prior to joining Sidley in 1988, he was a partner in the Chicago law firm of Isham, Lincoln & Beale. During 1994 to 1995, he served for four months as Acting General Counsel for Orange and Rockland Utilities, Inc., a New York electric and gas utility. Mr. Steptoe earned his A.B. degree in Physics from Princeton University and his Juris Doctor (law) degree from the University of Virginia.

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PART II

Item 5.    Market for Registrant’s Common, Stock Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

The shares of common stock of the Company are traded on the New York Stock Exchange under the symbol “NCI.” The following table sets forth, for the periods indicated, the high and low closing sale prices per share.

Holders

As of March 10, 2005, there were approximately 450 holders of record of shares of common stock of the Company.

Distributions

The Company has not paid any cash dividends since its organization. The Company does not currently anticipate that it will make any such distributions and reviews this policy on a periodic basis.

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Issuance of Unregistered Securities

During the year ended December 31, 2004, the Company has issued the following unregistered securities:

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Item 6.    Selected Financial Data.

The following financial and operating data should be read in conjunction with the information set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements of the Company and related notes thereto appearing elsewhere in this report. The amounts are shown in thousands, except for per share data.

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations relates to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

Overview

The Company is a specialized, independent consulting firm providing litigation, financial services, healthcare, energy and operational consulting services to government agencies, legal counsel, and large companies facing the challenges of uncertainty, risk, distress, and significant change. The Company focuses on industries undergoing substantial regulatory or structural change and on the issues driving these transformations.

The Company derives its revenues from fees for professional services. Over the last three years, a substantial majority of the Company’s revenues has been generated under hourly or daily rates billed on a time and expense basis. Clients are typically invoiced on a monthly basis, with revenue recognized as the services are provided. There are also client engagements where the Company is paid a fixed amount for its services, often referred to as fixed fee billings. This may be one single amount covering the whole engagement or several amounts for various phases or functions. From time to time, the Company earns incremental revenues, in addition to hourly or fixed fee billings, which are contingent on the attainment of certain contractual milestones or objectives. Such incremental revenues may cause variations in quarterly revenues and operating results if all other revenues and expenses during the quarters remain the same.

The Company’s most significant expense is cost of services before reimbursable expenses, which generally relates to costs associated with generating revenues, and includes consultant compensation and benefits, sales and marketing expenses, and the direct costs of recruiting and training the consulting staff. Consultant compensation consists of salaries and incentive compensation. The consultants’ total compensation is competitive with industry standards. Incentive compensation is structured to reward consultants based on business performance.

The Company’s most significant overhead expenses include administrative compensation and benefits, and office related expenses. Administrative compensation includes payroll costs for corporate management and administrative personnel, which are used to indirectly support client projects. Office related expenses include primarily office rent for the Company’s 35 locations.

Critical Accounting Estimates and Assumptions

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect amounts reported therein. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments with respect to the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements:

Revenue Recognition Policies

The Company recognizes revenues as the related professional services are provided. In connection with recording revenues, estimates and assumptions are required in determining the expected conversion of the revenues to cash. There are also client engagements where the Company is paid a fixed amount for its services. This may be one single amount covering the whole engagement or several amounts for various phases or functions. The recording of these fixed revenue amounts requires the Company to make an estimate of the total

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amount of work to be performed and revenues are then recognized on a percentage of completion basis. From time to time, the Company also earns incremental revenues. These incremental revenue amounts are generally contingent on a specific event and the incremental revenues are recognized when the contingencies are resolved.

Determinations of Accounts Receivable Realization

The Company maintains allowances for doubtful accounts for estimated reduction, if any, in amounts to be received, based on the Company’s review and assessment of its clients’ ability to make required payments, and the estimated realization, in cash, by the Company of amounts due from its clients. If the financial condition of a client were to deteriorate resulting in an impairment of the client’s ability to make payments, additional allowances might be required.

Goodwill and Identifiable Intangible Assets

Intangible assets consist of identifiable intangibles and goodwill. Identifiable intangible assets other than goodwill include customer lists, employee non-compete agreements, employee training methodology and materials, backlog revenue, and trade names. Intangible assets, other than goodwill, are amortized on the straight-line method based on the estimated useful lives, ranging up to seven years.

