FTI Consulting, Inc. Reports First-Quarter Financial Results

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Falcon Hldgs.	LSE:FCN	London	Ordinary Share	GB0009353847	ORD 5P

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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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FCN Falcon Hldgs.