SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 30, 2015

 

 

FTI CONSULTING, INC.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Maryland   001-14875   52-1261113

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

1101 K Street NW, Washington, D.C. 20005

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (202) 312-9100

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


ITEM 2.02. Results of Operations and Financial Condition

On July 30, 2015, FTI Consulting, Inc. (“FTI Consulting”) announced financial results for the three- and six-months ended June 30, 2015 and updated guidance for the year ending December 31, 2015. A copy of the press release (including accompanying financial tables) is attached as Exhibit 99.1 to this Current Report on Form 8-K and hereby is incorporated by reference herein.

ITEM 7.01. Regulation FD Disclosure

FTI Consulting defines “Segment Operating Income (Loss)” as a segment’s share of consolidated operating income (loss). FTI Consulting defines “Total Segment Operating Income (Loss)” as the total of Segment Operating Income (Loss) for all segments, which excludes unallocated corporate expenses. FTI Consulting uses Segment Operating Income (Loss) for the purpose of calculating Adjusted Segment EBITDA. FTI Consulting defines “Adjusted EBITDA” as consolidated net income (loss) before income tax provision, other non-operating income (expense), depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges and loss on early extinguishment of debt, “Adjusted Segment EBITDA” as a segment’s share of consolidated operating income before depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges, and “Total Adjusted Segment EBITDA” as the total of Adjusted Segment EBITDA for all segments, which excludes unallocated corporate expenses. FTI Consulting defines “Adjusted EBITDA Margin” as Adjusted EBITDA as a percentage of total revenues, and “Adjusted Segment EBITDA Margin” as Adjusted Segment EBITDA as a percentage of a segment’s share of revenue. Although Adjusted EBITDA, Adjusted Segment EBITDA, Total Adjusted Segment EBITDA Adjusted EBITDA Margin and Adjusted Segment EBITDA Margin are not measures of financial condition or performance determined in accordance with generally accepted accounting principles (“GAAP”), FTI Consulting believes that they can be useful supplemental operating performance measures. FTI Consulting uses Adjusted Segment EBITDA to internally evaluate the financial performance of each of its segments because it believes it is a useful supplemental measure which reflects current core operating performance and provides an indicator of the segment’s ability to generate cash. FTI Consulting also believes that these non-GAAP measures, when considered together with GAAP financial results, provide management and investors with a more complete understanding of FTI Consulting’s operating results, including underlying trends, by excluding the effects of remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges. In addition, EBITDA is a common alternative measure of operating performance used by many of FTI Consulting’s competitors. It is used by investors, financial analysts, rating agencies and others to value and compare the financial performance of companies in FTI Consulting’s industry. Therefore, FTI Consulting also believes that these measures, considered along with corresponding GAAP measures, provide management and investors with additional information for comparison of its operating results to the operating results of other companies.

 

1


FTI Consulting defines “Adjusted Net Income” and “Adjusted Earnings per Diluted Share” (“Adjusted EPS”) as net income (loss) and earnings per diluted share, respectively, excluding the impact of remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges and losses on early extinguishment of debt. FTI Consulting uses Adjusted Net Income for the purpose of calculating Adjusted EPS and uses Adjusted EPS to assess total FTI Consulting operating performance on a consistent basis. FTI Consulting believes that this non-GAAP measure, when considered together with its GAAP financial results, provides management and investors with a more complete understanding of its business operating results, including underlying trends, by excluding the effects of remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges and losses on early extinguishment of debt.

Non-GAAP financial measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, the information contained in FTI Consulting’s Consolidated Statements of Comprehensive Income. Reconciliations of GAAP to non-GAAP financial measures are included in the accompanying tables to the press release.

The information included herein, including Exhibit 99.1 furnished herewith, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any filing pursuant to the Securities Act of 1933, as amended, or the Exchange Act, regardless of any incorporation by reference language in any such filing, except as expressly set forth by specific reference in such filing.

