Exhibit 99.1
For more information contact:
Jennifer Moreno
Executive Director, Investor Relations
312.573.5634
jmoreno@navigantconsulting.com
NAVIGANT CONSULTING, INC. ANNOUNCES THIRD QUARTER 2009 RESULTS
| | • | | Revenue before reimbursements totaled $159.2 million, up slightly from second quarter 2009 and down 11% from third quarter 2008. |
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| | • | | Earnings per share totaled $0.17, up 6% from third quarter 2008; adjusted earnings per share (adjusted to exclude the net income impact from severance and other operating costs) totaled $0.20, up 5% from third quarter 2008. |
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| | • | | Utilization and average bill rate steadily improved over the course of the quarter and averaged 76% and $255, respectively, compared to 73% and $250 for the second quarter 2009, and 76% and $265 for the third quarter 2008. |
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| | • | | All operating segments realized sequential increases in revenue and operating profit in the third quarter 2009; ongoing companywide cost reduction efforts continue to exceed targets. |
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| | • | | Liquidity and cash flow remain solid as of September 30, 2009 with bank debt and notes payable down $21.6 million from June 30, 2009 and down $56.9 million from September 30, 2008. |
CHICAGO, October 29, 2009 –Navigant Consulting, Inc. (NYSE:NCI), a global consulting firm providing dispute, investigative, operational, risk management and financial and regulatory advisory solutions, today announced financial results for the third quarter ended September 30, 2009.
“We are pleased with our third quarter financial results which met our expectations and reflected further stabilization in the markets we serve,” stated William M. Goodyear, Chairman and Chief Executive Officer. “Throughout the year our senior leadership team has focused on market initiatives, maintained key client capabilities, and protected the firm’s profitability in a difficult economic climate. It is gratifying to see those efforts translate into results.”
Third Quarter 2009 Results
The Company’s third quarter 2009 results are summarized as follows:
Total Company Third Quarter 2009 Financial Results (1)
| | | | | | | | | | | | | | | | | | | | | |
| | | Q3 2009 | | Q3 2008 | | % Change | | Q2 2009 | | % Change |
| Revenue Before Reimbursements ($000) | | $ | 159,153 | | | $ | 178,908 | | | | -11.0 | % | | $ | 157,332 | | | | 1.2 | % |
| Total Revenues ($000) | | $ | 177,363 | | | $ | 198,092 | | | | -10.5 | % | | $ | 173,556 | | | | 2.2 | % |
| Adjusted EBITDA ($000) | | $ | 26,108 | | | $ | 27,408 | | | | -4.7 | % | | $ | 21,852 | | | | 19.5 | % |
| EBITDA ($000) | | $ | 25,238 | | | $ | 27,408 | | | | -7.9 | % | | $ | 17,627 | | | | 43.2 | % |
| Net Income ($000) | | $ | 8,340 | | | $ | 7,836 | | | | 6.4 | % | | $ | 3,385 | | | | 146.4 | % |
| Earnings Per Share | | $ | 0.17 | | | $ | 0.16 | | | | 6.3 | % | | $ | 0.07 | | | | 142.9 | % |
| Adjusted Earnings Per Share | | $ | 0.18 | | | $ | 0.17 | | | | 5.9 | % | | $ | 0.12 | | | | 50.0 | % |
| Average Billable FTEs | | | 1,734 | | | | 1,927 | | | | -10.0 | % | | | 1,832 | | | | -5.3 | % |
| End of Period Billable FTEs | | | 1,716 | | | | 1,952 | | | | -12.1 | % | | | 1,778 | | | | -3.5 | % |
| Consultant Utilization (1,850 base) | | | 76 | % | | | 76 | % | | | 0.0 | % | | | 73 | % | | | 4.1 | % |
| Average Bill Rate (excluding success fees) | | $ | 255 | | | $ | 265 | | | | -3.8 | % | | $ | 250 | | | | 2.0 | % |
| DSO | | | 87 | | | | 84 | | | | 3.6 | % | | | 91 | | | | -4.4 | % |
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| (1) | | See the attached financial schedules for a reconciliation of Adjusted EBITDA, Earnings per Share, and Adjusted Earnings per Share, adjusted to exclude the net income impact of severance and other operating costs, to the closest GAAP measure. |
Third quarter 2009 revenue before reimbursements (RBR) totaled $159.2 million, up slightly from $157.3 million in the second quarter 2009, but down from $178.9 million in the third quarter 2008. Despite the year over year revenue decline, net income increased 6% due to reductions in cost of services and general and administrative (G&A) expenses as well as lower amortization and interest expense.
Overall third quarter utilization improved to 76% from 73% for the second quarter 2009 and was flat compared to third quarter 2008. Third quarter average bill rate also improved to $255 from $250 for the second quarter 2009, but was down from $265 for the third quarter 2008. Average billable full time equivalents totaled 1,734 for the third quarter, which was down by approximately 100 from the second quarter 2009 and down nearly 200 from the third quarter 2008. Severance costs for the third quarter 2009 were $1.5 million ($0.02 per share), which was comparable to both the second quarter 2009 and year ago levels. Voluntary attrition rates continued to improve to 4% for the third quarter 2009 and 13% on a trailing twelve month basis, compared to 6% and 21%, respectively, for the comparable period in 2008. Adverse currency fluctuations impacted year over year third quarter revenue comparisons by $2.9 million, but were slightly favorable compared to second quarter 2009.
