2017
Annual Report
EXPERTS
WITH IMPACTTM
DefinitiveExpertiseA Culturethat DeliversComprehensiveServicesIndustryExperience 2017 Highlights
FTI Consulting named to Forbes
magazine’s list of America’s Best
Management Consulting Firms for the
second consecutive year – recognized in
20 sectors and functional areas
129 experts recognized
in the Who’s Who Legal
Consulting Experts Guide,
the most professionals
honored of any firm for
the second consecutive year
Compound Annual Growth
Rate of 31.9% for GAAP
EPS and 12.3% for
Adjusted EPS (2015-2017)
Returned $168.0 million to
shareholders through share repurchases
Acquired CDG Group, a leading
restructuring advisory, turnaround
management, value enhancement and
transaction advisory firm
Reduced net debt
levels by $140.2
million since December
31, 2015
$1.0+ million donated in pro
bono services and 5,200+ volunteer
hours recorded through the Company’s
Corporate Citizenship Program
International revenues up
6.5% from 2016 to 2017
Recognized by The Women’s Forum of New York for diversity
in the boardroom – honoring S&P 500 and Fortune 1000
companies that have at least 25% of their board seats held by women
Please refer to pages 4 through 8 of this Annual Report for the definitions of non-GAAP financial measures and the reconciliations of non-GAAP financial measures to
the most directly comparable GAAP financial measures.
Dear Fellow Shareholders,
After a slow first half of 2017, our firm delivered an exceptionally
strong second half. Combined, the two halves delivered GAAP
earnings per share growth for the fifth year in a row, and Adjusted
earnings per share growth for the third year in a row. Excluding the
estimated negative impact from foreign currency translation, we
also achieved record revenues in 2017.
We delivered these results while overcoming weaker restructuring
and M&A markets compared to 2016, as our investments in our
business transformation and transaction businesses offset revenue
declines in our restructuring business. Outside of the Americas, our
investments in Europe, the Middle East and Africa and Asia Pacific
resulted in strong revenue and Adjusted EBITDA contributions as
our brand and people continue to gain traction in these markets. We
also benefited from the disciplined actions and strategic shifts in our
Forensic and Litigation Consulting, Strategic Communications and
Technology segments, which have created stronger businesses with
more vibrant growth prospects.
Steven H. Gunby
President and Chief Executive Officer
In 2017, we remained committed to using our strong free cash flow in ways that we believe benefit our
shareholders. During the year, we returned $168 million to shareholders through share repurchases and
completed the first acquisition during my tenure as Chief Executive Officer.
As in years past, we continued our dual focus of investing in places where we believe we have a right to win – in
our core businesses like restructuring, international arbitration and public affairs, but also in key adjacencies
like business transformation, cybersecurity and information governance – while at the same time, rationalizing
positions where we are not well positioned.
Just as important, in 2017 we concluded a critical leadership development process that has resulted in each
of our business segments and regions having ambitious leaders in place executing against the medium-term
growth strategies each outlined at our investor day in November.
As we exit 2017, we are entering a new chapter in this company’s history. The combination of the changes we
have made in every business down to the practice and sub-practice levels, the aligned mental map and ambition
of our leadership team, and our disciplined use of capital, now have this company in a position where I believe
the brightest days are ahead of us – days in which we deliver strong shareholder returns while investing in
growing and supporting our people’s ambitions in ways that attract and motivate the best professionals.
That is the path we are on, which in turn can, and we believe will, create a bright future for this company. Thank
you for your investment and continued support.
Steven H. Gunby
President and Chief Executive Officer
FTI Consulting 2017 Annual Report • 1
Financial Overview
3 Year Revenues
(In Billions)
3 Year Net Income
(In Millions)
3 Year Adjusted EBITDA(1)
(In Millions)
$2.00
$1.80
$1.60
$1.40
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
$1.78
$1.81
$1.81
2015
2016
2017
$110.0
$100.0
$90.0
$80.0
$70.0
$60.0
$50.0
$40.0
$30.0
$20.0
$10.0
$0.0
$108.0
$85.5
$66.1
2015
2016
2017
$220.0
$200.0
$180.0
$160.0
$140.0
$120.0
$100.0
$80.0
$60.0
$40.0
$20.0
$0.0
$205.8
$203.0
$192.0
2015
2016
2017
3 Year Earnings
Per Diluted Share
3 Year Adjusted Earnings (1)
Per Diluted Share
3 Year Net Cash Provided
by Operating Activities
(In Millions)
3 Year Free Cash Flow (1)
(In Millions)
$2.80
$2.60
$2.40
$2.20
$2.00
$1.80
$1.60
$1.40
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
$2.75
$2.05
$1.58
2015
2016
2017
$2.40
$2.20
$2.00
$1.80
$1.60
$1.40
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
$2.24
$2.32
$1.84
2015
2016
2017
$240.0
$220.0
$200.0
$180.0
$160.0
$140.0
$120.0
$100.0
$80.0
$60.0
$40.0
$20.0
$0.0
$233.5
$139.9
$147.6
2015
2016
2017
$220.0
$200.0
$180.0
$160.0
$140.0
$120.0
$100.0
$80.0
$60.0
$40.0
$20.0
$0.0
$204.6
$108.5
$115.6
2015
2016
2017
2017 Revenues by Segment
2017 Adjusted Segment EBITDA
2017 Revenues by Region
Strategic Communications
Technology
10.6%
26.7%
Corporates
Law Firms
Governments
Boards of Directors
C-Suite
Secured Lenders
Bond Holders
Unsecured Creditors
Equity Sponsors
9.7%
27.4%
Economic
Consulting
Corporate
Finance &
Restructuring
Strategic Communications
10.3%
Technology
8.3%
Corporate
Finance &
Restructuring
31.0%
North
America
71.4%
Europe,
Middle East
and Africa
20.2%
7.1%
1.3%
Asia
Pacific
Latin
America
25.6%
Forensic and
Litigation
Consulting
23.2%
Economic
Consulting
27.2%
Forensic and
Litigation
Consulting
(1) Please refer to pages 4 through 8 of this Annual Report for the definitions of non-GAAP financial measures and the reconciliations of non-GAAP financial measures to the most
directly comparable GAAP financal measures.
2 • FTI Consulting 2017 Annual Report
FTI Consulting Client Testimonials
In a difficult situation, the FTI team came up to speed very rapidly, stabilized operations and established themselves
early as credible interim managers. While their technical expertise and restructuring experience were top notch, what
truly distinguished their effort was their ability to solve numerous complex problems with a variety of partners, key
vendors and other constituencies. They were pragmatic problem solvers, with a firm command of facts and analysis.
— Rich Rosenstein, Former Chief Financial Officer, SFX Entertainment (1)
The Compass Lexecon team was a pleasure to work with, as they worked diligently under significant timing
pressure to complete a first-rate analysis of a very complex set of issues.
— Randy Smith, Partner, Antitrust Group, Crowell & Moring
The duration of our relationship and the number of different projects for which we have engaged FTI Consulting
are testament to the trust and value we attach to the work that FTI Consulting does. We look forward to another
year of cooperation with FTI Consulting, which we hope will involve more new and exciting global projects that
build on the strong foundations we have already established together.
— Guangqiang Ji, Chief Culture Officer, Haier Group
The FTI team’s involvement was integral to our pre-close, Day 1 to Day 100 planning process, and end state NewCo
operating model. Their deep knowledge of the chemicals industry and extensive merger integration experience enabled
our teams to effectively plan for the integration, while also maintaining the current trajectory of the business. FTI designed
an effective Integration Management Office to govern all activities and provided functional subject matter expertise in
our most critical areas to enable an efficient transition with minimal disruption to our newly combined company.
— Frank Ruperto, Chief Financial Officer and Senior Vice President, Finance and Strategy, Rayonier
The FTI Consulting team’s dedication and expertise were critical to the tribunal’s award to JEG. They were thorough
in all their work and first rate in their expert reports and testimony. They were a true pleasure to work with.
— Joseph S. Guarino, Founding Partner, Varela, Lee, Metz & Guarino
(1) n/k/a LiveStyle.
FTI Consulting 2017 Annual Report • 3-
FTI Consulting, Inc.
Non-GAAP Financial Measures
In this Annual Report, FTI Consulting, Inc. (collectively, the “Company,” “we,” “our” or “FTI Consulting”)
includes information derived from consolidated and segment financial information that may not be prepared
in accordance with Accounting Principles Generally Accepted in the United States (“GAAP”). Certain of these
financial measures are considered not in conformity with GAAP (“non-GAAP financial measures”) under the
SEC rules. Specifically, we have referred to the following non-GAAP measures:
• Total Segment Operating Income
• Adjusted EBITDA
• Total Adjusted Segment EBITDA
• Adjusted EBITDA Margin
• Adjusted Net Income
• Adjusted Earnings per Diluted Share
• Free Cash Flow
We have included the definitions of Segment Operating Income (Loss) and Adjusted Segment EBITDA below
in order to more fully define the components of certain non-GAAP financial measures in the accompanying
analysis of financial information. As described in Note 17, “Segment Reporting” in Part II, Item 8, “Financial
Statement and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31,
2017 (our “Form 10-K”), we evaluate the performance of our operating segments based on Adjusted Segment
EBITDA, and Segment Operating Income (Loss) is a component of the definition of Adjusted Segment EBITDA.
We define Segment Operating Income (Loss) as a segment’s share of consolidated operating income (loss).
We define Total Segment Operating Income (Loss), which is a non-GAAP financial measure, 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 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 use Adjusted Segment EBITDA as a basis to internally evaluate
the financial performance of our segments because we believe it reflects current core operating performance
and provides an indicator of the segment’s ability to generate cash. We define Adjusted EBITDA Margin as
Adjusted EBITDA as a percentage of total revenues.
We define Total Adjusted Segment EBITDA, which is a non-GAAP financial measure, as the total of Adjusted
Segment EBITDA for all segments, which excludes unallocated corporate expenses. We define Adjusted
EBITDA, which is a non-GAAP financial measure, as consolidated net income before income tax provision,
other non-operating income (expense), depreciation, amortization of intangible assets, remeasurement
of acquisition-related contingent consideration, special charges, goodwill impairment charges and losses
on early extinguishment of debt. We believe that these non-GAAP financial measures, which exclude the
effects of remeasurement of acquisition-related contingent consideration, special charges and goodwill
impairment charges, when considered together with our GAAP financial results and GAAP measures, provide
management and investors with a more complete understanding of our operating results, including underlying
trends. 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
4 • FTI Consulting 2017 Annual Report
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 with the operating results of other companies.
We define Adjusted Net Income and Adjusted Earnings per Diluted Share (“Adjusted EPS”), which are non-
GAAP financial measures, as net income and earnings per diluted share (“EPS”), respectively, excluding
the impact of remeasurement of acquisition-related contingent consideration, special charges, goodwill
impairment charges and losses on early extinguishment of debt and the 2017 U.S. Tax Cuts and Jobs Act
(“the 2017 Tax Act”). 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 non-GAAP financial measure, which excludes the effects of the remeasurement of acquisition-related
contingent consideration, special charges, goodwill impairment charges and losses on early extinguishment of
debt and the impact of adopting the 2017 Tax Act, when considered together with our GAAP financial results,
provides management and investors with an additional understanding of our business operating results,
including underlying trends.
We define Free Cash Flow as net cash provided by operating activities less cash payments for purchases of
property and equipment. We believe this non-GAAP financial measure provides investors with an additional
understanding of the Company’s ability to generate cash for ongoing business operations and other capital
deployment.
Non-GAAP financial measures are not defined in the same manner by all companies and may not be
comparable with 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 Condensed
Consolidated Statements of Comprehensive Income. Reconciliations of non-GAAP financial measures to the
most directly comparable GAAP financial measures are included in this Annual Report.
FTI Consulting 2017 Annual Report • 5
2017-2015 Reconciliation of Net Income to Adjusted Net Income and Earnings Per Share
to Adjusted Earnings Per Share
(in thousands)
Year Ended December 31
Net income
Add back:
Special charges
Tax impact of special charges
Loss on early extinguishment of debt
Tax impact of loss on early extinguishment of debt
Remeasurement of acquisition-related contingent consideration
Tax impact of remeasurement of acquisition-related contingent
consideration
Impact of 2017 Tax Act
Adjusted Net Income (1)
2017
2016
2015
$107,962
$85,520
$66,053
40,885
(13,570)
–
–
702
(269)
(44,870)
10,445
(3,595)
–
–
1,403
(546)
–
–
–
19,589
(7,708)
(1,867)
747
–
$90,840
$93,227
$76,814
Earnings per common share — diluted
$2.75
$2.05
$1.58
Add back:
Special charges
Tax impact of special charges
Loss on early extinguishment of debt
Tax impact of loss on early extinguishment of debt
Remeasurement of acquisition-related contingent consideration
Tax impact of remeasurement of acquisition-related contingent
consideration
Impact of 2017 Tax Act
Adjusted earnings per common share — diluted (1)
Weighted average number of common shares
outstanding — diluted
1.04
(0.34)
–
–
0.02
(0.01)
(1,14)
$2.32
39,192
0.25
(0.08)
–
–
0.03
(0.01)
–
$2.24
41,709
–
–
0.47
(0.19)
(0.04)
0.02
–
$1.84
41,729
(1) Please refer to page 4 and 5 of this Annual Report for the definitions of non-GAAP financial measures.
6 • FTI Consulting 2017 Annual Report
Reconciliation of 2017 Net Income and Operating Income to Adjusted EBITDA
(in thousands)
Year Ended December 31, 2017
Net income
Interest income and other
Interest expense
Income tax provision
Corporate
Finance &
Restructuring
Forensic and
Litigation
Consulting
Economic
Consulting
Technology
Strategic
Communications
Unallocated
Corporate
Total
$107,962
(3,752)
25,358
(20,857)
Operating income
$70,324
$54,520
$49,154
$4,795
$13,148 ($83,140)
$108,711
Depreciation and amortization
3,175
4,259
5,589
11,684
2,405
4,065
31,711
Amortization of other
intangible assets
Special charges
Remeasurement of acquisition-
related contingent consideration
4,014
5,440
1,592,
597
635
12,334
6,624
5,057
3,725
7,752
–
10,563
3,678
40,855
–
–
–
–
702
–
702
Adjusted EBITDA (1)
$82,863
$72,705
$61,964
$22,171
$27,732 ($75,397) $192,038
Reconciliation of 2016 Net Income and Operating Income (Loss) to Adjusted EBITDA
(in thousands)
Year Ended December 31, 2016
Net income
Interest income and other
Interest expense
Income tax provision
Corporate
Finance &
Restructuring
Forensic and
Litigation
Consulting
Economic
Consulting
Technology
Strategic
Communications
Unallocated
Corporate
Total
$85,520
(10,466)
24,819
42,283
Operating income (loss)
$91,481
$49,088
$68,842
($2,183)
$23,110 ($88,128) $142,156
Depreciation and amortization
2,897
4.490
4,614
19,820
2,243
4,636
38,700
Amortization of other
intangible assets
Special charges
Remeasurement of acquisition-
related contingent consideration
3,310
–
–
2,000
2,304
–
646
–
–
648
7,529
3,702
–
10,306
–
612
10,445
–
1,403
–
1,403
Adjusted EBITDA (1)
$97,688
$57,882
$74,102 $25,814
$30,458 ($82,934) $203,010
(1) Please refer to page 4 and 5 of this Annual Report for the definitions of non-GAAP financial measures.
FTI Consulting 2017 Annual Report • 7
Reconciliation of 2015 Net Income and Operating Income to Adjusted EBITDA
(in thousands)
Year Ended December 31, 2015
Net income
Interest income and other
Interest expense
Loss on early extinguishment
of debt
Income tax provision
Corporate
Finance &
Restructuring
Forensic and
Litigation
Consulting
Economic
Consulting
Technology
Strategic
Communication
Unallocated
Corporate
Total
$66,053
(3,232)
42,768
19,589
39,333
Operating income
$85,207
$58,185
$57,912 $22,832
$21,723 ($81,348) $164,511
Depreciation and amortization
of intangible assets
Amortization of other
intangible assets
Remeasurement of acquisition-
related contingent consideration
2,835
3,860
3,562
15,390
2,070
3,675
31,392
3,550
2,222
1,232
788
3,934
(1,491)
–
(376)
–
–
–
–
11,726
(1,867)
Adjusted EBITDA (1)
$90,101
$64,267
$62,330 $39,010
$27,727
($77,673) $205,762
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
(in thousands)
Year Ended December 31
Net cash provided by operating activities
Purchases of property and equipment
Free Cash Flow (1)
2017
$147,625
(32,004)
$115,621
2016
$233,488
(28,935)
$204,553
2015
$139,920
(31,399)
$108,521
(1) Please refer to page 4 and 5 of this Annual Report for the definitions of non-GAAP financial measures.
8 • FTI Consulting 2017 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, 2017
OR
☐ 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)
555 12th Street NW
Washington, D.C.
(Address of Principal Executive Offices)
52-1261113
(I.R.S. Employer
Identification No.)
20004
(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 ☐
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 ☐ 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 ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 ☐
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. ☐
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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the
Exchange Act. (Check one):
Large Accelerated Filer
Non-accelerated filer
☒
☐ (Do not check if a smaller reporting company)
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant was $1.4 billion, based on the closing
sales price of the registrant’s common stock on June 30, 2017.
The number of shares of the registrant’s common stock outstanding on February 15, 2018 was 37,437,467.
Portions of our definitive Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the end of our 2017 fiscal
year are incorporated by reference into Part III of this Annual Report on Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
FTI CONSULTING, INC. AND SUBSIDIARIES
Annual Report on Form 10-K
Fiscal Year Ended December 31, 2017
TABLE OF CONTENTS
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
18
30
30
30
30
31
34
36
58
60
100
100
100
101
101
101
101
101
102
FTI CONSULTING, INC.
PART I
Forward-Looking Information
This Annual Report on Form 10-K (the “Annual Report”) 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
allocations and expenditures, expectations, plans or intentions relating to acquisitions, share repurchases and other matters,
business trends, new, or changes to, laws and regulations, including the 2017 U.S. Tax Cuts and Jobs Act, and other information
that is not historical. Forward-looking statements often contain words such as “estimates,” “expects,” “anticipates,”
“projects,” “plans,” “intends,” “believes,” “forecasts” and variations of such words or similar expressions. All forward-
looking statements, including, without limitation, management’s financial guidance and examination of 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, forecasts 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, forecasts 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 of this Annual Report. 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
FTI Consulting is a global business advisory firm dedicated to helping organizations manage change, mitigate risk and
resolve disputes: financial, legal, operational, political and regulatory, reputational and transactional. Individually, each of our
segments and practices is staffed with experts recognized for the depth of their knowledge and a track record of making an
impact. Collectively, FTI Consulting offers a comprehensive suite of services designed to assist clients across the business
cycle, from proactive risk management to rapid response to unexpected events and dynamic environments.
