NCI Navigant Consulting Inc

 

 

UNITED STATES

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 28, 2015

 

 

Navigant Consulting, Inc.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware		1-12173		36-4094854
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

30 South Wacker Drive, Suite 3550, Chicago, Illinois		60606
(Address of Principal Executive Offices)		(Zip Code)

(312) 573-5600

(Registrant’s telephone number, including area code)

Not Applicable

(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 (see General Instruction A.2. below):

 

¨

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))

 

 

 

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Item 2.02. Results of Operations and Financial Condition.

On July 28, 2015, Navigant Consulting, Inc. issued a press release announcing its financial results for the second quarter ended June 30, 2015. A copy of the press release is attached hereto as Exhibit 99.1.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit No.
99.1		Press Release dated July 28, 2015.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				NAVIGANT CONSULTING, INC.
Date: July 28, 2015				By:		/s/ Lucinda M. Baier
						Name:		Lucinda M. Baier
						Title:		Executive Vice President and
								Chief Financial Officer

 

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EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Press Release dated July 28, 2015.

 

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Exhibit 99.1

 

NAVIGANT REPORTS SECOND QUARTER 2015 FINANCIAL RESULTS

CHICAGO, July 28, 2015 – Navigant (NYSE: NCI) today announced financial results for the second quarter ended June 30, 2015.

Financial Summary and Highlights:

 

•

Second quarter 2015 revenues before reimbursements (RBR) increased 13% year-over-year to $211.0 million, and total revenues increased 12% year-over-year to $233.4 million.

 

•

Second quarter 2015 RBR results included organic growth of 8% year-over-year, with contributions from three out of four segments.

 

•

Net income from continuing operations was $7.8 million or $0.16 per share; adjusted earnings per share (EPS) increased 18% year-over-year to $0.26, and adjusted EBITDA increased 10% year-over-year to $30.1 million.

 

•

421,872 shares of common stock repurchased in second quarter 2015 at an average cost of $14.13 per share.

 

•

Confirms financial outlook for 2015.

Navigant reported second quarter 2015 RBR of $211.0 million, a 13% increase compared to $186.5 million for second quarter 2014, with year-over-year RBR organic growth in three out of four segments. Total revenues increased 12% to $233.4 million for second quarter 2015 compared to $208.1 million for second quarter 2014. Net income from continuing operations for second quarter 2015 was $7.8 million, or $0.16 per share, compared to a net loss of $75.9 million, or $1.55 per share, in the second quarter 2014, which included a non-cash goodwill impairment of $122.0 million ($86.9 million or $1.78 per share on an after-tax basis.) Adjusted EPS increased 18% to $0.26 for second quarter 2015 compared to $0.22 for second quarter 2014. Adjusted EBITDA increased 10% to $30.1 million for second quarter 2015 compared to $27.4 million for the same period in 2014.

Julie Howard, Chairman and Chief Executive Officer, commented, “I am very pleased with our strong results for the second quarter, notably with the achievement of an organic RBR growth rate of 8%, driven by our Healthcare, Energy and Disputes, Investigations and Economics segments.”

Howard continued, “We believe that combining revenue growth and operating efficiency are essential for creating long-term value for our shareholders. Consistent with this objective, during the quarter, we took certain actions, as previously discussed, to streamline our operations to improve profitability. These actions combined with our strong year-to-date results have kept us in line to deliver on the guidance we set forth at the beginning of the year.”

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Segment Financial Summary

 

		For the quarter ended June 30,
		2015				2014				Change
RBR ($000)
Disputes, Investigations & Economics		$	81,116			$	76,294				6.3	%
Financial, Risk & Compliance			29,509				32,193				-8.3	%
Healthcare			74,245				54,446				36.4	%
Energy			26,153				23,571				11.0	%
Total Company		$	211,023			$	186,504				13.1	%
Total Revenues ($000)
Disputes, Investigations & Economics		$	87,515			$	82,444				6.2	%
Financial, Risk & Compliance			34,439				38,224				-9.9	%
Healthcare			80,652				60,476				33.4	%
Energy			30,833				26,953				14.4	%
Total Company		$	233,439			$	208,097				12.2	%
Segment Operating Profit ($000)
Disputes, Investigations & Economics		$	25,721			$	26,213				-1.9	%
Financial, Risk & Compliance			11,201				13,541				-17.3	%
Healthcare			24,726				15,475				59.8	%
Energy			7,513				7,009				7.2	%
Total Company		$	69,161			$	62,238				11.1	%
Segment Operating Margin (% of RBR)
Disputes, Investigations & Economics			31.7	%			34.4	%
Financial, Risk & Compliance			38.0	%			42.1	%
Healthcare			33.3	%			28.4	%
Energy			28.7	%			29.7	%
Total Company			32.8	%			33.4	%

