Revenues Up 45 Percent, EBITDA Up 27 Percent, Operating Income Up
19 Percent; EPS After Share-Based Compensation Up 24 Percent
BALTIMORE, May 1 /PRNewswire-FirstCall/ -- FTI Consulting, Inc.
(NYSE: FCN), a premier provider of problem-solving consulting and
technology services to major corporations, financial institutions
and law firms, today reported its financial results for the first
quarter ended March 31, 2006. FASB Statement No. 123 (R) For 2006,
FTI has begun to expense share-based compensation payments in
accordance with Financial Accounting Standards Board Statement
No.123(R). This Statement impacts, among other things, direct cost
of revenues, SG&A expense, operating income, EBITDA, income tax
provision, net income and earnings per share. Unless specifically
stated, all financial information in this release includes
share-based compensation expense for 2006 but does not include it
for prior periods. First quarter 2006 results include approximately
$3.1 million of pre-tax share-based compensation expense, $0.06 per
share after taxes, in accordance with the Statement, compared with
$2.7 million and $0.04, respectively, of pro forma share-based
compensation expense for the same period in the prior year as if
Statement No.123(R) had been adopted at the beginning of 2005.
First-Quarter Results For the first quarter of 2006, revenues rose
45.2 percent to $169.3 million compared with $116.6 million for the
first quarter of the prior year. Operating income increased 18.8
percent to $27.8 million from $23.4 million in the comparable
quarter last year. Earnings per diluted share in the first quarter
of 2006 were $0.31 compared to $0.25 for the first quarter of 2005,
a 24 percent increase, based on pro forma net income disclosed
under Financial Accounting Standards Board Statement No.123(R) for
the first quarter of 2005 which includes $0.04 per share of
share-based compensation expense. Earnings from operations before
interest, taxes, depreciation and amortization (EBITDA) rose 27.3
percent to $33.6 million, 19.8 percent of revenues (21.6 percent
prior to the effect of Statement 123(R)), compared with EBITDA of
$26.4 million, 22.6 percent of revenues, in the prior year. The
company's income tax rate, including the effect of share-based
compensation, was approximately 45.6 percent for the first quarter
of 2006 and approximately 42.5 percent before the effect of
share-based compensation. Commenting on the quarter, Jack Dunn,
FTI's president and chief executive officer, said, "This was a
tremendously powerful quarter for our company as we continued to
build upon the strong momentum we enjoyed in 2005. We experienced
solid, balanced performance across all of our markets. Both our
Forensic and Litigation and our Technology groups experienced
particularly strong quarters, benefiting from the continuing
emphasis on governance and integrity in corporate America and the
increasing use of technology as a critical investigatory and
litigation tool in that battle. In addition, our Compass
acquisition, which closed in the quarter, also reinforced our
leading position within the expanding economic consulting field,
which continues to benefit not only from M&A and litigation
activity, but from the worldwide concern with energy and the
increasing regulatory response to it. "Our ability to provide the
best in technology combined with the best in content investigation
and consulting services is helping us establish a market niche as
the firm that can provide "last mile" execution. In recognition of
the power of this market position, during the quarter we spent
approximately $2 million in Europe to increase our presence and
anticipate expanding into the Pacific Rim and South America in the
near future. This quarter is a great step forward in reaching our
goal of being a highly profitable, billion dollar company by the
end of 2009." Cash flow used in operations was $37.8 million in
2006 compared with $15.5 million in the first quarter of 2005. At
March 31, 2006, FTI had cash and cash equivalents of approximately
$47.6 million. Total long-term debt at March 31, 2006 was $350.0
million, and no amounts were outstanding under the company's
revolving credit agreement. The company repurchased 300,000 shares
of common stock during the first quarter at an average price of
$28.33 per share, for an aggregate of approximately $8.5 million.