Goodwill represents the difference between the purchase price of an acquired company and the related fair value of the net assets acquired, which is accounted for by the purchase method of accounting. In 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Intangible Assets.” This Statement eliminated the amortization of goodwill and intangibles with indefinite lives and instead requires that they be tested annually, for impairment. This annual test is performed in the second quarter of each year by reviewing the book value compared to the fair value at the reporting unit level. The Company also reviews long-lived assets, including identifiable intangibles and goodwill, for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An asset is deemed impaired and written down to its fair value if estimated related future cash flows are less than its carrying amount.

Considerable management judgment is required to estimate future cash flows. Assumptions used in the Company’s impairment evaluations, such as forecasted growth rates and cost of capital, are consistent with internal projections and operating plans. The Company did not recognize any impairment charges for goodwill, indefinite-lived intangible assets or identifiable intangible assets subject to amortization during the years presented.

Acquisitions and Divestiture

2004 Acquisitions

On January 30, 2004, the Company acquired substantially all of the assets of Tucker Alan, Inc. (“Tucker”) for $89.5 million, which consisted of payments at closing of $45.6 million cash and 0.3 million shares of its common stock, valued at $6.0 million at closing, and $37.9 million payable in two installments of cash and the Company’s common stock within the first two years following the closing date of the transaction. In connection with the Tucker acquisition, the Company acquired tangible assets of $1.3 million. The Tucker acquisition included 230 consulting professionals active primarily in the litigation, construction, and healthcare practices. The Company acquired Tucker to strengthen its national platform in these practices. Tucker has a significant presence in the western region of the United States that complements the Company’s other geographic regions. Tucker’s service offerings and industry expertise are also complementary to those of the Company.

On June 4, 2004, the Company acquired substantially all of the assets of Capital Advisory Services, LLC (“CapAdvisory”) for $10.5 million, which consisted of payments at closing of $6.5 million cash and 0.1 million shares of its common stock, valued at $1.5 million at closing, and $2.5 million payable in two installments of cash and the Company’s common stock in the first two years following the closing date of the transaction. The

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CapAdvisory acquisition included 49 consulting professionals who complement the Company’s financial services practice and primarily provide financial and accounting consulting services. The Company acquired CapAdvisory to expand the Company’s service offerings within the financial services industry.

On August 31, 2004, the Company acquired substantially all of the assets of Invalesco Group, Inc. (“Invalesco”) for $2.5 million, which consisted of payments at closing of $1.2 million cash and 0.04 million shares of its common stock, valued at $0.8 million at closing, and $0.5 million payable in cash on the first anniversary of the closing date of the transaction. The Invalesco acquisition included 14 consulting professionals who complement the Company’s healthcare practice and primarily provide services to hospitals and healthcare providers. The Company acquired Invalesco to expand the Company’s service offerings within the healthcare industry.

2003 Acquisition

On December 15, 2003, the Company acquired substantially all of the assets of Front Line Strategic Consulting, Inc. (“Front Line”) for $4.8 million, which included $2.5 million cash at closing and 0.1 million shares of its common stock valued at $1.3 million at closing, and $1.0 million payable in two equal installments on the first and second anniversary of the closing date. The Front Line acquisition consisted of 27 consulting professionals. Front Line was acquired primarily to augment the Company’s healthcare practice.

2002 Acquisitions

On April 5, 2002, the Company acquired portions of Arthur D. Little, Inc.’s assets for $6.1 million cash at closing. The acquisition consisted of two consulting units, with approximately 30 consulting professionals who primarily serve the energy and public sector industries.

On May 24, 2002, the Company acquired substantially all of the assets of Financial Analytics Consulting Group, LLC (“FACG”) for $6.3 million, which consisted of $4.5 million cash at closing and 0.3 million shares of its common stock valued at $1.8 million at closing. In addition to the initial consideration, the purchase agreements provided for additional payments in cash over the two full calendar years after closing that are contingent on revenues generated and the attainment of certain gross margin thresholds. The additional payments related to this contingency were accounted for as goodwill. FACG was formed in conjunction with a management buyout from Arthur Andersen, LLP, and consisted of approximately 90 consulting professionals from five different Arthur Andersen practices. FACG was acquired primarily to augment the Company’s litigation support and investigation services offerings.