RBR for the Healthcare segment increased 36% year-over-year for second quarter 2015 with 14% organic RBR growth for the period. Overall RBR growth for the segment was driven primarily by business process management services and increased demand for our life sciences consulting expertise. Segment operating profit margin increased to 33% compared to 28% in the same period last year, driven by better operating leverage within the segment.

The Financial, Risk & Compliance segment RBR for second quarter 2015 decreased 8% compared to the prior year quarter, reflecting lower volume of work from an ongoing large financial institution client, partially offset by continued strong demand for regulatory and compliance consulting engagements for major financial institutions. Second quarter 2015 segment operating profit was down 17% year-over-year as a result of lower RBR and our decision to maintain capabilities in the segment based on our expected market demand for this segment’s consulting services. In addition, segment operating profit was further impacted by a change in the use of flexible resources.

 

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The Energy segment RBR for second quarter 2015 increased 11% compared to second quarter 2014, all of which represented organic growth. The RBR growth in the quarter was driven by continued demand for the segment’s services from both the public and private sector, as well as increased client penetration from the segment’s key client accounts program. Second quarter 2015 segment operating profit was up 7% compared to the same period last year, as higher RBR was partially offset by higher compensation and benefits expenses associated with investments to expand the segment’s capabilities.

The Disputes, Investigations & Economics segment RBR for second quarter 2015 increased 6% year-over-year, primarily on an organic basis. The increase was driven by continued demand for our global construction and financial services disputes expertise. In addition, healthcare disputes and legal technology solutions contributed to the segment’s results for the second quarter 2015, partially offset by a lower contribution from forensic investigations and economic consulting engagements. Segment operating profit decreased 2% in second quarter 2015 compared to the same period of 2014, as higher RBR was offset by higher costs, mainly due to severance expense and costs incurred to better align resources.

Cash Flow

Free cash flow was $11.6 million for second quarter 2015 compared to $17.2 million for the same period in 2014, reflecting increased capital investment spending. Days Sales Outstanding (DSO) was 80 days as of June 30, 2015, down 2 days compared to June 30, 2014.

Bank debt was $171.4 million at June 30, 2015 compared to $188.8 million at June 30, 2014. Leverage (bank debt divided by trailing twelve month adjusted EBITDA) was 1.37 at June 30, 2015 compared to 1.71 at June 30, 2014.

Navigant repurchased 421,872 shares of common stock during second quarter 2015 at an aggregate cost of $6.0 million and an average cost of $14.13 per share. Effective July 1, 2015, our board of directors increased the amount authorized under the Company’s stock repurchase authorization to $100 million and extended the authorization through December 31, 2017.

2015 Outlook

Navigant confirmed its 2015 financial outlook. As previously disclosed, full year 2015 RBR is expected to range between $815 and $845 million while 2015 total revenues are estimated to be between $900 and $930 million. Adjusted EBITDA for full year 2015 is expected to range between $115 and $125 million and adjusted EPS for full year 2015 is estimated to be between $0.90 and $1.00.

 

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Non-GAAP Financial Information and Key Operating Metrics

This press release includes certain non-GAAP financial measures as defined by the Securities and Exchange Commission. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles (GAAP) are included in the financial schedules attached to this press release. This information should be considered as supplemental in nature and not as a substitute for, or superior to, any measure of performance prepared in accordance with GAAP.

As used in this press release, organic growth represents RBR adjusted to include the impact of acquisitions as if the Company owned them from the beginning of each comparable period and adjusted to exclude the impact of foreign currency exchange rate fluctuations. Our definition of organic growth may not be comparable to similarly titled metrics at other companies. Management believes that organic growth reflects the growth of our existing business and is, therefore, useful in analyzing the Company’s financial condition and results of operations.

