EX-99.1

EX-99.1 2 d769305dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

LOGO

FTI Consulting, Inc.

1101 K Street NW

Washington, D.C. 20005

+1.202.312.9100

Investor & Media Contact:

Mollie Hawkes

+1.617.747.1791

mollie.hawkes@fticonsulting.com

FTI Consulting Reports Second Quarter 2014 Results

• Second Quarter Revenues of $454.3 Million

• Second Quarter Adjusted EPS of $0.55; Fully Diluted EPS of $0.42

Washington, D.C., July 31, 2014 – 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, 2014.

For the quarter, revenues increased 9.6 percent to $454.3 million compared to $414.6 million in the prior year quarter. Fully diluted earnings per share (“EPS”) were $0.42 compared to $0.58 in the prior year quarter. EPS for the quarter included a special charge of $9.4 million related to the closure of the Company’s West Palm Beach office and the termination of a corporate plane lease which reduced EPS by $0.14. Adjusted EPS for the quarter were $0.55. Adjusted EBITDA for the quarter was $59.9 million or 13.2 percent of revenues compared to $66.0 million or 15.9 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 financial tables that accompany this press release.

Commenting on these results, Steven H. Gunby, President and Chief Executive Officer of FTI Consulting said, “Our second quarter results are in line with the focus and expectations we discussed at our June investor day, including a focus on organic growth and continued investment to build the business.”

Cash and Capital Allocation

Net cash provided by operating activities for the quarter was $33.7 million compared to $21.7 million in the prior year. Cash and cash equivalents were $94.4 million at June 30, 2014.

Second Quarter Segment Results

Corporate Finance/Restructuring

Revenues in the Corporate Finance/Restructuring segment increased 7.6 percent to $104.0 million in the quarter compared to $96.7 million in the prior year quarter. The increase in revenues was driven by higher demand for the segment’s North America non-distressed service offerings partially offset by continued softness in global bankruptcy engagements. Adjusted Segment EBITDA was $19.1 million or 18.4 percent of segment revenues compared to $17.8 million or 18.5 percent of segment revenues in the prior year quarter.

Economic Consulting

Revenues in the Economic Consulting segment increased 5.6 percent to $117.2 million in the quarter compared to $111.0 million in the prior year quarter. The increase in revenues was due to higher demand in the segment’s

Europe, Middle East and Africa (“EMEA”) antitrust litigation practice and higher demand and realized pricing in its EMEA international arbitration, regulatory and valuation practices. Adjusted Segment EBITDA was $18.1 million or 15.4 percent of segment revenues compared to $20.8 million or 18.7 percent of segment revenues in the prior year quarter. The decline in Adjusted Segment EBITDA margin was due largely to increased compensation expense related to extensions of employment contracts entered into late last year with key senior client-service professionals and lower utilization in the financial economics practice in North America.

Forensic and Litigation Consulting

Revenues in the Forensic and Litigation Consulting segment increased 13.3 percent to $119.1 million in the quarter compared to $105.1 million in the prior year quarter. Revenues increased organically by 10.4 percent due to increased demand related primarily to disputes and investigations in the segment’s North America and Asia Pacific regions. Adjusted Segment EBITDA was $22.3 million or 18.7 percent of segment revenues compared to $18.8 million or 17.9 percent of segment revenues in the prior year quarter. The increase in Adjusted Segment EBITDA margin was due to strong utilization and employee leverage in the aforementioned practices, which was partially offset by higher performance-based compensation costs as well as lower success fees and lower utilization as a result of increased hiring in our health solutions practice.

Technology

Revenues in the Technology segment increased 18.6 percent to $60.7 million in the quarter compared to $51.2 million in the prior year quarter. The increase in revenues was primarily due to increased demand related to large scale complex global investigations. Adjusted Segment EBITDA was $15.1 million or 24.9 percent of segment revenues compared to $16.9 million or 33.0 percent of segment revenues in the prior year quarter. The decrease in Adjusted Segment EBITDA margin was due to an increase in the mix of lower margin services and increased investment in business development activities.

Strategic Communications

Revenues in the Strategic Communications segment increased 5.4 percent to $53.3 million in the quarter compared to $50.6 million in the prior year quarter. Favorable foreign currency translation resulted in a revenues increase of 2.8 percent and the remaining growth resulted from increases in the number of retainer-based relationships in EMEA. Adjusted Segment EBITDA was $5.8 million or 10.9 percent of segment revenues compared to $5.2 million or 10.3 percent of segment revenues in the prior year quarter. The increase in Adjusted Segment EBITDA margin was due to the favorable foreign currency translation impact and higher margins on pass-through revenues.

