Exhibit 99.1
FTI Consulting, Inc.
777 South Flagler Drive
West Palm Beach, Florida 33401
(561) 515-1900
FOR FURTHER INFORMATION:
| | | | |
| AT FTI CONSULTING: | | AT FD: | | |
| Jack Dunn, President & CEO | | Investors: Gordon McCoun | | |
| (561) 515-1900 | | Media: Andy Maas | | |
| | (212) 850-5600 | | |
FOR IMMEDIATE RELEASE
FTI CONSULTING, INC. REPORTS FOURTH QUARTER AND FULL YEAR 2008 RESULTS
•Full Year Revenues Increase 29% to $1.29 Billion; EPS of $2.34
•Fourth Quarter Revenues Increase 15% to $322.9 Million; EPS of $0.58
•2009 Guidance of Revenues from $1.45 Billion to $1.55 Billion; EPS of $2.55 to $2.70
West Palm Beach, FL, March 2, 2009 — FTI Consulting (NYSE: FCN), the global business advisory firm dedicated to helping organizations protect and enhance their enterprise value, today reported its financial results for the fourth quarter and full-year ended December 31, 2008.
Fourth Quarter Results
Revenues for the fourth quarter of 2008 were $322.9 million, an increase of 15.1% over revenues of $280.5 million in the prior year period. Net income for the fourth quarter of 2008 was $31.2 million, compared to net income of $30.8 million in the prior year period. Diluted earnings per common share were $0.58 compared to $0.60 in the prior year period, and reflected an increase of 4% in weighted average shares outstanding.
Operating income before depreciation and amortization of intangible assets (plus non-operating litigation settlements) (“EBITDA”) was $71.3 million, or 22.1% of revenue, in the fourth quarter of 2008, an increase of 10.8% over EBITDA of $64.3 million, or 22.9% of revenue, in the prior year period.
Commenting on the year, Jack Dunn, FTI’s president and chief executive officer, said, “In a year where the world economies suffered the worst crisis since the Great Depression, FTI’s business of assisting clients when they face enterprise threatening issues performed exceptionally well. Our organic growth in revenues for the year was very strong at 17% and the addition of several key strategic acquisitions resulted in total growth of 29%. EBITDA and EPS increased 31% and 17%, respectively.
“We made substantial progress in expanding our breadth of services and global reach, and in deepening our expertise in key industries. For example, we are very pleased to now have all five of our segments in London, which will serve as our European center of operations. Our performance last year was testimony to the breadth and balance of our business and our
MORE
leadership position that enabled us to advise on the largest restructurings, consult on industry-changing strategic mergers, help many of the world’s most prominent companies contend with enterprise-threatening crises, and advise on investigations into the largest fraud cases in history.”
Mr. Dunn added, “Our performance in the fourth quarter was at the top end of our expectations despite the tremendous level of uncertainty plaguing the markets. Our revenues grew 15% and EBITDA grew 11% compared to a very strong fourth quarter last year and we generated 4% organic growth in the quarter. As was the case in the third quarter, our growth was largely a product of the deepening stresses caused by the recession and the absence of liquidity in the economy.
“Corporate Finance/Restructuring had another outstanding quarter, as it continues to see dramatic increases in demand from a broadening range of industries suffering from the financial crisis. Economic Consulting also continues to perform very well driven by growing demand from clients preparing to address the damage from the credit crisis and the expectation of attendant litigation or regulatory inquiries. Forensic and Litigation Consulting and Technology performed well in relatively slow litigation and regulatory enforcement markets and produced sound financial results. Strategic Communications was very active in a number of large engagements relating to the crisis in the economy, but had results adversely affected by significant weakness in the values of key foreign currencies as well as a dearth of capital markets activity.
“During 2008, the Company generated $200 million of operating cash flow on net income of $125 million, a substantial increase from 2007 where we generated $69 million of operating cash flow on net income of $92 million. Our financial condition is also strong, with cash balances at the end of the year totaling $192 million, total debt outstanding of $569.5 million and no amounts outstanding under the Company’s $175 million line of credit.
“We believe now is an excellent time to expand our leadership position and use the strength of FTI to increase our market share. We have commenced aggressively investing in our brand and we have accelerated our funding of the research efforts that are intended to further enhance our leading electronic discovery capabilities. More importantly, we intend to use the strength and breadth of our practices and our strong financial condition, at a time when many other firms are financially weakened or strategically challenged, to attract and retain the best professionals to FTI. We currently plan to grow our headcount of professionals who serve clients by approximately 14% in 2009.”