On June 19, 2002, the Company acquired substantially all of the assets of Keevan Consulting, LLC (“Keevan”) for $7.2 million, which consisted of $4.0 million cash at closing, 0.4 million shares of its common stock valued at $2.7 million at closing, and $0.5 million cash payable in April 2003. In addition to the initial consideration, the purchase agreement provided for additional payments in cash and the Company’s common stock over the two and one-half years from closing that are contingent on revenues generated and the attainment of certain gross margin thresholds. The additional payments related to this contingency were accounted for as goodwill. Keevan was formed in conjunction with a management buyout from Arthur Andersen, LLP, and consisted of approximately 38 consulting professionals. Keevan was acquired to augment the Company’s government contracts consulting services practice.

On July 15, 2002, the Company acquired substantially all of the assets of Barrington Energy Partners, LLC (“Barrington Energy”) for $11.1 million, which consisted of $4.8 million cash at closing, 0.7 million shares of its common stock valued at $4.8 million at closing, and $1.5 million cash payable on the first anniversary of the closing date. In addition to the initial consideration, the purchase agreement provided for additional payments in cash and the Company’s common stock over the two and one-half years from closing that are contingent on the attainment of certain performance thresholds. The additional payments related to this contingency were

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accounted for as goodwill. Barrington Energy consisted of eight senior-level professionals and six other staff who complement the Company’s energy industry sector and primarily provide financial and transaction advisory service offerings.

Effective September 17, 2002, the Company acquired substantially all of the assets of Hunter & Associates Management Services, Inc. (“Hunter”) for $25.4 million, which consisted of $10.2 million cash at closing, 1.5 million shares of the Company’s common stock valued at $8.2 million at closing, $0.5 million cash payable on April 1, 2003, and $6.5 million in the Company’s common stock payable in two equal installments on the first and second anniversary of the closing. In addition to the initial consideration, the purchase agreement provided for additional payments in cash and the Company’s common stock over the three years following closing that are contingent on the attainment of certain performance targets. The additional payments related to this contingency were accounted for as goodwill. Hunter consisted of 20 senior-level professionals and 40 additional staff that provide a comprehensive range of performance improvement services to hospitals and healthcare systems, including physician practices and provider owner-managed care organizations. Hunter also provided interim executive-level management services as well as consulting services related to hospital restructurings. Hunter was acquired to significantly expand the Company’s service offerings within the healthcare industry.

Accounting for Acquisitions

All of the Company’s acquisitions described above have been accounted for by the purchase method of accounting for business combinations and, accordingly, the results of operations have been included in the consolidated financial statements since the dates of acquisition.

2003 Divestiture

In September 2003, the Company sold for a nominal sales price its water consulting practice, Bookman–Edmonston, Inc., which was previously part of the Energy Consulting business segment. Bookman–Edmonston accounted for 3 percent or less of the Company’s total revenues for the years ended December 31, 2003 and 2002, and operated at a loss.

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Results of Operations

The following table sets forth, for the periods indicated, selected statement of operations data as a percentage of revenues before reimbursements:

Results of Operations—Annual Comparisons for the Years ended December 31, 2004, 2003 and 2002

Revenues before Reimbursements. Most revenues before reimbursements are earned from consultants’ fee revenues that are primarily a function of billable hours, bill rates, and consultant headcount. Revenues before reimbursements were $426.9 million and $276.1 million for the years ended December 31, 2004 and 2003, respectively, which represent increases in revenues before reimbursements of 55 percent and 23 percent, respectively, when compared to each preceding year.

Revenues before reimbursements in 2004 grew through an increase in consulting headcount and improved pricing mix. The Company had 1,556 billable consultants as of December 31, 2004, compared to 959 as of December 31, 2003, which represented a net increase of 62 percent, or 597 consultants, for the year. Approximately 290 consulting professionals joined the Company through business acquisitions made during year, which represented nearly half of the increase in billable headcount. The remaining increase in consulting professionals, net of attrition, was attributable to the Company’s recruiting efforts. The increased staffing levels, along with the commensurate client engagements required to support this increased headcount, had the most significant impact on operating results. Given that the Company’s bill rates are tiered in accordance with experience and levels, increasing the number of senior level consultants in 2004 improved the Company’s pricing mix and was an additional factor in the revenue increase. Consultant utilization was 72 percent for the years 2004 and 2003, compared to 66 percent for 2002. The improvements in utilization in 2003, along with improved pricing mix, were the primary factors in the increase from 2002 to 2003.