In addition, the company made a payment of $6.8 million during the
first quarter in final settlement of its accelerated share
repurchase transaction entered into on July 28, 2005. At March 31,
2006, the remaining amount authorized under the company's current
share repurchase program was approximately $41.5 million. Total
headcount at March 31, 2006 was 1,448, and revenue-generating
headcount was 1,086, an increase of more than 80 professionals from
the end of 2005. Utilization of revenue-generating personnel was
approximately 83 percent for the first quarter, and average rate
per hour for the quarter was approximately $336. First-Quarter
Business Segment Results Forensic and Litigation Consulting
Revenues increased 31.8 percent to $50.1 million in the first
quarter from $38.0 million for the same period in the prior year.
Segment EBITDA was $13.0 million, 26.0 percent of revenues, an
increase of 16.1 percent from $11.2 million, 29.4 percent of
revenues, for the same period in the prior year. The prior year's
revenues and segment EBITDA have been adjusted to exclude the
company's new Technology Consulting segment. The Technology
Consulting segment, which is discussed separately below, began
reporting as a separate segment in 2006. Technology Consulting
Revenues increased 130.8 percent to $27.0 million in the first
quarter from $11.7 million in the same period in the prior year.
Segment EBITDA was $11.0 million, 40.7 percent of revenues, an
increase of 189.5 percent from $3.8 million, 32.2 percent of
revenues, for the same period in the prior year. Corporate
Finance/Restructuring Revenues were $54.1 million for the first
quarter of 2006, compared with $41.5 million for the first quarter
of 2005, an increase of 30.4 percent. Segment EBITDA was $14.3
million, 26.4 percent of revenues, an increase of 6.7 percent from
$13.4 million, 32.2 percent of revenues, for the same period in the
prior year. Economic Consulting Revenues were $38.1 million in the
first quarter of 2006, including revenues earned from the
previously announced acquisition of Competition Policy Associates,
Inc. (COMPASS) at the beginning of 2006, increasing 50.0 percent
from $25.4 million in the first quarter of 2005. Segment EBITDA was
$8.7 million, 22.9 percent of revenues, an increase of 50.0 percent
from $5.8 million, 22.8 percent of revenues, for the same period in
the prior year. Outlook for 2006 Based on results for the first
quarter of 2006 and market conditions, FTI reaffirms its previously
provided outlook for 2006, adjusted for its estimate of the impact
of share-based compensation. Revenues are anticipated to range from
$616.0 million to $640.0 million, and earnings per diluted share
are anticipated to range from $1.24 to $1.33, including the impact
of expensing stock options in accordance with FASB Statement
No.123(R). FTI presently anticipates pre-tax share-based
compensation of approximately $12.0-$13.0 million, approximately
$0.21-$0.22, or 14%, per diluted share for 2006, although the
anticipated amounts can not be predicted with certainty because
they will depend on the levels and timing of share-based
compensation that may be issued in connection with the company's
hiring, performance evaluation and retention programs and potential
acquisitions, as well as the price of the company's stock. For
comparative purposes, earnings per diluted share for 2005 on a pro
forma basis would have been reduced by approximately $0.18 per
share, or approximately 14%, if 123(R) had been adopted at the
beginning of 2005. EBITDA, including the expensing of stock
options, is expected to range from $135.0 million to $141.0
million. Cash flow from operations is expected to range between $85
million and $90 million. Average bill rates per hour in 2006 are
expected to range from $342 to $344 and utilization is anticipated
to range from approximately 79 percent to 80 percent (on a 2,032
hours base). Revenue-generating headcount at the end of 2006 is
anticipated to range from 1,127 to 1,155. The accompanying table
indicates anticipated results and applicable business metrics by
the company's four business segments for 2006 and is presented
including the estimated impact of expensing stock options.