We report financial results for the following five reportable segments:
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•
•
•
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Corporate Finance & Restructuring;
Forensic and Litigation Consulting;
Economic Consulting;
Technology; and
Strategic Communications.
We work closely with our clients to help them anticipate, illuminate and overcome complex business challenges and
make the most of opportunities arising from factors such as the economy, financial and credit markets, governmental legislation
and regulation, and litigation. We provide advice and services, such as restructuring (including bankruptcy), capital formation
and indebtedness, interim business management, performance improvements, forensic accounting and litigation matters,
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international arbitrations, mergers and acquisitions (“M&A”), antitrust and competition matters, securities litigation, electronic
discovery (or “e-discovery”), management and retrieval of electronically stored information (“ESI”), reputation management
and strategic communications. Our experienced professionals are acknowledged leaders in their chosen field not only for their
level of knowledge and understanding, but for their ability to structure practical workable solutions to complex issues and real-
world problems. Our clients include Fortune 500 corporations, FTSE 100 companies, global banks, major law firms, and local,
state and national governments and agencies around the globe. 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 consists of our 48 U.S. offices located in 19 states and three offices located in Calgary, Toronto and Vancouver, Canada;
and our offices in Latin America located in Argentina, Brazil, Colombia, Mexico, the Cayman Islands and the Virgin Islands
(British); (ii) the Asia Pacific region, which consists of 15 offices located in Australia, China (including Hong Kong), India,
Indonesia, Japan, South Korea, Malaysia and Singapore; and (iii) the Europe, Middle East and Africa (“EMEA”) region, which
consists of 19 offices located in Belgium, Denmark, Finland, France, Germany, Ireland, Netherlands, Qatar, South Africa,
Spain, United Arab Emirates 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, 2017, we derived approximately 30% of our consolidated revenues from the work of professionals who are
assigned to locations outside the U.S.
Summary Financial and Other Information
The following table sets forth the percentage of consolidated revenues for the last three years contributed by each of our
five reportable segments.
Reportable Segment
Corporate Finance & Restructuring
Forensic and Litigation Consulting
Economic Consulting
Technology
Strategic Communications
Total
Year Ended December 31,
2017
2016
2015
27%
26%
27%
10%
10%
100%
27%
25%
28%
10%
10%
100%
25%
27%
25%
12%
11%
100%
The following table sets forth the number of offices and countries in which each segment operates, as well as the net
number of revenue-generating professionals in each of our reportable segments.
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2015
Billable Headcount
901
1,067
683
292
630
3,573
Billable Headcount
895
1,110
656
288
647
3,596
Billable Headcount
838
1,131
599
349
599
3,516
Offices
Countries
Corporate Finance & Restructuring
Forensic and Litigation Consulting
Economic Consulting
Technology
Strategic Communications
Total
43
52
37
30
34
15
18
15
8
16
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Our Reportable Segments
Corporate Finance & Restructuring
Our Corporate Finance & Restructuring segment focuses on the strategic, operational, financial and capital needs of our
clients around the world. We address the full spectrum of financial, operational and transactional risks and opportunities facing
our clients. Our clients include companies, boards of directors, investors, private equity sponsors, banks, lenders, and other
financing sources and creditor groups, as well as other parties-in-interest. We deliver a wide range of service offerings,
including corporate restructuring (and bankruptcy) and interim management services for clients in financial distress.
Additionally, our services include financing, M&A, M&A integration, valuation and tax advice, as well as financial, operational
and performance improvement services. We also provide expert witness testimony, bankruptcy and insolvency litigation
support, and trustee and examiner services. Our clients demand our industry expertise, which includes emphasis in the energy,
healthcare, real estate, retail and consumer products, and telecom, media and technology ("TMT") sectors.
In 2017, our Corporate Finance & Restructuring segment operated through restructuring, business transformation and
transactions practices, which offer the following services:
Restructuring.
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Turnaround & Restructuring. We provide advisory services to help our clients stabilize finances and operations
to reassure creditors and other stakeholders that proactive steps are being taken to preserve and enhance value. For
clients confronting liquidity problems, excessive leverage, underperformance, overexpansion, or other business or
financial issues, we develop liquidity forecasts, identify cash flow improvements, obtain financing, negotiate loan
covenant waivers and guide complex debt restructuring.
Our company advisory group advises and assists clients by providing liquidity management, operational
improvement, turnaround and restructuring, and capital solutions services to achieve successful turnarounds.
Through our out-of-court services, we assist clients to rightsize infrastructure, improve liquidity and solvency,
improve cash flow and working capital management, sell noncore assets or business units and recapitalize. We
perform due diligence reviews, financial statement, cash flow and EBITDA (earnings before interest expense,
income taxes, depreciation and amortization) 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 also lead and manage the financial aspects of in-court restructurings and
bankruptcies 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 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.
Our creditor advisory group advises and assists secured and unsecured creditors in distressed situations to
maximize recoveries and preserve the value of assets. Our services include assessing the short-term and long-term
liquidity needs, evaluating operations and the reasonableness of business plans, determining enterprise value,
negotiating executable restructuring programs, building a consensus within the creditor group, investigating
intercompany transactions and potential fraudulent conveyances, 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.
Business Transformation.
• Business Transformation. The services offered by our business transformation practice focus on improving the
efficiency and effectiveness of clients’ operations by implementing systemic changes leading to sustainable results.
Our Office of the Chief Financial Officer (“CFO”) provides holistic, practical, value-enhancing solutions to address
people, process and technology gaps. Our 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 organizations 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 performance improvement practice service offerings help clients drive revenues and unlock profitability
through, among other things, sales and supply chain effectiveness, customer and market development, product and
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price optimization, cost improvements, human capital optimization, operational excellence and digital
transformation.
•
Interim Management. Our professionals fill the void when our clients need skilled, experienced leadership to
pursue opportunities, contend with executive turnover and transition, or drive strategic transactions or change. The
experienced and credentialed professionals in our transitional management practice assume executive officer level
roles, providing the leadership, financial management, and operating and strategic decision-making abilities to lead
transitions due to extraordinary events such as M&A, divestitures, changes in control and carve-outs of businesses
from larger enterprises.
Our turnaround management professionals provide their turnaround skills, restructuring expertise, and industry and
functional experience to lead through crisis situations, such as financial and operational restructuring and
insolvency and bankruptcy, by stabilizing financial position, optimizing financial resources, protecting enterprise
value, resolving regulatory compliance issues, building morale and establishing credibility with stakeholders. 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.
• Valuation & Financial Advisory. We provide clients with the information necessary to manage a broad range of
complex transactional and strategic situations requiring relevant, timely and sensitive information. Our strategic
advisory and transaction support provides business valuation, intangible asset valuation, financial and strategic
analyses, forecasting, strategic alternatives and transaction support services. We also provide transaction opinions
(such as fairness, solvency, collateral valuation, intellectual property (“IP”) and intangible asset valuation
opinions).
Our financial reporting and tax services include goodwill impairment analyses, portfolio valuations, equity
compensation valuations, purchase price allocations, and estate and gift tax analyses and related opinions. We
provide litigation support services (including expert witness testimony, damages valuations and analysis, court-
ready reports and opinions, and opposing and corroborating expert reports) covering a broad spectrum of industries
and situations.
Transactions.
• 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 investment banking, lender services, M&A integration, and structured
finance and transaction services include: performing due diligence reviews, evaluating key value drivers and risk
factors, advising on the most advantageous tax and accounting structures, 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 and 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 provide investment banking services in the U.S. through FTI Capital Advisors, LLC, our Financial Industry
Regulatory Authority registered subsidiary, which focuses on identifying and executing value-added transactions
for public and private middle market companies.
• Dispute Advisory. We provide independent litigation consulting, including bankruptcy and avoidance litigation
and industry-specific civil, commercial and regulatory dispute services. Our bankruptcy and avoidance litigation
services include consulting, 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.
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
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automotive, hospitality, gaming and leisure, real estate and infrastructure, retail and consumer products, structured
finance, and TMT industries.
• Tax Services. 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. We advise
businesses on a variety of tax matters ranging from tax transaction support to best practice process implementation
and structuring.
Forensic and Litigation Consulting
Our Forensic and Litigation Consulting segment provides law firms, companies, government clients and other interested
parties with multidisciplinary, independent dispute advisory, investigations, data analytics, forensic accounting, business
intelligence 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 anti-corruption. We assist our clients in protecting enterprise value by (i) quantifying
damages and providing expert testimony in a wide range of dispute situations: claims and liabilities, government and regulatory
inquiries, investigations and proceedings, litigation, IP, professional malpractice, lost profits, valuations, breach of contract,
purchase price disagreements, business interruption, environmental claims, construction claims and fraud, (ii) employing
forensic accounting and complex modeling to analyze financial transactions, and (iii) identifying, collecting, analyzing and
preserving structured information within enterprise systems. We have the capacity to provide our full array of practice offerings
across jurisdictional boundaries around the world.
In 2017, our Forensic and Litigation Consulting segment operated through risk advisory, investigations and disputes
practices, which offer the following services:
Risk Advisory.
• Anti-Corruption Investigations & Compliance. We help clients mitigate corruption risks and investigate and
prevent corruption issues arising from the U.S. Foreign Corrupt Practices Act (the “FCPA”), the UK Anti-Bribery
Act (the “UKBA”), Brazil’s Clean Company Act and other similar global statutes.
• 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 trustees, monitors, receivers and examiners. In matters involving the appointment of monitors, receivers
or examiners by courts or regulators, our experts possess the necessary independence and skills to test and monitor
compliance with and the continuing effectiveness of the terms of settlements or reforms across many industries and
professions.
• Data & Analytics. 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
information technology (“IT”) audits and due diligence.
Investigations.
• Cybersecurity. Our cybersecurity practice uses cutting-edge technologies and capabilities together with our
comprehensive practice offerings to enable clients to address their most critical needs and integrate new solutions
atop or alongside pre-existing policies and programs to address cyber threats. We help our clients understand their
own environments, implement defensive strategies, identify threats, holistically respond to crises, and sustainably
recover their operations and reputation after an incident.
• Forensic Accounting & Advisory Services. We assist U.S. and multinational clients with responding to
allegations involving the propriety of accounting, financial reporting, fraud, regulatory scrutiny and anti-corruption
inquiries. We identify, collect, analyze and interpret financial and accounting data and information for fraud,
accounting, complex financial reporting, audit and special committee investigations. We analyze issues, identify
options and make recommendations to respond to financial misstatements, financial restatements and inadequate
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disclosure allegations, claims, threatened and pending litigation, regulatory inquiries and 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 investigating compliance with the FCPA and other anti-corruption laws,
including the UKBA and the Organisation for Economic Co-operation and Development (the “OECD”). We
provide 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.
• Global Risk and Investigations Practice. We utilize a multidisciplinary approach to 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. We uncover
actionable intelligence and perform value-added analysis to help our clients address and mitigate risks, protect
assets, remediate compliance, make informed decisions and maximize opportunities. 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 anti-corruption 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 with which to comply, and we investigate
suspected violations of the FCPA and other anti-corruption laws, including the UKBA and 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.
Disputes.
• Construction Solutions. We provide commercial management, risk-based advisory and dispute resolution services
to the construction industry around the globe, including services relating to capital program risk management, cost
analytics and auditing services, government contracts, and planning and scheduling. Our professionals include
engineers, architects, accountants, quantity surveyors, planning and scheduling specialists, cost engineers and
project managers. Our expertise includes technical, business, regulatory and legal matters, allowing us to identify
key issues and recommend solutions for a wide range of issues affecting U.S. and international construction
projects through clear and commercially driven practices and strategies. When litigation or arbitration is
unavoidable, our experts work as an integrated part of our clients’ legal teams under the leadership of appointed
solicitors or legal counsel.
• Dispute Advisory Services. 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 financial and economic 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. We help our clients successfully deal with the myriad of challenges and complexities of IP
management. 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.
• Trial Services. We work as part of the team advising and supporting clients in large and highly complex civil trials.
Through the use of our proprietary information technology, we turn facts and ideas into presentations and
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information that drive decisions. 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.
• Business Insurance Claims. We assist clients in preparing and submitting comprehensive, logical and well-
documented claims for large 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.
• Health Solutions. 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.
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 international 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 complex M&A transactions, 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. Our
professionals regularly provide expert testimony on damages, rates and prices, valuations (including valuations of complex
financial instruments), antitrust and competition regulation, business valuations, IP, transfer pricing and public policy.
In 2017, our Economic Consulting segment offered the following services:
• 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.
• Business Valuation. We help clients identify and understand the value of their businesses in both 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
provide our clients with specialized valuation opinions and expert testimony involving international disputes before
international courts of jurisdiction and arbitration tribunals. We assist our clients in making 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.
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•
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. We provide clients with statistical and economic
analysis of Fair Labor Standards Act wage and hour issues, state wage and hour issues, employment discrimination
issues, Equal Employment Opportunity Commission investigations, Office of Federal Contract Compliance
Program audits, reduction-in-force assessments and compensation studies.
• 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, regulatory and policy reform, tort liability,
forecasting, public private partnerships and public finance.
• Securities Litigation & Risk Management. Our professionals apply economic theory, econometrics and the
modern theory of finance to assess, quantify and manage risks inherent in global financial markets. We 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 also evaluate financial
products such as derivatives, securitized products, collateralized obligations, special purpose entities, and
structured financial instruments and transactions.
• Regulated Industries. We provide economic analysis, econometrics and network modeling to 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.
• Center for Healthcare Economics and Policy. We support and facilitate the work of local governments, insurers,
providers, physicians, employers and community-based stakeholders by providing data-driven strategies and
solutions based on empirical analyses and modeling to reduce the per capita cost of healthcare, improve the health
of populations, and enhance patient experience and access to care.
• Network Analysis. We provide our clients with hindsight, insight and foresight by using our technology and
experience to visualize and evaluate relationships and flows among people, groups, markets, organizations,
infrastructure, IT systems, biological systems and other interconnected entities in order to understand complex
interconnected data. The information we generate can be used by our clients to evaluate and defend insurance
claims, support litigation and regulatory proceedings, detect fraud, identify trends and problematic events, certify
class litigation claims, and investigate social and terrorist networks.
• Economic Impact Analysis. We apply both market and macroeconomic models across a range of industries to
analyze how markets and the broader economy react to changes in public policy and investments. Our clients use
our analyses to formulate their strategic plans to educate key stakeholders, policymakers, regulators, the media and
the public on the benefits and costs of their plans when determining the best course of action.
Technology
Our Technology segment offers a comprehensive portfolio of information governance, e-discovery and data analytics
software, services and consulting to corporations, law firms, courts and government agencies worldwide. Our consulting and
services allow our clients to control the risk and expense of information during legal and regulatory events more confidently, as
well as better understand and act on their data in the context of compliance and risk. Our professionals help clients locate,
analyze, review and produce electronically stored information ("ESI"), including email, computer files, audio, video, instant
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messaging, cloud data and social media. Our professionals have a proven track record of helping clients with complex issues,
including internal investigations, regulatory and global investigations such as under the FCPA and UKBA, 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.
In 2017, our Technology segment operated through software and consulting and services practices, which offer the
following services:
Software.
• Ringtail® E-discovery Software. Our Ringtail® software is a sophisticated e-discovery and document review
software platform designed to help law firms and corporate legal teams manage the complexity and scope of
investigations and litigation at a predictable cost. Ringtail® software is highly scalable, designed to speed the legal
review process and help clients find relevant information quickly and accurately. 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 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.
• Relativity®*. We became an authorized provider of Relativity®, a third-party software, in 2017 and successfully
delivered Relativity® on multiple legal and regulatory engagements.
Consulting & Services.
• E-discovery Management. We plan, design and manage discovery workflows and engagements 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 managed services 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.
• 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 these reviews themselves.
With Acuity®, we drive review efficiency by leveraging the power of data analytics and machine learning software
with rigorous budget oversight. Acuity® workflows enable collaboration among the corporation, law firm and our
Acuity® review teams.
• Collections & Digital Forensics. We help organizations meet requirements for collecting, analyzing and
producing large amounts of data from a variety of sources, including email, 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
advisors understand technology-dependent issues. We also offer services to reconstruct data that has been deleted,
misplaced or damaged.
•
Information Governance & Compliance Services. We provide the people, process and technology to develop,
implement and deliver information governance projects that reduce corporate risk, cut storage costs, secure data,
improve the e-discovery process and enable better insight into data. Services include: readiness assessment
consulting and services for the General Data Protection Regulation Act, scanning and quarantine of sensitive data,
including personally identifiable information and trade secrets, clean up of file share, litigation hold and
preservation optimization, e-discovery readiness/meet-and-confer support, divestiture data segregation,
decommission and disposition of business applications in a defensible manner, modernization of messaging
policies, backup remediation, workstation and forensic image remediation, social media and messaging archive
migration and remediation, migration to cloud applications, discovery of key data, enterprise content management
and Sharepoint migration and decommissioning, voice and audio readiness, and cybersecurity readiness
assessment.
* Registered trademark of Relativity Technologies, Inc.
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• FTI Investigations. Our “FTI Investigate” offering helps organizations quickly and defensibly manage
investigations, whistleblower allegations, corporate due diligence, financial fraud, FCPA and other types of
investigations. FTI 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.
• Contract Intelligence. Our Contract Intelligence service provides a cost-effective solution for a key component of
contract life cycle management, offering organizations a centralized, organized method to review and analyze their
global contract universe. Corporations and firms using our Contract Intelligence service can better find, understand
and act upon contracts to meet regulatory requirements, reduce risk and recognize greater business value in
business contexts such as pre-merger contract diligence, alignment of contract with new regulations, and analyses
of leasing agreements for compliance with new accounting standards.
Strategic Communications
Our Strategic Communications segment designs and executes communications strategies for management teams and
boards of directors to help them seize opportunities, manage financial, regulatory and reputational challenges, navigate market
disruptions, articulate their brand, stake a competitive position, and preserve and grow operations. We believe our integrated
offerings, which include a broad scope of services, deep industry expertise and global reach, are unique and distinguish us from
other strategic communications consultancies.
In 2017, our Strategic Communications segment offered the following services:
• Public Affairs & Government Relations. We advise senior business leaders and leading organizations around the
world on how to effectively engage with governments, politicians and policymakers and respond to regulatory
changes. 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 Berlin, Brussels, London, Melbourne 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, public policy debates and business strategies, whether in terms of message
refinement, policy mapping, reputation benchmarking, opinion polling or speech writing.
• M&A Crisis Communications & Special Situations. We specialize in advising clients on their communications
to investors and other audiences to help them protect their business, brand and market positions and achieve fair
valuations in capital markets. We employ a disciplined discovery process to identify preparedness gaps, assess the
situation, plan for various possibilities, prepare and disseminate communications, and manage legal and political
consequences. We provide services relating to 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 integrated communications services
are designed to address the concerns of all internal and external stakeholders.
