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Exhibit 99.1

 

LOGO

NAVIGANT REPORTS SECOND QUARTER 2014 FINANCIAL RESULTS

CHICAGO, July 29, 2014 – Navigant (NYSE:NCI) today announced financial results for the second quarter ended June 30, 2014. Results for the quarter include the partial period contribution from Cymetrix Corporation, a revenue cycle management firm providing services to hospital and healthcare networks, acquired on May 14, 2014.

Financial Summary and Highlights:

 

    Second quarter 2014 revenues before reimbursements (RBR) of $186.5 million and total revenues of $208.1 million.

 

    Net loss per share from continuing operations of $1.55 reflecting a non-cash goodwill impairment of $122.0 million ($86.9 million or $1.78 per share on an after-tax basis).

 

    Adjusted earnings per share (EPS) of $0.22 and adjusted EBITDA of $27.4 million, both of which exclude the impact of the non-cash goodwill impairment and other items.

 

    Repurchased 404,508 shares of common stock in second quarter 2014 at an average cost of $17.39 per share.

 

    Reiterates financial outlook for 2014.

Navigant reported second quarter 2014 RBR of $186.5 million compared to $187.1 million for second quarter 2013. Total revenues for the Company were $208.1 million for second quarter 2014 compared to $209.7 million for second quarter 2013. The Company reported a net loss from continuing operations for second quarter 2014 of $75.9 million, or $1.55 per share, reflecting a non-cash goodwill impairment of $122.0 million ($86.9 million or $1.78 per share on an after-tax basis) to reduce the carrying value of goodwill related to the Disputes, Investigations & Economics segment. Net income from continuing operations in the prior year quarter was $14.2 million, or $0.28 per share. Adjusted EPS was $0.22 for second quarter 2014 compared to $0.31 for second quarter 2013. Adjusted EBITDA was $27.4 million for second quarter 2014 compared to $34.5 million for the second quarter 2013.

Julie Howard, Chairman and Chief Executive Officer, commented, “During the quarter, better-than-expected performance from several regulatory compliance matters in the Financial, Risk & Compliance segment only partially offset lower organic growth in other areas, particularly in our Healthcare segment. However we still expect to deliver on our previously stated RBR expectations for the full year 2014, albeit with a different mix among business areas than previously anticipated. Longer term, we expect our Healthcare and Energy segments to reaccelerate organic growth as we benefit from favorable industry demand trends in these high-growth sectors and as we continue to pursue and develop solutions that offer more consistent, recurring revenue opportunities. During the quarter, we announced the acquisition of Cymetrix which represents an important step in this direction. This and other recent investments, along with the addition of senior hires throughout the organization, are expected to accelerate our growth plans but have impacted near-term profitability.”


Segment Financial Summary

 

     For the quarter ended
June 30,
       
     2014     2013     Change  

RBR ($000)

      

Disputes, Investigations & Economics

   $ 76,294      $ 76,352        -0.1

Financial, Risk & Compliance

     32,193        40,097        -19.7

Healthcare

     54,446        46,814        16.3

Energy

     23,571        23,803        -1.0
  

 

 

   

 

 

   

 

 

 

Total Company

   $ 186,504      $ 187,066        -0.3
  

 

 

   

 

 

   

 

 

 

Total Revenues ($000)

      

Disputes, Investigations & Economics

   $ 82,444      $ 82,828        -0.5

Financial, Risk & Compliance

     38,224        46,939        -18.6

Healthcare

     60,476        52,383        15.4

Energy

     26,953        27,505        -2.0
  

 

 

   

 

 

   

 

 

 

Total Company

   $ 208,097      $ 209,655        -0.7
  

 

 

   

 

 

   

 

 

 

Segment Operating Profit ($000)

      

Disputes, Investigations & Economics

   $ 26,213      $ 25,393        3.2

Financial, Risk & Compliance

     13,541        16,791        -19.4

Healthcare

     15,475        18,110        -14.5

Energy

     7,009        8,075        -13.2
  

 