Fourth Quarter Business Segment Results
Corporate Finance/Restructuring
Revenue in the Corporate Finance/Restructuring segment increased 45.7% to $107.3 million from $73.6 million in the prior year period. Segment EBITDA increased 66.2% to $37.2 million, or 34.7% of segment revenue, compared to $22.4 million, or 30.4% of segment revenue, in the prior year period. Organic growth for the segment was 33.1% during the quarter. The Corporate Finance/Restructuring segment results were driven by the growing demand for restructuring services fueled by the global economic crisis. Demand continued to be robust in the financial services, automotive, retail, real estate, construction and manufacturing sectors, and the segment also benefitted from ongoing strong growth within its recently commenced UK operations.
Economic Consulting
Revenue in the Economic Consulting segment increased 19.5% to $53.3 million from $44.6 million in the prior year period. Nearly all of the revenue growth was organic. Segment EBITDA increased 35.6% to $16.0 million, or 30.0% of segment revenue, from $11.8 million, or 26.4% of segment revenue, in the prior year period. The segment’s strong performance reflects ongoing high levels of demand for antitrust litigation consulting, as well as a steady increase in demand arising from disputes related to the global credit crisis. Performance also continued to be driven by robust demand for consulting surrounding strategic M&A initiatives, although at a somewhat slower pace than that seen in the first half of the year. During the period, the segment launched its Auctions Solutions practice through the addition of a new team including the leading expert on auction design, bidding strategies and related matters. Since year end, the segment has commenced operations in London with the addition of several senior practitioners and a growing number of staff, and added several other senior practitioners in New York and Los Angeles.
Forensic and Litigation Consulting
Revenue in the Forensic and Litigation Consulting segment increased 6.9% to $58.6 million from $54.8 million in the prior year period. Segment EBITDA was $12.2 million, or 20.8% of segment revenue, compared to $15.4 million, or 28.1% of segment revenue, in the prior year period. The segment’s revenue growth included a contribution of $8.3 million from acquisitions that closed during 2008. The segment’s results for the 2008 fourth quarter largely reflect a continuation of the soft market conditions seen in the third quarter of 2008, as the lack of large cases in the U.S. investigative and damage arenas continued to affect utilization in the period. Also affecting the segment’s performance in the period was a reduction in regulatory enforcement actions by the SEC and DOJ against large multinational corporations, as we believe is typical during the transition in presidential administrations. The segment experienced solid demand for services to regulated industries, including insurance, healthcare and pharmaceuticals. Its intellectual property and construction practices also performed well. With the presidential election completed, the segment has already begun to see an increased level of activity in 2009 including several major fraud investigations and a number of regulatory enforcement actions.
Technology
Revenue in the Technology segment in the fourth quarter increased 9.7% to $52.2 million from $47.5 million in the prior year period. Segment EBITDA was $13.6 million, or 26.1% of segment revenue, compared to $19.6 million, or 41.1% of segment revenue, in the prior year period. Segment revenue growth in the quarter was driven by the contribution of $8.2 million from acquired businesses which offset an organic decline of 7.6%. Factors affecting results in the Technology segment were similar to those seen in the third quarter of 2008, as revenues were negatively affected by the impact of the global financial crisis on companies’ spending decisions with regard to litigation and M&A activity, as well as a slowdown in certain large matters. Pricing also declined compared to the prior year period. The EBITDA margin declined in the period primarily as a result of lower pricing compared to the prior period and significantly increased investment in research and development. As planned, in early 2009 the segment successfully completed the integration of the Attenex acquisition and launched a combined offering of two of the industry’s leading e-Discovery solutions under the unified FTI Technology brand. Similar to our Forensic and Litigation segment, the Technology segment has begun to see increased activity levels in 2009.
Strategic Communications
Revenue in the Strategic Communications segment was $51.6 million compared to $60.0 million in the prior year period. Segment EBITDA was $12.9 million, or 24.9% of segment revenue, compared to $16.1 million, or 26.9% of revenue, in the prior year period. The weakness of the
British Pound, the Euro and the Australian dollar compared to last year reduced revenue by $7.8 million in the period. Businesses acquired during the year contributed $4.3 million of revenue. The continued impact of the global financial crisis on M&A and capital markets activity, as well as lower fees from the segment’s retained client base as clients seek to reduce costs in the current economic environment, both contributed to the revenue decline. The segment benefitted from a number of significant financial crisis management projects, as well as continued strong performance within acquired businesses and emerging markets. The segment remains a widely-recognized leader in the marketplace, recently ranked by Mergermarket as the #1 M&A communications advisor by transaction volume, and it continues to take advantage of opportunities for growth. In Europe, the segment recently launched its Restructuring and Recapitalization communications practice to address issues arising from the global financial crisis.