• Corporate Reputation. We both promote businesses and protect corporate reputations, creating solutions for 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, as well as qualitative
and quantitative research.
• People & Change. We help clients plan, design and implement internal communications and programs to increase
engagement and understanding among leadership teams, employees, vendors, partners and customers. We partner
with our clients to understand their unique business environment and internal and external communications
aspirations. Our services assist business leaders in communicating and navigating change and 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.
• Strategy Consulting & Research. We provide in-depth market and stakeholder analyses to help our clients solve
complex business and communications problems. Our research services include reputation benchmarking, peer
analysis, benchmarking and financial market valuations, brand awareness studies and brand extension audits,
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including customer focus groups, shareholder analysis and investor targeting, consumer trend analysis, public
opinion polling and policymaker perception audits.
• 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
and the media. 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.
• Capital Markets Communications. We assist clients in developing and delivering a consistent and credible
narrative to investors and the investment community. We help companies articulate and present their entry into the
equity markets, from articulating the strategic rationale and investment story to preparing the registration statement
with securities regulators to developing the road show for the IPO. We provide investor relations best practices
programs and investor relations services and communications. We conduct perception audits and organize investor
community events. We provide a wide range of research and analyses to our clients. We also help clients
communicate leadership transitions and demonstrate new management credibility to investors.
Our Industry Specializations
We employ professionals across our segments and practices who are qualified to provide both our core services plus a
range of specialized consulting services and solutions that address the strategic, reputational, operational, financial, regulatory,
legal and other needs of specific industries. The major industry groups that we service include:
Aerospace & Defense. Our aerospace and defense professionals provide services addressing the core issues related to
the strategic growth and tactical priorities of commercial aviation, airlines, defense contractors, aviation maintenance, repair
and overhaul and service providers, and security-oriented businesses. We help our clients navigate issues such as organic and
inorganic growth, affordability, profitability, digital strategies, complex disputes with governments and regulators, regulatory
audits, strategic communications and improvements to business systems.
Agriculture. Our agribusiness experts advise producers, accumulators and processers to address global concerns
relating to the quality, quantity, biodiversity, commodity pricing and sustainable practices, and the effects of weather, climate
change and animal rights activism on the food supply.
Automotive. Our automotive experts offer vehicle manufacturers, suppliers, retailers, vehicle financers and other
automotive subsectors, as well as their creditors, lenders and other stakeholders, a comprehensive range of corporate finance
and strategic communications services.
Construction. Our construction services professionals provide 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, regulatory compliant and fully supported from beginning to end.
Energy, Power & Products. Our 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 and clean
energy technologies. Our professionals are involved in many of the largest financial and operational restructurings, regulatory
and litigation matters involving energy and utility companies globally.
Environmental. Our environmental services professionals provide a comprehensive suite of services aimed at helping
organizations manage and resolve specific environmental issues or programmatic challenges. Our services focus on the
resolution of complex contamination, toxic tort, products liability, and insurance investigations and disputes before courts,
regulators, mediators and alternative dispute tribunals.
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Financial Institutions. Our professionals assist banks and financial services clients of all sizes and types in navigating
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,
engage with relevant stakeholders, and leverage their assets to protect and enhance enterprise value.
Healthcare and 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,
regulatory, legal and reputational 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.
Hospitality, Gaming and Leisure. Our professionals help hotels, resorts, casinos, timeshares and condo hotels with
operational realignment, asset and interim management, strategic analysis and event readiness (e.g., IPO, receivership,
bankruptcy) and stakeholder engagement to preserve, protect and enhance asset and enterprise value.
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.
We apply methodologies, analytics and communications counsel to support the strategic requirements of our clients to protect
assets, meet compliance requirements, achieve performance goals and engage with key stakeholders. 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.
Mining. Our professionals assist mining businesses in understanding how to conduct business in emerging markets,
M&A, capital markets financing, commodity pricing, valuations and quantification of damages in dispute situations.
Public Sector. Our government contracts team assists businesses through all phases of public sector contracting,
including complying with government regulations and managing government business, risk avoidance, dispute resolution and
litigation support. Our public sector solutions team delivers services, including financial and performance improvement, risk
management and forensic consulting, economic and public policy consulting, technology and data analytics, and strategic
communications.
Real Estate and Infrastructure. Our professionals have the industry expertise and experience to help real estate
owners, users, investors and lenders better navigate the real estate 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 and Consumer Products. Our professionals provide a full range of corporate finance, turnaround, restructuring
and strategic communications expertise for retailers. We have experience in developing strategies for retail and consumer
products 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, implement plans and engage with key
stakeholders 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.
Telecom, Media and Technology. Our TMT team provides strategic, financial, operational and communications
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, carve-outs and divestitures planning, valuation, interim management,
restructuring and strategic communications. We deliver original insights that help clients better understand company
performance, consumer behavior, digital substitution, emerging technologies, disruptive trends and stakeholder priorities in our
industries.
Transportation. Our professionals provide corporate communications, financial communications, public affairs advice,
strategy consulting and research to a broad range of organizations and companies involved in various forms of transportation,
including rail, trucking and infrastructure.
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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 communications 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 markets 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 capabilities across practices with industry 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 require the evaluation and re-evaluation 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 board 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,
structure M&A transactions and conduct due diligence, which drives demand for the services of all of our segments.
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:
•
Pre-eminent Businesses and Professionals. We believe that our segments include some of the pre-eminent practices
and professionals in our industry today. During 2017, the awards and recognitions received by our segments include
the following:
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▪
▪
▪
▪
▪
▪
FTI Consulting named to Forbes magazine list of America’s Best Management Consulting Firms for the
second consecutive year - recognized in 20 sectors and functional areas
Corporate Finance & Restructuring ranked the #1 U.S. Restructuring Advisor according to The Deal for the
last 10 years
Forensic and Litigation Consulting recognized as the #1 Global Risk & Investigations Services Provider by
The National Law Journal
FTI Consulting and Compass Lexecon had the most experts (129) recognized in the Who’s Who Legal
Consulting Experts Guide for the second consecutive year
FTI Technology named a Leader in Worldwide E-discovery Services Vendor by IDC MarketScape’s Vendor
Assessment Report
Strategic Communications named EMEA PR Consultancy of the Year by The Holmes Report
•
•
•
•
Diversified Service Offerings. Our five reportable segments offer a diversified portfolio of practices providing services
within our four geographic regions. Our broad range of practices and services, the diversity of our revenue streams, our
specialized industry expertise and our global locations distinguish us from our competitors. This 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, 96 of the 100 law firms as ranked by American Lawyer Global
100: Most Revenue List 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, and 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 that 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 reputation of our professionals.
We provide diverse complementary 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 Practitioners, Businesses, Extensive Geographic Diversification and Relationships. 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.
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.
Attract and Retain Highly Qualified Professionals. Our professionals are crucial to delivering our services to clients
and generating new business. As of December 31, 2017, we employed 3,573 revenue-generating professionals, many of
whom have an established and widely recognized name in their respective service and industry specialization, 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, cash incentive
bonuses and equity compensation, along with a competitive benefits package and the chance to work on challenging
engagements with other highly skilled peers.
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•
•
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.
Acquisitions and Other Investments. We consider strategic and 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 segments, practices, services and industry focuses. We 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 workforce. Our professionals include
PhDs, MBAs, JDs, CPAs, CPA-ABVs (CPAs accredited in business valuations), CPA-CFFs (CPAs certified in financial
forensics), CRAs (certified risk analysts), Certified Turnaround Professionals, Certified Insolvency and Reorganization
Advisors, 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, 2017, we employed 4,609 employees, of which 3,573 were revenue-generating professionals.
Employment Agreements
As of December 31, 2017, we had written employment arrangements with substantially all of our 452 Senior Managing
Directors and equivalent personnel (collectively, “SMD”). These arrangements 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 an SMD leaves our employment
for specified reasons prior to the expiration date of their employment agreement. The length and amount of payments to be paid
by us following the termination or resignation of an SMD may vary, depending on whether the person resigned with or without
“good reason” or was terminated by us with or without “cause,” retired or did 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 require some notice period be given by the parties prior to termination of
employment and include covenants providing for restrictions on the SMDs competing against, and soliciting employees from,
the Company for a specified period of time following the end of the SMDs employment.
Incentive and Retention Payments
Our SMDs and other employees, consultants and professionals may receive incentive, retention or sign-on payments, on
a case-by-case basis, through unsecured general recourse forgivable loans, equity awards or other payments (collectively,
“Retention Awards”). We believe that providing these multi-year Retention Awards greatly enhances our ability to attract and
retain our key professionals.
Some or all of the principal amount and accrued interest of the loans we make will be forgiven by us upon the passage of
time, or their repayment will be funded by us through additional cash bonus compensation, provided that the recipient 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 Company without cause or the recipient with good reason, or the recipient may be required to repay the unpaid accrued
interest and outstanding principal balance upon certain other termination events such as voluntary resignation, as provided in
the applicable promissory note. 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 and outside directors are not eligible
to receive loans, and no loans have been made to them.
Our executive officers, other members of senior management and outside directors, as well as employees and
independent service providers, have received and will continue to receive equity awards, which may include 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, has been and is expected to continue to be significant.
Recipients of sign-on or other retention payments, other than loans, may be required to repay a portion or all of the
original payment upon a termination event. These awards are typically smaller amounts in nature than forgivable loans and
have a shorter service requirement than forgivable loans.
Select SMDs may participate in certain 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
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(the “KSIP”). The ICP was closed to new participants effective January 2015. Participants were recommended by
management and approved by the Compensation Committee of the Board of Directors of the Company. The ICP and KSIP
provide for a combination of forgivable loans, equity awards and retention bonuses that are paid over an average of six to 10
years depending on the program and economic value of the award. These programs also require participants to defer a portion
of their bonus in the form of cash or restricted stock over a two-to-three-year period.
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, Technology and
Strategic Communications segments.
Clients
During the year ended December 31, 2017, no single client accounted for more than 10% of our consolidated revenues.
No reportable segment had a single client that accounted for more than 10% of its respective total revenues for the year ended
December 31, 2017. 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, that offer a broad range of consulting services; investment banking firms; IT
consulting and software companies, that 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 and global
accounting firms 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 FTI. 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
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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, as well as boutique M&A, crisis
communications and public affairs firms.
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.
Patents, Licenses and Trademarks
We hold 96 U.S. patents and have 23 U.S. patent applications pending and zero pending U.S. provisional patent
applications. We have filed 23 international patent applications under the Patent Cooperation Treaty, 21 of which have entered
the National phase. We hold 24 non-U.S.-issued patents in Canada and Europe, and one non-U.S. patent application is pending
in Canada. No additional patent applications have been issued or are pending in other countries covering various aspects of
software of our Technology segment.
We have no pending U.S. patent applications and no pending international patent applications filed under the Patent
Cooperation Treaty covering clock auctions. We rely upon non-disclosure, license and other agreements to protect our interests
in these products.
We have registered Ringtail®, Attenex®, Acuity® and TrialMax® and have filed to register Radiance™ as trademarks of
FTI Consulting. We consider the Ringtail®, Attenex®, Acuity®, Radiance™ and our other technologies and software to be
proprietary and confidential. We have also developed other e-discovery software products under 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 international
copyright laws, non-disclosure agreements and contractual agreements, 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, software and other works. Despite these safeguards, there is a risk that competitors may
obtain and seek to use such intellectual property.
We have also developed marketing language such as “Critical Thinking at the Critical Time®” and “Experts with
Impact™” and trademarks, logos and designs. 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. Certain FTI Consulting, Palladium and
Compass-formative marks’ use is pursuant to certain Co-Existence, Consent and/or Settlement agreements. We believe we take
the appropriate steps to protect our trademarks and brands.
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 (the “NYSE”) under the symbol FCN. Our executive offices are located at 555 12th
Street NW, Washington, D.C. 20004. 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 Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and Note 17, “Segment Reporting” in Part II, Item 8 of this Annual Report 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 http://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., 6300 Blair Hill Lane, Suite 303, Baltimore, MD 21209, telephone number
410-591-4800.
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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, legal or regulatory requirements, general economic conditions and monetary or
geo-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:
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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;
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frequency and complexity of significant commercial litigation;
overexpansion by businesses causing financial difficulties;
business and management crises, including the occurrence of alleged fraudulent or illegal activities and practices;
new and complex laws and regulations, repeals of existing laws and regulations or changes of enforcement of laws,
rules and regulations, including antitrust/competition reviews of proposed M&A transactions;
other economic, geographic or political 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 segments’ 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, repeals of or changes to 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 the implementation or adoption of new laws of regulation, or 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 offerings.
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 (i) the types and complexity, number,
size, timing and duration of client engagements; (ii) the timing of revenue recognition under U.S. GAAP; (iii) the utilization of
revenue-generating professionals, including the ability to adjust staffing levels up or down to accommodate the business and
prospects of the applicable segment and practice;; (iv) the time it takes before a new hire becomes profitable; (v) the
geographic locations of our clients or the locations where services are rendered; (vi) billing rates and fee arrangements,
including the opportunity and ability to successfully reach milestones and complete, and collect success fees and other
outcome-contingent or performance-based fees; (vii) the length of billing and collection cycles and changes in amounts that
may become uncollectible; (viii) changes in the frequency and complexity of government regulatory and enforcement
activities; (ix) business and asset acquisitions; (x) fluctuations in the exchange rates of various currencies against the U.S.
dollar; and (xi) economic factors beyond our control.
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The results of different segments and practices may be affected differently by the above factors. Certain of our practices,
particularly our restructuring practice, tend to experience their highest demand during periods when market and/or industry
conditions are less favorable for many businesses. For example, in periods of limited credit availability, reduced M&A activity
and/or declining business and/or consumer spending, while not always the case, there may be increased restructuring
opportunities that will cause our restructuring practice to experience high demand. On the other hand, those same factors may
cause a number of our other segments and practices, such as our antitrust and competition practice in Economic Consulting and
our transaction advisory services practice in Corporate Finance & Restructuring to experience reduced demand. The positive
effects of certain events or factors on certain segments and practices may not be sufficient to overcome the negative effects of
those same events or factors on other parts of our business. In addition, our mix of practice offerings adds complexity to the
task of predicting revenues and results of operations and managing our staffing levels and expenditures across changing
business cycles and economic environments.
Our results are subject to seasonal and similar factors, such as during the fourth quarter when our professionals and our
clients typically 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 acquisitions and the cost of integrating them may cause fluctuations in
our financial results, including operating income and cash flows. This volatility makes it difficult to forecast our future results
with precision and to assess accurately whether increases or decreases in any one or more quarters are likely to cause annual
results to exceed or fall short of previously issued guidance. While we assess our annual guidance at the end of each quarter
and update such guidance when we think it is appropriate, unanticipated future volatility can cause actual results to vary
significantly from our guidance, even where that guidance reflects a range of possible results and has been updated to take
account of partial-year results.
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 turnover, fixed compensation expenses in periods of declining revenues, the inability to
appropriately staff engagements (including adding or reducing staff during periods of increased or decreased demand for our
services), 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 events, 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 complexity, 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 and market conditions;
utilization of professionals across segments and geographic regions; competition and acquisitions. In addition, 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.
Segments may enter into engagements which involve 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 lower revenues or the costs of
providing services under those types of arrangements may exceed the fees collected by the Company.
Factors that could negatively affect utilization in our segments include:
Corporate Finance & Restructuring - 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 and restructuring activity, or less capital markets
activity.
Forensic and Litigation Consulting - The settlement of litigation; less frequent instances of significant mismanagement,
fraud, wrongdoing or other business problems that could result in fewer or less complex business engagements; 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.
Economic Consulting - Fewer, 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 or less aggressive antitrust and competition
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regulation or enforcement; fewer government investigations and proceedings; and the timing of client utilization of our
services.
Technology - The settlement of litigation; a decline in volume and complexity of litigation proceedings and governmental
investigations; and lower consulting revenues resulting from direct licensing to clients and channel partners.
Strategic Communications - Fewer event-driven crises affecting businesses; general economic decline that may reduce
certain discretionary spending by clients; and a decline in capital markets activity, including M&A, and fewer public securities
offerings.
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.
In some cases, our segments are engaged by certain clients who are experiencing or anticipate experiencing financial
distress or are facing complex challenges. This may be true in light of general economic conditions; lingering effects of past
economic slowdowns or recession; or business- or operations-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 may receive 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 routinely receive these types of requests 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 not to 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.
Certain of our clients prefer fixed and other alternative fee arrangements that place revenue ceilings or other limitations
on our fee structure or may shift more of our revenue-generating potential to back-end contingent and success 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 achievement of 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 engagements, adversely affecting the financial
results of the segment.
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 has been experiencing increasing competition from companies providing similar services at
lower prices, particularly with respect to hosting and e-discovery services.
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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, 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.
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 canceled 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 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.
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Risks Related to Our Operations
Our international operations involve special risks.
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;
longer sales and/or collections cycles;
potential restrictions or adverse tax consequences for the repatriation of foreign earnings, 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 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.
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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 underperformance relative to expected historical or projected future operating results and
significant negative industry or economic trends. We have previously recorded impairment charges to the carrying value of
goodwill of certain of our segments and it is possible that we may be required to record significant impairment charges in the
future. 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. Our success is dependent, in large part, on our ability to
keep our supply of skills and resources in balance with client demand around the world. 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. If we are unable to successfully integrate, motivate and retain qualified
professionals, our ability to continue to secure work in may suffer. 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 our professionals. 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 in staffing engagements, if we are unable to renegotiate employment arrangements or
the costs of retaining qualified professionals becomes too high. The implementation of new compensation arrangements may
result in the concentration of potential turnover in future years.
Headcount reductions to manage costs during periods of reduced demand for our services could have negative impacts on
our business over the longer term.
Our people are our primary assets and account for the majority of our expenses. During periods of reduced demand for
our services, or in response to unfavorable changes in market or industry conditions, we may seek to align our cost structure
more closely with our revenues and increase our utilization rates by reducing headcount and eliminating or consolidating
underused locations in affected business segments or practices. Following such actions, in response to subsequent increases in
demand for our services, including as a result of favorable changes in market or industry conditions, we may need to hire, train
and integrate additional qualified and skilled personnel and may be unable to do so to meet our needs or our clients’ demands
on a timely basis If we are unable to manage staffing levels on a timely basis in light of changing opportunities or conditions,
our ability to accept or service business opportunities and client engagements, take advantage of positive market and industry
developments and realize future growth could be negatively affected, which could negatively impact our revenues and
profitability. In addition, while increased utilization resulting from headcount reductions may enhance our profitability in the
near term, it could negatively affect our business over the longer term by limiting the time our professionals have to seek out
and cultivate new client relationships and win new projects.