 

   

 

 

   

 

 

 

Total Company

   $ 62,238      $ 68,369        -9.0
  

 

 

   

 

 

   

 

 

 

Segment Operating Margin (% of RBR)

      

Disputes, Investigations & Economics

     34.4     33.3  

Financial, Risk & Compliance

     42.1     41.9  

Healthcare

     28.4     38.7  

Energy

     29.7     33.9  
  

 

 

   

 

 

   

Total Company

     33.4     36.5  
  

 

 

   

 

 

   

Healthcare RBR increased 16% year-over-year for second quarter 2014. Growth was driven by an increased contribution from Navigant’s revenue cycle management services, which include both the Cymetrix and Alleviant operations. The integration of the acquired Cymetrix operations is proceeding according to plan. On an organic basis, RBR was flat for the segment in the second quarter, year over year, primarily because two sizeable engagements that were completed in the second half of 2013 have not yet been replaced with similarly sized projects in 2014. Additionally, the U.S. Government’s postponement of the ICD-10 compliance date has caused some clients to cancel or delay their related engagements. Segment operating profit was 15% lower compared to second quarter 2013. Navigant expects a resumption of year-over-year organic growth in the Healthcare segment in the second half of 2014.

 

2


The Financial, Risk & Compliance segment benefited from strong demand from financial institutions which are required to address heightened regulation and compliance requirements. The segment delivered better-than-anticipated RBR for second quarter 2014, resulting in a smaller than expected year-over-year RBR decline compared to second quarter 2013. The decline in year-over-year RBR reflects significant RBR from mortgage servicing review engagements in the second quarter of 2013 which were substantially completed in the first half of 2013 as well as the expected reduced RBR contribution from restructuring services in 2014. For the second quarter 2014, segment operating margin remained stable at 42% as segment operating profit declined 19% year-over-year, consistent with the expected decline in RBR.

RBR performance for the Energy segment in the second quarter 2014 was relatively consistent compared to second quarter 2013 RBR. Segment operating profit in the second quarter 2014 decreased 13% year over year due to investments in senior hires during 2014. Navigant expects to benefit over time from the recent investments in senior hires and ongoing alignment of resources with anticipated market trends. Additionally, Navigant is investing in the expansion of the segment’s capabilities more broadly into other growth areas, including oil and gas.

Stable RBR performance in the Disputes, Investigations & Economics segment for second quarter 2014 compared to 2013 reflected strong demand in the global construction sector and in the legal technology solutions area. These improvements were offset by lower RBR from the economics business and from international arbitration services which experienced a very strong environment in the prior year period. Segment operating profit increased 3% compared to the same period of 2013.

Goodwill Impairment

After performing its annual goodwill impairment test during the second quarter of 2014 and in connection with the preparation of its second quarter 2014 financial statements, the Company determined that a pre-tax goodwill impairment of $122.0 million related to its Disputes, Investigations & Economics segment was necessary. In making this determination, the Company considered historical financial performance, future projections for the segment and other considerations. The impairment is only partially deductible for income tax purposes, reducing the associated tax benefit of the impairment and resulting in the Company’s second quarter 2014 effective tax rate being significantly lower than historical rates. The goodwill impairment was non-cash in nature and did not affect the Company’s current liquidity, cash flows, borrowing capability or operations, nor did it impact the debt covenants under its credit agreement.

Cash Flow

Net cash provided by operating activities was $35.2 million for second quarter 2014 compared to $47.5 million for the same period in 2013. Free cash flow was $17.2 million for second quarter 2014 compared to $24.5 million for the same period in 2013. The decrease in free cash flow was primarily due to lower earnings in second quarter 2014 compared to 2013 and increased capital spending, primarily on technology infrastructure and software investments. DSO was 82 days as of June 30, 2014 compared to 79 days at June 30, 2013.

