FTI Consulting, Inc. Reports 2011 Fourth Quarter and Full Year Results

FINANCIAL TABLES FOLLOW

FTI CONSULTING, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

(in thousands, except per share data)

Year Ended December 31,

2011

2010 ⁽¹⁾

Revenues

$        1,566,768

$        1,401,461

Operating expenses

Direct cost of revenues

956,908

825,599

Selling, general and administrative expense

373,295

341,239

Special charges

15,212

51,131

Acquisition-related contingent consideration

(6,465)

1,190

Amortization of other intangible assets

22,371

23,910

1,361,321

1,243,069

Operating income

205,447

158,392

Other income (expense)

Interest income and other

6,304

4,423

Interest expense

(58,624)

(50,263)

Loss on early extinguishment of debt

-

(5,161)

(52,320)

(51,001)

Income before income tax provision

153,127

107,391

Income tax provision

49,224

41,407

Net income

$           103,903

$             65,984

Earnings  per common share - basic

$                 2.53

$                 1.45

Weighted average common shares outstanding - basic

41,131

45,557

Earnings per common share - diluted

$                 2.39

$                 1.38

Weighted average common shares outstanding - diluted

43,473

47,664

(1) These amounts are revised based upon our completion of  a re-examination of our historical practices regarding our accounting for compensation expense related to our Senior Managing Director Incentive Compensation Program and related agreements.  In connection with this evaluation, we concluded that we had reported immaterial errors in prior period financial statements.  Further information related to these immaterial errors can be found in the Current Report on Form 8-K as filed by the Company with the Securities and Exchange Commission on November 2, 2011.  This press release should be read in conjunction with such previously filed Form 8-K.  The impact of the correction of these errors resulted in a decrease in net income of $5.9 million and a decrease in basic and fully-diluted earnings per share of $0.13 for the year ended December 31, 2010.

FTI CONSULTING, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED DECEMBER 31, 2011 AND 2010

(in thousands, except per share data)

(unaudited)

Three Months Ended

December 31,

2011

2010 ⁽¹⁾

Revenues

$           390,713

$           356,248

Operating expenses

Direct cost of revenues

233,005

207,959

Selling, general and administrative expense

92,932

88,222

Special charges

-

21,775

Acquisition-related contingent consideration

(9,004)

1,011

Amortization of other intangible assets

5,576

5,681

322,509

324,648

Operating income

68,204

31,600

Other income (expense)

Interest income and other

895

(317)

Interest expense

(14,495)

(15,663)

(13,600)

(15,980)

Income before income tax provision

54,604

15,620

Income tax provision

14,723

6,765

Net income

$             39,881

$               8,855

Earnings  per common share - basic

$                 1.00

$                 0.20

Weighted average common shares outstanding - basic

39,932

45,110

Earnings per common share - diluted

$                 0.93

$                 0.19

Weighted average common shares outstanding - diluted

42,857

46,972

(1) These amounts are revised based upon our completion of a re-examination of our historical practices regarding our accounting for compensation expense related to our Senior Managing Director Incentive Compensation Program and related agreements.  In connection with this evaluation, we concluded that we had reported immaterial errors in prior period financial statements.  Further information related to these immaterial errors can be found in the Current Report on Form 8-K as filed by the Company with the Securities and Exchange Commission on November 2, 2011.  This press release should be read in conjunction with such previously filed Form 8-K.  The impact of the correction of these errors resulted in a decrease in net income of $1.8 million and a decrease in basic and fully-diluted earnings per share of $0.04 for the three months ended December 31, 2010.

FTI CONSULTING, INC.

OPERATING RESULTS BY BUSINESS SEGMENT

(unaudited)

 Average  

Revenue-

Adjusted

Billable

Generating

Revenues

EBITDA ⁽¹⁾

Margin

Utilization

Rate

Headcount

 (in thousands)  

Three Months Ended December 31, 2011

Corporate Finance/Restructuring

$       108,352

$               38,466

35.5%

72%

$          438

692

Forensic and Litigation Consulting

89,981

16,134

17.9%

68%

$          325

852

Economic Consulting

89,580

16,394

18.3%

83%

$          472

433

Technology  ⁽²⁾

53,601

18,649

34.8%

N/M

N/M

290

Strategic Communications  ⁽²⁾

49,199

7,532

15.3%

N/M

N/M

582

$       390,713

97,175

24.9%

N/M

N/M

2,849

  Corporate

(16,320)