We incur substantial costs to hire and retain our professionals, and we expect these costs to continue and to 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
23
aggregate amount of loans to professionals is significant. 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
Senior Managing Director Incentive Compensation Programs, Key Senior Managing Director Incentive Plans 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 who provide for
compensation equal to a percentage of 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
expenses 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 rely heavily on our executive officers and the heads of our operating segments and industry leaders for the success of
our business.
We rely heavily on our executive officers and the heads of our operating segments, regions and industries to manage our
operations. Given the highly specialized nature of our services and the scale of our operations, our executive officers and the
heads of our operating segments and industry and regional leaders must have a thorough understanding of our service offerings,
as well as the skills and experience necessary to manage a large organization in diverse geographic locations. We are unable to
predict with certainty the impact that leadership transitions may have on our business operations, prospects, financial results,
client relationships, or employee retention 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 an individual professional, in the event that a professional leaves, such clients may decide that they prefer to
continue working with a specific professional rather than with our Company. Substantially all of our written employment
arrangements with our senior managing directors and equivalent employees 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 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 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 a former employee or
client, or other concerns, outweighs 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.
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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 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 canceled, litigation may be settled or 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. 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 of the Company could be adversely affected.
We may not have, or may choose not to pursue, legal remedies against clients that 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.
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.
Compromise of confidential or proprietary information could damage our reputation, harm our businesses and adversely
impact our financial results.
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 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,
25
including the loss of clients. The theft or compromise of our or our clients’ information could negatively impact our reputation,
financial results and prospects. In addition, if our reputation is damaged due to a data security breach, 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 results or financial condition.
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 proposed,
adopted 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 financial results.
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.
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 hiring and retaining 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 from 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 businesses or assets. The duration of post-employment non-competition and non-solicitation agreements
typically ranges 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 a business or assets, 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 a former employee or his clients, or other concerns, outweighs
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 businesses 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.
26
Risks Related to Acquisitions
We will consider future strategic or opportunistic acquisitions. In those cases, some or all of the following risks could 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
properly manage and integrate 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.
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
consent 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 “Credit Facility”) or the availability and cost of alternative financing) may cause us to be unable to pursue or
complete an acquisition.
27
An acquisition may not be accretive in the near term or at all.
Competitive market conditions may require us to pay a price that represents a higher multiple of revenues or profits for
an acquisition. As a result of these competitive dynamics, cost 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 a company we acquire or its parent, which could
cause professionals who join us from an acquired company to leave us.
Our governance and management policies and practices will not mirror the policies and practices of an acquired
company or its parent. 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 financial results 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 an acquisition 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
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’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, offer stock price guarantees, 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 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 cost of such acquisition.
Risks Related to Our Indebtedness
Our leverage could adversely affect our financial condition or operating flexibility.
Our level of indebtedness could have important consequences on our future operations. Our Credit Facility and the
indenture governing the 6% Senior Notes due 2022 (“2022 Notes”) include 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 restricted payments, investments and loans;
•
•
•
•
•
•
create, incur or assume additional indebtedness or guarantees;
create restrictions on the payment of dividends or other distributions to us from our restricted subsidiaries;
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;
•
prepay, redeem or purchase certain indebtedness; and
• make material changes to accounting and reporting practices.
28
In addition, the Credit Facility includes financial covenants that require us (i) not to exceed a maximum consolidated
total leverage ratio (the ratio of total funded debt to adjusted EBITDA) and (ii) to exceed a minimum consolidated interest
coverage ratio (the ratio of adjusted EBITDA less capital expenditures and cash taxes to cash interest expense).
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 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, financial results or financial condition could be materially and adversely
affected. In addition, complying with these covenants may 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.
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 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 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 Credit Facility and the indenture that governs the 2022 Notes, may restrict us from pursuing any of these alternatives.
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 financial results.
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 Credit Facility and
substantially all of their assets are pledged as collateral for the Credit Facility. Future U.S. subsidiaries will be required to
provide similar guarantees and, in the case of the 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 our U.S. subsidiaries’ assets to satisfy unpaid obligations, which would materially adversely affect our business
and financial results.
29
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 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 Credit Facility, 2022 Notes or our
other indebtedness outstanding from time to time.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
In June 2017, our executive offices moved to a new location in Washington, D.C., which consists of 93,507 square feet
under a lease expiring April 2028. In May 2017, our principal corporate facilities moved its location to Bowie, Maryland,
which consists of 30,835 square feet under a lease expiring April 2028. We also lease offices to support our operations in 35
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 27 countries — the United Kingdom, Ireland, Finland, France,
Germany, Spain, Belgium, Denmark, Australia, Malaysia, the Netherlands, China (including Hong Kong), Japan, Singapore,
the United Arab Emirates, South Korea, South Africa, Argentina, Brazil, Colombia, Mexico, Canada, Indonesia, India, Qatar,
the Cayman Islands and the British Virgin Islands. We believe our existing leased 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.
30
PART II
ITEM 5.
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
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
March 31
June 30
September 30
December 31
2017
2016
High
Low
High
Low
$
$
$
$
45.22
42.29
36.38
44.61
$
$
$
$
39.45
33.61
31.93
36.18
$
$
$
$
35.51
43.38
44.85
46.60
$
$
$
$
30.41
34.23
40.75
38.96
Number of Stockholders of Record. As of January 31, 2018, the number of holders of record of our common stock was
194.
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, to fund general corporate expenses or to repurchase
shares of our common stock. Moreover, our Credit Facility and the indenture governing our 2022 Notes may restrict our ability
to pay dividends. See Note 12, “Long-Term Debt” in Part II, Item 8 of this Annual Report for more information.
Securities Authorized for Issuance under Equity Compensation Plans
The following table includes the number of shares of common stock of the Company to be issued upon exercise of
outstanding options, warrants and rights awarded under our employee equity compensation plans. In addition, the Company has
made the following outstanding stock-based awards:
•
•
•
•
•
•
14 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”);
22 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”);
1,078,407 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”);
144,644 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 2017
Omnibus Incentive Compensation Plan (the “2017 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
No shares of common stock issued as unvested restricted stock awards as employment inducement awards (the “2014
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.
31
Equity Compensation Plan Information as of December 31, 2017
Plan Category
Equity compensation plans approved by our
security holders
Equity compensation plans not approved by our
security holders
Total
(a)
(b)
(c)
Number of Securities
to Be Issued upon
Exercise of
Outstanding
Options, Warrants
and Rights
Weighted Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
Number of Securities
Remaining Available
for Future Issuance
under Equity
Compensation Plans
(Excluding Securities
Reflected in Column
(a))
(in thousands, except per share data)
2,205 (1) $
54 (2)
2,259
$
42.38
36.75
42.24
2,667 (3)
—
2,667
(1)
(2)
(3)
Includes up to (i) 50,164 shares of common stock issuable upon vesting and exercise of outstanding stock options
granted under our 2004 Plan; (ii) 568,196 shares of common stock issuable upon vesting and exercise of outstanding
stock options granted under our 2006 Plan; and (iii) 1,586,585 shares of common stock issuable upon vesting and
exercise of outstanding stock options granted under our 2009 Omnibus Plan.
Includes up to 53,552 shares of common stock issuable upon vesting and exercise of outstanding stock options granted
under our 2014 Inducement Awards to new executive officer hires pursuant to Rule 303.08 of the NYSE.
Includes 2,666,668 shares of common stock available for issuance under our 2017 Omnibus Plan, all of which are
available for stock-based awards.
Issuances of Unregistered Securities
Not Applicable.
32
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 2017.
Total
Number of
Shares
Purchased
Average
Price
Paid per
Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Program (1)
Approximate
Dollar Value
That May yet Be
Purchased
under the
Program
(in thousands, except per share data)
October 1 through October 31, 2017
November 1 through November 30, 2017
December 1 through December 31, 2017
Total
— $
310 (2) $
2 (3) $
312
—
41.51
42.66
— $
308 (4) $
— (5) $
308
26,129
13,323
113,319
(1) On June 2, 2016, our Board of Directors authorized a stock repurchase program of up to $100.0 million (the
“Repurchase Program”). On May 18, 2017 and December 1, 2017, our Board of Directors authorized an additional
$100.0 million, respectively, increasing the Repurchase Program to an aggregate authorization of $300.0 million.
During the year ended December 31, 2017, we repurchased an aggregate of 4,674,418 shares of our outstanding
common stock under the Repurchase Program at an average repurchase price of $35.94 per share for a total cost of
approximately $168.0 million.
Includes 1,710 shares of common stock withheld to cover payroll tax withholdings related to the lapse of restrictions
on restricted stock.
Includes 1,882 shares of common stock withheld to cover payroll tax withholdings related to the lapse of restrictions
on restricted stock.
(2)
(3)
(4) During the month ended November 30, 2017, we repurchased and retired 308,300 shares of common stock, at an
average per share price of $41.53, for an aggregate cost of $12.8 million.
(5) During the month ended December 31, 2017, we repurchased and retired 100 shares of common stock, at an average
per share price of $43.00, for an aggregate cost of $4,300.
33
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 Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” and Part II, Item 8 of this Annual Report.
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 include: acquisitions, goodwill impairment charges, special charges and stock repurchases.
Income Statement, Balance Sheet and Stockholders' Equity Data
Income Statement 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
Interest income and other
Interest expense
Loss on early extinguishment of debt
Income before income tax provision (benefit)
Income tax provision (benefit)
Net income (loss)
Earnings (loss) per common share — basic
Earnings (loss) per common share — diluted
Weighted average number of common shares
$
$
$
outstanding
Basic
Diluted
Year Ended December 31,
2017
2016
2015
2014
2013
(in thousands, except per share data)
$ 1,807,732
$ 1,810,394
$ 1,779,149
$ 1,756,212
$ 1,652,432
1,215,560
429,722
40,885
2,291
10,563
—
1,699,021
108,711
3,752
(25,358)
—
87,105
(20,857)
107,962
2.79
2.75
1,210,771
434,552
10,445
2,164
10,306
—
1,668,238
142,156
10,466
(24,819)
—
127,803
42,283
85,520
2.09
2.05
1,171,444
432,668
—
(1,200)
11,726
—
1,614,638
164,511
3,232
(42,768)
(19,589)
105,386
39,333
66,053
1.62
1.58
$
$
$
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)
$
$
$
$
$
$
38,697
39,192
40,943
41,709
40,846
41,729
39,726
40,729
39,188
39,188
Balance Sheet Data
Cash and cash equivalents
Working capital (1)
Total assets
Long-term debt, net, including current portion
Stockholders’ equity
December 31,
2017
2016
2015
2014
2013
(in thousands)
189,961
$
383,851
$
$ 2,257,241
$
396,284
$ 1,191,971
216,158
$
404,716
$
$ 2,225,368
$
365,528
$ 1,207,358
149,760
$
394,548
$
$ 2,229,018
$
494,772
$ 1,147,603
283,680
$
489,749
$
$ 2,391,599
$
699,404
$ 1,102,746
205,833
$
392,841
$
$ 2,324,927
$
703,684
$ 1,042,259
(1) Working capital is defined as current assets less current liabilities.
34
Year Ended December 31,
2017
2016
2015
2014
2013
(in thousands)
Stockholders' Equity Data
Shares of common stock repurchased and retired
4,674
537
765
Total cost
$
168,001
$
21,479
$
26,516
$
—
— $
1,957
71,110
35
ITEM 7.
OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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, 2017 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 Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual
Report. Historical results and any discussion of prospective results may not indicate our future performance.
Business Overview
FTI Consulting is a global business advisory firm dedicated to helping organizations manage change, mitigate risk and
resolve disputes: financial, legal, operational, political and regulatory, reputational and transactional. Individually, each of our
practices is staffed with experts recognized for the depth of their knowledge and a track record of making an impact.
Collectively, FTI Consulting offers a comprehensive suite of services designed to assist clients across the business cycle, from
proactive risk management to rapid response to unexpected events and dynamic environments.
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 our clients around the world and delivers a wide range of service offerings related to
restructuring, business transformation and transaction support. Our restructuring practice includes corporate restructuring,
including bankruptcy and interim management services. Our business transformation and transactions support practices include
financings, mergers and acquisitions ("M&A"), M&A integration, valuations and tax advice, as well as financial, operational
and performance improvement services.
Our Forensic and Litigation Consulting (“FLC”) segment provides law firms, companies, government clients and
other interested parties with multidisciplinary, independent dispute advisory, investigations, data analytics, forensic accounting,
business intelligence 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 offers a comprehensive portfolio of information governance and electronic discovery ("e-
discovery") software, services and consulting support to companies, law firms, courts and government agencies worldwide.
Our services allow our clients to control the risk and expense of e-discovery events more confidently, as well as manage their
data in the context of compliance and risk.
Our Strategic Communications segment designs and executes communications strategies for management teams and
boards of directors to help them seize opportunities, manage financial, regulatory and reputational challenges, navigate market
disruptions, articulate their brand, stake a competitive position, and preserve and grow their operations.
We derive substantially all of our revenues from providing professional services to both United States ("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 cancelable 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. Seasonal factors, such as the timing of our
employees’ and clients’ vacations and holidays, may impact the timing of our revenues across our segments.
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. We license certain
products directly to end users, as well as indirectly through our channel partner relationships. Unit-based revenues are defined
as revenues billed on a per-item, per-page or some other unit-based method and include revenues from data processing and
hosting, software usage and software licensing. Unit-based revenues include revenues associated with our proprietary software
that are made available to customers, either via a web browser (“on-demand”) or installed at our customer or partner locations
36
(“on-premise”). On-demand revenues are charged on a unit or monthly basis and include, but are not limited to, processing and
review related functions. On-premise revenues are comprised of upfront license fees, with recurring support and maintenance.
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;
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 revenues of acquired companies in the first 12 months following the effective date of an
acquisition. Our definition of organic growth is the change in revenues, excluding the impact of all such acquisitions.
When significant, we identify the estimated impact of foreign currency translation (“FX”) driven by our businesses with
functional currencies other than the U.S. dollar (“USD”), on the period-to-period performance results. The estimated impact of
FX is calculated as the difference between the prior period results multiplied by the average foreign currency exchange rates to
USD in the current period and the prior period results, multiplied by the average foreign currency rates to USD in the prior
period.
Non-GAAP Financial Measures
In the accompanying analysis of financial information, we sometimes use information derived from consolidated and
segment financial information that may not be presented in our financial statements or prepared in accordance with generally
accepted accounting principles in the United States ("GAAP"). Certain of these financial measures are considered “not in
conformity with GAAP ("non-GAAP financial measures”) under the SEC rules. Specifically, we have referred to the following
non-GAAP financial measures:
•
•
•
•
•
•
•
Total Segment Operating Income
Adjusted EBITDA
Total Adjusted Segment EBITDA
Adjusted EBITDA Margin
Adjusted Net Income
Adjusted Earnings per Diluted Share
Free Cash Flow
We have included the definitions of Segment Operating Income (Loss) and Adjusted Segment EBITDA below in order
to more fully define the components of certain non-GAAP financial measures in the accompanying analysis of financial
information. As described in Note 17, “Segment Reporting” in Part II, Item 8, “Financial Statement and Supplementary Data”
of this Annual Report on the Form 10-K, we evaluate the performance of our operating segments based on Adjusted Segment
EBITDA, and Segment Operating Income (Loss) is a component of the definition of Adjusted Segment EBITDA.
We define Segment Operating Income (Loss) as a segment’s share of consolidated operating income (loss). We define
Total Segment Operating Income, which is a non-GAAP financial measure, 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 Segment EBITDA as a segment’s share of consolidated operating
income (loss) before depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent
37
consideration, special charges and goodwill impairment charges. We use Adjusted Segment EBITDA as a basis to internally
evaluate the financial performance of our segments because we believe it reflects current core operating performance and
provides an indicator of the segment’s ability to generate cash. We define Adjusted EBITDA Margin as Adjusted EBITDA as a
percentage of total revenues.
We define Total Adjusted Segment EBITDA, which is a non-GAAP financial measure, as the total of Adjusted Segment
EBITDA for all segments, which excludes unallocated corporate expenses. We define Adjusted EBITDA, which is a non-
GAAP financial measure, as consolidated net income before income tax provision, other non-operating income (expense),
depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges,
goodwill impairment charges and losses on early extinguishment of debt. We believe that these non-GAAP financial measures,
which exclude the effects of remeasurement of acquisition-related contingent consideration, special charges, goodwill
impairment charges and losses on early extinguishment of debt, when considered together with our GAAP financial results and
GAAP measures, provide management and investors with a more complete understanding of our operating results, including
underlying trends. 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 with
the operating results of other companies.
We define Adjusted Net Income and Adjusted Earnings per Diluted Share (“Adjusted EPS”), which are non-GAAP
financial measures, as net income and earnings per diluted share ("EPS"), respectively, excluding the impact of remeasurement
of acquisition-related contingent consideration, special charges, goodwill impairment charges, losses on early extinguishment
of debt and the impact of adopting the 2017 U.S. Tax Cuts and Jobs Act (the “2017 Tax Act”). 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 non-GAAP financial measure, which excludes the effects of the remeasurement of
acquisition-related contingent consideration, special charges, goodwill impairment charges, losses on early extinguishment of
debt and the 2017 Tax Act, when considered together with our GAAP financial results, provides management and investors
with an additional understanding of our business operating results, including underlying trends.
We define Free Cash Flow, which is a non-GAAP financial measure, as net cash provided by operating activities less cash
payments for purchases of property and equipment. We believe this non-GAAP financial measure, when considered together
with our GAAP financial results, provides management and investors with an additional understanding of the Company’s
ability to generate cash for ongoing business operations and other capital deployment.
Non-GAAP financial measures are not defined in the same manner by all companies and may not be comparable with
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 non-GAAP financial measures to the most directly comparable GAAP financial measures are included
elsewhere in this report.
38
Full Year 2017 Executive Highlights
Financial Highlights
Revenues
Special charges
Net income
Adjusted EBITDA
Earnings per common share — diluted
Adjusted earnings per common share — diluted
Net cash provided by operating activities
Total number of employees as of December 31
Revenues
Year Ended December 31,
2017
2016
% Growth
(dollar amounts in thousands, except per share amounts)
-0.1%
$
291.4%
$
26.2%
$
-5.4%
$
34.1%
$
3.6%
$
-36.8%
-2.3%
1,810,394
10,445
85,520
203,010
2.05
2.24
233,488
4,718
1,807,732
40,885
107,962
192,038
2.75
2.32
147,625
4,609
$
$
$
$
$
$
Revenues decreased $2.7 million, or 0.1%, from 2016 to 2017. The decrease in revenues was primarily due to lower
demand in the Economic Consulting and Technology segments, which was partially offset by higher demand in our FLC
segment.