Cost of Services before Reimbursable Expenses. Cost of services before reimbursable expenses increased $88.9 million, or 56 percent, to $249.0 million for the year ended December 31, 2004, and increased $24.0 million, or 18 percent, to $160.1 million for the year ended December 31, 2003, when compared to each preceding year.

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Cost of services before reimbursable expenses increased primarily because of consultant compensation and benefits. The increased employee headcount was the primary cause of the increase in consultant compensation and benefits. Additionally, the Company’s business model rewards employees with incentive compensation, which is primarily derived as a percentage of profitability. The increase in the Company’s profits and the associated incentive compensation to employees is an additional reason for the increase in cost of services before reimbursable expenses for 2004 and 2003, when compared to each preceding year. Increasing amounts of recruiting expenses were an additional factor in the expense increases.

Stock-based Compensation Expense. Stock-based compensation expense includes compensation expense related to restricted shares, restricted stock units, stock appreciation rights, and certain stock options awarded to the Company’s employees. Stock-based compensation expense is recorded for restricted stock awards on a straight-line basis over their vesting term based on the valuation amount at grant date. The Company expects to continue to grant restricted stock as part of the costs to recruit and retain consulting personnel. Certain stock options and stock appreciation rights (“variable accounting awards”) are subject to variable accounting treatment. Compensation expense (or credit) for the variable accounting awards is recorded quarterly for the increase (or decrease) in the market price of the Company’s common stock above the grant prices.

Stock-based compensation expense was $9.6 million and $11.1 million for the years ended December 31, 2004 and 2003, respectively, which represents a decrease of $1.5 million and an increase of $7.7 million, respectively, when compared to each preceding year. Stock-based compensation expense related to restricted stock awards was $7.7 million and $6.3 million for the years ended December 31, 2004 and 2003, respectively, which represents increases of $1.4 million and $3.6 million, respectively, when compared to each preceding year. The Company has implemented several incentive programs, using restricted stock, to recruit, retain and reward its employees, which is the primary reason for the increase in stock-based compensation expense. At December 31, 2004, the Company’s common stock price was $26.60, compared to $18.86 and $5.90 at December 31, 2003 and 2002, respectively, which represents increases of $7.74 and $12.96, respectively, over the price at each preceding year-end. Accordingly, the Company recorded stock-based compensation expense of $1.9 million related to variable accounting awards for the year ended December 31, 2004, to reflect the increase in market valuation of its common stock. Stock-based compensation expense for variable accounting awards was $4.8 million and $0.7 million for the comparable years of 2003 and 2002.

The number of awards, as of December 31, 2004 subject to variable accounting, was 0.1 million and approximately two-thirds of these awards are stock appreciation rights that expire in the second quarter of 2005. The agreements for certain restricted stock awards outstanding at December 31, 2004 contain provisions that allow for an acceleration of vesting, if the Company achieves a certain level of financial performance. Accordingly, the Company may be required to accelerate the unamortized compensation expense related to those awards and, therefore, the Company may experience variations in stock-based compensation expense from period to period.

General and Administrative Expenses. General and administrative expenses include facility-related costs, salaries and benefits of management and support personnel, uncollectible billed accounts receivable amounts, professional and administrative services, and all other support costs.

General and administrative expenses increased $21.4 million, or 34 percent, to $84.7 million in the year ended December 31, 2004, and increased $2.6 million, or 4 percent, to $63.3 million in 2003. The increases in expenses are due to several factors including business acquisitions, as well as the hiring of additional consulting personnel. Increases in administrative headcount to support the additional consulting personnel contributed to an increase in total administrative payroll and benefit costs. The balance of the increase is attributed to expansion of existing facilities, facilities acquired through business acquisitions, other general and administrative costs associated with the support infrastructure of the Company’s increased size, and other costs incurred to facilitate the integration of the acquired businesses.