 

3


Bank debt was $188.8 million at June 30, 2014 compared to $128.1 million at June 30, 2013. The increase reflects additional borrowings to fund the Cymetrix acquisition. Leverage (bank debt divided by trailing twelve month adjusted EBITDA) increased to 1.71 at June 30, 2014 compared to 1.05 at June 30, 2013.

Navigant repurchased 404,508 shares of common stock during second quarter 2014 at an aggregate cost of $7.0 million and an average cost of $17.39 per share. As of June 30, 2014, $85.6 million remained on the Company’s share repurchase authorization.

Lucinda (Cindy) Baier, Executive Vice President and Chief Financial Officer, commented, “We are excited to add Cymetrix to our portfolio during the second quarter, and we are pleased with the initial progress of the integration. The financial flexibility resulting from our significant deleveraging over the past several years enabled us to use our credit facility to finance the acquisition of Cymetrix. Moving forward, we plan to make the necessary investments in additional infrastructure and technology to ensure a successful integration of the acquired operations while maintaining the ability to pursue additional growth initiatives. At the same time, our anticipated strong operating cash flows are expected to help reduce our leverage ratio to under 1.5 by the end of 2014 even as we continue to return cash to shareholders through our ongoing share repurchase program.”

2014 Outlook

Navigant reiterated its full year 2014 outlook of RBR in the range of $772 and $816 million with 2014 total revenues estimated in the range of $848 and $892 million. Adjusted EBITDA is expected to range between $120 and $130 million and adjusted EPS is estimated to be between $0.94 and $1.06.

Non-GAAP Financial Information

This press release includes certain non-GAAP financial measures as defined by the Securities and Exchange Commission. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles (GAAP) are included in the financial schedules attached to this press release. This information should be considered as supplemental in nature and not as a substitute for, or superior to, any measure of performance prepared in accordance with GAAP.

 

4


Conference Call Details

Julie Howard and Cindy Baier will host a conference call to discuss the Company’s second quarter 2014 results at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on Tuesday, July 29, 2014. The conference call may be accessed via the Navigant website (www.navigant.com/investor_relations) or by dialing 888.469.1095 (517.308.9064 for international callers) and referencing pass code “NCI.” An archived version of the webcast will also be available via the Navigant website. A report of financial and related supplemental information is also available via the Navigant website.

About Navigant

Navigant (NYSE: NCI) is a specialized, global professional services firm dedicated to assisting clients in creating and protecting value in the face of critical business risks and opportunities. Enhanced by senior level engagement with clients, Navigant professionals provide services that extend from expert and advisory work through implementation and outsourcing. The firm combines deep technical expertise in Disputes and Investigations, Economics, Financial Advisory and Management Consulting with business pragmatism to address clients’ needs in highly regulated industries including Construction, Energy, Financial Services and Healthcare. More information about Navigant can be found at www.navigant.com.

Statements included in this press release which are not historical in nature are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may generally be identified by words such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “plan,” “outlook” and similar expressions. These statements are based upon management’s current expectations and speak only as of the date of this press release. The Company cautions readers that there may be events in the future that the Company is not able to accurately predict or control and the information contained in the forward-looking statements is inherently uncertain and subject to a number of risks that could cause actual results to differ materially from those contained in or implied by the forward-looking statements including, without limitation: the success of the Company’s organizational changes and margin improvement initiatives; risks inherent in international operations, including foreign currency fluctuations; ability to make acquisitions and divestitures; pace, timing and integration of acquisitions and separation of divestitures; operational risks associated with new or expanded service areas, including revenue cycle management; impairments; management of professional staff, including dependence on key personnel, recruiting, attrition and the ability to successfully integrate new consultants into the Company’s practices; utilization rates; conflicts of interest; potential loss of clients or large engagements; clients’ financial condition and their ability to make payments to the Company; risks inherent with litigation; higher risk client assignments; professional liability; potential legislative and regulatory changes; continued access to capital; and market and general economic conditions. Further information on these and other potential factors that could affect the Company’s financial results are included under the “Risk Factors” section and elsewhere in the Company’s filings with the Securities and Exchange Commission (SEC), which are available on the SEC’s website or at www.navigant.com/investor_relations. The Company cannot guarantee any future results, levels of activity, performance or achievement and undertakes no obligation to update any of its forward-looking statements.

