CORRECTING and REPLACING
Duff & Phelps Reports Third Quarter 2010 Results and Declares Quarterly Dividend
CORRECTION...by Duff & Phelps Corporation
NEW YORK--October 28, 2010--In the "Results Of Operations By Segment" financial table, the entries for segment operating income and segment operating income margin for the three months ended September 30, 2010 are corrected.
The corrected release reads:
DUFF & PHELPS REPORTS
THIRD QUARTER 2010 RESULTS
AND DECLARES QUARTERLY DIVIDEND
HIGHLIGHTS:
| | - | Quarterly revenues of $86.8 million including reimbursable expenses and $84.4 million excluding reimbursable expenses |
| | - | Adjusted EBITDA(1) of $12.2 million, representing a 14.5% margin |
| | - | Adjusted Pro Forma Net Income (1) of $0.15 per share |
| | - | Declares quarterly dividend of $0.06 per share of Class A common stock |
Duff & Phelps Corporation (NYSE: DUF), a leading independent financial advisory and investment banking firm, today announced financial results for its third quarter of 2010 and declared a quarterly dividend.
Results
For the quarter ended September 30, 2010, Duff & Phelps generated revenues excluding reimbursable expenses of $84.4 million, compared to $93.2 million for the corresponding prior year quarter. Adjusted EBITDA(1) for the quarter was $12.2 million, representing 14.5% of revenues excluding reimbursable expenses, compared to $16.5 million for the corresponding prior year quarter, representing 17.7% of revenues excluding reimbursable expenses. Net income attributable to Duff & Phelps Corporation was $4.1 million, or $0.15 per share of Class A common stock on a fully diluted basis, compared to $3.5 million, or $0.14 for the corresponding prior year quarter. Adjusted Pro Forma Net Income(1) was $5.7 million, or $0.15 per share on a fully exchanged, fully diluted basis, compared to $8.4 million, or $0.22 per share, for the corresponding prior year quarter.
For the nine months ended September 30, 2010, Duff & Phelps generated revenues excluding reimbursable expenses of $262.3 million, compared to $272.6 million for the corresponding prior year period. Adjusted EBITDA(1) for the period was $42.4 million, representing 16.1% of revenues excluding reimbursable expenses, compared to $48.5 million for the corresponding prior year period, representing 17.8% of revenues excluding reimbursable expenses. Adjusted EBITDA for the nine months ended September 30, 2010 excludes a $3.6 million charge related to the departure of our former president and one of our segment leaders(2). Net income attributable to Duff & Phelps Corporation was $10.9 million, or $0.40 per share of Class A common stock on a fully diluted basis, compared to $7.0 million, or $0.35 for the corresponding prior year period. Adjusted Pro Forma Net Income(1) was $20.2 million, or $0.52 per share on a fully exchanged, fully diluted basis, compared to $23.4 million, or $0.64 per share, for the corresponding prior year period. Adjusted Pro Forma Net Income(1) per share excludes a $0.05 per share charge related to the departure of our former president and one of our segment leaders(2).
“During the third quarter, certain of our businesses experienced revenue challenges due to the recent economic environment and lower restructuring activity. In addition, we faced a difficult year-over-year comparison given the significant revenue contribution of last year’s Lehman Examiner assignment,” said Noah Gottdiener, chief executive officer. “Despite these challenges, we saw meaningful improvements in our M&A correlated businesses compared to last year. Based on increased levels of transaction activity, we anticipate improved business performance in the fourth quarter, in particular from our M&A correlated businesses.”
Declaration of Quarterly Dividend
The Company also announced today that its board of directors has declared a quarterly dividend of $0.06 per share on its outstanding Class A common stock. The dividend is payable on December 3, 2010 to shareholders of record on November 23, 2010.
| (1) | Adjusted EBITDA, Adjusted Pro Forma Net Income and Adjusted Pro Forma Net Income per share are non-GAAP financial measures. See definitions and disclosures herein. |
| (2) | On April 22, 2010, the Company announced certain management changes related to the departure of our former president and one of our segment leaders. The Company incurred a onetime charge associated with these changes of approximately $3.6 million in its second quarter of 2010 related to cash severance and the accounting impact of accelerated vesting of equity-based awards. Of this amount, approximately $3.0 million primarily resulted from cash severance and a charge from the accelerated vesting of restricted stock awards which is added back to Adjusted EBITDA and Adjusted Pro Forma Net Income (as defined below). The remaining approximately $0.5 million related to a charge from the accelerated vesting of Legacy Units and IPO Options, which is also added back to Adjusted EBITDA and Adjusted Pro Forma Net Income (as defined below) consistent with prior presentation. |
FOR IMMEDIATE RELEASE
Earnings Call Webcast
As previously announced, Duff & Phelps will host a conference call today, October 28, 2010, at 5 p.m. EDT to discuss the Company’s financial results. Interested parties can access the webcast for this call through http://ir.duffandphelps.com/.
About Duff & Phelps
As a leading global independent provider of financial advisory and investment banking services, Duff & Phelps delivers trusted advice to our clients principally in the areas of valuation, transactions, financial restructuring, dispute and taxation. Our world class capabilities and resources, combined with an agile and responsive delivery, distinguish our clients' experience in working with us. With offices in North America, Europe and Asia, Duff & Phelps is committed to fulfilling its mission to protect, recover and maximize value for its clients. Investment banking services in the United States are provided by Duff & Phelps Securities, LLC. Investment banking services in the United Kingdom and Germany are provided by Duff & Phelps Securities Ltd. Duff & Phelps Securities Ltd. is authorized and regulated by the Financial Services Authority. Investment banking services in France are provided by Duff & Phelps SAS. For more information, visit www.duffandphelps.com. (NYSE: DUF)
Non-GAAP Financial Measures
Adjusted EBITDA, Adjusted Pro Forma Net Income and Adjusted Pro Forma Net Income per share are non-GAAP financial measures. We believe that Adjusted EBITDA provides a relevant and useful alternative measure of our ongoing profitability and performance, when viewed in conjunction with GAAP measures, as it adjusts net income or loss attributable to Duff & Phelps Corporation for (a) net income or loss attributable to noncontrolling interest, (b) provision for income taxes, (c) interest expense and depreciation and amortization (a significant portion of which relates to debt and capital investments that have been incurred as the result of acquisitions and investments in stand-alone infrastructure which we do not expect to incur at the same levels in the future), (d) equity-based compensation associated with the Legacy Units of D&P Acquisitions, a significant portion of which is due to certain onetime grants associated with acquisitions prior to our IPO, and options to purchase shares of the Company’s Class A common stock granted in connection with the IPO, (e) impairment charges, acquisition retention expenses and other merger and acquisition costs, which are generally non-recurring in nature or are related to deferred payments associated with prior acquisitions, and (f) costs incurred from the realignment of our senior management which are generally non-recurring in nature and primarily include cash severance and charges from the accounting impact of the acceleration of vesting of restricted stock awards.
Given the level of acquisition activity during the period prior to our IPO, and related capital investments and one time equity grants associated with acquisitions during the this period (which we do not expect to incur at the same levels post IPO) and the IPO, and our belief that, as a professional services organization, our operations are not capital intensive on an ongoing basis, we believe the Adjusted EBITDA measure, in addition to GAAP financial measures, provides a relevant and useful benchmark for investors, in order to assess our financial performance and comparability to other companies in our industry. The Adjusted EBITDA measure is utilized by our senior management to evaluate our overall performance and operating expense characteristics and to compare our performance to that of certain of our competitors. A measure similar to Adjusted EBITDA is the principal measure that determines the compensation of our senior management team. In addition, a measure similar to Adjusted EBITDA is a key measure that determines compliance with certain financial covenants under our credit facility. Management compensates for the inherent limitations associated with using the Adjusted EBITDA measure through disclosure of such limitations, presentation of our financial statements in accordance with GAAP and reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, net income or loss. Furthermore, management also reviews GAAP measures, and evaluates individual measures that are not included in Adjusted EBITDA such as our level of capital expenditures, equity issuance and interest expense, among other measures.