Stock Purchase Program
The Company also announced that on February 25, 2009, its Board of Directors has authorized a stock purchase program for up to $50 million of the Company’s common stock that will expire on February 25, 2010. The Company did not purchase any shares of common stock under the prior 12 month program.
2009 Guidance
Based on current market conditions, the Company believes revenues for the year will be between $1.45 billion and $1.55 billion and fully diluted EPS will be between $2.55 and $2.70.
(Note: 2009 EPS guidance includes a non cash $0.05 per diluted share cost from adoption of FASB Staff Position APB 14-1 – “Accounting for Convertible Debt Instruments”.)
Mr. Dunn concluded, “Entering 2009 our business has never been better positioned to take advantage of the opportunities that will present themselves as these economic and regulatory cycles evolve. We expect to experience continued strong demand throughout the year for restructuring and dispute engagements in connection with the recession and credit crisis, and we bring the largest restructuring practice and the industry’s strongest set of economists to bear to meet that demand. We believe there will be a growing level of work advising clients on their litigation and regulatory challenges as the new Congress and Administration cooperate to investigate the causes of our economic crisis and develop new, tougher regulatory frameworks.”
Fourth Quarter and 2008 Year End Conference Call
FTI will hold a conference call for analysts and investors to discuss fourth quarter financial results at 9:00 a.m. Eastern time on Monday, March 2, 2009. The call can be accessed live and will be available for replay over the Internet for 90 days by logging onto the Company’s website,www.fticonsulting.com.
About FTI Consulting
FTI Consulting, Inc. is a global business advisory firm dedicated to helping organizations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic
environment. With more than 3,300 employees located in most major business centers in the world, we work closely with clients every day to anticipate, illuminate, and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management and restructuring. More information can be found atwww.fticonsulting.com.
Use of Non-GAAP Measure
Note: We define EBITDA as operating income before depreciation and amortization of intangible assets plus non-operating litigation settlements. We use EBITDA in evaluating financial performance. Although EBITDA is not a measure of financial condition or performance determined in accordance with GAAP we believe that it can be a useful operating performance measure for evaluating our results of operation as compared from period to period and as compared to our competitors. EBITDA is a common alternative measure of operating performance used by investors, financial analysts and rating agencies to value and compare the financial performance of companies in our industry. We use EBITDA to evaluate and compare the operating performance of our segments and it is one of the primary measures used to determine employee bonuses. We also use EBITDA to value the businesses we acquire or anticipate acquiring. Reconciliations of EBITDA to Net Income and Segment EBITDA to segment operating profit are included in the accompanying tables to today’s press release. EBITDA is not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies unless the definition is the same. This non-GAAP measure should be considered in addition to, but not as a substitute for or superior to, the information contained in our statements of income.
Safe Harbor Statement
This press release includes “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 that involve uncertainties and risks. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues, future results and performance, expectations, plans or intentions relating to acquisitions and other matters, business trends and other information that is not historical, including statements regarding estimates of our future financial results. When used in this press release, words such as “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, estimates of our future financial results, are based upon our expectations at the time we make them and various assumptions. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and projections will result or be achieved or that actual results will not differ from expectations. The Company has experienced fluctuating revenue, operating income and cash flow in some prior periods and expects this will occur from time to time in the future. The Company’s actual results may differ from our expectations. Further, preliminary results are subject to normal year-end adjustments. Other factors that could cause such differences include the current global financial crisis, a continuing deterioration of global economic conditions, the crisis in and deterioration of the financial and real estate markets, the pace and timing of the consummation and integration of past and future acquisitions, the Company’s ability to realize cost savings and efficiencies, competitive and general economic conditions, retention of staff and clients and other risks described under the heading “Item 1A.
Risk Factors” in the Company’s most recent Form 10-K and in the Company’s other filings with the Securities and Exchange Commission. We are under no duty to update any of the forward-looking statements to conform such statements to actual results or events and do not intend to do so.