For additional information contact:

Paul Longhini

Investor Relations

312.583.5836

plonghini@navigant.com

###

 

5


NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands, except per share data (1))

(Unaudited)

 

     For the quarter ended
June 30,
    For the six months ended
June 30,
 
     2014     2013     2014     2013  

Revenues:

        

Revenues before reimbursements

   $ 186,504      $ 187,066      $ 361,560      $ 370,200   

Reimbursements

     21,593        22,589        44,285        48,954   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     208,097        209,655        405,845        419,154   

Costs of services:

        

Cost of services before reimbursable expenses

     126,792        122,360        246,920        245,412   

Reimbursable expenses

     21,593        22,589        44,285        48,954   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total costs of services

     148,385        144,949        291,205        294,366   

General and administrative expenses

     34,237        32,556        67,339        65,122   

Depreciation expense

     4,953        4,100        9,262        7,830   

Amortization expense

     1,633        1,713        2,995        3,411   

Other operating costs (benefit):

        

Contingent acquisition liability adjustments, net

     (2,444     —          (3,604     —     

Office consolidation, net

     —          290        —          498   

Gain on disposition of assets

     —          —          —          (1,715

Goodwill impairment

     122,045        —          122,045        —     

Other impairment

     204        —          204        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (100,916     26,047        (83,601     49,642   

Interest expense

     1,397        1,172        2,235        2,397   

Interest income

     (71     (112     (160     (275

Other (income) expense, net

     186        6        268        (142
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income tax (benefit) expense

     (102,428     24,981        (85,944     47,662   

Income tax (benefit) expense

     (26,569     10,732        (20,455     20,298   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) from continuing operations

     (75,859     14,249        (65,489     27,364   

Income (loss) from discontinued operations, net of tax

     —          (299     509        384   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (75,859   $ 13,950      $ (64,980   $ 27,748   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic per share data

        

Net income (loss) from continuing operations

   $ (1.55   $ 0.28      $ (1.34   $ 0.55   

Income (loss) from discontinued operations, net of tax

   $ —        $ (0.01   $ 0.01      $ 0.01   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) (1)

   $ (1.55   $ 0.28      $ (1.33   $ 0.55   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in computing basic per share data

     48,971        50,041        48,917        50,168   

Diluted per share data

        

Net income (loss) from continuing operations

   $ (1.55   $ 0.28      $ (1.34   $ 0.53   

Income (loss) from discontinued operations, net of tax

   $ —        $ (0.01   $ 0.01      $ 0.01   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (1.55   $ 0.27      $ (1.33   $ 0.54   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in computing diluted per share data (2)

     48,971        51,022        48,917        51,191   

 

6


NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AND SELECTED DATA

(In thousands, except DSO data)

 

     June 30,
2014
    December 31,
2013
 
     (Unaudited)        

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 9,852      $ 1,968   

Accounts receivable, net

     205,527        167,066   

Prepaid expenses and other current assets

     26,633        24,554   

Deferred income tax assets

     14,550        17,314   
  

 

 

   

 

 

 

Total current assets

     256,562        210,902   

Non-current assets:

    

Property and equipment, net

     57,149        44,338   

Intangible assets, net

     27,776        10,778   

Goodwill

     571,863        615,343   

Other assets

     20,984        22,836   
  

 

 

   

 

 

 

Total assets

   $ 934,334      $ 904,197   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 11,087      $ 13,415   

