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8-K - FORM 8-K - FTI CONSULTING, INCd581238d8k.htm

Exhibit 99.1

 

LOGO

FTI Consulting, Inc.

777 South Flagler Drive, Suite 1500

West Palm Beach, FL 33401

+1.561.515.6078

Investor & Media Contact:

Mollie Hawkes

+1.617.747.1791

mollie.hawkes@fticonsulting.com

FTI Consulting Reports Second Quarter 2013 Results

    Second Quarter Revenues of $414.6 Million

    Second Quarter Adjusted EPS of $0.58

•     2013 Guidance Reduced Primarily Due to Softness in North America Restructuring Demand

West Palm Beach, Fla., August 8, 2013 – FTI Consulting, Inc. (NYSE: FCN), the global business advisory firm dedicated to helping organizations protect and enhance their enterprise value (the “Company”), today released its financial results for the quarter ended June 30, 2013.

For the quarter, revenues increased 4.6 percent to $414.6 million compared to $396.2 million in the prior year quarter. Fully diluted earnings per share (“EPS”) were $0.58 for the quarter compared to $0.18 in the prior year quarter, which included a special charge reducing EPS by $0.42. Adjusted EPS were $0.58 for the quarter compared to $0.60 in the prior year quarter. Adjusted EPS for the quarter were reduced by $0.04 per share as a result of an Australian “Stamp Tax” and other closing costs related to our acquisition of an Australian corporate advisory firm. As discussed elsewhere in this press release, Adjusted EPS for the quarter also included the offsetting effects of two non-cash valuation adjustments – a revaluation gain related to the contingent consideration liability of a prior acquisition which increased Adjusted EPS by $0.18 and a deferred tax valuation reserve related to foreign tax credits which reduced Adjusted EPS by $0.17.

Adjusted EBITDA was $74.2 million for the quarter compared to $66.6 million in the prior year quarter. Adjusted EBITDA included the revaluation gain of $8.2 million during the quarter, compared to a revaluation gain of $4.1 million in the prior year quarter. The increase in Adjusted EBITDA compared to the prior year quarter resulted from the larger revaluation gain in the current quarter and a reduction of performance-based compensation expense.

Adjusted EPS, Adjusted EBITDA and Adjusted Segment EBITDA are non-GAAP measures defined elsewhere in this press release and are reconciled to GAAP measures in the financial tables that accompany this press release.

Commenting on these results, Jack Dunn, FTI Consulting President and Chief Executive Officer said, “The most significant factor affecting the quarter’s performance and our reduced guidance for the year was slowing demand for bankruptcy and restructuring work in North America. Record levels of new speculative grade and structured finance offerings and the continuation of the Fed’s policy of quantitative easing have resulted in lower than expected default rates and demand for bankruptcy and restructuring services. On the other hand, the record level of highly levered debt outstanding over the long term should create the potential for significant engagements when interest rates and default rates regress to more normal levels.”

“Across the remainder of our business, results included continued strength in our Economic Consulting segment, notably in Europe. We also realized improved revenues and profitability in our Technology segment driven by increased demand for our M&A-related second request services, and 12 percent revenue growth over the prior year quarter in our health solutions practice.”


Cash and Capital Allocation

Net cash provided by operating activities in the quarter was $21.7 million compared to $0.5 million in the prior year quarter, primarily due to strong cash collections. Cash and cash equivalents were $92.6 million at June 30, 2013. During the quarter, the Company utilized cash of $25.8 million for acquisitions, which was primarily related to the acquisition of an Australian corporate advisory firm.

Second Quarter Segment Results

Corporate Finance/Restructuring

Revenues in the Corporate Finance/Restructuring segment were $96.7 million in the quarter compared to $96.2 million in the prior year quarter. The segment benefited from three acquisitions which contributed revenues of $13.0 million in the quarter; however, the segment experienced an equivalent decline in bankruptcy and restructuring revenues in the North America and Asia Pacific regions. Adjusted Segment EBITDA was $24.1 million or 24.9 percent of segment revenues, compared to $27.3 million or 28.4 percent of segment revenues in the prior year quarter. Adjusted Segment EBITDA included a revaluation gain of $6.3 million during the quarter, compared to a revaluation gain of $3.8 million in the prior year quarter, and a reduction of $1.8 million due to the Australian “Stamp Tax” and other closing costs related to our acquisition of an Australian corporate advisory firm. Adjusted Segment EBITDA margin in the quarter was reduced by underutilization in the segment’s North America bankruptcy and restructuring practice, which was partially offset by a reduction of performance-based compensation expense and the revaluation gain.