Second Quarter 2014 Conference Call

FTI Consulting will host a conference call for analysts and investors to discuss second quarter 2014 financial results at 9:00 a.m. Eastern Time on July 31, 2014. 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 4,200 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 $1.65 billion in revenues during fiscal year 2013. More information can be found at www.fticonsulting.com.

Note: We define Segment Operating Income as a segment’s share of consolidated operating income. We define Total Segment Operating Income as the total of Segment Operating Income for all segments, which excludes unallocated corporate expenses. We use Segment Operating Income for the purpose of calculating Adjusted Segment EBITDA. We define Adjusted EBITDA as consolidated net income 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 losses 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 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 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 SIX MONTHS ENDED JUNE 30, 2014 AND 2013

(in thousands, except per share data)

(unaudited)


	Six Months Ended
	June 30,
	2014			2013

Revenues	$	879,876		$	821,791


Operating expenses
Direct cost of revenues		569,824			518,008
Selling, general and administrative expense		215,419			192,972
Special charges		9,364			427
Acquisition-related contingent consideration		(1,848	)		(6,721	)
Amortization of other intangible assets		8,068			11,517

		800,827			716,203


Operating income		79,049			105,588


Other income (expense)
Interest income and other		2,451			550
Interest expense		(25,563	)		(25,786	)

		(23,112	)		(25,236	)


Income before income tax provision		55,937			80,352

Income tax provision		20,573			33,186


Net income	$	35,364		$	47,166


Earnings per common share - basic	$	0.89		$	1.20


Earnings per common share - diluted	$	0.87		$	1.17


Weighted average common shares outstanding - basic		39,560			39,272


Weighted average common shares outstanding - diluted		40,604			40,456


Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax of $0	$	12,422		$	(27,223	)

Total other comprehensive income (loss), net of tax		12,422			(27,223	)

Comprehensive income	$	47,786		$	19,943

FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED JUNE 30, 2014 AND 2013

(in thousands, except per share data)

(unaudited)


	Three Months Ended
	June 30,
	2014			2013

Revenues	$	454,324		$	414,613


Operating expenses
Direct cost of revenues		295,549			259,528
Selling, general and administrative expense		107,032			96,325
Special charges		9,364			—
Acquisition-related contingent consideration		(5	)		(7,452	)
Amortization of other intangible assets		3,452			5,953

		415,392			354,354


Operating income		38,932			60,259


Other income (expense)
Interest income and other		1,448			(387	)
Interest expense		(12,908	)		(13,071	)

		(11,460	)		(13,458	)


Income before income tax provision		27,472			46,801

Income tax provision		10,225			23,315


Net income	$	17,247		$	23,486


Earnings per common share - basic	$	0.43		$	0.60


Earnings per common share - diluted	$	0.42		$	0.58


Weighted average common shares outstanding - basic		39,681			39,143


Weighted average common shares outstanding - diluted		40,750			40,293


Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax of $0	$	7,694		$	(11,714	)

Total other comprehensive income (loss), net of tax		7,694			(11,714	)

Comprehensive income	$	24,941		$	11,772

FTI CONSULTING, INC.

OPERATING RESULTS BY BUSINESS SEGMENT


	Revenues		Adjusted EBITDA ⁽¹⁾			Margin⁽¹⁾			Utilization			Average Billable Rate		Revenue- Generating Headcount
	(in thousands)													(at period end)

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 ⁽²⁾		60,720		15,104			24.9	%		N/M			N/M		328
Strategic Communications⁽²⁾		53,276		5,834			11.0	%		N/M			N/M		566

	$	454,324		80,385			17.7	%							3,191

Corporate				(20,482	)

Adjusted EBITDA⁽¹⁾			$	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 ⁽²⁾		120,783		32,452			26.9	%		N/M			N/M		328
Strategic Communications⁽²⁾		96,503		8,563			8.9	%		N/M			N/M		566

	$	879,876		150,937			17.2	%							3,191

Corporate				(39,838	)

Adjusted EBITDA⁽¹⁾			$	111,099			12.6	%


Three Months Ended June 30, 2013
Corporate Finance/Restructuring	$	96,714	$	17,848			18.5	%		62	%	$	416		718
Forensic and Litigation Consulting		105,120		18,752			17.8	%		67	%	$	307		969
Economic Consulting		111,014		20,803			18.7	%		82	%	$	505		499
Technology ⁽²⁾		51,196		16,888			33.0	%		N/M			N/M		285
Strategic Communications⁽²⁾		50,569		5,219			10.3	%		N/M			N/M		611

	$	414,613		79,510			19.2	%							3,082

Corporate				(13,498	)

