2 15
A N N U A L R E P O R T
2015: Still Work To Do, But
Making Real Progress…
Adjusted EPS(1)
increased 12%
year-over-year
Revenues grew
organically
by 10%(2)
cumulatively
over the past
two years
Total debt
decreased by
$211 million,
reducing
leverage from
3.38 to 2.43(3)
Net headcount(4)
increased 7%
year-over-year
— 98% was
below SMD
level
Authorized
a $50 million
stock repurchase
program
Revolving line of
credit increased
to $550 million
and maturity
date extended
to 2020
(1) Please refer to pages 3 through 8 of this annual report for the definitions of non-GAAP measures and the reconciliations of non-GAAP measures to GAAP measures
(2) Excluding foreign currency translation
(3) Leverage has been calculated by dividing the total debt balance as of December 31, 2015 and 2014 by Adjusted EBITDA for 2015 and 2014 respectively; please refer to pages 3
through 8 of this annual report for the definition and reconciliation of Adjusted EBITDA to the nearest applicable GAAP measure
(4) Excludes divestitures
2 • FTI Consulting 2015 Annual Report
Dear Fellow Stockholders,
2015 was a pivotal year — a year where the progress made by our teams
in changing our trajectory became visible in powerful ways.
We rebuilt our pipeline of talent, improving our leverage ratios and
growing net headcount, excluding divestitures, by seven percent this year.
The overwhelming majority of the growth, 98 percent, came from below
the Senior Managing Director level. We focused the headcount growth
and management attention on core areas where there is deep client need
and where we see ourselves as having a right to win. We also began to
identify adjacencies where our clients would benefit by our expansion.
We streamlined operations where we don’t have a right to win. And we
invested in our people, to allow them to develop into even more powerful
professionals for our clients and our business.
Steven H. Gunby
President & Chief Executive Officer
We have a long way to go to fully meet our aspirations, but it is clear that these efforts are moving us in
the right direction. Excluding the impact of foreign currency translation, our organic revenue growth of 10
percent cumulatively over the past two years was the best two-year organic growth rate we have achieved
in more than half a decade. And notwithstanding ups and downs in some areas of the business, on a
percentage basis we had the largest gain in adjusted earnings per share that this company has had
since 2009.
In 2016, we will continue to drive a multiplicity of change efforts. For example, we are going to focus our
energy and headcount growth where we have a right to win. We will advance our commercial excellence
efforts to strengthen our positions and relationships. We will use our cash and EBITDA investments in
ways that we believe will enhance stockholder returns.
As always, we will invest behind the passion and capabilities of our core client service professionals in
the ways they believe will best deliver value to our clients. We will do this with the objective of turning
FTI Consulting into a company with sustained growth and earnings potential — a company that is both
fabulous for professionals to work for and a great company for its clients and stockholders.
There is still much work to do, but we are on our way. I look forward to continuing this journey together.
Steven H. Gunby
President & Chief Executive Officer
of FTI Consulting, Inc.
FTI Consulting 2015 Annual Report • 1
Financial Highlights
2015 Revenues by Segment
7 Year Revenues (In Billions)
Strategic
Communications
10.7%
Technology
12.3%
Corporate
Finance &
Restructuring
24.8%
27.0%
25.2%
Forensic and
Litigation
Consulting
Economic
Consulting
$1.80
$1.60
$1.40
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
7
5
.
1
$
8
5
.
1
$
5
6
.
1
$
6
7
.
1
$
8
7
.
1
$
0
4
.
1
$
0
4
.
1
$
2009
2010
2011
2012
2013
2014
2015
2015 Adjusted Segment EBITDA(1)
7 Year Adjusted EBITDA (In Millions)(1)
Strategic
Communications
9.8%
Technology
13.8%
Corporate
Finance &
Restructuring
31.8%
22.6%
Forensic and
Litigation
Consulting
22.0%
Economic
Consulting
.
8
4
6
2
$
7
.
1
6
2
$
.
8
5
4
2
$
.
5
5
4
2
$
.
6
0
1
2
$
.
8
5
0
2
$
6
.
1
1
3
$
$300
$250
$200
$150
$100
$50
$0
2009
2010
2011
2012
2013
2014
2015
2015 Revenues by Region
7 Year Adjusted EPS(1)
North
America
73.1%
2.7%
Latin America
5.9%
Asia Pacific
18.3%
EMEA
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
.
3
6
2
$
.
7
3
2
$
3
1
.
2
$
7
1
.
2
$
9
0
2
$
.
4
8
.
1
$
4
6
.
1
$
2009
2010
2011
2012
2013
2014
2015
(1) Please refer to pages 3 through 8 of this annual report for the definitions of non-GAAP measures and the reconciliations of non-GAAP measures to GAAP measures
2 • FTI Consulting 2015 Annual Report
FTI Consulting, Inc. Use of
Non-GAAP Measures
The accompanying Annual Report of FTI Consulting, Inc. (collectively the “Company”, “we”, “our”, or “FTI Consulting”)
includes Adjusted Net Income, Adjusted Earnings per Diluted Share (“Adjusted EPS”), Adjusted EBITDA and Adjusted Seg-
ment EBITDA, which are not prepared in accordance with Accounting Principles Generally Accepted in the United States of
America (“GAAP”) and have not been audited or reviewed by our independent registered accounting firm.
We define Adjusted Net Income and 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 charg-
es 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 remeas-
urement of acquisition-related contingent consideration, special charges, goodwill impairment charges and losses on early
extinguishment of debt.
We define Segment Operating Income (Loss) as a segment’s share of consolidated operating income (loss). We define Total
Segment Operating Income (Loss) as the total of Segment Operating Income (Loss) for all segments, which excludes un-
allocated corporate expenses. We use Segment Operating Income (Loss) for the purpose of calculating Adjusted Segment
EBITDA (Loss). We define Adjusted EBITDA as consolidated net income (loss) before income tax provision, other non-op-
erating income (expense), depreciation, amortization of intangible assets, remeasurement of acquisition-related contin-
gent 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 (loss) before depreciation, amortization
of intangible assets, remeasurement of acquisition-related contingent consideration, special charges and goodwill impair-
ment charges. We define Total Adjusted Segment EBITDA as the total of Adjusted Segment EBITDA for all segments, which
excludes unallocated corporate expenses. We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of total
revenues. We define Adjusted Segment EBITDA Margin as Adjusted Segment EBITDA as a percentage of a segment’s share
of revenue. 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, includ-
ing underlying trends, by excluding the effects of remeasurement of acquisition-related contingent consideration, special
charges and goodwill impairment charges. In addition, EBITDA and Adjusted EBITDA are common alternative measures of
operating performance used by many of our competitors. They are 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.
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 (Loss).
Reconciliations of GAAP to non-GAAP financial measures are included in the following tables:
FTI Consulting 2015 Annual Report • 3
7 Year Adjusted EPS(1)
2015 – 2009 Reconciliation of Earnings Per Share to Adjusted Earnings Per Share
(in thousands, except per share data) (unaudited)
2015
2014
2013
2012
2011
2010
2009
Net income (loss)
$66,053
$58,807 ($10,594) ($36,986) $103,903
$65,984 $139,843
Add back:
Special charges, net of tax
Goodwill impairment charge
Loss on early extinguishment of debt,
net of tax
Remeasurement of acquisition-related
contingent consideration, net of taxes
–
–
11,881
9,637
23,267
19,115
9,285
32,733
–
–
83,752
110,387
–
2,910
–
–
–
3,019
(1,120)
(1,718)
(12,054)
(5,228)
(9,953)
–
–
–
–
–
Adjusted Net Income
$76,814
$66,726
$84,371
$90,198 $103,235
$101,736 $139,843
$1.58
$1.44
($0.27)
($0.92)
$2.39
$1.38
$2.63
–
–
0.28
0.24
–
–
0.59
2.14
0.47
2.74
–
0.07
–
–
0.21
0.69
(0.02)
(0.04)
(0.30)
(0.13)
(0.23)
–
–
(0.07)
(0.06)
–
–
0.06
–
–
–
–
–
–
–
$1.84
$1.64
$2.09
$2.17
$2.37
$2.13
$2.63
41,729
40,729
40,421
41,578
43,473
47,664
53,127
Earnings (loss) per common share —
diluted
Add back:
Special charges, net of tax
Goodwill impairment charge
Loss on early extinguishment of debt,
net of tax
Remeasurement of acquisition-related
contingent consideration, net of taxes
Impact of denominator for diluted ad-
justed earnings per common share
Adjusted earnings per common share
— diluted
Weighted average number of common
shares outstanding — diluted
4 • FTI Consulting 2015 Annual Report
Reconciliation of 2015 Net Income and Operating Income (Loss) To Adjusted EBITDA
Corporate
Finance &
Restructuring
Forensic and
Litigation
Consulting
Economic
Consulting
Technology
Strategic
Comm.
Unallocated
Corporate
(in thousands) (unaudited)
Year Ended December 31, 2015
Net income
Interest income and other
Interest expense
Loss on early extinguishment of
debt
Income tax provision
Total
$66,053
($3,232)
$42,768
$19,589
$39,333
Operating income (loss)
$85,207
$58,185
$57,912
$22,832
$21,723
($81,348)
$164,511
Depreciation and amortization
$2,835
$3,860
$3,562
$15,390
$2,070
$3,675
$31,392
Amortization of other intangible
assets
Remeasurement of acquisition-
related contingent consideration
$3,550
$2,222
$1,232
$788
$3,934
($1,491)
–
($376)
–
–
–
–
$11,726
($1,867)
Adjusted EBITDA
$90,101
$64,267
$62,330
$39,010
$27,727
($77,673)
$205,762
Reconciliation of 2014 Net Income and Operating Income (Loss) To Adjusted EBITDA
(in thousands) (unaudited)
Year Ended December 31, 2014
Net income
Interest income and other
Interest expense
Income tax provision
Corporate
Finance &
Restructuring
Forensic and
Litigation
Consulting
Economic
Consulting
Technology
Strategic
Comm.
Unallocated
Corporate
Total
$58,807
($4,670)
$50,685
$42,604
Operating income (loss)
$46,913
$83,180
$55,282
$46,906
$15,603 ($100,458)
$147,426
Depreciation and amortization
of intangible assets
Amortization of other intangible
assets
$3,568
$4,301
$4,068
$15,768
$2,562
$3,722
$33,989
$5,589
$3,613
$1,047
$852
$4,420
–
$15,521
Special charges
$84
$308
$12
$19
$3
$15,913
$16,339
Remeasurement of acquisition-
related contingent consideration
($662)
($934)
($1,127)
–
–
–
($2,723)
Adjusted EBITDA
$55,492
$90,468
$59,282
$63,545
$22,588
($80,823)
$210,552
FTI Consulting 2015 Annual Report • 5
Reconciliation of 2013 Net Income and Operating Income (Loss) To Adjusted EBITDA
(in thousands) (unaudited)
Year Ended December 31, 2013
Net loss
Interest income and other
Interest expense
Income tax provision
Corporate
Finance &
Restructuring
Forensic and
Litigation
Consulting
Economic
Consulting
Technology
Strategic
Comm.
Unallocated
Corporate
Total
($10,594)
($1,748)
$51,376
$42,405
Operating income (loss)
$58,594
$68,211
$86,714
$38,038
($72,129)
($97,989)
$81,439
Depreciation and amortization
of intangible assets
$9,929
$6,100
$5,479
$22,601
$7,048
$4,338
$55,495
Special charges
$10,274
$2,111
$11
$16
$66
$25,936
$38,414
Goodwill impairment charge
–
–
Remeasurement of acquisition-
related contingent consideration
($11,614)
($1,941)
–
–
–
–
$83,752
–
$83,752
–
–
($13,555)
Adjusted EBITDA
$67,183
$74,481
$92,204
$60,655
$18,737
($67,715)
$245,545
Reconciliation of 2012 Net Income and Operating Income (Loss) To Adjusted EBITDA
(in thousands) (unaudited)
Year Ended December 31, 2012
Net loss
Interest income and other
Interest expense
Income tax provision
Loss on early extinguishment of
debt
Corporate
Finance &
Restructuring
Forensic and
Litigation
Consulting
Economic
Consulting
Technology
Strategic
Comm.
Unallocated
Corporate
Total
($36,986)
($5,659)
$56,731
$40,100
$4,850
Operating income (loss)
$80,970
$45,809
$71,992
$33,642
($97,298)
($76,079)
$59,036
Depreciation and amortization
of intangible assets
Special charges
Goodwill impairment charge
Remeasurement of acquisition-
related contingent consideration
$8,835
$11,332
–
$6,487
$8,276
–
($5,222)
($6)
$4,478
$20,447
$991
$3,114
$7,218
$4,712
$4,546
$52,011
$1,132
$29,557
–
–
–
$110,387
–
$110,387
–
–
–
($5,228)
Adjusted EBITDA
$95,915
$60,566
$77,461
$57,203
$25,019
($70,401)
$245,763
6 • FTI Consulting 2015 Annual Report
Reconciliation of 2011 Net Income and Operating Income (Loss) To Adjusted EBITDA
(in thousands) (unaudited)
Year Ended December 31, 2011
Net income
Interest income and other
Interest expense
Income tax provision
Corporate
Finance &
Restructuring
Forensic and
Litigation
Consulting
Economic
Consulting
Technology
Strategic
Comm.
Unallocated
Corporate
Total
$103,903
($6,304)
$58,624
$49,224
Operating income (loss)
$66,591
$74,831
$60,890
$57,917
$19,066
($73,848)
$205,447
Depreciation and amortization
of intangible assets
Special charges
Remeasurement of acquisition-
related contingent consideration
$8,902
$9,440
$839
$2,093
$6,215
$4,045
$19,094
$7,735
$4,962
$50,953
–
–
–
–
$2,840
$15,212
–
($9,953)
($8,991)
($962)
–
Adjusted EBITDA
$75,942
$80,923
$67,028
$77,011
$26,801
($66,046)
$261,659
Reconciliation of 2010 Net Income and Operating Income (Loss) To Adjusted EBITDA
Corporate
Finance &
Restructuring
Forensic and
Litigation
Consulting
Economic
Consulting
Technology
Strategic
Comm.
Unallocated
Corporate
(in thousands) (unaudited)
Year Ended December 31, 2010
Net income
Interest income and other
Interest expense
Income tax provision
Loss on early extinguishment of
debt
Total
$65,984
($4,423)
$50,263
$41,407
$5,161
Operating income (loss)
$89,861
$62,759
$39,180
$27,569
$11,602
($72,579)
$158,392
Depreciation and amortization
of intangible assets
Special charges
$9,730
$8,561
$7,447
$3,634
$20,876
$8,325
$5,232
$55,244
$6,196
$6,667
$15,913
$9,044
$4,750
$51,131
Adjusted EBITDA
$108,152
$76,402
$49,481
$64,358
$28,971
($62,597)
$264,767
FTI Consulting 2015 Annual Report • 7
Reconciliation of 2009 Net Income and Operating Income (Loss) To Adjusted EBITDA
(in thousands) (unaudited)
Year Ended December 31, 2009
Net income
Interest income and other
Interest expense
Income tax provision
Corporate
Finance &
Restructuring
Forensic and
Litigation
Consulting
Economic
Consulting
Technology
Strategic
Comm.
Unallocated
Corporate
Total
$139,843
($8,408)
$44,923
$81,825
Operating income (loss)
$150,092
$83,290
$43,650
$37,410
$16,455
($72,714)
$258,183
Depreciation and amortization
of intangible assets
$9,794
$5,520
$3,917
$19,721
$8,486
$6,027
$53,465
Adjusted EBITDA
$159,886
$88,810
$47,567
$57,131
$24,941
($66,687)
$311,648
8 • FTI Consulting 2015 Annual Report
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
⌧ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR
(cid:134) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-14875
FTI CONSULTING, INC.
(Exact Name of Registrant as Specified in its Charter)
Maryland
(State or Other Jurisdiction of
Incorporation or Organization)
1101 K Street NW,
Washington D.C.
(Address of Principal Executive Offices)
52-1261113
(I.R.S. Employer
Identification No.)
20005
(Zip Code)
(202) 312-9100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $0.01 par value
Name of Each Exchange on which Registered
New York Stock Exchange
Securities Registered pursuant to Section 12(g) of the Act None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ⌧ No (cid:134)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:134) No ⌧
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes ⌧ No (cid:134)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). Yes ⌧ No (cid:134)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. (cid:134)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
Large Accelerated Filer ⌧
(cid:134)
Non-accelerated filer
(cid:134)
Accelerated filer
Smaller reporting company (cid:134)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:134) No ⌧
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant was 1.1 billion, based on the
closing sales price of the registrant’s common stock on June 30, 2015.
The number of shares of registrant’s common stock outstanding on February 19, 2016 was 41,234,314.
Portions of our definitive Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the end of our 2015
fiscal year are incorporated by reference into Part III of this Annual Report on Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
[THIS PAGE INTENTIONALLY LEFT BLANK]
FTI CONSULTING, INC. AND SUBSIDIARIES
Annual Report on Form 10-K
Fiscal Year Ended December 31, 2015
INDEX
PART I
Item 1.
Business .......................................................................................................................................................................
Item 1A. Risk Factors..................................................................................................................................................................
Item 1B. Unresolved Staff Comments ........................................................................................................................................
Item 2.
Properties .....................................................................................................................................................................
Item 3.
Legal Proceedings ........................................................................................................................................................
Item 4. Mine Safety Disclosures ..............................................................................................................................................
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities .................................................................................................................................................................
Item 6.
Selected Financial Data ................................................................................................................................................
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .......................................
Item 7A. Quantitative and Qualitative Disclosures About Market Risk .....................................................................................
Item 8.
Financial Statements and Supplementary Data ............................................................................................................
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .......................................
Item 9A. Controls and Procedures ..............................................................................................................................................
Item 9B. Other Information ........................................................................................................................................................
PART III
Item 10. Directors, Executive Officers and Corporate Governance ...........................................................................................
Item 11. Executive Compensation ..............................................................................................................................................
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .....................
Item 13. Certain Relationships and Related Transactions, and Director Independence .............................................................
Item 14.
Principal Accountant Fees and Services ......................................................................................................................
PART IV
Item 15. Exhibits and Financial Statement Schedule .................................................................................................................
Page
1
16
29
29
29
29
30
32
35
58
60
94
94
94
95
95
95
95
95
96
[THIS PAGE INTENTIONALLY LEFT BLANK]
FTI CONSULTING, INC.
PART I
Forward-Looking Information
This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange
Act”), that involve uncertainties and risks. Forward-looking statements include statements concerning our plans, objectives, goals,
strategies, future events, future revenues, future results and performance, future capital expenditures, expectations, plans or intentions
relating to acquisitions and other matters, business trends, and other information that is not historical. Forward-looking statements
often contain words such as anticipates, estimates, expects, goals, projects, plans, intends, believes, targets, forecasts, and variations
of such words or similar expressions. All forward-looking statements, including, without limitation, management’s estimates of
growth targets and operating trends, are based upon our historical performance and our current plans, estimates and expectations at the
time we make them and various assumptions. There can be no assurance that management’s expectations, beliefs, estimates, growth
targets, and projections will result or be achieved. Our actual financial results, performance or achievements could differ materially
from those expressed in, or implied by, any forward-looking statements. The inclusion of any forward-looking information should not
be regarded as a representation by us or any other person that the future plans, estimates, or expectations contemplated by us will be
achieved. Given these risks, uncertainties and other factors, you should not place undue reliance on any forward-looking statements.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking
statements contained in, or implied by, statements in this Annual Report. Important factors that could cause our actual results to differ
materially from the forward-looking statements we make in this Annual Report are set forth in this report, including under the heading
“Risk Factors” in Part I — Item 1A. All forward-looking statements attributable to us or persons acting on our behalf apply only as of
the date of this Annual Report and are expressly qualified in their entirety by the cautionary statements included herein. We undertake
no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances and do not
intend to do so.
ITEM 1.
BUSINESS
Unless otherwise indicated or required by the context, when we use the terms “Company,” “FTI Consulting,” “we,” “us,” and
“our” we mean FTI Consulting, Inc. a Maryland corporation and its consolidated subsidiaries.
Company Overview
General
We are a global business advisory firm dedicated to helping organizations protect and enhance their enterprise value in an
increasingly complex legal, regulatory and economic environment throughout the world. We operate through five reportable
segments:
•
•
•
•
•
Corporate Finance & Restructuring;
Forensic and Litigation Consulting;
Economic Consulting;
Technology; and
Strategic Communications.
We work closely with our clients to help them anticipate, understand, manage, and overcome complex business matters arising
from such factors as the economy, financial and credit markets, governmental regulation and legislation, and litigation. We assist
clients in addressing a broad range of business challenges, such as restructuring (including bankruptcy), capital market issues and
indebtedness, interim business management, forensic accounting and litigation matters, international arbitrations, mergers and
acquisitions (“M&A”), antitrust and competition matters, securities litigation, electronic discovery (“e-discovery”), management and
retrieval of electronically stored information (“ESI”), reputation management, and strategic communications. We also provide services
to help our clients take advantage of economic, regulatory, financial, and other business opportunities. Our experienced professionals
include many individuals who are widely recognized as experts in their respective fields. Our professionals include PhDs, MBAs, JDs,
CPAs, CPA-ABVs (who are CPAs accredited in business valuations), CPA-CFFs (who are CPAs certified in financial forensics),
CRAs (certified risk analysts), Certified Turnaround Professionals, Certified Insolvency and Reorganization Advisers, Certified Fraud
Examiners, ASAs (accredited senior appraisers), construction engineers, and former senior government officials. Our clients include
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Fortune 500 corporations, FTSE 100 companies, global banks, major law firms and local, state and national governments and agencies
globally. In addition, major United States (“U.S.”) and international law firms refer us or engage us on behalf of their clients. We
believe clients retain us because of our recognized expertise and capabilities in highly specialized areas, as well as our reputation for
successfully meeting our clients’ needs.
We have organized our business segments across four geographic regions consisting of (i) the North America region, which is
comprised of our 48 U.S. offices located in 19 states and three offices located in Calgary, Toronto and Vancouver, Canada; (ii) the
Latin America region, which is comprised of eight offices located in five countries — Argentina, Brazil, Colombia, Panama, and
Mexico; (iii) the Asia-Pacific region, which is comprised of 21 offices located in nine countries — Australia, China (including Hong
Kong), India, Indonesia, Japan, Korea, Singapore, the Cayman Islands, and the Virgin Islands (British); and (iv) the Europe, Middle
East and Africa (“EMEA”) region, which is comprised of 22 offices located in thirteen countries — Belgium, Denmark, France,
Germany, Ireland, Netherlands, Qatar, Russia, South Africa, Spain, Switzerland, United Arab Emirates (“UAE”), and the United
Kingdom (“UK”).
We derive the majority of our revenues from providing professional services to clients in the U.S. For the year ended
December 31, 2015, we derived approximately 28% of our consolidated revenues from the work of professionals who are assigned to
locations outside of the U.S. For the year ended December 31, 2015, approximately 56% of revenues of our Strategic Communications
segment, 30% of revenues of our Corporate Finance & Restructuring segment, 28% of revenues of our Economic Consulting segment,
21% of revenues of our Forensic and Litigation Consulting segment, and 15% of revenues of our Technology segment were derived
from the work of professionals who are assigned to locations outside of the U.S.
Summary Financial Information
The following table sets forth the percentage of consolidated revenues for the last three years contributed by each of our five
reportable segments, which are discussed below:
Reportable Segment
Corporate Finance & Restructuring .......................................
Forensic and Litigation Consulting .......................................
Economic Consulting ............................................................
Technology ............................................................................
Strategic Communications .....................................................
Total ................................................................................
Year Ended December 31,
2014
2013
2015
25%
27%
25%
12%
11%
100%
22 %
27 %
26 %
14 %
11 %
100 %
23%
26%
27%
12%
12%
100%
Our Reportable Segments
Corporate Finance & Restructuring
Our Corporate Finance & Restructuring segment focuses on the strategic, operational, financial and capital needs of businesses
around the world. We address the full spectrum of financial and transactional challenges facing our clients, which include companies,
boards of directors, private equity sponsors, banks, lenders, other financing sources and creditor groups, as well as other parties-in-
interest. We advise on a wide range of areas, including restructuring (including bankruptcy), interim management, financings, M&A
integration, valuations and tax issues as well as financial operational and performance improvement. We also provide expert witness
testimony, bankruptcy and insolvency litigation support and trustee and examiner services. We have particular expertise in the
agriculture, automotive, energy, power & products, health solutions, hospitality, gaming & leisure, mining, real estate &
infrastructure, retail & consumer products and telecom, media & technology industries.
In 2015, the offerings of our Corporate Finance & Restructuring segment included:
Business Transformation. Our Office of the CFO solutions are designed to preserve, create and sustain value and to help the
CFO team achieve rapid success. We collaborate with CFOs and their finance and accounting organization and use innovative
engagement tools to provide transformation services, manage risk, deliver business intelligence capabilities and prepare for and
execute events, all while building confidence, clarity, controls and consistency. Our services assist our clients to achieve sustainable
business improvement.
Our performance improvement service offerings help clients unlock profitability through, among other things, sales process
improvements, customer and market analyses, product and price optimization, human capital optimization, cost improvements and
reductions and working capital management. Our professionals have relevant skills across industries.
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Turnaround & Restructuring. We provide advisory services to companies, creditors and other stakeholders of companies
confronting liquidity problems, excessive leverage, underperformance, over-expansion or other business or financial issues. We help
our clients through out of court processes to right-size infrastructure, improve liquidity or solvency, improve cash-flow and working
capital management, sell non-core assets or business units, and recapitalize. We also perform due diligence reviews and financial
statement, cash flow and EBITDA analyses, prepare liquidity forecasts and financial projections, recommend credit alternatives, assist
in determining optimal capital structure, monitor portfolios of assets, assess collateral, provide crisis credit and securitized transaction
assistance, negotiate loan covenant waivers and guide complex debt restructurings.
We lead and manage the financial aspects of in-court restructuring processes by offering services that help our clients assess the
impact of a bankruptcy filing on their financial condition and operations. We provide critical services specific to court-supervised
insolvency and bankruptcy proceedings. We represent underperforming companies that are debtors-in-possession, creditors’
committees and lenders. With a focus on minimizing disruption and rebuilding the business after an exit from bankruptcy or
insolvency, we help clients accelerate a return to business as usual. We also work with creditors and other stakeholders to maximize
recoveries from companies that have filed for bankruptcy or insolvency. Our services include bankruptcy preparation and reporting
services, financial analysis in support of petitions and affiliated motions, strategies for monetizing a debtor’s assets, the discovery of
unidentified assets and liabilities, and expert witness testimony. We also provide trustee, examiner and receiver services to preserve
the value of assets and maximize recoveries.
Interim Management. Our professionals fill the void when client companies face leadership, financial or operational
challenges or turnover. Our experienced and credentialed professionals assume executive officer level roles, providing the leadership,
financial management, and operating and strategic decision making abilities to maintain momentum, stabilize financial position and
protect enterprise value, resolve regulatory compliance issues, build morale, establish credibility with stakeholders, provide critical
continuity, and lead transitions due to extraordinary events such as M&A, divestitures, changes of control, and carve-outs of
businesses from larger enterprises. Our professionals serve in the following interim executive and management roles: chief executive
officer, chief operating officer, chief financial officer, chief restructuring officer, controller and treasurer, and other senior positions
that report to them.
Transactions. We combine the disciplines of structured finance, investment banking, lender services, M&A, M&A integration
and valuation services, and Securities and Exchange Commission (“SEC”) and other regulatory experience to help our clients
maximize value and minimize risk in M&A and other high stakes transactions. The many services that we provide relating to business
and asset acquisitions and divestitures include: performing due diligence reviews, evaluating key value drivers and risk factors,
advising on the most advantageous tax and accounting structures for the transaction, and assessing quality of earnings, quality of
balance sheet and working capital requirements. We identify value enhancers and value issues. We provide comprehensive tax
consulting intended to maximize a client’s return on investment. We help structure post-acquisition earn-outs and price adjustment
mechanisms to allow a client to realize optimal value.
We advise clients regarding regulatory and SEC requirements and internal controls and compliance with the Sarbanes-Oxley
Act of 2002 (“SOX”). We help structure retention and exit strategies. We also perform services for clients involved in purchase price
disputes such as assessing the consistent application of U.S. generally accepted accounting principles (“GAAP”), earn-out issues,
working capital issues, settlement ranges and allocation of purchase price for tax purposes. We have the capacity to provide
investment banking services through FTI Capital Advisors, our Financial Industry Regulatory Authority registered subsidiary, which
focuses on identifying and executing value-added transactions for public and private middle market companies.
We provide integration planning and execution services for transactions ranging from full operational mergers to tuck-in
acquisitions, divestitures and carve-outs. We deploy teams to assist both buyers and sellers in planning and executing the operational
side of transactions to integrate all aspects of a business, plan for activities, and organize the combined company.
Valuation and Financial Advisory. We provide business valuation, intangible asset valuation, financial and strategic analyses,
forecasting and transaction support services, transaction opinions (such as fairness, solvency and collateral valuation opinions),
financial reporting and tax valuation, intellectual property valuation, and litigation services (including expert witness testimony)
covering a broad spectrum of industries and situations.
Dispute Advisory. We provide litigation consulting, including bankruptcy-related litigation and complex industry specific
commercial and regulatory disputes. We provide expert witness and trial services related to preferential payments, solvency and
fraudulent conveyances, substantive consolidation, claims litigation, plan feasibility, valuation disputes, and board fiduciary
assessments, in the bankruptcy arena. Our commercial and regulatory dispute services involve industry specific expertise relating to
industry standards and customary practices, economic damages, fact finding, and forensic review and analysis, primarily related to the
automotive, hospitality, gaming and leisure, real estate & infrastructure, retail & consumer products, structured finance, and telecom,
media & technology industries.
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Tax. We advise businesses on a variety of tax matters ranging from tax transaction support to best practice process
implementation and structuring. We provide advisory services relating to corporate, partnership, and real estate investment trust
(“REIT”) and real estate tax compliance and reporting, international taxation, debt restructuring, foreign, state and local taxes,
research and development, transfer pricing, tax valuation services, and value added taxation.
Our Corporate Finance & Restructuring segment operates through a global network of 51 offices in 14 countries. The net
number of revenue-generating professionals in our Corporate Finance & Restructuring segment increased by 132 from 706 at
December 31, 2014 to 838 at December 31, 2015.
Forensic and Litigation Consulting
Our Forensic and Litigation Consulting segment provides law firms, companies, government clients and other interested parties
with dispute advisory, investigations, forensic accounting, business intelligence assessments, data analytics and risk mitigation
services as well as interim management and performance improvement services for our health solutions practice clients. We advise
our clients in response to allegations involving the propriety of accounting and financial reporting, fraud, regulatory scrutiny, and
anticorruption. We assist our clients in all phases of government and regulatory investigations, inquiries and litigation, including pre-
filing assessments, discovery, trial preparation, expert testimony, investigations, and forensic accounting services. We have particular
expertise in the construction and environmental, insurance, pension, government and public contracts, and healthcare & life sciences
industries. We have the capacity to provide our full array of practice offerings across jurisdictional boundaries around the world.
In 2015, the offerings of our Forensic and Litigation Consulting segment included:
Forensic Accounting & Advisory. We combine investigative accounting and financial reporting skills with business and
practical experience to provide forensic accounting and other advisory services requested by boards of directors, audit committees,
special litigation committees and other entities. We identify, collect, analyze and interpret financial and accounting data and
information for accounting and financial reporting investigations. We analyze issues, identify options, and make recommendations to
respond to complex accounting, reporting and regulatory matters, threatened or pending litigation, regulatory actions and
whistleblower allegations. We employ investigative skills, establish document and database controls, prepare analytical models,
perform forensic accounting, present expert testimony and render opinions, and prepare written reports. We have particular expertise
providing consulting assistance and expert witness services to securities counsel and their clients regarding inquiries and
investigations initiated by the Divisions of Enforcement and Corporate Finance and Office of the Chief Accountant of the SEC. We
assist clients in responding to inquiries from the Public Company Accounting Oversight Board (the “PCAOB”).
Global Risk and Investigations Practice (“GRIP”). We conduct complex factual and regulatory investigations combining
teams of former federal prosecutors and regulators, law enforcement and intelligence officials, forensic accountants, industry
specialists and computer forensic specialists. Our capabilities and services include white collar defense intelligence and investigations,
complex commercial and financial investigations, business intelligence and investigative due diligence, political risk assessments,
business risk assessments, fraud and forensic accounting investigations, computer forensics and electronics evidence, specialized fact-
finding, domestic and international arbitration proceedings, asset searching and analysis, IP and branding protection, anti-money
laundering consulting, ethics and compliance program design, and transactional due diligence. We help our clients navigate anti-
bribery and anticorruption risk proactively (assessing and mitigating risk), and reactively (responding to allegations with
multidisciplinary investigation, forensic accounting and information preservation experts). We help clients institute the necessary
internal controls to comply with, and we investigate suspected violations of, the U.S. Foreign Corrupt Practices Act (the “FCPA”), and
other anticorruption laws, including the UK Anti-Bribery Act and the Organization for Economic Co-operation and Development (the
“OECD”). We also develop remediation and monitoring plans, including the negotiation of settlement agreements. Through our
services we uncover actionable intelligence and perform value-added analysis to help our clients and other decision-makers address
and mitigate risk, protect assets, remediate compliance deficiencies, make informed decisions and maximize opportunities.
Dispute Advisory. We provide early case assessment and pre-trial, in-trial and post-trial dispute advisory services, in judicial
and a broad range of alternative dispute resolution and regulatory forums, to help clients assess potential, threatened and pending
claims resulting from complex events and transactions, and accounting and professional malpractice allegations. We analyze records
and information, including electronic information, to locate assets, trace flows of funds, identify illegal or fraudulent activity,
reconstruct events from incomplete and/or corrupt data, uncover vital evidence, quantify damages and prepare for trial or settlement.
In many of our engagements we also act as an expert witness.
Intellectual Property (“IP”). Our IP team consists of professionals who are dedicated to IP matters. We provide litigation
support and damages quantification, tangible and intangible IP valuation, royalty compliance, licensing and technology and IP
management and commercialization services. Our experts also assist clients with resolving brand integrity issues, such as
counterfeiting, through brand development, marketing research, investigations, and protection. We perform economic and commercial
analyses necessary to support International Trade Commission Section 337 investigations used to prevent certain products from
entering the U.S.
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Trial Services. Our professionals work as a part of the team advising and supporting clients in large and highly complex civil
trials. Through the use of our proprietary information technology, we help control litigation costs, expedite the in-trial process, prepare
evidence, and help our clients to readily organize, access and present case-related data. Our proprietary TrialMax® software integrates
documents, photographs, animations, deposition videos, audios, and demonstrative graphics into a single trial preparation and
presentation tool. Our graphics consulting services select the most appropriate presentation formats to maximize impact and
memorability, and then create persuasive graphic presentations that support, clarify and emphasize the key themes of a case. We
provide illustrations and visual aids that help simplify complex technical subjects for jurors, through opening and closing statement
consulting, witness presentations, research presentations, exhibit plans and outlines, hardboards, scale models, storyboards, timelines
and technical and medical illustrations.
Financial & Enterprise Data Analytics (“FEDA”). We deliver strategic business solutions for clients requiring in-depth
identification, analysis and preservation of large, disparate sets of financial, operational and transactional data. We map relationships
among various information systems and geographies, mine for specific transactions, and uncover patterns that may signal fraudulent
activity or transactional irregularities. We assist with recovering assets and designing and implementing safeguards to minimize the
risk of recurrence. We produce detailed visualizations from complex data, making it easier to identify abnormalities and share
information. We also have the expertise to perform system and IT audits and due diligence.
Compliance, Monitoring & Receivership. Our expert industry professionals provide full-scale assessments and process
improvement and support services for compliance programs, as well as act as independent monitors or in support of monitors,
receivers and examiners. In matters involving the appointment of monitors, receivers or examiners by courts or regulators, our experts
possess the necessary independence to test and monitor compliance with and the continuing effectiveness of the terms of settlements
or reforms across many industries and professions.
Business Insurance Claims. We assist clients to prepare and submit comprehensive, logical and well-documented claims for
property and casualty, business interruption, errors and omissions, builders’ risks, political risks, product liability, data breaches, and
other types of insured risks, across a wide-variety of industries and U.S. and foreign jurisdictions. We serve as testifying experts on
insurance coverage litigation matters. We also assist our clients on pre-loss matters, such as business interruption values, insurable
values, and maximum probable loss studies.
Healthcare & Life Sciences. We work with a variety of healthcare and life science clients to discern innovative solutions that
optimize performance in the short term and prepare for future strategic, operational, financial and legal challenges. We provide a one-
company team of experts across the spectrum of healthcare disciplines. These professionals have specialized capabilities and a record
of success across hospital operations and restructuring, healthcare economics, and stakeholder engagement and communication.
Our Forensic Litigation and Consulting segment operates through a global network of 56 offices in 19 countries. The net
number of revenue-generating professionals in our Forensic Litigation and Consulting segment decreased by 23 from 1,154 at
December 31, 2014 to 1,131 at December 31, 2015.
Economic Consulting
Our Economic Consulting segment provides law firms, companies, government entities and other interested parties with
analysis of complex economic issues for use in legal, regulatory and arbitration proceedings, strategic decision making and public
policy debates in the U.S. and around the world. We deliver sophisticated economic analysis and modeling of issues arising in M&A
transactions, complex antitrust litigation, commercial disputes, international arbitrations, regulatory proceedings, IP disputes and a
wide range of financial litigation. We help clients analyze issues such as the economic impact of deregulation on a particular industry
and the amount of damages suffered by a business as a result of a particular event. We have deep industry experience in such areas as
aerospace and defense, energy, power & products, financial institutions, healthcare & life sciences, telecom, media & technology, and
transportation. Our professionals regularly provide expert testimony on damages, rates and prices, valuations (including valuations of
complex financial instruments), antitrust and competition regulation, business valuations, and public policy.
In 2015, the offerings of our Economic Consulting segment included:
Antitrust & Competition Economics. We provide financial, economic and econometric consulting services to assist clients in
public policy debates, regulatory proceedings and litigation. We apply our models to complex data in order to evaluate the likely
effects of transactions on prices, costs and competition. Our professionals are experts at analyzing and explaining the antitrust and
competition impact of diverse transactions and proceedings relating to M&A, price fixing, monopolization and abuse of a dominant
position, exclusionary conduct, bundling and tying, and predatory pricing. Our services include financial and economic analyses of
policy, regulatory and litigation matters. We provide expert testimony, testimony regarding class certifications, and quantification of
damages analyses for corporations, governments and public-sector entities in the U.S. and around the world.
5
Business Valuation. We help clients identify and understand the value of their businesses in contentious and uncontentious
situations. We provide business valuation, expert valuation, and expert testimony services relating to traditional commercial disputes
and other matters as diverse as transaction pricing and structuring, securities fraud, valuations for financial reporting, tax, regulatory
and stakeholder investment compliance, solvency issues, fraudulent transfers, post-acquisition M&A disputes and transactions and
disputes between shareholders. We assist our clients to make economic and investment decisions that significantly affect shareholder
value, economic returns, and capital allocation.
Intellectual Property. We help clients understand and maximize the value of their intangible business assets. We calculate
losses from IP infringement, apply econometrics to develop pricing structures for IP valuations and licensing, manage the purchase or
sale of IP assets, negotiate with tax authorities and determine IP-related losses in legal disputes and arbitrations. We provide IP-related
advice and expert opinions and testimony for commercial transactions, intergroup transfers, M&A, and negotiations with taxing
authorities, to a wide-range of industries.
International Arbitration. We help clients navigate each phase of the dispute resolution process. Our international arbitration
practice works with companies, governments and members of the international bar to provide independent advice and expert
testimony relating to business valuations and economic damages in a wide variety of commercial and treaty disputes before
international arbitration tribunals. Our services include evaluating claims, identifying and quantifying economic damages, and
identifying the best approaches to win positive outcomes.
Labor & Employment. We prepare economic and statistical analyses for clients facing disputes relating to wage and hour
issues, class-action, class certification, lost earnings and discrimination. Our experienced labor and employment team provide
statistical analyses of data and damage exposure, review and rebut expert reports, calculate the economic value of a claim, determine
if the purported class in labor and employment litigation meets legal requirements for certification, and provide expert testimony.
Public Policy. We advise clients regarding the impact of legislation and political considerations on industries and commercial
transactions. We perform financial and economic analyses of policy and regulatory matters and the effect of legislation, regulations
and political considerations on a wide-range of issues facing our clients around the world, such as the environment, taxation, and
regulations relating to global competitiveness. We provide comparative analyses of proposed policy alternatives, division of
responsibilities of federal and local regulators, the effects of regulations on risk sharing across constituencies and geographies, and
unintended consequences. Our services include strategic and regulatory planning, program evaluation, and forecasting.
Regulated Industries. We provide information to major network and regulated industry participants on the effects of
regulations on global business strategies. We provide advice on pricing, valuation, risk management, and strategic and tactical
challenges. We also advise clients on the transition of regulated industries to more competitive environments. Our services include
economic analysis, econometrics and modeling, due diligence, and expert testimony. We have extensive regulated industry expertise
in energy, power & products, financial institutions, telecom, media & technology, and transportation.
Financial Litigation & Risk Management. Our professionals apply economic theory and econometrics to advise clients and
testify on a variety of issues, including securities fraud, insider trading, initial public offering (“IPO”) allocations, market efficiency,
market manipulation, and forms of securities litigation. We have the expertise to assess and quantify risks inherent in global financial
markets. We also evaluate financial products such as derivatives, securitized products, collateralized obligations, special purpose
entities and structured financial instruments and transactions.
Center for Healthcare Economics and Policy. We support and facilitate the work of local governments, insurers, providers,
physicians, employers and community-based stakeholders to reduce the per capita cost of healthcare, improve the health of
populations, and enhance patient access to and experience of care.
Our Economic Consulting segment operates through a global network of 32 offices in 12 countries. The net number of revenue-
generating professionals in our Economic Consulting segment increased 25 from 574 at December 31, 2014 to 599 at December 31,
2015.
Technology
Our Technology segment is a leading provider of e-discovery and information governance software, and consulting services to
companies, law firms, courts and government agencies worldwide. These include internal investigations, regulatory and global
investigations such as under the FCPA and UK Bribery Act, litigation and joint defense, discovery and preparation, and antitrust and
competition investigations, including “second requests” under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. We provide a comprehensive suite of software and services to help clients locate, review and produce ESI, including e-mail,
computer files, voicemail, instant messaging, cloud and social media data as well as financial and transactional data.
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In 2015, the offerings of our Technology segment included:
Ringtail® E-Discovery Software. Our Ringtail® software product is highly scalable software designed to speed the legal review
process and help clients find relevant information quickly. Ringtail® features patented visual analytics, concept clustering, predictive
coding and other advanced features to accelerate document review. Ringtail® also processes and culls data, provides a broad range of
features for quick data review and coding, and gives users a comprehensive set of redaction and production tools. Ringtail® is
available on-premises, on-demand or in a Software as a Service (“SaaS”) deployment model. Our Ringtail Audio Discovery service
transforms audio files to reviewable, redactable and searchable files that can be analyzed and produced alongside other ESI.
E-Discovery Management. We plan, design and manage discovery approaches and projects to maximize responsiveness,
minimize costs and risks, and provide greater budget predictability. We offer several deployment options, from a do-it-yourself on-
premises model to a full service management review option. We offer clients the option to establish master repositories so that data
need only be collected and processed once. In the repository, the data can be accessed and used across multiple matters, enabling the
reuse and retention of valuable attorney work product and other information. In January 2016, our Technology segment announced
the launch of its new e-discovery product, RadianceTM, a visual analytics software platform that enables organizations to dynamically
investigate and understand their enterprise data.
Managed Document Review. We offer Acuity®, a managed review offering designed to optimize the speed of document
review and reduce the cost and complexity of e-discovery at a single, predictable price. Managed review is a service that allows
corporations and their law firms to improve the cost effectiveness of their e-discovery processes via outsourced review and analysis of
e-discovery data instead of performing it themselves. With Acuity®, we drive review efficiency by leveraging the power and expertise
of Ringtail® with rigorous budget oversight. Acuity® is different from many managed review offerings in that its workflows enable
collaboration between the corporation, law firm, and our Acuity® review teams.
Collections & Computer Forensics. We help organizations meet requirements for collecting, analyzing and producing data
from a variety of sources, including e-mail, voicemail, backup tapes, social media, the cloud, mobile devices, shared server files, and
databases, often on multiple continents. We provide both proactive and reactive support using expert services, methodologies and
tools that help companies and their legal advisers understand technology-dependent issues. We also regularly design, implement and
offer proprietary software to forensically collect, secure and analyze ESI from emerging data sources. We also offer services to
reconstruct data that has been deleted, misplaced or damaged.
Information Governance & Compliance. Our professionals consult on a wide-range of legal, regulatory and investigative
situations and our discovery project capabilities span a broad spectrum of size and complexity. Our professionals work as an extension
of our clients and their advisors to establish immediate solutions and best practices. Our professionals identify, forensically collect,
secure and analyze data from a variety of sources, oversee processing, review and production of data, manage the discovery lifecycle
from identification through production, advise outside and in-house counsels, prepare cost estimates to support excess burden claims,
develop repeatable and cross matter procedures for legal departments, conduct corporate system inventories to develop sustainable
data maps, and provide expert testimony to verify results and other matters.