Economic Consulting

Revenues in the Economic Consulting segment increased 11.6 percent to $111.0 million compared to $99.5 million in the prior year quarter. The increase in revenues was driven by continued strong demand for the segment’s antitrust litigation services in North America and Europe, Middle East and Africa (“EMEA”) and international arbitration, regulatory and valuation practices in EMEA. Adjusted Segment EBITDA was $20.8 million or 18.7 percent of segment revenues, compared to $18.5 million or 18.6 percent of segment revenues in the prior year quarter.

Forensic and Litigation Consulting

Revenues in the Forensic and Litigation Consulting segment were $105.1 million in the quarter compared to $106.3 million in the prior year quarter. Revenue growth in the health solutions practice was offset by continued weak demand for the segment’s North America investigations and trial services practices. Adjusted Segment EBITDA was $20.7 million or 19.7 percent of segment revenues, compared to $19.5 million or 18.4 percent of segment revenues in the prior year quarter. Adjusted Segment EBITDA included a revaluation gain of $1.9 million during the quarter, compared to a revaluation gain of $0.3 million in the prior year quarter. The increase in Adjusted Segment EBITDA margin was due to a reduction of performance-based compensation expense and the larger revaluation gain in the quarter, which was partially offset by underutilization in the trial services practice and investments in certain new EMEA practices.

Technology

Revenues in the Technology segment increased 7.3 percent to $51.2 million compared to $47.7 million in the prior year quarter. The increase in revenues was due to increased volume for M&A-related second request services and continued growth in EMEA and North America related to financial services investigations and competition matters. Adjusted Segment EBITDA was $16.9 million or 33.0 percent of segment revenues, compared to $12.9 million or 26.9 percent of segment revenues in the prior year quarter. Adjusted Segment EBITDA margin in the quarter was positively impacted by increased volumes for services and a lower level of R&D spend due to the completion of recently released versions of Ringtail®, which was partially offset by reduced pricing for services and consulting.

Strategic Communications

Revenues in the Strategic Communications segment increased 8.4 percent to $50.6 million compared to $46.6 million in the prior year quarter. The increase in revenues included a $1.5 million contribution from the acquisition of a U.S. public policy group completed in March 2013, increased pass-through revenues for certain North America retained engagements and improved project income in North America and EMEA. Adjusted Segment EBITDA was $5.2 million or 10.3 percent of segment revenues, compared to $5.0 million or 10.7 percent of segment revenues in the prior year quarter. Adjusted Segment EBITDA margin was adversely impacted by a greater proportion of low margin pass-through revenues.


Non-Cash Valuation Adjustments

For the quarter, EPS and Adjusted EPS included the offsetting effects of non-cash valuation adjustments of (1) an acquisition-related contingent consideration liability, and (2) a foreign tax credit asset.

The Company reduced its acquisition-related contingent consideration liability related to business operations in Asia that were acquired in 2010, based upon a re-evaluation of the consideration expected to be paid over the remaining earn out period. The $8.2 million non-cash valuation adjustment was recorded as a revaluation gain and is included within “Acquisition-related contingent consideration” in the Consolidated Statement of Income. This revaluation gain resulted in a $0.18 increase in EPS and Adjusted EPS for the quarter. A revaluation gain of $4.1 million related to the same business operations was recorded in the prior year quarter, resulting in a $0.08 increase in EPS and Adjusted EPS.

Additionally, a $6.9 million non-cash valuation reserve was recorded to reduce a deferred tax asset previously established to reflect the benefit of future foreign tax credits which, based on a current assessment, may not be realizable in the future. This valuation allowance was recorded as an increase in income tax expense for the quarter, which decreased EPS and Adjusted EPS by $0.17.

2013 Guidance

Based on current market conditions, in particular the weakened outlook for North America bankruptcy and restructuring engagements, the Company now estimates that revenues for 2013 will be between $1.62 billion and $1.65 billion and Adjusted EPS will be between $2.10 and $2.20.

Second Quarter Conference Call

FTI Consulting will hold a conference call for analysts and investors to discuss second quarter financial results at 9:00 AM Eastern Time on August 8, 2013. The call can be accessed live and will be available for replay over the Internet for 90 days by logging onto the Company’s website at www.fticonsulting.com.