FOR IMMEDIATE RELEASE
Adjusted EBITDA, as defined by the Company and reconciled below, consists of net income or loss attributable to Duff & Phelps Corporation before (a) net income or loss attributable to the noncontrolling interest, (b) provision for income taxes, (c) other expense/(income), net, (d) depreciation and amortization, (e) charges from impairment of intangible assets, (f) equity-based compensation associated with Legacy Units and IPO Options included in both compensation and benefits and in selling, general and administrative expenses, (g) acquisition retention expenses, (h) cash severance and equity-compensation expense from the acceleration of vesting of restricted stock awards due to the realignment of our senior management, and (i) merger and acquisition costs:
Reconciliation of Adjusted EBITDA
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | | | September 30, | | | September 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| Revenues (excluding client reimbursables) | | $ | 84,427 | | | $ | 93,240 | | | $ | 262,333 | | | $ | 272,558 | |
| | | | | | | | | | | | | | | | | |
| Net income attributable to Duff & Phelps Corporation | | $ | 4,109 | | | $ | 3,452 | | | $ | 10,889 | | | $ | 6,951 | |
| Net income attributable to noncontrolling interest | | | 3,088 | | | | 4,136 | | | | 8,494 | | | | 12,417 | |
| Provision for income taxes | | | 2,010 | | | | 2,999 | | | | 8,166 | | | | 7,532 | |
| Other expense/(income), net | | | (6 | ) | | | 124 | | | | 317 | | | | 2,919 | |
| Depreciation and amortization | | | 2,567 | | | | 2,594 | | | | 7,410 | | | | 7,712 | |
| Charge from impairment of certain intangible assets | | | - | | | | - | | | | 674 | | | | - | |
| Equity-based compensation associated with Legacy Units and IPO Options | | | 391 | | | | 3,229 | | | | 2,968 | | | | 10,963 | |
| Charge from realignment of senior management (not included in equity-based compensation from Legacy Units and IPO Options above) | | | - | | | | - | | | | 3,040 | | | | - | |
| Merger and acquisition costs | | | 76 | | | | - | | | | 397 | | | | - | |
| | | | | | | | | | | | | | | | | |
| Adjusted EBITDA | | $ | 12,235 | | | $ | 16,534 | | | $ | 42,355 | | | $ | 48,494 | |
| | | | | | | | | | | | | | | | | |
| Adjusted EBITDA as a percentage of revenues | | | 14.5 | % | | | 17.7 | % | | | 16.1 | % | | | 17.8 | % |
Adjusted Pro Forma Net Income, as defined by Duff & Phelps and reconciled below, consists of net income or loss attributable to Duff & Phelps Corporation before (a) net income or loss attributable to the noncontrolling interest, (b) a non-recurring charge from the repayment and subsequent termination of our former credit agreement, (c) equity-based compensation associated with Legacy Units and IPO Options included in both compensation and benefits and in selling, general and administrative expenses, (d) acquisition retention expenses, (e) cash severance and equity-compensation expense from the acceleration of vesting of restricted stock awards due to the realignment of our senior management, (f) merger and acquisition costs, and less (g) pro forma corporate income tax applied at an assumed rate as specified in the applicable footnote (such assumed pro forma corporate income tax rate may fluctuate between periods and may include true-ups relating to prior periods, based on management estimates and judgments). Adjusted Pro Forma Net Income per share, as defined by Duff & Phelps, consists of Adjusted Pro Forma Net Income divided by the weighted average number of the Company's Class A and Class B shares for the applicable period, giving effect to the dilutive impact, if any, of stock options and restricted stock awards.
FOR IMMEDIATE RELEASE
Reconciliation of Adjusted Pro Forma Net Income
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | | | September 30, | | | September 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| Net income attributable to Duff & Phelps Corporation | | $ | 4,109 | | | $ | 3,452 | | | $ | 10,889 | | | $ | 6,951 | |
Net income attributable to noncontrolling interest(a) | | | 3,088 | | | | 4,136 | | | | 8,494 | | | | 12,417 | |
Loss on early extinguishment of debt(b) | | | - | | | | - | | | | - | | | | 1,737 | |
Equity-based compensation associated with Legacy Units and IPO Options(c) | | | 391 | | | | 3,229 | | | | 2,968 | | | | 10,963 | |
Charge from realignment of senior management (not included in equity-based compensation from Legacy Units and IPO Options above)(d) | | | - | | | | - | | | | 3,040 | | | | - | |
| Merger and acquisition costs | | | 76 | | | | - | | | | 397 | | | | - | |
Adjustment to provision for income taxes(e) | | | (1,967 | ) | | | (2,458 | ) | | | (5,606 | ) | | | (8,625 | ) |
| | | | | | | | | | | | | | | | | |
| Adjusted Pro Forma Net Income, as defined | | $ | 5,697 | | | $ | 8,359 | | | $ | 20,182 | | | $ | 23,443 | |
| | | | | | | | | | | | | | | | | |
Pro forma fully exchanged, fully diluted shares outstanding(f) | | | 37,857 | | | | 38,694 | | | | 38,673 | | | | 36,781 | |
| | | | | | | | | | | | | | | | | |
| Adjusted Pro Forma Net Income per fully exchanged, fully diluted shares outstanding | | $ | 0.15 | | | $ | 0.22 | | | $ | 0.52 | | | $ | 0.64 | |
| | (a) | Represents elimination of the noncontrolling interest associated with the ownership by existing unitholders of D&P Acquisitions (excluding D&P Corporation), as if such unitholders had fully exchanged their partnership units and Class B common stock of the Company for shares of Class A common stock of the Company. |
| | (b) | Represents a non-recurring charge from the repayment and subsequent termination of our credit agreement. |
| | (c) | Represents elimination of equity-based compensation associated with Legacy Units and IPO Options. |
| | (d) | Represents elimination of a charge from the departure of our former president and one of our segment leaders which is not included in equity-based compensation from Legacy Units and IPO Options. |
| | (e) | Represents an adjustment to reflect an assumed effective corporate tax rate of approximately 40.6% and 40.8% for the full year, as applied to the three and nine months ended September 30, 2010 and 2009, respectively, which includes a provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state, local and/or foreign jurisdiction. For the three months ended September 30, 2010 and 2009, the pro forma tax rates of 41.1% and 39.5% reflect a true-up adjustment relating to the six months ended June 30, 2010 and 2009, respectively. Assumes full exchange of existing unitholders' partnership units and Class B common stock of the Company into Class A common stock of the Company. |
| | (f) | Based on the weighted-average number of aggregated Class A and Class B shares of common stock outstanding, excluding Ongoing RSAs, and dilutive effect of Ongoing RSAs for the three and nine months ended September 30, 2010 and 2009, respectively. The Company believes that IPO Options would not be considered dilutive when applying the treasury method. |
Both Adjusted EBITDA and Adjusted Pro Forma Net Income are non-GAAP financial measures which are not prepared in accordance with, and should not be considered alternatives to, measurements required by GAAP, such as operating income, net income or loss, net income or loss per share, cash flow from continuing operating activities or any other measure of performance or liquidity derived in accordance with GAAP. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. In addition, it should be noted that companies calculate Adjusted EBITDA and Adjusted Pro Forma Net Income differently and, therefore, Adjusted EBITDA and Adjusted Pro Forma Net Income as presented for us may not be comparable to Adjusted EBITDA and Adjusted Pro Forma Net Income reported by other companies.