Investigations. Our “FTI Investigate” offering combines our industry-leading software and expert forensic investigation teams
to help organizations quickly and defensibly manage investigations, whistleblower allegations, corporate due diligence, and financial
fraud, FCPA and other types of investigations. Investigate helps organizations quickly understand case facts, secure control of
sensitive data and defensibly preserve and review data in compliance with local data privacy laws.
Our Technology segment operates through a global network of 29 offices in six countries. The net number of revenue-
generating professionals in our Technology segment increased by 5 from 344 at December 31, 2014 to 349, excluding professionals
employed on an as-needed basis, at December 31, 2015.
Strategic Communications
We provide advice and consulting services relating to financial and corporate communications, investor relations, reputation
management, brand communications, public affairs, business consulting, digital design, and marketing. We believe our integrated
offerings, which include a broad scope of services, diverse industry coverage and global reach, is unique and distinguishes us from
other strategic communications consultancies.
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In 2015, the offerings of our Strategic Communications segment included:
M&A Crisis Communications & Special Situations. We specialize in advising clients on their communications to investors
and other financial audiences to help them achieve fair valuations in capital markets through ongoing investor relations advice,
support and strategic consulting, on issues that can impact enterprise value. We provide advice on investment positioning, corporate
governance and disclosure policy, strategic boardroom and investor issues, capital markets intelligence, research and analysis of
shareholder demographics, investor targeting, institutional investor and financial analyst meetings, investor perception audits,
financial news and calendar management, peer monitoring, and IPO communications. We provide advice on a wide range of M&A
scenarios, including transformative and bolt-on acquisitions, friendly and hostile takeovers, and activism defense. We also advise
clients in situations that present threats to their valuation and reputation with investors such as proxy contests, financial restatements,
shareholder activism, unplanned management changes, and other crises. Our communication services are designed to address the
concerns of all stakeholders.
Financial Communications. We assist companies in communicating pivotal events to investment analysts and cultivate a
growing shareholder base. We help companies articulate and present their entry into the equity markets, from articulating the strategic
rational and investment story to preparing the registration statement with the SEC to the development of the road show for the IPO.
We provide investor relations best practices programs and investor relations services and communications. We provide a wide-range
of research and analyses to our clients. We also help communicate leadership transitions.
Corporate Reputation. We both promote businesses and protect corporate reputations, creating solutions to our clients’
mission critical communications needs. Our services include crisis and issues management; reputational risk advisory; stakeholder
identification, mapping and engagement; messaging and organization positioning; thought leadership consultancy; corporate social
responsibility; strategic media relations; employee communications, engagement and change communications; media and presentation
coaching; qualitative and quantitative research; sponsorship consultancy, and launch and event management.
Public Affairs & Government Relations. We advise senior business leaders and leading organizations across the world on
how to manage relationships and communicate with governments, politicians and policy-makers. We advise governments on how to
attract investors by improving their regulatory and legal frameworks. Our integrated global team is based in leading political centers,
including Beijing, Brussels, London and Washington D.C. We combine public policy, economic consulting and capital markets
expertise with strategic communications and business advisory skills. We offer the full range of engagement programs, ranging from
crisis management of imminent legislation to longer-term shaping of the policy environment. We use a range of qualitative and
quantitative tools to establish our clients’ case in connection with government investigations, political and legislative engagement, and
business strategies, whether in terms of message refinement, policy mapping, reputation benchmarking, opinion polling, and speech
writing.
Employee Engagement & Change Communications. We help clients plan, design and implement internal communications
and programs to increase employee engagement and understanding. We partner with our clients to understand their unique business
environment and internal and external communications aspirations. Our services assist business leaders to communicate
transformative events, including new strategy and vision introductions, leadership positioning, M&A, operating model changes,
outsourcing or insourcing, workforce consolidations or reductions, and restructurings and reorganizations. Our services are designed
to align stakeholder insights with organizational needs.
Digital & Creative Communications. We collaborate with clients to conceive and produce integrated design, content and
digital strategies across all media and markets to advance business objectives with key stakeholders. Our approach includes defining
corporate and brand positioning, surveying the audience to gauge social sentiments and needs, demystifying complex business
operations and situations, selecting a program that resonates with the marketplace, building the communications plan, launching the
initiative for maximum visibility, and evaluating the success of the program. We provide customized solutions to reach target
audiences through digital channels. Our design and marketing teams specialize in corporate and brand identity development, website
development, advertising, interactive marketing campaigns, video and animation, brochures, fact sheets, testimonials and other
marketing materials, and annual report development. Our social media experts work with clients to identify and engage stakeholders
through the most appropriate and useful paid and non-paid social and digital media outlets.
Strategy Consulting & Research. We provide analyses to help solve complex business and communications problems. Our
dedicated research group works with professionals from across our practices and other disciplines, including public relations, investor
relations and public affairs, to conduct customized research to identify perceptions, trends and opportunities within key stakeholder
audiences. Our research services include reputation benchmarking, peer analysis, benchmarking and financial market valuations,
brand awareness studies and brand extension audits, including customer focus groups, shareholder analysis and investor targeting,
consumer trend analysis, public opinion polling, and policymaker perception audits.
8
Our Strategic Communications services are offered through a global network of 34 offices in 14 countries. The net number of
revenue-generating professionals in our Strategic Communications segment increased by 33 from 566 at December 31, 2014 to 599 at
December 31, 2015.
Our Industry Specializations
We employ professionals with expertise in a broad range of industries across our reportable segments, and our largest industry
practice groups generally provide both our core services plus a wider range of specialized consulting services and solutions that are
unique to their industries. These professionals provide a wide array of services that address the strategic, reputational, operational,
financial, regulatory, legal and other needs of specific industries, including, aerospace and defense; agriculture; automotive;
construction; energy, power & products; environmental; financial institutions; healthcare & life sciences; hospitality, gaming and
leisure; information technology; insurance; mining; public sector; real estate & infrastructure; retail & consumer products; telecom,
media & technology; and transportation. The major industries that we service, often spanning multiple business segments, include:
Construction. Our construction services team provides commercial management, risk-based advice, dispute resolution services,
and strategic communications counsel, on complex projects across all construction and engineering industries. Our professionals are
industry leaders who understand technical, business, regulatory and legal matters, and are seasoned in giving expert testimony, to
ensure that every aspect of their capital program or project is properly governed, well-executed and fully supported from beginning to
end.
Energy, Power & Products (“EPP”). Our EPP professionals provide a wide array of advisory services that address the
strategic, financial, restructuring, reputational, regulatory and legal needs of energy and utility clients involved in the production of
crude oil, natural gas, refined products, chemicals, coal, electric power, emerging technologies, and renewable energy. Our
professionals are involved in many of the largest financial and operational restructurings, regulatory, and litigation matters involving
energy and utility companies globally.
Environmental. The environmental services team offers a comprehensive suite of services aimed at helping organizations deal
with specific environmental issues or programmatic challenges. Our services focus on the resolution of complex contamination, toxic
tort, products liability and insurance disputes.
Financial Institutions. Our professionals assist banks and financial services clients of all sizes and types navigate through a
changing environment of financial services regulations and enforcement actions, litigation threats, and economic and competitive
challenges. We work with clients to manage risk, ensure compliance, resolve regulatory inquiries as they arise, and leverage their
assets to protect and enhance enterprise value. Our team is composed of highly respected CPAs, attorneys, economists, bankers,
forensic specialists, technology professionals, strategic communications experts, policymakers, and former bank and securities
regulators, all of whom have extensive financial services industry knowledge and experience.
Healthcare & Life Sciences. Our professionals work with a wide variety of healthcare and life sciences clients to discern
innovative solutions that optimize performance in the short term and prepare for future strategic, operational, financial and legal
challenges. We provide a one-company team of experts across the spectrum of healthcare disciplines. These professionals have
specialized capabilities and a record of success across hospital operations and restructuring, healthcare economics, regulatory
compliance, and stakeholder engagement and communications.
Insurance. Our professionals combine their business and technical acumen to help insurers, reinsurers, captives, brokers,
investors, regulators, corporations and their legal and business advisors address complex strategic and tactical issues. Our
professionals have a proven track record of effectively managing a broad range of large domestic and international engagements such
as high-profile, discreet investigations and disputes, complex restructuring and enterprise-wide transformations, and the application of
methodologies and analytics to innovate, improve performance, reduce risk and achieve compliance.
Real Estate & Infrastructure. Our professionals have the industry expertise and experience to help real estate owners, users,
investors and lenders better navigate the market’s complexities and manage its inherent risks. We represent leading public and private
real estate entities and stakeholders, including REITs, financial institutions, investment banks, opportunity funds, insurance
companies, hedge funds, pension advisors, owners and developers, offering services that help align strategy with business goals.
Retail & Consumer Products. We provide a full range of corporate finance, turnaround and restructuring expertise for
retailers. We have experience in developing strategies for retail and consumer product companies to address internal and external
challenges from inception through maturity. Our professionals have deep industry expertise in critical functional areas to help our
clients drive performance and implement plans that will have sustained results. Our Fast Track™ approach utilizes highly developed
frameworks and analytics to identify levers in the retail value equation that can be influenced quickly and serve to fund longer term
strategic initiatives that drive shareholder value.
9
Telecom, Media & Technology (“TMT”). Our TMT team provides strategic, financial and operational consulting with
industry specialists in wireline and wireless telecom, print and digital media, broadcast TV and radio, entertainment and content
production, and technology companies of all types including software, hardware, internet business models, and cloud based
technology. We provide targeted performance improvement strategies and implementation, commercial diligence and transaction
advisory, M&A integration, carveouts and divestitures planning, valuation, interim management, restructuring, and strategic
communications. We deliver original insights that help clients better understand company performance, customer behavior, digital
substitution, emerging technologies, and disruptive trends in our industries.
Our Business Drivers
Factors that drive demand for our business offerings include:
• M&A Activity. M&A activity is an important driver for all of our segments. We offer services for all phases of the M&A
process. Our services during the pre-transaction phase include government competition advice and pre-transaction
analysis. Our services during the negotiation phase include due diligence, negotiation and other transaction advisory
services, government competition and antitrust regulation services, expert advice, asset valuations, and financial advice.
We also offer post-M&A integration and transformation services.
•
•
•
•
•
Financial Markets. Financial market factors, including credit and financing availability, terms and conditions, the
willingness of financial institutions to provide debt modifications or relief, corporate debt levels, default rates, and capital
market transactions are significant drivers of demand for our business offerings, particularly our Corporate Finance &
Restructuring and Strategic Communications segments.
Regulatory Complexity, Public Scrutiny and Investigations. Increasingly complex global regulations and legislation,
greater scrutiny of corporate governance, instances of corporate malfeasance, and more stringent and complex reporting
requirements, drive demand for our business offerings. The need to understand and address the impact of regulation and
legislation, as well as the increasing costs of doing business, have prompted companies to focus on better assessing and
managing risks and opportunities. In addition, boards of directors, audit committees and independent board committees
have been increasingly tasked with conducting internal investigations of financial wrongdoing, regulatory non-
compliance, and other issues. These factors and laws such as SOX and the Dodd–Frank Wall Street Reform and
Consumer Protection Act, have contributed to the demand for independent consultants and experts to investigate and
provide analyses and to support the work of outside legal counsel, accountants and other advisors. These types of
investigations also increasingly demand the use of multiple disciplinary service offerings like ours, which combine skills
and expertise. These factors drive demand for various practices and services of all our segments.
Litigation and Disputes. Litigation and business disputes, the complexity of the issues presented, and the amount of
potential damages and penalties drive demand for the services offered by many of our segments, particularly our Forensic
and Litigation Consulting, Economic Consulting and Technology segments. Law firms and their clients as well as
government regulators and other interested third parties rely on independent outside resources to evaluate claims, facilitate
discovery, assess damages, provide expert reports and testimony, manage the pre-trial and in-trial process and effectively
present evidence.
Operational Challenges and Opportunities. Businesses facing challenges that require the evaluation and reevaluation of
strategy, risks and opportunities as a result of crisis driven situations, competition, regulation, innovation and other events
that arise in the course of business. These challenges include enterprise risk management, global expansion, competition
from established companies and emerging businesses and technologies, doing business in emerging markets, and new and
changing regulatory requirements and legislation. Management, companies and their boards need outside help to
recognize, understand and evaluate such events and effect change, which drives demand for independent expertise that can
combine general business acumen with the specialized technical expertise of our practice offerings and industry expertise.
These factors drive demand for various practices and services of all our segments.
Developing Markets. The growth of multinational firms and global consolidation can precipitate antitrust and competition
scrutiny and the spread internationally of issues and practices that historically have been more common in the U.S., such
as increased and complex litigation, corporate restructuring and bankruptcy activities, and antitrust and competition
scrutiny. Companies in the developing world and multinational companies can benefit from our expert advice to access
capital and business markets, comply with the regulatory and other requirements of multiple countries, and structure
M&A transactions, and conduct due diligence, which drives demand for the services of our Corporate Finance &
Restructuring , Economic Consulting, Technology and Strategic Communications segments.
10
Our Competitive Strengths
We compete primarily on the basis of the breadth of our services, the quality of our work, the prominence of our professionals,
our geographic reach, our reputation and performance record, our specific industry expertise, and our strong client relationships. We
believe our success is driven by a combination of long-standing competitive strengths, including:
•
Preeminent Practices and Professionals. We believe that our segments include some of the preeminent practices and
professionals in our industry today. During 2015, the awards and recognitions received by our segments include the
following:
•
•
•
•
•
•
Corporate Finance & Restructuring recognized with eight Turnaround Atlas Awards from the Global M&A
Network.
Forensic and Litigation Consulting recognized by The Recorder’s Best of 2015 Legal Products and Services and
The National Law Journal’s 2015 Best of Chicago in the following categories.
Economic Consulting’s Compass Lexecon practice named by Who’s Who Legal as 2015 Competition Economist
Firm of the Year and Janusz Ordover named Competition Economist Individual Expert of the Year.
Technology recognized by The New York Law Journal annual reader rankings as the #1 firm in the category of e-
discovery managed service provider.
Strategic Communications recognized by The Holmes Report with a gold SABRE Award in the Asia Pacific region.
Our Economic Consulting segment includes six former Deputy Attorney Generals of the Antitrust Division of the
Department of Justice, one former chief economist of the Federal Trade Commission, two former chief economists
of the Federal Communications Commission, and two former chief economists of the Securities and Exchange
Commission, and maintains access to numerous other high-profile academic consultants, including two Nobel Prize
winners.
•
•
•
•
Diversified Service Offerings. Our five reportable segments offer a diversified portfolio of service offerings within our
four geographic regions. Our broad range of services, the diversity of our revenue streams, and our global locations
distinguish us from our competitors and help us manage fluctuations due to market conditions in any one of our segments,
regions or industries. Our diversity helps to mitigate the impact of crises, events and changes in a particular practice,
industry or country.
Diversified Portfolio of Elite Clients. We provide services to a diverse group of clients, including global Fortune 500
companies, FTSE 100 companies, global financial institutions banks, and local, state and national governments and
agencies in the U.S. and other countries. Additionally, 92 of the top 100 global law firms, as ranked by The ABA Journal,
refer or engage us on behalf of multiple clients on multiple matters.
Strong Cash Flow. Our business model has several characteristics that produce consistent cash flows. Our strong cash
flow supports business operations, capital expenditures, research and development efforts in our Technology segment, and
our ability to service our indebtedness, and pursue our growth and other strategies.
Demand for Integrated Solutions and a Consultative Approach. Our breadth and depth of practice and service offerings
and industry expertise across the globe drive demand by businesses who seek our integrated services and consultative
approach covering different aspects of event driven occurrences, reputational issues, and transactions, across different
jurisdictions.
Our Business Strategy
We build client relationships based on the quality of our services, our reputation, and the recognition of our professionals. We
provide diverse complimentary services to meet our clients’ needs around the world. We emphasize client service and satisfaction. We
aim to build strong brand recognition. The following are key elements of our business strategy:
•
Leverage Our Practices, Relationships and Expertise. We work hard to maintain and strengthen our core practices and
competencies. We believe that our recognized expertise, client relationships, and the quality of our reputation, coupled
with our successful track record, size, and geographic diversity are the most critical elements in a decision to retain us.
Many of our professionals are recognized experts in their respective fields. By successfully leveraging our reputation,
experience, broad client base, and the expertise of our professionals, we expect to continue to obtain engagements from
new as well as existing clients.
11
•
•
•
•
Grow Organically. Our strategy is to grow organically by increasing headcount and market share to provide clients with a
complete suite of services across our segments, as well as the industries and geographic regions in which we operate. We
strive to engage in our markets competitively to produce better than average success.
Attract and Retain Highly Qualified Professionals. Our professionals are crucial to delivering our services to clients and
generating new business. As of December 31, 2015, we employed 3,516 revenue-generating professionals, many of whom
have established and widely recognized names in their respective service and industry specializations, and specialized
industry expertise. Through our substantial staff of highly qualified professionals, we can handle a large number of
complex assignments simultaneously. To attract and retain highly qualified professionals, we offer significant
compensation opportunities, including sign-on bonuses, forgivable loans, retention bonuses, incentive bonuses, and equity
compensation, along with a competitive benefits package and the chance to work on challenging engagements with other
highly skilled peers.
Enhance Profitability. We endeavor to manage costs, headcount, utilization, bill rates, and pricing for both time and
materials and alternative fee arrangements, to operate profitably, at segment and regional levels.
Acquisitions and Other Investments. We will consider future strategic or opportunistic acquisition opportunities on a
selective basis. We seek to integrate completed acquisitions and manage investments in a way that fosters organic growth,
expands our geographic presence, or complements our current practices, services and industry focuses. We will typically
structure our acquisitions to retain the services of key individuals from the acquired companies.
Our Employees
Our success depends on our ability to attract and retain our expert professional work force. Our professionals include PhDs,
MBAs, JDs, CPAs, CPA-ABVs (who are CPAs accredited in business valuations), CPA-CFFs (who are CPAs certified in financial
forensics), CRAs (certified risk analysts), Certified Turnaround Professionals, Certified Insolvency and Reorganization Advisers,
Certified Fraud Examiners, ASAs (accredited senior appraisers), construction engineers and former senior government officials. We
also engage independent contractors to supplement our professionals on client engagements as needed. As of December 31, 2015, we
employed 4,634 employees, of which 3,516 were revenue-generating professionals.
Employment Agreements
As of December 31, 2015, we had written employment arrangements with substantially all of our 410 Senior Managing Director
and equivalent personnel, (collectively, “SMD”s), 261 of which are employment agreements with fixed terms ending between 2016
and 2024, while the other 149 contracts are of an at-will nature with no fixed term. Of the 261 written agreements with a fixed
term, 253 provide that at the end of the initial term they automatically renew for successive year-to-year terms, unless either party
provides advance written notice of non-renewal prior to commencement of the renewal term.
The employment agreements with SMDs generally provide for fixed salary and participation in incentive payment programs
(which in some cases may be based on financial measures such as EBITDA), salary continuation benefits, accrued bonuses and other
benefits beyond the termination date if such professional leaves our employ for specified reasons prior to the expiration date of the
employment agreement. The length and amount of payments to be paid by us following the termination or resignation of a
professional varies depending on whether the person resigned with or without “good reason” or was terminated by us with or without
“cause,” retires or does not renew, died or became “disabled,” or was terminated as a result of a “change in control” (all such terms as
defined in such SMD’s employment agreement). All of our written employment arrangements with SMDs include covenants
providing for restrictions on the SMD’s ability to compete and solicit the employees of the Company following the end of their
employment.
Loan and Equity Compensation
Employees, consultants and professionals who join us in connection with acquisitions or as new hires may receive retention or
sign-on payments, on a case by case basis, through unsecured general recourse forgivable loans or other payments. We believe that the
loan arrangements enhance our ability to attract and retain professionals. Some or all of the principal amount and accrued interest of
the loans we make to employees and consultants will be forgiven by us, or their repayment will be funded by us through additional
bonus compensation, upon the passage of time, provided that the professional is an employee or consultant on the forgiveness date. In
addition, upon certain termination events, accrued interest and the outstanding principal balance may be forgiven, including upon
death, disability and, in some cases, retirement or termination by the employer without cause or the employee with good reason, or the
employee may be required to repay the unpaid accrued interest and outstanding principal balance upon certain other termination
events such as voluntary resignation, as applicable to the specific loan. The value of the forgivable loans we have made, in the
aggregate as well as on an individual basis, have been, and we anticipate will continue to be, significant. Our executive officers are not
eligible to receive loans and no loans have been made to them.
12
Our executive officers, other members of senior management, outside directors, as well as employees and independent service
providers, have received and will continue to receive equity awards, including stock option and share-based awards (including awards
in the form of restricted stock, performance-based restricted stock units, deferred restricted stock units, and cash-settled stock
appreciation rights and units), on a case-by-case basis, to the extent that shares are available under our stockholder approved equity
compensation plans. The value of such equity and cash-based awards, in the aggregate, as well as on an individual basis, have been
and are expected to continue to be significant.
Select SMDs may participate in other incentive compensation programs, such as our Senior Managing Director Incentive
Compensation Program in the U.S., UK and Canada (the “ICP”) or the Key Senior Managing Director Incentive Plan (the “KSIP”),
which provide for initial, and in the case of the ICP recurring, compensation. Employment arrangements under the ICP and KSIP are
discussed below.
Select SMD Compensation Opportunities
The ICP and the KSIP are supplemental incentive compensation arrangements open only to select SMDs who are recommended
by management and approved by the Compensation Committee of the Board of Directors of the Company. Effective January 2015, the
ICP was closed to new participants and was replaced with the KSIP. SMDs previously admitted to the ICP continue to be eligible to
receive annual recurring equity awards related to the deferral of a portion of each participant’s annual bonus award for the prior bonus
year.
The benefits under the KSIP include an initial cash payment in the form of an initial unsecured general recourse forgivable loan
and a restricted stock award, as well as future cash bonus opportunities, which are contingent upon the SMD entering into a new five-
year employment agreement and agreeing to defer payment of one-third his or her annual performance-based discretionary bonus over
a two-year term. ICP participants who enter the KSIP are required to forego future annual recurring equity awards under the ICP,
which are not replicated in the KSIP. KSIP awards typically cliff-vest, 50% at the end of four or six years, with the balance vesting at
the end of six or nine years, depending on the aggregate monetary value of the awards to such participant. All or portions of the
awards may vest or forfeit upon different termination events.
As of December 31, 2015, there were 74 SMDs participating in the ICP and 17 SMDs participating in the KSIP (of which 12
were former ICP participants).
For the past five years, we have made the following aggregate forgivable loans and equity awards to (i) new participants
entering the ICP, (ii) participants moving to higher participation levels within the ICP, (iii) participants receiving annual deferred
bonus, restricted stock bonus and additional equity awards pursuant to the annual bonus matching features of the ICP, and (iv)
participants in the KSIP:
Year
Unsecured General
Recourse Forgivable
Loan Amounts (1) Option Shares
Restricted Share-
Based Awards
Cash Settled Stock
Appreciation Rights
Cash Bonus
Opportunity
Awards
2011 ............................................................. $
2012 ............................................................. $
2013 ............................................................. $
2014 ............................................................. $
2015 ............................................................. $
8,700
9,900
6,200
4,800
6,500
(in thousands, except for share data)
385,815
467,075
373,656
445,999
65,065
242,508
245,470
240,269
328,507
253,012
63,000 $
2,834 $
44,370 $
16,748 $
2,777 $
—
—
—
—
6,500
(1)
In 2011, 2012, 2013, 2014, and 2015, we also funded $34.3 million, $51.5 million, $40.8 million, $47.9 million and $20.3
million, respectively, of unsecured forgivable loans and other loans to SMDs and other professionals outside of the ICP and
KSIP. Our corporate officers are not eligible to receive loans of any kind.
Marketing
We rely primarily on our senior professionals to identify and pursue business opportunities. Referrals from clients, law firms
and other intermediaries and our reputation from prior engagements are also key factors in securing new business. Our professionals
often learn about new business opportunities from their frequent contacts and close working relationships with clients. In marketing
our services, we emphasize our experience, the quality of our services and our professionals’ particular areas of expertise, as well as
our ability to quickly staff new and large engagements. While we aggressively seek new business opportunities, we maintain high
professional standards and carefully evaluate potential new client relationships and engagements before accepting them. We also
employ or contract with sales professionals who are tasked primarily with marketing the services of our Corporate Finance &
Restructuring, Forensic and Litigation Consulting, Strategic Communications and Technology segments.
13
Clients
During the year ended December 31, 2015, no single client accounted for more than 10% of our consolidated revenues. Our
Technology segment had one client that individually accounted for 19% of its total revenues for the year ended December 31, 2015. No other
reportable segment had a single client that accounted for more than 10% of its respective total revenues for the year ended December 31,
2015. The loss of this client by the Technology segment would not have a material adverse effect on FTI Consulting and our subsidiaries as a
whole but could have a material adverse effect on such segment if that business was not quickly replaced. In some cases, we may have
engagements through law firms that represent a larger percentage of our consolidated revenues or the revenues of a segment; however, each
law firm engages us on behalf of multiple clients.
Competition
We compete with different companies or businesses of companies depending on the particular nature of a proposed engagement
and the requested types of service(s) or the location of the client, or delivery of the service(s) or product(s). Our businesses are highly
competitive. Our competitors include large organizations, such as the global accounting firms and large management and financial
consulting companies, which offer a broad range of consulting services; investment banking firms; consulting and software
companies, which offer niche services that are the same or similar to services or products offered by one or more of our segments; and
small firms and independent contractors that provide one or more specialized services.
We compete primarily on the basis of the breadth of our services, the quality of our work, the prominence of our professionals,
our geographic reach, our reputation and performance record, our specific industry expertise, our ability to staff multiple significant
engagements across disciplines and industries in multiple locations, and our strong client relationships. Our Technology segment, and
to a lesser extent our other segments, may also compete on price, although the critical nature of the services provided by our Corporate
Finance & Restructuring, Forensic and Litigation Consulting and Economic Consulting segments typically makes price a secondary
consideration with respect to those segments. Since our businesses depend in a large part on professional relationships, there are low
barriers of entry for professionals, including our professionals, electing to work independently, start their own firms, or change
employers.
Our Corporate Finance & Restructuring segment primarily competes with specialty boutiques providing restructuring,
bankruptcy or M&A services, and to a lesser extent large investment banks and global accounting firms.
Our Forensic and Litigation Consulting segment primarily competes with other large consulting companies with service
offerings similar to ours.
Our Economic Consulting segment primarily competes with individually recognized economists, specialty boutiques, and large
consulting companies with service offerings similar to ours.
Our Technology segment primarily competes with consulting and/or software providers specializing in e-discovery, ESI and the
management of electronic content. Competitors may offer products and/or services intended to address one piece or more of those
areas. There continues to be significant consolidation of companies providing products and services similar to our Technology
segment, through M&A and other transactions, which may provide competitors access to greater financial and other resources than
those of the Company. This industry is subject to significant and rapid innovation. Larger competitors may be able to invest more in
research and development or react more quickly to new regulatory or legal requirements and other changes and may be able to
innovate more quickly and efficiently. Our Ringtail® software has been facing significant competition from competing software
products that are offered to end-users on a commodity basis through licensing as opposed to our historical integrated product and
consulting service offerings. In addition, companies compete aggressively against our Technology segment on the basis of price,
particularly with respect to hosting and e-discovery services.
Our Strategic Communications segment competes with large public relations firms and boutique M&A and crisis management
communications firms. Our Strategic Communications segment has been experiencing competitive downward fee pressure on higher
margin types of engagements and fewer or smaller retainer relationships.
Some service providers are larger than we are and, on certain engagements, may have an advantage over us with respect to one
or more competitive factors. Specialty boutiques or smaller local or regional firms, while not offering the range of services we
provide, may compete with us on the basis of geographic proximity, specialty services or pricing advantages.
14
Patents, Licenses and Trademarks
We consider Ringtail®, Acuity® and other technologies and software to be proprietary and confidential. We have also developed
other e-discovery integrated services using the Ringtail® brand, which we consider proprietary and confidential. We consider our
TrialMax® comprehensive trial preparation software to be proprietary and confidential. The Ringtail® and TrialMax® software and
technology are not protected by patents. We rely upon non-disclosure agreements and contractual agreements and internal controls,
including confidentiality and invention disclosure agreements with our employees and independent contractors, and license
agreements with third parties, to protect our proprietary information. Despite these safeguards, there is a risk that competitors may
obtain and seek to use our IP.
We hold 77 U.S. patents and have 25 U.S. patent applications pending, and there are no pending U.S. provisional patent
applications. We have filed 21 international patent applications under the Patent Cooperation Treaty all of which have entered the
National phase. We hold 21 non-U.S. issued patents in Canada and Europe, and four non-U.S. patent applications pending in Canada
and Europe. No additional patent applications have been issued or are pending in other countries. All of the above patents and patent
applications cover various aspects of software of our Technology segment.
We have developed marketing language, such as “Critical Thinking at the Critical Time” and logos and designs that we have
registered or taken steps to register and protect. In some cases, but not all, the trademarks have been registered in the U.S. and/or
foreign jurisdictions, or, in some cases, applications have been filed and are pending. We use the FTI, Palladium and Compass-
formative marks pursuant to co-existence, consent and/or settlement agreements with third parties. We believe we take the appropriate
steps to protect our trademarks and brands.
We also rely upon non-disclosure, license and other agreements to protect our products and services.
Corporate Information
We incorporated under the laws of the State of Maryland in 1982. We are a publicly traded company with common stock listed
on the New York Stock Exchange (“NYSE”), under the symbol “FCN.” Our executive offices are located at 1101 K Street NW,
Washington, D.C. 20005. Our telephone number is 202-312-9100. Our website is http://www.fticonsulting.com.
Financial Information on Industry Segments and Geographic Areas
We manage and report operating results through five reportable segments. We also administratively manage our business
through four geographic regions. See “Risk Factors — Risks Related to our Operations” for a discussion of risks related to
international operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 17
in the “Notes to Consolidated Financial Statements” for a discussion of revenues, net income and total assets by business segment and
revenues for the U.S., UK, and all other foreign countries as a group.
Available Information
We make available, free of charge, on or through our website at www.fticonsulting.com, our annual, quarterly and current
reports and any amendments to those reports, as well as our other filings with the SEC, as soon as reasonably practicable after
electronically filing them with the SEC. Information posted on our website is not part of this Annual Report on Form 10-K or any
other report filed with the SEC in satisfaction of the requirements of the Exchange Act. Copies of this Annual Report on Form 10-K as
well as other periodic reports filed with the SEC may also be requested at no charge from our Corporate Secretary at FTI Consulting,
Inc., 2 Hamill Road, North Building, Baltimore, Maryland 21210, telephone number 410-591-4800.
15
ITEM 1A. RISK FACTORS
All of the following risks could materially and adversely affect our business, financial condition and results of operations. In
addition to the risks discussed below and elsewhere in this Annual Report on Form 10-K, other risks and uncertainties not currently
known to us or that we currently consider immaterial could, in the future, materially and adversely affect our business, financial
condition, and financial results.
Risks Related to Our Reportable Segments
Changes in capital markets, M&A activity, and legal or regulatory requirements, general economic conditions, and monetary or
political disruptions, as well as other factors beyond our control, could reduce demand for our practice offerings or services, in
which case our revenues and profitability could decline.
Different factors outside of our control could affect demand for a segment’s practices and our services. These include:
•
•
•
fluctuations in U.S. and/or global economies, including economic recessions and the strength and rate of any general
economic recoveries;
the U.S. or global financial markets and the availability, costs and terms of credit and credit modifications;
the level of leverage incurred by countries or businesses;
• M&A activity;
•
•
•
•
•
over-expansion by businesses causing financial difficulties;
business and management crises;
new and complex laws and regulations or changes of enforcement of laws, rules and regulations;
other economic or geographic factors; and
general business conditions.
We are not able to predict the positive or negative effects that future events or changes to the U.S. or global economies will have
on our business or the business of any particular segment. Fluctuations, changes and disruptions in financial, credit, M&A and other
markets, political instability, and general business factors could impact various segment’s operations and could affect such operations
differently. Changes to factors described above, as well as other events, including by way of example, contractions of regional
economies, or the economy of a particular country, monetary systems, banking, real estate and retail or other industries; debt or credit
difficulties or defaults by businesses or countries; new or changes to legislation laws and regulations, including changes to the
bankruptcy and competition laws of the U.S. or other countries; tort reform; banking reform; a decline in government enforcement,
litigation or monetary damages or remedies that are sought; or political instability may have adverse effects on one or more of our
segments or service, practice or industry offering.
Our revenues, operating income and cash flows are likely to fluctuate.
We experience fluctuations in our revenues and cost structure and the resulting operating income and cash flows, and expect that
this will continue to occur in the future. We experience fluctuations in our annual and quarterly financial results, including revenues,
operating income, and earnings per share for reasons that include the number, size, timing and duration of client engagements; the
timing of revenue recognition under GAAP; utilization of revenue-generating professionals; the types of engagements we are working
on at different times; the geographic locations of our clients or the location where services are rendered; billing rates and other fee
arrangements; the length of billing and collection cycles; new hiring; business and asset acquisitions; and economic factors beyond our
control. Our profitability is likely to decline if we experience declines in the number, size or duration or delays to the timing of client
assignments and the utilization rates of our professionals; less profitable fee arrangements or discounting of fees; or increases in our
receivable collection cycles. Our results are subject to seasonal and similar factors, such as during the fourth quarter when our
professionals and our clients take vacations. We may also experience fluctuations in our operating income and related cash flows
because of increases in employee compensation, including changes to our incentive compensation structure and the timing of incentive
payments, which we generally pay during the first quarter of each year, or hiring or retention payments which are paid throughout the
year. Also, the timing of investments or future acquisitions and the cost of integrating them may cause fluctuations in our financial
results, including operating income and cash flows.
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If we do not effectively manage the utilization of our professionals or billable rates, our financial results could decline.
Our failure to manage the utilization of our professionals who bill on an hourly basis or maintain or increase the hourly rates we
charge our clients for our services, could result in adverse consequences, such as non- or lower-revenue-generating professionals,
increased employee turn-over, fixed compensation expenses in periods of declining revenues, the inability to appropriately staff
engagements, or special charges associated with reductions in staff or operations. Reductions in workforce or increases of billable
rates will not necessarily lead to savings. In such event, our financial results may decline or be adversely impacted. A number of
factors affect the utilization of our professionals. Some of these factors we cannot predict with certainty, including general economic
and financial market conditions; the number, type, size and timing of client engagements; the level of demand for our services;
appropriate professional staffing levels in light of changing client demands; utilization of professionals across segments and
geographic regions; competition and acquisitions.
Segments may enter into engagements which involve more complicated non-time and material arrangements, such as fixed-fees
and time and materials with caps. Failure to effectively manage professional hours and other aspects of alternative fee engagements
may result in the costs of providing such services exceeding the fees collected by the Company. Failure to successfully complete or
reach milestones with respect to contingent fee or success fee assignments may also lead to less revenue or the costs of providing
services under those types of arrangements exceeding the fees collected by the Company.
Factors that could negatively affect utilization in our Corporate Finance & Restructuring segment include the completion of
bankruptcy proceedings; the timing of the completion of other engagements; fewer and smaller restructuring (including bankruptcy)
cases; a recovering or strong economy; easy credit availability; low interest rates; and fewer, smaller and less complex M&A activity
or less capital markets activity. Factors that could negatively affect utilization in our Forensic and Litigation Consulting segment
include the settlement of litigation; fewer and less complex legal disputes; fewer class action suits; the timing of the completion of
engagements, less government regulation or fewer regulatory investigations and the timing of government investigations and
litigation. Factors that could adversely affect utilization in our Economic Consulting segment include fewer or smaller, and less
complex M&A activity; less capital markets activity or fewer complex transactions, a reduced number of regulatory filings and less
litigation, reduced antitrust and competition regulation or enforcement; fewer government investigations and proceedings; and the
timing of client utilization of our services. Our global expansion into or within locations where we are not well known or where
demand for our services is not well developed could also contribute to low or lower utilization rates in certain locations. Our
Technology segment derives revenue from consulting services, e-discovery services, software licensing fees, and the amount of data
hosted for a client. Factors that could adversely affect our Technology segment’s utilization include the settlement of litigation and a
decline in and less complex litigation proceedings and governmental investigations. Our Strategic Communications segment derives
some of its revenues from fixed fee and retainer based contracts. Factors that could adversely affect our Strategic Communications
segment’s utilization include a decline in M&A or capital markets activity; fewer event driven crises affecting businesses; fewer
public securities offerings and general economic decline that may reduce certain discretionary spending by clients.
Our segments may face risks of fee non-payment, clients may seek to renegotiate existing fees and contract arrangements, and
clients may not accept billable rate or price increases, which could result in loss of clients, fee write-offs, reduced revenues and less
profitable business.
Our segments are engaged by certain clients who are experiencing or anticipate experiencing financial distress or are facing
complex challenges that could result in financial liabilities. This may be true in light of general economic conditions; lingering effects
of past economic slowdowns or recession; or business or operating specific reasons. Such clients may not have sufficient funds to
continue operations or to pay for our services. We typically do not receive retainers before we begin performing services on a client’s
behalf in connection with a significant number of engagements in our segments. In the cases where we have received retainers, we
cannot assure the retainers will adequately cover our fees for the services we perform on behalf of these clients. With respect to
bankruptcy cases, bankruptcy courts have the discretion to require us to return all, or a portion of, our fees.
We have received requests to discount our fees or to negotiate lower rates for our services and to agree to contract terms relative
to the scope of services and other terms that may limit the size of an engagement or our ability to pass through costs. We consider
these requests on a case-by-case basis. We have been receiving these types of requests and negotiations more frequently and expect
this to continue in the future. In addition, our clients and prospective clients may not accept rate increases that we put into effect or
plan to implement in the future. Fee discounts, pressure to not increase or even decrease our rates, and less advantageous contract
terms, could result in the loss of clients, lower revenues and operating income, higher costs, and less profitable engagements. More
discounts or write-offs than we expect in any period would have a negative impact on our results of operations. There is no assurance
that significant client engagements will be renewed or replaced in a timely manner or at all, or that they will generate the same volume
of work or revenues, or be as profitable as past engagements.
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The clients of certain of our services prefer fixed and other alternative fee arrangements that place cost ceilings or other
limitations on our fee structure, or may shift more of our revenue generating potential to back end success fee or contingent fee
arrangements. With respect to such alternative fee arrangements, we may discount our rates initially, which could mean that the cost
of providing services exceeds the fees collected by the Company during all or a portion of the term of the engagement. In such cases,
the Company’s failure to manage the engagement efficiently or collect the success or performance fees could expose the Company to
a greater risk of loss on such engagement than other fee arrangements, or may cause variations in the Company’s revenues and
operating results due to the timing of achieving the performance-based criteria, if achieved at all. A segment’s ability to service clients
with these fee arrangements at a cost that does not directly correlate to time and materials may negatively impact or result in a loss of
the profitability of such engagement, adversely affecting the financial results of the segment. In addition, our Technology segment has
experienced competition from companies providing similar services and competitors who offer competing services at lower costs.
Our Technology segment faces certain risks, including (i) industry consolidation and a heightened competitive environment, (ii)
client concentration, (iii) downward pricing pressure, (iv) technology changes and obsolescence, (v) failure to protect client
information against cyber-attacks, and (vi) failure to protect IP used by the segment, which individually or together could cause
the financial results and prospects of this segment and the Company to decline.
Our Technology segment is facing significant competition from other consulting and/or software providers specializing in e-
discovery, ESI and the management of electronic content. There continues to be significant consolidation of companies providing
products and services similar to those offered by our Technology segment, which may provide competitors access to greater financial
and other resources than those of the Company. This industry is subject to significant and rapid innovation. Larger competitors may be
able to invest more in research and development, react more quickly to new regulatory or legal requirements and other changes, or
innovate more quickly and efficiently. Our Ringtail® software has been facing significant competition from competing software
products, which are offered on a commodity basis through licensing as opposed to our historical integrated product and consulting
service offering.
Our Technology segment relies on a few clients for a greater proportion of its revenues than our other segments. For the year
ended December 31, 2015, one client of our Technology segment accounted for approximately 19% of that segment’s annual
revenues.
Our Technology segment has been experiencing increasing competition from companies providing similar services at lower
prices, particularly with respect to hosting and e-discovery services.
The success of our Technology segment and its ability to compete depends significantly on our technology and other IP,
including our proprietary Ringtail® software, Acuity® e-discovery offering and other proprietary information and IP rights. The
software and products of our Technology segment are subject to rapid technological innovation. There is no assurance that we will
successfully develop new versions of our Ringtail® software or other products. Our software may not keep pace with necessary
changes and innovation. There is no assurance that new, innovative or improved software or products will be developed, compete
effectively with the software and technology developed and offered by competitors, be price competitive with other companies
providing similar software or products, or be accepted by our clients or the marketplace. If our Technology segment is unable to
develop and offer competitive software and products or is otherwise unable to capitalize on market opportunities, the impact could
adversely affect our operating margins and financial results.
Our reputation for providing secure information storage and maintaining the confidentiality of proprietary, confidential and
trade secret information is critical to the success of our Technology segment which hosts client information as a service. We routinely
face cyber-based attacks and attempts by hackers and similar unauthorized users to gain access to or corrupt our information
technology systems, which so far have been unsuccessful. Such attacks could disrupt our business operations, cause us to incur
unanticipated losses or expenses, and result in unauthorized disclosures of confidential or proprietary information. We expect to
continue to face such attempts. Although we seek to prevent, detect and investigate these network security incidents, and have taken
steps to mitigate the likelihood of network security breaches, there can be no assurance that attacks by unauthorized users will not be
attempted in the future or that our security measures will be effective.
We rely on a combination of copyrights, trademarks, patents, trade secrets, and confidentiality and other contractual provisions
to protect our assets. Our Ringtail® software and related documentation are protected principally under trade secret and copyright
laws, which afford only limited protection, and the laws of some foreign jurisdictions provide less protection for our proprietary rights
than the laws of the U.S. Certain aspects of our Technology segment software are protected by patents granted in the U.S. and foreign
jurisdictions. Unauthorized use and misuse of our IP by employees or third parties could have a material adverse effect on our
business, financial condition and results of operations. The available legal remedies for unauthorized or misuse of our IP may not
adequately compensate us for the damages caused by unauthorized use.
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If we (i) fail to compete effectively, including by offering our software and services at a competitive price,(ii) are unable to keep
pace with industry innovation and user requirements, (iii) are unable to replace clients or revenues as engagements end or are
cancelled or the scope of engagements are curtailed, or (iv) are unable to protect our clients’ or our own IP and proprietary
information, the financial results and profitability of this segment and the Company would be adversely affected. There is no
assurance that we can replace clients or the revenues from engagements, eliminate the costs associated with those engagements, find
other engagements to utilize our professionals, develop competitive products or services that will be accepted or preferred by users,
offer our products and services at competitive prices, or continue to maintain the confidentiality of our IP and the information of our
clients.
We may not manage our growth effectively and our profitability may suffer.
We experience fluctuations in growth of our different segments, practices or services, including periods of rapid or declining
growth. Periods of rapid expansion may strain our management team, or human resources and information systems. To manage
growth successfully, we may need to add qualified managers and employees and periodically update our operating, financial and other
systems, as well as our internal procedures and controls. We also must effectively motivate, train and manage a larger professional
staff. If we fail to add or retain qualified managers, employees and contractors when needed, estimate costs, or manage our growth
effectively, our business, financial results, and financial condition may suffer.
We cannot assure that we can successfully manage growth through acquisitions and the integration of the companies and assets
we acquire or that they will result in the financial, operational and other benefits that we anticipate. Some acquisitions may not be
immediately accretive to earnings and some expansion may result in significant expenditures.
In periods of declining growth, underutilized employees and contractors may result in expenses and costs being a greater
percentage of revenues. In such situations, we will have to weigh the benefits of decreasing our workforce or limiting our service
offerings and saving costs against the detriment that the Company could experience from losing valued professionals and their
industry expertise and clients.
Risks Related to Our Operations
Our international operations involve special risks.
We operate in 28 countries in addition to the U.S. For the year ended December 31, 2015, we derived approximately 28% of our
consolidated revenues from the work of professionals who are assigned to locations outside of the U.S. For the year ended December
31, 2015, approximately 56% of revenues of our Strategic Communications segment, 30% of revenues of our Corporate Finance &
Restructuring segment, 28% of revenues of our Economic Consulting segment, 21% of revenues of our Forensic and Litigation
Consulting segment, and 15% of revenues of our Technology segment were derived from the work of professionals who are assigned
to locations outside of the U.S.