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General and administrative expenses as a percentage of revenues before reimbursements were 20 percent, 23 percent, and 27 percent for the years ended December 31, 2004, 2003 and 2002, respectively.

Amortization Expense. Amortization expense includes primarily the straight-line amortization of intangible assets derived from the purchase price allocation of certain business acquisitions. Intangible assets include customer lists, covenants not-to-compete and trade names. In accordance with Statement of Financial Accounting Standards No. 142, which the Company adopted in 2002, goodwill is no longer subject to amortization beginning in 2002, but is subject to annual impairment testing.

Amortization expense was $3.6 million and $1.9 million for the years ended December 31, 2004 and 2003, respectively. The increase of $1.7 million in amortization expense for 2004 compared to 2003 represents the amortization of intangible assets, which were acquired as part of the business acquisitions made during the year. Amortization expense decreased by $0.5 million for the year ended December 31, 2003 when compared to 2002, which was primarily related certain intangible assets acquired prior to 2003 being fully amortized in 2002 or during 2003.

Restructuring costs. During the year ended December 31, 2004, the Company recorded a restructuring charge of $1.1 million, primarily for changes in the Company’s plans regarding utilization of a facility for which a restructuring accrual had been recorded in a prior year.

Litigation and Settlements Provisions. Litigation and settlement provisions included amounts accrued, based on then current information, for costs estimated to resolve certain litigation matters. The Company recorded $0.4 million each for the year ended December 31, 2004 and 2003, and $0.8 million for the year ended December 31, 2002. The matters for which the Company had established the provisions have been resolved and paid as of December 31, 2004.

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Unaudited Quarterly Results

The following table sets forth certain unaudited quarterly financial information. The unaudited quarterly financial data has been prepared on the same basis as the audited consolidated financial statements contained elsewhere in this Form 10-K. The data includes all normal recurring adjustments necessary for the fair presentation of the information for the periods presented, when read in conjunction with the Company’s consolidated financial statements and related notes thereto. Results for any quarter are not necessarily indicative of results for the full year or for any future quarter.

The amounts in the following table are in thousands, except for per share data:

Operating results fluctuate from quarter to quarter as a result of a number of factors, including the significance of client engagements commenced and completed during a quarter, the number of business days in a quarter, employee hiring, and utilization rates. The timing of revenues varies from quarter to quarter due to various factors, such as the ability of clients to terminate engagements without penalty, the size and scope of assignments, and general economic conditions. Because a significant percentage of the Company’s expenses are relatively fixed, a variation in the number of client assignments, or the timing of the initiation or the completion of client assignments, can cause significant variations in operating results from quarter to quarter. Furthermore, the Company’s stock price volatility may cause fluctuations in expenses and operating results as the Company measures the valuation of stock-based compensation for options subject to variable accounting treatment from quarter to quarter.

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Human Capital Resources

The Company had 1,556 billable consultants as of December 31, 2004, compared to 959 as of December 31, 2003, which represented a net increase of 62 percent, or 597 consultants, for the year. Approximately 290 consulting professionals were hired as a part of business acquisitions made during the year, which represented nearly half of the increase in billable headcount. The remaining increase in consulting professionals, net of attrition, was attributable to the Company’s recruiting efforts. The Full Time Equivalent (“FTE”) consultant headcounts at December 31, 2004, 2003 and 2002 were 1,523, 932 and 1,002, respectively. The average numbers of FTE consultants during the years were 1,319, 937 and 999, respectively. The average number of FTE consultants is adjusted for part-time status and takes into consideration hiring and attrition which occur during the year.

In connection with certain recruiting activities and business acquisitions, the Company’s policy is to obtain non-solicitation covenants from senior and mid-level consultants. Most of these covenants have restrictions that extend twelve months beyond the cessation of employment. The Company employs these contractual agreements, and other agreements, to reduce the risk of attrition and to safeguard the Company’s existing clients, staff, and projects from departing employees.