Both cost of services (excluding reimbursables) and G&A expenses continue to run significantly lower than 2008 levels, reflecting the impact of numerous cost reduction initiatives implemented throughout 2009. Cost of services (excluding reimbursables) and G&A expenses totaled $133.0 million in the third quarter 2009, down $18.5 million (12%) from third quarter 2008. While bad debt expense decreased to $6.1 million from $7.7 million in the third quarter 2008, third quarter 2009 accruals were higher than expected as receivables aging lengthened. Days sales outstanding (DSO) decreased to 87 days for the third quarter 2009 from 91 days for the second quarter 2009, but was up from 84 days for the third quarter 2008. Based on third quarter results and the fourth quarter outlook, Navigant continues to expect full year 2009 cost reduction efforts to match or exceed its $50.0 million target.
The Company’s year to date 2009 results are summarized as follows:
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Year-to-Date 2009 Financial Results (1)
| | | | | | | | | | | | | |
| | | YTD 2009 | | YTD 2008 | | % Change |
| Revenue Before Reimbursements ($000) | | $ | 483,697 | | | $ | 552,587 | | | | -12.5 | % |
| Total Revenues ($000) | | $ | 533,281 | | | $ | 616,639 | | | | -13.5 | % |
| Adjusted EBITDA ($000) | | $ | 70,012 | | | $ | 95,078 | | | | -26.4 | % |
| EBITDA ($000) | | $ | 64,617 | | | $ | 92,473 | | | | -30.1 | % |
| Net Income ($000) | | $ | 17,158 | | | $ | 28,728 | | | | -40.3 | % |
| Earnings Per Share | | $ | 0.35 | | | $ | 0.60 | | | | -41.7 | % |
| Adjusted Earnings Per Share | | $ | 0.42 | | | $ | 0.66 | | | | -36.4 | % |
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| (1) | | See the attached financial schedules for a reconciliation of Adjusted EBITDA, Earnings per Share, and Adjusted Earnings per Share, adjusted to exclude the net income impact of severance and other operating costs, to the closest GAAP measure. |
On a year to date basis, RBR declined 13% and totaled $483.7 million for 2009, compared to $552.6 million for 2008. Currency impacts adversely affected year to date RBR comparisons by $15.9 million. 2009 utilization decreased to 74% from 79% for 2008 and average bill rate totaled $252 for 2009, compared to $262 for 2008. Average full time equivalents dropped to 1,834 for 2009 from 1,918 for 2008, as the Company moved to align its staffing to better match current demand levels. Cost of services (excluding reimbursables) and G&A totaled $413.7 million on a year to date basis, down $43.8 million (10%) from $457.5 million in 2008. Year to date bad debt expense was $14.3 million, compared to $17.2 million in 2008.
The Company’s liquidity and cash flow remain solid; bank debt and notes payable declined $21.6 million from June 30, 2009 and declined $56.9 million from September 30, 2008. As a result, debt to total capitalization declined to 35% at the close of the third quarter 2009 from 42% at the end of the third quarter 2008. Navigant remained within the covenant levels of its $500 million unsecured bank facility, which will mature in 2012.
Business Segment Highlights
Third quarter 2009 financial results for the Company’s four business segments are summarized as follows:
Business Segment Third Quarter 2009 Financial Results
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| | | Q3 2009 | | | Q3 2008 | | | % Change | | | Q2 2009 | | | % Change | |
| Business Segment Revenues ($000) | | | | | | | | | | | | | | | | | | | | |
| North American Dispute and Investigative Services | | $ | 72,578 | | | $ | 79,836 | | | | -9.1 | % | | $ | 72,225 | | | | 0.5 | % |
| North American Business Consulting Services | | | 70,738 | | | | 82,902 | | | | -14.7 | % | | | 69,356 | | | | 2.0 | % |
| International Consulting Operations | | | 19,423 | | | | 20,828 | | | | -6.7 | % | | | 17,820 | | | | 9.0 | % |
| Economic Consulting Services | | | 14,624 | | | | 14,526 | | | | 0.7 | % | | | 14,155 | | | | 3.3 | % |
| | | | | | | | | | | | | | | | |
| Total Company | | $ | 177,363 | | | $ | 198,092 | | | | -10.5 | % | | $ | 173,556 | | | | 2.2 | % |
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| Business Segment Revenues before Reimbursements ($000) | | | | | | | | | | | | | | | | | | |
| North American Dispute and Investigative Services | | $ | 65,859 | | | $ | 72,363 | | | | -9.0 | % | | $ | 65,810 | | | | 0.1 | % |
| North American Business Consulting Services | | | 63,884 | | | | 74,048 | | | | -13.7 | % | | | 63,566 | | | | 0.5 | % |
| International Consulting Operations | | | 15,532 | | | | 18,311 | | | | -15.2 | % | | | 14,698 | | | | 5.7 | % |
| Economic Consulting Services | | | 13,878 | | | | 14,186 | | | | -2.2 | % | | | 13,258 | | | | 4.7 | % |
| | | | | | | | | | | | | | | | |
| Total Company | | $ | 159,153 | | | $ | 178,908 | | | | -11.0 | % | | $ | 157,332 | | | | 1.2 | % |
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| Segment Operating Profit ($000) (2) | | | | | | | | | | | | | | | | | | | | |
| North American Dispute and Investigative Services | | $ | 28,068 | | | $ | 32,558 | | | | -13.8 | % | | $ | 25,681 | | | | 9.3 | % |
| North American Business Consulting Services | | | 24,408 | | | | 28,047 | | | | -13.0 | % | | | 23,356 | | | | 4.5 | % |
| International Consulting Operations | | | 4,105 | | | | 6,127 | | | | -33.0 | % | | | 4,070 | | | | 0.9 | % |
| Economic Consulting Services | | | 5,239 | | | | 5,954 | | | | -12.0 | % | | | 4,888 | | | | 7.2 | % |
| | | | | | | | | | | | | | | | |
| Total Company | | $ | 61,820 | | | $ | 72,686 | | | | -14.9 | % | | $ | 57,995 | | | | 6.6 | % |
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| (2) | | For further detail and comparable year to date amounts see the Q3 2009 Metrics Datasheet posted atwww.navigantconsulting.com/investor_relations. |
Dispute and Investigative Services segment RBR was stable at $65.9 million for the third quarter 2009, while segment operating profit improved by 9% from the second quarter 2009. Although RBR was down from third quarter 2008, as the quarter progressed demand showed signs of strengthening in areas such as financial markets related litigation and investigations, white collar litigation, and construction disputes and advisory services. Additionally, as the impact of the global economic crisis spreads, a second generation of litigation is beginning to rise on matters including contract disputes, employment class actions, data breaches and theft of trade secrets.