ITEM 9.01. Financial Statements and Exhibits

(d) Exhibits

 

99.1    Press Release dated July 30, 2015 of FTI Consulting, Inc.

 

2


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, FTI Consulting, Inc. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    FTI CONSULTING, INC.
Dated: July 31, 2015     By:  

/S/ DAVID JOHNSON

      David Johnson
      Chief Financial Officer

 

3


EXHIBIT INDEX

 

Exhibit No.

  

Description

99.1    Press Release dated July 30, 2015 of FTI Consulting, Inc.

 

4



Exhibit 99.1

 

LOGO

FTI Consulting, Inc.

1101 K Street NW

Washington, DC 20005

+1.202.312.9100

Investor & Media Contact:

Mollie Hawkes

+1.617.747.1791

mollie.hawkes@fticonsulting.com

FTI Consulting Reports Second Quarter 2015 Results

Second Quarter Revenues of $449.1 Million

Second Quarter Adjusted EPS of $0.50; Fully Diluted EPS of $0.52

Company Updates 2015 Guidance to Revenues of between $1.75 Billion and $1.85 Billion and Adjusted EPS of between $1.95 and $2.15

Washington, D.C., July 30, 2015 — FTI Consulting, Inc. (NYSE: FCN) (the “Company”), the global business advisory firm dedicated to helping organizations protect and enhance their enterprise value, today released its financial results for the quarter ended June 30, 2015.

For the quarter, revenues decreased 1.1 percent to $449.1 million, which included a 3.1 percent estimated negative impact due to foreign currency translation (“FX”), compared to $454.3 million in the prior year quarter. Excluding the estimated negative impact of FX, revenues increased 2.0 percent compared to the prior year quarter. Fully diluted earnings per share (“EPS”) were $0.52 compared to $0.42 in the prior year quarter. EPS in the quarter included contingent consideration remeasurement gains, which increased EPS by $0.02. EPS in the prior year quarter included a special charge of $9.4 million, which reduced EPS by $0.14. Adjusted EPS and Adjusted EBITDA, which exclude the remeasurement gains and special charges, were $0.50 and $55.8 million, or 12.4 percent of revenues in the quarter, compared to $0.55 and $59.9 million, or 13.2 percent of revenues in the prior year quarter.

Adjusted EPS, Adjusted EBITDA and Adjusted Segment EBITDA are non-GAAP measures defined elsewhere in this press release and are reconciled to GAAP measures in the accompanying financial tables.

Commenting on these results, Steven H. Gunby, President and Chief Executive Officer of FTI Consulting, said, “Our second quarter operating performance was solid and in line with our expectations. Obviously there is still much work to do, but our teams are making real progress towards turning this business into a sustainable growth engine.”

Cash Position

Net cash provided by operating activities for the quarter was $20.6 million compared to net cash provided by operating activities of $33.7 million in the prior year quarter. Cash and cash equivalents were $240.0 million at June 30, 2015 compared to $94.4 million at June 30, 2014.


Second Quarter Segment Results

Corporate Finance/Restructuring

Revenues in the Corporate Finance/Restructuring segment increased 4.9 percent to $109.1 million in the quarter, which included a 4.0 percent estimated negative impact due to FX, compared to $104.0 million in the prior year quarter. Excluding the estimated negative impact of FX, revenues increased 8.9 percent. The increase in revenues was driven by higher demand for the segment’s distressed and non-distressed service offerings in North America and higher demand for the segment’s transaction advisory services in the Europe, Middle East and Africa (“EMEA”) region, which was partially offset by the continued softness in the Asia Pacific region. Adjusted Segment EBITDA was $22.0 million, or 20.2 percent of segment revenues, compared to $19.1 million, or 18.4 percent of segment revenues in the prior year quarter. The increase in Adjusted Segment EBITDA margin was due to an increase in higher margin distressed activity in North America and EMEA, coupled with growth in the transaction advisory services practice in EMEA, which was partially offset by lower restructuring activity in the Asia Pacific region.