The Company continually monitors and adjusts, if needed, the consultants’ total compensation, which includes salaries, annual cash incentive compensation, and other cash and equity incentives from certain Company programs, to ensure both that the consultants’ compensation is competitive within the industry and that the Company has the opportunity to achieve target profitability levels. Material changes to the Company’s compensation structure are done with the requisite approval from the Compensation Committee of the Company’s Board of Directors. The Company’s bill rates to clients are tiered in accordance with the experience and levels of the consulting staff. The Company monitors and adjusts those bill rates according to the supply and demand of the then-current market conditions within the various industry segments served by the Company.

Liquidity and Capital Resources

Summary

The Company had $36.9 million in cash and cash equivalents at December 31, 2004, compared to $38.4 million at December 31, 2003. The Company’s cash equivalents were primarily limited to commercial paper or securities (rated A or better), with maturity dates of 90 days or less.

Working capital, the excess of current assets over current liabilities, was $48.5 million at December 31, 2004 compared to $51.9 million at December 31, 2003.

The Company calculates accounts receivable days sales outstanding (“DSO”) by dividing the accounts receivable balance, net of deferred revenue credits, at the end of the quarter by daily net revenues. Daily net revenues are calculated by taking quarterly net revenues divided by 90 days, approximately equal to the number of days in a quarter. Calculated as such, DSO was 71 days at December 31, 2004 compared to 72 days at December 31, 2003. Revenues for the fourth quarter 2004 increased by 59 percent compared with 2003 fourth quarter revenues, while accounts receivable, net of deferred revenue credits, increased 56 percent to $100.4 million at December 31, 2004, from $64.5 million at December 31, 2003. The Company has a limited number of engagements that are billed and collected in advance of services. The collection of these billings, and management’s continued focus on collection efforts and on more timely billings, was a factor in reducing the DSO at the 2004 year-end. Another reason for the decrease in DSO at December 31, 2004 was the factoring of certain client receivables in conjunction with its sale, in January 2005, of certain assets. The Company made an adjustment in the calculation at December 31, 2004 to remove the daily revenues and related client receivables of the aforementioned factored assets. As of December 31, 2004, the Company recorded assets held for sale of $5.8 million, which consisted of $5.0 million of billed and unbilled receivables and $0.8 million of fixed assets. The assets held for sale were sold on January 3, 2005. At December 31, 2004, the Company recorded a write down of $0.6 million to state the assets held for sale at net realizable value.

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Cash Flow

For the year ended December 31, 2004, net cash provided by operating activities was $72.2 million, compared to $57.0 million and $8.9 million for the years ended December 31, 2003 and 2002, respectively. For the year ended December 31, 2004, the Company’s net income was $40.4 million, which included $11.9 million of depreciation and amortization expense, $9.6 million of stock-based compensation expense and other expense amortization of $3.1 million. The Company’s liability for accrued compensation-related costs increased by $31.4 million and is primarily related to an increase in the annual employee incentive compensation liability, which will not be paid until the first quarter 2005. The Company realized tax benefits of $13.1 million related to the vesting of restricted stock and stock option exercises for the difference between the Company’s then-current common stock market price and the strike price of the equity awards. These amounts were offset by an increase in accounts receivable of $54.4 million, resulting primarily from the recent revenue increases. The timing of cash collections from clients and other normal operating disbursements, some of which are cyclical, may cause variations in the cash operating activities from period to period.

Net cash used by investing activities for the year ended December 31, 2004 was $81.6 million. The Company paid $53.7 million for acquisition-related transactions, of which $45.6 million, $6.5 million and $1.2 million were paid at closing for the acquisitions of Tucker, CapAdvisory and Invalesco, respectively, and were related to portions of the purchase price agreements. The Company also paid $13.5 million related to businesses acquired prior to 2004. In addition, the Company expended $14.7 million for capital spending, which was predominately related to computer purchases, furnishing its facilities and leasehold improvements in certain offices.

Net cash provided by financing activities was $7.8 million in 2004, which was related to employee purchases of shares under stock option and stock purchase plans.

Debt, Commitments and Capital

As of December 31, 2004, the Company maintained an unsecured revolving line of credit agreement for $150.0 million. The revolving line of credit agreement expires on October 31, 2005 and the Company has the option to extend the agreement for an additional two years from the expiration date. Borrowings under the revolving line of credit agreement bear interest based, at the Company’s option, on either (1) the higher of the prime rate or the Federal fund rates plus 0.5 percent, or (2) London Interbank Offered Rate (LIBOR) plus 1.25 percent. The line of credit agreement requires the Company to maintain a minimum level of earnings before interest, taxes, depreciation and amortization, among other things. The Company complied with the terms of its line of credit agreement as of December 31, 2004 and 2003. The Company did not have a balance outstanding under its line of credit agreement as of December 31, 2004 and December 31, 2003.