Results for the Business Consulting Services segment were also steady with RBR of $63.9 million for third quarter 2009, while segment operating profit improved 5% from the second quarter 2009. RBR was down from third quarter 2008 largely due to the ongoing tight corporate spending environment. Solid demand in the energy arena continues, particularly as the Company strengthens itsClean Energy Advisorbrand which supports activities aimed at reducing greenhouse gas (GHG) emissions. The firm’s healthcare practice also performed well in the third quarter 2009, largely driven by services related to revenue management, coding and documentation, and mergers and acquisitions.
Navigant’s International Consulting Operations segment achieved RBR of $15.5 million, an increase of 6.0% over the previous quarter and a 15% decline from third quarter 2008. On a local currency basis, segment RBR for third quarter 2009 was consistent with that of both second quarter 2009 and third quarter 2008. Segment operating profit improved slightly from second quarter 2009. The market remains strong for global construction dispute services, with particular focus on large infrastructure matters in the Middle East. The financial services business also maintained a strong pipeline, with clients requiring both operational and distribution strategy and transformation.
RBR for the Company’s Economic Consulting Services segment was $13.9 million, an increase of 5% over the previous quarter and a decrease of 2% from second quarter 2009. Segment operating profit for the segment improved 7% from second quarter 2009. Despite recent softness in the legal and regulatory environment, the market for economics expertise continues to be strong.
A Company metrics summary including data by segment is available atwww.navigantconsulting.com/investor_relations.
Strategic Refresh Initiative Update
As communicated earlier this year, Navigant completed a strategic assessment of its portfolio of businesses and services and refined its strategy to enhance the firm’s long term value. During the course of the third quarter the Company added several strategic hires, initiated a collaborative agreement with Geisinger Health System, a leading healthcare provider, and made steps toward the acquisition of a small energy firm. Various other senior hires and acquisitions are being pursued consistent with the Company’s growth plans. Additionally, certain service lines were discontinued in the third quarter and further rationalization of other, nonstrategic service areas is likely to continue. The future financial impacts and timing resulting from either new growth initiatives or other redeployments are difficult to predict at this time and are excluded from the earnings outlook referenced below.
2009 Outlook
“We achieved higher adjusted earnings per share for the quarter despite lower year over year revenues and a challenging operating environment,” stated Mr. Goodyear. “While the market tone has begun to feel more optimistic, we remain cautious and will continue to operate under the disciplines that we put into place earlier this year. With one quarter remaining in the fiscal year, we have tightened our range of estimated revenues and RBR while maintaining our full year earnings guidance for 2009.”
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Navigant’s RBR and total revenue for 2009 are expected to range from $630 million to $650 million, and $690 million to $710 million, respectively. Estimated earnings per share for the year remain between $0.60 and $0.70, adjusted to exclude the net income impact of severance and other operating costs.
Third Quarter 2009 Earnings Conference Call
Mr. Goodyear will host a conference call to discuss the Company’s financial results at 10:00 a.m. Eastern Time on Thursday, October 29, 2009. The web cast may be accessed at www.navigantconsulting.com/investor_relations. A replay of the web cast will be available for approximately 90 days.
About Navigant Consulting
Navigant Consulting, Inc. (NYSE: NCI) is a global consulting firm providing dispute, investigative, operational, risk management and financial and regulatory advisory solutions to government agencies, legal counsel and large companies facing the challenges of uncertainty, risk, distress and significant change. The Company focuses on industries undergoing substantial regulatory or structural change and on the issues driving these transformations.“Navigant”is a service mark of Navigant International, Inc. Navigant Consulting, Inc. (NCI) is not affiliated, associated, or in any way connected with Navigant International, Inc. and NCI’s use of “Navigant” is made under license from Navigant International, Inc. More information about Navigant Consulting can be found atwww.navigantconsulting.com.
Except as set forth below, statements included in this press release which are not historical in nature are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words including “goals,” “anticipates,” “believes,” “intends,” “estimates,” “expects” and similar expressions. These statements are based upon management’s current expectations 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 indicated in the forward-looking statements including, without limitation: the success and timing of the Company’s strategy implementation following its strategic business assessment; the success of the Company’s cost reduction actions; risks inherent in international operations including foreign currency fluctuations; ability to make acquisitions; pace, timing and integration of acquisitions; impairment charges; 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; 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 general economic conditions. Further information on these and other potential factors that could affect the Company’s financial results are included in the Company’s filings with the SEC under the “Risk Factors” section and elsewhere in those filings. 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 after the date of this press release.