Our international operations involve financial and business risks that differ from or are in addition to those faced by our U.S.
operations, including:
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cultural and language differences;
limited “brand” recognition;
different employment laws and rules, employment or service contracts, compensation methods, and social and cultural
factors that could result in employee turnover, lower utilization rates, higher costs, and cyclical fluctuations in utilization,
that could adversely affect financial and operating results;
foreign currency disruptions and currency fluctuations between the U.S. dollar and foreign currencies that could adversely
affect financial and operating results;
different legal and regulatory requirements and other barriers to conducting business;
greater difficulties in resolving the collection of receivables when legal proceedings are necessary;
greater difficulties in managing our non-U.S. operations, including client relationships, in certain locations;
disparate systems, policies, procedures, and processes;
failure to comply with the FCPA and anti-bribery laws of other jurisdictions;
higher operating costs;
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longer sales and/or collections cycles;
restrictions or adverse tax consequences for the repatriation of earnings;
potentially adverse tax consequences, such as trapped foreign losses and importation or withholding taxes;
different or less stable political and/or economic environments; and
civil disturbances or other catastrophic events that reduce business activity.
If we are not able to quickly adapt to or effectively manage our operations in geographic markets outside of the U.S., our
business prospects and results of operations could be negatively impacted.
Failure to comply with governmental, regulatory and legal requirements or with our company-wide Code of Ethics and Business
Conduct, Anti-Corruption Policy, Policy on Inside Information and Insider Trading, and other policies could lead to governmental
or legal proceedings that could expose us to significant liabilities and damage our reputation.
We have a robust Code of Ethics and Business Conduct, Anti-Corruption Policy, Policy on Inside Information and Insider
Trading, and other policies and procedures that are designed to educate and establish the standards of conduct that we expect from our
executive officers, outside directors, employees and independent consultants and contractors. These policies require strict compliance
with U.S. and local laws and regulations applicable to our business operations, including those laws and regulations prohibiting
improper payments to government officials. In addition, as a corporation whose securities are registered under the Securities Act and
publicly traded on the NYSE, our executive officers, outside directors, employees and independent contractors are required to comply
with the prohibitions against insider trading of our securities. In addition, we impose certain restrictions on the trading of securities of
our clients. Nonetheless, we cannot assure you that our policies, procedures and related training programs will ensure full compliance
with all applicable legal requirements. Illegal or improper conduct by our executive officers, directors, employees, independent
consultants or contractors, or others who are subject to our policies and procedures could damage our reputation in the U.S. and
internationally, or lead to litigation or governmental or regulatory proceedings in the U.S. or foreign jurisdictions, which could result
in civil or criminal penalties, including substantial monetary awards, fines and penalties, as well as disgorgement of profits.
We may be required to recognize goodwill impairment charges, which could materially affect our financial results.
We assess our goodwill, trade names and other intangible assets as well as our other long-lived assets as and when required by
GAAP to determine whether they are impaired and, if they are, to record appropriate impairment charges. Factors we consider include
significant under-performance relative to expected historical or projected future operating results and significant negative industry or
economic trends. In the fourth quarter of 2012 and the third quarter of 2013, we recorded impairment charges to the carrying value of
goodwill of our Strategic Communications segment of $110.4 million and $83.8 million, respectively. It is possible that we may be
required to record significant impairment charges in the future relating to that or other segments. Such charges have had and could
have an adverse impact on our results of operations.
Risks Related to Our People
Our failure to recruit and retain qualified professionals could negatively affect our financial results and our ability to staff client
engagements, maintain relationships with clients and drive future growth.
We deliver sophisticated professional services to our clients. To attract and retain clients, we need to demonstrate professional
acumen and build trust and strong relationships. Our professionals have highly specialized skills. They also develop strong bonds with
the clients they serve. Our continued success depends upon our ability to attract and retain professionals who have expertise,
reputations and client relationships critical to maintaining and developing our business. We face intense competition in recruiting and
retaining highly qualified professionals to drive our organic growth and support expansion of our services and geographic footprint.
We cannot assure that we will be able to attract or retain qualified professionals to maintain or expand our business. Moreover,
competition has caused our costs of retaining and hiring qualified professionals to increase, a trend which could continue and could
adversely affect our operating margins and financial results.
Despite fixed terms or renewal provisions, we could face retention issues during and at the end of the terms of those agreements
and large compensation expenses to secure extensions. There is no assurance we will enter into new or extend employment
agreements with SMDs. We monitor contract expirations carefully to commence dialogues with professionals regarding their
employment in advance of the actual contract expiration dates. Our goal is to renew employment agreements when advisable and to
stagger the expirations of the agreements if possible. Because of the concentration of contract expirations in certain years, we may
experience high turnover or other adverse consequences, such as higher costs, loss of clients and engagements, or difficulty staffing
engagements, if we are unable to renegotiate employment arrangements or the costs of retaining qualified professionals becomes too
high. The implementation of or new compensation arrangements may result in the concentration of potential turnover in future years.
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We incur substantial costs to hire and retain our professionals and we expect these costs to continue and grow.
We may pay hiring or retention bonuses to secure the services of professionals. Those payments have taken the forms of
unsecured general recourse forgivable loans, stock option, restricted stock, cash-based stock appreciation rights and other equity- and
cash-based awards, and cash payments to attract and retain our professional employees. We make forgivable loans to KSIP
participants and may provide forgivable or other types of loans to new hires and professionals who join us in connection with
acquisitions as well as to select current employees and other professionals on a case-by-case basis. The aggregate amount of loans to
professionals is significant. Some or all of the principal amount and accrued interest of the loans we make to employees will be
forgiven by us, or we will fund the repayment through special bonus compensation, upon the passage of time, provided that the
professional is an employee or consultant on the forgiveness date, and upon other specified events, such as death, disability,
termination by us without cause, termination by the employee or consultant with good reason, retirement or contract non-renewal, as
may be applicable to the relevant employment agreement or loan grant. We expect to continue issuing unsecured general recourse
forgivable loans.
We also provide significant additional payments under the KSIP and annual recurring equity or cash awards under the ICP and
other compensation programs, including awards in the form of restricted stock and other stock- or cash-based awards or, alternatively,
cash if we do not have adequate equity securities available under stockholder-approved equity plans.
In addition, our Economic Consulting segment has contracts with select economists or professionals that provide for
compensation equal to such individual’s annual collected client fees plus a percentage of the annual fees generated by junior
professionals working on engagements managed by such professionals, which results in compensation expense for that segment being
a higher percentage of revenues and EBITDA than the compensation paid by other segments. We expect that these arrangements will
continue and that the Company may enter into similar arrangements with other economists and professionals hired by the Company.
We have engaged in a major change effort that has resulted in, and may lead to turnover of executive officers and other leaders.
We rely heavily on our executive officers, the leaders of our segments and our regional, practice and industry leaders to manage
our operations for the success of our business. Given the highly specialized nature of our services and products and the scale of our
operations, our executive officers and other leaders must have a thorough understanding of our service, product and industry offerings,
as well as the skills and experience necessary to manage a large organization in diverse geographic locations. At the same time, key
initiatives associated with the Company’s change efforts to improve performance have required or resulted in changes in our
leadership. Since January of 2014, we have had several voluntary departures and turned over a number of executives and other senior
leadership positions, including:
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Chief Executive Officer
General Counsel
Chief Financial Officer
Regional Chairmen – North America (position eliminated); Latin America and EMEA
Operating segment leadership (Technology, co-leader Corporate Finance)
Key Industries (Health Solutions)
It is possible that further changes in leadership will occur as the Company continues to develop and evolve its business strategy.
We are unable to predict with certainty the impact that executive officer and leadership transitions may have on our business
operations, prospects, financial results, client relationships, retention of key professionals and other employees or morale.
Professionals may leave our Company to form or join competitors and we may not have, or may choose not to pursue, legal
recourse against such professionals.
Our professionals typically have close relationships with the clients they serve, based on their expertise and bonds of personal
trust and confidence. Therefore, the barriers to our professionals pursuing independent business opportunities or joining our
competitors should be considered low. Although our clients generally contract for services with us as a company, and not with
individual professionals, in the event that professionals leave, such clients may decide that they prefer to continue working with a
professional rather than with our Company. Substantially all of our written employment arrangements with our SMDs include non-
competition and non-solicitation covenants. These restrictions have generally been drafted to comply with state “reasonableness”
standards. However, states generally interpret restrictions on competition narrowly and in favor of employees. Therefore, a state may
hold certain restrictions on competition to be unenforceable. In the case of employees outside of the U.S., we draft non-competition
provisions in an effort to comply with applicable foreign law. In the event an employee departs and acts in a way that we believe
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violates his or her non-competition or non-solicitation agreement, we will consider any legal remedies we may have against such
person on a case-by-case basis. We may decide that preserving cooperation and a professional relationship with the former employee
or client, or other concerns, outweigh the benefits of any possible legal recourse. We may also decide that the likelihood of success
does not justify the costs of pursuing a legal remedy. Therefore, there may be times we may decide not to pursue legal action, even if
it is available to us.
Risks Related to Our Client Relationships
If we are unable to accept client engagements due to real or perceived relationship issues, our revenues, growth, client
engagements, and prospects may be negatively affected.
Our inability to accept engagements from existing or prospective clients, represent multiple clients in connection with the same
or competitive engagements, or any requirement that we resign from a client engagement, may negatively impact our revenues,
growth, and financial results. While we follow internal practices to assess real and potential issues in the relationships between and
among our clients, engagements, segments, practices and professionals, such concerns cannot always be avoided. For example, we
generally will not represent parties adverse to each other in the same matter. Under U.S. federal bankruptcy rules, we generally may
not represent both a debtor and its creditors in the same proceeding, and we are required to notify the U.S. Trustee of real or potential
conflicts. Even if we begin a bankruptcy-related engagement, the U.S. Trustee could find that we no longer meet the disinterestedness
standard because of real or potential changes in our status as a disinterested party, and order us to resign, which could result in
disgorgement of fees. Acquisitions may require us to resign from a client engagement because of relationship issues that are not
currently identifiable. In addition, businesses that we acquire or employees who join us may not be free to accept engagements they
could have accepted prior to our acquisition or hire because of relationship issues.
Claims involving our services could harm our overall professional reputation and our ability to compete and attract business or
hire or retain qualified professionals.
Our engagements involve matters that may result in a severe impact on a client’s business, cause the client a substantial
monetary loss, or prevent the client from pursuing business opportunities. Our ability to attract new clients and generate new and
repeat engagements or hire professionals depends upon our ability to maintain a high degree of client satisfaction, as well as our
reputation among industry professionals. As a result, any claims against us involving the quality of our services may be more
damaging than similar claims against businesses in other industries.
We may incur significant costs and may lose engagements as a result of claims by our clients regarding our services.
Many of our engagements involve complex analysis and the exercise of professional judgment, including litigation and
governmental investigatory matters where we act as experts. Therefore, we are subject to the risk of professional and other liabilities.
Although we believe we maintain an appropriate amount of insurance, it is limited. Damages and/or expenses resulting from any
successful claim against us, for indemnity or otherwise, in excess of the amount of insurance coverage, will be borne directly by us
and could harm our profitability and financial resources. Any claim by a client or a third party against us could expose us to
reputational issues that adversely affect our ability to attract new or maintain existing engagements or clients or qualified professionals
or other employees, consultants or contractors.
Our clients may terminate our engagements with little or no notice and without penalty, which may result in unexpected declines
in our utilization and revenues.
Our engagements center on transactions, disputes, litigation and other event-driven occurrences that require independent
analysis or expert services. Transactions may be postponed or cancelled, litigation may be settled or be dismissed, and disputes may
be resolved, in each case with little or no prior notice to us. If we cannot manage our work in process, our professionals may be
underutilized until we can reassign them or obtain new engagements, which can adversely affect financial results.
The engagement letters that we typically enter into with clients do not obligate them to continue to use our services. Typically,
our engagement letters permit clients to terminate our services at any time without penalties. In addition, our business involves large
client engagements that we staff with a substantial number of professionals. At any time, one or more client engagements may
represent a significant portion of a segment’s revenues. For the year ended December 31, 2015, one client of our Technology segment
accounted for approximately 19% of that segment’s annual revenues. If we are unable to replace clients or revenues as engagements
end, clients unexpectedly cancel engagements with us or curtail the scope of our engagements, and we are unable to replace the
revenues from those engagements, eliminate the costs associated with those engagements or find other engagements to utilize our
professionals, the financial results and profitability of the Company could be adversely affected.
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We may not have, or may choose not to pursue, legal remedies against clients who terminate their engagements.
The engagement letters that we typically have with clients do not obligate them to continue to use our services and permit them
to terminate the engagement without penalty at any time. Even if the termination of an ongoing engagement by a client could
constitute a breach of the client’s engagement agreement, we may decide that preserving the overall client relationship is more
important than seeking damages for the breach, and for that or other reasons, decide not to pursue any legal remedies against a client,
even though such remedies may be available to us. We make the determination whether to pursue any legal actions against a client on
a case-by-case basis.
Failures of our internal information technology systems controls or compromise of confidential or proprietary client or company
information could damage our reputation, harm our businesses and adversely impact our results of operations.
Our reputation for providing secure information storage and maintaining the confidentiality of proprietary, confidential and
trade secret information is critical to the success of our businesses, especially our Technology segment which hosts client information
as a service. We routinely face cyber-based attacks and attempts by hackers and similar unauthorized users to gain access to or corrupt
our information technology systems, which so far have been unsuccessful. Such attacks could disrupt our business operations, cause
us to incur unanticipated losses or expenses, and result in unauthorized disclosures of confidential or proprietary information. We
expect to continue to face such attempts. Although we seek to prevent, detect and investigate these network security incidents, and
have taken steps to mitigate the likelihood of network security breaches, there can be no assurance that attacks by unauthorized users
will not be attempted in the future or that our security measures will be effective.
In addition, the Company’s own confidential and proprietary information and that of our clients could be compromised, whether
intentionally or unintentionally, by our employees, consultants or vendors. A successful breach and compromise of the security of our
information technology systems leading to theft or misuse of our own or our clients’ proprietary or confidential information, or the
public disclosure or use of such information by others, could result in losses, third party claims against us and reputational harm,
including the loss of clients.
If our reputation is damaged due to a data security breach or theft or compromise of confidential or proprietary information, our
ability to attract new engagements and clients may be impaired or we may be subjected to damages or penalties, which could
negatively impact our businesses, financial condition or results of operations. In addition, if our reputation is damaged, we may
become less competitive, which could negatively impact our businesses, financial condition or results of operations.
Governmental focus on data privacy and security could increase our costs of operations.
In reaction to publicized incidents in which electronically stored personal and other information has been lost, accessed or
stolen, or transmitted by or to third parties without permission, U.S. and non-U.S. governmental authorities have adopted, proposed, or
are considering proposing or adopting, data security and/or data privacy statutes or regulations. Continued governmental focus on data
security and privacy may lead to additional legislative and regulatory action, which could increase the complexity of doing business in
the U.S. or the applicable jurisdiction. The increased emphasis on information security and the requirements to comply with applicable
U.S. and foreign data security and privacy laws and regulations may increase our costs of doing business and negatively impact our
results of operations.
Risks Related to Competition
If we fail to compete effectively, we may miss new business opportunities or lose existing clients and our revenues and profitability
may decline.
The market for some of our consulting services is highly competitive. We do not compete against the same companies across all
of our segments, practices, services, industries or geographic regions. Instead we compete with different companies or businesses of
companies depending on the particular nature of a proposed engagement and the types of requested service(s) and the location of the
client or delivery of the service(s). Our operations are highly competitive.
Our competitors include large organizations, such as the global accounting firms and the large management and financial
consulting companies that offer a broad range of consulting services; investment banking firms; IT consulting and software
companies, which offer niche services that are the same or similar to services or products offered by one or more of our segments; and
small firms and independent contractors that focus on specialized services. Some of our competitors have significantly more financial
resources, a larger national or international presence, larger professional staffs and greater brand recognition than we do. Some have
lower overhead and other costs and can compete through lower cost service offerings.
23
Since our business depends in large part on professional relationships, our business has low barriers of entry for professionals
electing to start their own firms or work independently. In addition, it is relatively easy for professionals to change employers.
If we cannot compete effectively or if the costs of competing, including the costs of retaining and hiring professionals, become
too expensive, our revenue growth and financial results could be negatively affected and may differ materially from our expectations.
We may face competition from parties who sell us their businesses and from professionals who cease working for us.
In connection with our acquisitions, we generally obtain non-solicitation agreements from the professionals we hire, as well as
non-competition agreements from senior managers and professionals. The agreements prohibit such individuals from competing with
us during the term of their employment and for a fixed period afterwards, and seeking to solicit our employees or clients. In some
cases, but not all, we may obtain non-competition or non-solicitation agreements from parties who sell us their business or assets. The
duration of post-employment non-competition and non-solicitation agreements typically range from six- to 12-months. Non-
competition agreements with the sellers of businesses or assets that we acquire typically continue longer than 12-months. Certain
activities may be carved out of, or otherwise may not be prohibited by, these arrangements. We cannot assure that one or more of the
parties from whom we acquire assets or a business, or who do not join us or leave our employment, will not compete with us or solicit
our employees or clients in the future. States and foreign jurisdictions may interpret restrictions on competition narrowly and in favor
of employees or sellers. Therefore, certain restrictions on competition or solicitation may be unenforceable. In addition, we may not
pursue legal remedies if we determine that preserving cooperation and a professional relationship with the former employee or his
clients, or other concerns, outweigh the benefits of any possible legal recourse or the likelihood of success does not justify the costs of
pursuing a legal remedy. Such persons, because they have worked for our Company or a business that we acquire, may be able to
compete more effectively with us, or be more successful in soliciting our employees and clients, than unaffiliated third parties.
Risks Related to Acquisitions
Prior to 2014, a substantial amount of our growth resulted from acquisitions. Since that time, we have not pursued an acquisition
strategy on the same scale. We will consider future strategic or opportunistic acquisitions. In those cases some or all of the following
risks would be applicable.
We may have difficulty integrating acquisitions or convincing clients to allow assignment of their engagements to us, which can
reduce the benefits we receive from acquisitions.
The process of managing and integrating acquisitions into our existing operations may result in unforeseen operating difficulties
and may require significant financial, operational and managerial resources that would otherwise be available for the operation,
development and organic expansion of our existing operations. To the extent that we misjudge our ability to integrate and properly
manage acquisitions, we may have difficulty achieving our operating, strategic and financial objectives.
Acquisitions also may involve a number of special financial, business and operational risks, such as:
•
•
•
•
•
•
•
•
•
•
difficulties in integrating diverse corporate cultures and management styles;
disparate policies and practices;
client relationship issues;
decreased utilization during the integration process;
loss of key existing or acquired personnel;
increased costs to improve or coordinate managerial, operational, financial and administrative systems;
dilutive issuances of equity securities, including convertible debt securities, to finance acquisitions;
the assumption of legal liabilities;
future earn-out payments or other price adjustments; and
potential future write-offs relating to the impairment of goodwill or other acquired intangible assets, or the revaluation of
assets.
In addition to the integration challenges mentioned above, our acquisitions of non-U.S. companies offer distinct integration
challenges relating to foreign laws and governmental regulations, including tax and employee benefit laws, and other factors relating
to operating in countries other than the U.S., which we have addressed above in the discussion regarding the difficulties we may face
operating globally.
24
Asset transactions may require us to seek client consents to the assignment of their engagements to us or a subsidiary. All clients
may not consent to assignments. In certain cases, such as government contracts and bankruptcy engagements, the consents of clients
cannot be solicited until after the acquisition has closed. Further, such engagements may be subject to security clearance requirements
or bidding provisions with which we might not be able to comply. There is no assurance that clients of the acquired entity or local,
state, federal or foreign governments will agree to novate or assign their contracts to us.
The Company may also hire groups of selected professionals from another company. In such event there may be restrictions on
the ability of the professionals who join the Company to compete and work on client engagements. In addition, the Company may
enter into arrangements with the former employers of those professionals regarding limitations on their work until any time
restrictions pass. In such circumstances, there is no assurance that the Company will enter into mutually agreeable arrangements with
any former employer and the utilization of such professionals may be limited and our financial results could be negatively affected
until their restrictions end. The Company could also face litigation risks from group hires.
We may be unable to take advantage of opportunistic acquisition situations, which may adversely affect our ability to expand or
diversify our business.
At the time an acquisition opportunity presents itself, internal and external pressures (including, but not limited to, competition
for such acquisition, the cost of such acquisition, borrowing capacity under our senior secured bank revolving credit facility (our
“Senior Bank Credit Facility”) or the availability and cost of alternative financing), may cause us to be unable to pursue or complete
an acquisition.
An acquisition may not be accretive in the near term or at all.
Competitive market conditions may require us to pay prices that represent a higher multiple of revenues or profits for an
acquisition. As a result of these competitive dynamics, costs of the acquisition, or other factors, certain acquisitions may not be
accretive to our overall financial results at the time of the acquisition or at all.
We may have a different system of governance and management from the companies we acquire or their parents, which could
cause professionals who join us from acquired companies to leave us.
Our governance and management practices and policies will not mirror the policies and practices of acquired companies or their
parents. In some cases, different management practices and policies may lead to workplace dissatisfaction on the part of professionals
who join our Company. Some professionals may choose not to join our Company or leave after joining us. Existing professionals may
leave us as well. The loss of key professionals may harm our business and results of operations and cause us not to realize the
anticipated benefits of the acquisition.
Due to fluctuations in our stock price, acquisition candidates may be reluctant to accept shares of our common stock as purchase
price consideration, use of our shares as purchase price consideration may be dilutive, or the owners of certain companies we seek
to acquire may insist on stock price guarantees.
We may structure acquisitions to pay a portion of the purchase price in shares of our common stock. The number of shares
issued as consideration is typically based on an average closing price per share of our common stock for a number of days prior to the
closing of such acquisition. We believe that payment in the form of shares of common stock of FTI Consulting, Inc. provides the
acquired entity and its principals with a vested interest in the future success of the acquisition and the Company. Stock market
volatility, generally, or FTI Consulting, Inc.’s stock price volatility, specifically, may result in acquisition candidates being reluctant to
accept our shares as consideration. In such cases, we may have to issue more shares, if stock constitutes part of the consideration, pay
the entire purchase price in cash, or negotiate an alternative price structure. The result may be an increase in the cost of an acquisition.
Certain past acquisition related agreements have contained stock price guarantees that resulted in cash payments in the future if
the price per share of FTI Consulting, Inc. common stock fell below a specified per share market value on the date restrictions lapse.
There is no assurance that an acquisition candidate will not negotiate stock price guarantees, with respect to a future acquisition, which
may increase the costs of such acquisition.
25
Risks Related to our Indebtedness
Our leverage could adversely affect our financial condition or operating flexibility and prevent us from fulfilling our obligations
under our outstanding 2022 Notes, Senior Bank Credit Facility and other outstanding indebtedness.
Our total consolidated long-term indebtedness as of December 31, 2015 was approximately $500.0 million under our 6% Senior
Notes due 2022 (the “2022 Notes”) and our Senior Bank Credit Facility. As of December 31, 2015 we had $348.6 million of undrawn
availability under our Senior Bank Credit Facility.
Our level of indebtedness could have important consequences on our future operations, including:
•
•
•
•
•
•
•
•
making it more difficult for us to satisfy our payment and other obligations under the 2022 Notes or other outstanding
indebtedness from time to time;
resulting in an event of default if we fail to comply with the financial and other covenants contained in the indenture
governing the 2022 Notes, the terms of our Senior Bank Credit Facility or other outstanding debt agreements in effect
from time to time;
accelerating indebtedness and enforcing cross default provisions among the 2022 Notes, the Senior Bank Credit Facility
and applicable other indebtedness that may be outstanding from time to time;
permitting the lenders under our Senior Bank Credit Facility to foreclose on the assets securing such indebtedness;
subjecting us to the risk of increased sensitivity to interest rate increases on our indebtedness with variable interest rates
under the Senior Bank Credit Facility;
reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, and other general
corporate purposes, and limiting our ability to obtain additional financing for these purposes;
limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the
industries in which we operate, and the general economy; and
placing us at a competitive disadvantage compared to our competitors that have less indebtedness or are less leveraged.
Our business may not generate sufficient cash flow from operations and future borrowings may not be available to us under our
Senior Bank Credit Facility or otherwise in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity
needs.
Despite our current level of indebtedness, we and our subsidiaries may still incur significant additional indebtedness, which could
further exacerbate the risks associated with our substantial indebtedness.
We and our subsidiaries may be able to incur substantial additional indebtedness, including additional secured indebtedness, in
the future. The terms of the indenture governing the 2022 Notes and our Senior Bank Credit Facility, limit, but do not prohibit, us
from incurring additional indebtedness and do not prevent us from incurring other liabilities that do not constitute indebtedness. In
addition, the indenture that governs the 2022 Notes allows our domestic subsidiaries that guarantee the 2022 Notes and the Senior
Bank Credit Facility to guarantee additional indebtedness, from time to time. The indenture for the 2022 Notes also permits us to incur
certain other additional secured debt, which would be effectively senior to the 2022 Notes. Our ability to incur additional indebtedness
may have the effect of reducing the amounts available to pay amounts due with respect to our indebtedness. If we incur new
indebtedness or other liabilities, the related risks that we and our subsidiaries now face could intensify.
We may not be able to generate sufficient cash to service our indebtedness, and we may be forced to take other actions to satisfy
our payment obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or to refinance our indebtedness depends on our future performance, including the
performance of our subsidiaries, which will be affected by financial, business and economic conditions and other factors. We will not
be able to control many of these factors, such as the general economy, economic conditions in the industries in which we operate, and
competitive pressures. Our cash flow may not be sufficient to allow us to pay principal and interest on our indebtedness and to meet
our other obligations. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to
reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our
indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.
In addition, the terms of existing or future debt agreements, including our Senior Bank Credit Facility and the indenture that governs
the 2022 Notes, may restrict us from pursuing any of these alternatives.
26
In the event that we need to refinance all or a portion of our outstanding indebtedness before maturity or as it matures, we may
not be able to obtain terms as favorable as the terms of our existing indebtedness or refinance our existing indebtedness at all. If
interest rates or other factors existing at the time of refinancing result in higher interest rates upon refinancing, we will incur higher
interest expense. Furthermore, if any rating agency changes our credit rating or outlook, our debt and equity securities could be
negatively affected, which could adversely affect our financial condition and results of operations.
Our indebtedness is guaranteed by substantially all of our domestic subsidiaries and will be required to be guaranteed by future
domestic subsidiaries, including those that join us in connection with acquisitions.
Substantially all of our U.S. subsidiaries guarantee our obligations under our 2022 Notes and Senior Bank Credit Facility and
substantially all of their assets are pledged as collateral for the Senior Bank Credit Facility. Future U.S. subsidiaries will be required to
provide similar guarantees and, in the case of the Senior Bank Credit Facility, similar security. If we default on any guaranteed
indebtedness, our U.S. subsidiaries could be required to make payments under their guarantees, and our senior secured creditors could
foreclose on their assets to satisfy unpaid obligations, which would materially adversely affect our business and financial results.
Our variable rate indebtedness will subject us to interest rate risk, which could cause our annual debt service obligations to
increase significantly.
Borrowings under our Senior Bank Credit Facility will be at variable rates of interest, which expose us to interest rate risk. If
interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed
remained the same, and our cash flow could be adversely affected. An increase in debt service obligations under our variable rate
indebtedness could affect our ability to make payments required under the terms of the Senior Bank Credit Facility, 2022 Notes or our
other indebtedness outstanding from time to time.
The covenants in our Senior Bank Credit Facility and the indenture governing our 2022 Notes impose restrictions that may limit
our operating and financial flexibility.
The Senior Bank Credit Facility includes negative covenants that may, subject to exceptions, limit our ability and the ability of
our subsidiaries to, among other things:
•
•
•
•
•
•
•
•
•
•
create, incur, or assume certain liens;
make certain investments and loans;
create, incur, or assume additional indebtedness or guarantees;
engage in M&As, consolidations, sale-leasebacks and other asset sales and dispositions;
pay dividends or redeem or repurchase our capital stock;
alter the business that we and our subsidiaries conduct;
engage in certain transactions with affiliates;
modify the terms of certain indebtedness, including the indenture governing the 2022 Notes;
prepay, redeem or purchase certain indebtedness, including the 2022 Notes; and
make material changes to accounting and reporting practices.
In addition, the Senior Bank Credit Facility includes financial covenants that require us (i) not to exceed a maximum leverage
ratio, (ii) not to exceed a maximum senior secured leverage ratio, and (iii) to maintain a minimum fixed charge coverage ratio.
The indenture governing the 2022 Notes contains a number of significant restrictions and covenants that may limit our ability
and our subsidiaries’ ability to, among other things:
•
•
•
•
•
incur or guarantee additional indebtedness;
make certain restricted payments;
create or incur certain liens;
create restrictions on the payment of dividends or other, distributions to us from our restricted subsidiaries;
engage in certain sale and leaseback transactions;
27
•
•
transfer all or substantially all of our assets or the assets of any restricted subsidiary or enter into merger or consolidation
transactions with third parties; and
engage in certain transactions with affiliates.
Operating results below a certain level or other adverse factors, including a significant increase in interest rates, could result in
us being unable to comply with certain covenants. If we violate these covenants and are unable to obtain waivers, our indebtedness
under the indenture , the Senior Bank Credit Facility or other applicable agreement could be declared in default and could be
accelerated, which could permit, in the case of secured debt, the lenders to foreclose on our assets securing the debt thereunder. If the
indebtedness is accelerated, we may not be able to repay our debt or borrow sufficient funds to refinance it. Even if we are able to
obtain new financing, it may not be on commercially reasonable terms or on terms that are acceptable to us. If our debt is in default for
any reason, our cash flows, results of operations or financial condition could be materially and adversely affected. In addition,
complying with these covenants may also cause us to take actions that are not favorable to holders of the 2022 Notes and may make it
more difficult for us to successfully execute our business strategy and compete against companies that are not subject to such
restrictions.
28
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
Our executive offices located in Washington, D.C. consist of 95,767 square feet under a lease expiring November 2021. Under
leases expiring August 2017, we lease 53,474 square feet of office space for our principal corporate facilities located in Annapolis,
Maryland. We also lease offices to support our operations in 36 other cities across the U.S., including New York, Chicago, Denver,
Houston, Dallas, Los Angeles, and San Francisco, and we lease office space to support our international locations in 28 countries —
the United Kingdom, Ireland, France, Germany, Spain, Belgium, Denmark, Russia, Australia, Switzerland, Netherlands, China
(including Hong Kong), Japan, Singapore, the United Arab Emirates, Korea, South Africa, Argentina, Brazil, Colombia, Panama,
Mexico, Canada, Indonesia, India, Qatar, the Cayman Islands and the British Virgin Islands. We believe our existing facilities are
adequate to meet our current requirements and that suitable space will be available as needed.
ITEM 3.
LEGAL PROCEEDINGS
From time to time in the ordinary course of business, we are subject to claims, asserted or unasserted, or named as a party to
lawsuits or investigations. Litigation, in general, and IP and securities litigation in particular, can be expensive and disruptive to
normal business operations. Moreover, the results of legal proceedings cannot be predicted with any certainty and in the case of more
complex legal proceedings, such as IP and securities litigation, the results are difficult to predict at all. We evaluate litigation claims
and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses.
Based on these assessments and estimates, we establish reserves and/or disclose the relevant litigation claims or legal proceedings, as
appropriate. These assessments and estimates are based on the information available to management at the time and involve a
significant amount of management judgment. Actual outcomes or losses may differ materially from those anticipated at the time. We
currently are not aware of any asserted or unasserted legal proceedings or claims that we believe would have a material adverse effect
on our financial condition or results of our operations.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
29
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Price of and Dividends on Our Common Equity and Related Stockholder Matters
Market Information. Our common stock trades on the NYSE under the symbol “FCN.” The following table lists the high and
low sale prices per share for our common stock based on the closing sales price as reported on the NYSE for the periods indicated.
Quarter Ended
2015
2014
High
Low
High
Low
March 31 ......................................................................... $
June 30 ............................................................................ $
September 30 .................................................................. $
December 31 ................................................................... $
40.97 $
43.64 $
43.55 $
45.66 $
36.21 $
37.41 $
38.72 $
33.62 $
41.76 $
38.01 $
38.01 $
41.09 $
28.51
29.30
34.91
33.30
Number of Stockholders of Record. As of January 31, 2016, the number of holders of record of our common stock was 205.
Dividends. We have not declared or paid any cash dividends on our common stock to date and we currently do not anticipate
paying any cash dividends on our shares of common stock in the foreseeable future. We intend to retain our earnings, if any, to finance
the expansion of our business, to make acquisitions, for general corporate purposes or to repurchase shares of our common stock.
Moreover, our Senior Bank Credit Facility and the indenture governing our 2022 Notes restrict our ability to pay dividends. See Note
12 — “Long-Term Debt” to our consolidated financial statements for more information.
Securities Authorized for Issuance under Equity Compensation Plans
The following table lists information regarding outstanding stock options and authorized shares of common stock reserved for
future issuances under our equity compensation plans as of December 31, 2015. None of the plans have outstanding warrants or rights
other than options and cash-based stock appreciation rights, except for stock-based awards, including shares of restricted and
unrestricted stock or units and performance restricted or unrestricted stock or units, and deferred stock awards, including stock units
and restricted stock units. We have not issued any shares of our common stock to employees as compensation under plans that have
not been approved by our security holders, except for employment inducement awards granted to certain executive officers at the time
they were hired pursuant to Rule 303A.08 of the NYSE. The number of securities to be issued upon exercise of outstanding options,
warrants and rights included in Column (a) of the following table excludes:
•
•
•
•
•
9,945 shares of common stock issued as unvested stock-based awards under our 2004 Long-Term Incentive Plan (as
Amended and Restated Effective as of May 14, 2008) (the “2004 Plan”);
19,490 shares of common stock issued as unvested stock-based awards under our 2006 Global Long-Term Incentive Plan
(as Amended and Restated Effective as of May 14, 2008) (the “2006 Plan”);
1,068,852 shares of common stock issued as unvested stock-based awards, including restricted stock awards,
performance-based restricted stock and unit awards, stock units and restricted stock unit awards, under our 2009 Omnibus
Incentive Compensation Plan (as Amended and Restated Effective as of June 3, 2015) (the “2009 Omnibus Plan”);
137,895 shares of common stock sold under our 2007 Employee Stock Purchase Plan, as Amended and Restated (the
“ESPP”), and 1,255,735 shares deregistered with the SEC on January 30, 2009 upon termination of our ESPP effective
January 1, 2009; and
31,305 shares of common stock issued as unvested restricted stock awards as employment inducement awards
(“Inducement Awards”), as approved by the Compensation Committee of the Company’s Board of Directors on July 30,
2014. The remaining 38,290 unissued shares were deregistered with the SEC on October 7, 2014.
30
Equity Compensation Plan Information as of December 31, 2015
(a)
(b)
Number of Securities
to be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
Weighted-
Average
Exercise Price of
Outstanding
Options,
Warrants
and Rights
(in thousands, except per share data)
(c)
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column
(a))
Plan Category
Equity compensation plans approved by our security
holders .................................................................................
Equity compensation plans not approved by our security
holders .................................................................................
Total .......................................................................................
3,271 (1) $
(2)
149
3,420 $
41.45
36.75
41.25
1,760 (3)
—
1,760
(1)
(2)
(3)
Includes up to 245,542 shares of common stock issuable upon vesting and exercise of outstanding stock options granted under
our 2004 Plan; up to 976,172 shares of common stock issuable upon vesting and exercise of outstanding stock options granted
under our 2006 Plan; and up to 2,048,871 shares of common stock issuable upon vesting and exercise of outstanding stock
options granted under our 2009 Omnibus Plan.
Includes up to 148,944 shares of common stock issuable upon vesting and exercise of outstanding stock options granted under
our Inducement Awards to new executive officer hires pursuant to Rule 303.08 of the NYSE.
Includes 55,597 shares of common stock available for issuance under our 2006 Plan, none of which may be issued as stock-
based awards, and 1,704,898 shares of common stock available for issuance under our 2009 Omnibus Plan, all of which are
available for stock-based awards (including deferred stock unit and restricted stock unit awards).
Issuances of Unregistered Securities
Not Applicable.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table provides information with respect to purchases we made of our common stock during the fourth quarter of
2015.
Total
Number of
Shares
Purchased
Average
Price
Paid per
Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Program
Approximate
Dollar Value
that May Yet Be
Purchased
Under the
Program (4)
October 1 through October 31, 2015 ..................................
November 1 through November 30, 2015 ..........................
December 1 through December 31, 2015 ...........................
Total .............................................................................
(in thousands, except per share data)
— $
29 (2) $
736 (3) $
765
—
36.45
34.72
— $
1 (1) $
5 (1) $
6
—
48,969
23,469
(1)
(2)
(3)
(4)
Represents shares of common stock withheld to cover payroll tax withholdings related to the lapse of restrictions on restricted
stock.
In November 2015, our Board of Directors authorized a six-month stock repurchase program of up to $50.0 million (the “2015
Repurchase Program”). During the month ended, November 30, 2015, we repurchased and retired 28,700 shares of common
stock, at an average per share price of $36.25, for an aggregate cost of $1.0 million.
During the month ended December 31, 2015, we repurchased and retired 735,845 shares of common stock, at an average per
share price of $34.84 under the 2015 Repurchase Program, for an aggregate cost of $25.5 million.
At December 31, 2015, a balance of approximately $23.5 million remained available for share repurchases under the 2015
Repurchase Program.
31
ITEM 6.
SELECTED FINANCIAL DATA
We derived the selected financial data presented below for the periods or dates indicated from our consolidated financial
statements. The data below should be read in conjunction with our consolidated financial statements, related notes and other financial
information appearing in “— Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
“— Item 8. Financial Statements and Supplementary Data.”
A number of factors have caused our results of operations and financial position to vary significantly from one year to the next
and can make it difficult to evaluate period-to-period comparisons because of a lack of comparability. The most significant of these
factors are as follows:
Acquisitions
Our results of operations and financial position were impacted by our acquisition activities. The results of operations for
acquired businesses have been included in our results of operations since the date of their acquisitions.
Goodwill Impairment Charge
There were no goodwill impairment charges during the years ended December 31, 2015 and 2014.
For the years ended December 31, 2013 and 2012, we recorded an $83.8 million and $110.4 million goodwill impairment
charge related to the Strategic Communications segment, respectively. The impairment charges were non-cash in nature and did not
affect the Company’s current liquidity, cash flows, borrowing capability or operations. These charges are further described under
“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and in “Note 10. Goodwill and
Other Intangible Assets” in the Consolidated Financial Statements under “Item 8. Financial Statements and Supplementary Data.”
Special Charges
There were no special charges recorded during the year ended December 31, 2015.
During the year ended December 31, 2014, we recorded special charges totaling $16.3 million, of which $0.7 million was non-
cash. The charges reflect the contractual post-employment payments and equity award expense acceleration, net of forfeitures of
unvested equity and liability awards and annual bonus payments of former executive officers, the termination of the Company’s
corporate airplane lease, the closure of the Company’s former West Palm Beach executive office and related lease termination, and
updated forecasts of expected sublease income for corporate and segment offices previously vacated.
During the year ended December 31, 2013, we recorded special charges totaling $38.4 million, of which $14.1 million was non-
cash. The charges reflect certain executive leadership transition costs, costs related to actions we took to realign our workforce to
address current business demands impacting our Corporate Finance & Restructuring and Forensic and Litigation Consulting segments,
and to reduce certain corporate overhead within our EMEA region.
During the year ended December 31, 2012, we recorded special charges of $29.6 million, of which $5.0 million was non-cash.
The charges reflect actions we took to realign our workforce to address current business demands and global macro-economic
conditions impacting our Forensic and Litigation Consulting, Strategic Communications and Technology segments, to address certain
targeted practices within our Corporate Finance & Restructuring and Economic Consulting segments, and to reduce excess real estate
capacity. These actions included the termination of 116 employees, the consolidation of leased office space within nine office
locations and certain other actions.
During the year ended December 31, 2011, we recorded special charges of $15.2 million, of which $4.8 million was non-cash.
The charges reflect actions we took to reduce overhead in connection with the realignment of certain senior management on a global
basis and to align our workforce with expected market trends, primarily in our Corporate Finance & Restructuring segment.
32
Stockholders’ Equity
2015 stock repurchase program
On November 5, 2015, our Board of Directors authorized a six month stock repurchase program of up to $50 million (the “2015
Repurchase Program”). During the year ended December 31, 2015, we repurchased and retired 764,545 shares of our common stock
for an average price per share of $34.68, at a total cost of $26.5 million, which was paid in full in 2015.
2012 stock repurchase program
On June 6, 2012, our Board of Directors authorized a two-year stock repurchase program of up to $250.0 million (the “2012
Repurchase Program”). During the year ended December 31, 2013, we repurchased and retired 1,956,900 shares of our common stock
for an average price per share of $36.35, at a cost of $71.1 million, of which $4.4 million was accrued and included in the Condensed
Consolidated Balance Sheet, and $66.7 million was paid at December 31, 2013. In January 2014, we paid the balance due of $4.4
million on our 2013 share repurchases. No shares were repurchased during the year ended December 31, 2014. The 2012 Repurchase
Program expired on June 5, 2014.
Income Statement and Balance Sheet Data
2015
INCOME STATEMENT DATA
Revenues ............................................................................ $ 1,779,149
Operating Expenses
Direct cost of revenues .................................................. 1,171,444
432,668
Selling, general and administrative expenses ................
Special charges ..............................................................
—
(1,200)
Acquisition-related contingent consideration ................
11,726
Amortization of other intangible assets .........................
—
Goodwill impairment charge .........................................
1,614,638
164,511
3,232
(42,768)
(19,589)
105,386
39,333
66,053
1.62
1.58
Operating income ..............................................................
Interest income and other...............................................
Interest expense .............................................................
Loss on early extinguishment of debt ............................
Income before income tax provision ................................
Income tax provision .........................................................
Net income (loss)................................................................ $
Earnings (loss) per common share—basic ...................... $
Earnings (loss) per common share—diluted ................... $
Weighted average number of common shares
outstanding
2014
Year Ended December 31,
2013
(in thousands, except per share data)
2012
2011
$ 1,756,212
$ 1,652,432
$ 1,576,871 $ 1,566,768
1,144,757
433,845
16,339
(1,676)
15,521
—
1,608,786
147,426
4,670
(50,685)
—
101,411
42,604
58,807
1.48
1.44
$
$
$
1,042,061
394,681
38,414
(10,869 )
22,954
83,752
1,570,993
81,439
1,748
(51,376 )
—
31,811
42,405
(10,594 )
(0.27 )
(0.27 )
$
$
$
980,532
378,016
29,557
(3,064)
22,407
110,387
1,517,835
956,908
373,295
15,212
(6,465)
22,371
—
1,361,321
205,447
59,036
6,304
5,659
(58,624)
(56,731)
—
(4,850)
153,127
3,114
40,100
49,224
(36,986) $ 103,903
2.53
2.39
(0.92) $
(0.92) $
$
$
$
Basic ..............................................................................
Diluted ...........................................................................
40,846
41,729
39,726
40,729
39,188
39,188
40,316
40,316
41,131
43,473
2015
2014
December 31,
2013
(in thousands)
2012
2011
BALANCE SHEET DATA
Cash and cash equivalents ................................................... $ 149,760 $ 283,680 $ 205,833 $ 156,785 $ 264,423
Working capital (1)(2) ............................................................ $ 394,548 $ 489,749 $ 392,841 $ 366,563 $ 285,371
Total assets (3) ...................................................................... $ 2,229,018 $ 2,391,599 $ 2,324,927 $ 2,256,877 $ 2,398,694
Long-term debt, net, including current portion ................... $ 494,772
$ 703,684 $ 708,085 $ 784,570
Stockholders’ equity ........................................................... $ 1,147,603 $ 1,102,746 $ 1,042,259 $ 1,068,232 $ 1,106,202
$ 699,404
(1) Working capital is defined as current assets less current liabilities.
33
(2)
(3)
As more fully described in “Note 2. New Accounting Standards” in the Consolidated Financial Statements, we adopted FASB
Accounting Standards Update (“ASU”) 2015-17 – Income Taxes (Topic 740). In this table, working capital has been reduced for
the impact of reclassifying current deferred tax assets to non-current deferred tax liabilities by $27.3 million, $26.7 million, and
$3.6 million as of December 31, 2014, 2013, and 2012, respectively, and working capital for 2011 has been increased by $12.3
million for the reclassification of current deferred tax liabilities to non-current deferred tax liabilities.
As more fully described in “Note 2. New Accounting Standards” in the Consolidated Financial Statements, we adopted ASU
2015-03 and ASU 2015-15. In this table, total assets and long-term debt, net, including current portion have both been reduced
for the impact of reclassifying unamortized debt issue costs from non-current assets to a deduction from long-term debt by $11.6
million, $13.3 million, $15.0 million, and $12.4 million as of December 31, 2014, 2013, 2012, and 2011, respectively.
Additionally, total assets have been reduced for the impact of reclassifying current deferred tax assets to non-current deferred
tax liabilities in 2014 through 2012 as described above.
34
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is a discussion and analysis of our consolidated financial condition, results of operations, liquidity and capital
resources for each of the three years in the period ended December 31, 2015 and significant factors that could affect our prospective
financial condition and results of operations. This discussion should be read in conjunction with our consolidated financial statements
and notes included in “— Item 8. Financial Statements and Supplementary Data.” Historical results and any discussion of prospective
results may not indicate our future performance.