FOR IMMEDIATE RELEASE
Disclosure Regarding Forward-Looking Statements
Statements in this press release contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), which reflect the Company’s current views with respect to, among other things, future events and financial performance. The Company generally identifies forward looking statements by terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “could,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this discussion are based upon our historical performance and on our current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us, or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and the risk factors section that are included in our Annual Report on Form 10-K for the year ended December 31, 2009 and any subsequent filings of our Quarterly Reports on Form 10-Q. The forward-looking statements included in this press release are made only as of the date this press release was issued. The Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
Investor Relations
Marty Dauer
+1 212 871 7700
investor.relations@duffandphelps.com
Media Relations
Alex Wolfe
+1 212 871 9087
alex.wolfe@duffandphelps.com
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | | | September 30, | | | September 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | | | | | | | | | | | |
| Revenues | | $ | 84,427 | | | $ | 93,240 | | | $ | 262,333 | | | $ | 272,558 | |
| Reimbursable expenses | | | 2,403 | | | | 3,394 | | | | 7,163 | | | | 8,057 | |
| Total revenues | | | 86,830 | | | | 96,634 | | | | 269,496 | | | | 280,615 | |
| | | | | | | | | | | | | | | | | |
| Direct client service costs | | | | | | | | | | | | | | | | |
| Compensation and benefits (includes $3,430 and $4,294 of equity-based compensation for the three months ended September 30, 2010 and 2009, respectively, and $11,362 and $13,631 for the nine months ended September 30, 2010 and 2009, respectively) | | | 47,829 | | | | 52,287 | | | | 146,842 | | | | 155,115 | |
| Other direct client service costs | | | 1,342 | | | | 2,954 | | | | 5,211 | | | | 5,801 | |
| Reimbursable expenses | | | 2,330 | | | | 3,468 | | | | 7,223 | | | | 8,120 | |
| | | | 51,501 | | | | 58,709 | | | | 159,276 | | | | 169,036 | |
| | | | | | | | | | | | | | | | | |
| Operating expenses | | | | | | | | | | | | | | | | |
| Selling, general and administrative (includes $1,004 and $2,018 of equity-based compensation for the three months ended September 30, 2010 and 2009, respectively, and $4,462 and $5,574 for the nine months ended September 30, 2010 and 2009, respectively) | | | 23,485 | | | | 24,620 | | | | 73,873 | | | | 74,048 | |
| Depreciation and amortization | | | 2,567 | | | | 2,594 | | | | 7,410 | | | | 7,712 | |
| Charge from impairment of certain intangible assets | | | - | | | | - | | | | 674 | | | | - | |
| Merger and acquisition costs | | | 76 | | | | - | | | | 397 | | | | - | |
| | | | 26,128 | | | | 27,214 | | | | 82,354 | | | | 81,760 | |
| | | | | | | | | | | | | | | | | |
| Operating income | | | 9,201 | | | | 10,711 | | | | 27,866 | | | | 29,819 | |
| | | | | | | | | | | | | | | | | |
| Other expense/(income), net | | | | | | | | | | | | | | | | |
| Interest income | | | (29 | ) | | | (17 | ) | | | (106 | ) | | | (34 | ) |
| Interest expense | | | 66 | | | | 91 | | | | 234 | | | | 1,079 | |
| Loss on early extinguishment of debt | | | - | | | | - | | | | - | | | | 1,737 | |
| Other expense | | | (43 | ) | | | 50 | | | | 189 | | | | 137 | |
| | | | (6 | ) | | | 124 | | | | 317 | | | | 2,919 | |
| | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 9,207 | | | | 10,587 | | | | 27,549 | | | | 26,900 | |
| | | | | | | | | | | | | | | | | |
| Provision for income taxes | | | 2,010 | | | | 2,999 | | | | 8,166 | | | | 7,532 | |
| | | | | | | | | | | | | | | | | |
| Net income | | | 7,197 | | | | 7,588 | | | | 19,383 | | | | 19,368 | |
| | | | | | | | | | | | | | | | | |
| Less: Net income attributable to noncontrolling interest | | | 3,088 | | | | 4,136 | | | | 8,494 | | | | 12,417 | |
| | | | | | | | | | | | | | | | | |
| Net income attributable to Duff & Phelps Corporation | | $ | 4,109 | | | $ | 3,452 | | | $ | 10,889 | | | $ | 6,951 | |
| | | | | | | | | | | | | | | | | |
| Weighted average shares of Class A common stock outstanding | | | | | | | | | | | | | | | | |
| Basic | | | 24,873 | | | | 21,625 | | | | 24,972 | | | | 17,517 | |
| Diluted | | | 24,954 | | | | 22,448 | | | | 25,741 | | | | 18,197 | |
| | | | | | | | | | | | | | | | | |
| Net income per share attributable to stockholders of Class A common stock of Duff & Phelps Corporation | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.15 | | | $ | 0.15 | | | $ | 0.41 | | | $ | 0.37 | |
| Diluted | | $ | 0.15 | | | $ | 0.14 | | | $ | 0.40 | | | $ | 0.35 | |
| | | | | | | | | | | | | | | | | |
| Cash dividends declared per common share | | $ | 0.06 | | | $ | 0.05 | | | $ | 0.17 | | | $ | 0.10 | |
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
YEAR-OVER-YEAR SUMMARY OF REVENUE BY SEGMENT
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Variance | | | Variance | |
| | | 2009 | | | 2010 | | | Q3 2010 vs Q3 2009 | | | YTD 2010 vs YTD 2009 | |
| | | | | | | | | | | | | | | Total | | | | | | | | | | | | Total | | | Dollar | | | Percent | | | Dollar | | | Percent | |
| Financial Advisory | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Valuation Advisory | | $ | 40,370 | | | $ | 33,772 | | | $ | 29,692 | | | $ | 34,676 | | | $ | 138,510 | | | $ | 35,020 | | | $ | 32,829 | | | $ | 31,173 | | | $ | 99,022 | | | $ | 1,481 | | | | 5.0 | % | | $ | (4,812 | ) | | | (4.6 | )% |
| Tax Services | | | 10,878 | | | | 11,972 | | | | 15,045 | | | | 10,007 | | | | 47,902 | | | | 9,447 | | | | 12,089 | | | | 11,157 | | | | 32,693 | | | | (3,888 | ) | | | (25.8 | )% | | | (5,202 | ) | | | (13.7 | )% |
| Dispute & Legal Management Consulting | | | 9,643 | | | | 12,162 | | | | 12,897 | | | | 12,518 | | | | 47,220 | | | | 9,415 | | | | 9,316 | | | | 10,571 | | | | 29,302 | | | | (2,326 | ) | | | (18.0 | )% | | | (5,400 | ) | | | (15.6 | )% |
| | | | 60,891 | | | | 57,906 | | | | 57,634 | | | | 57,201 | | | | 233,632 | | | | 53,882 | | | | 54,234 | | | | 52,901 | | | | 161,017 | | | | (4,733 | ) | | | (8.2 | )% | | | (15,414 | ) | | | (8.7 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Corporate Finance Consulting | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Valuation | | | 6,295 | | | | 4,338 | | | | 5,858 | | | | 5,662 | | | | 22,153 | | | | 5,482 | | | | 4,642 | | | | 4,455 | | | | 14,579 | | | | (1,403 | ) | | | (24.0 | )% | | | (1,912 | ) | | | (11.6 | )% |