FINANCIAL TABLES FOLLOW
FTI CONSULTING, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(in thousands, except per share data)
| | | | | | | | |
| | | Year Ended December 31, | |
| | | 2008 | | | 2007 | |
Revenues | | $ | 1,293,145 | | | $ | 1,001,270 | |
| | | | | | | | |
| | |
Operating expenses | | | | | | | | |
Direct cost of revenues | | | 705,611 | | | | 548,407 | |
Selling, general and administrative expense | | | 330,052 | | | | 255,238 | |
Amortization of other intangible assets | | | 18,824 | | | | 10,615 | |
| | | | | | | | |
| | | 1,054,487 | | | | 814,260 | |
| | | | | | | | |
Operating income | | | 238,658 | | | | 187,010 | |
| | | | | | | | |
| | |
Other income (expense) | | | | | | | | |
Interest income and other | | | 8,685 | | | | 7,639 | |
Interest expense | | | (41,051 | ) | | | (43,857 | ) |
Litigation settlement losses, net | | | (661 | ) | | | (1,002 | ) |
| | | | | | | | |
| | | (33,027 | ) | | | (37,220 | ) |
| | | | | | | | |
Income before income tax provision | | | 205,631 | | | | 149,790 | |
| | |
Income tax provision | | | 80,196 | | | | 57,669 | |
| | | | | | | | |
| | |
Net income | | $ | 125,435 | | | $ | 92,121 | |
| | | | | | | | |
| | |
Earnings per common share - basic | | $ | 2.55 | | | $ | 2.14 | |
| | | | | | | | |
| | |
Weighted average common shares outstanding - basic | | | 49,193 | | | | 43,028 | |
| | | | | | | | |
| | |
Earnings per common share - diluted | | $ | 2.34 | | | $ | 2.00 | |
| | | | | | | | |
| | |
Weighted average common shares outstanding - diluted | | | 53,603 | | | | 45,974 | |
| | | | | | | | |
FTI CONSULTING, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007
(in thousands, except per share data)
| | | | | | | | |
| | | Three Months Ended
December 31, | |
| | | 2008 | | | 2007 | |
Revenues | | $ | 322,876 | | | $ | 280,519 | |
| | | | | | | | |
| | |
Operating expenses | | | | | | | | |
Direct cost of revenues | | | 170,410 | | | | 151,746 | |
Selling, general and administrative expense | | | 88,199 | | | | 69,963 | |
Amortization of other intangible assets | | | 5,805 | | | | 2,837 | |
| | | | | | | | |
| | | 264,414 | | | | 224,546 | |
| | | | | | | | |
Operating income | | | 58,462 | | | | 55,973 | |
| | | | | | | | |
| | |
Other income (expense) | | | | | | | | |
Interest income and other | | | 1,305 | | | | 4,439 | |
Interest expense | | | (10,216 | ) | | | (10,650 | ) |
Litigation settlement losses, net | | | 50 | | | | (130 | ) |
| | | | | | | | |
| | | (8,861 | ) | | | (6,341 | ) |
| | | | | | | | |
Income before income tax provision | | | 49,601 | | | | 49,632 | |
| | |
Income tax provision | | | 18,408 | | | | 18,838 | |
| | | | | | | | |
| | |
Net income | | $ | 31,193 | | | $ | 30,794 | |
| | | | | | | | |
| | |
Earnings per common share - basic | | $ | 0.63 | | | $ | 0.66 | |
| | | | | | | | |
| | |
Weighted average common shares outstanding - basic | | | 49,738 | | | | 46,996 | |
| | | | | | | | |
| | |
Earnings per common share - diluted | | $ | 0.58 | | | $ | 0.60 | |
| | | | | | | | |
| | |
Weighted average common shares outstanding - diluted | | | 53,411 | | | | 51,347 | |
| | | | | | | | |
FTI CONSULTING, INC.