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5
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | For the quarter ended September 30, | | For the nine months ended September 30, |
| | | 2009 | | 2008 | | 2009 | | 2008 |
| Revenue before reimbursements | | $ | 159,153 | | | $ | 178,908 | | | $ | 483,697 | | | $ | 552,587 | |
| Reimbursements | | | 18,210 | | | | 19,184 | | | | 49,584 | | | | 64,052 | |
| | | | | |
Total revenues | | | 177,363 | | | | 198,092 | | | | 533,281 | | | | 616,639 | |
| Cost of services before reimbursable expenses | | | 100,545 | | | | 110,083 | | | | 312,779 | | | | 337,008 | |
| Reimbursable expenses | | | 18,210 | | | | 19,184 | | | | 49,584 | | | | 64,052 | |
| | | | | |
Total costs of services | | | 118,755 | | | | 129,267 | | | | 362,363 | | | | 401,060 | |
| General and administrative expenses | | | 32,500 | | | | 41,417 | | | | 100,906 | | | | 120,501 | |
| Depreciation expense | | | 4,352 | | | | 4,330 | | | | 13,312 | | | | 12,876 | |
| Amortization expense | | | 3,055 | | | | 3,955 | | | | 10,067 | | | | 12,779 | |
| Other operating costs: | | | | | | | | | | | | | | | | |
| Office consolidation | | | 985 | | | | 553 | | | | 6,505 | | | | 4,646 | |
| | | | | |
Operating income | | | 17,716 | | | | 18,570 | | | | 40,128 | | | | 64,777 | |
| Interest expense | | | 3,671 | | | | 5,170 | | | | 11,591 | | | | 15,390 | |
| Interest income | | | (300 | ) | | | (380 | ) | | | (908 | ) | | | (877 | ) |
| Other expense (income), net | | | 214 | | | | 93 | | | | (194 | ) | | | 30 | |
| | | | | |
Income before income tax expense | | | 14,131 | | | | 13,687 | | | | 29,639 | | | | 50,234 | |
| Income tax expense | | | 5,791 | | | | 5,851 | | | | 12,481 | | | | 21,506 | |
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Net income | | $ | 8,340 | | | $ | 7,836 | | | $ | 17,158 | | | $ | 28,728 | |
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Basic income per share | | $ | 0.17 | | | $ | 0.17 | | | $ | 0.36 | | | $ | 0.62 | |
| Shares used in computing income per basic share | | | 48,493 | | | | 46,707 | | | | 48,050 | | | | 46,439 | |
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Diluted income per share | | $ | 0.17 | | | $ | 0.16 | | | $ | 0.35 | | | $ | 0.60 | |
| Shares used in computing income per diluted share | | 49,954 | | | | 48,895 | | | | 49,720 | | | | 47,997 | |
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the quarter ended September 30, 2009 | | For the quarter ended September 30, 2008 |
| | | Adjusted | | Adjustments | | Reported | | Adjusted | | Adjustments | | Reported |
| | | | | |
| Revenue before reimbursements | | $ | 159,153 | | | | | | | $ | 159,153 | | | $ | 178,908 | | | | | | | $ | 178,908 | |
| Reimbursements | | | 18,210 | | | | | | | | 18,210 | | | | 19,184 | | | | | | | | 19,184 | |
| | | | | |
Total revenues | | | 177,363 | | | | | | | | 177,363 | | | | 198,092 | | | | | | | | 198,092 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Cost of services before reimbursable expenses | | | 100,545 | | | | | | | | 100,545 | | | | 110,083 | | | | | | | | 110,083 | |
| Reimbursable expenses | | | 18,210 | | | | | | | | 18,210 | | | | 19,184 | | | | | | | | 19,184 | |
| | | | | |
Total costs of services | | | 118,755 | | | | | | | | 118,755 | | | | 129,267 | | | | | | | | 129,267 | |
| General and administrative expenses | | | 32,500 | | | | | | | | 32,500 | | | | 41,417 | | | | | | | | 41,417 | |
| Depreciation expense | | | 4,352 | | | | | | | | 4,352 | | | | 4,330 | | | | | | | | 4,330 | |
| Amortization expense | | | 3,055 | | | | | | | | 3,055 | | | | 3,955 | | | | | | | | 3,955 | |
| Other operating costs: | | | | | | | | | | | | | | | | | | | | | | | | |
| Office consolidation | | | — | | | $ | 985 | | | | 985 | | | | — | | | $ | 553 | | | | 553 | |
| | | | | |
Operating income | | | 18,701 | | | | (985 | ) | | | 17,716 | | | | 19,123 | | | | (553 | ) | | | 18,570 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest expense | | | 3,671 | | | | | | | | 3,671 | | | | 5,170 | | | | | | | | 5,170 | |
| Interest income | | | (300 | ) | | | | | | | (300 | ) | | | (380 | ) | | | | | | | (380 | ) |
| Other expense, net | | | 214 | | | | | | | | 214 | | | | 93 | | | | | | | | 93 | |
| | | | | |
Income before income tax expense | | | 15,116 | | | | (985 | ) | | | 14,131 | | | | 14,240 | | | | (553 | ) | | | 13,687 | |
| Income tax expense | | | 6,188 | | | | (397 | ) | | | 5,791 | | | | 6,074 | | | | (223 | ) | | | 5,851 | |
| | | | | |
Net income | | $ | 8,928 | | | $ | (588 | ) | | $ | 8,340 | | | $ | 8,166 | | | $ | (330 | ) | | $ | 7,836 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | |
Diluted income per share (EPS) (3) | | $ | 0.18 | | | | | | | $ | 0.17 | | | $ | 0.17 | | | | | | | $ | 0.16 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | |
| Shares used in computing income per diluted share | | | 49,954 | | | | | | | | 49,954 | | | | 48,895 | | | | | | | | 48,895 | |
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Percentage of revenues before reimbursements : | | | | | | | | | | | | | | | | | | | | | | | | |
| Cost of services before reimbursable expenses | | | 63 | % | | | | | | | 63 | % | | | 62 | % | | | | | | | 62 | % |
| Reimbursable expenses | | | 11 | % | | | | | | | 11 | % | | | 11 | % | | | | | | | 11 | % |
| General and administrative expenses | | | 20 | % | | | | | | | 20 | % | | | 23 | % | | | | | | | 23 | % |
| EBITDA (4) | | | 16 | % | | | | | | | 16 | % | | | 15 | % | | | | | | | 15 | % |
| Operating income | | | 12 | % | | | | | | | 11 | % | | | 11 | % | | | | | | | 10 | % |
| Net income | | | 6 | % | | | | | | | 5 | % | | | 5 | % | | | | | | | 4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA (4) reconciliation: | | | | | | | | | | | | | | | | | | | | | | | | |
| EBITDA (4) | | $ | 26,108 | | | $ | (870 | ) | | $ | 25,238 | | | $ | 27,408 | | | | | | | $ | 27,408 | |
| Depreciation | | | 4,352 | | | | | | | | 4,352 | | | | 4,330 | | | | | | | | 4,330 | |
| Accelerated Depreciation — Office consolidation | | | — | | | | (115 | ) | | | 115 | | | | — | | | | (553 | ) | | | 553 | |
| Amortization | | | 3,055 | | | | | | | | 3,055 | | | | 3,955 | | | | | | | | 3,955 | |
| | | | | |
Operating income | | $ | 18,701 | | | $ | (985) | (1) | | $ | 17,716 | | | $ | 19,123 | | | $ | (553 | )(2) | | $ | 18,570 | |
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| (1) | | During the third quarter of 2009 the Company recorded office consolidation costs of $1.0 million associated with real estate rationalization, including office closure costs, leasehold improvement write downs and accelerated depreciation on leasehold improvements. |
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| (2) | | During the third quarter of 2008 the Company recorded office consolidation costs of $0.6 million in accelerated depreciation on leasehold improvements associated with real estate rationalization. |
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| (3) | | The Company recorded severance costs of $1.5 million during the third quarters of 2009 and 2008. After reducing the severance costs to reflect the tax benefit on such costs of approximately 40%, the net income impact of the severance costs was $0.9 million during the third quarters of 2009 and 2008. |
| | | | | | | | | |
| | | For the quarter ended September 30, | |
| | | 2009 | | | 2008 | |
| Severance costs | | $ | 1,545 | | | $ | 1,489 | |
| Tax benefit of severance costs at 40% | | | (618 | ) | | | (596 | ) |
| | | | | | | |
| Net income impact of severance costs | | $ | 927 | | | $ | 893 | |
| | | | | | | |
| Shares used in computing income per diluted share | | | 49,954 | | | | 48,895 | |
| Diluted income per share impact of severance costs | | $ | 0.02 | | | $ | 0.02 | |
| | | | | | | |
| | | | | | | | | |
| Adjusted net income | | $ | 8,928 | | | $ | 8,166 | |
| Net income impact of severance costs | | | 927 | | | | 893 | |
| | | | | | | |
| Adjusted net income, excluding the net income impact of severance costs | | $ | 9,855 | | | $ | 9,059 | |
| | | | | | | |
| Shares used in computing income per diluted share | | | 49,954 | | | | 48,895 | |
| Adjusted diluted income per share, excluding the impact of severance costs | | $ | 0.20 | | | $ | 0.19 | |
| | | | | | | |
| | |
| (4) | | EBITDA (earnings before interest, taxes, depreciation and amortization) is not a measure of financial performance under generally accepted accounting principles (GAAP). The Company believes EBITDA is useful supplemental information for investors to evaluate financial performance. This data is also used by the Company for assessment of its operating and financial results, in addition to operating income, net income and other GAAP measures. Management believes EBITDA is a useful indicator of the Company’s financial and operating performance and its ability to generate cash flows from operations that are available for taxes and capital expenditures. Investors should recognize that EBITDA might not be comparable to similarly-titled measures of other companies. This measure should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP. |
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the nine months ended September 30, 2009 | | For the nine months ended September 30, 2008 |
| | | Adjusted | | Adjustments | | Reported | | Adjusted | | Adjustments | | Reported |
| | | | | |
| Revenue before reimbursements | | $ | 483,697 | | | | | | | $ | 483,697 | | | $ | 552,587 | | | | | | | $ | 552,587 | |