| Financial Engineering | | | 4,148 | | | | 5,159 | | | | 5,201 | | | | 4,663 | | | | 19,171 | | | | 4,126 | | | | 3,355 | | | | 2,481 | | | | 9,962 | | | | (2,720 | ) | | | (52.3 | )% | | | (4,546 | ) | | | (31.3 | )% |
| Strategic Value Advisory | | | 2,620 | | | | 3,588 | | | | 4,034 | | | | 3,208 | | | | 13,450 | | | | 3,158 | | | | 2,883 | | | | 2,840 | | | | 8,881 | | | | (1,194 | ) | | | (29.6 | )% | | | (1,361 | ) | | | (13.3 | )% |
| Due Diligence | | | 1,553 | | | | 1,893 | | | | 2,352 | | | | 2,384 | | | | 8,182 | | | | 2,170 | | | | 2,439 | | | | 3,072 | | | | 7,681 | | | | 720 | | | | 30.6 | % | | | 1,883 | | | | 32.5 | % |
| | | | 14,616 | | | | 14,978 | | | | 17,445 | | | | 15,917 | | | | 62,956 | | | | 14,936 | | | | 13,319 | | | | 12,848 | | | | 41,103 | | | | (4,597 | ) | | | (26.4 | )% | | | (5,936 | ) | | | (12.6 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Investment Banking | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Global Restructuring Advisory | | | 5,578 | | | | 8,614 | | | | 11,038 | | | | 12,164 | | | | 37,394 | | | | 9,841 | | | | 12,004 | | | | 7,363 | | | | 29,208 | | | | (3,675 | ) | | | (33.3 | )% | | | 3,978 | | | | 15.8 | % |
| Transaction Opinions | | | 6,101 | | | | 6,180 | | | | 2,714 | | | | 6,081 | | | | 21,076 | | | | 6,823 | | | | 6,041 | | | | 6,711 | | | | 19,575 | | | | 3,997 | | | | 147.3 | % | | | 4,580 | | | | 30.5 | % |
| M&A Advisory | | | 2,079 | | | | 2,375 | | | | 4,409 | | | | 6,982 | | | | 15,845 | | | | 3,682 | | | | 3,144 | | | | 4,604 | | | | 11,430 | | | | 195 | | | | 4.4 | % | | | 2,567 | | | | 29.0 | % |
| | | | 13,758 | | | | 17,169 | | | | 18,161 | | | | 25,227 | | | | 74,315 | | | | 20,346 | | | | 21,189 | | | | 18,678 | | | | 60,213 | | | | 517 | | | | 2.8 | % | | | 11,125 | | | | 22.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Revenues | | $ | 89,265 | | | $ | 90,053 | | | $ | 93,240 | | | $ | 98,345 | | | $ | 370,903 | | | $ | 89,164 | | | $ | 88,742 | | | $ | 84,427 | | | $ | 262,333 | | | $ | (8,813 | ) | | | (9.5 | )% | | $ | (10,225 | ) | | | (3.8 | )% |
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(In thousands, except headcount data)
(Unaudited)
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | | | September 30, | | | September 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| Financial Advisory | | | | | | | | | | | | |
| Revenues (excluding reimbursables) | | $ | 52,901 | | | $ | 57,634 | | | $ | 161,017 | | | $ | 176,431 | |
| Segment operating income | | $ | 5,743 | | | $ | 8,855 | | | $ | 21,730 | | | $ | 29,543 | |
| Segment operating income margin | | | 10.9 | % | | | 15.4 | % | | | 13.5 | % | | | 16.7 | % |
| | | | | | | | | | | | | | | | | |
| Corporate Finance Consulting | | | | | | | | | | | | | | | | |
| Revenues (excluding reimbursables) | | $ | 12,848 | | | $ | 17,445 | | | $ | 41,103 | | | $ | 47,039 | |
| Segment operating income | | $ | 2,754 | | | $ | 5,389 | | | $ | 6,913 | | | $ | 11,819 | |
| Segment operating income margin | | | 21.4 | % | | | 30.9 | % | | | 16.8 | % | | | 25.1 | % |
| | | | | | | | | | | | | | | | | |
| Investment Banking | | | | | | | | | | | | | | | | |
| Revenues (excluding reimbursables) | | $ | 18,678 | | | $ | 18,161 | | | $ | 60,213 | | | $ | 49,088 | |
| Segment operating income | | $ | 3,665 | | | $ | 2,364 | | | $ | 13,772 | | | $ | 7,195 | |
| Segment operating income margin | | | 19.6 | % | | | 13.0 | % | | | 22.9 | % | | | 14.7 | % |
| | | | | | | | | | | | | | | | | |
| Total | | | | | | | | | | | | | | | | |
| Revenues (excluding reimbursables) | | $ | 84,427 | | | $ | 93,240 | | | $ | 262,333 | | | $ | 272,558 | |
| | | | | | | | | | | | | | | | | |
| Segment operating income | | $ | 12,162 | | | $ | 16,608 | | | $ | 42,415 | | | $ | 48,557 | |
| Net client reimbursable expenses | | | 73 | | | | (74 | ) | | | (60 | ) | | | (63 | ) |
| Equity-based compensation from Legacy Units and IPO Options | | | (391 | ) | | | (3,229 | ) | | | (2,968 | ) | | | (10,963 | ) |
| Depreciation and amortization | | | (2,567 | ) | | | (2,594 | ) | | | (7,410 | ) | | | (7,712 | ) |
| Charge from impairment of certain intangible assets | | | - | | | | - | | | | (674 | ) | | | - | |
| Charge from realignment of senior management | | | - | | | | - | | | | (3,040 | ) | | | - | |
| Merger and acquisition costs | | | (76 | ) | | | - | | | | (397 | ) | | | - | |
| Operating income | | $ | 9,201 | | | $ | 10,711 | | | $ | 27,866 | | | $ | 29,819 | |
| | | | | | | | | | | | | | | | | |
|
| Average Client Service Professionals | | | | | | | | | | | | | | | | |
| Financial Advisory | | | 546 | | | | 642 | | | | 574 | | | | 668 | |
| Corporate Finance Consulting | | | 107 | | | | 133 | | | | 115 | | | | 133 | |
| Investment Banking | | | 124 | | | | 130 | | | | 128 | | | | 134 | |
| Total | | | 777 | | | | 905 | | | | 817 | | | | 935 | |
| | | | | | | | | | | | | | | | | |
| End of Period Client Service Professionals | | | | | | | | | | | | | | | | |
| Financial Advisory | | | 555 | | | | 641 | | | | 555 | | | | 641 | |
| Corporate Finance Consulting | | | 106 | | | | 131 | | | | 106 | | | | 131 | |
| Investment Banking | | | 128 | | | | 130 | | | | 128 | | | | 130 | |
| Total | | | 789 | | | | 902 | | | | 789 | | | | 902 | |
| | | | | | | | | | | | | | | | | |
| Revenue per Client Service Professional | | | | | | | | | | | | | | | | |
| Financial Advisory | | $ | 97 | | | $ | 90 | | | $ | 281 | | | $ | 264 | |
| Corporate Finance Consulting | | $ | 120 | | | $ | 131 | | | $ | 357 | | | $ | 354 | |
| Investment Banking | | $ | 151 | | | $ | 140 | | | $ | 470 | | | $ | 366 | |
| Total | | $ | 109 | | | $ | 103 | | | $ | 321 | | | $ | 292 | |
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT – CONTINUED
(In thousands, except utilization, rate-per-hour and headcount data)
(Unaudited)
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | | | September 30, | | | September 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
Utilization(1) | | | | | | | | | | | | |
| Financial Advisory | | | 66.3 | % | | | 62.4 | % | | | 65.1 | % | | | 64.0 | % |
| Corporate Finance Consulting | | | 62.0 | % | | | 70.0 | % | | | 58.9 | % | | | 62.0 | % |
| | | | | | | | | | | | | | | | | |
Rate-Per-Hour(2) | | | | | | | | | | | | | | | | |
| Financial Advisory | | $ | 346 | | | $ | 336 | | | $ | 343 | | | $ | 322 | |
| Corporate Finance Consulting | | $ | 428 | | | $ | 402 | | | $ | 444 | | | $ | 407 | |
| | | | | | | | | | | | | | | | | |
|
| Revenues (excluding reimbursables) | | | | | | | | | | | | | | | | |