OPERATING RESULTS BY BUSINESS SEGMENT
| | | | | | | | | | | | | | | | | | |
| | | Revenues | | EBITDA (1) | | | Margin | | | Utilization (2) | | | Average
Billable
Rate(2) | | Revenue-
Generating
Headcount |
| | | (in thousands) | | | | | | | | | | | |
Three Months Ended December 31, 2008 | | | | | | | | | | | | | | | | | | |
Corporate Finance/Restructuring | | $ | 107,280 | | $ | 37,181 | | | 34.7 | % | | 73 | % | | $ | 447 | | 669 |
Forensic and Litigation Consulting | | | 58,567 | | | 12,188 | | | 20.8 | % | | 65 | % | | $ | 339 | | 639 |
Strategic Communications | | | 51,571 | | | 12,852 | | | 24.9 | % | | — | | | | — | | 592 |
Technology | | | 52,164 | | | 13,600 | | | 26.1 | % | | — | | | | — | | 359 |
Economic Consulting | | | 53,294 | | | 15,966 | | | 30.0 | % | | 76 | % | | $ | 456 | | 264 |
| | | | | | | | | | | | | | | | | | |
| | $ | 322,876 | | | 91,787 | | | 28.4 | % | | | | | | | | 2,523 |
| | | | | | | | | | | | | | | | | | |
Corporate | | | | | | (20,532 | ) | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
EBITDA (1) | | | | | $ | 71,255 | | | 22.1 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | |
Year Ended December 31, 2008 | | | | | | | | | | | | | | | | | | |
Corporate Finance/Restructuring | | $ | 374,504 | | $ | 114,178 | | | 30.5 | % | | 75 | % | | $ | 434 | | 669 |
Forensic and Litigation Consulting | | | 253,918 | | | 57,493 | | | 22.6 | % | | 70 | % | | $ | 340 | | 639 |
Strategic Communications | | | 224,481 | | | 55,164 | | | 24.6 | % | | — | | | | — | | 592 |
Technology | | | 220,359 | | | 73,506 | | | 33.4 | % | | — | | | | — | | 359 |
Economic Consulting | | | 219,883 | | | 59,020 | | | 26.8 | % | | 83 | % | | $ | 446 | | 264 |
| | | | | | | | | | | | | | | | | | |
| | $ | 1,293,145 | | | 359,361 | | | 27.8 | % | | | | | | | | 2,523 |
| | | | | | | | | | | | | | | | | | |
Corporate | | | | | | (76,503 | ) | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
EBITDA (1) | | | | | $ | 282,858 | | | 21.9 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | |
Three Months Ended December 31, 2007 | | | | | | | | | | | | | | | | | | |
Corporate Finance/Restructuring | | $ | 73,644 | | $ | 22,370 | | | 30.4 | % | | 82 | % | | $ | 402 | | 406 |
Forensic and Litigation Consulting | | | 54,770 | | | 15,380 | | | 28.1 | % | | 71 | % | | $ | 331 | | 430 |
Strategic Communications | | | 59,990 | | | 16,147 | | | 26.9 | % | | — | | | | — | | 538 |
Technology | | | 47,535 | | | 19,557 | | | 41.1 | % | | — | | | | — | | 344 |
Economic Consulting | | | 44,580 | | | 11,776 | | | 26.4 | % | | 81 | % | | $ | 400 | | 236 |
| | | | | | | | | | | | | | | | | | |
| | $ | 280,519 | | | 85,230 | | | 30.4 | % | | | | | | | | 1,954 |
| | | | | | | | | | | | | | | | | | |
Corporate | | | | | | (20,943 | ) | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
EBITDA (1) | | | | | $ | 64,287 | | | 22.9 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | |
Year Ended December 31, 2007 | | | | | | | | | | | | | | | | | | |
Corporate Finance/Restructuring | | $ | 261,625 | | $ | 71,629 | | | 27.4 | % | | 80 | % | | $ | 409 | | 406 |
Forensic and Litigation Consulting | | | 217,028 | | | 57,292 | | | 26.4 | % | | 75 | % | | $ | 321 | | 430 |
Strategic Communications | | | 185,333 | | | 48,826 | | | 26.3 | % | | — | | | | — | | 538 |
Technology | | | 162,837 | | | 62,921 | | | 38.6 | % | | — | | | | — | | 344 |
Economic Consulting | | | 174,447 | | | 48,085 | | | 27.6 | % | | 85 | % | | $ | 412 | | 236 |
| | | | | | | | | | | | | | | | | | |
| | $ | 1,001,270 | | | 288,753 | | | 28.8 | % | | | | | | | | 1,954 |
| | | | | | | | | | | | | | | | | | |
Corporate | | | | | | (72,779 | ) | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
EBITDA (1) | | | | | $ | 215,974 | | | 21.6 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| (1) | We define EBITDA as operating income before depreciation and amortization of intangible assets plus non-operating litigation settlements. Although EBITDA is not a measure of financial condition or performance determined in accordance with accounting principles generally accepted in the United States (GAAP), we believe that it can be a useful operating performance measure for evaluating our results of operation as compared from period to period and as compared to our competitors. EBITDA is a common alternative performance measure used by investors, financial analysts and credit rating agencies to value and compare the financial performance of companies within our industry. We use EBITDA to evaluate and compare the operating performance of our segments and it is one of the primary measures used to determine employee bonuses. We also use EBITDA to value the businesses we acquire or anticipate acquiring. EBITDA is not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies unless the definition is the same. This non-GAAP measure should be considered in addition to, but not as a substitute for or superior to, the information contained in our statements of income. See also our reconciliation of Non-GAAP financial measures. |