About FTI Consulting

FTI Consulting, Inc. is a global business advisory firm dedicated to helping organizations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. With over 4,000 employees located in 24 countries, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management, strategic communications and restructuring. The Company generated $1.58 billion in revenues during fiscal year 2012. More information can be found at www.fticonsulting.com.

Use of Non-GAAP Measures

Note: We define Segment Operating Income as a segment’s 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. 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. We define Adjusted Segment EBITDA as a segment’s share of consolidated operating income before depreciation, amortization of intangible assets, special charges and goodwill impairment charges. We define Total Adjusted Segment EBITDA as the total of Adjusted Segment EBITDA for all segments, which excludes unallocated corporate expenses. 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 segment’s 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.


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. 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 our Consolidated Statements of Comprehensive Income (Loss). Reconciliations of GAAP to non-GAAP financial measures are included elsewhere in this press release.

Safe Harbor Statement

This press release 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 press release, words such as “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, estimates of our future financial results, are based upon our expectations at the time we make them and various assumptions. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and estimates will be achieved, and the Company’s actual results may differ materially from our expectations, beliefs and estimates. Further, preliminary results are subject to normal year-end adjustments. 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 Company’s most recent Form 10-K filed with the SEC on February 28, 2013, the 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.

FINANCIAL TABLES FOLLOW

# # #


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012

(in thousands, except per share data)

(unaudited)

 

     Six Months Ended  
     June 30,  
     2013     2012  

Revenues

   $ 821,791      $ 791,471   
  

 

 

   

 

 

 

Operating expenses

    

Direct cost of revenues

     518,008        493,838   

Selling, general and 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 and 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

     (27,223     1,889   
  

 

 

   

 

 

 

Comprehensive income

   $ 19,943      $ 28,067   
  

 

 

   

 

 

 


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED JUNE 30, 2013 AND 2012

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended  
     June 30,  
     2013     2012  

Revenues

   $ 414,613      $ 396,243   
  

 

 

   

 

 

 

Operating expenses

    

Direct cost of revenues

     259,528        248,220   

Selling, general and 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 and 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

     39,143        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
  

 

 

   

 

 

 


FTI CONSULTING, INC.

OPERATING RESULTS BY BUSINESS SEGMENT

 

            Adjusted                 Average
Billable
    

Revenue-

Generating

 
     Revenues      EBITDA (1)     Margin     Utilization  (4)     Rate (4)      Headcount  
     (in thousands)                           

Three Months Ended June 30, 2013

              

Corporate Finance/Restructuring (3)

   $ 96,714       $ 24,123        24.9     62   $ 416         718   

Forensic and 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   
  

 

 

    

 

 

          

 

 

 
   $ 414,613         87,726        21.2          3,082   
  

 

 

             

 

 

 

Unallocated Corporate Expenses

        (13,498         
     

 

 

          

Adjusted EBITDA (1)

      $ 74,228        17.9       
     

 

 

          

Six Months Ended June 30, 2013

              

Corporate Finance/Restructuring (3)

   $ 195,794       $ 43,208        22.1     66   $ 412         718   

Forensic and 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   
  

 

 

    

 

 

          

 

 

 
   $ 821,791         163,086        19.8          3,082   
  

 

 

             

 

 

 

Unallocated Corporate Expenses

        (29,532         
     

 

 

          

Adjusted EBITDA (1)

      $ 133,554        16.3       
     

 

 

          

Three Months Ended June 30, 2012

              

Corporate Finance/Restructuring (3)

   $ 96,187       $ 27,296        28.4     75   $ 413         596   

Forensic and 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   
  

 

 

    

 

 

          

 

 

 
   $ 396,243         83,148        21.0          2,903   
  

 

 

             

 

 

 

Unallocated Corporate Expenses

        (16,532         
     

 

 

          

Adjusted EBITDA (1)

      $ 66,616        16.8       
     

 

 

          

Six Months Ended June 30, 2012

              

Corporate Finance/Restructuring (3)

   $ 193,061       $ 51,468        26.7     77   $ 413         596   

Forensic and 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   
  

 

 

    

 

 

          

 

 

 
   $ 791,471         158,157        20.0          2,903   
  

 

 

             

 

 

 

Unallocated Corporate Expenses

        (37,581         
     

 

 

          

Adjusted EBITDA (1)

      $ 120,576        15.2       
     

 

 

          

 

(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 segment’s 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 segment’s 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 Company’s 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.


