NAVIGANT CONSULTING INC - FORM 8-K - EX-99.1

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EX-2.3 - EX-2.3 - NAVIGANT CONSULTING INC	d611499dex23.htm
EX-2.2 - EX-2.2 - NAVIGANT CONSULTING INC	d611499dex22.htm
8-K - FORM 8-K - NAVIGANT CONSULTING INC	d611499d8k.htm

Exhibit 99.1

Unaudited Pro Forma Condensed Consolidated Financial Information

On June 23, 2018, Navigant Consulting, Inc. (the “Company” or “Navigant”) entered into an Equity Purchase Agreement (as amended, the “Purchase Agreement”), with Ankura Consulting Group, LLC (“Ankura”) and its subsidiary Ankura Consulting Worldwide, Inc. (“Worldwide” and together with Ankura, the “Buyer”), pursuant to which, among other things, Navigant agreed to sell its Disputes, Forensics and Legal Technology segment and Transaction Advisory Services practice (the “Business”) to the Buyer (the transactions described in the Purchase Agreement, together, referred to as the “Disposition”). On August 24, 2018, the Company completed the previously announced Disposition, which constituted a significant disposition for purposes of Item 2.01 of the Current Report on Form 8-K of the Company dated as of August 30, 2018 relating to the closing of the Disposition (the “Navigant Closing Form 8-K”).

The accompanying unaudited pro forma financial information should be read in conjunction with the Company’s historical consolidated financial statements and the accompanying notes included in the Quarterly Report on Form 10-Q for the six months ended June 30, 2018 filed with the Securities and Exchange Commission (the “SEC”) on August 7, 2018 (“2018 Q2 10Q”).

Based on its magnitude, the Disposition represents a significant shift that has a material effect on the operations and financial results of the Company. Accordingly, the Business qualified for discontinued operations treatment as of June 30, 2018, as required by Accounting Standards Codification 205-20 and the assets and liabilities of the Business qualified as assets and liabilities held for sale for the same period. This presentation was reflected in the Company’s unaudited consolidated statements of income for the six months ended June 30, 2018, and the unaudited consolidated balance sheets of the Company as of six months ended June 30, 2018 and the year ended December 31, 2017, in each case, as included in the Company’s 2018 Q2 10Q.

In connection with the Disposition, the Company entered into a Transition Services Agreement pursuant to which Navigant will provide the Buyer with certain services to enable the operation of the Business (“TSA Services”). The TSA Services will include information technology, finance and accounting, human resources and other corporate support services. The TSA Services will be provided at a cost to the Buyer for a period of up to 9 months after the closing of the Disposition for most services, although some services may extend beyond that date. As a result Navigant will continue to incur a higher level of general and administrative costs, which are expected to be partially offset by transitions fees to be received from the Buyer.

The following unaudited pro forma condensed consolidated statements of income for the six months ended June 30, 2018 and for the years ended December 31, 2017, 2016, and 2015 have been prepared giving effect to the Disposition as if the Disposition had occurred on January 1, 2015. The following unaudited pro forma consolidated balance sheets have been prepared giving effect to the Disposition as if the Disposition occurred on June 30, 2018.

The Disposition transaction was valued at $470 million and Navigant expects to realize approximately $370 million in net cash proceeds from the Disposition, after taxes and transaction and separation-related costs. The Company currently plans to use such proceeds to repay third-party indebtedness, return capital to shareholders, fund a dividend announced August 27, 2018, and pursue growth opportunities.

The unaudited pro forma condensed consolidated financial statements are prepared in accordance with Article 11 of Regulation S-X. The pro forma adjustments are described in the accompanying notes and are based upon and derived from information and assumptions available at the time of the filing of the Navigant Closing Form 8-K.

The unaudited pro forma financial information is based on financial statements prepared in accordance with U.S. generally accepted accounting principles, which are subject to change and interpretation. The unaudited pro forma condensed consolidated financial statements were based on and derived from our historical consolidated financial statements, adjusted for those amounts which were determined to be directly attributable to the Disposition, factually supportable, and with respect to the unaudited pro forma condensed consolidated statements of income, expected to have a continuing impact on our consolidated results. Actual adjustments, however, may differ materially from the information presented. Pro forma adjustments do not include allocations of corporate costs, as those are not directly attributable to the Disposition. In addition, the unaudited pro forma financial information is based upon available information and assumptions that management considers to be reasonable, and such assumptions have been made solely for purposes of developing such unaudited pro forma financial information for illustrative purposes in compliance with the disclosure requirements of the SEC. The unaudited pro forma financial information is not necessarily indicative of what the financial position or income statement results would have actually been had the Disposition occurred on the dates indicated. In addition, these unaudited pro forma condensed consolidated financial statements should not be considered to be indicative of our future consolidated financial performance and income statement results.

NAVIGANT CONSULTING, INC.