Business Overview
We are a global business advisory firm dedicated to helping organizations protect and enhance their enterprise value. We work
closely with our clients to help them anticipate, understand, manage and overcome complex business matters arising from such factors
as the economy, financial and credit markets, governmental regulation and legislation and litigation. We assist clients in addressing a
broad range of business challenges, such as restructuring (including bankruptcy), capital market issues and indebtedness, interim
business management, forensic accounting and litigation matters, international arbitrations, M&A, antitrust and competition matters,
securities litigation, e-discovery, management and retrieval of ESI, reputation management and strategic communications. We also
provide services to help our clients take advantage of economic, regulatory, financial and other business opportunities. Our
experienced teams of professionals include many individuals who are widely recognized as experts in their respective fields. We
believe clients retain us because of our recognized expertise and capabilities in highly specialized areas as well as our reputation for
satisfying client needs.
We report financial results for the following five reportable segments:
Our Corporate Finance & Restructuring (“Corporate Finance”) segment focuses on the strategic, operational, financial and
capital needs of businesses around the world and provides consulting and advisory services on a wide range of areas, such as
restructuring (including bankruptcy), interim management, financings, M&As, M&A integration, valuations and tax issues, as well as
financial, operational and performance improvement. Our distressed service offerings generally include corporate restructurings and
our non-distressed generally includes all other services mentioned above.
Our Forensic and Litigation Consulting (“FLC”) segment provides law firms, companies, government clients and other
interested parties with dispute advisory, investigations, forensic accounting, business intelligence assessments, data analytics and risk
mitigation services as well as interim management and performance improvement services for our health solutions practice clients.
Our Economic Consulting segment provides law firms, companies, government entities and other interested parties with
analysis of complex economic issues for use in legal, regulatory and international arbitration proceedings, strategic decision making
and public policy debates in the U.S. and around the world.
Our Technology segment provides e-discovery and information governance, hosting and consulting services and software to its
clients. It provides products, services and consulting to companies, law firms, courts and government agencies worldwide. Its
comprehensive suite of software and services help clients locate, review and produce ESI, including e-mail, computer files, voicemail,
instant messaging, cloud and social media data, as well as financial and transactional data.
Our Strategic Communications segment provides advice and consulting services relating to financial and corporate
communications, investor relations, reputation management, brand communications, public affairs, business consulting, digital design
and marketing.
We derive substantially all of our revenues from providing professional services to both U.S. and global clients. Most of our
services are rendered under time-and-expense arrangements that obligate the client to pay us a fee for the hours that we incur at agreed
upon rates. Under this arrangement, we typically bill our clients for reimbursable expenses, which may include the cost of producing
our work product and other direct expenses that we incur on behalf of the client, such as travel costs. We also render services for
which certain clients may be required to pay us a fixed fee or recurring retainer. These arrangements are generally cancellable at any
time. Some of our engagements contain performance-based arrangements in which we earn a success fee when and if certain
predefined outcomes occur. This type of success fee may supplement a time-and-expense or fixed-fee arrangement. Success fee
revenues may cause variations in our revenues and operating results due to the timing of achieving the performance-based criteria. In
our Technology segment, certain clients are also billed based on the amount of data stored on our electronic systems, the volume of
information processed or the number of users licensing our Ringtail® software products for use or installation within their own
environments. We license certain products directly to end users as well as indirectly through our channel partner relationships. Unit-
based revenue is defined as revenue billed on a per-item, per-page, or some other unit-based method and includes revenue from data
35
processing and hosting, software usage and software licensing. Unit-based revenue includes revenue associated with our proprietary
software that is made available to customers, either via a web browser (“on-demand”) or installed at our customer or partner locations
(“on-premise”). On-demand revenue is charged on a unit or monthly basis and includes, but is not limited to, processing and review
related functions. On-premise revenue is comprised of up-front license fees, with recurring support and maintenance. Seasonal factors,
such as the timing of our employees’ and clients’ vacations and holidays, impact the timing of our revenues.
Our financial results are primarily driven by:
•
•
•
•
•
•
•
•
•
the number, size and type of engagements we secure;
the rate per hour or fixed charges we charge our clients for services;
the utilization rates of the revenue-generating professionals we employ;
the number of revenue-generating professionals;
fees from clients on a retained basis or other;
licensing of our software products and other technology services;
the types of assignments we are working on at different times;
the length of the billing and collection cycles; and
the geographic locations of our clients or locations in which services are rendered.
We define acquisition growth as revenue of acquired companies in the first twelve months following the effective date of an
acquisition. Our definition of organic growth is the change in revenue excluding the impact of all such acquisitions.
When significant, we identify the estimated impact of foreign currency translation driven by our businesses with functional
currencies other than the U.S. dollar, on the period-to-period performance results. The estimate impact of foreign currency translation
is calculated as the difference between the prior period results multiplied by the average foreign currency exchange rates in the current
period and the prior period results multiplied by the average foreign currency rates in the prior period.
Non-GAAP Measures
In the accompanying analysis of financial information, we sometimes use information derived from consolidated and segment
financial information that is not presented in our financial statements and prepared in accordance with GAAP. Certain of these
measures are considered “non-GAAP financial measures” under the SEC rules. Specifically, we have referred to:
•
•
•
•
•
•
•
•
•
Segment Operating Income (Loss)
Total Segment Operating Income (Loss)
Adjusted EBITDA
Adjusted Segment EBITDA
Total Adjusted Segment EBITDA
Adjusted EBITDA Margin
Adjusted Segment EBITDA Margin
Adjusted Net Income
Adjusted Earnings per Diluted Share
We define Segment Operating Income (Loss) as a segment’s share of consolidated operating income (loss). We define Total
Segment Operating Income (Loss) as the total of Segment Operating Income (Loss) for all segments, which excludes unallocated
corporate expenses. We use Segment Operating Income (Loss) for the purpose of calculating Adjusted Segment EBITDA. We define
Adjusted EBITDA as consolidated net income (loss) 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 (loss) 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
36
Segment EBITDA for all segments, which excludes unallocated corporate expenses. We define Adjusted EBITDA Margin as
Adjusted EBITDA as a percentage of total revenues. We define Adjusted Segment EBITDA Margin as Adjusted Segment EBITDA as
a percentage of a segment’s share of revenue. 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 (loss) 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 the 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 filing.
Full Year 2015 Executive Highlights
Financial Highlights
Revenues ........................................................................................... $
Special charges (1) .............................................................................. $
Loss on early extinguishment of debt (1) ............................................ $
Adjusted EBITDA ............................................................................. $
Net income ........................................................................................ $
Earnings per common share — diluted ............................................. $
Adjusted earnings per common share — diluted ............................... $
Net cash provided by operating activities .......................................... $
Total number of employees at December 31 .....................................
2015
% Growth
Year Ended December 31,
2014
(dollar amounts in thousands, except per share amounts)
1.3%
-100.0%
100.0%
-2.3%
12.3%
9.7%
12.2%
3.3%
5.2%
1,779,149 $
— $
19,589 $
205,762 $
66,053 $
1.58 $
1.84 $
139,920 $
4,634
1,756,212
16,339
—
210,552
58,807
1.44
1.64
135,401
4,404
(1)
Excluded from non-GAAP measures.
Revenues
Revenues increased $22.9 million, or 1.3% to from 2014 to 2015. Revenues increased $72.0 million, or 4.1%, excluding a 2.8%
estimated negative impact from foreign currency translation. A prior year acquisition contributed $7.4 million of the year-over-year
growth. The remaining increase in revenues primarily resulted from higher demand for North America distressed engagements in our
Corporate Finance segment, partially offset by reduced demand for cross-border investigations and financial services litigations in our
Technology segment.
Special Charges
There were no special charges for the year ended December 31, 2015. Special charges for the year ended December 31, 2014
were $16.3 million. See “Special Charges” in “Item 6. – Selected Financial Information” for an expanded discussion.
37
Adjusted EBITDA
Adjusted EBITDA decreased $4.8 million, or 2.3%, from 2014 to 2015. Adjusted EDITDA decreased $2.2 million, or 1.1%,
excluding a 1.2% estimated negative impact from foreign currency translation. Adjusted EBITDA was unfavorably impacted by
underutilization with increased billable headcount in the Forensics and Litigation Consulting segment, and lower demand in our
Technology segment, partially offset by improved demand for restructuring services at higher realized prices in our Corporate Finance
& Restructuring segment.
Loss on early extinguishment of debt
In order to more effectively utilize the Company’s growing cash balances, maintain financial flexibility and reduce interest
expense, we retired $400 million principal amount of 6 ¾% Senior Notes due in 2020 (the “2020 Notes”) during 2015. We recognized
a $19.6 million loss on early extinguishment of debt for 2015, consisting primarily of a redemption premium of $14.3 million and a
$4.9 million non-cash write-off of unamortized deferred financing costs. The impact of early extinguishment of debt is excluded from
calculation of Adjusted EBITDA.
Net Income
Net income increased $7.2 million, or 12.3% from 2014 to 2015. This increase was driven by the business results described
above, as well as lower interest expense due to the debt restructuring completed in the third quarter, and lower income tax expense due
to the mix of earnings in the current year and a $4.6 million charge for a valuation reserve on deferred tax assets related to net
operating losses in the Company’s Australia business which was recorded in 2014. Partially offsetting these increases was the $11.9
million loss on early extinguishment of debt (net of taxes) that was recorded in the third quarter of 2015.
Earnings (loss) per diluted share and Adjusted Earnings Per Share
Earnings per diluted share increased $0.14 to $1.58 in 2015 compared to $1.44 in 2014.
Adjusted earnings per diluted share, which excludes the impact of special charges, loss on early extinguishment of debt, and the
remeasurement of acquisition-related contingent consideration, increased $0.20 to $1.84 in 2015 compared to $1.64 in 2014.
Liquidity & Capital Allocation
Cash balances decreased by $133.9 million, or 47.2%, to $149.8 million for the year ended December 31, 2015. Cash provided
by operating activities increased $4.5 million to $139.9 million in 2015 as compared to $135.4 million in 2014. The increase was
primarily due to lower forgivable loan funding, higher cash collections, lower payments for income taxes and other operating expenses
partially offset by increased payments for compensation in the year ended December 31, 2015. Days Sales outstanding (“DSO”) at
December 31, 2015 was 97 days unchanged from DSO at December 31, 2014. DSO is a measure used to assess how quickly revenues
are collected by the Company. We calculate DSO at the end of each reporting period by dividing net accounts receivable reduced by
billings in excess of services provided, by revenue for the quarter, adjusted for changes in foreign exchange rates. We multiply the
result by the number of days in the quarter.
During the third quarter of 2015, we purchased $192.9 million of the 2020 Notes through a tender offer and redeemed $207.1
million of the 2020 Notes for a total of $414.7 million using $164.7 million of cash on hand and $250 million of borrowings under our
Senior Bank Credit Facility. Subsequent to the debt tender offer and redemption, we repaid $50 million of the borrowings under our
Senior Bank Credit Facility. In addition, we repaid the final $11.0 million in notes payable to former shareholders of acquired
businesses in 2015. Financing activities in 2015 also included the repurchase and retirement of 764,545 shares of our common stock
for an average price per share of $34.68, at a total cost of $26.5 million. Our Board of Directors authorized a stock repurchase
program of up to $50 million at any time prior to May 5, 2016. As of December 31, 2015, we have $23.5 million available under this
program to purchase additional shares.
Strategic Initiatives
As a result of an ongoing strategic review of the Technology segment, the Company has taken actions to realign its workforce to
address current business demands and position itself for future growth. These actions include the termination of approximately 50
employees, representing approximately 10% of the segment’s current workforce. We estimate the impact of these actions will result in
a pre-tax income charge of approximately $4.5 million to $5.5 million, which will be recorded as a special charge in the first quarter of
2016.
38
Headcount
As of December 31, 2015, our total headcount of 4,634 increased by 230 from 4,404 as of December 31, 2014.
We increased the net number of non-billable employees by 58, from 1,060 as of December 31, 2014 to 1,118 as of
December 31, 2015. Billable headcount additions for the year-ended December 31, 2015 are referenced in the table below.
Billable Headcount
December 31, 2014 ..................................................
Additions (reductions), net .......................................
December 31, 2015 ..................................................
706
132
838
1,154
(23)
1,131
574
25
599
Strategic
Communications
566
33
599
344
5
349
Total
3,344
172
3,516
Corporate
Finance &
Restructuring
Forensic and
Litigation
Consulting
(1)
Economic
Consulting Technology
Percentage change in headcount from
prior year ..........................................................
18.7%
-2.0%
4.4%
1.5 %
5.8%
5.1%
(1)
There were 86 revenue-generating professionals as of December 31, 2014 related to a business in Latin America that was
disposed of during 2015. Excluding these professionals, the total number of revenue-generating professionals of our Forensic
and Litigation Consulting segment would be 1,068 as of December 31, 2014, resulting in a net increase of 63 professionals
(increase of 5.9%) during 2015.
Critical Accounting Policies
General. Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial
statements, which we have prepared in accordance with GAAP. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. We evaluate our estimates, including those related to allowance for doubtful accounts and unbilled
services, goodwill, share based compensation, income taxes and contingencies on an ongoing basis. We base our estimates on current
facts and circumstances, historical experience and on various other assumptions that we believe are reasonable. These results form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions.
We believe that the following critical accounting policies reflect our more significant judgments and estimates used in the
preparation of our consolidated financial statements.
Revenue Recognition. Revenue is recognized when persuasive evidence of an arrangement exists, the related services are
provided, the price is fixed or determinable and collectability is reasonably assured. If at the outset of an arrangement we determine
that the arrangement fee is not fixed or determinable, revenue is deferred until all criteria for recognizing revenue are met. Provisions
are recorded for the estimated realization adjustments on all engagements, including engagements for which fees are subject to review
by the bankruptcy courts and other regulatory institutions. If the client is in bankruptcy, fees for our services may be subject to
approval by the court. In some cases, a portion of the fees to be paid to us by a client is required by a court to be held until completion
of our work and final fee settlements have been negotiated. We make a determination whether to record all or a portion of such
holdback as revenue prior to collection on a case-by-case basis. We generate the majority of our revenues from providing professional
services under four types of billing arrangements: time-and-expense, fixed-fee, performance-based and unit-based.
Time-and-expense billing arrangements require the client to pay based on the number of hours worked by our revenue-
generating professionals at contractually agreed-upon rates. We recognize revenues for our professional services rendered under time-
and-expense engagements based on the hours incurred at agreed-upon rates as work is performed. In some cases, time-and-expense
arrangements are subject to a cap, in which case we assess work performed on a periodic basis to ensure that the cap has not been
exceeded.
In fixed-fee billing arrangements, we agree to a pre-established fee in exchange for a pre-determined set of professional
services. Generally, the client agrees to pay a fixed fee over the specified contract term. These contracts are for varying periods and
generally permit the client to cancel the contract before the end of the term. We recognize revenues for our professional services
rendered under these fixed-fee billing arrangements monthly over the specified contract term or, in certain cases, revenue is
recognized on the proportional performance method of accounting based on the ratio of labor hours incurred to estimated total labor
hours, which we consider to be the best available indicator of the pattern and timing in which such contract obligations are fulfilled.
39
In performance-based or contingent billing arrangements, fees are tied to the attainment of contractually defined objectives.
Often this type of arrangement supplements a time-and-expense or fixed-fee engagement, where payment of a performance-based fee
is deferred until the conclusion of the matter or upon the achievement of performance-based criteria. We do not recognize revenues
under performance-based billing arrangements until all related performance criteria are met and collection of the fee is reasonably
assured.
In our Technology segment, unit-based revenues are based on either the amount of data stored or processed, the number of
concurrent users accessing the information, or the number of pages or images processed for a client. We recognize revenues for our
professional services rendered under unit-based engagements as the services are provided based on agreed-upon rates. We also
generate certain revenue from software licenses and maintenance. We have vendor-specific objective evidence of fair value for
support and maintenance separate from software for the majority of our products. Accordingly, when licenses of certain offerings are
included in an arrangement with support and maintenance, we recognize the license revenue upon delivery of the license and
recognize the support and maintenance revenue over the term of the maintenance service period. Substantially all of our software
license agreements do not include any acceptance provisions. If an arrangement allows for customer acceptance of the software, we
defer revenue until the earlier of customer acceptance or when the acceptance provisions lapse. Revenues from hosting fees are
recognized based on the units used over the term of the hosting agreement. We have certain arrangements with clients in which we
provide multiple elements of services under one engagement contract. Revenues under these types of arrangements are accounted for
in accordance ASC 605-25, Multiple-Element Arrangements, and recognized pursuant to the criteria described above.
Some clients pay us retainers before we begin work for them. We hold retainers on deposit until we have completed the work.
We generally apply these retainers to final billings and refund any excess over the final amount billed to clients, as appropriate.
Reimbursable expenses, including those relating to travel, out-of pocket expenses, outside consultants and other similar costs,
are generally included in revenues, and an equivalent amount of reimbursable expenses is included in costs of services in the period in
which the expense is incurred. Revenues recognized, but not yet billed to clients and amounts billed to clients in advance of work
being performed have been recorded as “Unbilled receivables” and “Billings in excess of services provided”, respectively, in the
Consolidated Balance Sheets.
Allowance for Doubtful Accounts and Unbilled Services. We maintain an allowance for doubtful accounts and unbilled
services for estimated losses resulting from disputes that affect our ability to fully collect our billed accounts receivable, potential fee
reductions negotiated by clients or imposed by bankruptcy courts as well as the inability of clients to pay our fees. Even if a
bankruptcy court approves our services, the court has the discretion to require us to refund all or a portion of our fees due to the
outcome of the case or a variety of other factors. We estimate the allowance for all receivable risks by reviewing the status of each
matter and recording reserves based on our experience and knowledge of the particular client and historical collection patterns.
However, our actual experience may vary significantly from our estimates. If the financial condition of our clients were to deteriorate,
resulting in their inability or unwillingness to pay our fees, or bankruptcy courts require us to refund certain fees, we may need to
record additional allowances or write-offs in future periods. This risk related to a client’s inability to pay may be partially mitigated to
the extent that we may receive retainers from some of our clients prior to performing services.
We record adjustments to the allowance for doubtful accounts and unbilled services as a reduction in revenue when there are
changes in estimates of fee reductions that may be imposed by bankruptcy courts and other regulatory institutions, for both billed and
unbilled receivables. The allowance for doubtful accounts and unbilled services is also adjusted after the related work has been billed
to the client and we later discover that collectability is not reasonably assured. These adjustments are recorded to “Selling, general and
administrative expense” on the Consolidated Statements of Comprehensive Income (Loss), and totaled $15.6 million, $18.3 million,
and $13.3 million for the years ended December 31, 2015, 2014 and 2013, respectively.
Goodwill and Other Intangible Assets. Goodwill represents the purchase price of acquired businesses in excess of the fair
market value of net assets acquired. Other intangible assets include trade names, customer relationships, non-competition agreements
and software.
We test our goodwill and other indefinite-lived intangible assets for impairment annually as of the first day of the fourth quarter
or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. On a quarterly
basis, we monitor the key drivers of fair value to detect events or other changes that would warrant an interim impairment test of our
goodwill and intangible assets. Factors we consider important that could trigger an interim impairment review include, but are not
limited to, the following:
•
•
significant underperformance relative to expected historical or projected future operating results;
a significant change in the manner of our use of the acquired asset or the strategy for our overall business;
40
•
•
a significant market decline related to negative industry or economic trends; and/or
our market capitalization relative to net carrying value.
We assess our goodwill for impairment using a fair value approach at the reporting unit level. The goodwill impairment test is a
two-step process, if necessary. The provisions for the accounting standard of goodwill provide an entity with the option to assess
qualitative factors to determine whether the existence of events or circumstances leads to the determination that it is more-likely-than-
not that the fair value of a reporting unit is less than its carrying amount. This qualitative assessment is referred to as a “step zero”
approach. If, based on the review of the qualitative factors, an entity determines it is not more-likely-than-not that the fair value of a
reporting unit is less than its carrying value, the entity may skip the two-step impairment test required by prior accounting guidance. If
an entity determines otherwise, Step 1 of the two-step impairment test is required. Step 1 involves determining whether the estimated
fair value of the reporting units exceeds the respective carrying value. If the fair value exceeds the carrying value, goodwill of that
reporting unit is not impaired. However, if the carrying value exceeds the fair value of the reporting unit, goodwill may be impaired
and additional analysis is required. Step 2 of the goodwill impairment test compares the implied fair value of a reporting unit’s
goodwill to its carrying value. The implied fair value of goodwill is derived by performing a hypothetical purchase price allocation for
the reporting unit as of the measurement date, allocating the reporting unit’s estimated fair value to its net assets and identifiable
intangible assets. The residual amount from performing this allocation represents the implied fair value of goodwill. To the extent this
amount is below the carrying value of goodwill, an impairment charge is recorded.
In performing Step 1 of the goodwill impairment test, we compare the carrying amount of our reporting units to their estimated
fair values. We estimate fair value using a combination of market approaches and discounted cash flows (an income approach), using
appropriate weighting factors. We evaluate the reasonableness of the fair value calculations of our reporting units by reconciling the
total of the fair values of all of our reporting units to our total market capitalization, taking into account a reasonable control premium
for our industry.
In the market approach, we utilize market multiples derived from comparable guideline companies and comparable market
transactions to the extent available. These valuations are based on estimates and assumptions, including projected future cash flows
and the determination of appropriate market comparables and determination of whether a premium or discount should be applied to
such comparables.
The cash flows employed in the income approach are based on our most recent budgets, forecasts and business plans, as well as
various growth rate assumptions for years beyond the current business plan period, discounted using an estimated weighted average
cost of capital (“WACC”) based on our assessment of the risk inherent in the future revenue streams and cash flows and our WACC.
The WACC is comprised of (1) a risk free rate of return, (2) an equity risk premium that is based on the rate of return on equity of
publicly traded companies with business characteristics comparable to our reporting units, (3) the current after-tax market rate of
return on debt of companies with business characteristics similar to our reporting units, each weighted by the relative market value
percentages of our equity and debt, and (4) an appropriate size premium.
The process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment and
estimates, as our businesses operate in a number of markets and geographical regions. The assumptions utilized in the evaluation of
the impairment of goodwill under the market approach include the selection of comparable or “guideline” companies, which are
subject to change based on the economic characteristics of our reporting units and the selection of reference transactions, if any, for
which a fair value impact may be assessed based on market prices realized in an actual transaction. The assumptions utilized in the
evaluation of the impairment of goodwill under the income approach include revenue growth and EBITDA (earnings before interest
expense, income taxes, depreciation and amortization), tax rates, capital expenditures, WACC and related discount rates and expected
long-term growth rates. The assumptions which have the most significant effect on our valuations derived using the income approach
are: (1) the expected long-term growth rate of our reporting units’ cash flows and (2) the discount rate. There can be no assurance that
the estimates and assumptions used in our goodwill impairment testing will prove to be accurate predictions of the future. If our
assumptions regarding forecasted cash flows are not achieved or market conditions significantly deteriorate, we may be required to
record goodwill impairment charges in future periods, whether in connection with our next annual impairment test or prior to that, if a
triggering event occurs outside of the quarter during which the annual goodwill impairment test is performed. It is not possible at this
time to determine if any future impairment charge would result or, if it does, whether such charge would be material.
For the 2015 annual goodwill impairment test performed as of the Company’s measurement date of October 1, 2015, we utilized
the quantitative tests described above for each of our reporting units. Based on the results of Step1 of our goodwill impairment
analysis, we determined that the estimated fair values of each of our reporting units significantly exceeded their respective carrying
values and no further impairment testing was required. While the results of our 2015 annual goodwill impairment test indicate that
none of our reporting units are at risk for impairment, the amount by which the estimated fair value of our Technology segment
exceeded its carrying value declined considerably from the amount of excess estimated fair value over carrying value as of October 1,
41
2014, the date of our previous goodwill impairment test. Significant reductions to our current estimates of cash flows for our
reporting units, declines in the market participant multiples for comparable companies and reference transactions in the market could
result in an impairment of goodwill in the future.
In the third quarter of 2013, in addition to reduced levels of M&A activity, our Strategic Communications segment experienced
pricing pressure for certain discretionary communications services, including initial public offering support services where there is
volume but also increasing competition. These factors compressed segment margins and contributed to a change in the Company’s
near-term outlook for this segment. This was considered an interim impairment indicator for the Strategic Communications segment at
the Strategic Communications reporting unit level. As a result, we performed an interim impairment analysis with respect to the
carrying value of goodwill in our Strategic Communications reporting unit in connection with the preparation of our financial
statements for the quarter ended September 30, 2013. The results of the Step 1 goodwill impairment analysis indicated that the
estimated fair value of our Strategic Communications reporting unit was less than its carrying value; therefore we applied Step 2 of the
goodwill impairment test. The results of Step 2 indicated that the carrying values of the goodwill associated with the Strategic
Communications reporting unit exceeded its implied fair value, resulting in an $83.8 million non-deductible goodwill impairment
charge which is recorded as a separate line item within operating income (loss) within the Consolidated Statements of Comprehensive
Income (Loss). The impairment charge was non-cash in nature and did not affect the Company’s current liquidity, cash flows,
borrowing capability or operations; nor did it impact the debt covenants under the Company’s existing credit facility and the
indentures for the 2020 and 2022 Notes.
Intangible assets with finite lives are amortized over their estimated useful lives and reviewed for impairment whenever events
or changes in circumstances indicate an asset’s carrying value may not be recoverable. We amortize our acquired finite-lived
intangible assets on a straight-line basis over periods ranging from 1 to 15 years.
Share-Based Compensation. We recognize share-based compensation using a fair value based recognition method. Share-based
compensation cost is estimated at the grant date based on the fair value of the award and is recognized as expense over the requisite
service period or performance period of the award. The amount of share-based compensation expense recognized at any date must at
least equal the portion of grant date value of the award that is vested at that date.
We use the Black-Scholes pricing model to determine the fair value of stock options on the dates of grant. The Black-Scholes
pricing model requires various assumptions, including volatility and expected term, which are based on our historical experience. We
also make assumptions regarding the risk-free interest rate and the expected dividend yield. The risk-free interest rate is based on the
U.S. Treasury interest rate whose term is consistent with the expected term of the share-based award. The dividend yield on our
common stock is assumed to be zero since we do not pay dividends and have no current plans to do so in the future.
Restricted stock is measured based on the fair market values of the underlying stock on the dates of grant. Awards with
performance-based vesting conditions require the achievement of specific financial targets at the end of the specified performance
period and the employee’s continued employment. We recognize the estimated fair value of performance-based awards as share-based
compensation expense over the performance period. We consider each performance period separately, based upon our determination
of whether it is probable that the performance target will be achieved. At each reporting period, we reassess the probability of
achieving the performance targets. If a performance target is not met, no compensation cost is ultimately recognized against that
target, and, to the extent previously recognized, compensation expense is reversed. For all our share-based awards, we estimate the
expected forfeiture rate and recognize expense only for those shares expected to vest. We estimate the forfeiture rate based on
historical experience. Groups of share-based award holders that have similar historical behavior with regard to option exercise timing
and forfeiture rates are considered separately for valuation and attribution purposes. Forfeitures are estimated at the time an award is
granted and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
Income Taxes. Our income tax provision consists principally of federal, state and international income taxes. We generate
income in a significant number of states located throughout the U.S., as well as foreign countries in which we conduct business. Our
effective income tax rate may fluctuate due to changes in the mix of earnings between higher and lower state or country tax
jurisdictions and the impact of non-deductible expenses. Additionally, we record deferred tax assets and liabilities using the asset and
liability method of accounting, which requires us to measure these assets and liabilities using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse. A valuation allowance is recognized if, based on the weight of available
evidence, it is more-likely-than-not that some portion, or all, of the deferred tax asset will not be realized. In evaluating our ability to
recover our deferred tax assets, we consider all available positive and negative evidence, including scheduled reversals of temporary
differences, projected future taxable income, tax-planning strategies, and results of recent operations. The evaluation of the need for a
valuation allowance requires management judgment and could impact our financial results and effective tax rate.
42
Significant New Accounting Pronouncements
See Item 8. of Part II, “Financial Statements and Supplementary Data—Note 2—New Accounting Standards."
RESULTS OF OPERATIONS
Segment and Consolidated Operating Results:
2015
Year Ended December 31,
2014
(in thousands, except per share data)
2013
Revenues
Corporate Finance & Restructuring .......................................................... $
Forensic and Litigation Consulting ..........................................................
Economic Consulting ...............................................................................
Technology ...............................................................................................
Strategic Communications ........................................................................
Total revenues.................................................................................... $
440,398 $
482,269
447,909
218,599
189,974
1,779,149 $
391,115 $
483,380
451,040
241,310
189,367
1,756,212 $
382,526
433,632
447,366
202,663
186,245
1,652,432
Operating income (loss)
Corporate Finance & Restructuring .......................................................... $
Forensic and Litigation Consulting ..........................................................
Economic Consulting ...............................................................................
Technology ...............................................................................................
Strategic Communications ........................................................................
Segment operating income ................................................................
Unallocated corporate expenses................................................................
Operating income ..............................................................................
Other income (expense)
Interest income and other..........................................................................
Interest expense ........................................................................................
Loss on early extinguishment of debt .......................................................
Other income (expense) ....................................................................
Income before income tax provision ...........................................................
Income tax provision ....................................................................................
Net income (loss)........................................................................................... $
Earnings (loss) per common share — basic ............................................... $
Earnings (loss) per common share — diluted ............................................ $
85,207 $
58,185
57,912
22,832
21,723
245,859
(81,348)
164,511
3,232
(42,768)
(19,589)
(59,125)
105,386
39,333
66,053 $
1.62 $
1.58 $
46,913 $
83,180
55,282
46,906
15,603
247,884
(100,458 )
147,426
4,670
(50,685 )
—
(46,015 )
101,411
42,604
58,807 $
1.48 $
1.44 $
58,594
68,211
86,714
38,038
(72,129)
179,428
(97,989)
81,439
1,748
(51,376)
—
(49,628)
31,811
42,405
(10,594)
(0.27)
(0.27)
Reconciliation of Net Income (Loss) to Adjusted EBITDA:
Net income (loss)........................................................................................... $
Add back:
Income tax provision ................................................................................
Other income (expense), net .....................................................................
Depreciation and amortization ..................................................................
Amortization of other intangible assets ....................................................
Special charges .........................................................................................
Loss on early extinguishment of debt .......................................................
Remeasurement of acquisition-related contingent
consideration ..........................................................................................
Goodwill impairment charge ....................................................................
Adjusted EBITDA ............................................................................. $
2015
Year Ended December 31,
2014
(in thousands)
2013
66,053 $
58,807 $
(10,594)
39,333
39,536
31,392
11,726
—
19,589
42,604
46,015
33,989
15,521
16,339
—
42,405
49,628
32,541
22,954
38,414
—
(1,867)
—
205,762
$
(2,723 )
—
210,552
$
(13,555)
83,752
245,545
43
Reconciliation of Net Income (Loss) and Earnings (Loss) Per Share to Adjusted Net Income and Adjusted Earnings Per Share:
Net income (loss)............................................................................................ $
Add back:
Special charges, net of tax (1) .....................................................................
Goodwill impairment charge (2) .................................................................
Loss on early extinguishment of debt, net of tax (3) ...................................
Remeasurement of acquisition-related contingent consideration, net of
tax (3) .......................................................................................................
Adjusted Net Income .................................................................................... $
Earnings (loss) per common share — diluted ............................................. $
Add back:
Special charges, net of tax (1) .....................................................................
Goodwill impairment charge (2) .................................................................
Remeasurement of acquisition-related contingent consideration, net of
tax (4) .......................................................................................................
Loss on early extinguishment of debt, net of tax (3) ...................................
Impact of denominator for diluted adjusted earnings per common share (5) ...
Adjusted earnings per common share — diluted ....................................... $
Weighted average number of common shares outstanding —
diluted (5) ....................................................................................................
2015
Year Ended December 31,
2014
2013
(in thousands, except per share data)
66,053 $
58,807 $
(10,594)
—
—
11,881
9,637
—
—
(1,120)
76,814 $
1.58 $
(1,718 )
66,726 $
1.44 $
—
—
(0.02)
0.28
—
1.84 $
0.24
—
(0.04 )
—
—
1.64 $
23,267
83,752
—
(12,054)
84,371
(0.27)
0.59
2.14
(0.30)
—
(0.07)
2.09
41,729
40,729
40,421
(1)
(2)
(3)
(4)
(5)
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 special charges for the years ended December 31,
2014 and 2013 were 41.0% and 39.4%, respectively. The tax expense related to the adjustments related to special charges for the
years ended December 31, 2014 and 2013 were $6.7 million or $0.16 impact on diluted earnings per share, and $15.1 million or
$0.39 impact on diluted earnings per share, respectively.
The goodwill impairment charge is non-deductible for income tax purposes and resulted in no tax benefit for the year ended
December 31, 2013.
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 adjustment related to the loss on early extinguishment of debt for the
year ended December 31, 2015 was 39.3%. The tax benefit related to the adjustment for the year ended December 31, 2015 was
$7.7 million or $0.18 impact on diluted earnings per share. There was no loss on early extinguishment of debt in the years ended
December 31, 2014 or December 31, 2013.
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 years ended December 31, 2015, 2014 and 2013 were 40.0%, 36.9% and 11.1%, respectively.
The tax expense related to the adjustments related to the remeasurement of acquisition-related contingent consideration for the
years ended December 31, 2015, 2014 and 2013 were $0.7 million or $0.02 impact on diluted earnings per share, $1.0 million or
$0.02 impact on diluted earnings per share and $1.5 million or $0.04 impact on diluted earnings per share respectively.
For the year ended December 31, 2013, the Company reported a net loss. For the period, the basic weighted average common
shares outstanding equals the diluted weighted average common shares outstanding for purposes of calculating GAAP earnings
per share because potentially dilutive securities would be antidilutive. For non-GAAP purposes, the per share and share amounts
presented herein reflect the impact of the inclusion of share-based awards and convertible notes that are considered dilutive
based on the impact of the add backs included in Adjusted Net Income above.
Year Ended December 31, 2015 compared to December 31, 2014
Revenues and Operating income
See “Segment Results” for an expanded discussion of Revenue and Adjusted Segment EBITDA.
44
Special charges
There were no special charges for the year ended December 31, 2015. Special charges for the year ended December 31, 2014
were $16.3 million. See “Special Charges” in Item 6 – Selected Financial Information for an expanded disclosure.
The following table details the special charges by segment.
Corporate Finance & Restructuring ............................................................................................
Forensic and Litigation Consulting ............................................................................................
Economic Consulting .................................................................................................................
Technology .................................................................................................................................
Strategic Communications .........................................................................................................
$
Unallocated Corporate ................................................................................................................
Total .....................................................................................................................................
$
2014
(in thousands)
84
308
12
19
3
426
15,913
16,339
Unallocated corporate expenses
Unallocated corporate expenses decreased $19.2 million, or 19.1%, to $81.3 million in 2015 from $100.5 million in 2014.
Excluding the impact of special charges of $15.9 million recorded in 2014, unallocated corporate expenses decreased $3.3 million in
2015, or 3.9%. The decrease was primarily due to lower third party costs related to strategic development efforts and executive search
activities, the termination of the airplane lease and closure of the West Palm Beach executive office in 2014, partially offset by an
increase in infrastructure department costs to support growth in the business and to support strategic initiatives.
Interest income and other
Interest income and other, which includes foreign currency transaction gains and losses, decreased by $1.4 million to $3.3
million for 2015 from $4.7 million for 2014. The decrease was due to a $1.2 million gain related to an insurance settlement in 2014, a
$1.0 million loss on the sale of a foreign subsidiary in 2015, and $0.9 million lower interest income in 2015 relative to the prior year,
partially offset by lower foreign currency transaction losses in 2015 relative to 2014. Transaction losses were $0.9 million for the year
ended December 31, 2015 as compared to net losses of $2.8 million in the same prior year period. Transaction gains and losses, both
realized and unrealized, relate to the remeasurement or settlement of monetary assets and liabilities that are denominated in a currency
other than an entity’s functional currency. These monetary assets and liabilities include cash as well as third party and intercompany
receivables and payables.
Interest expense
Interest expense decreased $7.9 million, or 15.6%, to $42.8 million for 2015 from $50.7 million for 2014. Interest expense in
2015 was favorably impacted by lower average interest rates and borrowings compared to the same prior year period. This was
primarily driven by the retirement of the 2020 Notes. The retirement of the 2020 Notes was financed with a combination of cash and
borrowings under the Senior Bank Credit Facility resulting in both significantly lower average debt balances and lower interest rates.
Income tax provision
Our income tax provision was $39.3 million with an effective tax rate of 37.3% for 2015, as compared to the income tax
provision of $42.6 million with an effective tax rate of 42.0% for 2014. The decrease in the effective tax rate in 2015 was driven by
lower valuation allowances recorded on foreign net operating losses, favorable impact of change in state tax law, and favorable mix of
earnings in foreign jurisdictions.
Year Ended December 31, 2014 compared to December 31, 2013
Revenues and Operating income
See “Segment Results” for an expanded discussion of Revenue and Adjusted Segment EBITDA.
45
Special charges
During the years ended December 31, 2014 and 2013, we recorded special charges totaling $16.3 million and $38.4 million,
respectively. See “Special Charges” in Item 6 – Selected Financial Information for an expanded disclosure.
The following table details the special charges by segment, and for 2013, the decrease in total headcount.
2014
Special
Charges
2013
Special
Charges
Headcount
Corporate Finance & Restructuring ............................................................... $
Forensic and Litigation Consulting ...............................................................
Economic Consulting ....................................................................................
Technology ....................................................................................................
Strategic Communications ............................................................................
Unallocated Corporate ...................................................................................
Total ........................................................................................................ $
84 $
(dollars in thousands)
10,274
2,111
11
16
66
12,478
25,936
38,414
308
12
19
3
426
15,913
16,339 $
25
17
—
—
—
42
3
45
Unallocated corporate expenses
Unallocated corporate expenses increased $2.5 million, or 2.6%, to $100.5 million in 2014 from $98.0 million in 2013.
Excluding the impact of special charges of $15.9 million recorded in 2014 and $25.9 million recorded in 2013, unallocated corporate
expenses increased $12.5 million in 2014, or 17.3%. The increase was primarily due to increased resources to assess and evaluate
certain strategic initiatives, higher costs related to performance based compensation for U.S. and regional personnel, and costs related
to our global SMD leadership meeting, partially offset by lower costs related to corporate executives and the termination of the
airplane lease.
Interest income and other
Interest income and other, which includes foreign currency transaction gains and losses, increased by $2.9 million to $4.7
million in 2014 from $1.7 million in 2013. The increase in interest income and other was primarily due to non-recurring interest and
other non-operating income related to client and insurance settlements.
Interest expense
Interest expense decreased $0.7 million, or 1.3%, to $50.7 million in 2014 from $51.4 million in 2013. Interest expense in 2014
was favorably impacted by lower average borrowings.
Income tax provision
Our effective tax rate for the year ended December 31, 2014 was 42.0%. The effective tax rate in 2014 was unfavorably
impacted by valuation allowances on foreign net operating losses and the mix of U.S. earnings by State. The effective tax rate for
2013 was not meaningful due to the impact of the non-deductible goodwill impairment charges of $83.8 million. The effective tax rate
for 2013 excluding goodwill impairment charges from pre-tax income was 36.7%.
46
SEGMENT RESULTS
Total Adjusted Segment EBITDA
We evaluate the performance of our operating segments based on Adjusted Segment EBITDA which is a non-GAAP measure.
The following table reconciles Net Income (Loss) to Total Adjusted Segment EBITDA for the years ended December 31, 2015, 2014,
and 2013.
Net income (loss) ............................................................... $
Add back:
2015
Year Ended December 31,
2014
(in thousands)
2013
66,053 $
58,807 $
(10,594)
Income tax provision .....................................................
Other income (expense), net ..........................................
Loss on early extinguishment of debt............................
Unallocated corporate expense ......................................
Total segment operating income .............................
39,333
39,536
19,589
81,348
245,859
42,604
46,015
—
100,458
247,884
42,405
49,628
—
97,989
179,428
Add back:
Segment depreciation expense .................................
Amortization of other intangible assets ...................
Segment special charges ..........................................
Remeasurement of acquisition-related contingent
consideration .........................................................
Goodwill impairment charge ...................................
Total Adjusted Segment EBITDA .................. $
27,717
11,726
—
30,267
15,521
426
28,203
22,954
12,478
(1,867)
(2,723 )
—
283,435 $
—
291,375 $
(13,555)
83,752
313,260
Other Segment Operating Data
2015
Year Ended December 31,
2014
2013
Number of revenue-generating professionals: (at period end)
Corporate Finance & Restructuring .........................................
Forensic and Litigation Consulting ..........................................
Economic Consulting ...............................................................
Technology (1) ..........................................................................
Strategic Communications .......................................................
Total revenue-generating professionals..........................
Utilization rates of billable professionals: (2)
Corporate Finance & Restructuring .........................................
Forensic and Litigation Consulting ..........................................
Economic Consulting ...............................................................
Average billable rate per hour: (3)
Corporate Finance & Restructuring ......................................... $
Forensic and Litigation Consulting .......................................... $
Economic Consulting ............................................................... $
838
1,131
599
349
599
3,516
69%
64%
72%
383 $
319 $
512 $
706
1,154
574
344
566
3,344
67 %
69 %
75 %
374 $
321 $
512 $
737
1,061
530
306
590
3,224
65%
68%
81%
410
317
503
(1)
The number of revenue-generating professionals for the Technology segment excludes as-needed professionals, who we employ
based on demand for the segment’s services. Prior to 2014, we generally contracted with third-party agencies to source
professionals; beginning in August 2014, we initiated a direct employment model to fill certain roles. We employed an average
of 395 as needed employees during the year ended December 31, 2015 and an average of 295 as-needed employees during the
period from August 2014 through December 31, 2014.
(2) We calculate the utilization rate for our billable professionals by dividing the number of hours that all of our billable
professionals worked on client assignments during a period by the total available working hours for all of our billable
professionals during the same period. Available hours are determined by the standard hours worked by each employee, adjusted
for part-time hours, local country standard work weeks and local country holidays. Available working hours include vacation
and professional training days, but exclude holidays. Utilization rates are presented for our segments that primarily bill clients
on an hourly basis. We have not presented a utilization rate for our Technology and Strategic Communications segments as most
of the revenues of these segments are not based on billable hours.
47
(3)
For engagements where revenues are based on number of hours worked by our billable professionals, average billable rate per
hour is calculated by dividing revenues for a period by the number of hours worked on client assignments during the same
period. We have not presented an average billable rate per hour for our Technology and Strategic Communications segments as
most of the revenues of these segments are not based on billable hours.
CORPORATE FINANCE & RESTRUCTURING
2015
Year Ended December 31,
2014
(dollars in thousands, except rate per hour)
2013
Revenues .................................................................................................. $
Percentage change in revenues from prior year ......................................
440,398 $
12.6%
391,115 $
2.2 %
382,526
Operating expenses:
Direct cost of revenues ........................................................................
Selling, general and administrative expenses ......................................
Special charges ....................................................................................
Acquisition-related contingent consideration ......................................
Amortization of other intangible assets ...............................................
Segment operating income ...........................................................
Percentage change in segment operating income
271,530
81,550
—
(1,439)
3,550
355,191
85,207
263,599
75,382
84
(452 )
5,589
344,202
46,913
from prior year ........................................................................
81.6%
-19.9 %
Add back:
Depreciation and amortization of intangible assets .............................
Special charges ....................................................................................
Remeasurement of acquisition-related contingent consideration ........
Adjusted Segment EBITDA ........................................................ $
Gross profit (1) ........................................................................................... $
Percentage change in gross profit from prior year..................................
Gross profit margin (2) ...............................................................................
Adjusted Segment EBITDA as a percent of revenues ..............................
Number of revenue-generating professionals (at period end) ...................
Percentage change in number of revenue-generating professionals
from prior year ....................................................................................
Utilization rates of billable professionals ..................................................
Average billable rate per hour ................................................................... $
6,385
—
(1,491)
90,101 $
$
32.4%
38.3%
20.5%
838
168,868
18.7%
69%
383 $
9,157
84
(662 )
55,492 $
$
127,516
-7.2 %
32.6 %
14.2 %
706
-4.2 %
67 %
374 $
245,112
71,966
10,274
(9,900)
6,480
323,932
58,594
9,929
10,274
(11,614)
67,183
137,414
35.9%
17.6%
737
65%
410
(1)
(2)
Revenues less direct cost of revenues.
Gross profit as a percent of revenues.
Year ended December 31, 2015 compared to December 31, 2014
Revenues increased $49.3 million, or 12.6%, from 2014 to 2015, which included a 3.6% estimated negative impact from foreign
currency translation. Excluding the estimated impact of foreign currency translation, the revenue increase of $63.4 million, or 16.2%,
was driven primarily by higher demand for the segment’s distressed and non-distressed service offerings in North America and higher
demand in our transaction advisory services in EMEA, partially offset by lower demand and lower realized rates in our Asia Pacific
restructuring practice.