| Financial Advisory | | $ | 52,901 | | | $ | 57,634 | | | $ | 161,017 | | | $ | 176,431 | |
| Corporate Finance Consulting | | | 12,848 | | | | 17,445 | | | | 41,103 | | | | 47,039 | |
| Investment Banking | | | 18,678 | | | | 18,161 | | | | 60,213 | | | | 49,088 | |
| Total | | $ | 84,427 | | | $ | 93,240 | | | $ | 262,333 | | | $ | 272,558 | |
| | | | | | | | | | | | | | | | | |
| Average Number of Managing Directors | | | | | | | | | | | | | | | | |
| Financial Advisory | | | 92 | | | | 95 | | | | 92 | | | | 98 | |
| Corporate Finance Consulting | | | 29 | | | | 31 | | | | 30 | | | | 30 | |
| Investment Banking | | | 40 | | | | 40 | | | | 41 | | | | 38 | |
| Total | | | 161 | | | | 166 | | | | 163 | | | | 166 | |
| | | | | | | | | | | | | | | | | |
| End of Period Managing Directors | | | | | | | | | | | | | | | | |
| Financial Advisory | | | 90 | | | | 93 | | | | 90 | | | | 93 | |
| Corporate Finance Consulting | | | 28 | | | | 29 | | | | 28 | | | | 29 | |
| Investment Banking | | | 40 | | | | 40 | | | | 40 | | | | 40 | |
| Total | | | 158 | | | | 162 | | | | 158 | | | | 162 | |
| | | | | | | | | | | | | | | | | |
| Revenue per Managing Director | | | | | | | | | | | | | | | | |
| Financial Advisory | | $ | 575 | | | $ | 607 | | | $ | 1,750 | | | $ | 1,800 | |
| Corporate Finance Consulting | | $ | 443 | | | $ | 563 | | | $ | 1,370 | | | $ | 1,568 | |
| Investment Banking | | $ | 467 | | | $ | 454 | | | $ | 1,469 | | | $ | 1,292 | |
| Total | | $ | 524 | | | $ | 562 | | | $ | 1,609 | | | $ | 1,642 | |
| (1) | The utilization rate for any given period is calculated by dividing the number of hours incurred by client service professionals who worked on client assignments (including internal projects for the Company) during the period by the total available working hours for all of such client service professionals during the same period, assuming a 40 hour work week, less paid holidays and vacation days. Financial Advisory utilization excludes client service professionals associated with Rash & Associates, L.P. (“Rash”), a wholly-owned subsidiary, due to the nature of the work performed, and client service professionals from our acquisition of Cole Valuation Partners Limited prior to their transition to the Company’s financial system. |
| (2) | Average billing rate-per-hour is calculated by dividing applicable revenues for the period by the number of hours worked on client assignments (including internal projects for the Company) during the same period. Financial Advisory revenues used to calculate rate-per-hour exclude revenues associated with Rash. The average billing rate also excludes certain hours from our acquisition of Cole Valuation Partners Limited prior to their transition to the Company’s financial system. |
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
SUMMARY OF CLIENT SERVICE PROFESSIONALS BY SEGMENT
| | | 2009 | | | 2010 | |
| | | Q1 | | | Q2 | | | Q3 | | | Q4 | | | YTD | | | Q1 | | | Q2 | | | Q3 | | | YTD | |
| Average Client Service Professionals | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Financial Advisory | | | 700 | | | | 658 | | | | 642 | | | | 627 | | | | 657 | | | | 607 | | | | 566 | | | | 546 | | | | 574 | |
| Corporate Finance Consulting | | | 131 | | | | 134 | | | | 133 | | | | 130 | | | | 132 | | | | 124 | | | | 113 | | | | 107 | | | | 115 | |
| Investment Banking | | | 136 | | | | 135 | | | | 130 | | | | 131 | | | | 133 | | | | 131 | | | | 127 | | | | 124 | | | | 128 | |
| | | | 967 | | | | 927 | | | | 905 | | | | 888 | | | | 922 | | | | 862 | | | | 806 | | | | 777 | | | | 817 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| End of Period Client Service Professionals | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Financial Advisory | | | 681 | | | | 640 | | | | 641 | | | | 618 | | | | | | | | 585 | | | | 548 | | | | 555 | | | | | |
| Corporate Finance Consulting | | | 130 | | | | 136 | | | | 131 | | | | 129 | | | | | | | | 117 | | | | 109 | | | | 106 | | | | | |
| Investment Banking | | | 137 | | | | 131 | | | | 130 | | | | 131 | | | | | | | | 128 | | | | 125 | | | | 128 | | | | | |
| | | | 948 | | | | 907 | | | | 902 | | | | 878 | | | | | | | | 830 | | | | 782 | | | | 789 | | | | | |
| | | 2009 | | | 2010 | |
| | | Q1 | | | Q2 | | | Q3 | | | Q4 | | | YTD | | | Q1 | | | Q2 | | | Q3 | | | YTD | |
| Average Managing Directors | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Financial Advisory | | | 101 | | | | 99 | | | | 95 | | | | 93 | | | | 97 | | | | 91 | | | | 91 | | | | 92 | | | | 92 | |
| Corporate Finance Consulting | | | 30 | | | | 30 | | | | 31 | | | | 29 | | | | 30 | | | | 32 | | | | 30 | | | | 29 | | | | 30 | |
| Investment Banking | | | 36 | | | | 39 | | | | 40 | | | | 40 | | | | 39 | | | | 40 | | | | 41 | | | | 40 | | | | 41 | |
| | | | 167 | | | | 168 | | | | 166 | | | | 162 | | | | 166 | | | | 163 | | | | 162 | | | | 161 | | | | 163 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| End of Period Managing Directors | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Financial Advisory | | | 101 | | | | 96 | | | | 93 | | | | 93 | | | | | | | | 88 | | | | 94 | | | | 90 | | | | | |
| Corporate Finance Consulting | | | 30 | | | | 31 | | | | 29 | | | | 30 | | | | | | | | 31 | | | | 29 | | | | 28 | | | | | |
| Investment Banking | | | 38 | | | | 38 | | | | 40 | | | | 40 | | | | | | | | 39 | | | | 40 | | | | 40 | | | | | |
| | | | 169 | | | | 165 | | | | 162 | | | | 163 | | | | | | | | 158 | | | | 163 | | | | 158 | | | | | |
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(Unaudited)
| | | September 30, | | | December 31, | |
| | | 2010 | | | 2009 | |
| ASSETS | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | $ | 98,798 | | | $ | 107,311 | |
| Accounts receivable (net of allowance for doubtful accounts of $1,332 at September 30, 2010 and $1,690 at December 31, 2009) | | | 52,043 | | | | 55,079 | |
| Unbilled services | | | 27,518 | | | | 22,456 | |
| Prepaid expenses and other current assets | | | 6,357 | | | | 6,100 | |
| Net deferred income taxes, current | | | 1,687 | | | | 4,601 | |
| Total current assets | | | 186,403 | | | | 195,547 | |
| | | | | | | | | |
| Property and equipment (net of accumulated depreciation of $24,836 at September 30, 2010 and $20,621 at December 31, 2009) | | | 28,484 | | | | 27,413 | |
| Goodwill | | | 132,894 | | | | 122,876 | |
| Intangible assets (net of accumulated amortization of $19,670 at September 30, 2010 and $16,881 at December 31, 2009) | | | 29,936 | | | | 27,907 | |
| Other assets | | | 2,880 | | | | 3,218 | |
| Investments related to deferred compensation plan | | | 21,780 | | | | 17,807 | |