PRO FORMA CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)


	June 30, 2018 (a)			Pro Forma Adjustments			Pro Forma June 30, 2018
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	11,140			370,000	(c)	$	381,140
Accounts receivable, net and contract assets		164,741						164,741
Prepaid expenses and other current assets		19,988						19,988
Assets held for sale		366,892			(366,892	)(b)		—

Total current assets		562,761			3,108			565,869
Non-current assets:
Property and equipment, net		68,554						68,554
Intangible assets, net		17,126						17,126
Goodwill		422,547						422,547
Other assets		7,115						7,115

Total assets	$	1,078,103			3,108		$	1,081,211

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	7,146					$	7,146
Accrued liabilities		11,928						11,928
Accrued compensation-related costs		41,255						41,255
Income tax payable		4,158						4,158
Other current liabilities		23,170						23,170
Liabilities held for sale		69,065			(69,065	)(b)		—

Total current liabilities		156,722			(69,065	)		87,657
Non-current liabilities:
Deferred income tax liabilities		38,239						38,239
Other non-current liabilities		25,935						25,935
Bank debt non-current		147,005						147,005

Total non-current liabilities		211,179			—			211,179

Total liabilities		367,901			(69,065	)		298,836

Stockholders' equity:
Common stock		59						59
Additional paid-in capital		662,416						662,416
Treasury stock		(243,213	)					(243,213	)
Retained earnings		311,825			57,173	(d)		368,998
Accumulated other comprehensive loss		(20,885	)		15,000	(e)		(5,885	)

Total stockholders' equity		710,202			72,173			782,375

Total liabilities and stockholders' equity	$	1,078,103			3,108		$	1,081,211

NAVIGANT CONSULTING, INC.

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

(Dollars in thousands, except per share amounts)

(unaudited)


	Pro Forma Adjustments
	For the six months ended June 30, 2018 (f)			Remove Discontinued Operations (h)			Pro Forma six months ended June 30, 2018
Revenues before reimbursements	$	326,669		$			$	326,669
Reimbursements		36,112						36,112

Total revenues		362,781						362,781
Cost of services before reimbursable expenses		230,057						230,057
Reimbursable expenses		36,112						36,112

Total cost of services		266,169						266,169
General and administrative expenses		71,991						71,991
Depreciation expense		9,940						9,940
Amortization expense		3,417						3,417
Other operating costs:								—
Contingent acquisition liability adjustments, net		—						—
Other costs		3,278						3,278

Operating income		7,986						7,986
Interest expense		1,739						1,739
Interest income		(196	)					(196	)
Other (income) expense, net		178						178

Income from continuing operations before income tax expense		6,265						6,265
Income tax expense		1,734						1,734

Net income from continuing operations		4,531						4,531
Income from discontinued operations, net of tax		36,148			(36,148	)		—

Net income	$	40,679		$	(36,148	)	$	4,531


Basic net income per share
Net income from continuing operations	$	0.10					$	0.10
Income from discontinued operations, net of tax		0.80						—

Net income	$	0.90					$	0.10
Shares used in computing basic per share data		45,113						45,113

Diluted net income per share
Net income from continuing operations	$	0.10					$	0.10
Income from discontinued operations, net of tax		0.77						—

Net income	$	0.87					$	0.10
Shares used in computing diluted per share data		46,692						46,692

NAVIGANT CONSULTING, INC.

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

(Dollars in thousands, except per share amounts)

(unaudited)


	Pro Forma Adjustment
	For the year ended December 31, 2017 (g)			Remove Discontinued Operations (h)			Pro Forma for the year ended December 31, 2017
Revenues before reimbursements	$	939,639		$	(302,697	)	$	636,942
Reimbursements		92,688			(15,564	)		77,124

Total revenues		1,032,327			(318,261	)		714,066
Cost of services before reimbursable expenses		654,586			(211,163	)		443,423
Reimbursable expenses		92,688			(15,564	)		77,124

Total cost of services		747,274			(226,727	)		520,547
General and administrative expenses		166,922			(27,898	)		139,024
Depreciation expense		28,826			(8,428	)		20,398
Amortization expense		8,960			(386	)		8,574
Other operating costs:
Contingent acquisition liability adjustments, net		2,213			—			2,213
Other costs		2,007			(1,620	)		387

Operating income		76,125			(53,202	)		22,923
Interest expense		4,970			(1,948	)		3,022
Interest income		(345	)		25			(320	)
Other (income) expense, net		919			(24	)		895

Income from continuing operations before income tax expense		70,581			(51,255	)		19,326
Income tax expense		(4,371	)		(7,660	)		(12,031	)

Net income from continuing operations		74,952			(43,595	)		31,357
Income from discontinued operations, net of tax		—			—			—

Net income	$	74,952		$	(43,595	)	$	31,357


Basic net income per share
Net income from continuing operations	$	1.61					$	0.67
Income from discontinued operations, net of tax		—						—

Net income	$	1.61					$	0.67
Shares used in computing basic per share data		46,593						46,593

Diluted net income per share
Net income from continuing operations	$	1.55					$	0.65
Income from discontinued operations, net of tax		—						—

Net income	$	1.55					$	0.65
Shares used in computing diluted per share data		48,226						48,226

NAVIGANT CONSULTING, INC.