| (2) | The majority of the Technology and Strategic Communications segments' revenues are not generated on an hourly basis. Accordingly, utilization and average billable rate metrics are not presented as they are not meaningful. Utilization where presented is based on a 2,032 hour year. |
RECONCILIATION OF OPERATING INCOME AND NET INCOME TO ADJUSTED EARNINGS BEFORE
INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Corporate
Finance | | | Forensic and
Litigation
Consulting | | | Strategic
Communications | | | Technology | | | Economic
Consulting | | Corp HQ | | | Total | |
Three Months Ended December 31, 2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Net income | | | | | | | | | | | | | | | | | | | | | | | | | $ | 31,193 | |
Interest income and other | | | | | | | | | | | | | | | | | | | | | | | | | | (1,305 | ) |
Interest expense | | | | | | | | | | | | | | | | | | | | | | | | | | 10,216 | |
Litigation settlement gains | | | | | | | | | | | | | | | | | | | | | | | | | | (50 | ) |
Income tax provision | | | | | | | | | | | | | | | | | | | | | | | | | | 18,408 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating income | | $ | 35,268 | | | $ | 10,800 | | | $ | 10,946 | | | $ | 8,434 | | | $ | 15,027 | | $ | (22,013 | ) | | | 58,462 | |
Depreciation | | | 723 | | | | 597 | | | | 701 | | | | 3,067 | | | | 369 | | | 1,481 | | | | 6,938 | |
Amortization of other intangible assets | | | 1,190 | | | | 791 | | | | 1,155 | | | | 2,099 | | | | 570 | | | — | | | | 5,805 | |
Litigation settlement gains | | | — | | | | — | | | | 50 | | | | — | | | | — | | | — | | | | 50 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA(1) | | | 37,181 | | | | 12,188 | | | | 12,852 | | | | 13,600 | | | | 15,966 | | | (20,532 | ) | | | 71,255 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Year Ended December 31, 2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Net income (loss) | | | | | | | | | | | | | | | | | | | | | | | | | $ | 125,435 | |
Interest income and other | | | | | | | | | | | | | | | | | | | | | | | | | | (8,685 | ) |
Interest expense | | | | | | | | | | | | | | | | | | | | | | | | | | 41,051 | |
Litigation settlement losses | | | | | | | | | | | | | | | | | | | | | | | | | | 661 | |
Income tax provision | | | | | | | | | | | | | | | | | | | | | | | | | | 80,196 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating income | | $ | 108,013 | | | $ | 52,118 | | | $ | 47,287 | | | $ | 58,090 | | | $ | 55,123 | | $ | (81,973 | ) | | | 238,658 | |
Depreciation | | | 2,603 | | | | 2,482 | | | | 3,014 | | | | 10,627 | | | | 1,616 | | | 5,695 | | | | 26,037 | |
Amortization of other intangible assets | | | 3,562 | | | | 2,893 | | | | 5,064 | | | | 5,024 | | | | 2,281 | | | — | | | | 18,824 | |
Litigation settlement losses | | | — | | | | — | | | | (201 | ) | | | (235 | ) | | | — | | | (225 | ) | | | (661 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA(1) | | | 114,178 | | | | 57,493 | | | | 55,164 | | | | 73,506 | | | | 59,020 | | | (76,503 | ) | | | 282,858 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Three Months Ended December 31, 2007 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Net income | | | | | | | | | | | | | | | | | | | | | | | | | $ | 30,794 | |
Interest income and other | | | | | | | | | | | | | | | | | | | | | | | | | | (4,439 | ) |
Interest expense | | | | | | | | | | | | | | | | | | | | | | | | | | 10,650 | |
Litigation settlement losses | | | | | | | | | | | | | | | | | | | | | | | | | | 130 | |
Income tax provision | | | | | | | | | | | | | | | | | | | | | | | | | | 18,838 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating income | | $ | 21,836 | | | $ | 14,145 | | | $ | 14,266 | | | $ | 17,301 | | | $ | 10,707 | | $ | (22,282 | ) | | | 55,973 | |