Forensic and Litigation Consulting

Revenues in the Forensic and Litigation Consulting segment increased 5.9 percent to $126.1 million in the quarter, which included a 1.9 percent estimated negative impact due to FX, compared to $119.1 million in the prior year quarter. Excluding the estimated negative impact of FX, revenues increased 7.9 percent. The increase in revenues was driven by higher demand and success fees in the segment’s health solutions practice and increased demand for the segment’s investigations and global construction solutions practices, which was partially offset by declines in the disputes and financial and enterprise data analytics practices. Adjusted Segment EBITDA was $20.0 million, or 15.8 percent of segment revenues, compared to $22.3 million, or 18.7 percent of segment revenues in the prior year quarter. The decrease in Adjusted Segment EBITDA margin was due to lower utilization in certain practices coupled with an increase in staffing in order to expand capabilities, a $1.5 million severance charge related to a senior managing director departure and higher outside services and bad debt expenses.

Economic Consulting

Revenues in the Economic Consulting segment declined 7.3 percent to $108.7 million in the quarter, which included a 2.8 percent estimated negative impact due to FX and a 1.8 percent benefit from a prior year acquisition, compared to $117.2 million in the prior year quarter. Excluding the estimated negative impact of FX and the benefit from the acquisition, revenues declined 6.3 percent. The decline in revenues was driven by decreased demand in non-mergers and acquisitions (“M&A”) related antitrust and financial economics services, which was partially offset by higher demand for international arbitration services. Adjusted Segment EBITDA was $15.3 million, or 14.1 percent of segment revenues, compared to $18.0 million, or 15.4 percent of segment revenues in the prior year quarter. The decrease in Adjusted Segment EBITDA margin was due to lower utilization in the non-M&A related antitrust and financial economics practices, which was partially offset by higher realized bill rates and utilization in the segment’s energy services.

Technology

Revenues in the Technology segment increased 1.8 percent to $61.8 million in the quarter, which included a 1.0 percent decrease from the estimated negative impact due to FX, compared to $60.7 million in the prior year quarter. Excluding the estimated negative impact of FX, revenues increased 2.8 percent. The increase in revenues was due to higher M&A-related “second request” assignments, which was partially offset by a decline in cross-border investigations and reduced pricing for certain services. Adjusted Segment EBITDA was $12.2 million, or 19.7 percent of segment revenues, compared to $15.1 million, or 24.9 percent of segment revenues in the prior year quarter. The decrease in Adjusted Segment EBITDA margin was due to lower realized pricing for certain services, investment in global personnel to support future growth opportunities and an increase in lower margin services as a percentage of total revenues.


Strategic Communications

Revenues in the Strategic Communications segment decreased 18.6 percent to $43.4 million in the quarter, which included a 7.3 percent decrease from the estimated negative impact due to FX, compared to $53.3 million in the prior year quarter. Excluding the estimated negative impact of FX, revenues decreased 11.3 percent with $4.3 million of the year-over-year decline resulting from lower pass-through income. The remaining decline resulted from lower project-based revenues in North America and EMEA and lower retainer-based revenues in North America. Adjusted Segment EBITDA was $5.6 million, or 13.0 percent of segment revenues, compared to $5.8 million, or 10.9 percent of segment revenues in the prior year quarter. The increase in Adjusted Segment EBITDA margin was driven by a decrease in lower margin pass-through income and reduced headcount-related costs resulting from cost saving activities initiated in 2014, which was partially offset by higher bad debt.

2015 Guidance

The Company now estimates that revenues for 2015 will be between $1.75 billion and $1.85 billion and Adjusted EPS will be between $1.95 and $2.15.

Second Quarter 2015 Conference Call

FTI Consulting will host a conference call for analysts and investors to discuss second quarter 2015 financial results at 9:00 a.m. Eastern Time on July 30, 2015. 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 at 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 4,400 employees located in 26 countries, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management, strategic communications and restructuring. The company generated $1.76 billion in revenues during fiscal year 2014. More information can be found at www.fticonsulting.com.