Conference Call Details

Navigant will host a conference call to discuss the Company’s second quarter 2015 results at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on Tuesday, July 28, 2015. The conference call may be accessed via the Navigant website (www.navigant.com/investor_relations) or by dialing 888.455.9733 (630.395.0358 for international callers) and referencing pass code “NCI.” An archived version of the webcast will also be available via the Navigant website. A report of financial and related supplemental information is also available via the Navigant website.

About Navigant

Navigant Consulting, Inc. (NYSE: NCI) is an independent specialized, global professional services firm that combines deep industry knowledge with technical expertise to enable companies to defend, protect and create value. With a focus on industries and clients facing transformational change and significant regulatory and legal issues, the Firm serves clients primarily in the healthcare, energy and financial services sectors which represent highly complex market and regulatory environments. Professional service offerings include strategic, financial, operational, technology, risk management, compliance, investigative solutions, dispute resolutions services and business process management services. The Firm provides services to companies, legal counsel and governmental agencies. The business is organized in four reporting segments – Disputes, Investigations & Economics; Financial, Risk & Compliance; Healthcare; and Energy. More information about Navigant can be found at navigant.com.

Statements included in this press release which are not historical in nature are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may generally be identified by words such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “plan,” “outlook” and similar expressions. These statements are based upon management’s current expectations and speak only as of the date of this press release. The Company cautions readers

 

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that there may be events in the future that the Company is not able to accurately predict or control and the information contained in the forward-looking statements is inherently uncertain and subject to a number of risks that could cause actual results to differ materially from those contained in or implied by the forward-looking statements including, without limitation: the success of the Company’s organizational changes and margin improvement initiatives; risks inherent in international operations, including foreign currency fluctuations; ability to make acquisitions and divestitures; pace, timing and integration of acquisitions and separation of divestitures; operational risks associated with new or expanded service areas, including business process management services; impairments; management of professional staff, including dependence on key personnel, recruiting, attrition and the ability to successfully integrate new consultants into the Company’s practices; utilization rates; conflicts of interest; potential loss of clients or large engagements; clients’ financial condition and their ability to make payments to the Company; risks inherent with litigation; higher risk client assignments; professional liability; potential legislative and regulatory changes; continued access to capital; and market and general economic conditions. Further information on these and other potential factors that could affect the Company’s financial results are included under the “Risk Factors” section and elsewhere in the Company’s filings with the Securities and Exchange Commission (SEC), which are available on the SEC’s website or at www.navigant.com/investor_relations. The Company cannot guarantee any future results, levels of activity, performance or achievement and undertakes no obligation to update any of its forward-looking statements.

For additional information contact:

Aaron Miles

Investor Relations

312.583.5820

aaron.miles@navigant.com

###

 

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NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands, except per share data(1))

(Unaudited)

 

		For the quarter ended June 30,								For the six months ended June 30,
		2015				2014				2015				2014
Revenues:
Revenues before reimbursements		$	211,023			$	186,504			$	412,179			$	361,560
Reimbursements			22,416				21,593				44,431				44,285
Total revenues			233,439				208,097				456,610				405,845
Costs of services:
Cost of services before reimbursable expenses			145,367				126,792				283,968				246,920
Reimbursable expenses			22,416				21,593				44,431				44,285
Total costs of services			167,783				148,385				328,399				291,205
General and administrative expenses			39,068				34,237				74,733				67,339
Depreciation expense			5,724				4,953				11,079				9,262
Amortization expense			2,297				1,633				4,566				2,995
Other operating costs (benefit):
Contingent acquisition liability adjustments, net			2,308				(2,444	)			(12,625	)			(3,604	)
Office consolidation, net			1,804				—				2,740				—
Goodwill impairment			—				122,045				—				122,045
Other impairment			98				204				98				204
Operating income (loss)			14,357				(100,916	)			47,620				(83,601	)
Interest expense			1,238				1,397				2,970				2,235
Interest income			(46	)			(71	)			(101	)			(160	)
Other (income) expense, net			176				186				(152	)			268
Income (loss) from continuing operations before income tax (benefit) expense			12,989				(102,428	)			44,903				(85,944	)
Income tax (benefit) expense			5,162				(26,569	)			11,933				(20,455	)
Net income (loss) from continuing operations			7,827				(75,859	)			32,970				(65,489	)
Income from discontinued operations, net of tax			—				—				—				509
Net income (loss)		$	7,827			$	(75,859	)		$	32,970			$	(64,980	)
Basic per share data
Net income (loss) from continuing operations		$	0.16			$	(1.55	)		$	0.68			$	(1.34	)
Income from discontinued operations, net of tax		$	—			$	—			$	—			$	0.01
Net income (loss) (1)		$	0.16			$	(1.55	)		$	0.68			$	(1.33	)
Shares used in computing basic per share data			48,150				48,971				48,137				48,917
Diluted per share data
Net income (loss) from continuing operations		$	0.16			$	(1.55	)		$	0.67			$	(1.34	)
Income from discontinued operations, net of tax		$	—			$	—			$	—			$	0.01
Net income (loss) (1)		$	0.16			$	(1.55	)		$	0.67			$	(1.33	)
Shares used in computing diluted per share data (2)			49,310				48,971				49,369				48,917