FTI CONSULTING, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012

(in thousands, except per share data)

 

     Three Months Ended      Six Months Ended  
     June 30,      June 30,  
     2013      2012      2013      2012  

Net income

   $ 23,486       $ 7,747       $ 47,166       $ 26,178   

Add back: Special charges, net of tax effect (1)

     —           17,320         253         17,320   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted Net Income (2)

   $ 23,486       $ 25,067       $ 47,419       $ 43,498   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per common share - diluted

   $ 0.58       $ 0.18       $ 1.17       $ 0.61   

Add back: Special charges, net of tax effect (1)

     —           0.42         —           0.41   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EPS (2)

   $ 0.58       $ 0.60       $ 1.17       $ 1.02   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average number of common shares outstanding - diluted

     40,293         42,074         40,456         42,672   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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 each of the three and 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 three and 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.


RECONCILIATION OF NET INCOME AND OPERATING INCOME (LOSS) TO ADJUSTED EBITDA

(in thousands)

 

Three Months Ended June 30, 2013   Corporate
Finance /
Restructuring (3)
    Forensic and
Litigation
Consulting (3)
    Economic
Consulting
    Technology     Strategic
Communi-
cations
    Unallocated
Corporate
Expenses
    Total  

Net income

              $ 23,486  

Interest income and other

                387  

Interest expense

                13,071  

Income tax provision

                23,315  
             

 

 

 

Operating income (1)

  $ 21,436      $ 19,177      $ 19,530      $ 11,292      $ 3,394      $ (14,570   $ 60,259  

Depreciation and amortization

    855        937        863        3,611        678        1,072        8,016  

Amortization of other intangible assets

    1,832        579        410        1,985        1,147        —          5,953  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA (2)

  $ 24,123      $ 20,693      $ 20,803      $ 16,888      $ 5,219      $ (13,498   $ 74,228  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Six Months Ended June 30, 2013

             

Net income

              $ 47,166  

Interest income and other

                (550 )

Interest expense

                25,786  

Income tax provision

                33,186  
             

 

 

 

Operating income (1)

  $ 38,135      $ 30,279      $ 44,525      $ 19,374      $ 5,121      $ (31,846     105,588  

Depreciation and amortization

    1,622        1,961        1,668        7,246        1,323        2,202        16,022  

Amortization of other intangible assets

    3,383        1,091        808        3,970        2,265        —          11,517  

Special charges

    68        173        (4     14        64        112        427  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA (2)

    43,208        33,504        46,997        30,604        8,773        (29,532     133,554  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Three Months Ended June 30, 2012   Corporate
Finance /
Restructuring (3)
    Forensic and
Litigation
Consulting (3)
    Economic
Consulting
    Technology     Strategic
Communi-
cations
    Unallocated
Corporate
Expenses
    Total  

Net income

              $ 7,747  

Interest income and other

                363  

Interest expense

                15,195  

Income tax provision

                3,527  
             

 

 

 

Operating income (loss) (1)

  $ 14,520      $ 10,201      $ 16,551      $ 4,757      $ (1,370   $ (17,827   $ 26,832  

Depreciation and amortization

    775        1,025        724        3,142        669        1,177        7,512  

Amortization of other intangible assets

    1,440        508        398        1,984        1,160        —          5,490  

Special charges

    10,561        7,808        818        2,966        4,511        118        26,782  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA (1)

  $ 27,296      $ 19,542      $ 18,491      $ 12,849      $ 4,970      $ (16,532   $ 66,616  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Six Months Ended June 30, 2012

             

Net income

              $ 26,178  

Interest income and other

                (2,919 )

Interest expense

                30,399  

Income tax provision

                14,121  
             

 

 

 

Operating income (1)

  $ 36,464      $ 23,298      $ 33,871      $ 12,958      $ 1,287      $ (40,099     67,779  

Depreciation and amortization

    1,565        2,081        1,429        6,164        1,369        2,400        15,008  

Amortization of other intangible assets

    2,878        1,024        797        3,976        2,332        —          11,007  

Special charges

    10,561        7,808        818        2,966        4,511        118        26,782  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA (2)

    51,468        34,211        36,915        26,064        9,499        (37,581     120,576  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

We define Segment Operating Income as a segment’s 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 column for each segment reflect the segments’ respective Adjusted Segment EBITDA. We define Adjusted Segment EBITDA as a segment’s 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 segment’s 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.