Use of Non-GAAP Measures

Note: We define Segment Operating Income (Loss) as a segment’s share of consolidated operating income (Loss). We define Total Segment Operating Income (Loss) as the total of Segment Operating Income (Loss) for all segments, which excludes unallocated corporate expenses. We use Segment Operating Income (Loss) for the purpose of calculating Adjusted Segment EBITDA. We define Adjusted EBITDA as consolidated net income (loss) before income tax provision, other non-operating income (expense), depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges and loss on early extinguishment of debt. We define Adjusted Segment EBITDA as a segment’s share of consolidated operating income before depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges. We define Total Adjusted Segment EBITDA as the total of Adjusted Segment EBITDA for all segments, which excludes unallocated corporate expenses. We define Adjusted Segment EBITDA margin as Adjusted Segment EBITDA as a percentage of a segment’s share of revenue. We use Adjusted Segment EBITDA to internally evaluate the financial performance of our segments because we believe it is a useful supplemental measure which reflects current core operating performance and provides an indicator of the segment’s ability to generate cash. We also believe that these measures, when considered together with our GAAP financial results, provide management and investors with a more complete understanding of our operating results, including underlying trends, by excluding the effects of remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges. In addition, EBITDA is a common alternative measure of operating performance used by many of our competitors. It is used by investors, financial analysts, rating agencies and others to value and compare the financial performance of companies in our industry. Therefore, we also believe that these measures, considered along with corresponding GAAP measures, provide management and investors with additional information for comparison of our operating results to the operating results of other companies.


We define Adjusted Net Income and Adjusted Earnings per Diluted Share (“Adjusted EPS”) as net income (loss) and earnings per diluted share, respectively, excluding the impact of remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges and losses on early extinguishment of debt. We use Adjusted Net Income for the purpose of calculating Adjusted EPS. Management uses Adjusted EPS to assess total Company operating performance on a consistent basis. We believe that this measure, when considered together with our GAAP financial results, provides management and investors with a more complete understanding of our business operating results, including underlying trends, by excluding the effects of remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges and losses on early extinguishment of debt. Non-GAAP financial measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, the information contained in our Consolidated Statements of Comprehensive Income. Reconciliations of GAAP to non-GAAP financial measures are included elsewhere in this press release.

Safe Harbor Statement

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which 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 estimates will be achieved, and the Company’s actual results may differ materially from our expectations, beliefs and estimates. Further, preliminary results are subject to normal year-end adjustments. The Company has experienced fluctuating revenues, operating income and cash flow in prior periods and expects that this will occur from time to time in the future. Other factors that could cause such differences include declines in demand for, or changes in, the mix of services and products that we offer, the mix of the geographic locations where our clients are located or where services are performed, adverse financial, real estate or other market and general economic conditions, which could impact each of our segments differently, 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 filed with the SEC and in the Company’s other filings with the SEC, including the risks set forth under “Risks Related to Our Reportable Segments” and “Risks Related to Our Operations”. 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.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED JUNE 30, 2015 AND 2014

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended  
     June 30,  
     2015     2014  

Revenues

   $ 449,137      $ 454,324   
  

 

 

   

 

 

 

Operating expenses

    

Direct cost of revenues

     291,469        295,549   

Selling, general and administrative expense

     109,045        107,032   

Special charges

     —          9,364   

Acquisition-related contingent consideration

     (1,538     (5

Amortization of other intangible assets

     3,007        3,452   
  

 

 

   

 

 

 
     401,983        415,392   
  

 

 

   

 

 

 

Operating income

     47,154        38,932   
  

 

 

   

 

 

 

Other income (expense)

    

Interest income and other

     950        1,448   

Interest expense

     (12,473     (12,908
  

 

 

   

 

 

 
     (11,523     (11,460
  

 

 

   

 

 

 

Income before income tax provision

     35,631        27,472   

Income tax provision

     13,922        10,225   
  

 

 

   

 

 

 

Net income

   $ 21,709      $ 17,247   
  

 

 

   

 

 

 

Earnings per common share - basic

   $ 0.53      $ 0.43   
  

 