Special Charges
Special charges increased $30.4 million from 2016 to 2017. For the year ended December 31, 2017, we recorded special
charges of $40.9 million related to certain targeted reductions of staff in areas of each segment to realign our workforce with
current business demand. In addition, cost-cutting actions were taken in certain corporate departments where we were able to
streamline support activities and reduce our real estate costs.
Net Income
Net income increased $22.4 million, or 26.2%, from 2016 to 2017. This increase was primarily due to a $44.9 million
net tax benefit recorded to reflect the impact of adopting the 2017 Tax Act, partially offset by a $30.4 million increase in pre-
tax special charges.
Adjusted EBITDA
Adjusted EBITDA decreased $11.0 million, or 5.4%, from 2016 to 2017. Adjusted EBITDA was 10.6% of revenues for
the year ended December 31, 2017 compared with 11.2% of revenues for the year ended December 31, 2016. The decrease in
Adjusted EBITDA was driven primarily by lower revenues coupled with higher compensation in our Corporate Finance and
Economic Consulting segments, which was partially offset by reduced compensation in our FLC segment.
EPS and Adjusted EPS
EPS increased $0.70 to $2.75 in 2017 compared with $2.05 in 2016. EPS includes the $44.9 million net tax benefit
recorded to reflect the impact of adopting the 2017 Tax Act, which increased EPS by $1.14, and the $40.9 million special
charge related to headcount and real estate reductions, which reduced EPS by $0.70.
Adjusted EPS, which excludes the impact of adopting the 2017 Tax Act, remeasurement of acquisition-related
contingent consideration and special charges, increased $0.08 to $2.32 in 2017 compared with $2.24 in 2016.
Liquidity and Capital Allocation
Cash balances decreased by $26.2 million, or 12.1%, to $190.0 million for the year ended December 31, 2017. Cash
provided by operating activities decreased $85.9 million to $147.6 million in 2017 as compared with $233.5 million in 2016.
The decrease was primarily due to higher compensation payments, including salaries, bonuses and severance, and lower cash
collections. This was partially offset by lower income taxes paid. Days sales outstanding (“DSO”) of 91 days as of
December 31, 2017 was the same as DSO as of December 31, 2016.
39
A portion of net cash provided by operating activities was used to repurchase and retire 4.7 million shares of our
common stock for an average price per share of $35.94, at a total cost of $168.0 million during the year ended December 31,
2017. We have $113.3 million remaining under the Repurchase Program to repurchase additional shares as of December 31,
2017.
Free Cash Flow, which is a non-GAAP financial measure, for the years ended December 31, 2017 and 2016 was $115.6
million and $204.6 million, respectively.
Other Strategic Activities
During the year ended December 31, 2017, we acquired the operations of a restructuring advisory firm in New York. As
part of the transaction, 19 professionals, including five Senior Managing Directors, joined the Company’s Corporate Finance
segment. The addition of these professionals will further enhance our top restructuring position in North America by
strengthening our company-side and interim management capabilities.
Headcount
Our total headcount decreased 2.3% from 4,718 as of December 31, 2016 to 4,609 as of December 31, 2017. The
following table includes the net billable headcount additions (reductions) for the year ended December 31, 2017. The net
reductions in the FLC and Strategic Communications segments were primarily driven by the programmatic staff reductions
described in the “Special Charges” section above.
Billable Headcount
December 31, 2016
Additions (reductions), net
December 31, 2017
Corporate
Finance &
Restructuring
895
Forensic and
Litigation
Consulting
1,110
6
901
(43)
1,067
Economic
Consulting
656
27
683
Technology
Strategic
Communications
288
4
292
647
(17)
630
Total
3,596
(23)
3,573
Percentage change in headcount from prior
year
0.7%
(3.9)%
4.1%
1.4%
(2.6)%
(0.6)%
40
RESULTS OF OPERATIONS
Segment and Consolidated Operating Results:
Revenues
Corporate Finance & Restructuring
Forensic and Litigation Consulting
Economic Consulting
Technology
Strategic Communications
Total revenues
Segment operating income (loss)
Corporate Finance & Restructuring
Forensic and Litigation Consulting
Economic Consulting
Technology
Strategic Communications
Total segment operating income
Unallocated corporate expenses
Operating income
Other income (expense)
Interest income and other
Interest expense
Loss on early extinguishment of debt
Income before income tax provision (benefit)
Income tax provision (benefit)
Net income
Earnings per common share — basic
Earnings per common share — diluted
Reconciliation of Net Income to Adjusted EBITDA:
Net income
Add back:
Income tax provision (benefit)
Interest income and other
Interest expense
Depreciation and amortization
Amortization of other intangible assets
Special charges
Loss on early extinguishment of debt
Remeasurement of acquisition-related contingent
consideration
Adjusted EBITDA
41
Year Ended December 31,
2017
2016
2015
(in thousands, except per share data)
482,041
462,324
496,029
174,850
192,488
1,807,732
70,234
54,520
49,154
4,795
13,148
191,851
(83,140)
108,711
3,752
(25,358)
—
(21,606)
87,105
(20,857)
107,962
2.79
2.75
$
$
$
$
$
$
483,269
457,734
500,487
177,720
191,184
1,810,394
91,481
49,088
68,842
(2,183)
23,110
230,338
(88,182)
142,156
10,466
(24,819)
—
(14,353)
127,803
42,283
85,520
2.09
2.05
$
$
$
$
$
$
440,398
482,269
447,909
218,599
189,974
1,779,149
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
$
$
$
$
$
$
Year Ended December 31,
2016
2015
2017
$
107,962
(in thousands)
85,520
$
$
66,053
(20,857)
(3,752)
25,358
31,177
10,563
40,885
—
702
42,283
(10,466)
24,819
38,700
10,306
10,445
—
39,333
(3,232)
42,768
31,392
11,726
—
19,589
1,403
(1,867)
$
192,038
$
203,010
$
205,762
Reconciliation of Net Income and Earnings Per Share to Adjusted Net Income and Adjusted Earnings Per Share:
Year Ended December 31,
2016
2015
2017
Net income
Add back:
Special charges
Tax impact of special charges
Loss on early extinguishment of debt
Tax impact of loss on early extinguishment of debt
Remeasurement of acquisition-related contingent consideration
Tax impact of remeasurement of acquisition-related contingent
consideration
Impact of 2017 Tax Act
Adjusted net income
Earnings per common share — diluted
Add back:
Special charges
Tax impact of special charges
Loss on early extinguishment of debt
Tax impact of loss on early extinguishment of debt
Remeasurement of acquisition-related contingent consideration
Tax impact of remeasurement of acquisition-related contingent
consideration
Impact of 2017 Tax Act
Adjusted earnings per common share — diluted
$
$
$
$
(in thousands, except per share data)
107,962
85,520
$
$
66,053
40,885
(13,570)
—
—
702
(269)
(44,870)
90,840
2.75
1.04
(0.34)
—
—
0.02
(0.01)
(1.14)
2.32
$
$
$
10,445
(3,595)
—
—
1,403
(546)
—
93,227
2.05
0.25
(0.08)
—
—
0.03
(0.01)
—
2.24
$
$
$
—
—
19,589
(7,708)
(1,867)
747
—
76,814
1.58
—
—
0.47
(0.19)
(0.04)
0.02
—
1.84
Weighted average number of common shares outstanding — diluted
39,192
41,709
41,729
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow:
Net cash provided by operating activities
Purchases of property and equipment
Free Cash Flow
2017
Year Ended December 31,
2016
(in thousands)
233,488
147,625
$
$
(28,935) $
(32,004) $
$
204,553
$
115,621
2015
139,920
(31,399)
108,521
$
$
$
Year Ended December 31, 2017 Compared with December 31, 2016
Revenues and Operating Income
See “Segment Results” for an expanded discussion of Revenues and Adjusted Segment EBITDA.
Special Charges
Special charges for the year ended December 31, 2017 were $40.9 million. See Note 4, "Special Charges" in Part II,
Item 8 of this Annual Report for expanded disclosure. Special charges for the year ended December 31, 2016 were $10.4
million.
42
The following table details the 2017 special charges by segment.
2017 Special Charges
Corporate Finance & Restructuring
Forensic and Litigation Consulting
Economic Consulting
Technology
Strategic Communications
Segment subtotal
Unallocated Corporate
Total
Unallocated Corporate Expenses
(in thousands)
5,440
$
12,334
6,624
5,057
7,752
37,207
3,678
40,885
$
Unallocated corporate expenses decreased $5.0 million, or 5.7%, to $83.1 million in 2017 from $88.2 million in 2016.
Excluding the impact of special charges of $3.7 million recorded in 2017, unallocated corporate expenses decreased by $8.1
million in 2017, or 9.3%. The decrease was primarily due to lower infrastructure department spend and lower executive
compensation expenses, which was partially offset by higher outside legal expenses.
Interest Income and Other
Interest income and other, which includes FX gains and losses, decreased $6.7 million to $3.8 million for the year ended
December 31, 2017 from $10.5 million for the year ended December 31, 2016. The decrease was primarily due to a net
unrealized FX loss, which was $0.1 million for the year ended December 31, 2017 compared with a $4.9 million gain for the
year ended December 31, 2016. FX 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 increased $0.5 million, or 2.2%, to $25.4 million in 2017 from $24.8 million in 2016 due to the impact
of a 0.7% increase in average interest rates on our borrowings under our senior secured bank revolving credit facility ("Credit
Facility") in 2017, partially offset by lower average borrowings outstanding during 2017 as compared to 2016.
Income Tax Provision (Benefit)
Our income tax benefit was $20.9 million for 2017 as compared with an income tax provision of $42.3 million for 2016.
Our 2017 income tax benefit included a discrete income tax benefit of $44.9 million related to the adoption of the 2017 Tax Act
on December 22, 2017. Excluding the impact of the 2017 Tax Act, our effective tax rate was 27.6% for 2017 as compared with
an effective tax rate of 33.1% for 2016. The current year effective tax rate, excluding the impact of adopting the 2017 Tax Act,
declined related to the mix of higher foreign and U.S. state earnings in lower taxed jurisdictions as compared with the prior
year.
The $44.9 million discrete adjustment related to the adoption of the 2017 Tax Act impact includes the following:
•
•
$65.1 million income tax benefit related to the remeasurement of U.S. deferred tax liabilities from the previous U.S.
federal tax rate of 35% to the newly enacted rate of 21%; and
$18.7 million income tax expense related to a Transition Tax on a deemed repatriation of accumulated foreign earnings
and profits as required under the new tax law.
Year Ended December 31, 2016 Compared with December 31, 2015
Revenues and Operating Income
See “Segment Results” for an expanded discussion of Revenues and Adjusted Segment EBITDA.
Special Charges
Special charges for the year ended December 31, 2016 were $10.4 million. See Note 4, "Special Charges" in Part II,
Item 8 of this Annual Report for an expanded disclosure. There were no special charges for the year ended December 31, 2015.
43
The following table details the 2016 special charges by segment.
2016 Special Charges
Corporate Finance & Restructuring
Forensic and Litigation Consulting
Economic Consulting
Technology
Strategic Communications
Segment subtotal
Unallocated Corporate
Total
Unallocated Corporate Expenses
(in thousands)
—
$
2,304
—
7,529
—
9,833
612
10,445
$
Unallocated corporate expenses increased $6.8 million, or 8.4%, to $88.2 million in 2016 from $81.3 million in 2015.
The increase was primarily due to higher outside legal expenses and higher regional performance-related compensation.
Interest Income and Other
Interest income and other, which includes FX gains and losses, increased $7.3 million to $10.5 million for the year
ended December 31, 2016 from $3.2 million for the year ended December 31, 2015. The increase was due, in part, to an
increase in net unrealized FX gains, as well as an adjustment of an acquisition-related liability. These FX gains were $4.9
million for the year ended December 31, 2016, resulting principally from the weakening of the British pound, compared with a
$0.9 million loss for the year ended December 31, 2015. 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 $18.0 million, or 42.0%, to $24.8 million in 2016 from $42.8 million in 2015. Interest
expense in 2016 was favorably impacted by a 1.3% reduction in average interest rates and a $184.2 million reduction in
average borrowings in 2016 as compared with 2015, as a result of the debt restructuring completed in the third quarter of 2015,
and the repayments of $130.0 million of borrowings under the Credit Facility in 2016.
Income Tax Provision
Our income tax provision was $42.3 million with an effective tax rate of 33.1% for 2016 as compared with the income
tax provision of $39.3 million with an effective tax rate of 37.3% for 2015. The decrease in the effective tax rate in 2016 was
mainly driven by the favorable impact of the reversal of an uncertain tax position upon the closure of certain income tax audits,
as well as lower valuation allowances recorded on foreign net operating losses and a favorable mix of earnings in foreign
jurisdictions. The effective tax rates, excluding discrete tax adjustments, were 35.9% and 36.5% in 2016 and 2015, respectively.
SEGMENT RESULTS
Total Adjusted Segment EBITDA
We evaluate the performance of our operating segments based on Adjusted Segment EBITDA, which is a GAAP
measure. The following table reconciles Net Income to Total Adjusted Segment EBITDA, a non-GAAP financial measure, for
the years ended December 31, 2017, 2016 and 2015.
44
Net income
Add back:
Income tax provision (benefit)
Interest income and other
Interest expense
Loss on early extinguishment of debt
Unallocated corporate expense
Total segment operating income
Add back:
Segment depreciation expense
Amortization of other intangible assets
Segment special charges
Remeasurement of acquisition-related
contingent consideration
Total Adjusted Segment EBITDA
Other Segment Operating Data
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 rate 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
2017
Year Ended December 31,
2016
(in thousands)
85,520
$
$
$
107,962
(20,857)
(3,752)
25,358
—
83,140
191,851
27,112
10,563
37,207
42,283
(10,466)
24,819
—
88,182
230,338
34,064
10,306
9,833
2015
66,053
39,333
(3,232)
42,768
19,589
81,348
245,859
27,717
11,726
—
702
267,435
$
1,403
285,944
$
(1,867)
283,435
$
Year Ended December 31,
2016
2015
2017
901
1,067
683
292
630
3,573
61%
61%
67%
396
321
524
$
$
$
895
1,110
656
288
647
3,596
65%
59%
73%
392
327
517
$
$
$
838
1,131
599
349
599
3,516
69%
64%
72%
383
319
512
$
$
$
(1)
(2)
(3)
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. We employed an average of 305, 287 and 395 as-needed
employees during the years ended December 31, 2017, 2016 and 2015, respectively.
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 utilization rates for our Technology and Strategic
Communications segments as most of the revenues of these segments are not based on billable hours.
For engagements where revenues are based on number of hours worked by our billable professionals, the 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 average billable rates per hour for our Technology and
Strategic Communications segments as most of the revenues of these segments are not based on billable hours.
45
CORPORATE FINANCE & RESTRUCTURING
Revenues
Year Ended December 31,
2017
2016
2015
(dollars in thousands, except rate per hour)
$
482,041
$
483,269
$
440,398
Percentage change in revenues from prior year
(0.3)%
9.7%
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
318,606
83,468
5,440
279
4,014
411,807
70,234
306,894
81,584
—
—
3,310
391,788
91,481
Percentage change in segment operating income from prior year
(23.2)%
7.4%
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 rate of billable professionals
Average billable rate per hour
(1)
(2)
Revenues less direct cost of revenues.
Gross profit as a percent of revenues.
Year Ended December 31, 2017 Compared with December 31, 2016
7,189
5,440
—
82,863
163,435
$
$
6,207
—
—
97,688
176,375
$
$
$
$
(7.3)%
33.9 %
17.2 %
901
0.7 %
61 %
4.4%
36.5%
20.2%
895
6.8%
65%
$
396
$
392
$
271,530
81,550
—
(1,439)
3,550
355,191
85,207
6,385
—
(1,491)
90,101
168,868
38.3%
20.5%
838
69%
383
Revenues decreased $1.2 million, or 0.3%, from 2016 to 2017. Acquisition-related revenues contributed $10.1 million,
or 2.1%, compared with 2016. Excluding the acquisition, revenues decreased $11.3 million, or 2.3%. This decrease was
primarily driven by lower demand for restructuring practice offerings globally, which was partially offset by increased demand
in the business transformation practice and higher success fees.
Gross profit decreased $12.9 million, or 7.3%, from 2016 to 2017. Gross profit margin decreased 2.6 percentage points
from 2016 to 2017. This decrease was due to lower utilization driven by an increase in billable headcount, which was partially
offset by higher success fees.
Selling, general and administrative (“SG&A”) expenses increased $1.9 million, or 2.3%, from 2016 to 2017, which
included $1.2 million from a recent acquisition and the impact of higher bad debt expenses, partially offset by other general
overhead expenses. Bad debt expenses in 2016 included collections of prior period write-offs. SG&A expenses were 17.3% of
revenues in 2017 compared with 16.9% in 2016.
Year Ended December 31, 2016 Compared with December 31, 2015
Revenues increased $42.9 million, or 9.7%, from 2015 to 2016, which included a 1.8% estimated negative impact
from FX. Excluding the estimated impact of FX, revenues increased $50.9 million, or 11.6%. This increase was primarily due
46
to higher demand for restructuring practice offerings in the North America and Europe, Middle East and Africa ("EMEA")
regions and higher demand for tax practice offerings in EMEA.
Gross profit increased $7.5 million, or 4.4%, from 2015 to 2016. Gross profit margin decreased 1.8 percentage points
from 2015 to 2016. The margin decrease was primarily due to lower utilization, higher employee-related costs, and increased
headcount in North America and EMEA, partially offset by improved staff leverage in EMEA and $11.9 million in success fees
in 2016.
SG&A expenses were flat from 2015 to 2016, as higher infrastructure support costs and recruiting expenses to support
additional headcount were offset by lower bad debt expenses as a result of collections on prior period bad debts. SG&A
expenses were 16.9% of revenues in 2016 compared with 18.5% in 2015.
FORENSIC AND LITIGATION CONSULTING
Revenues
Year Ended December 31,
2017
2016
2015
(dollars in thousands, except rate per hour)
$
462,324
$
457,734
$
482,269
Percentage change in revenues from prior year
1.0 %
(5.1)%
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
305,822
88,056
12,334
—
1,592
407,804
54,520
314,810
89,526
2,304
6
2,000
408,646
49,088
327,115
94,717
—
30
2,222
424,084
58,185
Percentage change in segment operating income from prior year
11.1 %
(15.6)%
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)
Percentage change in number of revenue-generating professionals
from prior year
Utilization rate of billable professionals
Average billable rate per hour
(1)
(2)
Revenues less direct cost of revenues.
Gross profit as a percent of revenues.