Accrued liabilities

     11,006        12,691   

Accrued compensation-related costs

     59,002        78,610   

Income tax payable

     —          1,137   

Other current liabilities

     28,990        32,009   
  

 

 

   

 

 

 

Total current liabilities

     110,085        137,862   

Non-current liabilities:

    

Deferred income tax liabilities

     71,240        86,571   

Other non-current liabilities

     38,888        26,016   

Bank debt non-current

     188,825        56,673   
  

 

 

   

 

 

 

Total non-current liabilities

     298,953        169,260   
  

 

 

   

 

 

 

Total liabilities

     409,038        307,122   
  

 

 

   

 

 

 

Stockholders’ equity:

    

Common stock

     63        63   

Additional paid-in capital

     606,606        598,724   

Treasury stock

     (262,522     (247,106

Retained earnings

     189,755        254,735   

Accumulated other comprehensive loss

     (8,606     (9,341
  

 

 

   

 

 

 

Total stockholders’ equity

     525,296        597,075   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 934,334      $ 904,197   
  

 

 

   

 

 

 

Selected Data

    

Days sales outstanding, net (DSO)

     82        65   

 

7


NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

     For the quarter ended
June 30,
    For the six months ended
June 30,
 
     2014     2013     2014     2013  

Cash flows from operating activities:

        

Net income (loss)

   $ (75,859   $ 13,950      $ (64,980   $ 27,748   

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

        

Depreciation expense

     4,953        4,100        9,262        7,830   

Accelerated depreciation—office consolidation

     —          290        —          498   

Amortization expense

     1,633        1,713        2,995        3,411   

Amortization expense—client-facing software

     178        78        242        151   

Share-based compensation expense

     2,522        2,874        5,236        5,419   

Accretion of interest expense

     490        234        654        453   

Deferred income taxes

     (31,638     4,951        (24,395     11,973   

Allowance for doubtful accounts receivable

     1,904        972        2,784        1,227   

Contingent acquisition liability adjustments, net

     (2,444     —          (3,604     —     

Gain on disposition of assets

     —          —          —          (1,715

Gain on disposition of discontinued operations

     —          —          (509     —     

Goodwill impairment

     122,045        —          122,045        —     

Other impairment

     204        —          204        —     

Changes in assets and liabilities (net of acquisitions and dispositions):

        

Accounts receivable

     (8,943     680        (29,293     (16,264

Prepaid expenses and other assets

     2,864        5,728        141        7,125   

Accounts payable

     (1,765     (5,629     (4,216     (5,559

Accrued liabilities

     (472     1,460        (1,695     87   

Accrued compensation-related costs

     19,703        20,644        (21,619     (21,428

Income taxes payable

     239        132        (837     (5,412

Other liabilities

     (370     (4,692     (4,879     21   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by operating activities

     35,244        47,485        (12,464     15,565   

Cash flows from investing activities:

        

Purchases of property and equipment

     (4,450     (2,075     (10,942     (5,755

Acquisitions of businesses, net of cash acquired

     (83,334     —          (84,834     —     

Proceeds from dispositions, net of selling costs

     —          —          824        15,607   

Payments of acquisition liabilities

     (443     (348     (443     (348

Capitalized client-facing software

     (36     (633     (864     (2,001
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (88,263     (3,056     (96,259     7,503   

Cash flows from financing activities:

        

Issuances of common stock

     516        1,074        1,535        2,145   

Repurchase of common stock

     (7,036     (7,451     (14,427     (13,645

Payments of contingent acquisition liabilities

     —          (1,287     (107     (3,287

Repayments to banks

     (88,497     (101,764     (156,895     (204,444

Borrowings from banks

     156,420        65,224        288,774        199,338   

Other, net

     (1,272     (507     (2,281     (1,452
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     60,131        (44,711     116,599        (21,345
  

 

 

   

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     2        (69     8        (187
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in cash and cash equivalents