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

(Dollars in thousands, except per share amounts)

(unaudited)


	Pro Forma Adjustment
	For the year ended December 31, 2016 (g)			Remove Discontinued Operations (h)			Pro Forma for the year ended December 31, 2016
Revenues before reimbursements	$	938,746		$	(318,959	)	$	619,787
Reimbursements		95,734			(19,453	)		76,281

Total revenues		1,034,480			(338,412	)		696,068
Cost of services before reimbursable expenses		631,935			(214,877	)		417,058
Reimbursable expenses		95,734			(19,453	)		76,281

Total cost of services		727,669			(234,330	)		493,339
General and administrative expenses		168,954			(31,261	)		137,693
Depreciation expense		27,742			(8,111	)		19,631
Amortization expense		11,507			(796	)		10,711
Other operating costs:
Contingent acquisition liability adjustments, net		1,330						1,330
Other costs		542						542

Operating income		96,736			(63,914	)		32,822
Interest expense		5,235			(2,054	)		3,181
Interest income		(141	)		1			(140	)
Other (income) expense, net		(1,769	)		15			(1,754	)

Income from continuing operations before income tax expense		93,411			(61,876	)		31,535
Income tax expense		35,313			(25,017	)		10,296

Net income from continuing operations		58,098			(36,859	)		21,239
Income from discontinued operations, net of tax		—			—			—

Net income	$	58,098		$	(36,859	)	$	21,239


Basic net income per share
Net income from continuing operations	$	1.23					$	0.45
Income from discontinued operations, net of tax		—						—

Net income	$	1.23					$	0.45
Shares used in computing basic per share data		47,343						47,343

Diluted net income per share
Net income from continuing operations	$	1.19					$	0.44
Income from discontinued operations, net of tax		—						—

Net income	$	1.19					$	0.44
Shares used in computing diluted per share data		48,813						48,813

NAVIGANT CONSULTING, INC.

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

(Dollars in thousands, except per share amounts)

(unaudited)


	Pro Forma Adjustment
	For the year ended December 31, 2015 (g)			Remove Discontinued Operations (h)			Pro Forma for the year ended December 31, 2015
Revenues before reimbursements	$	833,808		$	(316,663	)	$	517,145
Reimbursements		85,678			(20,666	)		65,012

Total revenues		919,486			(337,329	)		582,157
Cost of services before reimbursable expenses		571,894			(220,558	)		351,336
Reimbursable expenses		85,678			(20,666	)		65,012

Total cost of services		657,572			(241,224	)		416,348
General and administrative expenses		147,462			(26,544	)		120,918
Depreciation expense		23,612			(7,975	)		15,637
Amortization expense		8,613			(1,504	)		7,109
Other operating costs:
Contingent acquisition liability adjustments, net		(13,047	)					(13,047	)
Other costs		3,147						3,147

Operating income		92,127			(60,082	)		32,045
Interest expense		4,916			(1,928	)		2,988
Interest income		(250	)		46			(204	)
Other (income) expense, net		(692	)		(25	)		(717	)

Income from continuing operations before income tax expense		88,153			(58,175	)		29,978
Income tax expense		27,808			(23,508	)		4,300

Net income from continuing operations		60,345			(34,667	)		25,678
Income from discontinued operations, net of tax		—			—			—

Net income	$	60,345		$	(34,667	)	$	25,678


Basic net income per share
Net income from continuing operations	$	1.26					$	0.54
Income from discontinued operations, net of tax		—						—

Net income	$	1.26					$	0.54
Shares used in computing basic per share data		47,906						47,906

Diluted net income per share
Net income from continuing operations	$	1.23					$	0.52
Income from discontinued operations, net of tax		—						—

Net income	$	1.23					$	0.52
Shares used in computing diluted per share data		49,224						49,224

Notes:

Reflects the Company’s unaudited consolidated balance sheet as of June 30, 2018.

Reflects the elimination of the assets and liabilities balances of the Business as of June 30, 2018.

Reflects the estimated proceeds subject to finalization of closing and transaction costs.

The amount of the actual gain will be calculated based on the net book value of the Business as of the closing of the Disposition and therefore could differ from the current estimate.

Reflects the estimated realization of unrealized foreign currency translation adjustments as a result of the Disposition.

Reflects the Company’s unaudited consolidated statement of income as of the six months ended June 30, 2018 as contained in the Company’s Quarterly Report filed with the SEC on August 7, 2018.

Reflects the Company’s consolidated statements of income as of December 31, 2017, 2016 and 2015 as contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 23, 2018.

Reflects the elimination of revenue and expenses associated with the Business for the six months ended June 30, 2018 and for the years ended December 31, 2017, 2016 and 2015.

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