 

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NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AND SELECTED DATA

(In thousands, except DSO data)

 

		June 30,				December 31,
		2015				2014
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	3,854			$	2,648
Accounts receivable, net			223,717				187,652
Prepaid expenses and other current assets			28,923				27,142
Deferred income tax assets			13,683				13,455
Total current assets			270,177				230,897
Non-current assets:
Property and equipment, net			72,496				60,617
Intangible assets, net			28,929				26,502
Goodwill			582,836				568,091
Other assets			19,547				17,386
Total assets		$	973,985			$	903,493
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	11,951			$	11,735
Accrued liabilities			12,208				11,311
Accrued compensation-related costs			60,118				83,061
Income tax payable			3,132				1,763
Other current liabilities			40,402				52,526
Total current liabilities			127,811				160,396
Non-current liabilities:
Deferred income tax liabilities			81,194				76,329
Other non-current liabilities			20,084				14,387
Bank debt non-current			171,386				109,790
Total non-current liabilities			272,664				200,506
Total liabilities			400,475				360,902
Stockholders’ equity:
Common stock			64				64
Additional paid-in capital			622,260				611,882
Treasury stock			(287,684	)			(275,608	)
Retained earnings			251,307				218,337
Accumulated other comprehensive loss			(12,437	)			(12,084	)
Total stockholders’ equity			573,510				542,591
Total liabilities and stockholders’ equity		$	973,985			$	903,493
Selected Data
Days sales outstanding, net (DSO)			80				69

 

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NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

		For the quarter ended June 30,								For the six months ended June 30,
		2015				2014				2015				2014
Cash flows from operating activities:
Net income (loss)		$	7,827			$	(75,859	)		$	32,970			$	(64,980	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation expense			5,724				4,953				11,079				9,262
Accelerated depreciation - office consolidation			139				—				139				—
Amortization expense			2,297				1,633				4,566				2,995
Amortization expense - client-facing software			233				178				486				242
Share-based compensation expense			3,420				2,522				5,524				5,236
Accretion of interest expense			272				490				1,135				654
Deferred income taxes			1,073				(31,638	)			4,686				(24,395	)
Allowance for doubtful accounts receivable			1,402				1,904				1,592				2,784
Contingent acquisition liability adjustments, net			2,308				(2,444	)			(12,625	)			(3,604	)
Gain on disposition of discontinued operations			—				—				—				(509	)
Goodwill impairment			—				122,045				—				122,045
Other impairment			98				204				98				204
Changes in assets and liabilities (net of acquisitions and dispositions):
Accounts receivable			(12,313	)			(8,943	)			(36,747	)			(29,293	)
Prepaid expenses and other assets			409				2,864				(2,361	)			141
Accounts payable			(969	)			(1,765	)			136				(4,216	)
Accrued liabilities			(2,523	)			(472	)			1,444				(1,695	)
Accrued compensation-related costs			16,743				19,703				(22,896	)			(21,619	)
Income taxes payable			(790	)			239				46				(837	)
Other liabilities			3,799				(370	)			5,923				(4,879	)
Net cash provided by (used in) operating activities			29,149				35,244				(4,805	)			(12,464	)
Cash flows from investing activities:
Purchases of property and equipment			(10,284	)			(4,450	)			(23,197	)			(10,942	)
Acquisitions of businesses, net of cash acquired			—				(83,334	)			(21,379	)			(84,834	)
Proceeds from dispositions, net of selling costs			—				—				—				824
Payments of acquisition liabilities			(1,530	)			(443	)			(1,530	)			(443	)
Capitalized client-facing software			(309	)			(36	)			(346	)			(864	)
Net cash used in investing activities			(12,123	)			(88,263	)			(46,452	)			(96,259	)
Cash flows from financing activities:
Issuances of common stock			636				516				4,894				1,535
Repurchase of common stock			(5,964	)			(7,036	)			(12,081	)			(14,427	)
Payments of contingent acquisition liabilities			—				—				—				(107	)
Repayments to banks			(67,119	)			(88,497	)			(138,703	)			(156,895	)
Borrowings from banks			58,249				156,420				199,643				288,774
Other, net			(1,036	)			(1,272	)			(1,247	)			(2,281	)
Net cash provided by (used in) financing activities			(15,234	)			60,131				52,506				116,599
Effect of exchange rate changes on cash and cash equivalents			74				2				(43	)			8
Net increase in cash and cash equivalents			1,866				7,114				1,206				7,884
Cash and cash equivalents at beginning of the period			1,988				2,738				2,648				1,968
Cash and cash equivalents at end of the period		$	3,854			$	9,852			$	3,854			$	9,852