First-Quarter Conference Call FTI will hold a conference call to
discuss first-quarter financial results at 11:00 a.m. Eastern time
on Tuesday, May 2, 2006. 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, http://www.fticonsulting.com/. About FTI
Consulting FTI is a premier provider of problem-solving consulting
and technology services to major corporations, financial
institutions and law firms when confronting critical issues that
shape their future and the future of their clients, such as
financial and operational improvement, major litigation, mergers
and acquisitions and regulatory issues. Strategically located in 25
of the major US cities, London and Melbourne, FTI's total workforce
of more than 1,400 employees includes numerous PhDs, MBAs, CPAs,
CIRAs and CFEs, who are committed to delivering the highest level
of service to clients. Note: Although EBITDA (excluding one-time
charges) is not a measure of financial condition or performance
determined in accordance with GAAP, FTI believes that it is a
useful operating performance measure for evaluating its results of
operations from period to period and as compared to its
competitors. EBITDA is a common alternative measure of operating
performance used by investors, financial analysts and rating
agencies to value and compare the financial performance of
companies in its industry. FTI uses EBITDA to evaluate and compare
the operating performance of its segments and it is one of the
primary measures used to determine employee bonuses. FTI also uses
EBITDA to value businesses it acquires or anticipates acquiring. A
reconciliation of EBITDA to net earnings and EBITDA is included in
the accompanying tables to this press release when reasonably
available. Information relating to stock option issuances and stock
prices during 2006 cannot be predicted and are not quantifiable
with certainty at this time. In addition, the impact of accounting
under FASB Statement 123R with respect to 2006 stock option
issuances is not determinable with certainty at this time. Such
information is not available without an unreasonable effort or
otherwise. EBITDA is not defined in the same manner by all
companies and may not be comparable to other similarly titled
measures of other companies unless the definition is the same. In
addition, because the calculation of EBITDA in the maintenance
covenants contained in FTI's credit facilities is based on
accounting policies in use, consistently applied from the time the
indebtedness was incurred, EBITDA as a supplemental financial
measure is also indicative of the company's capacity to service
debt and thereby provides additional useful information to
investors regarding the company's financial condition and results
of operations. EBITDA for purposes of those covenants is not
calculated in the same manner as it is calculated in the
accompanying table. This press release includes "forward-looking"
statements that involve uncertainties and risks. There can be no
assurance that actual results will not differ from the company's
expectations. The company has experienced fluctuating revenues,
operating income and cash flow in some prior periods and expects
this may occur from time to time in the future. As a result of
these possible fluctuations, the company's actual results may
differ from our projections. Further, preliminary results are
subject to normal year-end adjustments. Other factors that could
cause such differences include pace and timing of additional
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 in the
company's filings with the Securities and Exchange Commission. We
are under no duty to update any of the forward-looking statements
to conform such statements to actual results or events and do not
intend to do so. FTI CONSULTING, INC. CONDENSED CONSOLIDATED
STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND
2005 (in thousands, except per share data) Three Months Ended March
31, March 31, 2006 2005 (unaudited) Revenues $169,264 $116,614
Direct cost of revenues 95,259 64,345 Selling, general and
administrative expense 43,226 28,153 Amortization of other
intangible assets 2,954 749 141,439 93,247 Operating income 27,825
23,367 Other income (expense) Interest and other expense, net
(4,962) (1,555) Litigation settlements (264) (304) Income from