As of December 31, 2004, the Company had commitments of $164.7 million, which consisted of $40.9 million in deferred business acquisition obligations and $16.3 million in acquisition earnout obligations, both payable in cash and its common stock, $1.1 million cash obligation related to the Management Stock Purchase Plan (“MSPP”) agreements, and $106.4 million in lease commitments. The deferred business acquisition obligations are primarily related to acquisitions made in 2004. The acquisition earnout obligations are related to acquisitions made prior to 2004 and were contingent upon the attainment of certain performance criteria before being payable at December 31, 2004. During the year ended December 31, 2004, the Company assumed a number of operating leases for office space from Tucker and secured other office space by signing long-term leases. As of December 31, 2004, the Company had no significant commitments for capital expenditures.

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The following table shows the components of significant commitments as of December 31, 2004 and the scheduled years of payments (shown in thousands):

The Company believes that its current cash and cash equivalents, the future cash flows from operations and the line of credit facility will provide adequate cash to fund anticipated short-term and long-term cash needs from normal operations. In the event the Company was to make significant cash expenditures in the future for major acquisitions or other non-operating activities, the Company might need additional debt or equity financing, as appropriate.

Other Events

On February 8, 2005, the Company acquired substantially all of the assets of Casas, Benjamin & White (“CBW”) for $47.5 million, which included $38.0 million cash at closing and an aggregate of $9.5 million of its common stock to be issued in February 2006, 2007 and 2008. The CBW acquisition included 23 consulting professionals specializing in corporate restructuring and transaction advisory services. The Company acquired CBW to strengthen its corporate finance practice. The Company filed a Current Report on Form 8-K dated February 8, 2005, relating to this acquisition.

In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment,” which replaces SFAS No. 123 and supersedes APB No. 25. The Statement requires that the cost resulting from all share-based compensation arrangements, such as the Company’s stock option and restricted stock plans, be recognized in the financial statements based on their fair value. The provisions of SFAS No. 123(R) are required to be applied as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. Accordingly, the Company will adopt the provisions of SFAS No. 123(R) at the beginning of the third quarter of fiscal year 2005. SFAS No. 123(R) requires companies to adopt its provisions prospectively by recognizing compensation expense for the unvested portion of previously granted awards and all new awards granted after the adoption date over the respective vesting periods. SFAS No. 123(R) also allows companies to restate previously issued financial statements, either for all years beginning after December 15, 1994, or only for the interim periods in the year of adoption.

The adoption of SFAS No. 123(R) will not affect the Company’s net cash flows, but it will reduce net earnings and basic and diluted net earnings per share. While the Company currently discloses the pro forma net earnings effects of its stock-based awards (see Note 2). The Company is in the process of evaluating the alternative methods of adoption and the impact that the implementation guidance and revisions included in SFAS No. 123(R) will have on its consolidated financial statements.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.

The Company’s primary exposure to market risks relates to changes in interest rates associated with its borrowings under the line of credit, and its investment portfolio, classified as cash equivalents. The Company’s general investment policy is to limit the risk of principal loss by limiting market and credit risks.

As of December 31, 2004, the Company’s investments were primarily limited to ‘A’ rated securities, with maturity dates of 90 days or less. These financial instruments are subject to interest rate risk and will decline in value if interest rates rise. Because of the short periods to maturity of these instruments, an increase in interest rates would not have a material effect on the Company’s financial position or operating results.

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The Company’s market risk associated with its line of credit relates to changes in interest rates. Borrowings under the amended line of credit agreement bear interest based, at the Company’s option, on either (1) the higher of the prime rate or the Federal fund rates plus 0.5 percent, or (2) London Interbank Offered Rate (LIBOR) plus 1.25 percent. Because at December 31, 2004, no amounts were outstanding under the line of credit, a change in interest rates would not affect the Company’s financial position or operating results.