 

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NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (3)

(In thousands, except per share data)

(Unaudited)

This press release includes certain non-GAAP financial measures as defined by the Securities and Exchange Commission. Below are the reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles (GAAP). This information should be considered as supplemental in nature and not as a substitute for, or superior to, any measure of performance prepared in accordance with GAAP. Management uses these non-GAAP financial measures in addition to GAAP financial measures to assess the Company’s operations and financial results and believes they are useful indicators of operating performance and the Company’s ability to generate cash flows from operations that are available for interest, debt service, taxes and capital expenditures. Investors should recognize that these non-GAAP financial measures may not be comparable to similarly-titled measures of other companies.

 

EBITDA, adjusted EBITDA, adjusted Net Income and		For the quarter ended								For the six months ended
adjusted Earnings Per Share (4)		June 30,								June 30,
		2015				2014				2015				2014
Severance expense		$	3,553			$	1,972			$	5,056			$	2,477
Income tax benefit (5)			(1,232	)			(758	)			(1,752	)			(957	)
Tax-effected impact of severance expense		$	2,321			$	1,214			$	3,304			$	1,520
Other operating cost (benefit) - contingent acquisition liability adjustment, net		$	2,308			$	(2,444	)		$	(12,625	)		$	(3,604	)
Income tax (benefit) expense (5)(6)(7)			(907	)			985				(1,090	)			1,453
Tax-effected impact of other operating benefit - contingent acquisition liability adjustment, net		$	1,401			$	(1,459	)		$	(13,715	)		$	(2,151	)
Other operating costs - office consolidation, net		$	1,804			$	—			$	2,740			$	—
Income tax benefit (5)			(729	)			—				(1,052	)			—
Tax-effected impact of other operating costs - office consolidation, net		$	1,075			$	—			$	1,688			$	—
Other operating costs - goodwill impairment		$	—			$	122,045			$	—			$	122,045
Income tax benefit (5)			—				(35,111	)			—				(35,111	)
Tax-effected impact of other operating costs - goodwill impairment		$	—			$	86,934			$	—			$	86,934
Other operating costs - other impairment		$	98			$	204			$	98			$	204
Income tax benefit (5)			(40	)			(82	)			(40	)			(82	)
Tax-effected impact of other operating costs - other impairment		$	58			$	122			$	58			$	122
EBITDA reconciliation:
Operating income (loss)		$	14,357			$	(100,916	)		$	47,620			$	(83,601	)
Depreciation expense			5,724				4,953				11,079				9,262
Accelerated depreciation - office consolidation			139				—				139				—
Amortization expense			2,297				1,633				4,566				2,995
EBITDA		$	22,517			$	(94,330	)		$	63,404			$	(71,344	)
Severance expense			3,553				1,972				5,056				2,477
Other operating cost (benefit) - contingent acquisition liability adjustment, net			2,308				(2,444	)			(12,625	)			(3,604	)
Other operating costs - office consolidation, net			1,665				—				2,601				—
Other operating costs - goodwill impairment			—				122,045				—				122,045
Other operating costs - other impairment			98				204				98				204
Adjusted EBITDA		$	30,141			$	27,447			$	58,534			$	49,778
Net income (loss) from continuing operations		$	7,827			$	(75,859	)		$	32,970			$	(65,489	)
Tax-effected impact of severance expense			2,321				1,214				3,304				1,520
Tax-effected impact of other operating benefit - contingent acquisition liability adjustment, net			1,401				(1,459	)			(13,715	)			(2,151	)
Tax-effected impact of other operating costs - office consolidation, net			1,075				—				1,688				—
Tax-effected impact of other operating costs - goodwill impairment			—				86,934				—				86,934
Tax-effected impact of other operating costs - other impairment			58				122				58				122
Adjusted net income		$	12,682			$	10,952			$	24,305			$	20,936
Shares used in computing adjusted per diluted share data (8)			49,310				50,078				49,369				50,257
Adjusted earnings per share		$	0.26			$	0.22			$	0.49			$	0.42
Free Cash Flow (9)		For the quarter ended June 30,								For the six months ended June 30,
		2015				2014				2015				2014
Net cash provided by (used in) operating activities		$	29,149			$	35,244			$	(4,805	)		$	(12,464	)
Changes in assets and liabilities			(4,356	)			(11,256	)			54,455				62,398
Allowance for doubtful accounts receivable			(1,402	)			(1,904	)			(1,592	)			(2,784	)
Purchases of property and equipment			(10,284	)			(4,450	)			(23,197	)			(10,942	)
Payments of acquisition liabilities			(1,530	)			(443	)			(1,530	)			(443	)
Payments of contingent acquisition liabilities			—				—				—				(107	)
Free Cash Flow		$	11,577			$	17,191			$	23,331			$	35,658