operations before income tax provision 22,599 21,508 Income tax
provision 10,312 9,033 Net income $12,287 $12,475 Earnings per
common share - basic $0.31 $0.29 Weighted average common shares
outstanding - basic 39,326 42,319 Earnings per common share -
diluted $0.31 $0.29 Weighted average common shares outstanding -
diluted 40,243 42,741 Supplemental Financial Data Three Months
Ended March 31, March 31, 2006 2005 EBITDA Reconciliation: (in
thousands) EBITDA(1) $33,564 $26,413 Litigation settlements 264 304
Depreciation and other amortization (3,049) (2,601) Amortization of
other intangible assets (2,954) (749) Operating income 27,825
23,367 Litigation settlements (264) (304) Interest expense, net
(4,962) (1,555) Income tax (10,312) (9,033) Net Income $12,287
$12,475 FTI CONSULTING, INC. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005 (in
thousands) March 31, March 31, 2006 2005 Operating activities Net
income $12,287 $12,475 Adjustments to reconcile net income to net
cash provided by operating activities Depreciation and other
amortization 3,049 2,601 Amortization of other intangible assets
2,954 749 Provision for (recoveries of) doubtful accounts 2,816
(580) Non-cash stock-based compensation expense 3,713 451 Non-cash
interest and other 457 1,144 Changes in operating assets and
liabilities Accounts receivable, billed and unbilled (35,476)
(25,277) Prepaid expenses and other assets (10,834) (1,511)
Accounts payable, accrued expenses and other 3,121 187 Accrued
compensation (24,291) (8,372) Income taxes payable 3,039 2,753
Billings in excess of services provided 1,368 (129) Net cash used
in operating activities (37,797) (15,509) Investing activities
Payments for acquisition of businesses, including contingent
payments and acquisition costs (51,475) (20,146) Purchases of
property and equipment (3,237) (4,025) Proceeds from note
receivable due from purchasers of former subsidiary - 5,525 Change
in other assets 339 10 Net cash used in investing activities
(54,373) (18,636) Financing activities Purchase and retirement of
common stock (15,333) (7,707) Payments of long-term debt - (5,000)
Borrowings under revolving credit facility - 25,000 Payments of
revolving credit facility - (2,500) Issuance of common stock under
equity compensation plans 1,577 2,491 Income tax benefit from stock
option exercises 132 - Payments of debt financing fees, capital
lease obligations and other 51 (71) Net cash (used in) provided by
financing activities (13,573) 12,213 Net increase in cash and cash
equivalents (105,743) (21,932) Cash and cash equivalents, beginning
of period 153,383 25,704 Cash and cash equivalents, end of period
$47,640 $3,772 FTI CONSULTING, INC. OPERATING RESULTS BY BUSINESS
SEGMENT Average Billable Revenues EBITDA(1) Margin Utilization Rate
Headcount (in thousands) Three Months Ended March 31, 2006
Corporate Finance/ Restructuring $54,090 $14,260 26.4% 81% $394 333
Forensic and Litigation Consulting 50,113 13,013 26.0% 84% $291 336
Economic Consulting 38,076 8,705 22.9% 85% $373 219 Technology
26,985 10,954 40.6% 85% $264 198 $169,264 46,932 27.7% 83% $336
1,086 Corporate expenses (13,368) EBITDA(1) $33,564 19.8% Three
Months Ended March 31, 2005 Corporate Finance/ Restructuring
$41,494 $13,380 32.2% 83% $411 237 Forensic and Litigation
Consulting 38,042 11,174 29.4% 78% $285 296 Economic Consulting
25,424 5,803 22.8% 85% $382 150 Technology 11,654 3,751 32.2% 77%
$248 102 $116,614 34,108 29.2% 81% $341 785 Corporate expenses
(7,695) EBITDA(1) $26,413 22.6% FTI CONSULTING, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2006 AND DECEMBER 31,
2005 (in thousands, except per share amounts) March 31, December
31, 2006 2005 Assets Current assets Cash and cash equivalents
$47,640 $153,383 Accounts receivable Billed 105,906 87,947 Unbilled
78,184 56,871 Allowance for doubtful accounts and unbilled services
(18,876) (17,330) 165,214 127,488 Other current assets 21,771
17,264 Total current assets 234,625 298,135 Property and equipment,
net 29,299 29,302 Goodwill, net 639,188 576,612 Other intangible
assets, net 26,000 21,454 Other assets 42,988 33,961 Total assets
$972,100 $959,464 Liabilities and Stockholders' Equity Current
liabilities Accounts payable, accrued expenses and other $23,576
$21,762 Accrued compensation 48,392 72,688 Billings in excess of