 

(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 Company’s 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.


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED June 30, 2013 AND 2012

(in thousands)

(unaudited)

 

     Six Months Ended  
     June 30,  
     2013     2012  

Operating activities

    

Net income

   $ 47,166      $ 26,178   

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

    

Depreciation and amortization

     16,022        18,449   

Amortization of other intangible assets

     11,517        11,186   

Acquisition-related contingent consideration

     (6,721     (2,984

Provision for doubtful accounts

     7,478        7,027   

Non-cash share-based compensation

     17,046        17,805   

Non-cash interest expense

     1,349        3,887   

Other

     (197     70   

Changes in operating assets and liabilities, net of effects from acquisitions:

    

Accounts receivable, billed and unbilled

     (58,827     (50,190

Notes receivable

     (11,113     (23,834

Prepaid expenses and other assets

     (1,485     (4,363

Accounts payable, accrued expenses and other

     (1,354     (1,216

Income taxes

     14,740        (17,108

Accrued compensation

     (10,467     (43,081

Billings in excess of services provided

     (5,785     886   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     19,369        (57,288
  

 

 

   

 

 

 

Investing activities

    

Payments for acquisition of businesses, net of cash received

     (40,512     (21,550

Purchases of property and equipment

     (14,130     (13,728

Other

     21        93   
  

 

 

   

 

 

 

Net cash used in investing activities

     (54,621     (35,185
  

 

 

   

 

 

 

Financing activities

    

Payments of long-term debt and capital lease obligations

     —          (1,974

Purchase and retirement of common stock

     (28,758     —     

Net issuance of common stock under equity compensation plans

     1,245        (840

Other

     (616     (1,324
  

 

 

   

 

 

 

Net cash used in financing activities

     (28,129     (4,138
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (850     (1,831
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (64,231     (98,442

Cash and cash equivalents, beginning of period

     156,785        264,423   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 92,554      $ 165,981   
  

 

 

   

 

 

 


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AT JUNE 30, 2013 AND DECEMBER 31, 2012

(in thousands, except per share amounts)

 

     June 30,     December 31,  
     2013     2012  
     (unaudited)        
Assets     

Current assets

    

Cash and cash equivalents

   $ 92,554      $ 156,785   

Restricted cash

     —          1,190   

Accounts receivable:

    

Billed receivables

     362,664        314,491   

Unbilled receivables

     223,875        208,797   

Allowance for doubtful accounts and unbilled services

     (106,507     (94,048
  

 

 

   

 

 

 

Accounts receivable, net

     480,032        429,240   

Current portion of notes receivable

     34,128        33,194   

Prepaid expenses and other current assets

     40,298        50,351   

Current portion of deferred tax assets

     17,765        3,615   
  

 

 

   

 

 

 

Total current assets

     664,777        674,375   

Property and equipment, net of accumulated depreciation

     65,607        68,192   

Goodwill

     1,263,166        1,260,035   

Other intangible assets, net of amortization

     101,675        104,181   

Notes receivable, net of current portion

     110,908        101,623   

Other assets

     64,748        67,046   
  

 

 

   

 

 

 

Total assets

   $ 2,270,881      $ 2,275,452   
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Current liabilities

    

Accounts payable, accrued expenses and other

   $ 85,974      $ 98,109   

Accrued compensation

     144,391        168,392   

Current portion of long-term debt and capital lease obligations

     6,000        6,021   

Billings in excess of services provided

     25,413        31,675   
  

 

 

   

 

 

 

Total current liabilities

     261,778        304,197   

Long-term debt and capital lease obligations, net of current portion

     717,000        717,024   

Deferred income taxes

     129,111        105,751   

Other liabilities

     83,425        80,248   
  

 

 

   

 

 

 

Total liabilities

     1,191,314        1,207,220   
  

 

 

   

 

 

 

Stockholders’ equity

    

Preferred stock, $0.01 par value; shares authorized — 5,000; none outstanding

     —          —     

Common stock, $0.01 par value; shares authorized — 75,000; shares issued and outstanding — 40,494 (2013) and 40,755 (2012)

     405        408   

Additional paid-in capital

     359,373        367,978   

Retained earnings

     788,381        741,215   

Accumulated other comprehensive loss

     (68,592     (41,369
  

 

 

   

 

 

 

Total stockholders’ equity

     1,079,567        1,068,232   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,270,881      $ 2,275,452