 

Leverage Ratio (10)		At June 30,
		2015				2014
Adjusted EBITDA for prior twelve-month period		$	124,979			$	110,379
Bank debt		$	171,386			$	188,825
Leverage ratio			1.37				1.71

 

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Footnotes

 

(1)	Per share data may not sum due to rounding.

(2)

For the three and six months ended June 30, 2014, the Company reported a net loss. For those periods, the basic weighted average common shares outstanding equals the diluted weighted average common shares outstanding for purposes of calculating U.S. GAAP earnings per share because potentially dilutive securities would be antidilutive.

(3)	All non-GAAP financial measures are presented on a continuing operations basis unless otherwise noted.

(4)

EBITDA is earnings from continuing operations before interest, taxes, depreciation and amortization. Adjusted EBITDA excludes the impact of severance expense and other operating costs (benefit). Adjusted net income and adjusted earnings per share exclude the net income (loss) and per share net income (loss) impact of discontinued operations, severance expense and other operating costs (benefit). Severance expense and other operating costs (benefit) are not considered to be non-recurring, infrequent or unusual to our business. Management believes that these measures provide investors with enhanced comparability of the Company’s results of operations across periods.

(5)	Effective income tax expense (benefit) has been determined based on specific tax jurisdiction.

(6)	A portion of the deferred contingent acquisition liability adjustment for the three and six months ended June 30, 2015 was non-taxable in nature.

(7)

On May 15, 2015, we executed an Amendment to Merger Agreement with the Cymetrix Sellers, establishing a definitive amount for the obligation and eliminating the contingent aspect of the Cymetrix acquisition liability. As a result of this agreement, the company will no longer record an interest expense for imputed interest resulting from the contingent aspect of the acquisition liability . Based on this change, the company re-evaluated the need for a deferred tax liability associated with expected non-deductible imputed interest and recorded an $826 thousand benefit to reverse the remaining tax impact in the quarter ended June 30, 2015.

(8)	For the three and six months ended June 30, 2014, the Company reported a net loss. For non-GAAP purposes, the per share and share amounts presented here reflect the inclusion of potentially dilutive shares based on the impact of the add backs included in Adjusted Net Income.

(9)

Free cash flow is calculated as net cash provided from operations excluding changes in assets and liabilities and allowance for doubtful accounts receivable less cash payments for property and equipment and deferred acquisition related payments. Free cash flow does not represent discretionary cash available for spending as it excludes certain contractual obligations such as debt repayment. However, management believes that it provides investors with an indicator of cash flows available for on-going business operations and long term value creation.

(10)	Leverage ratio is calculated as bank debt at the end of the period divided by adjusted EBITDA for the prior twelve-month period. Management believes that leverage ratio provides investors with an indicator of the cash flows available to repay the Company’s debt obligations.

 

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