Adjusted EBITDA ⁽¹⁾

$               80,855

20.7%

Year Ended December 31, 2011

Corporate Finance/Restructuring

$       427,813

$               97,638

22.8%

70%

$          427

692

Forensic and Litigation Consulting

365,326

69,180

18.9%

69%

$          330

852

Economic Consulting

353,981

67,028

18.9%

85%

$          482

433

Technology  ⁽²⁾

218,738

77,011

35.2%

N/M

N/M

290

Strategic Communications  ⁽²⁾

200,910

26,801

13.3%

N/M

N/M

582

$    1,566,768

337,658

21.6%

N/M

N/M

2,849

  Corporate

(66,046)

Adjusted EBITDA ⁽¹⁾

$             271,612

17.3%

Three Months Ended December 31, 2010

Corporate Finance/Restructuring

$       113,220

$               26,774

23.6%

69%

$          425

725

Forensic and Litigation Consulting

81,023

18,234

22.5%

69%

$          322

806

Economic Consulting

64,384

12,799

19.9%

80%

$          472

297

Technology  ⁽²⁾

47,722

17,715

37.1%

N/M

N/M

257

Strategic Communications  ⁽²⁾

49,899

7,408

14.8%

N/M

N/M

583

$       356,248

82,930

23.3%

N/M

N/M

2,668

  Corporate

(16,678)

Adjusted EBITDA ^{(1) (3)}

$               66,252

18.6%

Year Ended December 31, 2010

Corporate Finance/Restructuring

$       451,518

$             108,634

24.1%

70%

$          435

725

Forensic and Litigation Consulting

324,478

75,920

23.4%

72%

$          324

806

Economic Consulting

255,660

49,481

19.4%

79%

$          472

297

Technology  ⁽²⁾

176,607

64,358

36.4%

N/M

N/M

257

Strategic Communications  ⁽²⁾

193,198

28,971

15.0%

N/M

N/M

583

$    1,401,461

327,364

23.4%

N/M

N/M

2,668

  Corporate

(62,597)

Adjusted EBITDA ^{(1) (3)}

$             264,767

18.9%

(1) We define Adjusted EBITDA as consolidated operating income before depreciation, amortization of intangible assets, and special charges.  Amounts presented in the Adjusted EBITDA column for each segment reflect the segments' respective Adjusted Segment EBITDA.  We define Adjusted Segment EBITDA as the segments' share of consolidated operating income before depreciation, amortization of intangible assets, and special charges.  Although Adjusted EBITDA and Adjusted Segment EBITDA are not measures of financial condition or performance determined in accordance with generally accepted accounting principles ("GAAP"), we believe that these measures can be a useful operating performance measure for evaluating our results of operations as compared from period to period and as compared to our competitors.  We use Adjusted EBITDA and Adjusted Segment EBITDA to evaluate and compare the operating performance of our segments.

Adjusted EBITDA and Adjusted Segment EBITDA are 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.  These non-GAAP measures 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 based on billable hours.  Accordingly, utilization and average billable rate metrics are not presented as they are not meaningful as a segment-wide metric.

(3) These amounts are revised based upon our completion of a re-examination of our historical practices regarding our accounting for compensation expense related to our Senior Managing Director Incentive Compensation Program and related agreements. In connection with this evaluation, we concluded that we had reported immaterial errors in prior period financial statements.  Further information related to these immaterial errors can be found in the Current Report on Form 8-K as filed by the Company with the Securities and Exchange Commission on November 2, 2011.  This press release should be read in conjunction with such previously filed Form 8-K.  

FTI CONSULTING, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands, except per share data)

(unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

2011

2010 ⁽²⁾

2011

2010 ⁽²⁾

Net income

$       39,881

$         8,855

$     103,903

$       65,984

Add backs:

Special charges, net of tax

-

15,553

9,285

32,733

Loss on early extinguishment of debt, net of tax

-

-

-

3,019

Adjusted net income ⁽¹⁾

$       39,881

$       24,408

$     113,188

$     101,736

Earnings per common share - diluted

$           0.93

$           0.19

$           2.39

$           1.38

Adjusted earnings per common share - diluted ⁽¹⁾

$           0.93

$           0.52

$           2.60

$           2.13

Weighted average number of common shares outstanding - diluted

42,857

46,972

43,473

47,664

(1)  We define adjusted net income and adjusted earnings per diluted share as net income and earnings per diluted share, respectively, excluding the impact of the special charges and loss on early extinguishment of debt that were incurred in that period, and their related income tax effects.

(2)  These amounts are revised based upon our completion of a re-examination of our historical practices regarding our accounting for compensation expense related to our Senior Managing Director Incentive Compensation Program and related agreements. In connection with this evaluation, we concluded that we had reported immaterial errors in prior period financial statements.  Further information related to these immaterial errors can be found in the Current Report on Form 8-K as filed by the Company with the Securities and Exchange Commission on November 2, 2011.  This press release should be read in conjunction with such previously filed Form 8-K.  