5,851
12,334
72,705
156,502
$
$
6,490
2,304
57,882
142,924
$
$
6,082
—
64,267
155,154
$
$
9.5 %
33.9 %
15.7 %
1,067
(3.9)%
61 %
(7.9)%
31.2 %
12.6 %
1,110
(1.9)%
59 %
$
321
$
327
$
32.2%
13.3%
1,131
64%
319
Year Ended December 31, 2017 Compared with December 31, 2016
Revenues increased $4.6 million, or 1.0%, from 2016 to 2017. This increase was driven by increased volume in the
global construction solutions practice and investigations practice in EMEA, which was partially offset by lower demand in the
health solutions practice.
Gross profit increased $13.6 million, or 9.5%, from 2016 to 2017. Gross profit margin increased 2.7 percentage points
from 2016 to 2017. This increase in gross profit margin is related to higher utilization, largely in the construction solutions,
disputes and investigations practices, partially offset by lower success fees in our health solutions practice.
47
SG&A expenses decreased $1.5 million, or 1.6%, from 2016 to 2017. SG&A expenses were 19.0% of revenues in 2017
compared with 19.6% in 2016. The decrease in SG&A expenses was due to lower costs from headcount reductions, primarily in
our health solutions practice, partially offset by higher bad debt expenses.
Year Ended December 31, 2016 Compared with December 31, 2015
Revenues decreased $24.5 million, or 5.1%, from 2015 to 2016, which included a 1.1% estimated negative impact from
FX. Excluding the estimated impact of FX, revenues decreased $19.2 million, or 4.0%, due to lower demand in our health
solutions and global dispute advisory services practices. These decreases were partially offset by higher demand in our global
risk and investigations and global financial and enterprise data analytics practices.
Gross profit decreased $12.2 million, or 7.9%, from 2015 to 2016. Gross profit margin decreased 1.0 percentage points
from 2015 to 2016. This decrease was primarily due to lower utilization in our health solutions and global dispute advisory
services practices, combined with higher compensation expenses in our global risk and investigations practice, partially offset
by higher utilization in our global financial and enterprise data analytics practices.
SG&A expenses decreased $5.2 million, or 5.5%, from 2015 to 2016. SG&A expenses were 19.6% of revenues in 2016
compared with 19.6% in 2015. The decrease in SG&A expenses was a result of higher severance expenses recorded in 2015
related to the departure of a senior managing director and lower bad debt expenses in 2015, partially offset by higher
infrastructure support costs in 2016.
ECONOMIC CONSULTING
Revenues
Year Ended December 31,
2017
2016
2015
(dollars in thousands, except rate per hour)
$
496,029
$
500,487
$
447,909
Percentage change in revenues from prior year
(0.9)%
11.7%
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
367,711
71,832
6,624
111
597
446,875
49,154
363,616
67,330
—
53
646
431,645
68,842
327,870
61,213
—
(318)
1,232
389,997
57,912
Percentage change in segment operating income from prior year
(28.6)%
18.9%
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 rate of billable professionals
Average billable rate per hour
(1)
(2)
Revenues less direct cost of revenues.
Gross profit as a percent of revenues.
48
6,186
6,624
—
61,964
128,318
5,260
—
—
74,102
136,871
$
$
4,794
—
(376)
62,330
120,039
$
$
(6.2)%
25.9 %
12.5 %
683
4.1 %
67 %
524
14.0%
27.3%
14.8%
656
9.5%
73%
$
517
$
26.8%
13.9%
599
72%
512
$
$
$
Year Ended December 31, 2017 Compared with December 31, 2016
Revenues decreased $4.5 million, or 0.9%, from 2016 to 2017. This decrease was primarily driven by lower demand for
financial economics services in North America, which was partially offset by higher demand for antitrust services in EMEA
and international arbitration services in North America.
Gross profit decreased $8.6 million, or 6.2%, from 2016 to 2017. Gross profit margin decreased 1.4 percentage points
from 2016 to 2017. This decrease was primarily due to a decline in utilization, resulting from both lower demand and an
increase in billable headcount.
SG&A expenses increased $4.5 million, or 6.7%, from 2016 to 2017. SG&A expenses were 14.5% of revenues in 2017
compared with 13.5% in 2016. The increase in SG&A expenses was driven primarily by higher bad debt, compensation,
depreciation and infrastructure support costs, which were partially offset by lower legal fees.
Year Ended December 31, 2016 Compared with December 31, 2015
Revenues increased $52.6 million, or 11.7%, from 2015 to 2016, which included a 2.1% estimated negative impact from
FX. Excluding the estimated impact of FX, revenues increased $62.1 million, or 13.9%, primarily due to higher demand for our
M&A and non-M&A-related antitrust practice and our financial economics practice in North America.
Gross profit increased $16.8 million, or 14.0%, from 2015 to 2016. Gross profit margin increased 0.5 percentage points
from 2015 to 2016. This increase was primarily due to higher utilization and higher average realization in our M&A and non-
M&A-related antitrust practice and our financial economics practice in North America, largely offset by higher variable
compensation.
SG&A expenses increased $6.1 million, or 10.0%, from 2015 to 2016. SG&A expenses were 13.5% of revenues in 2016
compared with 13.7% in 2015. The increase in SG&A expenses was driven primarily by higher legal costs, depreciation and
amortization, and employee-related costs to support additional headcount.
49
TECHNOLOGY
Revenues
Year Ended December 31,
2017
2016
2015
$
174,850
(dollars in thousands)
177,720
$
$
218,599
Percentage change in revenues from prior year
(1.6)%
(18.7)%
Operating expenses:
Direct cost of revenues
Selling, general and administrative expenses
Special charges
Amortization of other intangible assets
Segment operating (loss) income
Percentage change in segment operating income from prior year
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
101,505
62,858
5,057
635
170,055
4,795
(319.7)%
107,591
64,135
7,529
648
179,903
(2,183)
(109.6)%
123,859
71,120
—
788
195,767
22,832
12,319
5,057
22,171
73,345
$
$
20,468
7,529
25,814
70,129
$
$
$
$
16,178
—
39,010
94,740
4.6 %
41.9 %
12.7 %
292
(26.0)%
39.5 %
14.5 %
288
1.4 %
(17.5)%
43.3%
17.8%
349
(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.
Year Ended December 31, 2017 Compared with December 31, 2016
Revenues decreased $2.9 million, or 1.6%, from 2016 to 2017. This decrease was primarily driven by lower pricing for
hosting services as a result of a decline in legacy hosting matters at the end of their cycle, coupled with lower demand for
managed review offerings, partially offset by higher demand for hosting services as a result of new engagements. Additionally,
higher demand for consulting was driven by growth in new engagements as well as growth in information governance
engagements.
Gross profit increased $3.2 million, or 4.6%, from 2016 to 2017. Gross profit margin increased 2.4 percentage points to
41.9% from 2016 to 2017. This margin increase was due to higher pricing for consulting, higher demand for hosting and lower
depreciation expense, which was partially offset by lower pricing for hosting services.
SG&A expenses decreased $1.3 million, or 2.0%, from 2016 to 2017. SG&A expenses were 35.9% of revenues in 2017
compared with 36.1% in 2016. This decrease was due to lower salary and benefits, and lower research and development
expense, partially offset by higher sales commissions. Research and development expenses related to software development
were $14.9 million in 2017, a decline of $2.6 million, compared with $17.5 million in 2016.
Year Ended December 31, 2016 Compared with December 31, 2015
Revenues decreased $40.9 million, or 18.7%, from 2015 to 2016, which included a 1.2% estimated negative impact
from FX. Excluding the estimated impact of FX, revenues decreased $38.2 million, or 17.5%, due to reduced demand for
M&A-related second request activity and fewer large cross-border investigations. Consulting and managed review practice
offerings declined largely due to a decrease in demand and lower realized pricing.
50
Gross profit decreased $24.6 million, or 26.0%, from 2015 to 2016. Gross profit margin decreased 3.8 percentage points
to 39.5% from 2015 to 2016. The decrease in gross profit margin was due to lower demand and realized pricing for consulting
and managed review practice offerings and $3.8 million in accelerated amortization of certain capitalized software assets in
2016.
SG&A expenses decreased $7.0 million, or 9.8%, from 2015 to 2016. SG&A expenses were 36.1% of revenues in 2016
compared with 32.5% in 2015. The decrease in SG&A expenses was due to lower compensation costs resulting from headcount
reductions, as well as lower occupancy costs and infrastructure support costs. Research and development expenses related to
software development were $17.5 million in 2016 compared with $19.5 million in 2015.
STRATEGIC COMMUNICATIONS
Revenues
Percentage change in revenues from prior year
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 from
prior year
Add back:
Depreciation and amortization of intangible assets
Special charges
Fair value remeasurement of 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
Year Ended December 31,
2017
2016
2015
$ 192,488
(dollars in thousands)
$ 191,184
$ 189,974
0.7 %
0.6%
121,916
44,046
7,752
1,901
3,725
179,340
13,148
117,858
44,409
—
2,105
3,702
168,074
23,110
121,070
42,720
—
527
3,934
168,251
21,723
(43.1)%
6.4%
6,130
7,752
702
27,732
70,572
$
$
5,945
—
1,403
30,458
73,326
6,004
—
—
27,727
68,904
$
$
$
$
(3.8)%
36.7 %
14.4 %
630
(2.6)%
6.4%
38.4%
15.9%
647
8.0%
36.3%
14.6%
599
(1)
(2)
Revenues less direct cost of revenues.
Gross profit as a percent of revenues.
Year Ended December 31, 2017 Compared with December 31, 2016
Revenues increased $1.3 million, or 0.7%, from 2016 to 2017. This increase was due to higher retainer-based revenues
across all regions, which was partially offset by lower project income in North America, primarily in the financial
communications practice.
Gross profit decreased $2.8 million, or 3.8%, from 2016 to 2017. Gross profit margin decreased 1.7 percentage points
from 2016 to 2017. This decrease was primarily due to fewer large, high-margin engagements in North America, as well as
higher compensation as a result of increased average billable headcount.
SG&A expenses decreased $0.4 million, or 0.8%, from 2016 to 2017. SG&A expenses were 22.9% of revenues in 2017
compared with 23.2% in 2016. The decrease in SG&A expenses was primarily due to lower staff costs, partially offset by
higher travel and entertainment expenses.
51
Year Ended December 31, 2016 Compared with December 31, 2015
Revenues increased $1.2 million, or 0.6%, from 2015 to 2016, which included a 3.9% estimated negative impact from
FX. Excluding the estimated negative impact of FX, revenues increased $8.5 million, or 4.5%, primarily due to higher project-
based revenues in North America and EMEA, predominantly in financial communications and public affairs-related
engagements. These increases were partially offset by a $6.7 million reduction in pass-through revenues.
Gross profit increased $4.4 million, or 6.4%, from 2015 to 2016. Gross profit margin increased 2.1 percentage points
from 2015 to 2016. Excluding the impact of net pass-through revenues, gross profit margin improved 0.7% due to a larger
proportion of revenues coming from large-scale and higher margin engagements.
SG&A expenses increased $1.7 million, or 4.0%, from 2015 to 2016. SG&A expenses were 23.2% of revenues in 2016
compared with 22.5% in 2015. The increase in SG&A expense was primarily due to higher infrastructure support costs and
compensation, partially offset by lower legal costs.
Liquidity and Capital Resources
Cash Flows
Cash Flows
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
DSO
$
$
$
Year Ended December 31,
2017
2016
(dollars in thousands)
233,488
$
(30,132) $
(125,310) $
147,625
$
(40,638) $
(140,934) $
91
91
2015
139,920
(31,737)
(235,962)
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 expenses. 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
revenues for the quarter, adjusted for changes in foreign exchange rates. We multiply the result by the number of days in the
quarter.
Free Cash Flow, a non-GAAP financial measure, for the three years ended December 31, 2017, 2016 and 2015 was
$115.6 million, $204.6 million, and $108.5 million, respectively.
Year Ended December 31, 2017 Compared with Year Ended December 31, 2016
Net cash provided by operating activities decreased $85.9 million, or 36.8%, from 2016 to 2017. The decrease was
primarily due to higher compensation payments, including salaries, bonuses and severance, and lower cash collections. This
was partially offset by lower income tax payments in the year ended December 31, 2017. DSO was 91 days as of December 31,
2017 and 2016.
Net cash used in investing activities increased $10.5 million, or 34.9%, from 2016 to 2017. Payment for the acquisition
of substantially all of the assets of a business completed in 2017 by our Corporate Finance segment was $8.9 million, net of
cash received. Payment for the acquisition completed in 2016 by our Strategic Communications segment was $1.2 million, net
of cash received. Capital expenditures were $32.0 million for 2017 as compared with $28.9 million for 2016.
Net cash used in financing activities increased $15.6 million, or 12.5%, from 2016 to 2017. Cash used in financing
activities in 2017 included $168.1 million in common stock repurchases and $5.2 million cash paid for acquisition-related
contingent consideration, partially offset by $30.0 million of net borrowings under our Credit Facility and the receipt of $2.8
million of refundable deposits related to one of our foreign entities. Net financing activities for 2016 included repayments of
$130.0 million of borrowings under our Credit Facility and $21.5 million in common stock repurchases, partially offset by
52
$21.7 million in cash received from the issuance of common stock under our equity compensation plan and the receipt of $4.0
million of refundable deposits related to one of our foreign entities.
Year Ended December 31, 2016 Compared with Year Ended December 31, 2015
Net cash provided by operating activities increased $93.6 million, or 66.9%, from 2015 to 2016. This increase is
primarily due to higher cash collections and lower payments for interest expenses and other operating expenses, which were
partially offset by increased payments for compensation in 2016. DSO was 91 days as of December 31, 2016 compared with 97
days as of December 31, 2015.
Net cash used in investing activities decreased $1.6 million, or 5.1%, from 2015 to 2016. Payments for acquisitions of
businesses were $1.3 million in 2016 compared with $0.6 million in 2015. Payment for the acquisition completed in 2016 by
our Strategic Communications segment was $1.2 million, net of cash received. Payment for the acquisition completed in 2015
by our Economic Consulting segment was $0.6 million, net of cash received. Capital expenditures were $28.9 million for 2016
as compared with $31.4 million for 2015.
Net cash used in financing activities decreased $110.7 million, or 46.9%, from 2015 to 2016. Cash used in financing
activities in 2016 included repayments of $130.0 million of borrowings under our Credit Facility and $21.5 million in common
stock repurchases, partially offset by $21.7 million in cash received from the issuance of common stock under our equity
compensation plans and the receipt of $4.0 million of refundable deposits related to one of our foreign entities. Net financing
activities for 2015 included the retirement of the $400.0 million principal amount of our 2020 Notes for $414.7 million using
cash on hand of $164.7 million and borrowings under our Credit Facility of $250.0 million. Subsequent to the debt tender offer
and redemption, we repaid $50.0 million of the borrowings under our 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 subsidiaries, offset by $26.5 million in stock repurchases and $3.8 million in debt
financing fees related to the Credit Facility.
Capital Resources
As of December 31, 2017, our capital resources included $190.0 million of cash and cash equivalents and available
borrowing capacity of $449.0 million under a $550.0 million revolving line of credit under our Credit Facility. As of
December 31, 2017, we had $100.0 million of outstanding borrowings under our Credit Facility and $1.0 million of outstanding
letters of credit, which reduced the availability of borrowings under the Credit Facility. We use letters of credit primarily in lieu
of security deposits for our leased office facilities. The $550.0 million revolving line of credit under the Credit Facility includes
a $75.0 million sublimit for borrowings in currencies other than USD, including the euro, British pound, Australian dollar and
Canadian dollar.
The availability of borrowings, as well as issuances and extensions of letters of credit, under our Credit Facility is
subject to specified conditions. We may choose to repay outstanding borrowings under the Credit Facility at any time before
maturity without premium or penalty. Borrowings under the Credit Facility in USD, euro, British pound and Australian dollar
bear interest at an annual rate equal to the London Interbank Offered Rate ("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 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 or
(2) the Canadian bankers’ acceptance rate plus 100 basis points. Under the Credit Facility, the lenders have a security interest in
substantially all of the assets of FTI Consulting 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 $650.0 million.
Our Credit Facility and the indenture governing our senior notes due 2022 ("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 (i) not to exceed a maximum
consolidated total leverage ratio (the ratio of total funded debt to adjusted EBITDA) and (ii) to exceed a minimum consolidated
interest coverage ratio (the ratio of adjusted EBITDA less capital expenditures and cash taxes to cash interest expense). As of
53
December 31, 2017, we were in compliance with all covenants as stipulated in the Credit Facility and the indenture governing
our 2022 Notes.
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;
compensation for 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 $28 million to $38 million to support our organization during 2018,
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 new client engagements 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
Credit Facility, as necessary, will provide adequate cash to fund our long-term cash needs from normal operations for the next
12 months or longer.
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, unexpected significant changes in number of
employees or other unanticipated uses of cash. 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 price of our securities.
Any new debt funding, if available, may be on terms less favorable to us than our 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.
54
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, 2017. 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.
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,
2017 and prior to the June 2020 maturity date of our 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
2018
2019
2020
2021
2022
Thereafter
Long-term debt
Interest on long-term debt (1)
Operating leases
Total obligations
$ 400,000
95,960
267,990
$ 763,950
$
— $
21,284
44,193
$ 65,477
21,284
41,386
$ 62,670
(in thousands)
— $ 100,000
19,642
38,877
$ 158,519
$
— $ 300,000
15,750
21,355
$ 337,105
18,000
36,942
$ 54,942
$
—
—
85,237
$ 85,237
(1)
In addition to the fixed interest payments on our 2022 Notes, interest on long-term debt from 2018 to 2020 includes
projected future interest payments for amounts drawn on our Credit Facility using interest rates in effect as of
December 31, 2017. 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.
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 various other assumptions that we believe are
reasonable. These results form the basis for making judgments about the carrying value 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. Revenues are 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, revenues are deferred until all criteria for recognizing revenues
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 holdbacks as revenues 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-
55
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 predetermined 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,
revenues are 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 the amount of data stored or processed, number of
concurrent users accessing the information, or 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 revenues 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 license revenues upon delivery of the
license and recognize support and maintenance revenues 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 revenues until the earlier of customer acceptance or when the acceptance provisions lapse. Revenues
from hosting fees are recognized based on units used over the term of the hosting agreement.
Some clients pay us a retainer 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 and 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 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 revenues 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 expenses” on the Consolidated Statements of Comprehensive Income and
totaled $15.4 million, $8.9 million and $15.6 million for the years ended December 31, 2017, 2016 and 2015, 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 at the date of acquisition. Other intangible assets may include trade names, customer
relationships, non-competition agreements and software.
56
We test our goodwill and other indefinite-lived intangible assets for impairment annually as of the first day of the fourth
quarter and 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. Important factors we consider 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 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. Entities have an option, under certain circumstances, to perform a qualitative assessment regarding
the reporting unit's fair value, to determine whether it is necessary to perform the quantitative impairment test.