Depreciation | | | 483 | | | | 620 | | | | 654 | | | | 1,968 | | | | 492 | | | 1,390 | | | | 5,607 | |
Amortization of other intangible assets | | | 40 | | | | 615 | | | | 1,317 | | | | 288 | | | | 577 | | | — | | | | 2,837 | |
Litigation settlement losses | | | 11 | | | | — | | | | (90 | ) | | | — | | | | — | | | (51 | ) | | | (130 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA(1) | | $ | 22,370 | | | $ | 15,380 | | | $ | 16,147 | | | $ | 19,557 | | | $ | 11,776 | | $ | (20,943 | ) | | $ | 64,287 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Year Ended December 31, 2007 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Net income (loss) | | | | | | | | | | | | | | | | | | | | | | | | | $ | 92,121 | |
Interest income and other | | | | | | | | | | | | | | | | | | | | | | | | | | (7,639 | ) |
Interest expense | | | | | | | | | | | | | | | | | | | | | | | | | | 43,857 | |
Litigation settlement losses | | | | | | | | | | | | | | | | | | | | | | | | | | 1,002 | |
Income tax provision | | | | | | | | | | | | | | | | | | | | | | | | | | 57,669 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating income | | $ | 70,412 | | | $ | 53,135 | | | $ | 42,893 | | | $ | 55,053 | | | $ | 42,861 | | $ | (77,344 | ) | | | 187,010 | |
Depreciation | | | 1,581 | | | | 2,230 | | | | 2,376 | | | | 6,623 | | | | 1,772 | | | 4,769 | | | | 19,351 | |
Amortization of other intangible assets | | | 162 | | | | 2,102 | | | | 3,654 | | | | 1,245 | | | | 3,452 | | | — | | | | 10,615 | |
Litigation settlement losses | | | (526 | ) | | | (175 | ) | | | (97 | ) | | | — | | | | — | | | (204 | ) | | | (1,002 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA(1) | | $ | 71,629 | | | $ | 57,292 | | | $ | 48,826 | | | $ | 62,921 | | | $ | 48,085 | | $ | (72,779 | ) | | $ | 215,974 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | We define EBITDA as operating income before depreciation and amortization of intangible assets plus non-operating litigation settlements. Although EBITDA is not a measure of financial condition or performance determined in accordance with accounting principles generally accepted in the United States (GAAP), we believe that it can be a useful operating performance measure for evaluating our results of operation as compared from period to period and as compared to our competitors. EBITDA is a common alternative performance measure used by investors, financial analysts and credit rating agencies to value and compare the financial performance of companies within our industry. We use EBITDA to evaluate and compare the operating performance of our segments and it is one of the primary measures used to determine employee bonuses. We also use EBITDA to value the businesses we acquire or anticipate acquiring. EBITDA is not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies unless the definition is the same. This non-GAAP measure should be considered in addition to, but not as a substitute for or superior to, the information contained in our statements of income. |
FTI CONSULTING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2008 AND 2007
(in thousands)
| | | | | | | | |
| | | Year Ended
December 31, | |
| | | 2008 | | | 2007 | |
Operating activities | | | | | | | | |
Net income | | $ | 125,435 | | | $ | 92,121 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
Depreciation | | | 26,037 | | | | 19,351 | |
Amortization of other intangible assets | | | 18,824 | | | | 10,615 | |
Provision for doubtful accounts | | | 22,474 | | | | 11,777 | |
Non-cash share-based compensation | | | 26,381 | | | | 22,703 | |
Excess tax benefits from share-based compensation | | | (10,820 | ) | | | (17,986 | ) |
Non-cash interest expense | | | 3,030 | | | | 3,139 | |
Other | | | 1,309 | | | | 357 | |
Changes in operating assets and liabilities, net of effects from acquisitions: | | | | | | | | |
Accounts receivable, billed and unbilled | | | (49,251 | ) | | | (85,565 | ) |
Notes receivable | | | (9,377 | ) | | | (22,037 | ) |
Prepaid expenses and other assets | | | (11,577 | ) | | | (1,771 | ) |
Accounts payable, accrued expenses and other | | | 52 | | | | 17,517 | |
Accrued special charges | | | (3,434 | ) | | | (8,703 | ) |
Income taxes | | | 15,671 | | | | (683 | ) |
Accrued compensation | | | 34,190 | | | | 27,687 | |
Billings in excess of services provided | | | 10,908 | | | | 214 | |
| | | | | | | | |