RECONCILIATION OF OPERATING INCOME AND NET INCOME TO ADJUSTED EBITDA

(in thousands)

(unaudited)

Three Months Ended December 31, 2011

Corporate Finance / Restructuring

Forensic and Litigation Consulting

Economic Consulting

Technology

Strategic Communi- cations

Corp HQ

Total

Net income

$             39,881

Interest income and other 

(895)

Interest expense 

14,495

Income tax provision 

14,723

Operating income

$               36,153

$             14,723

$             15,326

$             13,891

$               5,615

$           (17,504)

$             68,204

Depreciation and amortization

863

844

669

2,761

754

1,184

7,075

Amortization of other intangible assets

1,450

567

399

1,997

1,163

-

5,576

Special charges 

-

-

-

-

-

-

-

Adjusted EBITDA ⁽¹⁾

$               38,466

$             16,134

$             16,394

$             18,649

$               7,532

$           (16,320)

$             80,855

Year Ended December 31, 2011

Net income

$           103,903

Interest income and other

(6,304)

Interest expense

58,624

Income tax provision

49,224

Operating income

$               78,923

$             62,499

$             60,890

$             57,917

$             19,066

$           (73,848)

$           205,447

Depreciation and amortization

3,480

3,423

2,552

11,168

2,997

4,962

28,582

Amortization of other intangible assets

5,795

2,419

1,493

7,926

4,738

-

22,371

Special charges 

9,440

839

2,093

-

-

2,840

15,212

Adjusted EBITDA ⁽¹⁾

$               97,638

$             69,180

$             67,028

$             77,011

$             26,801

$           (66,046)

$           271,612

Three Months Ended December 31, 2010 ⁽²⁾

Net income

$               8,855

Interest income and other

317

Interest expense

15,663

Income tax provision

6,765

Operating income

$               20,364

$             17,192

$             12,101

$               2,025

$             (2,387)

$           (17,695)

$             31,600

Depreciation and amortization

940

853

549

2,872

774

1,208

7,196

Amortization of other intangible assets

1,593

723

296

1,832

1,237

-

5,681

Special charges 

3,877

(534)

(147)

10,986

7,784

(191)

21,775

Adjusted EBITDA ⁽¹⁾

$               26,774

$             18,234

$             12,799

$             17,715

$               7,408

$           (16,678)

$             66,252

Year Ended December 31, 2010 ⁽²⁾

Net income

$             65,984

Interest income and other 

(4,423)

Interest expense 

50,263

Loss on early extinguishment of debt

5,161

Income tax provision 

41,407

Operating income

$               88,499

$             64,121

$             39,180

$             27,569

$             11,602

$           (72,579)

$           158,392

Depreciation and amortization

3,736

3,325

2,418

13,397

3,226

5,232

31,334

Amortization of other intangible assets

6,463

3,653

1,216

7,479

5,099

-

23,910

Special charges 

9,936

4,821

6,667

15,913

9,044

4,750

51,131

Adjusted EBITDA ⁽¹⁾

$             108,634

$             75,920

$             49,481

$             64,358

$             28,971

$           (62,597)

$           264,767

(1) We define Adjusted EBITDA as consolidated operating income before depreciation, amortization of intangible assets, and special charges.  Amounts presented in the Adjusted EBITDA column for each segment reflect the segments' respective Adjusted Segment EBITDA.  We define Adjusted Segment EBITDA as the segments' share of consolidated operating income before depreciation, amortization of intangible assets, and special charges.  Although Adjusted EBITDA and Adjusted Segment EBITDA are not measures of financial condition or performance determined in accordance with generally accepted accounting principles ("GAAP"), we believe that these measures can be a useful operating performance measure for evaluating our results of operations as compared from period to period and as compared to our competitors.  We use Adjusted EBITDA and Adjusted Segment EBITDA to evaluate and compare the operating performance of our segments.

Adjusted EBITDA and Adjusted Segment EBITDA are 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.  These non-GAAP measures 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) These amounts are revised based upon our completion of a re-examination of our historical practices regarding our accounting for compensation expense related to our Senior Managing Director Incentive Compensation Program and related agreements.  In connection with this evaluation, we concluded that we had reported immaterial errors in prior period financial statements.  Further information related to these immaterial errors can be found in the Current Report on Form 8-K as filed by the Company with the Securities and Exchange Commission on November 2, 2011.  This press release should be read in conjunction with such previously filed Form 8-K.  