     7,114        (351     7,884        1,536   

Cash and cash equivalents at beginning of the period

     2,738        2,939        1,968        1,052   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of the period

   $ 9,852      $ 2,588      $ 9,852      $ 2,588   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

8


NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (3)

(In thousands, except per share data)

(Unaudited)

This press release includes certain non-GAAP financial measures as defined by the Securities and Exchange Commission. Below are the reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles (GAAP). This information should be considered as supplemental in nature and not as a substitute for, or superior to, any measure of performance prepared in accordance with GAAP. Management uses these non-GAAP financial measures in addition to GAAP financial measures to assess the Company’s operations and financial results and believes they are useful indicators of operating performance and the Company’s ability to generate cash flows from operations that are available for interest, debt service, taxes and capital expenditures. Investors should recognize that these non-GAAP financial measures may not be comparable to similarly-titled measures of other companies.

 

EBITDA, adjusted EBITDA, adjusted Net Income

and adjusted Earnings Per Share (4)

   For the quarter ended
June 30,
    For the six months ended
June 30,
 
     2014     2013     2014     2013  

Severance expense

   $ 1,972      $ 2,372      $ 2,477      $ 3,806   

Income tax benefit (5)

     (758     (798     (957     (1,223
  

 

 

   

 

 

   

 

 

   

 

 

 

Impact of severance expense, net of tax

   $ 1,214      $ 1,574      $ 1,520      $ 2,583   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other operating benefit—contingent acquisition liability adjustment

   $ (2,444   $ —        $ (3,604   $ —     

Income tax expense (5)

     985        —          1,453        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Impact of other operating benefit—contingent acquisition liability adjustment, net of tax

   $ (1,459   $ —        $ (2,151   $ —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Other operating costs —office consolidation

   $ —        $ 290      $ —        $ 498   

Income tax benefit (5)

     —          (117     —          (201
  

 

 

   

 

 

   

 

 

   

 

 

 

Impact of other operating costs—office consolidation, net of tax

   $ —        $ 173      $ —        $ 297   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other operating benefit—gain on disposition of assets

   $ —        $ —        $ —        $ (1,715

Income tax expense (5)

     —          —          —          692   
  

 

 

   

 

 

   

 

 

   

 

 

 

Impact of other operating benefit—gain on disposition of assets, net of tax

   $ —        $ —        $ —        $ (1,023
  

 

 

   

 

 

   

 

 

   

 

 

 

Other operating costs—goodwill impairment

   $ 122,045      $ —        $ 122,045      $ —     

Income tax benefit (5)

     (35,111     —          (35,111     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Impact of other operating costs—goodwill impairment, net of tax

   $ 86,934      $ —        $ 86,934      $ —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Other operating costs—other impairment

   $ 204      $ —        $ 204      $ —     

Income tax benefit (5)

     (82     —          (82     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Impact of other operating costs—other impairment, net of tax

   $ 122      $ —        $ 122      $ —     
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA reconciliation:

        

Operating income (loss)

   $ (100,916   $ 26,047      $ (83,601   $ 49,642   

Depreciation expense

     4,953        4,100        9,262        7,830   

Accelerated depreciation—office consolidation

     —          290        —          498   

Amortization expense

     1,633        1,713        2,995        3,411   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ (94,330   $ 32,150      $ (71,344   $ 61,381   

Severance expense

     1,972        2,372        2,477        3,806   

Other operating benefit—contingent acquisition liability adjustment

     (2,444     —          (3,604     —     

Other operating benefit—gain on disposition of assets

     —          —          —          (1,715

Other operating costs—goodwill impairment

     122,045        —          122,045        —     

Other operating costs—other impairment

     204        —          204        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 27,447      $ 34,522      $ 49,778      $ 63,472   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) from continuing operations

   $ (75,859   $ 14,249      $ (65,489   $ 27,364   

Impact of severance expense, net of tax

     1,214        1,574        1,520        2,583   

Impact of other operating benefit—contingent acquisition liability adjustment, net of tax