| Reimbursements | | | 49,584 | | | | | | | | 49,584 | | | | 64,052 | | | | | | | | 64,052 | |
| | | | | |
Total revenues | | | 533,281 | | | | | | | | 533,281 | | | | 616,639 | | | | | | | | 616,639 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Cost of services before reimbursable expenses | | | 312,779 | | | | | | | | 312,779 | | | | 337,008 | | | | | | | | 337,008 | |
| Reimbursable expenses | | | 49,584 | | | | | | | | 49,584 | | | | 64,052 | | | | | | | | 64,052 | |
| | | | | |
Total costs of services | | | 362,363 | | | | | | | | 362,363 | | | | 401,060 | | | | | | | | 401,060 | |
| General and administrative expenses | | | 100,906 | | | | | | | | 100,906 | | | | 120,501 | | | | | | | | 120,501 | |
| Depreciation expense | | | 13,312 | | | | | | | | 13,312 | | | | 12,876 | | | | | | | | 12,876 | |
| Amortization expense | | | 10,067 | | | | | | | | 10,067 | | | | 12,779 | | | | | | | | 12,779 | |
| Other operating costs: | | | | | | | | | | | | | | | | | | | | | | | | |
| Office consolidation | | | — | | | $ | 6,505 | | | | 6,505 | | | | — | | | $ | 4,646 | | | | 4,646 | |
| | | | | |
Operating income | | | 46,633 | | | | (6,505 | ) | | | 40,128 | | | | 69,423 | | | | (4,646 | ) | | | 64,777 | |
| Interest expense | | | 11,591 | | | | | | | | 11,591 | | | | 15,390 | | | | | | | | 15,390 | |
| Interest income | | | (908 | ) | | | | | | | (908 | ) | | | (877 | ) | | | | | | | (877 | ) |
| Other (income) expense, net | | | (194 | ) | | | | | | | (194 | ) | | | 30 | | | | | | | | 30 | |
| | | | | |
Income before income tax expense | | | 36,144 | | | | (6,505 | ) | | | 29,639 | | | | 54,880 | | | | (4,646 | ) | | | 50,234 | |
| Income tax expense | | | 15,104 | | | | (2,623 | ) | | | 12,481 | | | | 23,380 | | | | (1,874 | ) | | | 21,506 | |
| | | | | |
Net income | | $ | 21,040 | | | $ | (3,882 | ) | | $ | 17,158 | | | $ | 31,500 | | | $ | (2,772 | ) | | $ | 28,728 | |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Diluted income per share (EPS) (3) | | $ | 0.42 | | | | | | | $ | 0.35 | | | $ | 0.66 | | | | | | | $ | 0.60 | |
| | | | | |
| Shares used in computing income per diluted share | | | 49,720 | | | | | | | | 49,720 | | | | 47,997 | | | | | | | | 47,997 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Percentage of revenues before reimbursements : | | | | | | | | | | | | | | | | | | | | | | | | |
| Cost of services before reimbursable expenses | | | 65 | % | | | | | | | 65 | % | | | 61 | % | | | | | | | 61 | % |
| Reimbursable expenses | | | 10 | % | | | | | | | 10 | % | | | 12 | % | | | | | | | 12 | % |
| General and administrative expenses | | | 21 | % | | | | | | | 21 | % | | | 22 | % | | | | | | | 22 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| EBITDA (4) | | | 14 | % | | | | | | | 13 | % | | | 17 | % | | | | | | | 17 | % |
| Operating income | | | 10 | % | | | | | | | 8 | % | | | 13 | % | | | | | | | 12 | % |
| Net income | | | 4 | % | | | | | | | 4 | % | | | 6 | % | | | | | | | 5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA (4) reconciliation: | | | | | | | | | | | | | | | | | | | | | | | | |
| EBITDA (4) | | $ | 70,012 | | | $ | (5,395 | ) | | $ | 64,617 | | | $ | 95,078 | | | $ | (2,605 | ) | | $ | 92,473 | |
| Depreciation | | | 13,312 | | | | | | | | 13,312 | | | | 12,876 | | | | | | | | 12,876 | |
| Accelerated Depreciation — Office consolidation | | | — | | | | (1,110 | ) | | | 1,110 | | | | — | | | | (2,041 | ) | | | 2,041 | |
| Amortization | | | 10,067 | | | | | | | | 10,067 | | | | 12,779 | | | | | | | | 12,779 | |
| | | | | |
Operating income | | $ | 46,633 | | | $ | (6,505 | )(1) | | $ | 40,128 | | | $ | 69,423 | | | $ | (4,646 | )(2) | | $ | 64,777 | |
| | | | | |
| | |
| (1) | | During the nine months ended for 2009 the Company recorded office consolidation costs of $6.5 million associated with real estate rationalization, including office closure costs, leasehold improvement write downs and accelerated depreciation on leasehold improvements. |
| |
| (2) | | During the nine months ended for 2008 the Company recorded office consolidation costs of $4.6 million associated with real estate rationalization, including office closure costs, leasehold improvement write downs and accelerated depreciation on leasehold improvements. |
| |
| (3) | | The Company recorded severance costs of $5.9 million and $3.2 million during the nine months ended for 2009 and 2008 respectively. After reducing the severance costs to reflect the tax benefit on such costs of approximately 40%, the net income impact of the severance costs was $3.5 million and $1.9 million during the nine months ended for 2009 and 2008 respectively. |
| | | | | | | | | |