Other than the certain deferred purchase price obligations and contingent earnout obligations discussed above, the Company did not have, at December 31, 2004, any short-term debt, long-term debt, interest rate derivatives, forward exchange agreements, firmly committed foreign currency sales transactions, or derivative commodity instruments.

The Company operates in foreign countries which expose it to market risk associated with foreign currency exchange rate fluctuations; however, such risk is immaterial in relation to the Company’s consolidated financial statements.

Item 8.    Consolidated Financial Statements and Supplementary Data.

The Consolidated Financial Statements of the Company are in this report as pages F-1 through F-27. An index to such information appears on page F-1.

Item 9.    Changes In and Disagreements with the Company’s Independent Accountants on Accounting and Financial Disclosure.

None.

Item 9A.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

Under the direction of our principal executive officer and principal financial officer, the Company has evaluated the effectiveness of its disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of December 31, 2004. Based on that evaluation, the Company has concluded that its disclosure controls and procedures were effective in providing reasonable assurance that material information required to be disclosed is included on a timely basis in the reports its files with the Securities and Exchange Commission.

Management’s Annual Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the Company’s evaluation under the framework in Internal Control – Integrated Framework, the Company’s management concluded that its internal control over financial reporting was effective as of December 31, 2004.

The Company’s management assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included herein.

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Item 9B.    Other Information.

None

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Navigant Consulting, Inc.:

We have audited management’s assessment, presented in Management’s Annual Report on Internal Control Over Financial Reporting, that Navigant Consulting, Inc. maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Navigant Consulting, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Navigant Consulting, Inc. maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Navigant Consulting, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Navigant Consulting, Inc. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2004, and our report dated March 7, 2005 expressed an unqualified opinion thereon.

/s/    KPMG LLP

Chicago, Illinois

March 7, 2005

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PART III

Item 10.    Directors and Executive Officers of the Registrant.

Information required in response to this Item is incorporated herein by reference from the Company’s definitive proxy statement for the Company’s Annual Meeting of Stockholders scheduled to be held on May 4, 2005, which proxy statement will be filed with the Commission pursuant to Regulation 14A not later than 120 days after the end of the Company’s year ended December 31, 2004.

Item 11.    Executive Compensation.

Information required in response to this Item is incorporated herein by reference from the Company’s definitive proxy statement for the Company’s Annual Meeting of Stockholders scheduled to be held on May 4, 2005, which proxy statement will be filed with the Commission pursuant to Regulation 14A not later than 120 days after the end of the Company’s year ended December 31, 2004.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information required in response to this Item is incorporated herein by reference from the Company’s definitive proxy statement for the Company’s Annual Meeting of Stockholders scheduled to be held on May 4, 2005, which proxy statement will be filed with the Commission pursuant to Regulation 14A not later than 120 days after the end of the Company’s year ended December 31, 2004.

Information required with respect to the securities authorized for issuance under the Company’s equity compensation plans, including plans that have previously been approved by the Company’s stockholders and plans that have not previously been approved by the Company’s stockholders, will be set forth in the Proxy Statement, and such information is incorporated herein by reference.

Item 13.    Certain Relationships and Related Transactions.

Information required in response to this Item is herein incorporated by reference from the Company’s definitive proxy statement for the Company’s Annual Meeting of Stockholders scheduled to be held on May 4, 2005, which proxy statement will be filed with the Commission pursuant to Regulation 14A not later than 120 days after the end of the Company’s year ended December 31, 2004.

Item 14.    Principal Independent Accountant Fees and Services.

Information required in response to this Item is incorporated herein by reference from the Company’s definitive proxy statement for the Company’s Annual Meeting of Stockholders scheduled to be held on May 4, 2005, which proxy statement will be filed with the Commission pursuant to Regulation 14A not later than 120 days after the end of the Company’s year ended December 31, 2004.

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PART IV

Item 15.    Exhibits and Financial Statement Schedules.

(a) The consolidated financial statements and financial statement schedule filed as part of this report are listed in the accompanying Index to Consolidated Financial Statements. The Financial Statement Schedule filed as part of this report is listed below.

(c) The exhibits filed as part of this report are listed below:

a.    Exhibits:

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