Gross profit increased $41.4 million, or 32.4%, from 2014 to 2015. Gross profit margin increased 5.7 percentage points from
2014 to 2015. The majority of the margin increase is due to a higher mix of the segment’s distressed service offerings where increased
demand led to improved staff leverage and utilization in North America.
SG&A expense increased $6.2 million, or 8.2%, from 2014 to 2015, which included a 4.9% estimated positive impact from
foreign currency translation. SG&A expense was 18.5% of revenues for 2015 compared to 19.3% for 2014. Excluding the estimated
positive impact of foreign currency translation, the SG&A increase of $9.9 million, or 13.1%, was due to higher outside services,
travel expense related to business development activities, and employee compensation.
48
Year ended December 31, 2014 compared to December 31, 2013
Revenues increased $8.6 million, or 2.2%, from 2013 to 2014. Acquisition-related revenues contributed $4.4 million, or 1.1%,
compared to 2013. Revenues increased organically $4.2 million, or 1.1%, primarily due higher volume in in our EMEA practice and
growth in non-distressed engagements in North America, partially offset by continued slowdown in our global bankruptcy and
restructuring practices.
Gross profit decreased $9.9 million, or 7.2%, from 2013 to 2014. Gross profit margin decreased 3.3 percentage points from
2013 to 2014. The decrease in gross profit margin was due to a shift in the mix of engagements to lower margin non-distressed work,
continued investments in our European transaction advisory practice, and higher performance-based compensation expense.
SG&A expense increased $3.4 million, or 4.7%, from 2013 to 2014. SG&A expense was 19.3% of revenues for 2014 compared
to 18.8% for 2013. The increase in SG&A expense was due to increased bad debt expense, additional overhead costs related to
acquired practices, and the investment in the European transaction advisory practice partially offset by the absence of the non-
recurring acquisition costs of $1.8 million recorded in the same prior year period.
FORENSIC AND LITIGATION CONSULTING
2015
Year Ended December 31,
2014
2013
(dollars in thousands, except rate per hour)
Revenues .................................................................................................. $
Percentage change in revenues from prior year ......................................
482,269 $
-0.2%
483,380 $
11.5 %
433,632
Operating expenses:
Direct cost of revenues ........................................................................
Selling, general and administrative expenses ......................................
Special charges ....................................................................................
Acquisition-related contingent consideration ......................................
Amortization of other intangible assets ...............................................
Segment operating income ...........................................................
Percentage change in segment operating income
327,115
94,717
—
30
2,222
424,084
58,185
306,438
90,707
308
(866 )
3,613
400,200
83,180
from prior year ........................................................................
-30.0%
21.9 %
Add back:
Depreciation and amortization of intangible assets .............................
Special charges ....................................................................................
Remeasurement of acquisition-related contingent consideration ........
Adjusted Segment EBITDA ........................................................ $
Gross profit (1) ........................................................................................... $
Percentage change in gross profit from prior year..................................
Gross profit margin (2) ...............................................................................
Adjusted Segment EBITDA as a percent of revenues ..............................
Number of revenue-generating professionals (at period end) (3) ...............
Percentage change in number of revenue-generating professionals
from prior year ....................................................................................
Utilization rates of billable professionals ..................................................
Average billable rate per hour ................................................................... $
6,082
—
—
64,267 $
$
-12.3%
32.2%
13.3%
155,154
1,131
-2.0%
64%
319 $
7,914
308
(934 )
90,468 $
$
176,942
13.8 %
36.6 %
18.7 %
1,154
8.8 %
69 %
321 $
278,174
84,616
2,111
(1,622)
2,142
365,421
68,211
6,100
2,111
(1,941)
74,481
155,458
35.9%
17.2%
1,061
68%
317
(1)
(2)
(3)
Revenues less direct cost of revenues.
Gross profit as a percent of revenues.
There were 86 and 96 revenue-generating professionals as of December 31, 2014 and 2013, respectively, related to a business
that was disposed of during 2015. Excluding these professionals, the total number of revenue-generating professionals of our
Forensic and Litigation Consulting segment would be 1,068 and 965 as of December 31, 2014 and 2013, respectively.
49
Year Ended December 31, 2015 compared to December 31, 2014
Revenues decreased $1.1 million, or 0.2%, from 2014 to 2015, which included a 1.8% estimated negative impact from foreign
currency translation. Excluding the estimated impact of foreign currency translation, revenues increased $7.8 million, or 1.6%, due to
$9.0 million increase in success fees in our health solutions practice and higher demand in our construction solutions practices. These
increases were partially offset by lower demand in our global dispute advisory services practice and lower realized rates in our health
solutions practice.
Gross profit decreased $21.8 million, or 12.3%, from 2014 to 2015. Gross profit margin decreased 4.4 percentage points from
2014 to 2015. This was driven by a decrease in utilization in our global dispute advisory services and global risk and investigations
practice and due to severance associated with the departure of practitioners across some of our practices.
SG&A expense increased $4.0 million, or 4.4%, from 2014 to 2015, which included a $2.1 million, or 2.3%, estimated positive
impact from foreign currency translation. SG&A expense was 19.6% of revenue for 2015 compared to 18.8% for 2014. Excluding the
estimated positive impact of foreign currency translation, the SG&A expense increase of $6.1 million, or 6.7%, was driven by higher
bad debt expense in 2015 as compared to 2014, which was a result of collection on a prior period bad debt and higher business
development expenses. This was partially offset by lower compensation related to the departure of certain senior personnel.
Year Ended December 31, 2014 compared to December 31, 2013
Revenues increased $49.7 million, or 11.5%, from 2014 to 2015. Acquisition-related revenues contributed $11.1 million, or
2.6% compared to 2013. Revenues increased organically $38.7 million, or 8.9%, due to higher demand in our global disputes,
construction solutions and data analytics practices, and in the North America and Asia Pacific regions of our investigations practice,
partially offset by decline in our health solutions practice and lower success fees.
Gross profit increased $21.5 million, or 13.8%, from 2013 to 2014. Gross profit margin increased 0.7 percentage points from
2013 to 2014. The increase in gross profit margin is related to higher utilization in our construction solutions, data analytics, disputes
and investigations practices, partially offset by increased performance based compensation and continued investment in the health
solutions practice.
SG&A expense increased $6.1 million, or 7.2%, from 2013 to 2014. SG&A expense was 18.8% of revenues for 2014 compared
to 19.5% for 2013. The increase in SG&A expense was due to additional direct hiring to support increased demand, increased
corporate allocations and incremental SG&A expenses related to our acquired business, partially offset by collection on a prior period
bad debt.
50
ECONOMIC CONSULTING
2015
Year Ended December 31,
2014
(dollars in thousands, except rate per hour)
2013
Revenues .................................................................................................. $
Percentage change in revenues from prior year ......................................
447,909 $
-0.7%
451,040 $
0.8 %
Operating expenses:
Direct cost of revenues ........................................................................
Selling, general and administrative expenses ......................................
Special charges ....................................................................................
Acquisition-related contingent consideration ......................................
Amortization of other intangible assets ...............................................
Segment operating income ...........................................................
Percentage change in segment operating income
327,870
61,213
—
(318)
1,232
389,997
57,912
329,425
66,159
12
(885 )
1,047
395,758
55,282
from prior year ........................................................................
4.8%
-36.2 %
Add back:
Depreciation and amortization of intangible assets .............................
Special charges ....................................................................................
Remeasurement of acquisition-related contingent consideration ........
Adjusted Segment EBITDA ........................................................ $
Gross profit (1) ........................................................................................... $
Percentage change in gross profit from prior year..................................
Gross profit margin (2) ...............................................................................
Adjusted Segment EBITDA as a percent of revenues ..............................
Number of revenue-generating professionals (at period end) ...................
Percentage change in number of revenue-generating professionals
from prior year ....................................................................................
Utilization rates of billable professionals ..................................................
Average billable rate per hour ................................................................... $
4,794
—
(376)
62,330 $
$
-1.3%
26.8%
13.9%
599
120,039
4.4%
72%
512 $
5,115
12
(1,127 )
59,282 $
$
121,615
-17.3 %
27.0 %
13.1 %
574
8.3 %
75 %
512 $
447,366
300,293
58,282
11
258
1,808
360,652
86,714
5,479
11
—
92,204
147,073
32.9%
20.6%
530
81%
503
(1)
(2)
Revenues less direct cost of revenues.
Gross profit as a percent of revenues.
Year ended December 31, 2015 compared to December 31, 2014
Revenues decreased $3.1 million, or 0.7%, from 2014 to 2015, which included a 2.3% estimated negative impact from foreign
currency translation. Revenues increased $6.5 million, or 1.4% as a result of an acquisition in late 2014. Excluding the estimated
impact of foreign currency translation and acquisition related impacts, revenues increased $0.8 million primarily due to higher demand
for our M&A related antitrust and international arbitration services, which was partially offset by lower demand for our non-M&A
related financial economics and antitrust services.
Gross profit decreased $1.6 million, or 1.3%, from 2014 to 2015. Gross profit margin decreased 0.2 percentage points from
2014 to 2015. This was primarily driven by lower utilization in our non-M&A related financial economics and antitrust services. This
was partially offset by higher utilization in our M&A related antitrust and international arbitration services, and higher realized rates in
our non-M&A related antitrust and financial economics services, as well as an accrual for a non-recurring employee state tax
equalization obligation that reduced gross profit margin in 2014.
SG&A expense decreased $4.9 million, or 7.5%, from 2014 to 2015, which included a $2.0 million, or 3.0%, estimated positive
impact from foreign currency translation. SG&A expense was 13.7% of revenues for 2015 compared to 14.7% for 2014. Excluding
the estimated positive impact of foreign currency translation, the SG&A expense decrease of $3.0 million, or 4.5%, was driven
primarily by lower bad debt expenses in 2015, which was partially offset by higher technology infrastructure and legal costs, as well
as general and administrative costs from the acquired business.
51
Year ended December 31, 2014 compared to December 31, 2013
Revenues increased $3.7 million, or 0.8%, from 2013 to 2014. Acquisition-related revenues contributed $3.3 million, or 0.7%
compared to 2013. The revenues increased organically $0.4 million, or 0.1%, which includes a 0.6% increase from the estimated
positive impact of foreign currency translation. Excluding the impact of foreign currency translation, revenue declined due to lower
demand and lower realization in our antitrust practice, partially offset by higher demand in our M&A services.
Gross profit decreased $25.5 million, or 17.3%, from 2013 to 2014. Gross profit margin decreased 5.9 percentage points from
2013 to 2014. The decrease in gross profit margin was the result of increased compensation expense related to employment contract
extensions of certain key senior client-service professionals and an accrual for a non-recurring employee state tax equalization
obligation, which contributed approximately 5.6 percentage points and approximately 1.0 percentage points, respectively, to the total
decrease in gross profit margin. The impact of these increased costs on gross profit margin was partially offset by higher realized bill
rates.
SG&A expense increased $7.9 million, or 13.5%, from 2013 to 2014. SG&A expense was 14.7% of revenues for 2014
compared to 13.0% for 2013. The increase in SG&A expense was due to higher bad debt expense, an increase in overall employee
related support expenses, higher IT infrastructure costs and higher travel and entertainment expenses related to marketing and business
development. Bad debt expense was $9.9 million, or 2.2%, of revenues for 2014 compared to $6.7 million, or 1.5%, of revenues for
2013.
TECHNOLOGY
Revenues ....................................................................................... $
Percentage change in revenues from prior year ..........................
218,599 $
-9.4%
241,310 $
19.1 %
2015
Year Ended December 31,
2014
(dollars in thousands)
2013
202,663
Operating expenses:
Direct cost of revenues.............................................................
Selling, general and administrative expenses ...........................
Special charges ........................................................................
Amortization of other intangible assets....................................
Segment operating income ...............................................
Percentage change in segment operating income from
123,859
71,120
—
788
195,767
22,832
125,371
68,162
19
852
194,404
46,906
96,779
59,890
16
7,940
164,625
38,038
prior year .....................................................................
-51.3%
23.3 %
Add back:
Depreciation and amortization of intangible assets..................
Special charges ........................................................................
Adjusted Segment EBITDA ............................................. $
Gross profit (1) ................................................................................ $
Percentage change in gross profit from prior year ......................
Gross profit margin (2) ....................................................................
Adjusted Segment EBITDA as a percent of revenues ...................
Number of revenue-generating professionals (at period end) (3) ...
Percentage change in number of revenue-generating
professionals from prior year ...................................................
16,178
—
39,010 $
$
94,740
-18.3%
43.3%
17.8%
349
16,620
19
63,545 $
$
115,939
22,601
16
60,655
105,884
9.5 %
48.0 %
26.3 %
344
52.2%
29.9%
306
1.5%
12.4 %
(1)
(2)
(3)
Revenues less direct cost of revenues.
Gross profit as a percent of revenues.
Includes personnel involved in direct client assistance and revenue-generating consultants, and excludes professionals employed
on an as-needed basis.
52
Year Ended December 31, 2015 compared to December 31, 2014
Revenues decreased $22.7 million, or 9.4%, from 2014 to 2015, which included a 1.3% estimated negative impact from foreign
currency translation. Excluding the estimated negative impact of foreign currency translation, revenues decreased $19.6 million, or
8.1%, largely due to reduced demand for cross-border investigations and financial services litigations, partially offset by an increase in
M&A related second request activity. Consulting revenues declined largely due to a decrease in demand as referenced above and also
due to lower realized pricing on certain large clients. Other services revenue declined primarily due to lower realized pricing in
hosting services, which were partially offset by higher volumes.
Gross profit decreased $21.2 million, or 18.3%, from 2014 to 2015. Gross profit margin decreased 4.7 percentage points to
43.3% from 2014 to 2015. The decrease in gross profit margin was due to lower realized pricing and lower utilization in consulting,
and due to a decline in pricing referenced above for other services, coupled with higher compensation and reduced leverage.
SG&A expense increased $3.0 million, or 4.3%, from 2014 to 2015. SG&A expense was 32.5% of revenues for 2015 compared
to 28.2% for 2014. The increase in SG&A expense was due to higher salaries resulting from increased headcount in the latter part of
2014 and early 2015, as well as higher occupancy costs, outside contractors for software maintenance, partially offset by lower
variable compensation. Research and development expense related to software development was $19.5 million for 2015 compared to
$19.3 million for 2014. Additionally, there was an increase of $3.1 million in capitalization related to software development costs.
Year Ended December 31, 2014 compared to December 31, 2013
Revenues increased $38.6 million, or 19.1%, from 2013 to 2014. This increase was primarily due to the continued demand on
complex global investigations and financial services industry investigations and M&A Second Requests, higher Ringtail SaaS sales;
partially offset by price reductions in services and lower licensing sales.
Gross profit increased $10.1 million, or 9.5%, from 2013 to 2014. Gross profit margin decreased 4.2 percentage points to 48.0%
from 2014 to 2015. The decrease in gross profit margin was due to the increased mix of certain lower margin services as a percent of
total revenue and due to price reductions in other services.
SG&A expense increased $8.3 million, or 13.8%, from 2013 to 2014. SG&A expense was 28.2% of revenues for 2014,
compared to 29.6% for 2013. The increase in SG&A expense was due to increased personnel investments in business development,
marketing and research & development. Bad debt expense decreased to $0.4 million in 2014 compared to $1.3 million 2013. Research
and development expense for 2014 was $19.3 million compared to $15.8 million in 2013.
53
STRATEGIC COMMUNICATIONS
Revenues ....................................................................................... $
Percentage change in revenues from prior year ..........................
189,974 $
0.3%
189,367 $
1.7 %
2015
Year Ended December 31,
2014
(dollars in thousands)
Operating expenses:
Direct cost of revenues.............................................................
Selling, general and administrative expenses ...........................
Special charges ........................................................................
Acquisition-related contingent consideration ..........................
Amortization of other intangible assets....................................
Goodwill impairment charge ...................................................
Segment operating income (loss) .....................................
Percentage change in segment operating income from
prior year .......................................................................
Add back:
Depreciation and amortization of intangible assets..................
Special charges ........................................................................
Goodwill impairment charge ...................................................
Adjusted Segment EBITDA ............................................. $
Gross profit (1) ................................................................................ $
Percentage change in gross profit from prior year ......................
Gross profit margin (2) ....................................................................
Adjusted Segment EBITDA as a percent of revenues ...................
Number of revenue-generating professionals (at period end) .......
Percentage change in number of revenue-generating
professionals from prior year ...................................................
(1)
(2)
Revenues less direct cost of revenues.
Gross profit as a percent of revenues.
2013
186,245
121,703
47,874
66
395
4,584
83,752
258,374
(72,129)
121,070
42,720
—
527
3,934
—
168,251
21,723
119,924
48,890
3
527
4,420
—
173,764
15,603
39.2%
-121.6 %
6,004
—
—
27,727 $
$
68,904
-0.8%
36.3%
14.6%
599
6,982
3
—
22,588 $
$
69,443
7.6 %
36.7 %
11.9 %
566
7,048
66
83,752
18,737
64,542
34.7%
10.1%
590
5.8%
-4.1 %
Year Ended December 31, 2015 compared to December 31, 2014
Revenues increased $0.6 million, or 0.3%, from 2014 to 2015, which included a 6.6% estimated negative impact from foreign
currency translation. Excluding the estimated negative impact of foreign currency translation, revenues increased $13.1 million, or
6.9%, due to a $7.1 million increase in pass-through income and $6.0 million increase primarily from public affairs and crisis
communications-related engagements in our North America, Asia Pacific and EMEA regions.
Gross profit decreased $0.5 million, or 0.8%, from 2014 to 2015. Excluding a 6.2% estimated negative impact from foreign
currency translation, the gross profit increased $3.8 million. Gross profit margin decreased 0.4 percentage points from 2014 to 2015.
The decrease in gross profit margin was primarily due to a higher proportion of revenues from lower margin pass-through income,
which was partially offset by improved staff leverage.
SG&A expense decreased $6.2 million, or 12.6%, from 2014 to 2015, which included a $3.0 million, or 6.2%, estimated
positive impact from foreign currency translation. SG&A expense was 22.5% of revenues for 2015 compared to 25.8% for 2014.
Excluding the estimated positive impact of foreign currency translation, SG&A decreased $3.2 million, or 6.4%, primarily due to
lower occupancy costs.
Year Ended December 31, 2014 compared to December 31, 2013
Revenues increased $3.1 million, or 1.7%, from 2013 to 2014. Acquisition-related revenues contributed $1.8 million, or 1.0%,
compared to 2013. The remaining growth of $1.3 million included 0.8% in estimated positive impact of foreign currency translation.
Excluding the foreign currency translation gains, revenues declined organically by $0.2 million due to a decline in pass-through
revenues, partially offset by growth in retainer-based revenue in our EMEA region and increased project revenue in North America
and Asia Pacific.
54
Gross profit increased $4.9 million, or 7.6%, from 2013 to 2014. Gross profit margin increased 2.0 percentage points from 2013
to 2014. The increase in gross profit margin was primarily due to improved revenue growth and mix involving higher margin
engagements and lower proportion of low margin pass through revenues. Margin improvement was also favorably impacted by
targeted headcount reductions as part of the segment’s strategy to reduce costs.
SG&A expense increased $1.0 million, or 2.1%, from 2013 to 2014. SG&A expense was 25.8% of revenues for 2014 compared
to 25.7% for 2013. The increase in SG&A was primarily due to higher bad debt expense in North America and increased corporate
allocations; partially offset by lower occupancy costs.
Liquidity and Capital Resources
Cash Flows
Cash flows
Year Ended December 31,
2015
2014
(dollars in thousands)
2013
Net cash provided by operating activities ........................... $
Net cash used in investing activities ................................... $
Net cash (used in) provided by financing activities ............ $
DSO ....................................................................................
139,920 $
(31,737) $
(235,962) $
97
135,401 $
(57,595 ) $
6,330 $
97
193,271
(103,091)
(43,129)
97
We have generally financed our day-to-day operations, capital expenditures and acquisitions through cash flows from
operations. During the first quarter of our fiscal year, our cash needs generally exceed our cash flows from operations due to the
payment of annual incentive compensation. Our operating cash flows generally exceed our cash needs subsequent to the second
quarter of each year.
Our operating assets and liabilities consist primarily of billed and unbilled accounts receivable, notes receivable from
employees, accounts payable, accrued expenses and accrued compensation expense. The timing of billings and collections of
receivables as well as compensation and vendor payments affect the changes in these balances.
DSO is a performance measure used to assess how quickly revenues are collected by the Company. We calculate DSO at the
end of each reporting period by dividing net accounts receivable reduced by billings in excess of services provided, by revenue for the
quarter, adjusted for changes in foreign exchange rates. We multiply the result by the number of days in the quarter.
Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
Net cash provided by operating activities increased $4.5 million, or 3.3%, from 2014 to 2015. This increase is primarily due to
lower forgivable loan funding, higher cash collections, lower payments for income taxes, and other operating expenses, partially offset
by increased payments for compensation in the year ended December 31, 2015. DSO was 97 days at December 31, 2015 unchanged
from DSO at December 31, 2014.
Net cash used in investing activities decreased $25.9 million, or 44.9%, from 2014 to 2015. Payments for acquisitions of
businesses were $0.6 million in the current year as compared to $23.5 million for 2014. Payment for the acquisition completed in 2015
was $0.6 million, net of cash received, for an acquisition completed by our Economic Consulting segment. Payments for acquisitions
completed in 2014 were $8.8 million, net of cash received, included payment for an acquisition completed by our Economic
Consulting segment and final cash settlements for acquisitions completed in 2013 by our Forensic and Litigation Consulting segment.
There were no payments of acquisition-related contingent consideration and stock floors in 2015 as compared to $14.6 million and
$0.1 million, respectively for 2014. Capital expenditures were $31.4 million for 2015 as compared to $39.3 million for 2015.
Net cash used in financing activities for 2015 was $236.0 million as compared to net cash provided by financing activities of
$6.3 million for 2014. During the third quarter of 2015, we purchased $192.9 million of the 2020 Notes through a tender offer and
redeemed $207.1 million of the 2020 Notes for a total of $414.7 million using $164.7 million of cash on hand and $250 million of
borrowings under our Senior Bank Credit Facility. Subsequent to the debt tender offer and redemption, we repaid $50 million of the
borrowings under our Senior Bank Credit Facility. In addition, we repaid the final $11.0 million in notes payable to former
shareholders of acquired businesses in 2015. Financing activities in 2015 also included $16.7 million received from the issuance of
common stock under our equity compensation plans and $3.2 million of refundable deposits related to one of our foreign entities,
offset by $26.5 million in stock repurchases and $3.8 million in debt financing fees related to the Senior Bank Credit Facility. Our
financing activities for 2014 included the receipt of $13.1 million of refundable deposits related to one of our foreign entities and $4.8
million from the issuance of common stock under our equity compensation plans, offset by $6.0 million in repayments of notes to
former shareholders of acquired entities and $4.4 million paid to settle repurchases of the our common stock that were made but not
settled in the fourth quarter of 2013.
55
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Net cash provided by operating activities decreased $57.9 million to $135.4 million as compared to $193.3 million for the same
prior year period primarily due to increased payments for compensation and other operating expenses partially offset by higher
revenue driven cash collections in the year ended December 31, 2014. DSO was 97 days at December 31, 2014 unchanged from DSO
at December 31, 2013.
Net cash used in investing activities for 2014 was $57.6 million as compared to $103.1 million for 2013. Payments for
acquisitions of businesses were $23.5 million in the current year as compared to $55.5 million for 2013. Payments for acquisitions
completed in 2014 were $8.8 million, net of cash received, including payment for an acquisition completed by our Economic
Consulting segment and final cash settlements for acquisitions completed in 2013 by our Forensic and Litigation Consulting segment.
Payments for acquisitions completed in 2013 included $45.1 million, net of cash received, related to the acquisition of practices by our
Corporate Finance & Restructuring, Economic Consulting, Forensic and Litigation Consulting, and Strategic Communications
segments. Payments of acquisition-related contingent consideration and stock floors were $14.6 million and $0.1 million, respectively
for 2014 as compared to $6.2 million and $4.1 million, respectively for 2013. Capital expenditures were $39.3 million for 2014 as
compared to $42.5 million for 2013.
Net cash provided by financing activities for 2014 was $6.3 million as compared to net cash used in financing activities of $43.1
million for 2013. Our financing activities for 2014 included cash inflows of $13.1 million of refundable deposits related to one of our
foreign entities and $4.8 million received from the issuance of common stock under equity compensation plans, partially offset by
outflows of $6.0 million for the repayment of long-term debt and $4.4 million in cash used to settle repurchases of the Company’s
common stock that were made, but not settled in the fourth quarter of 2013. Our financing activities for 2013 included cash outflows
of $6.0 million for the repayment of long-term debt, $66.7 million in cash used to purchase and retire 1,956,900 shares of the
Company’s common stock pursuant to the 2012 Repurchase Program, partially offset by the $29.4 million received from the issuance
of common stock under equity compensation plans.
Capital Resources
As of December 31, 2015, our capital resources included $149.8 million of cash and cash equivalents and available borrowing
capacity of $348.6 million under a $550 million revolving line of credit under our Senior Bank Credit Facility. As of December 31,
2015, we had $200 million of outstanding borrowings under our Senior Bank Credit Facility and $1.4 million of outstanding letters of
credit, which reduced the availability of borrowings under the Senior Bank Credit Facility. We use letters of credit primarily in lieu of
security deposits for our leased office facilities. The $550 million revolving line of credit under the Senior Bank Credit Facility
includes a $75 million sublimit for borrowings in currencies other than U.S. dollars, including Euro, Sterling, Australian dollars and
Canadian dollars.
The availability of borrowings, as well as issuances and extensions of letters of credit, under our Senior Bank Credit Facility are
subject to specified conditions. We may choose to repay outstanding borrowings under the Senior Bank Credit Facility at any time
before maturity without premium or penalty. Borrowings under the Senior Bank Credit Facility in U.S. dollars, Euros, Sterling and
Australian dollars, bear interest at an annual rate equal to the LIBOR plus an applicable margin or an alternative base rate plus an
applicable margin. The alternative base rate means a fluctuating rate per annum equal to the highest of (1) the rate of interest in effect
for such day as the prime rate announced by Bank of America, (2) the federal funds rate plus the sum of 50 basis points and (3) the
one-month LIBOR plus 100 basis points. Borrowings under the Senior Bank Credit Facility in Canadian dollars bear interest at an
annual rate equal to the Canadian bankers’ acceptance rate plus an applicable margin or the Canadian prime rate plus an applicable
margin. The Canadian prime rate means a fluctuating rate per annum equal to the higher of (1) the rate of interest in effect for such
day as the prime rate for loans in Canadian dollars announced by Bank of America and (2) the Canadian bankers’ acceptance rate plus
100 basis points. Under the Senior Bank Credit Facility, the lenders have a security interest in substantially all of the assets of FTI
Consulting, Inc. and substantially all of our domestic subsidiaries. Subject to certain conditions, at any time prior to maturity, we will
be able to invite existing and new lenders to increase the size of the facility up to a maximum of $650 million.
Our Senior Bank Credit Facility and the indenture governing our 2022 Notes contain covenants that, among other things, may
limit our ability to: incur additional indebtedness; create liens; pay dividends on our capital stock, make distributions or repurchases of
our capital stock or make specified other restricted payments; consolidate, merge or sell all or substantially all of our assets; guarantee
obligations of other entities or our foreign subsidiaries; enter into hedging agreements; enter into transactions with affiliates or related
persons; or engage in any business other than consulting-related businesses. In addition, the Credit Facility includes financial
covenants that require us to (i) not exceed a maximum leverage ratio, (ii) not exceed a maximum senior secured leverage ratio and
(iii) maintain a minimum fixed charge coverage ratio. At December 31, 2015, we were in compliance with all covenants as stipulated
in the Senior Bank Credit Facility and the indenture governing our 2022 Notes.
56
Future Capital Needs
We anticipate that our future capital needs will principally consist of funds required for:
•
•
•
•
•
•
•
•
operating and general corporate expenses relating to the operation of our businesses;
capital expenditures, primarily for information technology equipment, office furniture and leasehold improvements;
debt service requirements, including interest payments on our long-term debt;
compensating designated executive management and senior managing directors under our various long-term incentive
compensation programs;
discretionary funding of our stock repurchase program;
contingent obligations related to our acquisitions;
potential acquisitions of businesses that would allow us to diversify or expand our service offerings; and
other known future contractual obligations.
We currently anticipate capital expenditures of $35 million to $45 million to support our organization during 2016, including
direct support for specific client engagements. Our estimate takes into consideration the needs of our existing businesses but does not
include the impact of any purchases that we may be required to make as a result of future acquisitions or specific client engagements
that are not currently contemplated. Our capital expenditure requirements may change if our staffing levels or technology needs
change significantly from what we currently anticipate, if we are required to purchase additional equipment specifically to support a
client engagement or if we pursue and complete additional acquisitions.
For the last several years, our cash flows from operations have exceeded our cash needs for capital expenditures and debt
service requirements. We believe that our cash flows from operations, supplemented by short-term borrowings under our Senior Bank
Credit Facility, as necessary, will provide adequate cash to fund our long-term cash needs from normal operations.
Our conclusion that we will be able to fund our cash requirements by using existing capital resources and cash generated from
operations does not take into account the impact of any future acquisitions or any unexpected significant changes in numbers of
employees. The anticipated cash needs of our business could change significantly if we pursue and complete additional business
acquisitions, if our business plans change, if economic conditions change from those currently prevailing or from those now
anticipated, or if other unexpected circumstances arise that may have a material effect on the cash flow or profitability of our business,
including material negative changes in the operating performance or financial results of our business. Any of these events or
circumstances, including any new business opportunities, could involve significant additional funding needs in excess of the identified
currently available sources and could require us to raise additional debt or equity funding to meet those needs. Our ability to raise
additional capital, if necessary, is subject to a variety of factors that we cannot predict with certainty, including:
•
•
•
•
•
our future profitability;
the quality of our accounts receivable;
our relative levels of debt and equity;
the volatility and overall condition of the capital markets; and
the market prices of our securities.
Any new debt funding, if available, may be on terms less favorable to us than our Senior Bank Credit Facility or the indenture
that governs our 2022 Notes.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements other than operating leases and we have not entered into any transactions involving
unconsolidated subsidiaries or special purpose entities.
Future Contractual Obligations
The following table sets forth our estimates as to the amounts and timing of contractual payments for our most significant
contractual obligations as of December 31, 2015. The information in the table reflects future unconditional payments and is based on
the terms of the relevant agreements, appropriate classification of items under GAAP currently in effect and certain assumptions such
as interest rates. Future events could cause actual payments to differ from these amounts.
57
Future contractual obligations related to our long-term debt assume that payments will be made based on the current payment
schedule and exclude any additional revolving line of credit borrowings or repayments subsequent to December 31, 2015 and prior to
the September 2020 maturity date of our Senior Bank Credit Facility.
The interest obligation on our long-term debt assumes that our 2022 Notes will bear interest at their stated rates.
Contractual Obligations
Total
2016
2017
2018
2019
2020
Thereafter
Long-term debt ..................... $ 500,000 $
Interest on long-term
debt(1) ............................... 142,815
Operating leases ................... 274,191
Total obligations .................. $ 917,006 $
— $
— $
— $
— $ 200,000 $ 300,000
(in thousands)
21,813
43,037
64,850 $
21,813
44,653
66,466 $
21,813
36,809
58,622 $
33,750
21,813
34,189
83,274
56,002 $ 254,042 $ 417,024
21,813
32,229
(1)
Interest payments on long-term debt include projected future interest payments for amounts drawn on our Senior Bank Credit
Facility using interest rates in effect as of December 31, 2015. These projected interest payments may differ in the future based
on the balance outstanding on our credit facility as well as changes in market interest rates.
Effect of Inflation. Inflation is not generally a material factor affecting our business. General operating expenses such as
salaries, employee benefits and lease costs are, however, subject to normal inflationary pressures.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates, changes in the price of our common stock and changes in foreign
exchange rates.
Interest Rate Risk
We are exposed to interest rate risk related to debt obligations outstanding. Interest rate changes expose our fixed rate long-term
borrowings to changes in fair value and expose our variable rate borrowings to changes in our interest expense. From time to time, we
use derivative instruments, primarily consisting of interest rate swap agreements, to manage our interest rate exposure by achieving a
desired proportion of fixed rate versus variable rate borrowings. All of our derivative transactions are entered into for non-trading
purposes.
The following table presents principal cash flows and related interest rates by year of maturity for our fixed rate Notes and a
comparison of the fair value of the debt at December 31, 2015 and 2014. The fair values have been determined based on quoted
market prices for our Notes.
Long-term debt
2016 2017 2018 2019
2020
Thereafter
December 31, 2015
Fair
Value
Total
December 31, 2014
Fair
Value
Total
(dollars in thousands)
Fixed rate ..................... $ — $ — $ — $ — $
Average interest rate .... — — — —
Variable rate ................. $ — $ — $ — $ — $200,000 $
1.9%
Average interest rate .... — — — —
— $300,000 $300,000
6.0%
—
— $200,000
—
1.9%
6.0%
$ 313,500 $ 711,000 $735,000
—
—
—
—
$ 200,000 $
—
6.5%
— $
—
Foreign Currency Exchange Rate Risk
Exchange Rate Risk
Our foreign currency exposure primarily relates to intercompany receivables and payables and third party receivables and
payables that are denominated in currencies other than the functional currency of our legal entities. Our largest foreign currency
exposure is unsettled intercompany payables and receivables which are reviewed on a regular basis. In cases where settlement of
intercompany balances is not practical we may use natural hedges to reduce exposure. Gains and losses from foreign currency
transactions are included in interest income and other on our Consolidated Statements of Comprehensive Income (Loss) and to date
have not had a material impact on our consolidated financial statements. See Note 5 — “Interest Income and Other” to our
consolidated financial statements for information.
58
Translation of Financial Results
Most of our foreign subsidiaries operate in a currency other than the United States dollar; therefore, increases or decreases in the
value of the U.S. dollar against other major currencies will affect our operating results and the value of our balance sheet items
denominated in foreign currencies. Our most significant exposures to translation risk relate to functional currency assets and liabilities
that are denominated in the British pound, Australian dollar, Euro and Canadian dollar. The following table details the unrealized
changes in the net investments of foreign subsidiaries whose currencies are denominated in currencies other than the U.S. dollar for
the years ended December 31, 2015, 2014 and 2013. These translation adjustments are reflected in “Other comprehensive income
(loss)” on our Consolidated Statements of Comprehensive Income (Loss).
Changes in the net investment of foreign subsidiaries
2015
Years ended December 31,
2014
(in thousands)
2013
British pound........................................................... $ (10,109) $ (13,710 ) $
(5,972 )
Australian dollar .....................................................
(5,451 )
Euro.........................................................................
Canadian dollar .......................................................
(890 )
(3,156 )
All other ..................................................................
Total .................................................................... $ (28,726) $ (29,179 ) $
(7,144)
(4,379)
(2,124)
(4,970)
4,528
(12,544 )
1,467
(629 )
(2,542 )
(9,720 )
59
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FTI Consulting, Inc. and Subsidiaries
Consolidated Financial Statements
INDEX
Management’s Report on Internal Control over Financial Reporting ..........................................................................................
Report of Independent Registered Public Accounting Firm — Internal Control over Financial Reporting ................................
Report of Independent Registered Public Accounting Firm — Consolidated Financial Statements ...........................................
Consolidated Balance Sheets — December 31, 2015 and 2014 ..................................................................................................
Consolidated Statements of Comprehensive Income (Loss) — Years Ended December 31, 2015, 2014 and 2013....................
Consolidated Statements of Stockholders’ Equity — Years Ended December 31, 2015, 2014 and 2013 ...................................
Consolidated Statements of Cash Flows — Years Ended December 31, 2015, 2014 and 2013 ..................................................
Notes to Consolidated Financial Statements ................................................................................................................................
Page
61
62
63
64
65
66
67
68
60
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for
performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2015. Internal control
over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our system of
internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles and that our receipts and expenditures are being made only in accordance with the authorization of our management and
directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on the financial statements. Under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting as of December 31, 2015 based on the framework in the 2013 Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of
December 31, 2015.
KPMG LLP, the independent registered public accounting firm that audited our financial statements, has issued an audit report
on their assessment of internal control over financial reporting, which is included elsewhere in this Annual Report.
Date: February 25, 2016
/s/ STEVEN H. GUNBY
Steven H. Gunby
President and Chief Executive Officer
(principal executive officer)
/s/ DAVID M. JOHNSON
David M. Johnson
Executive Vice President and Chief Financial Officer
(principal financial officer)
61
Report of Independent Registered Public Accounting Firm — Internal Control over Financial Reporting
The Board of Directors and Stockholders
FTI Consulting, Inc.:
We have audited FTI Consulting, Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2015,
based on criteria established in the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2015, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of FTI Consulting Inc. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated
statements of comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended
December 31, 2015, and our report dated February 25, 2016 expressed an unqualified opinion on those consolidated financial
statements.
/s/ KPMG LLP
Baltimore, Maryland
February 25, 2016
62
Report of Independent Registered Public Accounting Firm — Consolidated Financial Statements
The Board of Directors and Stockholders
FTI Consulting, Inc.
We have audited the accompanying consolidated balance sheets of FTI Consulting, Inc. and subsidiaries (the “Company”) as of
December 31, 2015 and 2014, and the related consolidated statements of comprehensive income (loss), stockholders’ equity and cash
flows for each of the years in the three-year period ended December 31, 2015. In connection with our audit of the consolidated
financial statements, we also have audited financial statement Schedule II, Valuation and Qualifying Accounts. These consolidated
financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of FTI Consulting, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 2015, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
FTI Consulting Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal
Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO), and our report dated February 25, 2016 expressed an unqualified opinion on the effectiveness of FTI Consulting Inc.’s
internal control over financial reporting.
/s/ KPMG LLP
Baltimore, Maryland
February 25, 2016
63
FTI Consulting, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except per share data)
Assets
Current assets
Cash and cash equivalents ........................................................................................ $
Accounts receivable:
149,760
$
283,680
December 31,
2015
2014
Billed receivables ................................................................................................
Unbilled receivables ...........................................................................................
Allowance for doubtful accounts and unbilled services .....................................
Accounts receivable, net ................................................................................
Current portion of notes receivable ..........................................................................
Prepaid expenses and other current assets ................................................................
Total current assets .............................................................................................
Property and equipment, net of accumulated depreciation ............................................
Goodwill ........................................................................................................................
Other intangible assets, net of amortization ...................................................................
Notes receivable, net of current portion .........................................................................
Other assets ....................................................................................................................
Total assets.............................................................................................. $
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable, accrued expenses and other ........................................................ $
Accrued compensation .............................................................................................
Current portion of long-term debt ............................................................................
Billings in excess of services provided ....................................................................
Total current liabilities ........................................................................................
Long-term debt, net .......................................................................................................
Deferred income taxes ...................................................................................................
Other liabilities ..............................................................................................................
Total liabilities ...................................................................................................
Commitments and contingent liabilities (note 13)
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 — 41,234 (2015) and 41,181 (2014) ....................
Additional paid-in capital .........................................................................................
Retained earnings .....................................................................................................
Accumulated other comprehensive loss ...................................................................
Total stockholders' equity ................................................................................
Total liabilities and stockholders' equity ............................................. $
405,000
280,538
(185,754 )
499,784
36,115
55,966
741,625
74,760
1,198,298
63,935
106,882
43,518
2,229,018
89,845
227,783
—
29,449
347,077
494,772
139,787
99,779
1,081,415
$
$
381,464
248,462
(144,825)
485,101
27,208
60,852
856,841
82,163
1,211,689
77,034
122,149
41,723
2,391,599
99,494
220,959
11,000
35,639
367,092
688,404
134,600
98,757
1,288,853
—
—
412
400,705
855,481
(108,995 )
1,147,603
2,229,018
$
412
393,174
789,428
(80,268)
1,102,746
2,391,599
See accompanying notes to consolidated financial statements.
64
FTI Consulting, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(in thousands, except per share data)
Revenues ...................................................................................................... $
Operating expenses
Direct cost of revenues ............................................................................
Selling, general and administrative expenses ..........................................
Special charges ........................................................................................
Acquisition-related contingent consideration ..........................................
Amortization of other intangible assets ...................................................
Goodwill impairment charge ...................................................................
Operating income ........................................................................................
Other income (expense)
Interest income and other.........................................................................
Interest expense .......................................................................................
Loss on early extinguishment of debt ......................................................
Income before income tax provision ..........................................................
Income tax provision ...................................................................................
Net income (loss).......................................................................................... $
Earnings (loss) per common share — basic .............................................. $
Earnings (loss) per common share — diluted ........................................... $
Other comprehensive loss, net of tax
Foreign currency translation adjustments, net of tax expense of $0 ........ $
Other comprehensive loss, net of tax .........................................................
Comprehensive income (loss) ..................................................................... $
2015
1,779,149
Year Ended December 31,
2014
1,756,212 $
$
1,171,444
432,668
—
(1,200)
11,726
—
1,614,638
164,511
3,232
(42,768)
(19,589)
(59,125)
105,386
39,333
66,053
1.62
1.58
(28,727)
(28,727)
37,326
1,144,757
433,845
16,339
(1,676 )
15,521
—
1,608,786
147,426
4,670
(50,685 )
—
(46,015 )
101,411
42,604
58,807 $
1.48 $
1.44 $
(29,179 ) $
(29,179 )
29,628 $
$
$
$
$
$
2013
1,652,432
1,042,061
394,681
38,414
(10,869)
22,954
83,752
1,570,993
81,439
1,748
(51,376)
—
(49,628)
31,811
42,405
(10,594)
(0.27)
(0.27)
(9,720)
(9,720)
(20,314)
See accompanying notes to consolidated financial statements.
65
FTI Consulting, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
(in thousands)
Balance at December 31, 2012 .......................................
Net income (loss) ........................................................
Other comprehensive income (loss):
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss)
Total
40,755 $
—
408 $ 367,978 $ 741,215 $
—
— $ (10,594 )
(41,369) $1,068,232
— $ (10,594)
Cumulative translation adjustment........................
—
—
—
—
(9,720)
(9,720)
Issuance of common stock in connection with:
Exercise of options, net of income tax benefit
from share-based awards of $1,051 ...................
Restricted share grants, less net settled shares
of 178 .................................................................
Stock units issued under incentive
compensation plan .............................................
Business combinations ................................................
Purchase and retirement of common stock .................
Share-based compensation ..........................................
Balance at December 31, 2013 .......................................
Net income ..................................................................
Other comprehensive income (loss):
1,278
13
34,966
—
—
34,979
369
3
(6,340)
—
—
(6,337)
—
81
(1,957)
—
40,526 $
—
—
1
(20)
—
3,005
(1,306)
(71,110)
35,129
—
—
—
—
405 $ 362,322 $ 730,621 $
58,807
— $
—
—
—
—
—
3,005
(1,305)
(71,130)
35,129
(51,089) $1,042,259
58,807
— $
Cumulative translation adjustment........................
—
—
—
—
(29,179)
(29,179)
Issuance of common stock in connection with:
Exercise of options, net of income tax benefit
from share-based awards of $1,451 ...................
Restricted share grants, less net settled shares
of 188 .................................................................
Stock units issued under incentive
compensation plan .............................................
Non-employee vesting of stock options ......................
Share-based compensation ..........................................
Balance at December 31, 2014 .......................................
Net income ..................................................................
Other comprehensive income (loss):
413
4
9,895
—
—
9,899
242
3
(6,511)
—
—
(6,508)
—
—
—
41,181 $
—
—
—
—
1,674
2,951
22,843
—
—
—
412 $ 393,174 $ 789,428 $
66,053
— $
—
—
—
—
1,674
2,951
22,843
(80,268) $1,102,746
66,053
— $
Cumulative translation adjustment........................
—
—
—
—
(28,727)
(28,727)
Issuance of common stock in connection with:
Exercise of options, net of income tax benefit
from share-based awards of $2,050 ...................
Restricted share grants, less net settled shares
of 116 .................................................................
Stock units issued under incentive
compensation plan .............................................
Purchase and retirement of common stock .................
Share-based compensation ..........................................
Balance at December 31, 2015 .......................................
713
7
19,019
—
—
19,026
105
1
(4,372)
—
—
(4,371)
—
(765)
—
41,234 $
—
(8)
—
—
—
—
412 $ 400,705 $ 855,481 $
2,124
(26,524)
17,284
—
—
—
2,124
(26,532)
17,284
(108,995) $1,147,603
See accompanying notes to consolidated financial statements.
66
FTI Consulting, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
2015
Year Ended December 31,
2014
2013
$
66,053
$
58,807
$
(10,594)
Operating activities
Net income (loss) .....................................................................................
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization ...........................................................
Amortization and impairment of other intangible assets....................
Goodwill impairment charge ..............................................................
Acquisition-related contingent consideration .....................................
Provision for doubtful accounts .........................................................
Non-cash share-based compensation ..................................................
Non-cash interest expense ..................................................................
Loss on early extinguishment of debt.................................................
Other ..................................................................................................
Changes in operating assets and liabilities, net of effects from
acquisitions:
Accounts receivable, billed and unbilled ........................................
Notes receivable..............................................................................