Net cash provided by operating activities | | | 199,852 | | | | 68,736 | |
| | | | | | | | |
| | |
Investing activities | | | | | | | | |
Payments for acquisition of businesses, including contingent payments and acquisition costs, net of cash received | | | (345,541 | ) | | | (32,243 | ) |
Purchases of property and equipment | | | (35,674 | ) | | | (36,422 | ) |
Other | | | 4,703 | | | | 482 | |
| | | | | | | | |
Net cash used in investing activities | | | (376,512 | ) | | | (68,183 | ) |
| | | | | | | | |
Financing activities | | | | | | | | |
Borrowings under revolving line of credit | | | — | | | | 25,000 | |
Payments of revolving line of credit | | | — | | | | (25,000 | ) |
Payments of short-term borrowings of acquired subsidiary | | | (2,275 | ) | | | — | |
Payments of long-term debt | | | (8,744 | ) | | | (7,945 | ) |
Issuance of common stock, net of offering costs | | | — | | | | 231,408 | |
Purchase and retirement of common stock | | | — | | | | (18,118 | ) |
Net issuance of common stock under equity compensation plans | | | 20,562 | | | | 46,322 | |
Excess tax benefits from share-based compensation | | | 10,820 | | | | 17,986 | |
Other | | | (112 | ) | | | — | |
| | | | | | | | |
Net cash provided by financing activities | | | 20,251 | | | | 269,653 | |
| | | | | | | | |
Effect of exchange rate changes and fair value adjustments on cash and cash equivalents | | | (12,212 | ) | | | (1,666 | ) |
| | | | | | | | |
Net decrease in cash and cash equivalents | | | (168,621 | ) | | | 268,540 | |
Cash and cash equivalents, beginning of period | | | 360,463 | | | | 91,923 | |
| | | | | | | | |
Cash and cash equivalents, end of period | | $ | 191,842 | | | $ | 360,463 | |
| | | | | | | | |
FTI CONSULTING, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
| | | | | | | | |
| | | December 31, | |
| | | 2008 | | | 2007 | |
| | |
| Assets | | | | | | | | |
| | |
Current assets | | | | | | | | |
Cash and cash equivalents | | $ | 191,842 | | | $ | 360,463 | |
Accounts Receivable | | | | | | | | |
Billed receivables | | | 237,009 | | | | 190,900 | |
Unbilled receivables | | | 98,340 | | | | 84,743 | |
Allowance for doubtful accounts and unbilled services | | | (45,309 | ) | | | (30,467 | ) |
| | | | | | | | |
| | | 290,040 | | | | 245,176 | |
Notes receivable | | | 15,145 | | | | 11,687 | |
Prepaid expenses and other current assets | | | 31,055 | | | | 33,657 | |
Deferred income taxes | | | 24,372 | | | | 10,544 | |
| | | | | | | | |
Total current assets | | | 552,454 | | | | 661,527 | |
| | |
Property and equipment, net of accumulated depreciation | | | 78,575 | | | | 67,843 | |
Goodwill | | | 1,151,388 | | | | 940,878 | |
Other intangible assets, net of amortization | | | 189,304 | | | | 84,673 | |
Notes receivable, net of current portion | | | 56,500 | | | | 52,374 | |
Other assets | | | 59,948 | | | | 51,329 | |
| | | | | | | | |
| | |
Total assets | | $ | 2,088,169 | | | $ | 1,858,624 | |
| | | | | | | | |
| | |
| Liabilities and Stockholders’ Equity | | | | | | | | |
| | |
Current liabilities | | | | | | | | |
Accounts payable, accrued expenses and other | | $ | 109,036 | | | $ | 103,410 | |
Accrued compensation | | | 133,103 | | | | 102,054 | |
Current portion of long-term debt and capital lease obligations | | | 150,898 | | | | 157,772 | |
Billings in excess of services provided | | | 30,872 | | | | 17,826 | |
| | | | | | | | |
Total current liabilities | | | 423,909 | | | | 381,062 | |
| | |
Long-term debt and capital lease obligations, net of current portion | | | 418,592 | | | | 415,653 | |
Deferred income taxes | | | 76,804 | | | | 49,113 | |
Other liabilities | | | 45,037 | | | | 40,546 | |
| | | | | | | | |
Total liabilities | | | 964,342 | | | | 886,374 | |
| | | | | | | | |
| | |
Stockholders’ equity | | | | | | | | |
Preferred stock, $0.01 par value; shares authorized -5,000, none outstanding | | | — | | | | — | |
Common stock, $0.01 par value; shares authorized -75,000; shares issued and outstanding- 50,934 (2008) and 48,979 (2007) | | | 509 | | | | 490 | |
Additional paid-in capital | | | 717,158 | | | | 601,637 | |
Retained earnings | | | 486,493 | | | | 361,058 | |
Accumulated other comprehensive (loss) income | | | (80,333 | ) | | | 9,065 | |
| | | | | | | | |
Total stockholders’ equity | | | 1,123,827 | | | | 972,250 | |
| | | | | | | | |
| | |
Total liabilities and stockholders’ equity | | $ | 2,088,169 | | | $ | 1,858,624 | |
| | | | | | | | |