In the qualitative assessment, we consider various factors, events or circumstances including macroeconomic conditions,
industry and market considerations, cost factors, overall financial performance and other relevant reporting unit specific events.
If, based on the qualitative assessment, an entity determines that it is not “more likely than not” that the fair value of a reporting
unit is less than its carrying value, we do not prepare a quantitative impairment test. If we determine otherwise, we will prepare
a quantitative assessment for potential goodwill impairment.
In the quantitative assessment, we compare the estimated fair value of the reporting unit to the carrying amount of that
reporting unit. We estimate fair value using a combination of an income approach (based on discounted cash flows) and market
approaches, using appropriate weighting factors. If the fair value exceeds the carrying amount, goodwill is not impaired.
However, if the carrying value exceeds the fair value of the reporting unit, an impairment loss shall be recognized in an amount
equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
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 consists 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 with 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. 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.
We determine whether to perform qualitative assessment first or to bypass the qualitative assessment and proceed with
the quantitative goodwill impairment test for each of our reporting units based on the headroom from the most recent
quantitative tests and other events or changes in circumstances that could impact the fair value of the reporting units.
The process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment
and estimates. 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.
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 one to 15 years.
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
57
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.
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.
Significant New Accounting Pronouncements
See Note 2, “New Accounting Standards” in Part II, Item 8 of this Annual Report.
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 vs. 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 2022 Notes and a
comparison of the fair value of the debt as of December 31, 2017 and 2016. The fair values have been determined based on
quoted market prices for our 2022 Notes.
Long-Term Debt
2018
2019
2020
2021
2022
Thereafter
Total
Fair
Value
Total
Fair
Value
December 31, 2017
December 31, 2016
Fixed rate
Average interest
rate
Variable rate
Average interest
rate
—
—
—
—
—
—
—
—
— 100,000
(dollars in thousands)
— 300,000
— 300,000
309,000
300,000
312,750
—
—
6.0%
—
—
6.0%
—
6.0%
—
— 100,000
100,000
70,000
70,000
—
3.3% —
—
—
3.3%
—
2.3%
—
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 cash to create offsetting currency positions to reduce
exposure. Gains and losses from foreign currency transactions are included in interest income and other on our Consolidated
Statements of Comprehensive Income and to date have not had a material impact on our consolidated financial statements. See
Note 5, “Interest Income and Other” in Part II, Item 8 of this Annual Report for information.
Translation of Financial Results
Most of our foreign subsidiaries operate in a currency other than the U.S. 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
58
denominated in foreign currencies. Our most significant exposures to translation risk currently relate to functional currency
assets and liabilities that are denominated in the British pound, euro, Australian dollar 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, 2017, 2016 and 2015. These translation adjustments are reflected in
“Other comprehensive gain/(loss)” on our Consolidated Statements of Comprehensive Income.
Changes in Net Investment of Foreign Subsidiaries
British pound
Euro
Australian dollar
Canadian dollar
All other
Total
Year Ended December 31,
2017
2016
2015
(in thousands)
$
$
20,394
6,595
4,058
1,439
(1,822)
30,664
$
$
(34,329) $
(1,274)
922
328
(7,531)
(41,884) $
(10,109)
(4,379)
(7,144)
(2,124)
(4,971)
(28,727)
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, 2017 and 2016
Consolidated Statements of Comprehensive Income - Years Ended December 31, 2017, 2016 and 2015
Consolidated Statements of Stockholders’ Equity - Years Ended December 31, 2017, 2016 and 2015
Consolidated Statements of Cash Flows - Years Ended December 31, 2017, 2016 and 2015
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, 2017. 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, 2017 based on the framework in the 2013 Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded
that our internal control over financial reporting was effective as of December 31, 2017.
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 22, 2018
/s/ STEVEN H. GUNBY
Steven H. Gunby
President and Chief Executive Officer
(principal executive officer)
/s/ AJAY SABHERWAL
Ajay Sabherwal
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.
Opinion on Internal Control Over Financial Reporting
We have audited FTI Consulting, Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2017,
based on criteria established in the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
("PCAOB"), the consolidated balance sheets of the Company as of December 31, 2017 and 2016, the related consolidated
statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended
December 31, 2017, and the related notes and financial statement Schedule II, Valuation and Qualifying Accounts (collectively,
the consolidated financial statements), and our report dated February 22, 2018 expressed an unqualified opinion on those
consolidated financial statements.
Basis of Opinion
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 are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
/s/ KPMG LLP
McLean, Virginia
February 22, 2018
62
Report of Independent Registered Public Accounting Firm — Consolidated Financial Statements
The Board of Directors and Stockholders
FTI Consulting, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of FTI Consulting, Inc. and subsidiaries (the “Company”) as of
December 31, 2017 and 2016, the related consolidated statements of comprehensive income, stockholders’ equity, and cash
flows for each of the years in the three‑year period ended December 31, 2017, and the related notes and financial statement
Schedule II, Valuation and Qualifying Accounts (collectively, the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the three‑year period
ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated February 22, 2018 expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.
Basis of Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company's auditor since 2006.
McLean, Virginia
February 22, 2018
63
FTI Consulting, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except per share data)
Assets
Current assets
Cash and cash equivalents
Accounts receivable:
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
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 — 37,729 (2017) and 42,037 (2016)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total stockholders' equity
Total liabilities and stockholders' equity
December 31,
2017
2016
$
189,961
$
216,158
390,996
312,569
(180,687)
522,878
25,691
55,649
794,179
75,075
1,204,803
44,150
98,105
40,929
2,257,241
94,873
268,513
46,942
410,328
396,284
124,471
134,187
1,065,270
$
$
365,385
288,331
(178,819)
474,897
31,864
60,252
783,171
61,856
1,180,001
52,120
104,524
43,696
2,225,368
87,320
261,500
29,635
378,455
365,528
173,799
100,228
1,018,010
—
—
377
266,035
1,045,774
(120,215)
1,191,971
2,257,241
$
420
416,816
941,001
(150,879)
1,207,358
2,225,368
$
$
$
See accompanying notes to consolidated financial statements.
64
FTI Consulting, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(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
Operating income
Other income (expense)
Interest income and other
Interest expense
Loss on early extinguishment of debt
Income before income tax provision (benefit)
Income tax provision (benefit)
Net income
Earnings per common share — basic
Earnings per common share — diluted
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
Year Ended December 31,
2017
1,807,732
$
2016
1,810,394
$
2015
1,779,149
$
1,215,560
429,722
40,885
2,291
10,563
1,699,021
108,711
1,210,771
434,552
10,445
2,164
10,306
1,668,238
142,156
3,752
(25,358)
—
(21,606)
87,105
(20,857)
107,962
2.79
2.75
30,664
30,664
138,626
$
$
$
$
$
10,466
(24,819)
—
(14,353)
127,803
42,283
85,520
2.09
2.05
$
$
$
(41,884) $
(41,884)
43,636
$
$
$
$
$
$
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
See accompanying notes to consolidated financial statements.
65
FTI Consulting, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
(in thousands)
Balance at December 31, 2014
Net income
Other comprehensive income (loss):
Cumulative translation adjustment
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
Net income
Other comprehensive income (loss):
Cumulative translation adjustment
Issuance of common stock in connection with:
Exercise of options, net of income tax benefit
from share-based awards of $2,051
Restricted share grants, less net settled shares
of 137
Stock units issued under incentive
compensation plan
Purchase and retirement of common stock
Share-based compensation
Balance at December 31, 2016
Net income
Other comprehensive income (loss):
Cumulative translation adjustment
Issuance of common stock in connection with:
Exercise of options
Restricted share grants, less net settled shares
of 92
Stock units issued under incentive
compensation plan
Purchase and retirement of common stock
Cumulative effect due to adoption of new
accounting standard
Share-based compensation
Balance at December 31, 2017
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
41,181
$
— $
412
$
— $
393,174
$
— $
789,428
66,053
$
$
(80,268) $ 1,102,746
— $
66,053
—
713
105
—
(765)
—
—
7
1
—
(8)
—
—
19,019
(4,372)
2,124
(26,524)
17,284
—
—
—
—
—
—
(28,727)
(28,727)
—
—
—
—
—
19,026
(4,371)
2,124
(26,532)
17,284
41,234
$
— $
412
$
— $
400,705
$
— $
855,481
85,520
$
$
(108,995) $ 1,147,603
— $
85,520
—
820
520
—
(537)
—
—
8
5
—
(5)
—
—
25,234
(5,541)
1,842
(21,484)
16,060
—
—
—
—
—
—
(41,884)
(41,884)
—
—
—
—
—
25,242
(5,536)
1,842
(21,489)
16,060
42,037
$
— $
420
$
— $
416,816
$
— $
941,001
107,962
$
$
(150,879) $ 1,207,358
— $
107,962
—
123
243
—
(4,674)
—
—
—
1
2
—
(46)
—
—
—
4,132
(4,442)
1,547
(168,048)
—
16,030
—
—
—
—
—
(3,189)
—
30,664
30,664
—
—
—
—
—
—
4,133
(4,440)
1,547
(168,094)
(3,189)
16,030
37,729
$
377
$
266,035
$ 1,045,774
$
(120,215) $ 1,191,971
See accompanying notes to consolidated financial statements.
66
FTI Consulting, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
Operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Amortization and impairment of other intangible assets
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 (repayments) 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
Payments for acquisition-related contingent consideration
Other
Net cash used in 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 stock units under incentive compensation plans
Acquisition related contingent liability
Year Ended December 31,
2017
2016
2015
$
107,962
$
85,520
$
66,053
31,177
10,563
2,291
15,386
16,030
1,984
—
611
(50,831)
14,928
629
4,421
(25,768)
1,795
16,447
147,625
(8,929)
(32,004)
295
(40,638)
30,000
—
—
2,825
(168,094)
(504)
(5,161)
—
(140,934)
7,750
(26,197)
216,158
189,961
23,285
4,929
1,547
3,426
$
$
$
$
$
38,700
10,306
2,164
8,912
16,920
1,985
—
(1,204)
3,471
3,145
(2,840)
3,268
22,012
40,350
779
233,488
(1,251)
(28,935)
54
(30,132)
(130,000)
—
—
4,006
(21,489)
21,708
(866)
1,331
(125,310)
(11,648)
66,398
149,760
216,158
23,154
20,270
$
$
$
1,842
$
— $
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
(745)
936
(235,962)
(6,141)
(133,920)
283,680
149,760
46,965
20,654
2,124
—
$
$
$
$
$
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 global business advisory firm dedicated to helping organizations manage change, mitigate risk and resolve
disputes: financial, legal, operational, political and regulatory, reputational and transactional. Individually, each of our segments
and practices is staffed with experts recognized for the depth of their knowledge and a track record of making an impact.
Collectively, FTI Consulting offers a comprehensive suite of services designed to assist clients across the business cycle, from
proactive risk management to rapid response to unexpected events and dynamic environments. 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 the Consolidated Statements of
Comprehensive Income. 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, other intangible assets and realization of deferred tax assets, the
valuation of share-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 do not have a single customer that represents 10% or more of our consolidated revenues. We derive the majority of
our revenues from providing professional services to clients in the U.S. For the year ended December 31, 2017, we derived
approximately 30% of our consolidated 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.
Revenue Recognition
Revenues are 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, revenues are deferred until all criteria for recognizing revenues are met.
Provisions are recorded for the estimated realization adjustments on all engagements, including engagements for which fees are
subject to review by 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
68
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 revenues 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, including discounts, 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.
Fixed-fee billing arrangements require the client to pay a pre-established fee in exchange for a predetermined
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, revenues are 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.
Performance-based or contingent billing arrangements require the client to pay fees based on 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.
Unit-based revenues, predominantly in our Technology segment, 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. Revenues from hosting fees are
recognized based on the units used over the term of the hosting agreement. Additionally, we may provide client
incentives in the form of volume fee discounts, which are recorded as a reduction of revenues.
We also generate certain revenues from software licenses and maintenance, predominantly in our Technology segment.
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 revenues upon delivery of the license and recognize the support and maintenance revenues 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 revenues until the earlier of customer acceptance or
when the acceptance provisions lapse.
Some clients pay us a retainer 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 outside
service 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,
as well as amortization of software. Direct cost of revenues does not include an allocation of corporate overhead and non-
billable segment costs.
69
Share-Based Compensation
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 date of grant. The Black-
Scholes pricing model requires the development of assumptions, including volatility and expected term, which are based on our
historical experience. 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 fair value of restricted share awards and restricted stock units is measured based on the closing price of the
underlying stock on the date of grant. The fair value of performance share units that contain market-based vesting conditions is
measured using a Monte Carlo pricing model. The compensation cost of performance stock units is based on the grant date fair
value and is not subsequently reversed if it is later determined that the market condition is unlikely to be met or is expected to
be lower than originally expected.
For all our share-based awards, we recognize forfeiture expense as forfeitures occur rather than estimating forfeitures
based on historical data.
Research and Development
Research and development costs related to software development are expensed as incurred. When we have determined
that technological feasibility for our software products is reached, development 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 expenses related to software development totaled $14.9 million, $17.5
million and $19.5 million for the years ended December 31, 2017, 2016 and 2015, respectively, and are included in “Selling,
general and administrative expenses” on the Consolidated Statements of Comprehensive Income.
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 $14.8 million, $15.9 million, and $18.2 million
for the years ended December 31, 2017, 2016 and 2015, respectively, and are included in “Selling, general and administrative
expenses” on the Consolidated Statements of Comprehensive Income.
Acquisition-Related Contingent Consideration
The fair value of acquisition-related contingent consideration is estimated at the acquisition date utilizing a probability
weighted estimate of future cash flow 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-related contingent consideration liabilities
to their present value. Remeasurement gains or losses and accretion expense are included in “Acquisition-related contingent
consideration” on the Consolidated Statements of Comprehensive Income.
Income Taxes
Our income tax provision (benefit) consists principally of U.S. 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 recent results of
operations.
Cash Equivalents
Cash equivalents consist of money market funds, commercial paper and certificates of deposit with maturities of three
months or less at the time of purchase.
70
Allowance for Doubtful Accounts and Unbilled Services
We maintain an allowance for doubtful accounts and unbilled services for estimated losses resulting from potential fee
reductions negotiated by clients or imposed by bankruptcy courts or other regulatory agencies and the inability of clients to pay
our fees, as well as from disputes that affect our ability to fully collect our billed accounts receivable. 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 non-payment may be
mitigated to the extent that we receive a retainer 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 revenues 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 and totaled $15.4
million, $8.9 million and $15.6 million for the years ended December 31, 2017, 2016 and 2015, 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 services 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 ratably 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 to 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 at
the date of acquisition. 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. 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. Important factors we consider 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 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. Entities have an option, under certain circumstances, to perform a qualitative assessment
regarding the reporting unit’s fair value, to determine whether it is necessary to perform the quantitative impairment test.
In the qualitative assessment, we consider various factors, events or circumstances including macroeconomic
conditions, industry and market considerations, cost factors, overall financial performance and other relevant reporting unit
specific events. If, based on the qualitative assessment, an entity determines that it is not “more likely than not” that the fair
value of a reporting unit is less than its carrying value, we do not prepare a quantitative impairment test. If we determine
otherwise, we will prepare a quantitative assessment for potential goodwill impairment.
In the quantitative assessment, we compare the estimated fair value of the reporting unit to the carrying amount of that
reporting unit. We estimate fair value using a combination of an income approach (based on discounted cash flows) and market
approaches, using appropriate weighting factors. If the fair value exceeds the carrying amount, goodwill is not impaired.
However, if the carrying value exceeds the fair value of the reporting unit, an impairment loss shall be recognized in an amount
equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
We determine whether to perform qualitative assessment first or to bypass the qualitative assessment and proceed with
the quantitative goodwill impairment test for each of our reporting units based on the headroom from the most recent
quantitative tests and other events or changes in circumstances that could impact the fair value of the reporting units.
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 one 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 with 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 revenues 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 the Consolidated Balance
Sheets. Unamortized capitalized software costs were $14.8 million and $16.6 million as of December 31, 2017 and 2016,
respectively. Amortization expense for capitalized software costs was $6.7 million, $12.0 million and $6.5 million for the years
ended December 31, 2017, 2016 and 2015, respectively.
72
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 $43.9 million and $41.9 million for the years ended December 31, 2017 and 2016,
respectively.
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 the Consolidated Balance Sheets.
2. New Accounting Standards
Adopted Accounting Standards
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This
standard makes several modifications to Topic 718, including the accounting for forfeitures, employer tax withholding on
share-based compensation and income tax consequences, and clarifies the statement of cash flows presentation for certain
components of share-based awards, all of which are intended to simplify various aspects of the accounting for share-based
compensation. We adopted this standard as of January 1, 2017. Previously, differences in the tax deduction and book expense
resulting from the exercise of employee stock options were recorded to "Additional paid-in capital" on the Consolidated
Balance Sheet. Since then, we have recorded the excess benefits realized from stock compensation transactions as a component
of income tax expense in the Consolidated Statement of Comprehensive Income. Additionally, we elected to recognize
forfeiture expense as forfeitures occur, rather than estimating forfeitures based on historical data.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash
Receipts and Cash Payments, which clarifies how cash receipts and cash payments are classified in the statement of cash flows.
We elected, as permitted by the standard, to early adopt ASU 2016-15, as of December 31, 2017. The adoption of this guidance
did not impact our consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than
Inventory, which removes the prohibition against immediate recognition of current and deferred income tax effects on intra-
entity transfers of assets other than inventory. We elected to early adopt this standard as of January 1, 2017 and recorded a $3.2
million cumulative effect adjustment to the beginning balance of retained earnings on January 1, 2017, which resulted in a net
impact of increasing deferred tax assets by $2.6 million and decreasing a deferred tax charge in other assets by $5.8 million
related to a prior period intra-entity transfer of intellectual property.
In January 2017, the FASB issued ASU 2017-04: Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for
Goodwill Impairment. This ASU simplifies the subsequent measurement of goodwill by removing Step 2 from the goodwill
impairment test. We elected, as permitted by the standard, to early adopt ASU 2017-04 on a prospective basis as of December
31, 2017. The adoption of this guidance would only impact the measurement of a future goodwill impairment to the extent
applicable.
Accounting Standards Not yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes existing lease guidance. Under
this ASU, we will be required to record right-of-use assets and corresponding lease liabilities on the balance sheet. Previously,
there was no requirement to recognize an asset or liability on the balance sheet for an operating lease. The ASU also requires
disclosure of key information about leasing arrangements. This guidance is effective beginning January 1, 2019. The new
standard is required to be applied with a modified retrospective approach for each prior reporting period presented. We are in
73
the preliminary phases of our implementation plan, which includes the identification of all lease contracts and an assessment of
the effect of the ASU on our portfolio of leases. While this assessment continues, we have not yet determined the effect of the
ASU on our results of operations, financial condition or cash flow presentation.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Under this ASU and
subsequently issued amendments, revenues are recognized at the time when goods or services are transferred to a customer in
an amount that reflects the consideration it expects to receive in exchange for those goods or services. Companies may use
either a full retrospective or a modified retrospective approach to adopt this ASU. We will adopt this standard using the
modified retrospective method effective January 1, 2018.