     (1,459     —          (2,151     —     

Impact of other operating costs—office consolidation, net of tax

     —          173        —          297   

Impact of other operating benefit—gain on disposition of assets, net of tax

     —          —          —          (1,023

Impact of other operating costs—goodwill impairment, net of tax

     86,934        —          86,934        —     

Impact of other operating costs—other impairment, net of tax

     122        —          122        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 10,952      $ 15,996      $ 20,936      $ 29,221   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in computing adjusted per diluted share data (6)

     50,078        51,022        50,257        51,191   

Adjusted earnings per share

   $ 0.22      $ 0.31      $ 0.42      $ 0.57   
  

 

 

   

 

 

   

 

 

   

 

 

 
Free Cash Flow (7)    For the quarter ended
June 30,
    For the six months ended
June 30,
 
     2014     2013     2014     2013  

Net cash (used in) provided by operating activities

   $ 35,244      $ 47,485      $ (12,464   $ 15,565   

Changes in assets and liabilities

     (11,256     (18,323     62,398        41,430   

Allowance for doubtful accounts receivable

     (1,904     (972     (2,784     (1,227

Purchases of property and equipment

     (4,450     (2,075     (10,942     (5,755

Payments of acquisition liabilities

     (443     (348     (443     (348

Payments of contingent acquisition liabilities

     —          (1,287     (107     (3,287
  

 

 

   

 

 

   

 

 

   

 

 

 

Free Cash Flow

   $ 17,191      $ 24,480      $ 35,658      $ 46,378   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Leverage Ratio (8)

   At
June 30,
 
     2014      2013  

Adjusted EBITDA for prior twelve-month period

   $ 110,379       $ 122,446   

Bank debt

   $ 188,825       $ 128,064   

Leverage ratio

     1.71         1.05   

 

9


Footnotes

 

(1) Per share data may not sum due to rounding.
(2) For the three and six months ended June 30, 2014, the Company reported a net loss. For those periods, the basic weighted average common shares outstanding equals the diluted weighted average common shares outstanding for purposes of calculating U.S. GAAP earnings per share because potentially dilutive securities would be antidilutive.
(3) During the year ended December 31, 2013, the United Kingdom financial services advisory business was sold. The results of operations from this business are presented as discontinued operations. All non-GAAP financial measures are presented on a continuing operations basis unless otherwise noted.
(4) EBITDA is earnings from continuing operations before interest, taxes, depreciation and amortization. Adjusted EBITDA excludes the impact of severance expense and other operating costs (benefit). Adjusted net income and adjusted earnings per share exclude the net income (loss) and per share net income (loss) impact of discontinued operations, severance expense and other operating costs (benefit). Severance expense and other operating costs (benefit) are not considered to be non-recurring, infrequent or unusual to our business. Management believes that these measures provide investors with enhanced comparability of the Company’s results of operations across periods.
(5) Effective income tax expense (benefit) has been determined based on specific tax jurisdiction.
(6) For the three and six months ended June 30, 2014, the Company reported a net loss. For non-GAAP purposes, the per share and share amounts presented here reflect the inclusion of potentially dilutive shares based on the impact of the add backs included in Adjusted Net Income.
(7) Free cash flow is calculated as net cash provided from operations excluding changes in assets and liabilities and allowance for doubtful accounts receivable less cash payments for property and equipment and deferred acquisition related payments. Free cash flow does not represent discretionary cash available for spending as it excludes certain contractual obligations such as debt repayment. However, management believes that it provides investors with an indicator of cash flows available for on-going business operations and long term value creation.
(8) Leverage ratio is calculated as bank debt at the end of the period divided by adjusted EBITDA for the prior twelve-month period. Management believes that leverage ratio provides investors with an indicator of the cash flows available to repay the Company’s debt obligations.

 

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