 

   

 

 

 

Earnings per common share - diluted

   $ 0.52      $ 0.42   
  

 

 

   

 

 

 

Weighted average common shares outstanding - basic

     40,792        39,681   
  

 

 

   

 

 

 

Weighted average common shares outstanding - diluted

     41,696        40,750   
  

 

 

   

 

 

 

Other comprehensive income, net of tax:

    

Foreign currency translation adjustments, net of tax of $0

   $ 13,298      $ 7,694   
  

 

 

   

 

 

 

Total other comprehensive income, net of tax

     13,298        7,694   
  

 

 

   

 

 

 

Comprehensive income

   $ 35,007      $ 24,941   
  

 

 

   

 

 

 


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

(in thousands, except per share data)

(unaudited)

 

     Six Months Ended  
     June 30,  
     2015     2014  

Revenues

   $ 881,475      $ 879,876   
  

 

 

   

 

 

 

Operating expenses

    

Direct cost of revenues

     570,499        569,824   

Selling, general and administrative expenses

     211,259        215,419   

Special charges

     —          9,364   

Acquisition-related contingent consideration

     (1,304     (1,848

Amortization of other intangible assets

     6,019        8,068   
  

 

 

   

 

 

 
     786,473        800,827   
  

 

 

   

 

 

 

Operating income

     95,002        79,049   
  

 

 

   

 

 

 

Other income (expense)

    

Interest income and other

     813        2,451   

Interest expense

     (24,841     (25,563
  

 

 

   

 

 

 
     (24,028     (23,112
  

 

 

   

 

 

 

Income before income tax provision

     70,974        55,937   

Income tax provision

     25,579        20,573   
  

 

 

   

 

 

 

Net income

   $ 45,395      $ 35,364   
  

 

 

   

 

 

 

Earnings per common share - basic

   $ 1.12      $ 0.89   
  

 

 

   

 

 

 

Earnings per common share - diluted

   $ 1.09      $ 0.87   
  

 

 

   

 

 

 

Weighted average common shares outstanding - basic

     40,607        39,560   
  

 

 

   

 

 

 

Weighted average common shares outstanding - diluted

     41,529        40,604   
  

 

 

   

 

 

 

Other comprehensive (loss) income, net of tax:

    

Foreign currency translation adjustments, net of tax of $0

   $ (7,184   $ 12,422   
  

 

 

   

 

 

 

Total other comprehensive (loss) income, net of tax

     (7,184     12,422   
  

 

 

   

 

 

 

Comprehensive income

   $ 38,211      $ 47,786   
  

 

 

   

 

 

 


FTI CONSULTING, INC.

OPERATING RESULTS BY BUSINESS SEGMENT

 

                              Average      Revenue-  
            Adjusted                 Billable      Generating  
     Revenues      EBITDA     Margin     Utilization     Rate      Headcount  
     (in thousands)                        (at period end)  

Three Months Ended June 30, 2015

              

Corporate Finance/Restructuring

   $ 109,113       $ 22,032        20.2     70   $ 394         775   

Forensic and Litigation Consulting

     126,131         19,979        15.8     66   $ 318         1,169   

Economic Consulting

     108,698         15,292        14.1     71   $ 530         554   

Technology (1)

     61,826         12,166        19.7     N/M        N/M         364   

Strategic Communications (1)

     43,369         5,631        13.0     N/M        N/M         551   
  

 

 

    

 

 

          

 

 

 
   $ 449,137         75,100        16.7          3,413   
  

 

 

             

 

 

 

Corporate

        (19,311         
     

 

 

          

Adjusted EBITDA

      $ 55,789        12.4       
     

 

 

          

Six Months Ended June 30, 2015

              

Corporate Finance/Restructuring

   $ 215,325       $ 44,512        20.7     72   $ 384         775   

Forensic and Litigation Consulting

     249,396         42,050        16.9     67   $ 318         1,169   

Economic Consulting

     214,779         26,848        12.5     72   $ 515         554   

Technology (1)