services provided 11,845 10,477 Total current liabilities 83,813
104,927 Long-term debt, less current portion 347,350 348,431
Deferred income taxes, deferred rent and other liabilities 55,651
51,837 Stockholders' equity Preferred stock, $0.01 par value; 5,000
shares authorized, none outstanding - - Common stock, $0.01 par
value; 75,000 shares authorized; 39,872 shares issued and
outstanding in 2006 and 39,009 shares issued and outstanding in
2005 399 390 Additional paid-in capital 245,687 238,055 Unearned
compensation - (11,089) Retained earnings 239,200 226,913 Total
stockholders' equity 485,286 454,269 Total liabilities and
stockholders' equity $972,100 $959,464 (1) We define EBITDA
(earnings before net interest, taxes, depreciation and
amortization) as net income before income taxes, net interest
expense, depreciation and amortization which may not be similar to
EBITDA measures of other companies. EBITDA is not a measurement
under accounting principles generally accepted in the United States
and should be considered in addition to, but not as a substitute
for, the information contained in our statement of operations. We
believe that EBITDA is useful to investors because it is an
indicator of the strength and performance of our ongoing business
operations, including our ability to fund capital expenditures and
service debt. While depreciation and amortization are considered
operating costs under generally accepted accounting principles,
these expenses primarily represent the non-cash current period
allocation of costs associated with long-lived assets acquired or
constructed in prior periods. EBITDA is a common alternative
performance measure used by investors, analysts and credit rating
agencies to evaluate and compare the operating performance and
value of companies within our industry. FTI CONSULTING, INC.
ADJUSTED OUTLOOK RANGE FOR 2006 BY BUSINESS SEGMENT Average Revenue
Revenues EBITDA(1) Margin Utilization Rate Generating (in
thousands) (2) (2) Headcount Outlook Range for 2006 From ($1.24 per
share) Forensic and Litigation $179,000 $54,000 30.2% 76% $305 356
Technology Consulting(2) $71,000 23,000 32.4% 72% $287 167
Corporate Finance/ Restructuring $215,000 64,000 29.8% 82% $386 363
Economic Consulting $151,000 42,000 27.8% 80% $361 241 $616,000
183,000 29.7% 79% $344 1,127 Corporate expenses 48,000 7.8%
EBITDA(1) $135,000 21.9% To ($1.33 per share) Forensic and
Litigation $185,000 $56,000 30.3% 77% $302 365 Technology
Consulting(2) $78,000 26,000 33.3% 72% $287 172 Corporate Finance/
Restructuring $224,000 66,000 29.5% 83% $384 375 Economic
Consulting $153,000 43,000 28.1% 81% $360 243 $640,000 191,000
29.8% 80% $342 1,155 Corporate expenses 50,000 7.8% EBITDA(1)
$141,000 22.0% (1) We define EBITDA (earnings before net interest,
taxes, depreciation and amortization) as operating income before
depreciation and amortization which may not be similar to EBITDA
measures of other companies. EBITDA is not a measurement under
accounting principles generally accepted in the United States and
should be considered in addition to, but not as a substitute for,
the information contained in our statement of operations. We
believe that EBITDA is useful to investors because it is an
indicator of the strength and performance of our ongoing business
operations, including our ability to fund capital expenditures and
service debt. While depreciation and amortization are considered
operating costs under generally accepted accounting principles,
these expenses primarily represent the non-cash current period
allocation of costs associated with long-lived assets acquired or
constructed in prior periods. EBITDA is a common alternative
performance measure used by investors, analysts and credit rating
agencies to evaluate and compare the operating performance and
value of companies with our industry (2) Utilization and Average
Rate metrics do not apply to significant portions of the Technology
Consulting segment DATASOURCE: FTI Consulting, Inc. CONTACT: Jack
Dunn, President & CEO of FTI Consulting, +1-410-224-1483; or
Winnie Lerner or Jessica Liddell, both of Abernathy MacGregor Group
for FTI Consulting, Inc., +1-212-371-5999 Web site:
http://www.fticonsulting.com/
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