Prepaid expenses and other assets...................................................
Accounts payable, accrued expenses and other ..............................
Income taxes ...................................................................................
Accrued compensation ....................................................................
Billings in excess of services provided ...........................................
Net cash provided by operating activities..............................
Investing activities
Payments for acquisition of businesses, net of cash received....................
Purchases of property and equipment ........................................................
Other ..........................................................................................................
Net cash used in investing activities .......................................
Financing activities
Borrowings under revolving line of credit, net ..........................................
Payments of long-term debt .......................................................................
Payments of debt issue costs......................................................................
Deposits .....................................................................................................
Purchase and retirement of common stock ................................................
Net issuance of common stock under equity compensation plans .............
Other ..........................................................................................................
Net cash (used in) provided by financing activities ..............
Effect of exchange rate changes on cash and cash equivalents.......................
Net increase (decrease) in cash and cash equivalents .....................................
Cash and cash equivalents, beginning of period .............................................
Cash and cash equivalents, end of period .......................................................
Supplemental cash flow disclosures
Cash paid for interest ...........................................................................
Cash paid for income taxes, net of refunds ..........................................
Non-cash investing and financing activities:
Issuance of common stock to acquire businesses................................
Issuance of stock units under incentive compensation plans................
Unsettled repurchase and retirement of common stock........................
$
$
$
$
$
$
31,392
11,726
—
(1,200)
15,564
17,951
2,521
19,589
(760)
(35,648)
3,106
(3,557)
(4,718)
18,491
4,780
(5,370)
139,920
(575)
(31,399)
237
(31,737)
200,000
(425,671)
(3,843)
3,227
(26,532)
16,666
191
(235,962)
(6,141)
(133,920)
283,680
149,760
46,965
20,654
$
$
35,126
15,521
—
(1,676)
18,252
22,848
2,691
—
(522)
(43,072)
(18,253)
10,733
980
15,283
11,106
7,577
135,401
(23,467)
(39,256)
5,128
(57,595)
—
(6,014)
—
13,071
(4,367)
4,772
(1,132)
6,330
(6,289)
77,847
205,833
283,680
48,169
27,326
$
$
2,124
— $
$
— $
1,674
— $
$
— $
32,638
22,954
83,752
(10,869)
13,335
35,129
2,699
—
(1,582)
(56,290)
(7,544)
(6,784)
8,505
7,963
82,917
(2,958)
193,271
(55,498)
(42,544)
(5,049)
(103,091)
—
(6,021)
—
—
(66,763)
29,392
263
(43,129)
1,997
49,048
156,785
205,833
48,156
35,074
2,883
3,005
(4,367)
See accompanying notes to consolidated financial statements.
67
FTI Consulting, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollar and share amounts in tables expressed in thousands, except per share data)
1. Description of Business and Summary of Significant Accounting Policies
Description of Business
FTI Consulting, Inc. including its consolidated subsidiaries (collectively, the “Company,” “we,” “our,” or “FTI Consulting”), is
a leading global business advisory firm dedicated to helping organizations protect and enhance their enterprise value. Our experienced
teams of professionals include many individuals who are widely recognized as experts in their respective fields. We believe clients
retain us because of our recognized expertise and capabilities in highly specialized areas as well as our reputation for satisfying our
clients’ needs. We operate through five reportable segments: Corporate Finance & Restructuring, Forensic and Litigation Consulting,
Economic Consulting, Technology, and Strategic Communications.
Accounting Principles
Our financial statements are prepared in conformity with United States (“U.S.”) generally accepted accounting principles
(“GAAP”). The consolidated financial statements include the accounts of FTI Consulting and all of our subsidiaries. All intercompany
transactions and balances have been eliminated. Reclassifications of certain prior period amounts have been made to conform to the
current period presentation.
Foreign Currency
Results of operations for our non-U.S. subsidiaries are translated from the designated functional currency to the reporting
currency of the U.S. dollar. Revenues and expenses are translated at average exchange rates for each month while assets and liabilities
are translated at balance sheet date exchange rates. Resulting net translation adjustments are recorded as a component of stockholders’
equity in “Accumulated other comprehensive income (loss).”
Transaction gains and losses arising from currency exchange rate fluctuations on transactions denominated in a currency other
than the local functional currency are included in “Interest income and other” on our Consolidated Statements of Comprehensive
Income (Loss). Such transaction gains and losses may be realized or unrealized depending upon whether the transaction settled during
the period or remains outstanding at the balance sheet date.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts in the consolidated financial statements and accompanying notes. Due to the inherent uncertainty involved
in making those assumptions, actual results could differ from those estimates. The most significant estimates made and assumptions
used are the determination of the allowance for doubtful accounts and unbilled services, the assessment of the recoverability of
goodwill and intangible assets and realization of deferred tax assets, the valuation of stock-based compensation, and the fair value of
acquisition-related contingent consideration. Management bases its estimates on historical trends, current experience, and other
assumptions that it believes are reasonable.
Concentrations of Risk
We derive the majority of our revenues from providing professional services to clients in the U.S. For the year ended December
31, 2015, we derived approximately 28% of our revenues from the work of professionals who are assigned to locations outside of the
U.S. We believe that the geographic and industry diversity of our customer base throughout the U.S. and internationally minimizes the
risk of incurring material losses due to concentrations of credit risk. We do not have a single customer that represents ten percent or
more of our consolidated revenues.
Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement exists, the related services are provided, the price is fixed or
determinable, and collectability is reasonably assured. If, at the outset of an arrangement, we determine that the arrangement fee is not
fixed or determinable, revenue is deferred until all criteria for recognizing revenue are met. Provisions are recorded for the estimated
realization adjustments on all engagements, including engagements for which fees are subject to review by the bankruptcy courts and
other regulatory institutions. If the client is in bankruptcy, fees for our services may be subject to approval by the court. In some cases,
68
a portion of the fees to be paid to us by a client is required by a court to be held until completion of our work and final fee settlements
have been negotiated. We make a determination whether to record all or a portion of such holdback as revenue prior to collection on a
case-by-case basis. We generate the majority of our revenues from providing professional services under four types of billing
arrangements: time-and-expense, fixed-fee, performance-based and unit-based.
1.
2.
3.
4.
Time-and-expense billing arrangements require the client to pay based on the number of hours worked by our revenue-
generating professionals at contractually agreed-upon rates. We recognize revenues for our professional services rendered
under time-and-expense engagements based on the hours incurred at agreed-upon rates as work is performed. In some
cases, time-and-expense arrangements are subject to a cap, in which case we assess work performed on a periodic basis to
ensure that the cap has not been exceeded.
In fixed-fee billing arrangements, we agree to a pre-established fee in exchange for a pre-determined set of professional
services. Generally, the client agrees to pay a fixed fee every month over the specified contract term. These contracts are
for varying periods and generally permit the client to cancel the contract before the end of the term. We recognize
revenues for our professional services rendered under these fixed-fee billing arrangements monthly over the specified
contract term or, in certain cases, revenue is recognized on the proportional performance method of accounting based on
the ratio of labor hours incurred to estimated total labor hours, which we consider to be the best available indicator of the
pattern and timing in which such contract obligations are fulfilled.
In performance-based or contingent billing arrangements, fees are tied to the attainment of contractually defined
objectives. Often this type of arrangement supplements a time-and-expense or fixed-fee engagement, where payment of a
performance-based fee is deferred until the conclusion of the matter or upon the achievement of performance-based
criteria. We do not recognize revenues under performance-based billing arrangements until all related performance criteria
are met and collection of the fee is reasonably assured.
In our Technology segment, unit-based revenues are based on either the amount of data stored or processed, the number of
concurrent users accessing the information, or the number of pages or images processed for a client. We recognize
revenues for our professional services rendered under unit-based engagements as the services are provided based on
agreed-upon rates. We also generate certain revenue from software licenses and maintenance. We have vendor-specific
objective evidence of fair value for support and maintenance separate from software for the majority of our products.
Accordingly, when licenses of certain offerings are included in an arrangement with support and maintenance, we
recognize the license revenue upon delivery of the license and recognize the support and maintenance revenue over the
term of the maintenance service period. Our software license agreements generally do not include acceptance provisions.
If an arrangement allows for customer acceptance of the software, we defer revenue until the earlier of customer
acceptance or when the acceptance provisions lapse. Revenues from hosting fees are recognized based on the units used
over the term of the hosting agreement. We have certain arrangements with clients in which we provide multiple elements
of services under one engagement contract. Revenues under these types of arrangements are accounted for in accordance
ASC 605-25, Multiple-Element Arrangements, and recognized pursuant to the criteria described above.
Some clients pay us retainers before we begin work for them. We hold retainers on deposit until we have completed the work.
We generally apply these retainers to final billings and refund any excess over the final amount billed to clients, as appropriate.
Reimbursable expenses, including those relating to travel, out-of-pocket expenses, outside consultants and other similar costs,
are generally included in revenues, and an equivalent amount of reimbursable expenses is included in costs of services in the period in
which the expense is incurred. Revenues recognized, but not yet billed to clients, have been recorded as “Unbilled receivables” in the
Consolidated Balance Sheets.
Direct Cost of Revenues
Direct cost of revenues consists primarily of billable employee compensation and related payroll benefits, the cost of contractors
assigned to revenue-generating activities and direct expenses billable to clients. Direct cost of revenues also includes depreciation
expense on the equipment of our Technology segment that is used to host and process client information. Direct cost of revenues does
not include an allocation of corporate overhead and non-billable segment costs.
Share-Based Compensation
We measure share-based compensation using a fair value based recognition method. Share-based compensation cost is estimated
at the grant date based on the fair value of the award and is recognized as expense over the requisite service period or performance
period of the award. The amount of share-based compensation expense recognized at any date must at least equal the portion of grant
date value of the award that is vested at that date.
69
We use the Black-Scholes pricing model to determine the fair value of stock options on the dates of grant. The Black-Scholes
pricing model requires various judgmental assumptions including volatility and expected term, which are based on our historical
experience. We also make assumptions regarding the risk-free interest rate and the expected dividend yield. The risk-free interest rate
is based on the term of U.S. Treasury interest rates that is consistent with the expected term of the share-based award. The dividend
yield on our common stock is assumed to be zero since we do not pay dividends and have no current plans to do so in the future.
The fair value of restricted stock is measured based on the closing price of the underlying stock on the dates of grant. Awards
with performance-based vesting conditions require the achievement of specific financial targets at the end of the specified
performance period and the employee’s continued employment. We recognize the estimated fair value of performance-based awards
as share-based compensation expense over the performance period. We consider each performance period separately, based upon our
determination of whether it is probable that the performance target will be achieved. At each reporting period, we reassess the
probability of achieving the performance targets. If a performance target is not met, no compensation cost is ultimately recognized
against that target, and, to the extent previously recognized, compensation expense is reversed.
For all our share-based awards, we estimate the expected forfeiture rate and recognize expense only for those shares expected to
vest. We estimate the forfeiture rate based on historical experience. Groups of share-based award holders that have similar historical
behavior with regard to option exercise timing and forfeiture rates are considered separately for valuation and attribution purposes.
Forfeitures are estimated at the time an award is granted and revised, if necessary, in subsequent periods if actual forfeitures differ
from those estimates.
Research and Development
Research and development costs related to software development are expensed as incurred. Development activities involve a
plan or design for the production of new or substantially improved products. When we have determined that technological feasibility
for our software products is reached, costs related to the project are capitalized until such products are available for general release to
customers as discussed in “Capitalized Software to be Sold, Leased or Otherwise Marketed.” Research and development costs related
to software development totaled $19.5 million, $19.3 million, and $15.8 million for the years ended December 31, 2015, 2014 and
2013, respectively. Research and development costs are included in “Selling, general and administrative expenses” on the
Consolidated Statements of Comprehensive Income (Loss).
Advertising Costs
Advertising costs consist of marketing, advertising through print and other media, professional event sponsorship and public
relations. These costs are expensed as incurred. Advertising costs totaled $18.2 million for the year ended December 31, 2015, and
$20.7 million for each of the years ended December 31, 2014 and 2013, respectively.
Acquisition-related Contingent Consideration
The fair value of acquisition-related contingent consideration is estimated at the acquisition date utilizing a probability weighted
estimated cash flow stream adjusted for the expected timing of each payment. Subsequent to the acquisition date, on a quarterly basis,
the contingent consideration liability is remeasured at current fair value with any changes recorded in earnings. Accretion expense is
recorded to adjust the discounted value of acquisition contingent consideration liabilities to their present value. Any remeasurement
gain or loss and the accretion expense related to the increase in the net present value of the contingent liability are included in
“Acquisition-related contingent consideration” on our Consolidated Statements of Comprehensive Income (Loss).
Income Taxes
Our income tax provision consists principally of federal, state and international income taxes. We generate income in a
significant number of states located throughout the U.S. as well as foreign countries in which we conduct business. Our effective
income tax rate may fluctuate due to a change in the mix of earnings between higher and lower state or country tax jurisdictions and
the impact of non-deductible expenses. Additionally, we record deferred tax assets and liabilities using the asset and liability method
of accounting which requires us to measure these assets and liabilities using the enacted tax rates and laws that will be in effect when
the differences are expected to reverse. A valuation allowance is recognized if, based on the weight of available evidence, it is more-
likely-than-not that some portion, or all, of the deferred tax asset will not be realized. In evaluating our ability to recover our deferred
tax assets, we consider all available positive and negative evidence, including scheduled reversals of temporary differences, projected
future taxable income, tax-planning strategies, and results of recent operations. The evaluation of the need for a valuation allowance
requires management judgment and could impact our financial results and effective tax rate.
70
Cash Equivalents and Short-Term Investments
Cash equivalents consist of highly liquid short-term investments, principally money market funds, commercial paper, and
certificates of deposit with maturities of three months or less at the time of purchase. In addition, we also may invest in short-term
investments with maturities greater than three months, consisting primarily of certificates of deposit and treasury bills. Any short-term
investments are classified as available-for-sale and carried at fair value, based on quoted market prices or other readily available
market information. Short-term investments are included in “Prepaid assets and other current assets” on our Consolidated Balance
Sheets.
Allowance for Doubtful Accounts and Unbilled Services
We maintain an allowance for doubtful accounts and unbilled services for estimated losses resulting from disputes that affect
our ability to fully collect our billed accounts receivable, potential fee reductions negotiated by clients or imposed by bankruptcy
courts as well as the inability of clients to pay our fees. Even if a bankruptcy court approves our services, the court has the discretion
to require us to refund all or a portion of our fees due to the outcome of the case or a variety of other factors. We estimate the
allowance for all receivable risks by reviewing the status of each matter and recording reserves based on our experience and
knowledge of the particular client and historical collection patterns. However, our actual experience may vary significantly from our
estimates. If the financial condition of our clients were to deteriorate, resulting in their inability or unwillingness to pay our fees, or
bankruptcy courts require us to refund certain fees, we need to record additional allowances or write-offs in future periods. This risk
related to a client’s inability to pay may be mitigated to the extent that we receive retainers from some of our clients prior to
performing services.
We record adjustments to the allowance for doubtful accounts and unbilled services as a reduction in revenue when there are
changes in estimates of fee reductions that may be imposed by bankruptcy courts and other regulatory institutions, for both billed and
unbilled receivables. The allowance for doubtful accounts and unbilled services is also adjusted after the related work has been billed
to the client and we discover that collectability is not reasonably assured. These adjustments are recorded to “Selling, general and
administrative expenses” on the Consolidated Statements of Comprehensive Income (Loss), and totaled $15.6 million, $18.3 million,
and $13.3 million for the years ended December 31, 2015, 2014 and 2013, respectively.
Property and Equipment
We record property and equipment, including improvements that extend useful lives, at cost, while maintenance and repairs are
charged to operations as incurred. We calculate depreciation using the straight-line method based on estimated useful lives ranging
from three to seven years for furniture, equipment and internal use software. We amortize leasehold improvements over the shorter of
the estimated useful life of the asset or the lease term. We capitalize costs incurred during the application development stage of
computer software developed or obtained for internal use. Capitalized software developed for internal use is classified within
furniture, equipment and software and is amortized over the estimated useful life of the software, which is generally three years.
Notes Receivable from Employees
Notes receivable from employees principally include unsecured general recourse forgivable loans and retention payments,
which are provided to attract and retain certain of our senior employees and other professionals. Generally, all of the principal amount
and accrued interest of the forgivable loans we make to employees and other professionals will be forgiven according to the stated
terms of the loan agreement, provided that the professional is providing service to the Company on the forgiveness date, and upon
other specified events, such as death or disability. Professionals who terminate their employment or services with us prior to the end of
the forgiveness period are required to repay the outstanding, unforgiven loan balance and any accrued but unforgiven interest. If the
termination was by the Company without cause or by the employee with good reason, or, subject to certain conditions, if the employee
terminates his or her employment due to retirement or non-renewal of his or her employment agreement, the loan may be forgiven or
continue to be forgivable, in whole or in part. We amortize forgivable loans over the requisite service period which ranges from a
period of one to ten years. The amount of expense recognized at any date must at least equal the portion of the principal forgiven on
the forgiveness date.
Goodwill and Other Intangible Assets
Goodwill represents the purchase price of acquired businesses in excess of the fair market value of net assets acquired. Other
intangible assets may include trade names, customer relationships, non-competition agreements and software.
71
We test our goodwill and other indefinite-lived intangible assets for impairment annually as of the first day of the fourth quarter
or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Factors we
consider important that could trigger an interim impairment review include, but are not limited to, the following:
•
•
•
•
significant underperformance relative to expected historical or projected future operating results;
a significant change in the manner of our use of the acquired asset or the strategy for our overall business;
a significant market decline related to negative industry or economic trends; and/or
our market capitalization relative to net carrying value.
We assess our goodwill for impairment using a fair value approach at the reporting unit level. A reporting unit is an operating
segment or a business one level below that operating segment if discrete financial information is available and regularly reviewed by
the chief operating decision makers. When available and as appropriate in order to estimate fair values, we use market multiples
derived from a set of guideline companies and/or guideline transactions (market approaches), discounted cash flows (an income
approach), or a combination of appropriately weighted income and market approaches.
Intangible assets with finite lives are amortized over their estimated useful lives and reviewed for impairment whenever events
or changes in circumstances indicate an asset’s carrying value may not be recoverable. We amortize our acquired finite-lived
intangible assets on a straight-line basis over periods ranging from 1 to 15 years.
Impairment of Long-Lived Assets
We review long-lived assets such as property and equipment and finite-lived intangible assets whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. These events or changes in circumstances may
include a significant deterioration of operating results, changes in business plans, or changes in anticipated future cash flows. If an
impairment indicator is present, we evaluate recoverability of assets to be held and used by a comparison of the carrying value of the
assets to future undiscounted net cash flows expected to be generated by the assets. We group assets at the lowest level for which there
are identifiable cash flows that are largely independent of the cash flows generated by other asset groups. If the total of the expected
undiscounted future cash flows is less than the carrying amount of the asset group, we estimate the fair value of the asset group to
determine whether an impairment loss should be recognized.
Capitalized Software to be Sold, Leased or Otherwise Marketed
We expense costs for software products that will be sold, leased or otherwise marketed until technological feasibility has been
established. Thereafter, eligible software development costs are capitalized and subsequently reported at the lower of unamortized cost
or net realizable value. Capitalized costs are amortized based on current and future revenue for each product with an annual minimum
equal to the straight-line amortization over the remaining estimated economic life of the product. We classify software products to be
sold, leased or otherwise marketed as noncurrent “Other assets” on our Consolidated Balance Sheets. Unamortized capitalized
software costs were $17.6 million and $13.4 million at December 31, 2015 and 2014, respectively. Amortization expense for
capitalized software costs were $6.5 million, $6.7 million, and $5.8 million for the years ended December 31, 2015, 2014 and 2013,
respectively.
Leases
We lease office space and equipment under non-cancelable operating leases. The leases normally provide for the payment of
minimum annual rentals and may include scheduled rent increases. Some leases include provisions for renewal options of up to five
years. Some of our leases for office space contain provisions whereby the future rental payments may be adjusted for increases in
operating expenses above specified amounts.
We recognize rent expense under operating leases on a straight-line basis over the non-cancelable lease term. For leases with
scheduled rent increases this treatment results in a deferred rent liability, which is classified within “Other liabilities” on the
Consolidated Balance Sheets. Lease inducements, such as tenant improvement allowances, cash inducements, and rent abatements, are
amortized on a straight-line basis over the life of the lease. Unamortized lease inducements are also included in deferred rent. Deferred
rent totaled $44.9 million and $42.0 million for the years ended December 31, 2015 and 2014, respectively.
72
Billings in Excess of Services Provided
Billings in excess of services provided represent amounts billed to clients, such as retainers, in advance of work being
performed. Clients may make advance payments, which are held on deposit until completion of work or are applied at predetermined
amounts or times. Excess payments are either applied to final billings or refunded to clients upon completion of work. Payments in
excess of related accounts receivable and unbilled receivables are recorded as billings in excess of services provided within the
liabilities section of our Consolidated Balance Sheets.
2. New Accounting Standards
In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-
17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred income
taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. The updated standard is effective
for the Company at the beginning of its first quarter 2017, with early application permitted as of the beginning of any interim or
annual reporting period. The Company elected to early adopt this standard as of December 31, 2015, and retrospectively reclassified
$27.3 million of our current deferred tax assets to noncurrent deferred tax liabilities as of December 31, 2014.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the
presentation of debt issue costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a
direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest
expense. In August 2015, FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated
with Line-of-Credit Arrangements, which states that the SEC would not object to the balance sheet presentation of the costs associated
with the line-of-credit arrangement as an asset that would be amortized ratably over the term of the arrangement. The Company
elected to early adopt ASU 2015-03 and ASU 2015-15, and has reclassified $5.2 million and $11.6 million of debt issue costs
associated with the Company’s long-term debt as of December 31, 2015 and 2014, respectively, from “Other Assets” to “Long-term
debt, net” on our Consolidated Balance Sheets.
In May 2014, the Financial Accounting Standards Board issued ASU 2014-09, Revenue from Contracts with Customers. ASU
2014-09 is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of
goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or
services. This guidance is effective for interim and annual periods beginning after December 15, 2017 and early adoption is not
permitted. Companies may use either a full retrospective or a modified retrospective approach to adopt this ASU. The Company is
evaluating which transition approach to use and the impact of the adoption of this accounting standard update on its consolidated
financial statements.
3. Earnings (Loss) Per Common Share
Basic earnings (loss) per common share are calculated by dividing net income (loss) by the weighted average number of
common shares outstanding during the period. Diluted earnings per common share adjust basic earnings per common share for the
effects of potentially dilutive common shares. Potentially dilutive common shares include the dilutive effects of shares issuable under
our equity compensation plans, including stock options and restricted stock, each using the treasury stock method. Due to a net loss
applicable to common stockholders for the year ended December 31, 2013, we excluded 1,232,880 potentially dilutive securities from
the computation as their effect would be anti-dilutive.
2015
Year Ended December 31,
2014
2013
Numerator—basic and diluted
Net income (loss) ..................................................................................... $
66,053
$
58,807 $
(10,594)
Denominator
Weighted average number of common shares outstanding — basic .......
Effect of dilutive stock options ................................................................
Effect of dilutive restricted shares ...........................................................
Weighted average number of common shares outstanding — diluted.....
Earnings (loss) per common share — basic .............................................. $
Earnings (loss) per common share — diluted ........................................... $
Antidilutive stock options and restricted shares ......................................
40,846
388
495
41,729
1.62
1.58
1,734
$
$
39,726
375
628
40,729
1.48 $
1.44 $
2,967
39,188
—
—
39,188
(0.27)
(0.27)
4,363
73
4. Special Charges
There were no special charges recorded during the year ended December 31, 2015.
During the year ended December 31, 2014, we recorded special charges as a separate line within operating income in our
Consolidated Statements of Income (Loss) totaling $16.3 million, of which $0.7 million was non-cash. The charges reflect the
contractual post-employment payments and equity award expense acceleration, net of forfeitures of unvested equity and liability
awards and annual bonus payments of former executive officers, the termination of the Company’s corporate airplane lease, the
closure of the Company’s former West Palm Beach executive office and related lease termination, and updated forecasts of expected
sublease income for corporate and segment offices previously vacated.
During the year ended December 31, 2013, we recorded special charges totaling $38.4 million, of which $14.1 million was non-
cash. The charges reflect certain executive leadership transition costs and costs related to actions we took to realign our workforce to
address current business demands impacting our Corporate Finance & Restructuring and Forensic and Litigation Consulting segments,
and to reduce certain corporate overhead within our EMEA region.
The following table details the special charges by segment:
Special Charges by Segment
Corporate Finance & Restructuring ....................................................... $
Forensic and Litigation Consulting .......................................................
Economic Consulting ............................................................................
Technology ............................................................................................
Strategic Communications .....................................................................
Unallocated Corporate ...........................................................................
Total ................................................................................................ $
For the years ended December 31,
2014
2013
84 $
308
12
19
3
426
15,913
16,339 $
10,274
2,111
11
16
66
12,478
25,936
38,414
The total cash outflow associated with the 2014, 2013 and 2012 special charges is expected to be $65.5 million, of which $53.7
million has been paid as of December 31, 2015. Approximately $3.2 million is expected to be paid in 2016, $3.2 million is expected to
be paid in 2017, $2.6 million is expected to be paid in 2018, $1.2 million is expected to be paid in 2019, and the remaining balance of
$1.6 million will be paid from 2020 to 2025. A liability for the current and noncurrent portions of the amounts to be paid is included in
“Accounts payable, accrued expenses and other” and “Other liabilities,” respectively, on the Consolidated Balance Sheets.
Activity related to the liabilities for these costs for the years ended December 31, 2015 and 2014 is as follows:
Employee
Termination
Costs
Lease
Termination
Costs
Balance at December 31, 2013 ........................................... $
Additions .........................................................................
Payments .........................................................................
Foreign currency translation adjustment and other .........
Balance at December 31, 2014 ........................................... $
Additions .........................................................................
Payments .........................................................................
Foreign currency translation adjustment and other(1) ......
Balance at December 31, 2015 ........................................... $
19,965 $
7,260
(13,390)
(76)
13,759 $
—
(5,826)
(165)
7,768 $
6,096 $
9,580
(10,822 )
—
4,854 $
—
(1,212 )
403
4,045 $
Total
26,061
16,840
(24,212)
(76)
18,613
—
(7,038)
238
11,813
(1) A fair value adjustment of $0.4 million related to expected sublease income was recorded to “Selling, general and administrative expenses”
within operating income in our Consolidated Statement of Income (Loss) during the three months ended December 31, 2015.
74
5. Interest Income and Other
The table below presents the components of “Interest income and other” as shown on the Consolidated Statements of
Comprehensive Income (Loss).
Interest Income and Other
Interest income ..................................................................... $
Foreign exchange transaction losses, net ..............................
Other .....................................................................................
Total ............................................................................... $
Year Ended December 31,
2014
2015
2013
4,996 $
(940)
(824)
3,232 $
5,853 $
(2,830 )
1,647
4,670 $
5,439
(2,326)
(1,365)
1,748
6. Share-Based Compensation
Share-Based Incentive Compensation Plans
Under the Company’s 2009 Omnibus Incentive Compensation Plan (Amended and Restated Effective as of June 3, 2015)
(“Restated 2009 Plan”), we are authorized to issue up to 7,450,000 shares of common stock, of which no more than 5,400,000 shares
of common stock may be issued in the form of restricted or unrestricted shares or other share-based awards. At December 31, 2015,
1,760,495 shares of common stock were available for grant under our Restated 2009 Plan, all of which may be granted as share-based
awards.
Our officers, employees, non-employee directors and certain individual service providers are eligible to participate in the
Company’s equity compensation plans, subject to the discretion of the administrator of the plans. During the year ended December 31,
2015, we awarded 307,965 restricted shares, stock options exercisable for up to 185,421 shares, 81,016 performance stock units, and
109,665 restricted stock units. These awards are recorded as equity on the Consolidated Balance Sheet. During the year ended
December 31, 2015, stock options exercisable for up to 270,506 shares, 113,141 performance stock units and 20,827 restricted shares
were forfeited prior to the completion of the vesting requirements.
We have also awarded employees cash-settled stock appreciation rights, cash settled units, and cash-settled performance units.
The cash-settled performance units are subject to market conditions based on the adjusted total shareholder return of the Company as
compared to the adjusted total shareholder return of the adjusted S&P 500 for the three year period ending March 31, 2017. During the
year ended December 31, 2015, we awarded a total of 5,554 cash-settled stock appreciation rights to employees in certain foreign
countries. As of December 31, 2015, there were 93,559 cash-settled stock appreciation rights, 17,896 cash-settled units, and 49,472
cash-settled performance units outstanding and there was $1.8 million of unrecognized compensation cost related to these unvested
cash-settled awards.
Share-Based Compensation Expense
The table below reflects the total share-based compensation expense recognized in our Consolidated Statements of
Comprehensive Income (Loss) for the years ended December 31, 2015, 2014 and 2013.
Income Statement Classification
Direct cost of revenues .............................................. $
Selling, general and administrative expense .............
Special charges (3) ......................................................
Share-based compensation expense before income
taxes .......................................................................
Income tax benefit .....................................................
Share-based compensation, net of income taxes ... $
2015
2014
2013
Restricted
Shares (2)
Options (1)
Restricted
Shares (2)
Options (1)
Restricted
Shares (2)
Options (1)
3,736 $
1,482
—
6,532 $
7,469
—
5,404 $
1,783
(126)
8,951 $
8,508
(990 )
6,807 $
1,849
1,482
9,181
10,053
5,938
5,218
1,353
3,865 $
14,001
5,138
8,863 $
7,061
2,698
4,363 $
16,469 10,138
6,490
9,979 $
25,172
4,101
9,094
6,037 $ 16,078
(1)
(2)
(3)
Includes options and cash-settled stock appreciation rights.
Includes restricted share awards, performance and market condition restricted stock units, and cash-settled restricted stock units.
Special charges of $0.2 million equity award expense acceleration and $0.1 million option expense acceleration are net of
forfeitures of $1.2 million and $0.2 million, respectively, for the year ended December 31, 2014. (See “Note 4. Special Charges”
to the Consolidated Financial Statements for information related to the special charges).
75
Stock Options
We use the Black-Scholes option-pricing model to value our option grants using the assumptions in the following table:
Year Ended December 31,
Assumptions
Risk-free interest rate ....................................
Dividend yield ..............................................
Expected term ...............................................
Stock price volatility ..................................... 31.03% to 40.36% 31.05% - 37.60%
2015
1.07% -1.70%
0%
3 - 5 years
0.99% - 1.94%
0%
3 - 6 years
2014
2013
0.77% - 1.71%
0%
5 - 6 years
37.30% - 38.27%
The following table summarizes the option activity under our Equity Compensation Plans as of and for the year ended
December 31, 2015. The aggregate intrinsic value in the table below represents the total pre-tax intrinsic value (the difference between
the closing price of our common stock on the last trading day of 2015 and the exercise price, multiplied by the number of in-the-
money options) that would have been received by the option holders had all option holders exercised their options on December 31,
2015. The aggregate intrinsic value changes based on fluctuations in the fair market value per share of our common stock.
Weighted-
Average
Exercise
Price
Shares
Weighted-
Average
Remaining
Contractual
Term
(In Years)
Aggregate
Intrinsic
Value
Options outstanding at December 31, 2014 .....................
Options granted ..............................................................
Options exercised ...........................................................
Options forfeited ............................................................
Options outstanding at December 31, 2015 .....................
Options exercisable at December 31, 2015 ......................
4,340 $
185 $
(763) $
(270) $
3,492 $
2,110 $
38.03
36.82
29.92
48.90
38.89
41.37
5.3 $
4.0 $
4,745
2,879
Cash received from option exercises for the years ended December 31, 2015, 2014 and 2013 was $21.1 million, $11.3 million
and $35.7 million, respectively. The actual tax benefit realized from stock options exercised totaled $5.5 million, $1.9 million and $5.5
million for the years ended December 31, 2015, 2014 and 2013, respectively.
The intrinsic value of stock options exercised is the amount by which the market value of our common stock on the exercise
date exceeds the exercise price. The total intrinsic value of stock options exercised for the years ended December 31, 2015, 2014 and
2013 was $8.1 million, $4.4 million and $15.1 million, respectively.
The following is a summary of the status of stock options outstanding and exercisable at December 31, 2015:
Exercise Price Range
$25.73-$31.13 ....................................................................
$31.54-$36.29 ....................................................................
$36.43-$37.95 ....................................................................
$38.03-$43.13 ....................................................................
$43.27-$70.55 ....................................................................
Options Outstanding
Options Exercisable
Weighted-
Average
Exercise
Price
Shares
Weighted-
Average
Remaining
Contractual
Term
(In Years)
729 $
717 $
716 $
710 $
620 $
3,492
28.81
34.46
37.06
40.57
56.07
4.6
6.2
7.2
5.3
2.8
Weighted-
Average
Exercise
Price
Shares
393 $
336 $
262 $
501 $
618 $
2,110
27.76
34.80
37.40
40.34
56.11
As of December 31, 2015, there was $7.4 million of unrecognized compensation cost related to unvested stock options. That
cost is expected to be recognized ratably over a weighted-average period of 2.2 years.
76
Restricted Share Awards
A summary of our unvested restricted share activity during the year ended December 31, 2015 is presented below. The fair value of
unvested restricted share awards is determined based on the closing market price per share of our common stock on the grant date.
Unvested restricted share awards outstanding at December 31, 2014...........
Restricted share awards granted ......................................................................
Restricted share awards vested .......................................................................
Restricted share awards forfeited ....................................................................
Unvested restricted share awards outstanding at December 31, 2015...........
Weighted-
Average Grant-
Date Fair
Value
Shares
1,032 $
308 $
(384 ) $
(173 )
$
783 $
35.96
38.91
35.77
39.08
36.55
As of December 31, 2015, there was $17.6 million of unrecognized compensation cost related to unvested restricted share
awards. That cost is expected to be recognized ratably over a weighted-average period of 3.97 years. The total fair value of restricted
share awards that vested during the year was $14.6 million, $20.5 million, and $17.9 million for the years ended December 31, 2015,
2014 and 2013, respectively.
Restricted Stock Units
A summary of our Restricted Stock Units activity during the year ended December 31, 2015 is presented below. The aggregate
intrinsic value in the table below represents the total pre-tax intrinsic value based on the closing price of our common stock on the last
trading day of 2015. The fair value of Restricted Stock Units is determined based on the closing market price per share of our common
stock on the grant date.
Restricted stock units outstanding at December 31,
2014 .................................................................................
Restricted stock units granted .........................................
Restricted stock units released ........................................
Restricted stock units forfeited ........................................
Restricted stock units outstanding at December 31,
Weighted-
Average Grant-
Shares
Date Fair
Value
Intrinsic
Value
776 $
193 $
(87) $
(113) $
37.00
39.17
33.37
37.55
2015 .................................................................................
769 $
37.87 $
26,547
The intrinsic value of Restricted Stock Units released reflects the market value of our common stock on the date of release. The
total intrinsic value of Restricted Stock Units released was $3.1 million, $1.7 million and $4.7 million for the years ended
December 31, 2015, 2014 and 2013, respectively.
As of December 31, 2015, there was $2.8 million of unrecognized compensation cost related to unvested Restricted Stock Units.
That cost is expected to be recognized ratably over a weighted-average period of 1.5 years. The total fair value of Restricted Stock Units
that vested during the years ended December 31, 2015, 2014 and 2013 was $7.5 million, $2.7 million, and $4.6 million, respectively.
The table below reflects the weighted-average grant date fair value per share of stock options, restricted share awards and
restricted stock units awarded during the years ended December 31, 2015, 2014 and 2013.
Weighted average fair value of grants
Stock options ................................................................... $
Restricted share awards and restricted stock units .......... $
10.85 $
39.01 $
10.77 $
32.87 $
13.15
36.31
Year Ended December 31,
2014
2013
2015
77
7. Balance Sheet Details
Prepaid expenses and other current assets
Prepaid expenses .................................................................................... $
Other current assets ................................................................................
Income tax receivable ............................................................................
Total ................................................................................................. $
Accounts payable, accrued expenses and other
Accounts payable ................................................................................... $
Accrued expenses ...................................................................................
Accrued contingent consideration ..........................................................
Accrued interest payable ........................................................................
Accrued taxes payable ............................................................................
Other current liabilities ..........................................................................
Total ................................................................................................. $
December 31,
2015
2014
30,779 $
10,040
15,147
55,966 $
9,937 $
46,279
306
2,585
17,309
13,429
89,845 $
29,566
7,993
23,293
60,852
9,119
53,298
896
9,304
12,191
14,686
99,494
8. Financial Instruments
We consider the recorded value of our certain financial assets and liabilities, which consist primarily of cash equivalents,
accounts receivable, long-term receivables and accounts payable, to approximate the fair value of the respective assets and liabilities at
December 31, 2015 and 2014, based on the short-term nature of the assets and liabilities. We determine the fair value of our long-term
debt primarily based on quoted market prices for our 6% Senior Notes Due 2022 (the “2022 Notes”) at December 31, 2015. The fair
value of our borrowings on our senior secured bank revolving credit facility (“Senior Bank Credit Facility”) approximates the carrying
amount. During the quarter ended September 30, 2015, we repurchased a portion of our 6 ¾% Senior Notes Due 2020 (the “2020
Notes”) through a cash tender offer and satisfied and discharged the entire remaining amount of our 2020 Notes. The fair value of
our long-term debt is classified within Level 2 of the fair value hierarchy, because it is traded in less active markets.
The following table presents the carrying amounts and estimated fair values of our other financial instruments at December 31,
2015 and 2014:
December 31,
2015
2014
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
Liabilities
Acquisition-related contingent consideration, including
current portion (1) ...................................................................
Long-term debt, including current portion................................
Total ...................................................................................
$
$
4,394
500,000
504,394
$
$
4,394 $
513,500
517,894 $
6,338
711,000
717,338
$
$
6,338
735,000
741,338
(1)
The short-term portion is included in “Accounts payable, accrued expenses and other.” The long-term portion is included in
“Other liabilities.”
For business combinations consummated on or after January 1, 2009, we estimate the fair value of acquisition-related contingent
consideration using a probability-weighted discounted cash flow model. This fair value measure is based on significant inputs not
observed in the market and thus represents a Level 3 measurement. Fair value measurements characterized within Level 3 of the fair
value hierarchy are measured based on unobservable inputs that are supported by little or no market activity and reflect our own
assumptions in measuring fair value.
The significant unobservable inputs used in the fair value measurements of our acquisition-related contingent consideration are
our measures of the future profitability and related cash flows and discount rates. Significant increases (decreases) in any of these
inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumptions used
for the discount rates is accompanied by a directionally opposite change in the fair value measurement and a change in the
assumptions used for the future cash flows is accompanied by a directionally similar change in the fair value measurement. The fair
value of the contingent consideration is reassessed at each reporting period by the Company based on additional information as it
becomes available. Any change in the fair value adjustment is recorded in the earnings of that period and is included within the
“Acquisition-related contingent considerations” line in the Consolidated Statements of Comprehensive Income (Loss).
78
During the years ended December 31, 2015, 2014, and 2013, management determined that the fair value of certain contingent
consideration liabilities had declined. This remeasurement of the contingent consideration was based on management’s probability-
adjusted present value of the consideration expected to be transferred during the remainder of the earnout period, based on the
acquired operations’ forecasted results. The resulting reduction in the liability was recorded as income totaling $1.9 million, $2.7
million and $13.6 million for the years ended December 31, 2015, 2014 and 2013, respectively.
Accretion expense for acquisition-related contingent consideration totaled $0.7 million, $1.0 million and $2.7 million for years
ended December 31, 2015, 2014 and 2013, respectively, and is included within “Acquisition-related contingent consideration” in the
Consolidated Statements of Comprehensive Income (Loss).
9. Property and Equipment
Property and equipment consist of the following.
Leasehold improvements ........................................................ $
Construction in progress .........................................................
Furniture and equipment .........................................................
Computer equipment and software .........................................
Accumulated depreciation and amortization ...........................
Property and equipment, net ............................................... $
December 31,
2015
83,875 $
2,147
38,015
111,191
235,228
(160,468)
74,760 $
2014
78,129
7,305
35,952
100,484
221,870
(139,707 )
82,163
Depreciation expense for property and equipment totaled $24.9 million, $28.5 million and $26.8 million during the years ended
December 31, 2015, 2014 and 2013, respectively.
10. Goodwill and Other Intangible Assets
Goodwill
The changes in the carrying amount of goodwill by reportable segment are as follows:
Corporate
Finance &
Restructuring
Forensic and
Litigation
Consulting
Economic
Consulting
Technology Communications
Total
Strategic
Balance at December 31, 2013
Goodwill ............................................................. $
Accumulated goodwill impairment ....................
Goodwill, net at December 31, 2013 .....................
Acquisitions(1) .....................................................
Foreign currency translation adjustment
and other ..........................................................
Balance at December 31, 2014
Goodwill .............................................................
Accumulated goodwill impairment ....................
Goodwill, net at December 31, 2014 .....................
Acquisitions(1) .....................................................
Foreign currency translation adjustment
and other ..........................................................
Balance at December 31, 2015
Goodwill .............................................................
Accumulated goodwill impairment ....................
Goodwill, net December 31, 2015 .......................... $
—
449,710 $ 241,651 $ 263,474 $ 118,073 $
—
449,710 241,651 263,474 118,073
—
7,150
(224)
—
—
—
339,964 $1,412,872
(194,139)
(194,139)
145,825 1,218,733
6,926
—
(3,644)
(3,254)
(727)
(106 )
(6,239)
(13,970)
—
446,066 238,173 269,897 117,967
—
446,066 238,173 269,897 117,967
—
—
—
70
—
—
333,725 1,405,828
(194,139)
(194,139)
139,586 1,211,689
70
—
(4,588)
(2,962)
(556)
(79 )
(5,276)
(13,461)
441,548
235,211
269,341
117,888
—
—
441,548 $ 235,211 $ 269,341 $ 117,888 $
—
—
1,392,437
328,449
(194,139)
(194,139)
134,310 $1,198,298
(1)
(2)
Includes adjustments during the purchase price allocation period.
Contingent consideration is related to business combinations consummated prior to January 1, 2009.
79
2015 and 2014 Goodwill Impairment Test
For the 2015 and 2014 annual goodwill impairment test performed as of October 1, 2015 and October 1, 2014 respectively, we
utilized the quantitative test for our six reporting units using a combination of appropriately weighted income and market approaches.
The cash flows employed in the income approach are based on our most recent budgets, forecasts and business plans, as well as
various growth rate assumptions for years beyond the current business plan period, discounted using an estimated weighted average
costs of capital. The results of the Step 1 goodwill impairment analysis indicated that the estimated fair value of all of our reporting
units exceeded their respective carrying values.
2013 Goodwill Impairment Test
In the third quarter of 2013, in addition to reduced levels of M&A activity, our Strategic Communications segment experienced
pricing pressure for certain discretionary communications services, including initial public offering support services where there is
volume but also increasing competition. These factors compressed segment margins and contributed to a change in the Company’s
near-term outlook for this segment. As a result, we performed an interim impairment analysis with respect to the carrying value of
goodwill in our Strategic Communications reporting unit in connection with the preparation of our financial statements for the quarter
ended September 30, 2013. We concluded that the carrying values of the Strategic Communications reporting unit exceeded its
implied fair value, resulting in a $83.8 million goodwill impairment charge.
Other Intangible Assets
Other intangible assets with finite lives are amortized over their estimated useful lives. We recorded amortization expense of
$11.7 million, $15.5 million, and $23.0 million during the years ended December 31, 2015, 2014 and 2013, respectively. Based solely
on the amortizable intangible assets recorded at December 31, 2015, we estimate amortization expense to be $10.5 million in 2016,
$9.7 million in 2017, $8.1 million in 2018, $7.5 million in 2019, $7.3 million in 2020 and an aggregate of $15.2 million in years after
2020. Actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible asset
acquisitions, changes in useful lives or other relevant factors or changes.
Amortized intangible assets
Customer relationships .................................................
Non-competition agreements ........................................
Software ........................................................................
Trade names ..................................................................
Unamortized intangible assets
Useful
Life
in Years
1 to 15
1 to 10
3 to 10
1 to 2
December 31, 2015
December 31, 2014
Gross
Gross
Carrying
Amount
Accumulated
Amortization
Carrying
Amount
Accumulated
Amortization
$ 128,512 $
7,263
3,273
360
139,408
72,941 $ 136,692 $
9,167
7,052
940
3,594
140
378
81,073 149,831
69,472
8,275
613
37
78,397
Trade names ..................................................................
Indefinite
Total .........................................................................
5,600
$ 145,008 $
—
5,600
81,073 $ 155,431 $
—
78,397
11. Notes Receivable from Employees
The table below summarizes the changes in the carrying amount of our notes receivable from employees as of December 31,
2015 and 2014.
Notes receivable from employees - beginning ................................... $
Notes granted ...................................................................................
Repayments ......................................................................................
Amortization Expense ......................................................................
CTA and other ..................................................................................
Notes receivable from employees - ending.........................................
Less current portion ..........................................................................