     116,480         22,239        19.1     N/M        N/M         364   

Strategic Communications (1)

     85,495         11,383        13.3     N/M        N/M         551   
  

 

 

    

 

 

          

 

 

 
   $ 881,475         147,032        16.7          3,413   
  

 

 

             

 

 

 

Corporate

        (32,575         
     

 

 

          

Adjusted EBITDA

      $ 114,457        13.0       
     

 

 

          

Three Months Ended June 30, 2014

              

Corporate Finance/Restructuring

   $ 104,020       $ 19,133        18.4     71   $ 412         713   

Forensic and Litigation Consulting

     119,081         22,271        18.7     71   $ 323         1,059   

Economic Consulting

     117,227         18,043        15.4     78   $ 522         525   

Technology (1)

     60,720         15,104        24.9     N/M        N/M         328   

Strategic Communications (1)

     53,276         5,834        10.9     N/M        N/M         566   
  

 

 

    

 

 

          

 

 

 
   $ 454,324         80,385        17.7          3,191   
  

 

 

             

 

 

 

Corporate

        (20,482         
     

 

 

          

Adjusted EBITDA

      $ 59,903        13.2       
     

 

 

          

Six Months Ended June 30, 2014

              

Corporate Finance/Restructuring

   $ 198,002       $ 30,084        15.2     71   $ 396         713   

Forensic and Litigation Consulting

     240,510         48,765        20.3     73   $ 319         1,059   

Economic Consulting

     224,078         31,073        13.9     75   $ 519         525   

Technology (1)

     120,783         32,452        26.9     N/M        N/M         328   

Strategic Communications (1)

     96,503         8,563        8.9     N/M        N/M         566   
  

 

 

    

 

 

          

 

 

 
   $ 879,876         150,937        17.2          3,191   
  

 

 

             

 

 

 

Corporate

        (39,838         
     

 

 

          

Adjusted EBITDA

      $ 111,099        12.6       
     

 

 

          

 

(1)  The majority of the Technology and Strategic Communications segments’ revenues are not generated based on billable hours. Accordingly, utilization and average billable rate metrics are not presented as they are not meaningful as a segment-wide metric.


FTI CONSULTING, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014

(in thousands, except per share data)

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2015     2014     2015     2014  

Net income

   $ 21,709      $ 17,247      $ 45,395      $ 35,364   

Add back:

        

Special charges, net of tax effect (1)

     —          5,523        —          5,523   

Remeasurement of acquisition-related contingent consideration, net of tax effect (2)

     (1,005     (164     (1,005     (1,514
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 20,704      $ 22,606      $ 44,390      $ 39,373   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share – diluted

   $ 0.52      $ 0.42      $ 1.09      $ 0.87   

Add back:

        

Special charges, net of tax effect (1)

     —          0.14        —          0.14   

Remeasurement of acquisition-related contingent consideration, net of tax effect (2)

     (0.02     (0.01     (0.02     (0.04
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EPS – diluted

   $ 0.50      $ 0.55      $ 1.07      $ 0.97   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of common shares outstanding – diluted

     41,696        40,750        41,529        40,604   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) The tax effect takes into account the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). As a result, the effective tax rate for the adjustments related to special charges for the three and six months ended June 30, 2014 was 41.0%. The tax expense related to the adjustment for special charges for the three and six months ended June 30, 2014 was $3.8 million, or a $0.09 impact on diluted earnings per share. In the three and six months ended, June 30, 2015, there were no special charges.
(2) The tax effect takes into account the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). As a result, the effective tax rates for the adjustments related to the remeasurement of acquisition-related contingent consideration for the three and six months ended June 30, 2015 was 40.0%. The tax expense related to the remeasurement of acquisition-related contingent consideration for the three and six months ended June 30, 2015 was $0.7 million, or a $0.02 impact on diluted earnings per share. The effective tax rates for the adjustments related to the remeasurement of acquisition-related contingent consideration for the three and six months ended June 30, 2014 were 37.2% and 36.5%, respectively. The tax expense related to the remeasurement of acquisition-related contingent consideration for the three and six months ended June 30, 2014 was $0.1 million with no impact on diluted earnings per share and $0.9 million, or a $0.02 impact on diluted earnings per share.