Adjusted EBITDA⁽¹⁾			$	66,012			15.9	%


Six Months Ended June 30. 2013
Corporate Finance/Restructuring	$	195,794	$	36,933			18.9	%		66	%	$	412		718
Forensic and Litigation Consulting		205,844		31,563			15.3	%		65	%	$	314		969
Economic Consulting		226,208		46,997			20.8	%		86	%	$	501		499
Technology ⁽²⁾		97,900		30,604			31.3	%		N/M			N/M		285
Strategic Communications⁽²⁾		96,045		8,773			9.1	%		N/M			N/M		611

	$	821,791		154,870			18.8	%							3,082

Corporate				(29,532	)

Adjusted EBITDA⁽¹⁾			$	125,338			15.3	%

⁽¹⁾

We define Adjusted EBITDA as consolidated net income 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 losses on early extinguishment of debt. Amounts presented in the Adjusted EBITDA column for each segment reflect the segments’ respective Adjusted Segment EBITDA. 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 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. 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. Margin is equal to Adjusted Segment EBITDA divided by the respective Segment Revenues. These non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, the information contained in our Condensed Consolidated Statements of Comprehensive Income. See also our reconciliation of GAAP to 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.

FTI CONSULTING, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

FOR THE THREE AND SIX MONTHS ENDED JUNE, 2014 AND 2013

(in thousands, except per share data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013

Net income	$	17,247		$	23,486		$	35,364		$	47,166
Add back:
Special charges, net of tax effect ⁽¹⁾		5,523			—			5,523			253
Remeasurement of acquisition-related contingent consideration, net of tax effect ⁽²⁾		(164	)		(8,216	)		(1,514	)		(8,216	)

Adjusted Net Income ⁽³⁾	$	22,606		$	15,270		$	39,373		$	39,203


Earnings per common share – diluted	$	0.42		$	0.58		$	0.87		$	1.17
Add back:
Special charges, net of tax effect ⁽¹⁾		0.14			—			0.14			—
Remeasurement of acquisition-related contingent consideration, net of tax effect ⁽²⁾		(0.01	)		(0.20	)		(0.04	)		(0.20	)

Adjusted earnings per common share – diluted ⁽³⁾	$	0.55		$	0.38		$	0.97		$	0.97


Weighted average number of common shares outstanding – diluted		40,750			40,293			40,604			40,456

⁽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 were $3.8 million or a $0.09 impact on diluted earnings per share. The effective tax rate for the adjustments related to special charges for the six months ended June 30, 2013 was 40.7%. The tax expense related to the adjustment for special charges for the six months ended June 30, 2013 was $0.2 million with no impact on diluted earnings per share. In the three months ended June 30, 2013, 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, 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. The adjustments related to remeasurement of acquisition-related contingent consideration for the three and six months ended June 30, 2013 were not taxable.

⁽³⁾

We define Adjusted Net Income and Adjusted Earnings per Diluted Share as net income 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 Earnings per Diluted Share. Management uses Adjusted Earnings per Diluted Share 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.

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, 2014

Net income																	$	17,247
Interest income and other																		(1,448	)
Interest expense																		12,908
Income tax provision																		10,225

Operating income ⁽¹⁾	$	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 ⁽²⁾	$	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 ⁽¹⁾	$	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 ⁽²⁾	$	30,084		$	48,765		$	31,073		$	32,452	$	8,563	$	(39,838	)	$	111,099


	Corporate Finance / Restructuring			Forensic and Litigation Consulting			Economic Consulting			Technology		Strategic Communications		Corp HQ			Total
Three Months Ended June 30, 2013

Net income																	$	23,486
Interest income and other																		387
Interest expense																		13,071
Income tax provision																		23,315

Operating income ⁽¹⁾	$	21,436		$	19,177		$	19,530		$	11,292	$	3,394	$	(14,570	)	$	60,259
Depreciation and amortization		855			937			863			3,611		678		1,072			8,016
Amortization of other intangible assets		1,832			579			410			1,985		1,147		—			5,953
Remeasurement of acquisition-related contingent consideration		(6,275	)		(1,941	)		—			—		—		—			(8,216	)

Adjusted EBITDA ⁽²⁾	$	17,848		$	18,752		$	20,803		$	16,888	$	5,219	$	(13,498	)	$	66,012


Six Months Ended June 30, 2013

Net income																	$	47,166
Interest income and other																		(550	)
Interest expense																		25,786
Income tax provision																		33,186