| Net deferred income taxes, non-current | | | 108,780 | | | | 112,265 | |
| Total non-current assets | | | 324,754 | | | | 311,486 | |
| | | | | | | | | |
| Total assets | | $ | 511,157 | | | $ | 507,033 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
| Current liabilities | | | | | | | | |
| Accounts payable | | $ | 2,996 | | | $ | 2,459 | |
| Accrued expenses | | | 8,226 | | | | 11,609 | |
| Accrued compensation and benefits | | | 21,611 | | | | 35,730 | |
| Liability related to deferred compensation plan, current portion | | | 1,537 | | | | - | |
| Deferred revenues | | | 3,692 | | | | 3,633 | |
| Other current liabilities | | | 127 | | | | 993 | |
| Due to noncontrolling unitholders, current portion | | | 4,303 | | | | 4,303 | |
| Total current liabilities | | | 42,492 | | | | 58,727 | |
| | | | | | | | | |
| Liability related to deferred compensation plan, less current portion | | | 20,386 | | | | 18,051 | |
| Other long-term liabilities | | | 15,387 | | | | 15,400 | |
| Due to noncontrolling unitholders, less current portion | | | 102,499 | | | | 101,098 | |
| Total non-current liabilities | | | 138,272 | | | | 134,549 | |
| | | | | | | | | |
| Total liabilities | | | 180,764 | | | | 193,276 | |
| | | | | | | | | |
| Commitments and contingencies | | | | | | | | |
| | | | | | | | | |
| Stockholders' equity | | | | | | | | |
| Preferred stock (50,000 shares authorized; zero issued and outstanding) | | | - | | | | - | |
| Class A common stock, par value $0.01 per share (100,000 shares authorized; 28,120 and 27,290 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively) | | | 281 | | | | 273 | |
| Class B common stock, par value $0.0001 per share (50,000 shares authorized; 12,898 and 12,974 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively) | | | 1 | | | | 1 | |
| Additional paid-in capital | | | 212,834 | | | | 207,210 | |
| Accumulated other comprehensive income | | | 564 | | | | 693 | |
| Retained earnings | | | 12,820 | | | | 6,709 | |
| Total stockholders' equity of Duff & Phelps Corporation | | | 226,500 | | | | 214,886 | |
| Noncontrolling interest | | | 103,893 | | | | 98,871 | |
| Total stockholders' equity | | | 330,393 | | | | 313,757 | |
| Total liabilities and stockholders' equity | | $ | 511,157 | | | $ | 507,033 | |
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2010 | | | 2009 | |
| Cash flows from operating activities: | | | | | | |
| Net income | | $ | 19,383 | | | $ | 19,368 | |
| | | | | | | | | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 7,410 | | | | 7,712 | |
| Equity-based compensation | | | 15,824 | | | | 19,205 | |
| Bad debt expense | | | 1,141 | | | | 1,698 | |
| Net deferred income taxes | | | 4,741 | | | | 4,637 | |
| Charge from impairment of certain intangible assets | | | 674 | | | | - | |
| Loss on early extinguishment of debt | | | - | | | | 1,674 | |
| Other | | | (570 | ) | | | (582 | ) |
| Changes in assets and liabilities providing/(using) cash: | | | | | | | | |
| Accounts receivable | | | 4,765 | | | | (8,065 | ) |
| Unbilled services | | | (4,544 | ) | | | (9,012 | ) |
| Prepaid expenses and other current assets | | | (31 | ) | | | 973 | |
| Other assets | | | (597 | ) | | | (2,396 | ) |
| Accounts payable and accrued expenses | | | (3,506 | ) | | | 4,668 | |
| Accrued compensation and benefits | | | (14,507 | ) | | | (10,019 | ) |
| Deferred revenues | | | (113 | ) | | | 1,219 | |
| Other liabilities | | | 395 | | | | (1,399 | ) |
| Net cash provided by operating activities | | | 30,465 | | | | 29,681 | |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| Purchase of property and equipment | | | (4,998 | ) | | | (4,744 | ) |
| Business acquisitions, net of cash acquired | | | (11,807 | ) | | | (61 | ) |
| Purchase of investments for deferred compensation plan | | | (3,175 | ) | | | (6,409 | ) |
| Net cash used in investing activities | | | (19,980 | ) | | | (11,214 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Repurchases of Class A common stock | | | (8,608 | ) | | | (821 | ) |
| Distributions and other payments to noncontrolling unitholders | | | (5,480 | ) | | | (15,510 | ) |
| Dividends | | | (4,828 | ) | | | (2,394 | ) |
| Net proceeds from sale of Class A common stock | | | (3 | ) | | | 111,808 | |
| Proceeds from exercises of IPO Options | | | 82 | | | | 456 | |
| Redemption of noncontrolling unitholders | | | - | | | | (67,112 | ) |
| Repayments of debt | | | - | | | | (42,763 | ) |
| Increase in restricted cash | | | - | | | | (689 | ) |
| Fees associated with early extinguishment of debt | | | - | | | | (63 | ) |
| Net cash used in financing activities | | | (18,837 | ) | | | (17,088 | ) |
| | | | | | | | | |
| Effect of exchange rate on cash and cash equivalents | | | (161 | ) | | | 1,436 | |
| | | | | | | | | |
| Net increase/(decrease) in cash and cash equivalents | | | (8,513 | ) | | | 2,815 | |
| Cash and cash equivalents at beginning of period | | | 107,311 | | | | 81,381 | |
| Cash and cash equivalents at end of period | | $ | 98,798 | | | $ | 84,196 | |
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
ADJUSTED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| | | Three Months Ended September 30, 2010 | |
| | | As | | | | | | Adjusted | |
| | | Reported | | | Adjustments | | | Pro Forma | |
| | | | | | | | | | |
| Revenues | | $ | 84,427 | | | $ | - | | | $ | 84,427 | |
| Reimbursable expenses | | | 2,403 | | | | - | | | | 2,403 | |
| Total revenues | | | 86,830 | | | | - | | | | 86,830 | |
| | | | | | | | | | | | | |
| Direct client service costs | | | | | | | | | | | | |
| Compensation and benefits | | | 47,829 | | | | 84 | (a) | | | 47,913 | |
| Other direct client service costs | | | 1,342 | | | | - | | | | 1,342 | |
| Reimbursable expenses | | | 2,330 | | | | - | | | | 2,330 | |
| | | | 51,501 | | | | 84 | | | | 51,585 | |
| | | | | | | | | | | | | |
| Operating expenses | | | | | | | | | | | | |
| Selling, general and administrative | | | 23,485 | | | | (475 | )(a) | | | 23,010 | |
| Depreciation and amortization | | | 2,567 | | | | - | | | | 2,567 | |
| Merger and acquisition costs | | | 76 | | | | (76 | )(b) | | | - | |
| | | | 26,128 | | | | (551 | ) | | | 25,577 | |
| | | | | | | | | | | | | |
| Operating income | | | 9,201 | | | | 467 | | | | 9,668 | |
| | | | | | | | | | | | | |
| Other expense/(income), net | | | | | | | | | | | | |
| Interest income | | | (29 | ) | | | - | | | | (29 | ) |
| Interest expense | | | 66 | | | | - | | | | 66 | |
| Other expense | | | (43 | ) | | | - | | | | (43 | ) |
| | | | (6 | ) | | | - | | | | (6 | ) |
| | | | | | | | | | | | | |