Notes receivable from employees, net of current portion................. $
December 31,
2015
2014
149,357 $
26,827
(4,622 )
(25,977 )
(2,588 )
142,997
(36,115 )
106,882 $
141,391
52,698
(8,180)
(32,070)
(4,482)
149,357
(27,208)
122,149
80
At December 31, 2015 and 2014, there were 285 and 311 notes outstanding, respectively. Total amortization expense for the
years ended December 31, 2015, 2014 and 2013 was $26.0 million, $32.1 million and $35.1 million, respectively.
12. Long-Term Debt
The components of the Company’s long-term debt were as follows:
6 ¾% senior notes due 2020 .................................................................. $
6% senior notes due 2022 ......................................................................
Senior bank credit facility ......................................................................
Notes payable to former shareholders of acquired businesses ...............
Total debt ........................................................................................
Less deferred debt issue costs ................................................................
Less current portion ...............................................................................
Long-term debt, net ....................................................................... $
December 31,
2015
2014
— $
300,000
200,000
—
500,000
(5,228 )
—
494,772 $
400,000
300,000
—
11,000
711,000
(11,596)
(11,000)
688,404
6% Senior Notes Due 2022. The 2022 Notes have been registered with the SEC. Cash interest is payable semi-annually
beginning on May 15, 2013 at a rate of 6% per year. The 2022 Notes will mature on November 15, 2022. The 2022 Notes are
guaranteed, with certain exceptions, by our existing and future domestic subsidiaries. The 2022 Notes and the guarantees are our and
the guarantors’ general unsecured senior obligations. The indebtedness evidenced by the 2022 Notes and the guarantees (i) rank
equally in right of payment with all of FTI Consulting, Inc.’s and the guarantors’ existing and future senior indebtedness, (ii) rank
senior in right of payment to any existing and future subordinated indebtedness, (iii) are effectively junior to all of FTI Consulting,
Inc.’s and the guarantors’ secured debt, including borrowings under the Senior Bank Credit Facility (as defined below), to the extent
of the value of the collateral securing such indebtedness, and (iv) are structurally subordinated to all existing and future indebtedness
and other liabilities of any current and future non-guarantor subsidiaries (other than indebtedness and liabilities owed to FTI
Consulting, Inc. or one of its guarantor subsidiaries).
At any time prior to November 15, 2017, we may redeem the 2022 Notes, in whole or in part, at a price equal to 100% of the
principal amount plus an applicable “make-whole” premium and accrued and unpaid interest, if any, to the redemption date. The 2022
Notes are subject to redemption at our option, in whole or in part, at any time after November 15, 2017, upon not less than 30 nor
more than 60 days prior notice at the following redemption prices (expressed as percentages of the principal amount to be redeemed)
set forth below, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
Year
2017..........................................................................................
2018..........................................................................................
2019..........................................................................................
2020 and thereafter ...................................................................
Redemption Price
103.000 %
102.000 %
101.000 %
100.000 %
Debt issue costs of approximately $7.6 million were capitalized and are being amortized over the term of the 2022 Notes, which
approximates the effective interest method.
6 3/4% Senior Notes Due 2020. On August 14, 2015, the Company commenced a cash tender offer for any and all of the 2020
Notes for a price equal to $1,037.88 per $1,000 principal amount, plus accrued interest (the “Tender Offer”). The Tender Offer
expired on August 27, 2015 and on August 28, 2015, we retired an aggregate of $192.9 million principal amount of 2020 Notes
pursuant to the Tender Offer. On September 1, 2015, the Company issued a notice of redemption for the balance of $207.1 million
principal amount of 2020 Notes that remained outstanding after the Tender Offer, with a redemption date of October 1, 2015. On
September 23, 2015, pursuant to the terms of the 2020 Note Indenture, we satisfied and discharged the $207.1 million principal
amount of the 2020 Notes that remained outstanding by irrevocably depositing with a trustee, prior to the redemption date, sufficient
funds to repurchase all such 2020 Notes at a redemption price of $1,033.75 (plus accrued and unpaid interest through September 30,
2015) for each $1,000 aggregate principal amount. The 2020 Notes were subsequently redeemed by the trustee on October 1, 2015.
We recognized a loss on our early extinguishment of debt of $19.6 million, consisting primarily of a redemption premium of
$14.3 million and a $4.9 million non-cash write-off of unamortized deferred financing costs. This loss has been recorded in “Loss on
early extinguishment of debt” within the Consolidated Statements of Comprehensive Income (Loss).
81
Senior Bank Credit Facility. On June 26, 2015, we entered into a credit agreement (the “2015 Credit Agreement”), which
effectively amended and extended our prior credit agreement, dated November 27, 2012 (the “2012 Credit Agreement”). The 2012
Credit Agreement provided for a five-year $350.0 million senior secured revolving line of credit maturing on November 27, 2017. The
2015 Credit Agreement provides for a $550.0 million senior secured revolving line of credit maturing on September 26, 2020. We did
not incur any early termination or prepayment penalties in connection with the replacement of the 2012 Credit Agreement. At the
Company’s option, borrowings under the Senior Bank Credit Facility will bear interest at either one, two or three month LIBOR or an
alternative base rate, in each case plus the applicable margin. The applicable margin will fluctuate between 1.375% per annum and
2.00% per annum, in the case of LIBOR borrowings, or between 0.375% per annum and 1.00% per annum, in the case of base rate
borrowings, in each case, based upon the Company’s Consolidated Total Leverage Ratio (as defined in the 2015 Credit Agreement) at
such time.
Under the Senior Bank Credit Facility, we are required to pay a commitment fee rate that fluctuates between 0.25% and
0.35% per annum and the letter of credit fee rate that fluctuates between 1.375% and 2.00% per annum, in each case, based upon the
Company’s Consolidated Total Leverage Ratio.
Under the Senior Bank Credit Facility, the lenders have a security interest in substantially all of the existing and after acquired
assets of FTI Consulting, Inc. and substantially all of our domestic subsidiaries. Subject to certain conditions, at any time prior to
maturity, we will be able to invite existing and new lenders to increase the size of the Senior Bank Credit Facility under the 2015
Credit Agreement or provide new term loans under the 2015 Credit Agreement, in each case, up to a maximum of $100.0 million plus
unlimited amounts so long as the effect of the new increase does not cause the Consolidated Total Leverage Ratio to be greater than
3.50 to 1.00.
The 2015 Credit Agreement governing our Senior Bank Credit Facility and the indenture governing our 2022 Notes contain
covenants which, among other things, limit our ability to incur additional indebtedness, create liens, pay dividends on our capital
stock, make distributions or repurchases of our capital stock or make specified other restricted payments, consolidate, merge or sell
assets or engage in sale-leasebacks, guarantee obligations of other entities and our foreign subsidiaries, make investments and loans,
enter into transactions with affiliates or related persons, repay, redeem or purchase certain indebtedness (or modify the terms thereof),
make material changes to accounting and reporting practices and engage in any business other than consulting-related businesses or
substantially related, complimentary or incidental businesses. In addition, the 2015 Credit Agreement governing our Senior Bank
Credit Facility includes financial covenants that require us not to (i) exceed a maximum consolidated total leverage ratio (the ratio of
total funded debt to adjusted EBITDA), and (ii) exceed a maximum consolidated interest coverage ratio (the ratio of adjusted EBITDA
minus capital expenditures and cash taxes to cash interest). At December 31, 2015, we were in compliance with all covenants as
stipulated in the 2015 Credit Agreement governing our Senior Bank Credit Facility and the indenture governing our 2022 Notes.
There were $200.0 million in borrowings outstanding under the Company’s Senior Bank Credit Facility as of December 31,
2015. The Company has classified these borrowings as long-term debt in the accompanying Consolidated Balance Sheet as the
Company has the intent and ability, as supported by availability under the 2015 Credit Agreement, to refinance these borrowings for
more than one year from the Balance Sheet date. Additionally, $1.4 million of the borrowing limit was used (and, therefore,
unavailable) as of December 31, 2015 for letters of credit.
There were $5.5 million, $2.8 million and $3.7 million of unamortized debt issue costs related to Senior Bank Credit Facility as
of December 31, 2015, 2014 and 2013 respectively. These amounts were included in “Other assets” on our Consolidated Balance
Sheets.
Notes payable to shareholders of acquired businesses. In connection with our 2010 acquisition of FS Asia Advisory Limited
(formerly Ferrier Hodgson Hong Kong Group), we issued $35.0 million of notes to selling shareholders as part of the total
consideration paid. On August 19, 2015, we repaid the remaining $11.0 million balance of notes payable to the former shareholders of
FS Asia Advisory Limited.
Guarantees. Currently, we do not have any debt guarantees related to entities outside of the consolidated group. At
December 31, 2015, substantially all of our domestic subsidiaries are guarantors of borrowings under our Senior Bank Credit Facility
and our Notes in the amount of $500.0 million.
82
13. Commitments and Contingencies
Operating Lease Commitments
Rental expense, net of rental income was $56.1 million, $57.8 million, and $60.7 million during the years ended December 31,
2015, 2014 and 2013, respectively. For years subsequent to December 31, 2015, future minimum payments for all operating lease
obligations that have initial non-cancelable lease terms exceeding one year, net of rental income from subleases of $2.0 million in
2016, $1.7 million in 2017, $1.4 million in 2018, $1.4 million in 2019, $0.8 million in 2020 and $3.2 million thereafter are as follows:
2016............................................................................................. $
2017.............................................................................................
2018.............................................................................................
2019.............................................................................................
2020.............................................................................................
Thereafter ....................................................................................
Total ..................................................................................... $
Operating
Leases
43,037
44,653
36,809
34,189
32,229
83,274
274,191
Contingencies
We are subject to legal actions arising in the ordinary course of business. In management’s opinion, we believe we have
adequate legal defenses and/or insurance coverage with respect to the eventuality of such actions. We do not believe any settlement or
judgment relating to any pending legal action would materially affect our financial position or results of operations.
14. Income Taxes
Significant components of deferred tax assets and liabilities are as follows:
Deferred tax assets
Allowance for doubtful accounts ..................................................... $
Accrued vacation and bonus ............................................................
Deferred rent ....................................................................................
Share-based compensation ...............................................................
Notes receivable from employees ....................................................
State net operating loss carryforward & credits ...............................
Foreign net operating loss carryforward...........................................
Foreign tax credits ............................................................................
Future foreign tax credit asset ..........................................................
Deferred compensation ....................................................................
Other - net ........................................................................................
Total deferred tax assets...........................................................
Year Ended December 31,
2014
2015
17,953 $
37,481
13,415
30,037
20,353
3,883
6,614
—
3,753
2,279
3,754
139,522
14,088
22,021
15,036
18,617
23,158
3,558
8,040
2,929
5,259
4,669
9,583
126,958
Deferred tax liabilities
Revenue recognition .........................................................................
Property, equipment and capitalized software ..................................
Goodwill and other intangible asset amortization ............................
Total deferred tax liabilities .....................................................
Valuation allowance .........................................................................
Net deferred tax assets (liabilities) ..................................................... $
(12,452 )
(5,739 )
(247,951 )
(266,142 )
(13,167 )
(139,787 ) $
(9,402)
(4,142)
(233,572)
(247,116)
(14,442)
(134,600)
As of December 31, 2015, we have not provided for deferred taxes on $46.8 million of the undistributed non-U.S. subsidiary
earnings that are considered permanently invested. If these earnings were distributed in the form of dividends or otherwise, the
distributors would be subject to U.S. federal income tax of approximately $16.4 million.
83
At December 31, 2015 and 2014, the Company believed certain deferred tax assets principally associated with foreign net
operating loss, foreign tax credit carryforwards, and other related foreign balance sheet accounts which can be carried forward for
periods ranging from 20 years to indefinite, would expire unused based on updated forward-looking financial information. Therefore,
valuation allowances of $13.2 million and $14.4 million were recorded against the Company’s net deferred tax assets at December 31,
2015 and 2014, respectively.
As of December 31, 2015, we have not recorded a $7.6 million deferred tax liability related to the tax basis difference in the
investment in our foreign subsidiaries as the investment is considered permanent in duration.
The components of “Income before income tax provision” from continuing operations are as follows:
Domestic ............................................................................... $
Foreign ..................................................................................
Total .............................................................................. $
59,408 $
45,978
105,386 $
60,315 $
41,096
101,411 $
32,498
(687)
31,811
Year Ended December 31,
2015
2014
2013
The components of income tax provision from continuing operations are as follows:
Current
Federal ............................................................................. $
State .................................................................................
Foreign ............................................................................
Deferred
Federal ............................................................................. $
State .................................................................................
Foreign ............................................................................
Income tax provision .......................................................... $
Year Ended December 31,
2014
2015
2013
23,957 $
1,943
10,029
35,929
1,546 $
1,265
593
3,404
39,333 $
288 $
4,681
14,042
19,011
21,657 $
2,309
(373 )
23,593
42,604 $
16,066
6,673
9,599
32,338
(1,094)
(1,054)
12,215
10,067
42,405
Our income tax provision from continuing operations resulted in effective tax rates that varied from the statutory federal income
tax rate as follows:
Income tax expense at federal statutory rate ......................... $
State income taxes, net of federal benefit .............................
Benefit from lower foreign tax rates .....................................
Non-deductible goodwill impairment ...................................
Valuation allowance on foreign tax credits & net operating
loss carryforward ...............................................................
Other expenses not deductible for tax purposes ...................
Changes in non-taxable contingent consideration ................
Other adjustments, net ..........................................................
Income tax provision .......................................................... $
Year Ended December 31,
2014
2015
2013
36,885
$
1,587
(5,973)
—
2,326
2,719
—
1,789
39,333 $
35,494
$
3,494
(4,154 )
—
4,604
2,962
—
204
42,604 $
11,134
3,270
(5,214)
29,313
8,206
2,872
(2,777)
(4,399)
42,405
We file numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and in many city, state and
foreign jurisdictions. We are currently under an IRS audit for the year 2012 and are no longer subject to U.S. federal income tax
examinations for years prior to 2011. We are also no longer subject to state and local or foreign tax examinations by tax authorities for
years prior to 2009. In addition, open tax years related to state and foreign jurisdictions remain subject to examination but are not
considered material to our financial position, results of operations or cash flows.
84
Our liability for uncertain tax positions was $8.1 million and $2.8 million at December 31, 2015 and 2014, respectively. The
$5.3 million increase in our liability for uncertain tax positions was due to the timing of tax deductions claimed in prior years. At
December 31, 2015, our accrual for the payment of tax- related interest and penalties was not material. Management believes that an
adequate provision has been made for any adjustments that may result from tax examinations. Although the timing of the resolution
and closure of such examinations is not certain, the Company believes it is reasonably possible that tax audit resolutions could reduce
its unrecognized tax benefits by approximately $5.8 million in the next 12 months.
15. Stockholders’ Equity
2015 stock repurchase program.
On November 5, 2015, our Board of Directors authorized a six month stock repurchase program of up to $50.0 million (the
“2015 Repurchase Program”). During the year ended December 31, 2015, we repurchased and retired 764,545 shares of our common
stock for an average price per share of $34.68, at a cost of $26.5 million, which was paid in full in 2015.
2012 stock repurchase program.
On June 6, 2012, our Board of Directors authorized a two-year stock repurchase program of up to $250.0 million (the “2012
Repurchase Program”). During the year ended December 31, 2013, we repurchased and retired 1,956,900 shares of our common stock
for an average price per share of $36.35, at a cost of $71.1 million, of which $4.4 million was accrued and included in the
Consolidated Balance Sheet, and $66.7 million was paid at December 31, 2013. In January 2014, we paid the balance due of $4.4
million on our 2013 share repurchases. No shares were repurchased during the year ended December 31, 2014. The 2012 Repurchase
Program expired on June 5, 2014.
16. Employee Benefit Plans
We maintain a qualified defined contribution 401(k) plan, which covers substantially all of our U.S. employees. Under the plan,
participants are entitled to make pre-tax and/or Roth post-tax contributions up to the annual maximums established by the Internal
Revenue Service. We match a certain percentage of participant contributions pursuant to the terms of the plan, which contributions are
limited to a percent of the participant’s eligible compensation. FTI Consulting matches each participant’s eligible 401(k) plan
contributions up to the annual limit specified by the Internal Revenue Service. We made contributions related to the plan of $10.9
million, $9.7 million and $9.2 million during the years ended December 31, 2015, 2014 and 2013, respectively.
We also maintain several defined contribution pension schemes for our employees in the United Kingdom and other foreign
countries. We contributed to these plans $6.1 million, $6.0 million and $5.3 million during the years ended December 31, 2015, 2014
and 2013, respectively.
17. Segment Reporting
We manage our business in five reportable segments: Corporate Finance & Restructuring (formally known as Corporate
Finance/Restructuring), Forensic and Litigation Consulting, Economic Consulting, Technology and Strategic Communications.
Our Corporate Finance & Restructuring segment focuses on the strategic, operational, financial and capital needs of businesses
around the world and provides consulting and advisory services on a wide range of areas, such as restructuring (including bankruptcy),
interim management, financings, mergers and acquisitions (“M&A”), M&A integration, valuations and tax issues and as well as
financial, operational and performance improvement. Our distressed service offerings generally include corporate restructurings and
interim management, and our non-distressed service offerings generally include all other services mentioned above.
Our Forensic and Litigation Consulting segment provides law firms, companies, government clients and other interested parties
with dispute advisory, investigations, forensic accounting, business intelligence assessments, data analytics and risk mitigation
services as well as interim management and performance improvement services for our health solutions practice clients.
Our Economic Consulting segment provides law firms, companies, government entities and other interested parties with
analysis of complex economic issues for use in legal, regulatory and international arbitration proceedings, strategic decision making
and public policy debates in the U.S. and around the world.
85
Our Technology segment provides e-discovery and information governance, hosting and consulting services and software to its
clients. It provides products, services and consulting to companies, law firms, courts and government agencies worldwide. Its
comprehensive suite of software and services help clients locate, review and produce ESI, including e-mail, computer files, voicemail,
instant messaging, cloud and social media data, as well as financial and transactional data.
Our Strategic Communications segment provides advice and consulting services relating to financial and corporate
communications, investor relations, reputation management, brand communications, public affairs, business consulting, digital design
and marketing.
We evaluate the performance of our operating segments based on 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 define Total Adjusted Segment
EBITDA as the total of Adjusted Segment EBITDA for all segments, which excludes unallocated corporate expenses. Although
Adjusted Segment EBITDA is not a measure of financial condition or performance determined in accordance with GAAP, 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.
The table below presents revenues and Adjusted Segment EBITDA for our reportable segments for the years ended
December 31, 2015, 2014 and 2013.
2015
Year Ended December 31,
2014
2013
Revenues
Corporate Finance & Restructuring ............................................. $
Forensic and Litigation Consulting ..............................................
Economic Consulting ...................................................................
Technology ..................................................................................
Strategic Communications ...........................................................
Total revenues ....................................................................... $
440,398 $
482,269
447,909
218,599
189,974
1,779,149 $
391,115 $
483,380
451,040
241,310
189,367
1,756,212 $
382,526
433,632
447,366
202,663
186,245
1,652,432
Adjusted Segment EBITDA
Corporate Finance & Restructuring ............................................. $
Forensic and Litigation Consulting ..............................................
Economic Consulting ...................................................................
Technology ..................................................................................
Strategic Communications ...........................................................
Total Adjusted Segment EBITDA ....................................... $
90,101 $
64,267
62,330
39,010
27,727
283,435 $
55,492 $
90,468
59,282
63,545
22,588
291,375 $
67,183
74,481
92,204
60,655
18,737
313,260
The table below reconciles Total Adjusted Segment EBITDA to income before income tax provision. Unallocated corporate
expenses include primarily indirect costs related to centrally manage administrative functions which have not been allocated to the
segments. These administrative costs include costs related to executive management, legal, corporate office support costs, information
technology, accounting, marketing, human resources, and company-wide business development and strategy functions.
Total Adjusted Segment EBITDA ..................................................... $
Segment depreciation expense ..........................................................
Amortization of intangible assets ......................................................
Special charges ..................................................................................
Goodwill impairment charge .............................................................
Unallocated corporate expenses, excluding special charges .............
Interest income and other ..................................................................
Interest expense .................................................................................
Loss on early extinguishment of debt ................................................
Remeasurement of acquisition-related contingent consideration ......
Income before income tax provision ......................................... $
2015
283,435 $
(27,717)
(11,726)
—
—
(81,348)
3,232
(42,768)
(19,589)
1,867
105,386 $
Year Ended December 31,
2014
291,375 $
(30,267 )
(15,521 )
(16,339 )
—
(84,545 )
4,670
(50,685 )
—
2,723
101,411 $
2013
313,260
(28,203)
(22,954)
(38,414)
(83,752)
(72,053)
1,748
(51,376)
—
13,555
31,811
86
The table below presents assets by segment. Segment assets primarily include accounts and notes receivable, fixed assets
purchased specifically for the segment, goodwill and other intangible assets.
December 31,
Corporate Finance & Restructuring ......................................... $
Forensic and Litigation Consulting ..........................................
Economic Consulting ...............................................................
Technology ..............................................................................
Strategic Communications .......................................................
2014
668,631
430,759
493,694
214,866
250,194
Total segment assets ......................................................... 2,048,198 2,058,144
333,455
Total assets ........................................................................ $ 2,229,018 $ 2,391,599
2015
671,605 $
437,398
498,765
200,987
239,443
Unallocated corporate assets ....................................................
180,820
The table below details information on our revenues for the years ended December 31, 2015, 2014 and 2013. Revenues have
been attributed to location based on the location of the legal entity generating the revenue.
Year Ended December 31,
2014
2013
2015
United States ......................................................................... $ 1,281,444 $ 1,256,046 $ 1,208,978
194,614
United Kingdom ...................................................................
248,840
All other foreign countries ....................................................
Total revenue ................................................................. $ 1,779,149 $ 1,756,212 $ 1,652,432
232,281
267,885
232,281
265,424
We do not have a single customer that represents ten percent or more of our consolidated revenues.
The table below details information on our long-lived assets and net assets at December 31, 2015 and 2014 attributed to
geographic location based on the location of the legal entity holding the assets.
December 31, 2015
December 31, 2014
United States
United
Kingdom
All other
foreign
countries United States
United
Kingdom
All foreign
countries
Property and equipment, net of accumulated
depreciation ........................................................... $
9,278
Net assets ................................................................ $ 660,396 $ 210,801 $ 276,406 $ 594,960 $ 226,019 $ 281,767
50,914 $ 21,971 $
5,033 $ 22,620 $
47,107 $
87
18. Supplemental Condensed Consolidating Guarantor and Non-Guarantor Financial Information
Substantially all of our domestic subsidiaries are guarantors of borrowings under our Senior Bank Credit Facility and 2022
Notes. The guarantees are full and unconditional and joint and several. All of our guarantors are 100% owned, direct or indirect,
subsidiaries.
The following financial information presents condensed consolidating balance sheets, statements of comprehensive income
(loss) and statements of cash flows for FTI Consulting, all the guarantor subsidiaries, all the non-guarantor subsidiaries and the
eliminations necessary to arrive at the consolidated information for FTI Consulting and its subsidiaries. For purposes of this
presentation, we have accounted for our investments in our subsidiaries using the equity method of accounting. The principal
eliminating entries eliminate investment in subsidiary and intercompany balances and transactions.
Condensed Consolidating Balance Sheet Information as of December 31, 2015
FTI
Consulting, Inc.
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
Assets
Cash and cash equivalents ............................... $
Accounts receivable, net ..................................
Intercompany receivables ................................
Other current assets .........................................
Total current assets ..................................
Property and equipment, net ............................
Goodwill ..........................................................
Other intangible assets, net ..............................
Investments in subsidiaries ..............................
Other assets ......................................................
165 $
169,488
936,452
25,627
1,131,732
13,409
416,053
15,571
486,462
72,981
Total assets ................................................ $ 2,892,726 $ 2,136,208 $
35,211 $
159,121
—
44,086
238,418
33,699
558,978
25,863
1,995,409
40,359
Liabilities
Intercompany payables .................................... $
Other current liabilities ....................................
Total current liabilities ............................
Long-term debt, net .........................................
Other liabilities ................................................
Total liabilities ..........................................
Stockholders' equity ............................................
Total liabilities and stockholders'
930,066 $
135,421
1,065,487
494,772
184,864
1,745,123
1,147,603
8,921 $
107,188
116,109
—
12,562
128,671
2,007,537
114,384 $
171,175
62,651
22,368
370,578
27,652
223,267
43,542
— $
—
(999,103)
—
(999,103)
—
—
(21,041)
— (2,481,871)
—
149,760
499,784
—
92,081
741,625
74,760
1,198,298
63,935
—
150,400
702,099 $ (3,502,015) $ 2,229,018
37,060
60,116 $
104,468
164,584
—
(999,103) $
—
(999,103)
—
—
206,724
(999,103)
495,375 (2,502,912)
42,140
—
347,077
347,077
494,772
239,566
1,081,415
1,147,603
equity .................................................... $ 2,892,726 $ 2,136,208 $
702,099 $ (3,502,015) $ 2,229,018
88
Condensed Consolidating Balance Sheet Information as of December 31, 2014
FTI
Consulting, Inc.
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
Assets
Cash and cash equivalents ............................... $
Accounts receivable, net ..................................
Intercompany receivables ................................
Other current assets .........................................
Total current assets ..................................
Property and equipment, net ............................
Goodwill ..........................................................
Other intangible assets, net ..............................
Investments in subsidiaries ..............................
Other assets ......................................................
171,090 $
153,495
—
47,123
371,708
33,864
559,318
29,807
1,915,869
50,810
159 $
162,032
875,000
22,994
1,060,185
17,050
416,053
18,432
484,162
78,388
Total assets ................................................ $ 2,961,376 $ 2,074,270 $
112,431 $
169,574
12,195
17,943
312,143
31,249
236,318
53,357
— $
—
(887,195)
—
(887,195)
—
—
(24,562)
— (2,400,031)
283,680
485,101
—
88,060
856,841
82,163
1,211,689
77,034
—
163,872
667,741 $ (3,311,788) $ 2,391,599
34,674
—
Liabilities
Intercompany payables .................................... $
Other current liabilities ....................................
Total current liabilities ............................
Long-term debt, net .........................................
Other liabilities ................................................
Total liabilities ..........................................
Stockholders' equity ............................................
Total liabilities and stockholders'
832,253 $
148,299
980,552
688,404
189,674
1,858,630
1,102,746
14,197 $
113,450
127,647
—
14,955
142,602
1,931,668
(887,195) $
40,745 $
—
105,343
(887,195)
146,088
—
—
—
28,728
(887,195)
174,816
492,925 (2,424,593)
—
367,092
367,092
688,404
233,357
1,288,853
1,102,746
equity .................................................... $ 2,961,376 $ 2,074,270 $
667,741 $ (3,311,788) $ 2,391,599
Condensed Consolidating Statement of Comprehensive Income (Loss) for the Year Ended December 31, 2015
Revenues
Operating expenses
FTI
Consulting, Inc.
$
667,259 $
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
754,458
$
504,429 $
(146,997) $ 1,779,149
Direct cost of revenues .....................................
Selling, general and administrative expenses ...
Acquisition-related contingent consideration ...
Amortization of other intangible assets ............
Operating income .................................................
Other (expense) income .......................................
Income (loss) before income tax provision .........
Income tax (benefit) provision ............................
Equity in net earnings of subsidiaries ................
Net income (loss)................................................... $
Other comprehensive loss, net of tax:
Foreign currency translation adjustments, net
of tax expense of $0 .....................................
Other comprehensive loss, net of tax:
Comprehensive income (loss) .............................. $
428,356
189,607
(1,408)
3,944
620,499
46,760
(64,554)
(17,794)
(6,944)
76,903
66,053 $
551,829
121,112
208
2,861
676,010
78,448
(4,881)
73,567
35,579
31,744
69,732
$
337,856
122,348
—
8,442
468,646
35,783
10,310
46,093
10,698
—
35,395 $
(146,597)
(399)
—
(3,521)
(150,517)
3,520
—
3,520
—
(108,647)
(105,127) $
1,171,444
432,668
(1,200)
11,726
1,614,638
164,511
(59,125)
105,386
39,333
—
66,053
—
—
66,053 $
—
—
69,732
(28,727 )
(28,727 )
—
—
$
6,668 $
(105,127) $
(28,727)
(28,727)
37,326
89
Condensed Consolidating Statement of Comprehensive Income (Loss) for the Year Ended December 31, 2014
FTI
Consulting, Inc.
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
Revenues ............................................................... $
Operating expenses
Direct cost of revenues .....................................
Selling, general and administrative expenses ...
Special charges .................................................
Acquisition-related contingent consideration ...
Amortization of other intangible assets ............
Operating income (loss) .......................................
Other (expense) income .......................................
Income (loss) before income tax provision .........
Income tax (benefit) provision ............................
Equity in net earnings of subsidiaries ................
Net income (loss)................................................... $
Other comprehensive loss, net of tax:
Foreign currency translation adjustments, net
of tax expense of $0 .....................................
Other comprehensive loss, net of tax:
Comprehensive income (loss) .............................. $
617,843 $ 1,002,571
$
506,181 $
(370,383) $ 1,756,212
401,451
181,529
15,227
(469)
4,235
601,973
15,870
(51,511)
(35,641)
(14,981)
79,467
58,807 $
778,648
121,085
30
(358)
2,702
902,107
100,464
(7,104)
93,360
43,915
23,633
73,078
$
334,015
132,257
1,082
(849 )
12,375
478,880
27,301
12,600
39,901
13,670
—
26,231 $
(369,357)
(1,026)
—
—
(3,791)
(374,174)
3,791
—
3,791
—
(103,100)
(99,309) $
1,144,757
433,845
16,339
(1,676)
15,521
1,608,786
147,426
(46,015)
101,411
42,604
—
58,807
—
—
58,807 $
—
—
73,078
(29,179 )
(29,179 )
—
—
$
(2,948 ) $
(99,309) $
(29,179)
(29,179)
29,628
Condensed Consolidating Statement of Comprehensive Income (Loss) for the Year Ended December 31, 2013
FTI
Consulting, Inc.
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
Revenues ............................................................... $
Operating expenses
Direct cost of revenues .....................................
Selling, general and administrative expenses ...
Special charges .................................................
Acquisition-related contingent consideration ...
Amortization of other intangible assets ............
Goodwill impairment charge ............................
Operating income (loss) .......................................
Other (expense) income .......................................
Income (loss) before income tax provision .........
Income tax (benefit) provision ............................
Equity in net earnings of subsidiaries ................
Net income (loss)................................................... $
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net
of tax expense of $0 .....................................
Other comprehensive income (loss), net of tax:
Comprehensive income (loss) .............................. $
593,644 $
985,398
$
453,272 $
(379,882) $ 1,652,432
382,066
166,014
34,338
416
4,504
—
587,338
6,306
(61,461)
(55,155)
(24,654)
19,907
(10,594) $
745,227
110,485
112
653
10,211
30,321
897,009
88,389
(5,947)
82,442
53,543
(17,744)
11,155
(60)
(60)
(10,654) $
—
—
11,155
$
$
292,214
120,618
3,964
(11,938 )
11,472
53,431
469,761
(16,489 )
17,780
1,291
13,516
—
(12,225 ) $
(377,446)
(2,436)
—
—
(3,233)
—
(383,115)
3,233
—
3,233
—
(2,163)
1,070 $
1,042,061
394,681
38,414
(10,869)
22,954
83,752
1,570,993
81,439
(49,628)
31,811
42,405
—
(10,594)
(9,660 )
(9,660 )
(21,885 ) $
—
—
1,070 $
(9,720)
(9,720)
(20,314)
90
Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2015
Operating activities
Net cash provided by operating activities ........................
$
14,815
$
83,516
$
41,589
$
139,920
FTI
Consulting, Inc.
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Consolidated
Investing activities
Payments for acquisition of businesses, net of cash
received.........................................................................
Purchases of property and equipment and other ..............
Other ................................................................................
Net cash used in investing activities...........................
Financing activities
Borrowings under revolving line of credit, net ..................
Payments of long-term debt ..............................................
Payments of debt financing fees ........................................
Deposits .............................................................................
Purchase and retirement of common stock ........................
Net issuance of common stock under equity
compensation plans .......................................................
Other ..................................................................................
Intercompany transfers ......................................................
Net cash used in financing activities ..........................
—
(9,192)
79
(9,113)
200,000
(425,671)
(3,843)
—
(26,532)
16,666
485
97,314
(141,581)
—
(16,487)
—
(16,487)
(575)
(5,720)
158
(6,137)
—
—
—
—
—
—
(294)
(66,729)
(67,023)
—
—
—
3,227
—
—
—
(30,585)
(27,358)
Effects of exchange rate changes on cash and cash
equivalents .........................................................................
Net increase (decrease) in cash and cash equivalents.......
Cash and cash equivalents, beginning of year ..................
Cash and cash equivalents, end of year ............................. $
—
(135,879)
171,090
35,211
$
—
6
159
165
$
(6,141)
1,953
112,431
114,384
$
(575)
(31,399)
237
(31,737)
200,000
(425,671)
(3,843)
3,227
(26,532)
16,666
191
—
(235,962)
(6,141)
(133,920)
283,680
149,760
Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2014
Operating activities
Net cash (used in) provided by operating activities........ $
(36,921) $
142,540
$
29,782
$
135,401
FTI
Consulting, Inc.
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Consolidated
Investing activities
Payments for acquisition of businesses, net of cash
received........................................................................
Purchases of property and equipment and other .............
Other ...............................................................................
Net cash used in investing activities..........................
Financing activities
Payments of long-term debt and capital lease
obligations ...................................................................
Deposits ..........................................................................
Purchase and retirement of common stock .....................
Net issuance of common stock under equity
compensation plans ......................................................
Other ...............................................................................
Intercompany transfers ...................................................
Net cash provided by (used in) financing
(14,729)
(12,738)
139
(27,328)
—
—
(4,367)
4,772
366
122,625
(7,783)
(13,080)
—
(20,863)
(955)
(13,438)
4,989
(9,404)
(6,000)
—
—
—
(555)
(115,457)
(14)
13,071
—
—
(943)
(7,168)
(23,467)
(39,256)
5,128
(57,595)
(6,014)
13,071
(4,367)
4,772
(1,132)
—
activities ...............................................................
123,396
(122,012)
4,946
6,330
Effects of exchange rate changes on cash and cash
equivalents ........................................................................
Net increase (decrease) in cash and cash equivalents......
Cash and cash equivalents, beginning of year .................
Cash and cash equivalents, end of year ............................ $
—
59,147
111,943
171,090
$
—
(335)
494
159
$
(6,289)
19,035
93,396
112,431
$
(6,289)
77,847
205,833
283,680
91
Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2013
Operating activities
Net cash (used in) provided by operating activities ........ $
(37,166) $
178,234 $
52,203 $
193,271
FTI
Consulting, Inc.
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Consolidated
Investing activities
Payments for acquisition of businesses, net of cash
received........................................................................
Purchases of property and equipment and other .............
Other ...............................................................................
Net cash used in investing activities..........................
Financing activities
Payments of long-term debt and capital lease
obligations ...................................................................
Purchase and retirement of common stock .....................
Net issuance of common stock under equity
compensation plans ......................................................
Other ...............................................................................
Intercompany transfers ...................................................
Net cash provided by (used in) financing
(12,555)
(4,296)
45
(16,806)
—
(66,763)
29,392
1,515
135,108
(7,157)
(17,507)
—
(24,664)
(35,786)
(20,741)
(5,094)
(61,621)
(55,498)
(42,544)
(5,049)
(103,091)
(6,000)
—
—
—
(147,686)
(21)
—
—
(1,252)
12,578
(6,021)
(66,763)
29,392
263
—
activities ...............................................................
99,252
(153,686)
11,305
(43,129)
Effects of exchange rate changes on cash and cash
equivalents ........................................................................
Net increase (decrease) in cash and cash equivalents......
Cash and cash equivalents, beginning of year .................
Cash and cash equivalents, end of year ............................ $
—
45,280
66,663
111,943 $
—
(116)
610
494 $
1,997
3,884
89,512
93,396 $
1,997
49,048
156,785
205,833
19. Quarterly Financial Data (unaudited)
March 31
June 30
September 30
December 31
Quarter Ended
2015
Revenues ....................................................................................... $
Operating expenses
Direct cost of revenues .............................................................
Selling, general and administrative expenses ...........................
Acquisition-related contingent consideration ...........................
Amortization of other intangible assets ....................................
Operating income .........................................................................
Interest income and other ............................................................
Interest expense ............................................................................
Loss on early extinguishment of debt .........................................
Income before income tax provision ...........................................
Income tax provision ....................................................................
Net income .................................................................................... $
Earnings per common share — basic ......................................... $
Earnings per common share — diluted ...................................... $
Weighted average common shares outstanding
Basic .........................................................................................
Diluted ......................................................................................
40,384
41,324
92
432,338
$
449,137
$
455,470
$
442,204
279,030
102,214
234
3,012
384,490
47,848
(137)
(12,368)
—
35,343
11,657
23,686
0.59
0.57
$
$
$
291,469
109,045
(1,538 )
3,007
401,983
47,154
950
(12,473 )
—
35,631
13,922
21,709
0.53
0.52
40,792
41,696
$
$
$
301,609
105,058
159
2,900
409,726
45,744
2,027
(11,696)
(19,589)
16,486
6,177
10,309
$
0.25 $
$
0.25
41,094
41,982
299,336
116,351
(55)
2,807
418,439
23,765
392
(6,231)
—
17,926
7,577
10,349
0.25
0.25
41,078
41,879
March 31
June 30
September 30
December 31
Quarter Ended
2014
Revenues ....................................................................................... $
Operating expenses
Direct cost of revenues .............................................................
Selling, general and administrative expenses ...........................
Special charges .........................................................................
Acquisition-related contingent consideration ...........................
Amortization of other intangible assets ....................................
Operating income .........................................................................
Interest income and other ............................................................
Interest expense ............................................................................
Income before income tax provision ...........................................
Income tax provision ....................................................................
Net income .................................................................................... $
Earnings per common share — basic ......................................... $
Earnings per common share — diluted ...................................... $
Weighted average common shares outstanding ........................
Basic .........................................................................................
Diluted ......................................................................................
425,552
$
454,324
$
451,178
$
425,158
274,275
108,387
—
(1,843)
4,616
385,435
40,117
1,003
(12,655)
28,465
10,348
18,117
0.46
0.45
39,438
40,457
$
$
$
295,549
107,032
9,364
(5 )
3,452
415,392
38,932
1,448
(12,908 )
27,472
10,225
17,247
0.43
0.42
39,681
40,750
$
$
$
293,244
102,461
5,347
257
3,398
404,707
46,471
1,014
(12,634)
34,851
12,329
22,522
0.57
0.55
39,789
40,819
$
$
$
281,689
115,965
1,628
(85)
4,055
403,252
21,906
1,205
(12,488)
10,623
9,702
921
0.02
0.02
39,991
41,090
The sum of the quarterly earnings per share amounts may not equal the annual amounts due to changes in the weighted-average
number of common share outstanding during each quarterly period.
93
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this
Annual Report on Form 10-K was made under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer
have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in
reports filed or submitted under the Exchange Act is timely recorded, processed, summarized and reported and include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted
under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief
Financial Officer as appropriate, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Management’s report on internal control over financial reporting is included in “Item 8. Financial Statements and Supplementary
Data.”
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting that occurred during the quarter ended
December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
ITEM 9B. OTHER INFORMATION
None
94
Certain information required in Part III is omitted from this report, but is incorporated herein by reference from our definitive
proxy statement for the 2016 Annual Meeting of Stockholders to be filed within 120 days after the end of our fiscal year ended
December 31, 2015, pursuant to Regulation 14A with the SEC.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information contained in our proxy statement under the captions “Information About the Board of Directors and
Committees,” “Corporate Governance,” “Executive Officers and Compensation,” and “Section 16(a) Beneficial Ownership Reporting
Compliance” is incorporated herein by reference.
We have adopted the FTI Consulting, Inc. Code of Ethics and Business Conduct (“Code of Ethics”), which applies to our
chairman of the board, president, chief executive officer, chief financial officer, corporate controller and our other financial
professionals, as well as all our other executive officers, including chief strategy and information officer, chief human resources
officer, executive vice president, general counsel, and chief risk officer and our other officers, directors, employees and independent
contractors. The Code of Ethics is publicly available on our website at http://www.fticonsulting.com. If we make any substantive
amendments to the Code of Ethics or grant any waiver, including any implicit waiver, from a provision of the Code of Ethics to our
president, chief executive officer, chief financial officer, corporate controller or persons performing similar functions, other executive
officers or directors, we will disclose the nature of such amendment or waiver on our website or in a Current Report on Form 8-K filed
with the SEC. We will provide a copy of our Code of Ethics without charge upon request to our Corporate Secretary, FTI Consulting,
Inc., 2 Hamill Road, North Building, Baltimore, Maryland 21210.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in our proxy statement under the caption “Executive Officers and Compensation” is incorporated
herein by reference.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information contained in our proxy statement under the captions “Security Ownership of Certain Beneficial Owners and
Management” and this Annual Report on Form 10-K under the caption “Part II — Item 5. Market for the Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Securities Authorized for Issuance under Equity
Compensation Plans” is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information contained in our proxy statement under the captions “Certain Relationships and Related Party Transactions,”
“Information About the Board of Directors and Committees” and “Corporate Governance” is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information contained in our proxy statement under the caption “Principal Accountant Fees and Services” is incorporated
herein by reference.
95
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) (1) The following financial statements are included in this Annual Report on Form 10-K:
Management’s Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm — Internal Control over Financial Reporting
Reports of Independent Registered Public Accounting Firm — Consolidated Financial Statements
Consolidated Balance Sheets — December 31, 2015 and 2014
Consolidated Statements of Comprehensive Income (Loss) — Years Ended December 31, 2015, 2014 and 2013
Consolidated Statements of Stockholders’ Equity — Years Ended December 31, 2015, 2014 and 2013
Consolidated Statements of Cash Flows — Years Ended December 31, 2015, 2014 and 2013
Notes to Consolidated Financial Statements
(2) The following financial statement schedule is included in this Annual Report on Form 10-K:
Schedule II — Valuation and Qualifying Accounts
All schedules, other than the schedule listed above, are omitted as the information is not required or is otherwise provided.
96
FTI Consulting, Inc. and Subsidiaries
Schedule II — Valuation and Qualifying Accounts
(in thousands)
Description
Year Ended December 31, 2015
Reserves and allowances deducted from asset
accounts:
Balance
at
Beginning
of Period
Additions
Charged
to
Expense
Charged
to Other
Accounts*
Deductions**
Balance
at End
of
Period
Allowance for doubtful accounts and unbilled
services ................................................................. $ 144,825 $
14,442 $
Valuation allowance for deferred tax asset ............. $
15,564 $
— $
42,134 $
— $
16,769 $ 185,754
13,167
1,275 $
Year Ended December 31, 2014
Reserves and allowances deducted from asset
accounts:
Allowance for doubtful accounts and unbilled
services ................................................................. $ 109,273 $
$
Valuation allowance for deferred tax asset ............. $
10,201
18,252 $
$
4,241
35,423 $
$
—
18,123 $ 144,825
14,442
— $
Year Ended December 31, 2013
Reserves and allowances deducted from asset
accounts:
Allowance for doubtful accounts and unbilled
services ................................................................. $
Valuation allowance for deferred tax asset ............. $
94,048 $
1,939 $
13,335 $
8,262 $
20,463 $
— $
18,573 $ 109,273
10,201
— $
*
**
Includes estimated provision for unbilled services recorded as a reduction to revenues (i.e., fee, rate and other adjustments).
Includes estimated direct write-offs of uncollectible and unrealizable accounts receivable.
Exhibit
Number
3.1
3.2
3.3
3.4
3.5
4.1
4.2
Description of Exhibits
Articles of Incorporation of FTI Consulting, Inc., as Amended and Restated. (Filed with the Securities and Exchange
Commission on May 23, 2003 as an exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated May 21, 2003
and incorporated herein by reference.)
Articles of Amendment dated June 1, 2011 to Charter of FTI Consulting, Inc. (Filed with the Securities and Exchange
Commission on June 2, 2011 as an exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated June 1, 2011
and incorporated herein by reference.)
Bylaws of FTI Consulting, Inc., as Amended and Restated on June 1, 2011. (Filed with the Securities and Exchange
Commission on June 2, 2011 as an exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated June 1, 2011
and incorporated herein by reference.)
Amendment No. 1 to Bylaws of FTI Consulting, Inc. (Filed with the Securities and Exchange Commission on
December 16, 2013 as an exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated December 13, 2013 and
incorporated herein by reference.)
Amendment No. 2 to Amended and Restated Bylaws of FTI Consulting, Inc. (Filed with the SEC on September 22,
2014 as an exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated September 17, 2014 and incorporated
herein by reference.)
Indenture, dated as of November 27, 2012, among FTI Consulting, Inc., the guarantors party thereto and U.S. Bank
National Association, as trustee, relating to FTI Consulting, Inc.’s 6.0% Senior Notes due 2022. (Filed with the
Securities and Exchange Commission on November 29, 2012 as an exhibit to FTI Consulting, Inc.’s Current Report on
Form 8-K dated November 27, 2012 and incorporated herein by reference.)