Operating income ⁽¹⁾	$	38,135		$	30,279		$	44,525		$	19,374	$	5,121	$	(31,846	)	$	105,588
Depreciation and amortization		1,622			1,961			1,668			7,246		1,323		2,202			16,022
Amortization of other intangible assets		3,383			1,091			808			3,970		2,265		—			11,517
Special charges		68			173			(4	)		14		64		112			427
Remeasurement of acquisition-related contingent consideration		(6,275	)		(1,941	)		—			—		—		—			(8,216	)

Adjusted EBITDA ⁽²⁾	$	36,933		$	31,563		$	46,997		$	30,604	$	8,773	$	(29,532	)	$	125,338

⁽¹⁾

We define Segment Operating Income as a segment’s share of consolidated operating income. We define Total Segment Operating Income as the total of Segment Operating Income for all segments, which excludes unallocated corporate expenses. We use Segment Operating Income for the purpose of calculating Adjusted Segment EBITDA.

⁽²⁾

We define Adjusted EBITDA as consolidated net income 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 losses on early extinguishment of debt. Amounts presented in the Adjusted EBITDA row for each segment reflect the segments’ respective Adjusted Segment EBITDA. 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 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. 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. These non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, the information contained in our Condensed Consolidated Statements of Comprehensive Income. See also our reconciliation of GAAP to non-GAAP financial measures.

FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013

(in thousands)

(unaudited)


	Six Months Ended
	June 30,
	2014			2013
Operating activities
Net income	$	35,364		$	47,166

Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		18,138			16,022
Amortization of other intangible assets		8,068			11,517
Acquisition-related contingent consideration		(1,848	)		(6,721	)
Provision for doubtful accounts		8,671			7,478
Non-cash share-based compensation		15,194			17,046
Non-cash interest expense		1,348			1,349
Other		(368	)		(197	)
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable, billed and unbilled		(115,787	)		(58,827	)
Notes receivable		(22,559	)		(11,113	)
Prepaid expenses and other assets		8,860			(1,485	)
Accounts payable, accrued expenses and other		2,645			(1,354	)
Income taxes		4,832			14,740
Accrued compensation		(47,418	)		(10,467	)
Billings in excess of services provided		7,756			(5,785	)

Net cash (used in) provided by operating activities		(77,104	)		19,369


Investing activities
Payments for acquisition of businesses, net of cash received		(15,611	)		(40,512	)
Purchases of property and equipment		(21,778	)		(14,130	)
Other		(6	)		21

Net cash used in investing activities		(37,395	)		(54,621	)


Financing activities
Purchase and retirement of common stock		(4,367	)		(28,758	)
Net issuance of common stock under equity compensation plans		(2,692	)		1,245
Deposits		11,580			—
Other		(891	)		(616	)

Net cash used in financing activities		3,630			(28,129	)


Effect of exchange rate changes on cash and cash equivalents		(552	)		(850	)


Net decrease in cash and cash equivalents		(111,421	)		(64,231	)
Cash and cash equivalents, beginning of period		205,833			156,785

Cash and cash equivalents, end of period	$	94,412		$	92,554

FTI CONSULTING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AT JUNE 30, 2014 AND DECEMBER 31, 2013

(in thousands, except per share amounts)


	June 30,			December 31,
	2014			2013
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	94,412		$	205,833
Accounts receivable:
Billed receivables		423,058			352,411
Unbilled receivables		296,299			233,307
Allowance for doubtful accounts and unbilled services		(139,620	)		(109,273	)

Accounts receivable, net		579,737			476,445
Current portion of notes receivable		29,911			33,093
Prepaid expenses and other current assets		52,162			61,800
Current portion of deferred tax assets		29,046			26,690

Total current assets		785,268			803,861
Property and equipment, net of accumulated depreciation		83,495			79,007
Goodwill		1,225,403			1,218,733
Other intangible assets, net of amortization		86,270			97,148
Notes receivable, net of current portion		131,707			108,298
Other assets		61,097			57,900

Total assets	$	2,373,240		$	2,364,947


Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable, accrued expenses and other	$	96,005		$	126,886
Accrued compensation		169,923			222,738
Current portion of long-term debt		6,000			6,014
Billings in excess of services provided		36,946			28,692

Total current liabilities		308,874			384,330
Long-term debt, net of current portion		711,000			711,000
Deferred income taxes		149,130			137,697
Other liabilities		96,316			89,661

Total liabilities		1,265,320			1,322,688


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 — 40,936 (2014) and 40,526 (2013)		409			405
Additional paid-in capital		380,193			362,322
Retained earnings		765,985			730,621
Accumulated other comprehensive loss		(38,667	)		(51,089	)

Total stockholders’ equity		1,107,920			1,042,259

Total liabilities and stockholders’ equity	$	2,373,240		$	2,364,947