| Income before income taxes | | | 9,207 | | | | 467 | | | | 9,674 | |
| | | | | | | | | | | | - | |
| Provision for income taxes | | | 2,010 | | | | 1,967 | (c) | | | 3,977 | |
| | | | | | | | | | | | | |
| Net income | | | 7,197 | | | | (1,500 | ) | | | 5,697 | |
| | | | | | | | | | | | | |
| Less: Net income attributable to the noncontrolling interest | | | 3,088 | | | | (3,088 | )(d) | | | - | |
| | | | | | | | | | | | | |
| Net income attributable to Duff & Phelps Corporation | | $ | 4,109 | | | $ | 1,588 | | | $ | 5,697 | |
| | | | | | |
| Pro forma fully exchanged, fully diluted shares outstanding | (e) | | | 37,857 | |
| | | | | | |
| Adjusted Pro Forma Net Income per fully exchanged, fully diluted shares outstanding | | | $ | 0.15 | |
| (a) | Represents elimination of equity-based compensation associated with Legacy Units and IPO Options. |
| (b) | Represents elimination of merger and acquisitions costs. |
| (c) | Represents an adjustment to reflect an assumed effective corporate tax rate of approximately 40.6% for the full year, which includes a provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state, local and/or foreign jurisdiction. For the three months ended September 30, 2010, the pro forma tax rate of approximately 41.1% reflects a true-up adjustment relating to the six months ended June 30, 2010. Assumes full exchange of existing unitholders' partnership units and Class B common stock of the Company into Class A common stock of the Company. |
| (d) | Represents elimination of the noncontrolling interest associated with the ownership by existing unitholders of D&P Acquisitions (excluding D&P Corporation), as if such unitholders had fully exchanged their partnership units and Class B common stock of the Company for shares of Class A common stock of the Company. |
| (e) | Based on the weighted-average number of aggregated Class A and Class B shares of common stock outstanding, excluding Ongoing RSAs, and dilutive effect of Ongoing RSAs for the quarter ended September 30, 2010. The Company believes that IPO Options would not be considered dilutive when applying the treasury method. |
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
ADJUSTED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| | | Three Months Ended September 30, 2009 | |
| | | As | | | | | | Adjusted | |
| | | Reported | | | Adjustments | | | Pro Forma | |
| | | | | | | | | | |
| Revenues | | $ | 93,240 | | | $ | - | | | $ | 93,240 | |
| Reimbursable expenses | | | 3,394 | | | | - | | | | 3,394 | |
| Total revenues | | | 96,634 | | | | - | | | | 96,634 | |
| | | | | | | | | | | | | |
| Direct client service costs | | | | | | | | | | | | |
| Compensation and benefits | | | 52,287 | | | | (2,124 | )(a) | | | 50,163 | |
| Other direct client service costs | | | 2,954 | | | | - | | | | 2,954 | |
| Reimbursable expenses | | | 3,468 | | | | - | | | | 3,468 | |
| | | | 58,709 | | | | (2,124 | ) | | | 56,585 | |
| | | | | | | | | | | | | |
| Operating expenses | | | | | | | | | | | | |
| Selling, general and administrative | | | 24,620 | | | | (1,105 | )(a) | | | 23,515 | |
| Depreciation and amortization | | | 2,594 | | | | - | | | | 2,594 | |
| | | | 27,214 | | | | (1,105 | ) | | | 26,109 | |
| | | | | | | | | | | | | |
| Operating income | | | 10,711 | | | | 3,229 | | | | 13,940 | |
| | | | | | | | | | | | | |
| Other expense/(income), net | | | | | | | | | | | | |
| Interest income | | | (17 | ) | | | - | | | | (17 | ) |
| Interest expense | | | 91 | | | | - | | | | 91 | |
| Other expense | | | 50 | | | | - | | | | 50 | |
| | | | 124 | | | | - | | | | 124 | |
| | | | | | | | | | | | | |
| Income before income taxes | | | 10,587 | | | | 3,229 | | | | 13,816 | |
| | | | | | | | | | | | - | |
| Provision for income taxes | | | 2,999 | | | | 2,458 | (b) | | | 5,457 | |
| | | | | | | | | | | | | |
| Net income | | | 7,588 | | | | 771 | | | | 8,359 | |
| | | | | | | | | | | | | |
| Less: Net income attributable to the noncontrolling interest | | | 4,136 | | | | (4,136 | )(c) | | | - | |
| | | | | | | | | | | | | |
| Net income attributable to Duff & Phelps Corporation | | $ | 3,452 | | | $ | 4,907 | | | $ | 8,359 | |
| | | | | | |
| Pro forma fully exchanged, fully diluted shares outstanding | (d) | | | 38,694 | |
| | | | | | |
| Adjusted Pro Forma Net Income per fully exchanged, fully diluted shares outstanding | | | $ | 0.22 | |
| (a) | Represents elimination of equity-based compensation associated with Legacy Units and IPO Options. |
| (b) | Represents an adjustment to reflect an assumed effective corporate tax rate of approximately 40.8% for the full year, which includes a provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state, local and/or foreign jurisdiction. For the quarter ended September 30, 2009, the pro forma tax rate of 39.5% reflects a true-up adjustment relating to the six months ended June 30, 2009. Assumes full exchange of existing unitholders' partnership units and Class B common stock of the Company into Class A common stock of the Company. |
| (c) | Represents elimination of the noncontrolling interest associated with the ownership by existing unitholders of D&P Acquisitions (excluding D&P Corporation), as if such unitholders had fully exchanged their partnership units and Class B common stock of the Company for shares of Class A common stock of the Company. |
| (d) | Based on the weighted-average number of aggregated Class A and Class B shares of common stock outstanding, excluding Ongoing RSAs, and dilutive effect of Ongoing RSAs for the three months ended September 30, 2009. The Company believes that IPO Options would not be considered dilutive when applying the treasury method. |
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
ADJUSTED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| | | Nine Months Ended September 30, 2010 | |
| | | As | | | | | | Adjusted | |
| | | Reported | | | Adjustments | | | Pro Forma | |
| | | | | | | | | | |
| Revenues | | $ | 262,333 | | | $ | - | | | $ | 262,333 | |
| Reimbursable expenses | | | 7,163 | | | | - | | | | 7,163 | |
| Total revenues | | | 269,496 | | | | - | | | | 269,496 | |
| | | | | | | | | | | | | |
| Direct client service costs | | | | | | | | | | | | |
| Compensation and benefits | | | 146,842 | | | | (1,690 | )(a) | | | 145,152 | |
| Other direct client service costs | | | 5,211 | | | | - | | | | 5,211 | |
| Reimbursable expenses | | | 7,223 | | | | - | | | | 7,223 | |
| | | | 159,276 | | | | (1,690 | ) | | | 157,586 | |
| | | | | | | | | | | | | |
| Operating expenses | | | | | | | | | | | | |