RECONCILIATION OF NET INCOME AND OPERATING INCOME TO ADJUSTED EBITDA

(in thousands)

 

    Corporate
Finance /
Restructuring
    Forensic and
Litigation
Consulting
    Economic
Consulting
    Technology     Strategic
Communications
    Corp HQ     Total  

Three Months Ended June 30, 2015

             

Net income

  

            $ 21,709   

Interest income and other

                (950

Interest expense

                12,473   

Income tax provision

                13,922   
             

 

 

 

Operating income

  $ 21,906      $ 18,476      $ 14,282      $ 8,465      $ 4,126      $ (20,101   $ 47,154   

Depreciation and amortization

    682        922        886        3,508        515        790        7,303   

Amortization of other intangible assets

    935        581        308        193        990        —          3,007   

Remeasurement of acquisition-related contingent consideration

    (1,491     —          (184     —          —          —          (1,675
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 22,032      $ 19,979      $ 15,292      $ 12,166      $ 5,631      $ (19,311   $ 55,789   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Six Months Ended June 30, 2015

             

Net income

  

            $ 45,395   

Interest income and other

                (813

Interest expense

                24,841   

Income tax provision

                25,579   
             

 

 

 

Operating income

  $ 42,670      $ 38,950      $ 24,578      $ 14,663      $ 8,323      $ (34,182   $ 95,002   

Depreciation and amortization

    1,464        1,937        1,838        7,185        1,080        1,607        15,111   

Amortization of other intangible assets

    1,869        1,163        616        391        1,980        —          6,019   

Remeasurement of acquisition-related contingent consideration

    (1,491     —          (184     —          —          —          (1,675
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 44,512      $ 42,050      $ 26,848      $ 22,239      $ 11,383      $ (32,575   $ 114,457   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Corporate
Finance /
Restructuring
    Forensic and
Litigation
Consulting
    Economic
Consulting
    Technology     Strategic
Communications
    Corp HQ     Total  

Three Months Ended June 30, 2014

             

Net income

  

            $ 17,247   

Interest income and other

                (1,448

Interest expense

                12,908   

Income tax provision

                10,225   
             

 

 

 

Operating income

  $ 17,068      $ 20,839      $ 16,840      $ 10,905      $ 4,030      $ (30,750   $ 38,932   

Depreciation and amortization

    854        1,019        981        3,981        677        904        8,416   

Amortization of other intangible assets

    1,211        674        222        218        1,127        —          3,452   

Special charges

    —          —          —          —          —          9,364        9,364   

Remeasurement of acquisition-related contingent consideration

    —          (261     —          —          —          —          (261
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 19,133      $ 22,271      $ 18,043      $ 15,104      $ 5,834      $ (20,482   $ 59,903   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Six Months Ended June 30, 2014

             

Net income

  

            $ 35,364   

Interest income and other

                (2,451

Interest expense

                25,563   

Income tax provision

                20,573   
             

 

 

 

Operating income

  $ 25,675      $ 46,241      $ 29,270      $ 23,971      $ 5,035      $ (51,143   $ 79,049   

Depreciation and amortization

    1,645        2,034        2,062        8,045        1,274        1,941        17,001   

Amortization of other intangible assets

    3,426        1,424        528        436        2,254        —          8,068   

Special charges

    —          —          —          —          —          9,364        9,364   

Remeasurement of acquisition-related contingent consideration

    (662     (934     (787     —          —          —          (2,383
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 30,084      $ 48,765      $ 31,073      $ 32,452      $ 8,563      $ (39,838   $ 111,099   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

(in thousands)

(unaudited)

 

     Six Months Ended  
     June 30,  
     2015     2014  

Operating activities

    

Net income

   $ 45,395      $ 35,364   

Adjustments to reconcile net income to net cash used in operating activities:

    