| | | For the nine months ended September 30, | |
| | | 2009 | | | 2008 | |
| Severance costs | | $ | 5,892 | | | $ | 3,200 | |
| Tax benefit of severance costs at 40% | | | (2,357 | ) | | | (1,280 | ) |
| | | | | | | |
| Net income impact of severance costs | | $ | 3,535 | | | $ | 1,920 | |
| | | | | | | |
| Shares used in computing income per diluted share | | | 49,720 | | | | 47,997 | |
| Diluted income per share impact of severance costs | | $ | 0.07 | | | $ | 0.04 | |
| | | | | | | |
| | | | | | | | | |
| Adjusted net income | | $ | 21,040 | | | $ | 31,500 | |
| Net income impact of severance costs | | | 3,535 | | | | 1,920 | |
| | | | | | | |
| Adjusted net income, excluding the net income impact of severance costs | | $ | 24,575 | | | $ | 33,420 | |
| | | | | | | |
| Shares used in computing income per diluted share | | | 49,720 | | | | 47,997 | |
| Adjusted diluted income per share, excluding the impact of severance costs | | $ | 0.49 | | | $ | 0.70 | |
| | | | | | | |
| | |
| (4) | | EBITDA (earnings before interest, taxes, depreciation and amortization) is not a measure of financial performance under generally accepted accounting principles (GAAP). The Company believes EBITDA is useful supplemental information for investors to evaluate financial performance. This data is also used by the Company for assessment of its operating and financial results, in addition to operating income, net income and other GAAP measures. Management believes EBITDA is a useful indicator of the Company’s financial and operating performance and its ability to generate cash flows from operations that are available for taxes and capital expenditures. Investors should recognize that EBITDA might not be comparable to similarly-titled measures of other companies. This measure should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP. |
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AND SELECTED DATA
(In thousands, except DSO data)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | September 30, | | September 30, | | December 31, | | June 30, |
| | | 2009 | | 2008 | | 2008 | | 2009 |
| | | |
| Current assets: | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 13,342 | | | $ | 10,530 | | | $ | 23,134 | | | $ | 5,132 | |
| Accounts receivable, net | | | 185,129 | | | | 197,877 | | | | 170,464 | | | | 187,201 | |
| Prepaid expenses and other current assets | | | 13,710 | | | | 18,599 | | | | 13,455 | | | | 15,617 | |
| Deferred income tax assets | | | 19,826 | | | | 20,950 | | | | 21,494 | | | | 19,367 | |
| | | |
| Total current assets | | | 232,007 | | | | 247,956 | | | | 228,547 | | | | 227,317 | |
| | | | | | | | | | | | | | | | | |
| Property and equipment, net | | | 43,782 | | | | 45,391 | | | | 45,151 | | | | 47,045 | |
| Intangible assets, net | | | 30,515 | | | | 46,203 | | | | 38,108 | | | | 33,956 | |
| Goodwill | | | 474,134 | | | | 475,058 | | | | 463,058 | | | | 475,777 | |
| Other assets | | | 14,040 | | | | 19,444 | | | | 17,529 | | | | 15,592 | |
| | | |
| Total assets | | $ | 794,478 | | | $ | 834,052 | | | $ | 792,393 | | | $ | 799,687 | |
| | | |
| | | | | | | | | | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | | | | | | | |
| Accounts payable | | $ | 6,117 | | | $ | 9,782 | | | $ | 8,511 | | | $ | 9,545 | |
| Accrued liabilities | | | 9,097 | | | | 9,364 | | | | 10,086 | | | | 9,404 | |
| Accrued compensation-related costs | | | 51,716 | | | | 69,519 | | | | 72,701 | | | | 43,602 | |
| Income taxes payable | | | 2,653 | | | | — | | | | 1,371 | | | | 557 | |
| Notes payable | | | — | | | | 6,239 | | | | 4,173 | | | | 4,170 | |
| Term loan — current | | | 7,313 | | | | 2,250 | | | | 2,250 | | | | 2,250 | |
| Other current liabilities | | | 36,583 | | | | 36,348 | | | | 31,467 | | | | 37,106 | |
| | | |
| Total current liabilities | | | 113,479 | | | | 133,502 | | | | 130,559 | | | | 106,634 | |
| Non-current liabilities | | | | | | | | | | | | | | | | |
| Deferred income tax liabilities | | | 31,512 | | | | 29,427 | | | | 28,511 | | | | 30,121 | |
| Other non-current liabilities | | | 24,477 | | | | 30,254 | | | | 37,336 | | | | 25,022 | |
| Term loan non-current | | | 212,625 | | | | 219,938 | | | | 219,375 | | | | 218,250 | |
| Bank debt non-current | | | 2,388 | | | | 50,791 | | | | 10,854 | | | | 19,217 | |
| | | |
| Total non-current liabilities | | | 271,002 | | | | 330,410 | | | | 296,076 | | | | 292,610 | |
| | | |
| Total liabilities | | | 384,481 | | | | 463,912 | | | | 426,635 | | | | 399,244 | |
| | | |
| Stockholders’ equity: | | | | | | | | | | | | | | | | |
| Preferred stock | | | — | | | | — | | | | — | | | | — | |
| Common stock | | | 60 | | | | 59 | | | | 59 | | | | 60 | |
| Additional paid-in capital | | | 557,758 | | | | 553,666 | | | | 555,737 | | | | 556,036 | |