Form of Notation of Guarantee of 6.0% Senior Notes due 2022 (included in Exhibit 4.2 to the Indenture, dated as of
November 27, 2012, among FTI Consulting, Inc., the guarantors party thereto and U.S. Bank National Association, as
trustee, relating to FTI Consulting, Inc.’s 6.0% Senior Notes due 2022 filed with the Securities and Exchange
Commission on November 29, 2012 as an exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated
November 27, 2012 and incorporated herein by reference.)
97
Exhibit
Number
4.3
4.4
4.5
4.6
4.7†
10.1 *
10.2 *
10.3 *
10.4 *
10.5 *
10.6 *
10.7 *
10.8 *
10.9 *
Description of Exhibits
Registration Rights Agreement, dated November 27, 2012, among FTI Consulting, Inc., the guarantors party thereto
and J.P. Morgan Securities LLC. (Filed with the Securities and Exchange Commission on November 29, 2012 as an
exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated November 27, 2012 and incorporated herein by
reference.)
First Supplemental Indenture relating to the 6.0% Senior Notes due 2022, dated as of May 15, 2013, by and among FTI
Consulting, Inc., FTI Consulting (Government Affairs) LLC, FTI Consulting Realty LLC and U.S. Bank National
Association, as trustee. (Filed with Securities and Exchange Commission on May 22, 2013 as an exhibit to FTI
Consulting, Inc.’s Registration Statement on Form S-4 dated May 22, 2013 and incorporate herein by reference.)
Second Supplemental Indenture relating to the 6.0% Senior Notes due 2022, dated as of August 16, 2013, by and
among FTI Consulting, Inc., FTI Consulting Acuity LLC and U.S. Bank National Association, as trustee. (Filed with
Securities and Exchange Commission on November 8, 2013 as an exhibit to FTI Consulting, Inc.’s Quarterly Report on
Form 10-Q for the Quarter Ended September 30, 2013 and incorporate herein by reference.)
Third Supplemental Indenture relating to the 6.0% Senior Notes due 2022, dated as of December 5, 2014, by and
among FTI Consulting, Inc., FTI Consulting Platt Sparks LLC, WDScott (US) Inc. and U.S. Bank National
Association, as trustee (filed with the Securities and Exchange Commission on February 23, 2015 as an exhibit to FTI
Consulting, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014 and incorporated herein by
reference).
Fourth Supplemental Indenture relating to the 6.0% Senior Notes due 2022, dated as of July 13, 2015, by and among
FTI Consulting, Inc., Greenleaf Power Management LLC and U.S. Bank National Association, as trustee.
FTI Consulting, Inc. 2004 Long-Term Incentive Plan, as Amended and Restated as of April 27, 2005. (Filed with the
Securities and Exchange Commission on May 24, 2005 as an exhibit to FTI Consulting, Inc.’s Current Report on
Form 8-K dated May 18, 2005 and incorporated herein by reference.)
Form of Incentive Stock Option Agreement used with 2004 Long-Term Incentive Plan. (Filed with the Securities and
Exchange Commission on November 9, 2004 as an exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q
for the quarter ended September 30, 2004 and incorporated herein by reference.)
Form of Restricted Stock Agreement used with 2004 Long-Term Incentive Plan, as amended. (Filed with the Securities
and Exchange Commission on November 9, 2004 as an exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-
Q for the quarter ended September 30, 2004 and incorporated herein by reference.)
FTI Consulting, Inc. Non-Employee Director Compensation Plan established effective April 27, 2005. (Filed with the
Securities and Exchange Commission on May 24, 2005 as an exhibit to FTI Consulting, Inc.’s Current Report on
Form 8-K dated May 18, 2005 and incorporated herein by reference.)
Form of FTI Consulting, Inc. Non-Employee Director Compensation Plan Stock Option Agreement. (Filed with the
Securities and Exchange Commission on May 24, 2005 as an exhibit to FTI Consulting, Inc.’s Current Report on
Form 8-K dated May 18, 2005 and incorporated herein by reference.)
Form of FTI Consulting, Inc. Non-Employee Director Compensation Plan Restricted Stock Agreement. (Filed with the
Securities and Exchange Commission on May 24, 2005 as an exhibit to FTI Consulting, Inc.’s Current Report on Form
8-K dated May 18, 2005 and incorporated herein by reference.)
Form of FTI Consulting, Inc. Non-Employee Director Compensation Plan Stock Unit Agreement. (Filed with the
Securities and Exchange Commission on May 24, 2005 as an exhibit to FTI Consulting, Inc.’s Current Report on Form
8-K dated May 18, 2005 and incorporated herein by reference.)
Form of Nonqualified Stock Option Agreement used with 2004 Long-Term Incentive Plan. (Filed with the Securities
and Exchange Commission on January 13, 2006 as an exhibit to FTI Consulting, Inc.’s Registration Statement on Form
S-4/A and incorporated herein by reference.)
Amendment to FTI Consulting, Inc. 2004 Long-Term Incentive Plan, as Amended and Restated Effective April 27,
2005. (Filed with the Securities and Exchange Commission on March 31, 2006 as an exhibit to FTI Consulting, Inc.’s
Current Report on Form 8-K dated March 31, 2006 and incorporated herein by reference.)
10.10 *
Amendment dated as of June 6, 2006 to the FTI Consulting, Inc. Non-Employee Director Compensation Plan. (Filed
with the Securities and Exchange Commission on June 7, 2006 as an exhibit to FTI Consulting, Inc.’s Current Report
on Form 8-K dated June 7, 2006 and incorporated herein by reference.)
98
Exhibit
Number
10.11 *
10.12 *
10.13 *
10.14 *
10.15 *
10.16 *
10.17 *
10.18 *
10.19 *
10.20 *
10.21 *
10.22 *
10.23 *
10.24 *
Description of Exhibits
Amendment dated as of June 6, 2006 to the FTI Consulting, Inc. 2004 Long-Term Incentive Plan, as Amended and
Restated Effective as of April 27, 2005, as further amended. (Filed with the Securities and Exchange Commission on
June 7, 2006 as an exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated June 7, 2006 and incorporated
herein by reference.)
FTI Consulting, Inc. 2006 Global Long-Term Incentive Plan. (Filed with the Securities and Exchange Commission, on
June 6, 2006 as exhibit 4.3 to FTI Consulting, Inc.’s Registration Statement on Form S-8 (333-134789) and
incorporated herein by reference.)
Form of FTI Consulting, Inc. 2006 Global Long-Term Incentive Plan Incentive Stock Option Agreement. (Filed with
the Securities and Exchange Commission on June 6, 2006 as an exhibit to FTI Consulting, Inc.’s Registration Statement
on Form S-8 (333-134789) and incorporated herein by reference.)
Form of FTI Consulting, Inc. 2006 Global Long-Term Incentive Plan Restricted Stock Agreement. (Filed with the
Securities and Exchange Commission on June 6, 2006 as an exhibit to FTI Consulting, Inc.’s Registration Statement on
Form S-8 (333-134789) and incorporated herein by reference.)
FTI Consulting, Inc. Deferred Compensation Plan for Key Employees and Non-Employee Directors. (Filed with the
Securities and Exchange Commission on April 28, 2006 as an exhibit to FTI Consulting, Inc.’s Definitive Proxy
Statement on Schedule 14A and incorporated herein by reference.)
Form of FTI Consulting, Inc. Deferred Compensation Plan For Key Employees and Non-Employee Directors
Restricted Stock Unit Agreement for Non-Employee Directors. (Filed with the Securities and Exchange Commission
on June 6, 2006 as an exhibit to FTI Consulting, Inc.’s Registration Statement on Form S-8 (333-134790) and
incorporated herein by reference.)
Form of FTI Consulting, Inc. Deferred Compensation Plan For Key Employees and Non-Employee Directors Stock
Unit Agreement for Non-Employee Directors. (Filed with the Securities and Exchange Commission on June 6, 2006 as
an exhibit to FTI Consulting, Inc.’s Registration Statement on Form S-8 (333-134790) and incorporated herein by
reference.)
FTI Consulting, Inc. 2007 Employee Stock Purchase Plan. (Filed with the Securities and Exchange Commission on
April 28, 2006 as an exhibit to FTI Consulting, Inc.’s Definitive Proxy Statement on Schedule 14A and incorporated
herein by reference.)
FTI Consulting, Inc. 2006 Global Long-Term Incentive Plan, Amended and Restated Effective October 25, 2006. (Filed
with the Securities and Exchange Commission on October 26, 2006 as an exhibit to FTI Consulting, Inc.’s Current
Report on Form 8-K dated October 25, 2006 and incorporated herein by reference.)
FTI Consulting, Inc. 2006 Global Long-Term Incentive Plan/Appendix II: Australian Sub-Plan. (Filed with the
Securities and Exchange Commission on December 15, 2006 as an exhibit to FTI Consulting, Inc.’s Registration
Statement on Form S-4 (File No. 333-139407) and incorporated herein by reference.)
FTI Consulting, Inc. 2006 Global Long-Term Incentive Plan/Appendix III: Ireland Sub-Plan. (Filed with the Securities
Exchange Commission on December 15, 2006 as an exhibit to FTI Consulting, Inc.’s Registration Statement on Form
S-4 (File No. 333-139407) and incorporated herein by reference.)
FTI Consulting, Inc. 2006 Global Long-Term Incentive Plan/Appendix IV: United Kingdom Sub-Plan. (Filed with the
Securities and Exchange Commission on December 15, 2006 as an exhibit to FTI Consulting, Inc.’s Registration
Statement on Form S-4 (File No. 333-139407) and incorporated herein by reference.)
FTI Consulting, Inc. Non-Employee Director Compensation Plan Stock Option Agreement under FTI Consulting, Inc.
2006 Global Long-Term Incentive Plan. (Filed with the Securities and Exchange Commission on December 13, 2006 as
an exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated December 11, 2006 and incorporated herein by
reference.)
FTI Consulting, Inc. Non-Employee Director Compensation Plan Restricted Stock Agreement under FTI Consulting,
Inc. 2006 Global Long-Term Incentive Plan. (Filed with the Securities and Exchange Commission on December 13,
2006 as an exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated December 11, 2006 and incorporated
herein by reference.)
99
Exhibit
Number
10.25 *
10.27 *
10.28 *
10.29 *
10.30 *
10.31 *
10.32 *
10.33 *
10.34 *
10.36 *
10.37 *
10.38 *
10.39 *
10.40 *
Description of Exhibits
FTI Consulting, Inc. Non-Qualified Stock Option Agreement under FTI Consulting, Inc. 2006 Global Long-Term
Incentive Plan. (Filed with the Securities and Exchange Commission on May 9, 2007 as an exhibit to FTI Consulting,
Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 and incorporated herein by reference.)
FTI Consulting, Inc. Non-Employee Director Compensation Plan Amended and Restated Effective as of February 20,
2008. (Filed with the Securities and Exchange Commission on May 7, 2008 as an exhibit to FTI Consulting, Inc.’s
Quarterly Report on Form 10-Q for quarter ended March 31, 2008 and incorporated herein by reference.)
FTI Consulting, Inc. Deferred Compensation Plan For Key Employees and Non-Employee Directors Restricted Stock
Unit Agreement for Non-Employee Directors Under the Non-Employee Director Compensation Plan, as Amended and
Restated Effective as of February 20, 2008. (Filed with the Securities and Exchange Commission on May 7, 2008 as an
exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for quarter ended March 31, 2008 and incorporated
herein by reference.)
FTI Consulting, Inc. 2006 Global Long-Term Incentive Plan Restricted Stock Agreement Under the Non-Employee
Director Compensation Plan, as Amended and Restated Effective as of February 20, 2008. (Filed with the Securities
and Exchange Commission on May 7, 2008 as an exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for
quarter ended March 31, 2008 and incorporated herein by reference.)
Form of Restricted Stock Unit Agreement for Non-Employee Directors under the Non-Employee Director
Compensation Plan, as Amended and Restated Effective as of February 20, 2008. (Filed with the Securities and
Exchange Commission on August 7, 2008 as an exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for
quarter ended June 30, 2008 and incorporated herein by reference.)
Form of Stock Unit Agreement for Non-Employee Directors under the Non-Employee Director Compensation Plan, as
Amended and Restated Effective as of February 20, 2008. (Filed with the Securities and Exchange Commission on
August 7, 2008 as an exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for quarter ended June 30, 2008
and incorporated herein by reference.)
Form of FTI Consulting, Inc. 2004 Long-Term Incentive Plan Incentive Stock Option Agreement. (Filed with the
Securities and Exchange Commission on August 7, 2008 as an exhibit to FTI Consulting, Inc.’s Quarterly Report on
Form 10-Q for quarter ended June 30, 2008 and incorporated herein by reference.)
FTI Consulting, Inc. 2006 Global Long-Term Incentive Plan [Amended and Restated Effective as of May 14, 2008].
(Filed with the Securities and Exchange Commission on August 7, 2008 as an exhibit to FTI Consulting, Inc.’s
Quarterly Report on Form 10-Q for quarter ended June 30, 2008 and incorporated herein by reference.)
Form of FTI Consulting, Inc. 2006 Global Long-Term Incentive Plan Restricted Stock Agreement under the Non-
Employee Director Compensation Plan, as Amended and Restated Effective as of February 20, 2008. (Filed with the
Securities and Exchange Commission on August 7, 2008 as an exhibit to FTI Consulting, Inc.’s Quarterly Report on
Form 10-Q for quarter ended June 30, 2008 and incorporated herein by reference.)
Form of Incentive Stock Option Agreement under the FTI Consulting, Inc. 2006 Global Long-Term Incentive Plan, as
Amended and Restated. (Filed with the Securities and Exchange Commission on November 6, 2008 as an exhibit to
FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated
herein by reference.)
Offer Letter dated April 26, 2006 to and accepted by Eric B. Miller. (Filed with the Securities and Exchange
Commission on March 2, 2009 as an exhibit to FTI Consulting, Inc.’s Annual Report on Form 10-K for the year ended
December 31, 2008 and incorporated herein by reference.)
Amendment made and entered into as of December 31, 2008 to Offer Letter dated April 26, 2006 to and accepted by
Eric B. Miller. (Filed with the Securities and Exchange Commission on March 2, 2009 as an exhibit to FTI Consulting,
Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated herein by reference.)
FTI Consulting, Inc. 2009 Omnibus Incentive Compensation Plan. (Filed with the Securities and Exchange
Commission on April 23, 2009 as an exhibit to FTI Consulting, Inc.’s Definitive Proxy Statement and incorporated
herein by reference.)
Form of FTI Consulting, Inc. 2009 Omnibus Incentive Compensation Plan Incentive Stock Option Agreement. (Filed
with the Securities and Exchange Commission on June 3, 2009 as an exhibit to FTI Consulting, Inc.’s Current Report
on Form 8-K dated June 3, 2009 and incorporated herein by reference).
100
Exhibit
Number
10.41 *
10.42 *
10.43 *
10.44 *
10.45 *
10.46 *
10.47 *
10.48 *
10.49 *
10.50 *
10.51 *
10.52 *
10.53 *
10.54 *
10.55 *
10.56*
Description of Exhibits
Form of FTI Consulting, Inc. 2009 Omnibus Incentive Compensation Plan Restricted Stock Agreement. (Filed with the
Securities and Exchange Commission on June 3, 2009 as an exhibit to FTI Consulting, Inc.’s Current Report on Form
8-K dated June 3, 2009 and incorporated herein by reference).
Form of FTI Consulting, Inc. 2009 Omnibus Incentive Compensation Plan Restricted Stock Unit Agreement for Non-
Employee Directors. (Filed with the Securities and Exchange Commission on June 3, 2009 as an exhibit to FTI
Consulting, Inc.’s Current Report on Form 8-K dated June 3, 2009 and incorporated herein by reference).
Form of FTI Consulting, Inc. 2009 Omnibus Incentive Compensation Plan Stock Unit Agreement for Non-Employee
Directors. (Filed with the Securities and Exchange Commission on June 3, 2009 as an exhibit to FTI Consulting, Inc.’s
Current Report on Form 8-K dated June 3, 2009 and incorporated herein by reference).
Form of FTI Consulting, Inc. 2009 Omnibus Incentive Compensation Plan Restricted Stock Agreement for Non-
Employee Directors. (Filed with the Securities and Exchange Commission on June 3, 2009 as an exhibit to FTI
Consulting, Inc.’s Current Report on Form 8-K dated June 3, 2009 and incorporated herein by reference).
Form of FTI Consulting, Inc. 2009 Omnibus Incentive Compensation Plan Nonstatutory Stock Option Agreement.
(Filed with the Securities and Exchange Commission on June 3, 2009 as an exhibit to FTI Consulting, Inc.’s Current
Report on Form 8-K dated June 3, 2009 and incorporated herein by reference).
FTI Consulting, Inc. 2009 Omnibus Incentive Compensation Plan Cash-Based Performance Award Agreement. (Filed
with the Securities and Exchange Commission on March 29, 2010 as an exhibit to FTI Consulting, Inc.’s Current
Report on Form 8-K dated March 25, 2010 and incorporated herein by reference.)
FTI Consulting, Inc. 2009 Omnibus Incentive Compensation Plan [as Amended and Restated Effective as of June 2,
2010. (Filed with the Securities and Exchange Commission on April 23, 2010 as Appendix A to FTI Consulting, Inc.’s
Definitive Proxy Statement dated April 23, 2010 and incorporated herein by reference.)
Offer Letter, as amended, dated March 23, 2010, between FTI Consulting, Inc. and Eric B. Miller. (Filed with the
Securities and Exchange Commission on May 6, 2010 as an exhibit to FTI Consulting, Inc.’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2010 and incorporated herein by reference.)
Second Amended Offer Letter dated June 2, 2010 to Eric B. Miller. (Filed with the Securities and Exchange
Commission on August 5, 2010 as an exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2010 and incorporated herein by reference).
FTI Consulting, Inc. Incentive Compensation Plan. (Filed with the Securities and Exchange Commission on April 18,
2011 as an exhibit to FTI Consulting, Inc.’s Definitive Proxy Statement on Schedule 14A and incorporated herein by
reference.)
Employment Agreement dated as of December 13, 2013, by and between FTI Consulting, Inc. and Steven Gunby.
(Filed with the Securities and Exchange Commission on December 16, 2013 as an exhibit to FTI Consulting, Inc.’s
Current Report on Form 8-K dated December 13, 2013 and incorporated herein by reference.)
Retention Bonus Letter Agreement dated January 15, 2014 by and between FTI Consulting, Inc. and Eric B Miller.
(Filed with the Securities and Exchange Commission on February 20, 2014 as an exhibit to FTI Consulting, Inc.’s
Current Report on Form 8-K dated February 18, 2014 and incorporated herein by reference.)
Form of Cash-Based Stock Appreciation Right Award Agreement. (Filed with the Securities and Exchange
Commission on March 27, 2014 as an exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated March 26,
2014 and incorporated herein by reference.)
Form of Cash Unit Award Agreement. (Filed with the Securities and Exchange Commission on March 27, 2014 as an
exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated March 26, 2014 and incorporated herein by
reference.)
Form of Cash-Based Performance Award Agreement. (Filed with the Securities and Exchange Commission on
March 27, 2014 as an exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated March 26, 2014 and
incorporated herein by reference.)
Offer of Employment Letter dated July 10, 2014, by and between FTI Consulting, Inc. and David M. Johnson. (Filed
with the Securities and Exchange Commission on July 31, 2014 as an exhibit to FTI Consulting, Inc.’s Current Report
on Form 8-K dated July 30, 2014 and incorporated herein by reference.)
101
Exhibit
Number
10.57 *
10.58 *
10.59 *
10.60 *
10.61*
10.62*
10.63* †
10.64* †
10.65* †
10.66 **
10.67 **
10.68 **
10.69 *
10.70†
10.71†
10.72†
10.73†
Description of Exhibits
Form of FTI Consulting, Inc. Restricted Stock Agreement for Employment Inducement Awards to Chief Financial
Officer and Chief Strategy and Transformation Officer .(Filed with the Securities and Exchange Commission on
August 22, 2014 as an exhibit to FTI Consulting, Inc.’s Registration Statement on Form S-8 (File No.: 333-198311) and
incorporated herein by reference.)
Form of FTI Consulting, Inc. Non-Statutory Stock Option Agreement for Employment Inducement Award to Chief
Financial Officer and Chief Strategy and Transformation Officer .(Filed with the Securities and Exchange Commission
on August 22, 2014 as an exhibit to FTI Consulting, Inc.’s Registration Statement on Form S-8 (File No.: 333-198311)
and incorporated herein by reference.)
Offer of Employment Letter dated July 15, 2014, by and between FTI Consulting, Inc. and Paul Linton. (Filed with the
Securities and Exchange Commission on October 30, 2014 as an exhibit to FTI Consulting, Inc.’s Quarterly Report on
Form 10-Q for the quarter ended September 30, 2014 and incorporated herein by reference.)
Offer of Employment Letter dated July 2, 2014, by and between FTI Consulting, Inc. and Holly Paul. (Filed with the
Securities and Exchange Commission on October 30, 2014 as an exhibit to FTI Consulting, Inc.’s Quarterly Report on
Form 10-Q for the quarter ended September 30, 2014 and incorporated herein by reference.)
Amendment No. 1 to Offer of Employment Letter dated July 27, 2014, by and between FTI Consulting, Inc. and Holly
Paul. (Filed with the Securities and Exchange Commission on October 30, 2014 as an exhibit to FTI Consulting, Inc.’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 and incorporated herein by reference.)
The FTI Consulting, Inc. 2009 Omnibus Incentive Compensation Plan (Amended and Restated Effective as of June 3,
2015). (Filed as Appendix A to FTI Consulting, Inc.’s Definitive Proxy Statement on Schedule 14A filed with the SEC
on April 21, 2015.)
Form of Non-Statutory Stock Option Award Agreement under FTI Consulting, Inc. 2009 Omnibus Incentive
Compensation Plan (Amended and Restated Effective as of June 3, 2015)
Form of Incentive Stock Option Award Agreement under FTI Consulting, Inc. 2009 Omnibus Incentive Compensation
Plan (Amended and Restated Effective as of June 3, 2015)
Form of Restricted Stock Award Agreement under FTI Consulting, Inc. 2009 Omnibus Incentive Compensation Plan
(Amended and Restated Effective as of June 3, 2015)
Credit Agreement, dated as of June 26, 2015, among FTI Consulting, Inc., the designated borrowers party thereto, the
guarantors party thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent. (Filed as an
exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated June 26, 2015 filed with the SEC on June 30, 2015
and incorporated herein by reference).
Security Agreement dated as of June 26, 2015, by and among FTI Consulting, Inc., the other grantors party thereto and
Bank of America, N.A., as administrative agent. (Filed as an exhibit to FTI Consulting, Inc.’s Current Report on Form
8-K dated June 26, 2015 filed with the SEC on June 30, 2015 and incorporated herein by reference).
Pledge Agreement, dated as of June 26, 2015, by and among FTI Consulting, Inc., the other pledgors party thereto and
Bank of America, N.A., as administrative agent. (Filed as an exhibit to FTI Consulting, Inc.’s Current Report on Form
8-K dated June 26, 2015 filed with the SEC on June 30, 2015 and incorporated herein by reference).
Employment Letter dated May 14, 2015 between FTI Consulting, Inc. and Curtis Lu. (Filed as an exhibit to FTI
Consulting, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 filed with the Securities and
Change Commission on July 30, 2015 and incorporated by reference herein).
FTI Consulting, Inc. Non-Employee Director Compensation Plan Amended and Restated as of January 1, 2016.
Form of Deferred Restricted Stock Unit Award Agreement for Non-Employee Directors Pursuant to the FTI
Consulting, Inc. Non-Employee Director Compensation Plan Amended and Restated as of January 1, 2016.
Form of Deferred Restricted Stock Unit Award Agreement for Non-Employee Directors Pursuant to the FTI
Consulting, Inc. Non-Employee Director Compensation Plan Amended and Restated as of January 1, 2016.
Form of Restricted Stock [or Unit] Award Agreement for Non-Employee Directors Pursuant to the FTI Consulting, Inc.
Non-Employee Director Compensation Plan Amended and Restated as of January 1, 2016.
102
Exhibit
Number
11.1†
14.0†
21.1†
23.0†
31.1†
31.2†
32.1†
32.2†
99.1†
99.2†
99.3
99.5
99.6
99.7
99.8
99.9
101
Description of Exhibits
Computation of Earnings Per Share (included in Note 3 to the Consolidated Financial Statements included in Part II —
Item 8 herein.)
FTI Consulting, Inc. Code of Ethics and Business Conduct, as Amended and Restated effective September 17, 2014.
Subsidiaries of FTI Consulting, Inc.
Consent of KPMG LLP
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange
Act of 1934, as amended (Section 302 of the Sarbanes-Oxley Act of 2002.)
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange
Act of 1934, as amended (Section 302 of the Sarbanes-Oxley Act of 2002.)
Certification of Principal Executive Officer Pursuant to 18 USC. Section 1350 (Section 906 of the Sarbanes-Oxley Act
of 2002.)
Certification of Principal Financial Officer Pursuant to 18 USC. Section 1350 (Section 906 of the Sarbanes-Oxley Act
of 2002.)
Policy on Disclosure Controls, as Amended and Restated Effective as of January 1, 2016.
Policy on Inside Information and Insider Trading, as Amended and Restated Effective January 1, 2016.
Corporate Governance Guidelines, as last Amended and Restated Effective as of September 17, 2014. (Filed with the
Securities and Exchange Commission on September 22, 2014 as an exhibit to FTI Consulting, Inc.’s Current Report on
Form 8-K dated September 17, 2014 and incorporated herein by reference.)
Categorical Standards of Director Independence, as last Amended and Restated Effective as of February 25, 2009.
(Filed with the Securities and Exchange Commission on February 28, 2013 as an exhibit to FTI Consulting, Inc.’s
Annual Report on Form 10-K for the year ended December 31, 2012 and incorporated herein by reference.)
Charter of Audit Committee of the Board of Directors, as last Amended and Restated Effective as of February 23, 2011.
(Filed with the Securities and Exchange Commission on April 11, 2011 as an exhibit to FTI Consulting, Inc.’s
Definitive Proxy Statement on Schedule 14A and incorporated herein by reference.)
Charter of the Compensation Committee of the Board of Directors, as last Amended and Restated Effective as of
February 27, 2013. (Filed with the Securities and Exchange Commission on May 9, 2013 as an exhibit to FTI
Consulting, Inc.’s Quarterly Report on Form 10-K for the quarter ended March 31, 2013 and incorporated herein by
reference.)
Charter of the Nominating and Corporate Governance Committee, as last Amended and Restated Effective as of
December 16, 2009. (Filed with the Securities and Exchange Commission on February 26, 2010 as an exhibit to FTI
Consulting, Inc.’s Annual Report on Form 10-K for year ended December 31, 2009 and incorporated herein by
reference.)
Anti-Corruption Policy, as Amended and Restated Effective February 19, 2016. (Filed with the Securities and
Exchange Commission on May 2, 2015 as an exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for the
quarter ended March 30, 2015 and incorporated herein by reference.)
The following financial information from the Annual Report on Form 10-K of FTI Consulting, Inc. for the year ended
December 31, 2015, filed herewith, and formatted in XBRL (Extensible Business Reporting Language): (i)
Consolidated Balance Sheets; (ii) Consolidated Statements of Comprehensive Income; (iii) Consolidated Statement of
Stockholders’ Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to the Consolidated Financial
Statements, tagged as blocks of text.
* Management contract or compensatory plan or arrangement.
†
** With certain exceptions that were specified at the time of initial filing with the Securities and Exchange Commission, exhibits,
Filed herewith.
schedules (or similar attachments) are not filed with the SEC. FTI Consulting, Inc. will furnish supplementally a copy of any
omitted exhibit or schedule to the SEC upon request.
103
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly
caused this report to be signed on its behalf by the undersigned; thereunto duly authorized this 25th day of February 2016.
SIGNATURES
SIGNATURE
/s/ STEVEN H. GUNBY
Steven H. Gunby
/s/ DAVID M. JOHNSON
David M. Johnson
/s/ CATHERINE M. FREEMAN
Catherine M. Freeman
/s/ GERARD E. HOLTHAUS
Gerard E. Holthaus
/s/ BRENDA J. BACON
Brenda J. Bacon
/s/ MARK S. BARTLETT
Mark S. Bartlett
/s/ CLAUDIO COSTAMAGNA
Claudio Costamagna
/s/ JAMES W. CROWNOVER
James W. Crownover
/s/ VERNON ELLIS
Vernon Ellis
/s/ NICHOLAS C. FANANDAKIS
Nicholas C. Fanandakis
FTI CONSULTING, INC.
By:
Name:
Title:
/s/ STEVEN H. GUNBY
Steven H. Gunby
President and Chief Executive Officer
CAPACITY IN WHICH SIGNED
DATE
Chief Executive Officer and
President and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
Senior Vice President, Controller
and Chief Accounting Officer
(Principal Accounting Officer)
February 25, 2016
February 25, 2016
February 25, 2016
Director and Chairman of the Board
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
Director
Director
Director
Director
Director
Director
104
Schedule of Subsidiaries of FTI Consulting, Inc.
Exhibit 21.1
Legal Name
Compass Lexecon LLC
[f/k/a Lexecon, LLC]
[f/k/a LI Acquisition Company, LLC]
FCN Holdings CV
FD MWA Holdings Inc.
FD-CMM Mexico, S. de r.L. de C.V.
Ferrier Hodgson Management Services Inc.
FH Asset Management Corp.
FH Corporate Services Inc.
FTI Capital Advisors (Australia) Pty Ltd
FTI Capital Advisors, LLC
[f/k/a FTI Merger & Acquisition Advisors, LLC]
FTI Consulting—FD Australia Holdings Pty Ltd
[f/k/a FD Australia Holdings Pty Ltd]
FTI Consulting—Qatar LLC
[f/k/a Dispute Resolution Consulting LLC]
FTI Consulting (Asia) Ltd
[f/k/a International Risk Limited]
FTI Consulting (Australia) Pty Ltd
FTI Consulting (Beijing) Co., Limited
[f/k/a—FD (Beijing) Consulting Co., Ltd.]
FTI Consulting (BVI) Limited
[f/k/a FTI Forensic Accounting Limited]
[f/k/a Forensic Accounting Limited]
FTI Consulting (Cayman) Ltd
FTI Consulting (China) Ltd.
[f/k/a Thompson Market Services (Shanghai) Co. Ltd]
FTI Consulting (CM) Limited
[f/k/a K Capital Source Limited]
FTI Consulting (Government Affairs) LLC
FTI Consulting (Hong Kong) Limited
FTI Consulting Capital Advisors (Hong Kong) Limited
[f/k/a FTI Consulting (Hong Kong) Services Four Limited]
[f/k/a Sun Easy Investment Limited]
FTI Consulting (Hong Kong) Services One Limited
[f/k/a Chater Secretaries Limited]
Power Famous Limited
[f/k/a FTI Consulting (Hong Kong) Services Three Limited]
[f/k/a Power Famous Limited]
FTI Consulting (Hong Kong) Services Two Limited
[f/k/a Lansdowne Nominees Limited]
FTI Consulting (Ireland) Limited
[f/k/a Financial Dynamics Ireland Ltd.]
FTI Consulting (Perth) Pty Ltd
[f/k/a FD PTY LIMITED]
[f/k/a FD Third Person Perth Pty Limited]
[f/k/a Kudos Consultants Pty Limited]
FTI Consulting (SC) Inc.
[f/k/a FD U.S. Communications, Inc.]
FTI Consulting (SC) Ltda.
Jurisdiction
Maryland
Netherlands
Delaware
Mexico
Philippines
Philippines
Philippines
Australia, New South Wales
Maryland
Australia, Victoria
Qatar
Hong Kong
Australia
Beijing, China
British Virgin Islands
Cayman Islands
China
Ireland
New York
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Ireland
Australia
New York
Colombia
Legal Name
[f/k/a FD Gravitas Ltda.]
[f/k/a Gravitas Comunicaciones Estrategicos Limitada]
FTI Consulting (SC)(Hong Kong) Limited
[f/k/a Financial Dynamics Asia Ltd.]
FTI Consulting (Singapore) PTE. LTD.
[f/k/a FS Asia Advisory Pte. LTD.]
FTI Consulting (Strategic Communications) S.A.S.
[f/k/a Financial Dynamics S.A.S.]
FTI Consulting (Sydney) Pty Ltd
[f/k/a FD (Sydney) PTY LTD]
[f/k/a FD Third Person Pty Limited]
[f/k/a Third Person Communications Pty Limited]
FTI Consulting Acuity LLC
FTI Consulting B.V.
[f/k/a Irharo B.V.]
FTI Consulting Belgium SA
[f/k/a Blueprint Partners SA]
FTI Consulting Canada Inc.
[f/k/a Watson, Edgar, Bishop, Meakin & Aquirre Inc.]
FTI Consulting Canada ULC
FTI Consulting Colombia S.A.S.
FTI Consulting Denmark ApS
FTI Consulting Deutschland GmbH
FTI Consulting Deutschland Holding GmbH
[f/k/a Maia Neunundzwanzigste Vermögensverwaltungs-GmbH]
FTI Consulting Group Limited
[f/k/a Financial Dynamics Ltd.]
FTI Consulting Gulf Limited
[f/k/a FD Gulf Limited]
[f/k/a FD Dubai Limited]
FTI Consulting India Private Limited
[f/k/a FD Communications India Private Limited]
FTI Consulting International Limited
FTI Consulting LLC
FTI Consulting LLP
[f/k/a—FTI Consulting Management LLP]
FTI Consulting Malaysia SDN. BHD.
FTI Consulting Management Limited
[f/k/a—FTI Consulting Limited]
[f/k/a—Carmill Limited]
FTI Consulting Management Ltd
[f/k/a—FTI Consulting (Asia) Limited]
[f/k/a— Baker Tilly Hong Kong Business Recovery Ltd] [f/k/a Baker Tilly
Purserblade Asia Limited]
[f/k/a Purserblade Asia Limited]
FTI Consulting Management Solutions Limited
[f/k/a Distinct Intelligence Limited]
FTI Consulting Mexico S DE RL DE CV
(f/k/a FDFTI Mexico S DE RL DE CV)
FTI CONSULTING MEXICO SERVICES. S DE R.L. DE C.V.
FTI Consulting Panama, SDAD. LTDA.
FTI Consulting Platt Sparks LLC
FTI Consulting Pte Ltd.
[f/k/a International Risk (Singapore) Pte Ltd].
FTI Consulting Puerto Rico, Inc.
FTI Consulting Realty LLC
FTI Consulting Russia Limited
Jurisdiction
Hong Kong
Singapore
France
Australia, New South Wales
Maryland
Netherlands
Belgium
British Columbia, Canada
British Columbia, Canada
Colombia
Denmark
Germany
Germany
England and Wales
England and Wales
India
British Virgin Islands
Maryland
England and Wales
Malaysia
England and Wales
Hong Kong
Ireland
Mexico
Mexico
Panama
Texas
Singapore
Puerto Rico
New York
England and Wales
Legal Name
[f/k/a FD Russia Limited]
FTI Consulting S.A.
FTI Consulting SC GmbH
[f/k/a Financial Dynamics GmbH]
[f/k/a A & B Financial Dynamics gmbh]
FTI Consulting Solutions Limited
[f/k/a Brewer Consulting Limited]
FTI Consulting South Africa (Pty) Ltd
[f/k/a FD Media and Investor Relations Pty Ltd]
[f/k/a Beachhead Media and Investor Relations (Proprietary) Limited]
FTI Consulting Spain, S.R.L.
FTI Consulting Switzerland GmbH
FTI Consulting Technology (Sydney) Pty Ltd
[f/k/a FTI Ringtail (AUST) PTY LTD]
[f/k/a FTI Australia Pty Ltd.]
FTI Consulting Technology LLC
[f/k/a FTI Technology LLC ]
[f/k/a FTI Repository Services, LLC ]
FTI Consulting Technology Software Corp
[f/k/a Attenex Corporation]
FTI Consulting, Inc.
FTI Consultoria Ltda.
[f/k/a FTI Holder Consultoria LTDA]
[f/k/a FTI Holder Consultoria S.A.]
[f/k/a Arbok Holdings S.A.]
FTI Director Services Limited
[f/k/a FS Director Services Limited]
FTI Director Services Number 2 Limited
[f/k/a FS Director Services Number 2 Limited]
FTI Director Services Number 3 Limited
[f/k/a FS Director Services Number 3 Limited]
FTI Financial Services Limited
[f/k/a Hoodwell Limited]
FTI France SAS
FTI General Partner (BVI) Limited
FTI General Partner LLC
FTI Global VAT Compliance B.V.
FTI Global VAT Compliance BVBA
FTI Global VAT Compliance S.R.L.
FTI Hosting LLC
FTI International LLC
[f/k/a FTI FD LLC]
FTI Investigations, LLC
FTI Services Limited
[f/k/a Total Sun Investments Limited]
FTI UK Holdings Limited
FTI, LLC
Gravitas Panama S.A.
Greenleaf Power Management LLC
IRL (Holdings) Limited
PT. FTI Consulting Indonesia
Sports Analytics LLC
Taxand VAT Compliance SL:
The Lost City Estates S.A.
Thompson Market Services Limited
WDSCOTT (US) INC.
Jurisdiction
Argentina
Germany
England And Wales
S. Africa
Spain
Switzerland
Australia
Maryland
Washington
Maryland
Brazil
British Virgin Islands
British Virgin Islands
British Virgin Islands
England and Wales
Paris, France
British Virgin Islands
Maryland
Netherlands
Belgium
Italy
Maryland
Maryland
Maryland
British Virgin Islands
England and Wales
Maryland
Panama
Maryland
British Virgin Islands
Indonesia
Maryland
Spain
Panama
Hong Kong
New York
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CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.0
The Board of Directors
FTI Consulting, Inc.
We consent to the incorporation by reference in registration statements No. 333-30173, 333-30357, 333-32160, 333-64050, 333-
92384, 333-105741, 333-115786, 333-115787, 333-125104, 333-134789, 333-134793, 333-134790, 333-167283, 333-198311 and
333-2046980 on Forms S-8, registration statement No. 333-129715 on Form S-3 and Registration Statement No. 333-173096 and 333-
188762 on Form S-4 of FTI Consulting, Inc. of our reports dated February 25, 2016, with respect to the consolidated balance sheets of
FTI Consulting, Inc. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive
income (loss), stockholders’ equity and cash flows, for each of the years in the three-year period ended December 31, 2015 and related
financial statement schedule, and the effectiveness of internal control over financial reporting of FTI Consulting Inc. as of
December 31, 2015, which reports appear in the December 31, 2015 Annual Report on Form 10-K of FTI Consulting, Inc.
/s/ KPMG LLP
Baltimore, Maryland
February 25, 2016
[THIS PAGE INTENTIONALLY LEFT BLANK]
Certification of Principal Executive Officer
Pursuant to Rule 13a-14(a)
(Section 302 of the Sarbanes-Oxley Act of 2002)
Exhibit 31.1
I, Steven H. Gunby, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of FTI Consulting, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an Annual Report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 25, 2016
By:
/s/ STEVEN H. GUNBY
Steven H. Gunby
President and Chief Executive Officer
(principal executive officer)
Certification of Principal Financial Officer
Pursuant to Rule 13a-14(a)
(Section 302 of the Sarbanes-Oxley Act of 2002)
Exhibit 31.2
I, David M. Johnson, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of FTI Consulting, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an Annual Report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 25, 2016
By:
/s/ DAVID M. JOHNSON
David M. Johnson
Executive Vice President and
Chief Financial Officer
(principal financial officer)
Certification of Principal Executive Officer
Pursuant to 18 USC. Section 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
Exhibit 32.1
In connection with the Annual Report of FTI Consulting, Inc. (the “Company”) on Form 10-K for the year ended December 31,
2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven H. Gunby, President and
Chief Executive Officer (principal executive officer) of the Company, certify, pursuant to 18 USC. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.
2.
the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Date: February 25, 2016
By:
/s/ STEVEN H. GUNBY
Steven H. Gunby
President and Chief Executive Officer
(principal executive officer)
Certification of Principal Financial Officer
Pursuant to 18 USC. Section 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
Exhibit 32.2
In connection with the Annual Report of FTI Consulting, Inc. (the “Company”) on Form 10-K for the year ended December 31,
2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David M. Johnson, Executive Vice
President and Chief Financial Officer (principal financial officer) of the Company, certify, pursuant to 18 USC. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.
2.
the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Date: February 25, 2016
By:
/s/ DAVID M. JOHNSON
David M. Johnson
Executive Vice President and Chief Financial Officer
(principal financial officer)
Performance Graph
The following graph compares the cumulative total stockholder return on our common stock from December 31, 2010,
through December 31, 2015, with the cumulative total return of the S&P 500 Index and a peer group index comprised of
Evercore Partners Inc., Greenhill & Co., Inc., Huron Consulting Group Inc., Lazard Limited, Navigant Consulting, Inc., Re-
sources Connection, Inc., Robert Half International Inc., and Towers Watson & Company, collectively, the Peer Group. The
Peer Group index was compiled by the Company as of December 31, 2015. Our common stock price is published every
weekday except certain holidays.
The information below assumes an investment of $100 in the Company’s common stock and in each of the comparison
groups beginning December 31, 2010. The comparison assumes that all dividends, if any, are reinvested into additional
shares of common stock during the holding period.
Comparison of 5 Year Cumulative Total Return*
Among FTI Consulting, Inc., the S&P 500 Index, and a Peer Group
200
180
160
140
120
100
80
60
40
20
0
12/10
12/11
12/12
12/13
12/14
12/15
FTI Consulting, Inc.
S&P 500
Peer Group
*$100 invested on 12/31/10 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2016 S&P, a division of McGraw-Hill Financial. All rights reserved.
FTI Consulting
S&P 500
Peer Group
12/10
100.00
100.00
100.00
12/11
113.79
102.11
77.68
12/12
88.52
118.45
90.17
12/13
110.35
156.82
133.37
12/14
103.62
178.29
152.48
12/15
92.97
180.75
135.73
Copyright© 2016 Standard & Poor’s, a division of McGraw Hill Financial. All rights reserved.
(www.researchdatagroup.com/S&P.htm)
FTI Consulting 2015 Annual Report • 9
Executive Management Team
Board of Directors
Corporate Information
Steven H. Gunby
President and Chief Executive Officer
Catherine M. Freeman
Interim Chief Financial Officer,
Senior Vice President, Controller and
Chief Accounting Officer
Paul Linton
Chief Strategy and Transformation
Officer
Holly Paul
Chief Human Resources Officer
Curtis Lu
General Counsel
Jeffrey S. Amling
Head of Business Development
and Chief Marketing Officer
Gerard E. Holthaus
Non-Executive Chairman of the Board of
FTI Consulting, Inc. and Chairman of the
Board of Algeco Scotsman Global S.a.r.l.
Executive Office
1101 K Street NW
Washington, DC 20005
+1.202.312.9100
Steven H. Gunby
President and Chief Executive
Officer of FTI Consulting, Inc.
Brenda J. Bacon
President and Chief Executive
Officer of Brandywine Senior Living
Mark S. Bartlett
Former Partner at Ernst & Young LLP
Claudio Costamagna
Chairman of CC e Soci S.r.l.
James W. Crownover
Former Head of McKinsey and
Company’s Southwest Practice and
Co-Head of McKinsey Worldwide
Energy Practice
Sir Vernon Ellis
Former Chair of the British Council
Nicholas C. Fanandakis
Executive Vice President and
Chief Financial Officer of
E. I. du Pont de Nemours and Company
Laureen E. Seeger
Executive Vice President and
General Counsel of
American Express Company
Principal Place of Business
909 Commerce Road
Annapolis, Maryland 21401
+1.800.334.5701
Annual Stockholders’ Meeting
The 2016 Annual Meeting of
Stockholders will be held on
June 1, 2016, at 9:30 a.m. at
our offices at
1101 K Street NW
Washington, DC 20005
Independent Registered Public
Accounting Firm
KPMG LLP
Baltimore, Maryland
Transfer Agent
American Stock Transfer
& Trust Company
New York, New York
Stock
FTI Consulting’s common stock
trades on the New York Stock
Exchange (NYSE) under the
symbol FCN
Investor Relations
Mollie Hawkes
200 State Street, 8th Floor
Boston, MA 02109
+ 1.617.747.1791
Our internet website is www.fticonsulting.com. We make available, free of charge on our website, our annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports and proxy statements
as soon as reasonably practicable after we electronically file with or furnish such materials to the Securities and Exchange
Commission. We also make available on our website our Corporate Governance Guidelines, Categorical Standards of Director
Independence, Code of Ethics and Business Conduct, Anti-Corruption Policy, Charters of the Audit, Compensation and
Nominating and Corporate Governance Committees of our Board of Directors, other corporate governance documents, and
any amendments to those documents.
3 • FTI Consulting 2015 Annual Report
1101 K Street NW
Washington, DC 20005
+1.202.312.9100
fticonsulting.com
NYSE: FCN
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©2016 FTI Consulting, Inc. All Rights Reserved.