Depreciation and amortization

     15,111        18,138   

Amortization of other intangible assets

     6,019        8,068   

Acquisition-related contingent consideration

     (1,304     (1,848

Provision for doubtful accounts

     6,571        8,671   

Non-cash share-based compensation

     10,581        15,194   

Non-cash interest expense

     1,343        1,348   

Other

     (223     (368

Changes in operating assets and liabilities, net of effects from acquisitions:

    

Accounts receivable, billed and unbilled

     (70,710     (115,787

Notes receivable

     (6,626     (22,559

Prepaid expenses and other assets

     (5,120     8,860   

Accounts payable, accrued expenses and other

     (2,435     2,645   

Income taxes

     16,458        4,832   

Accrued compensation

     (40,587     (47,418

Billings in excess of services provided

     (5,204     7,756   
  

 

 

   

 

 

 

Net cash used in operating activities

     (30,731     (77,104
  

 

 

   

 

 

 

Investing activities

    

Payments for acquisition of businesses, net of cash received

     (576     (15,611

Purchases of property and equipment

     (17,533     (21,778

Other

     64        (6
  

 

 

   

 

 

 

Net cash used in investing activities

     (18,045     (37,395
  

 

 

   

 

 

 

Financing activities

    

Payment of debt financing fees

     (3,090     —     

Purchase and retirement of common stock

     —          (4,367

Net issuance of common stock under equity compensation plans

     8,662        (2,692

Deposits

     2,423        11,580   

Other

     (326     (891
  

 

 

   

 

 

 

Net cash provided by financing activities

     7,669        3,630   
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (2,585     (552
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (43,692     (111,421

Cash and cash equivalents, beginning of period

     283,680        205,833   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 239,988      $ 94,412   
  

 

 

   

 

 

 


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AT JUNE 30, 2015 AND DECEMBER 31, 2014

(in thousands, except per share amounts)

 

     June 30,     December 31,  
     2015     2014  
     (unaudited)        
Assets     

Current assets

    

Cash and cash equivalents

   $ 239,988      $ 283,680   

Accounts receivable:

    

Billed receivables

     419,906        381,464   

Unbilled receivables

     298,964        248,462   

Allowance for doubtful accounts and unbilled services

     (169,570     (144,825
  

 

 

   

 

 

 

Accounts receivable, net

     549,300        485,101   

Current portion of notes receivable

     36,281        27,208   

Prepaid expenses and other current assets

     53,727        60,852   

Current portion of deferred tax assets

     25,127        27,332   
  

 

 

   

 

 

 

Total current assets

     904,423        884,173   

Property and equipment, net of accumulated depreciation

     80,527        82,163   

Goodwill

     1,208,508        1,211,689   

Other intangible assets, net of amortization

     70,356        77,034   

Notes receivable, net of current portion

     120,076        122,149   

Other assets

     53,174        53,319   
  

 

 

   

 

 

 

Total assets

   $ 2,437,064      $ 2,430,527   
  

 

 

   

 

 

 
Liabilities and Stockholders’ Equity     

Current liabilities

    

Accounts payable, accrued expenses and other

   $ 90,083      $ 99,494   

Accrued compensation

     183,416        220,959   

Current portion of long-term debt

     11,000        11,000   

Billings in excess of services provided

     30,122        35,639   
  

 

 

   

 

 

 

Total current liabilities

     314,621        367,092   

Long-term debt, net of current portion

     700,000        700,000   

Deferred income taxes

     161,534        161,932   

Other liabilities

     97,327        98,757   
  

 

 

   

 

 

 

Total liabilities

     1,273,482        1,327,781   
  

 

 

   

 

 

 

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 - 41,807 (2015) and 41,181 (2014)

     418        412   

Additional paid-in capital

     415,793        393,174   

Retained earnings

     834,823        789,428   

Accumulated other comprehensive loss

     (87,452     (80,268
  

 

 

   

 

 

 

Total stockholders’ equity

     1,163,582        1,102,746   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,437,064      $ 2,430,527   
  

 

 

   

 

 

 
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