| Deferred stock issuance, net | | | — | | | | 985 | | | | 985 | | | | — | |
| Treasury stock | | | (218,798 | ) | | | (238,696 | ) | | | (231,071 | ) | | | (218,798 | ) |
| Retained earnings | | | 86,397 | | | | 57,910 | | | | 69,239 | | | | 78,057 | |
| Accumulated other comprehensive loss | | | (15,420 | ) | | | (3,784 | ) | | | (29,191 | ) | | | (14,912 | ) |
| | | |
| Total stockholders’ equity | | | 409,997 | | | | 370,140 | | | | 365,758 | | | | 400,443 | |
| | | |
| Total liabilities and stockholders’ equity | | $ | 794,478 | | | $ | 834,052 | | | $ | 792,393 | | | $ | 799,687 | |
| | | |
| | | | | | | | | | | | | | | | | |
Selected Data | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Days sales outstanding, net (DSO)1 | | | 87 | | | | 84 | | | | 73 | | | | 91 | |
| | | |
| | |
| 1) | | Net of deferred revenue. |
NAVIGANT CONSULTING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in 000s
| | | | | | | | | | | | | | | | | |
| | | For the three months ended | | For the nine months ended |
| | | September 30, | | September 30, |
| | | 2009 | | 2008 | | 2009 | | 2008 |
| Cash flows from operating activities: | | | | | | | | | | | | | | | | |
| Net income | | $ | 8,340 | | | $ | 7,836 | | | $ | 17,158 | | | $ | 28,728 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | | | | | | |
| Depreciation expense | | | 4,352 | | | | 4,330 | | | | 13,312 | | | | 12,876 | |
| Depreciation expense- office consolidation | | | 115 | | | | 553 | | | | 1,110 | | | | 2,041 | |
| Amortization expense | | | 3,055 | | | | 3,955 | | | | 10,067 | | | | 12,779 | |
| Share-based compensation expense | | | 1,545 | | | | 3,055 | | | | 6,010 | | | | 9,632 | |
| Accretion of interest expense | | | 194 | | | | 361 | | | | 693 | | | | 704 | |
| Allowance for doubtful accounts receivable | | | 6,143 | | | | 7,731 | | | | 14,253 | | | | 17,201 | |
| Deferred income taxes | | | (650 | ) | | | (1,251 | ) | | | 822 | | | | (5,830 | ) |
| Other, net | | | — | | | | (259 | ) | | | — | | | | (273 | ) |
| Changes in assets and liabilities: | | | | | | | | | | | | | | | | |
| Accounts receivable | | | (4,192 | ) | | | 10,267 | | | | (25,550 | ) | | | (14,058 | ) |
| Prepaid expenses and other assets | | | 3,426 | | | | 3,051 | | | | 3,352 | | | | (15,966 | ) |
| Accounts payable | | | (3,427 | ) | | | 661 | | | | (2,495 | ) | | | 2,186 | |
| Accrued liabilities | | | (170 | ) | | | (2,746 | ) | | | (761 | ) | | | (500 | ) |
| Accrued compensation-related costs | | | 8,197 | | | | 14,791 | | | | (21,326 | ) | | | 1,820 | |
| Income taxes payable | | | 3,130 | | | | (9,256 | ) | | | 4,032 | | | | (6,498 | ) |
| Other liabilities | | | 419 | | | | (3,958 | ) | | | 2,566 | | | | (6,289 | ) |
| | | | | |
| | | | | | | | | | | | | | | | | |
Net cash provided by operating activities | | | 30,477 | | | | 39,121 | | | | 23,243 | | | | 38,553 | |
| | | | | | | | | | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | | | | | | | | | |
| Purchases of property and equipment | | | (1,271 | ) | | | (1,091 | ) | | | (13,623 | ) | | | (5,055 | ) |
| Acquisition of business | | | — | | | | — | | | | (1,875 | ) | | | (50,000 | ) |
| Payments of acquisition liabilities | | | — | | | | — | | | | (2,821 | ) | | | (3,154 | ) |
| Other, net | | | — | | | | (511 | ) | | | (109 | ) | | | (863 | ) |
| | | | | |
| | | | | | | | | | | | | | | | | |
Net cash used in investing activities | | | (1,271 | ) | | | (1,602 | ) | | | (18,428 | ) | | | (59,072 | ) |
| | | | | | | | | | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | | | | | | | | | |
| Issuances of common stock | | | 369 | | | | 1,220 | | | | 2,686 | | | | 5,298 | |
| Payments of notes payable | | | (4,127 | ) | | | (4,477 | ) | | | (4,482 | ) | | | (4,976 | ) |
| Borrowings from banks, net of repayments | | | (16,209 | ) | | | (32,604 | ) | | | (10,096 | ) | | | 20,995 | |
| Payments of term loan installments | | | (563 | ) | | | (562 | ) | | | (1,688 | ) | | | (1,687 | ) |
| Other, net | | | (74 | ) | | | (886 | ) | | | (888 | ) | | | (237 | ) |
| | | | | |
Net cash (used in) provided by financing activities | | | (20,604 | ) | | | (37,309 | ) | | | (14,468 | ) | | | 19,393 | |
| | | | | |
| | | | | | | | | | | | | | | | | |
| Effect of exchange rate changes on cash | | | (392 | ) | | | — | | | | (139 | ) | | | — | |
| | | | | |
| Net increase (decrease) in cash and cash equivalents | | | 8,210 | | | | 210 | | | | (9,792 | ) | | | (1,126 | ) |
| Cash and cash equivalents at beginning of the period | | | 5,132 | | | | 10,320 | | | | 23,134 | | | | 11,656 | |
| | | | | |
| Cash and cash equivalents at end of the period | | $ | 13,342 | | | $ | 10,530 | | | $ | 13,342 | | | $ | 10,530 | |
| | | | | |