| Selling, general and administrative | | | 73,873 | | | | (4,318 | )(a) | | | 69,555 | |
| Depreciation and amortization | | | 7,410 | | | | - | | | | 7,410 | |
| Charge from impairment of certain intangible assets | | | 674 | | | | - | | | | 674 | |
| Merger and acquisition costs | | | 397 | | | | (397 | )(b) | | | - | |
| | | | 82,354 | | | | (4,715 | ) | | | 77,639 | |
| | | | | | | | | | | | | |
| Operating income | | | 27,866 | | | | 6,405 | | | | 34,271 | |
| | | | | | | | | | | | | |
| Other expense/(income), net | | | | | | | | | | | | |
| Interest income | | | (106 | ) | | | - | | | | (106 | ) |
| Interest expense | | | 234 | | | | - | | | | 234 | |
| Other expense | | | 189 | | | | - | | | | 189 | |
| | | | 317 | | | | - | | | | 317 | |
| | | | | | | | | | | | | |
| Income before income taxes | | | 27,549 | | | | 6,405 | | | | 33,954 | |
| | | | | | | | | | | | - | |
| Provision for income taxes | | | 8,166 | | | | 5,606 | (c) | | | 13,772 | |
| | | | | | | | | | | | | |
| Net income | | | 19,383 | | | | 799 | | | | 20,182 | |
| | | | | | | | | | | | | |
| Less: Net income attributable to the noncontrolling interest | | | 8,494 | | | | (8,494 | )(d) | | | - | |
| | | | | | | | | | | | | |
| Net income attributable to Duff & Phelps Corporation | | $ | 10,889 | | | $ | 9,293 | | | $ | 20,182 | |
| | | | | | |
| Pro forma fully exchanged, fully diluted shares outstanding | (e) | | | 38,673 | |
| | | | | | |
| Adjusted Pro Forma Net Income per fully exchanged, fully diluted shares outstanding | | | $ | 0.52 | |
| (a) | Represents elimination of equity-based compensation associated with Legacy Units and IPO Options and a charge from the departure of our former president and one of our segment leaders. |
| (b) | Represents elimination of merger and acquisitions costs. |
| (c) | Represents an adjustment to reflect an assumed effective corporate tax rate of approximately 40.6% for the full year, which includes a provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state, local and/or foreign jurisdiction. The pro forma tax rate has changed from prior levels as a result of true-up adjustments. Assumes full exchange of existing unitholders' partnership units and Class B common stock of the Company into Class A common stock of the Company. |
| (d) | Represents elimination of the noncontrolling interest associated with the ownership by existing unitholders of D&P Acquisitions (excluding D&P Corporation), as if such unitholders had fully exchanged their partnership units and Class B common stock of the Company for shares of Class A common stock of the Company. |
| (e) | Based on the weighted-average number of aggregated Class A and Class B shares of common stock outstanding, excluding Ongoing RSAs, and dilutive effect of Ongoing RSAs for the nine months ended September 30, 2010. The Company believes that IPO Options would not be considered dilutive when applying the treasury method. |
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
ADJUSTED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| | | Nine Months Ended September 30, 2009 | |
| | | As | | | | | | Adjusted | |
| | | Reported | | | Adjustments | | | Pro Forma | |
| | | | | | | | | | |
| Revenues | | $ | 272,558 | | | $ | - | | | $ | 272,558 | |
| Reimbursable expenses | | | 8,057 | | | | - | | | | 8,057 | |
| Total revenues | | | 280,615 | | | | - | | | | 280,615 | |
| | | | | | | | | | | | | |
| Direct client service costs | | | | | | | | | | | | |
| Compensation and benefits | | | 155,115 | | | | (8,004 | )(a) | | | 147,111 | |
| Other direct client service costs | | | 5,801 | | | | - | | | | 5,801 | |
| Reimbursable expenses | | | 8,120 | | | | - | | | | 8,120 | |
| | | | 169,036 | | | | (8,004 | ) | | | 161,032 | |
| | | | | | | | | | | | | |
| Operating expenses | | | | | | | | | | | | |
| Selling, general and administrative | | | 74,048 | | | | (2,959 | )(a) | | | 71,089 | |
| Depreciation and amortization | | | 7,712 | | | | - | | | | 7,712 | |
| | | | 81,760 | | | | (2,959 | ) | | | 78,801 | |
| | | | | | | | | | | | | |
| Operating income | | | 29,819 | | | | 10,963 | | | | 40,782 | |
| | | | | | | | | | | | | |
| Other expense/(income), net | | | | | | | | | | | | |
| Interest income | | | (34 | ) | | | - | | | | (34 | ) |
| Interest expense | | | 1,079 | | | | - | | | | 1,079 | |
| Loss on early extinguishment of debt | | | 1,737 | | | | (1,737 | )(b) | | | - | |
| Other expense | | | 137 | | | | - | | | | 137 | |
| | | | 2,919 | | | | (1,737 | ) | | | 1,182 | |
| | | | | | | | | | | | | |
| Income before income taxes | | | 26,900 | | | | 12,700 | | | | 39,600 | |
| | | | | | | | | | | | - | |
| Provision for income taxes | | | 7,532 | | | | 8,625 | (c) | | | 16,157 | |
| | | | | | | | | | | | | |
| Net income | | | 19,368 | | | | 4,075 | | | | 23,443 | |
| | | | | | | | | | | | | |
| Less: Net income attributable to the noncontrolling interest | | | 12,417 | | | | (12,417 | )(d) | | | - | |
| | | | | | | | | | | | | |
| Net income attributable to Duff & Phelps Corporation | | $ | 6,951 | | | $ | 16,492 | | | $ | 23,443 | |
| | | | | | |
| Pro forma fully exchanged, fully diluted shares outstanding | (e) | | | 36,781 | |
| | | | | | |
| Adjusted Pro Forma Net Income per fully exchanged, fully diluted shares outstanding | | | $ | 0.64 | |
| (a) | Represents elimination of equity-based compensation associated with Legacy Units and IPO Options. |
| (b) | Represents a non-recurring charge from the repayment and subsequent termination of our credit agreement. |
| (c) | Represents an adjustment to reflect an assumed effective corporate tax rate of approximately 40.8% for the full year, which includes a provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state, local and/or foreign jurisdiction. Assumes full exchange of existing unitholders' partnership units and Class B common stock of the Company into Class A common stock of the Company. |
| (d) | Represents elimination of the noncontrolling interest associated with the ownership by existing unitholders of D&P Acquisitions (excluding D&P Corporation), as if such unitholders had fully exchanged their partnership units and Class B common stock of the Company for shares of Class A common stock of the Company. |
| (e) | Based on the weighted-average number of aggregated Class A and Class B shares of common stock outstanding, excluding Ongoing RSAs, and dilutive effect of Ongoing RSAs for the nine months ended September 30, 2009. The Company believes that IPO Options would not be considered dilutive when applying the treasury method. |
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