FTI CONSULTING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED December 31, 2011 and 2010

(in thousands)

Year Ended December 31,

2011

2010 ⁽¹⁾

Operating activities

Net income

$         103,903

$           65,984

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

28,582

31,334

Amortization and impairment of other intangible assets

22,371

47,666

Acquisition-related contingent consideration

(6,465)

1,190

Provision for doubtful accounts

12,586

10,720

Non-cash share-based compensation

37,352

35,246

Excess tax benefits from share-based compensation

(1,597)

(204)

Non-cash interest expense

8,439

12,670

Other

(471)

482

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

Accounts receivable, billed and unbilled

(94,178)

(18,881)

Notes receivable

(3,781)

(22,159)

Prepaid expenses and other assets

3,933

1,136

Accounts payable, accrued expenses and other

11,472

18,611

Income taxes

22,227

8,033

Accrued compensation

38,073

9,357

Billings in excess of services provided

(8,618)

(6,131)

                          Net cash provided by operating activities

173,828

195,054

Investing activities

Payments for acquisition of businesses, net of cash received

(62,346)

(63,086)

Purchases of property and equipment

(31,091)

(22,600)

Proceeds from sale or maturity of short-term investments

-

15,000

Other

(211)

(400)

                         Net cash used in investing activities

(93,648)

(71,086)

Financing activities

Borrowings under revolving line of credit

25,000

20,000

Payments of revolving line of credit

(25,000)

(20,000)

Payments of long-term debt and capital lease obligations

(6,994)

(209,747)

Issuance of debt securities

-

390,445

Payments of debt financing fees

-

(3,054)

Cash received for settlement of interest rate swaps

5,596

-

Purchase and retirement of common stock

(209,400)

(40,634)

Net issuance of common stock under equity compensation plans

11,109

6,196

Excess of tax benefits from share-based compensation

1,597

204

Other

(637)

442

                         Net cash (used in) provided by financing activities

(198,729)

143,852

Effect of exchange rate changes on cash and cash equivalents

(1,598)

(2,122)

Net (decrease) increase in cash and cash equivalents

(120,147)

265,698

Cash and cash equivalents, beginning of period

384,570

118,872

Cash and cash equivalents, end of period

$         264,423

$         384,570

(1) These amounts are revised based upon our completion of  a re-examination of our historical practices regarding our accounting for compensation expense related to our Senior Managing Director Incentive Compensation Program and related agreements.  In connection with this evaluation, we concluded that we had reported immaterial errors in prior period financial statements.  Further information related to these immaterial errors can be found in the Current Report on Form 8-K as filed by the Company with the Securities and Exchange Commission on November 2, 2011.  This press release should be read in conjunction with such previously filed Form 8-K.  

FTI CONSULTING, INC.

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2011 AND DECEMBER 31, 2010

(in thousands, except per share amounts)

December 31,

December 31,

2011

2010 ⁽¹⁾

Assets

Current assets

 Cash and cash equivalents

$           264,423

$           384,570

 Restricted cash

               10,213

               10,518

  Accounts receivable:

      Billed receivables

             335,758

             268,386

      Unbilled receivables

             173,440

             120,896

      Allowance for doubtful accounts and unbilled services

             (80,096)

             (63,205)

Accounts receivable, net

             429,102

             326,077

  Current portion of notes receivable

               26,687

               28,397

  Prepaid expenses and other current assets

               30,448

               28,174

  Income taxes receivable

               10,081

               13,246

Total current assets

             770,954

             790,982

Property and equipment, net of accumulated depreciation

               74,448

               73,238

Goodwill

          1,309,358

          1,269,447

Other intangible assets, net of amortization

             118,889

             134,970

Notes receivable, net of current portion

               81,748

               76,539

Other assets

               55,687

               60,312

Total assets

$        2,411,084

$        2,405,488

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable, accrued expenses and other

$           132,773

$           105,864

Accrued compensation

             180,366

             143,971

Current portion of long-term debt and capital lease obligations

             153,381

                 7,559

Billings in excess of services provided

               19,063

               27,836

Deferred income taxes

               12,254

                 1,072

Total current liabilities

             497,837

             286,302

Long-term debt and capital lease obligations, net of current portion

             643,579

             785,563

Deferred income taxes

               88,071

               85,956

Other liabilities

               75,395

               80,061

Total liabilities

          1,304,882

          1,237,882

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 — 41,484 (2011) and 46,144 (2010)

                    415

                    461

Additional paid-in capital

             383,977

             546,336

Retained earnings

             778,202

             674,299

Accumulated other comprehensive loss

             (56,392)

             (53,490)

Total stockholders' equity

          1,106,202

          1,167,606

Total liabilities and stockholders' equity

$        2,411,084

$        2,405,488

(1) These amounts are revised based upon our completion of  a re-examination of our historical practices regarding our accounting for compensation expense related to our Senior Managing Director Incentive Compensation Program and related agreements.  In connection with this evaluation, we concluded that we had reported immaterial errors in prior period financial statements.  Further information related to these immaterial errors can be found in the Current Report on Form 8-K as filed by the Company with the Securities and Exchange Commission on November 2, 2011.  This press release should be read in conjunction with such previously filed Form 8-K.