We generate the majority of our revenues from providing professional services under the following types of billing
arrangements: time and expense, fixed fee and performance based. The impact of the ASU adoption for each type of billing
arrangement is as follows:
Time and expense - The Company will use the right-to-invoice practical expedient to account for time-and-expense
billing arrangements when the Company has a right to consideration from a customer in an amount that corresponds directly
with the value of the entity’s performance completed to date. This is consistent with the Company’s current revenue recognition
policy.
Fixed fee - The Company will recognize revenues as individual performance obligations are satisfied using a measure of
progress that is based on the efforts or hours incurred as a percentage of total hours expected to be incurred (i.e., an input
method measure of progress). This method is consistent with the Company’s current revenue recognition policy. However, the
definition of a performance obligation under the new standard requires an evaluation of whether or not a good or service to a
customer is distinct. This assessment of whether or not a single or multiple performance obligations exists within a contract
may lead to a difference in the timing of revenue recognition compared with our current revenue recognition policy.
Performance based or contingent - These arrangements include some form of variable consideration whereby the
Company earns revenues if certain predefined outcomes occur in the future. When the related performance obligations are
satisfied over time, the Company may recognize revenues in the proportion that the outcome has been earned based on services
provided when the Company concludes that collection of the amount recorded is probable, i.e., a significant reversal will not
occur in the future. The Company will evaluate probability using either the expected value method or the most likely amount
method, as appropriate. Under the new standard, the Company may recognize revenues earlier than it previously did largely
relative to certain types of contingent success fees where revenues were recorded upon cash collection.
In addition, we believe this standard could affect the timing of revenue recognition for contracts that provide prospective
volume-based discounts, time-and-expense billing arrangements with a cap on total fees, where we expect the cap to be
exceeded, and other arrangements where a discount is provided, among others.
The Company is in its final stages of quantifying the financial impacts of the new guidance based on the contracts that
exist at the date of adoption, as well as evaluating presentation of our revenues and required enhancements to disclosures. We
have implemented both process and information systems changes to identify and assess contracts that are impacted by the new
revenue recognition criteria and accumulate data to satisfy new disclosure requirements. We expect that the new standard will
have an immaterial impact on our consolidated financial statements, other than increased disclosures, upon adoption. Changes
to revenue recognition as a result of applying the new standard will largely arise from certain contingent or success fee
arrangements as described above.
3. Earnings Per Common Share
Basic earnings per common share are calculated by dividing net income 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.
74
Numerator — basic and diluted
Net income
Denominator
Year Ended December 31,
2017
2016
2015
$
107,962
$
85,520
$
66,053
Weighted average number of common shares outstanding — basic
38,697
40,943
40,846
Effect of dilutive stock options
Effect of dilutive restricted shares
Weighted average number of common shares outstanding — diluted
Earnings per common share — basic
Earnings per common share — diluted
Antidilutive stock options and restricted shares
4. Special Charges
117
378
39,192
2.79
2.75
1,561
$
$
281
485
41,709
2.09
2.05
1,404
$
$
388
495
41,729
1.62
1.58
1,734
$
$
During the year ended December 31, 2017, we recorded special charges of $40.9 million. The charges related to certain
targeted reductions in areas of each segment where we needed to realign our workforce with current business demand. In
addition, cost-cutting actions were taken in certain corporate departments where we were able to streamline support activities
and reduce our real estate costs. $48.4 million of the charge will be paid in cash. The total charge is net of a $7.5 million non-
cash reduction to expense primarily for the reversal of a deferred rent liability. The special charge includes the following
components:
•
•
•
$23.5 million of employee severance and other employee-related costs associated with the reduction in workforce
of 255 employees in our segments and certain corporate departments. All of these amounts will be paid in cash;
$14.4 million of exit costs associated with the curtailment of our lease on our executive office in Washington, D.C.
$22.7 million of the charge will be paid in cash. The exit costs include an $8.3 million non-cash reduction to
expense primarily for the reversal of a deferred rent liability; and
$3.0 million of other expenses, including costs related to disposing or closing several small international offices, of
which $0.8 million was a non-cash expense.
During the year ended December 31, 2016, we recorded special charges of $10.4 million. The charges are related to
employee terminations in our Technology segment, health solutions practice of our Forensic and Litigation Consulting segment,
and Corporate infrastructure group. The charges consisted of salary continuance and other contractual employee-related costs.
There were no special charges recorded during the year ended December 31, 2015.
The following table details the special charges by segment and corporate.
Special Charges by Segment
Corporate Finance & Restructuring
Forensic and Litigation Consulting
Economic Consulting
Technology
Strategic Communications
Unallocated Corporate
Total
Year Ended December 31,
2017
2016
$
$
5,440
12,334
6,624
5,057
7,752
37,207
3,678
40,885
$
$
—
2,304
—
7,529
—
9,833
612
10,445
75
The table below summarizes the activity related to the liabilities for these costs for the years ended December 31, 2017
and 2016.
Balance at December 31, 2015
Additions (1)
Reductions
Foreign currency translation adjustment and other
Balance at December 31, 2016
Additions (1)
Reductions
Foreign currency translation adjustment and other
Balance at December 31, 2017 (2)
Employee
Termination
Costs
Lease
Termination
Costs
7,768
$
4,045
$
10,724
(10,264)
(3)
—
(896)
186
8,225
$
3,335
$
23,260
(20,771)
165
23,498
(7,757)
(19)
10,879
$
19,057
$
$
$
$
Other
Total
— $
—
—
—
— $
584
(584)
—
— $
11,813
10,724
(11,160)
183
11,560
47,342
(29,112)
146
29,936
(1)
(2)
Excludes $0.8 million and $0.3 million in net non-cash expense reversals for the years ended December 31, 2017 and
2016, respectively
Of the $29.9 million remaining liability for special charges, $16.0 million is expected to be paid in 2018, $4.8 million is
expected to be paid in 2019, $3.8 million is expected to be paid in 2020, $3.2 million is expected to be paid in 2021 and the
remaining balance of $2.1 million is expected to be paid from 2022 to 2026. These amounts are included in "Accounts payable,
accrued expenses and other" and "Other liabilities" in our Consolidated Balance Sheets.
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.
Interest Income and Other
Interest income
Foreign exchange transaction gains (losses), net
Other
Total
6. Share-Based Compensation
Share-Based Incentive Compensation Plans
Year Ended December 31,
2017
2016
2015
$
$
3,968
$
4,420
$
(77)
(139)
4,937
1,109
3,752
$
10,466
$
4,996
(940)
(824)
3,232
Under the Company's 2017 Omnibus Incentive Compensation Plan, effective as of June 7, 2017 (the "2017 Omnibus
Plan"), there were 1,714,952 shares of common stock available for grant as of December 31, 2017.
76
Share-Based Compensation Expense
The table below reflects the total share-based compensation expense recognized in our Consolidated Statements of
Comprehensive Income for the years ended December 31, 2017, 2016 and 2015.
Income Statement Classification
Direct cost of revenues
Selling, general and administrative expenses
Special charges
Total
2017
2016
2015
Options (1)
370
$
1,238
—
Restricted
Shares (2)
9,691
$
4,839
269
Options (1)
2,815
$
966
56
Restricted
Shares (2)
7,530
$
9,117
49
Options (1)
3,736
$
1,482
—
Restricted
Shares (2)
6,532
$
7,469
—
$
1,608
$ 14,799
$
3,837
$ 16,696
$
5,218
$ 14,001
(1)
(2)
Includes options and cash-settled stock appreciation rights.
Includes restricted share awards, restricted stock units, performance stock units and cash-settled restricted stock units.
Stock Options
We use the Black-Scholes option-pricing model to fair value our option grants using the assumptions in the following
table.
Assumptions
Risk-free interest rate
Dividend yield
Expected term
Stock price volatility
2017
1.60%
0%
3 years
31.94%
Year Ended December 31,
2016
0.98%
0%
3 years
34.33%
2015
1.07%-1.70%
0%
3-5 years
31.03%-40.36%
A summary of our stock option activity during the year ended December 31, 2017 is presented below. The aggregate
intrinsic value for stock options outstanding and exercisable, or fully vested, at December 31, 2017 in the table below
represents the total pre-tax intrinsic value, which is calculated as the difference between the closing price of our common stock
on the last trading day of 2017 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, 2017. The aggregate intrinsic
value changes based on fluctuations in the fair market value per share of our common stock.
Stock options outstanding at December 31, 2016
Stock options granted
Stock options exercised
Stock options forfeited
Stock options outstanding at December 31, 2017
Stock options exercisable at December 31, 2017
Weighted
Average
Exercise
Price
Options
2,418
131
$
$
(123) $
(168) $
2,258
1,683
$
$
40.79
40.36
33.69
47.76
40.63
42.32
Weighted
Average
Remaining
Contractual
Term
(in Years)
Aggregate
Intrinsic
Value
4.4
3.5
$
$
11,724
7,531
Cash received from option exercises for the years ended December 31, 2017, 2016 and 2015 was $4.1 million, $27.3
million and $21.1 million, respectively. The actual tax benefit realized from stock options exercised totaled $1.1 million, $4.8
million and $5.5 million for the years ended December 31, 2017, 2016 and 2015, 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,
2017, 2016 and 2015 was $0.9 million, $6.9 million and $8.1 million, respectively. Prior to the adoption of ASU 2016-09, the
excess (shortage) of the tax deduction versus the book expense was recorded to "Additional paid-in capital" in the Consolidated
77
Balance Sheets. After the adoption, the excess tax benefit was recorded as a component of income tax expense in the
Consolidated Statements of Comprehensive Income.
The following is a summary of stock options outstanding and exercisable as of December 31, 2017.
Exercise Price Range
$26.68-$33.95
$34.33-$36.87
$36.89-$39.84
$40.36-$47.46
$50.62-$70.55
Options Outstanding
Options Exercisable
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(in Years)
31.60
35.66
38.01
42.66
59.95
5.4
6.0
3.5
5.0
0.8
Options
$
$
$
$
$
454
526
453
465
360
2,258
Weighted
Average
Exercise
Price
31.93
35.84
38.10
43.70
59.95
Shares
$
$
$
$
$
257
364
409
293
360
1,683
As of December 31, 2017, there was $2.5 million of unrecognized compensation cost related to unvested stock options.
That cost is expected to be recognized ratably over a weighted average period of 1.5 years.
Restricted Share Awards
A summary of our unvested restricted share activity during the year ended December 31, 2017 is presented below.
Unvested restricted share awards outstanding at December 31, 2016
Restricted share awards granted
Restricted share awards vested
Restricted share awards forfeited
Unvested restricted share awards outstanding at December 31, 2017
Weighted
Average Grant
Date Fair
Value
Shares
941
$
289
$
(251) $
(46) $
933
$
37.92
38.45
36.16
37.55
38.58
As of December 31, 2017, there was $20.7 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 4.3 years. The total fair value of
restricted share awards that vested during the years ended December 31, 2017, 2016 and 2015 was $9.9 million, $10.4 million
and $14.6 million, respectively.
Restricted Stock Units
A summary of our restricted stock units activity during the year ended December 31, 2017 is presented below. The
aggregate intrinsic value represents the total pre-tax intrinsic value based on the closing price of our common stock on the last
trading day of 2017.
Restricted stock units outstanding at December 31, 2016
Restricted stock units granted
Restricted stock units released
Restricted stock units forfeited
Restricted stock units outstanding at December 31, 2017
78
Weighted
Average Grant
Date Fair
Value
Intrinsic
Value
Shares
$
465
50
$
(113) $
— $
$
402
37.87
38.35
39.47
—
37.49
$
17,287
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 for the years ended December 31, 2017, 2016 and 2015 was
$4.1 million, $9.3 million and $3.1 million, respectively.
As of December 31, 2017, there was $0.3 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 0.7 years. The total fair value of
restricted stock units that vested during the years ended December 31, 2017, 2016 and 2015 was $1.9 million, $2.4 million and
$4.4 million, respectively.
Performance Stock Units
A summary of our performance stock units activity during the year ended December 31, 2017 is presented below. The
performance stock units are subject to market conditions based on the adjusted total shareholder return of the Company as
compared with the adjusted total shareholder return of the adjusted Standard & Poor’s 500. The aggregate intrinsic value
represents the total pre-tax intrinsic value based on the closing price of our common stock on the last trading day of 2017.
Performance stock units outstanding at December 31, 2016
Performance stock units granted
Performance stock units released
Performance stock units forfeited
Performance stock units outstanding at December 31, 2017
Weighted
Average Grant
Date Fair
Value
Intrinsic
Value
Shares
206
$
100
$
— $
(54) $
252
$
26.64
24.99
—
33.84
25.71
$
10,818
As of December 31, 2017, there was $1.6 million of unrecognized compensation cost related to unvested performance
stock units. That cost is expected to be recognized ratably over a weighted average period of 0.9 years. There are no
performance stock units that vested during the years ended December 31, 2017, 2016 and 2015.
The table below reflects the weighted average grant date fair value per share of stock options, restricted share awards,
restricted stock units and performance stock units awarded during the years ended December 31, 2017, 2016 and 2015. The
fair value of our restricted stock awards and restricted stock units is determined based on the closing market price per share of
our common stock on the grant date. The fair value of the performance stock units reflects the market conditions as of the grant
date using a Monte Carlo simulation.
Weighted average fair value of grants
Stock options
$
Restricted share awards, restricted stock units and performance stock units $
9.56
38.88
$
$
8.41
37.64
$
$
10.85
39.01
Year Ended December 31,
2017
2016
2015
79
7. Balance Sheet Details
Prepaid expenses and other current assets
Prepaid expenses
Income tax receivable
Other current assets
Total
Accounts payable, accrued expenses and other
Accounts payable
Accrued expenses
Accrued interest payable
Accrued taxes payable
Other current liabilities
Total
8. Financial Instruments
December 31,
2017
2016
$
$
$
35,667
$
$
$
7,194
12,788
55,649
14,078
45,676
2,354
12,075
20,690
$
94,873
$
32,655
14,890
12,707
60,252
15,779
43,137
2,265
9,231
16,908
87,320
The following table presents the carrying amounts and estimated fair values of our other financial instruments by
hierarchy level as of December 31, 2017 and 2016.
December 31, 2017
Hierarchy Level
Carrying
Amount
Level 1
Level 2
Level 3
Liabilities
Acquisition-related contingent consideration, including
current portion (1)
Long-term debt
Total
$
$
3,750
400,000
403,750
$
$
— $
—
— $
409,000
— $
409,000
$
3,750
—
3,750
December 31, 2016
Hierarchy Level
Carrying
Amount
Level 1
Level 2
Level 3
Liabilities
Acquisition-related contingent consideration, including
current portion (1)
Long-term debt
Total
$
$
5,692
370,000
375,692
$
$
— $
—
— $
382,750
— $
382,750
$
5,692
—
5,692
(1)
The short-term portion is included in “Accounts payable, accrued expenses and other,” and the long-term portion is
included in “Other liabilities” on the Consolidated Balance Sheets.
The fair values of financial instruments not included in this table are estimated to be equal to their carrying values as of
December 31, 2017 and 2016.
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”) as of December 31, 2017 and 2016. The fair value of our borrowings on our senior secured bank
revolving credit facility (“Credit Facility”) approximates the carrying amount. 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.
80
We estimate the fair value of acquisition-related contingent consideration using a probability-weighted discounted cash
flow model. This fair value estimate represents a Level 3 measurement as it is based on significant inputs not observed in the
market and reflect our own assumptions. 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. 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 of an acquisition’s contingent consideration liability results in a remeasurement gain or loss
that is recorded in “Acquisition-related contingent consideration” on the Consolidated Statements of Comprehensive Income.
During the years ended December 31, 2017 and 2016, we recorded $0.7 million and $1.4 million in expense related to increases
in the fair value of future expected contingent consideration payments, respectively. During the year ended December 31, 2015,
we recorded a $1.9 million gain related to the decrease in the fair value of future contingent consideration payments.
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
Property and equipment, net
December 31,
2017
2016
77,921
806
33,827
100,186
212,740
(137,665)
75,075
$
$
69,278
2,349
35,780
94,637
202,044
(140,188)
61,856
$
$
Depreciation expense for property and equipment totaled $24.4 million, $26.7 million and $24.9 million during the years
ended December 31, 2017, 2016 and 2015, respectively.
81
10. Goodwill and Other Intangible Assets
Goodwill
The table below summarizes the changes in the carrying amount of goodwill by reportable segment.
Corporate
Finance &
Restructuring
Forensic and
Litigation
Consulting
Economic
Consulting
Technology
Strategic
Communications
Total
Balance at December 31, 2015
Goodwill
$
441,548
$ 235,211
$ 269,341
$ 117,888
$
328,449
$ 1,392,437
Accumulated goodwill impairment
—
—
—
—
(194,139)
(194,139)
Goodwill, net at December 31, 2015
441,548
235,211
269,341
117,888
134,310
1,198,298
Acquisitions (1)
—
—
—
—
218
218
Foreign currency translation
adjustment and other
Balance at December 31, 2016
(882)
(4,667)
(1,132)
(281)
(11,553)
(18,515)
Goodwill
440,666
230,544
268,209
117,607
317,114
1,374,140
Accumulated goodwill impairment
Goodwill, net at December 31, 2016
Acquisitions (2)
Foreign currency translation
adjustment and other
Balance at December 31, 2017
—
440,666
11,900
—
—
—
(194,139)
(194,139)
230,544
268,209
117,607
122,975
1,180,001
—
—
786
—
133
—
11,900
6,558
12,902
2,250
3,175
Goodwill
454,816
233,719
268,995
117,740
323,672
1,398,942
Accumulated goodwill impairment
Goodwill, net at December 31, 2017 $
—
—
—
—
(194,139)
(194,139)
454,816
$ 233,719
$ 268,995
$ 117,740
$
129,533
$ 1,204,803
(1)
(2)
Includes adjustments during the purchase price allocation period.
During the year ended December 31, 2017, we made an initial payment of $8.9 million at closing to acquire a
restructuring business within our Corporate Finance & Restructuring segment. We recorded $11.9 million in goodwill
as a result of the acquisition. We have included the results of the acquired business' operations in the Corporate
Finance & Restructuring segment since its acquisition date.
82
Other Intangible Assets
Other intangible assets were as follows:
December 31, 2017
December 31, 2016
Weighted
Average
Useful Life
in Years
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
13.7
N/A
9.8
N/A
13.6
$ 117,192
$
80,523
$ 36,669
$119,736
$
75,212
$ 44,524
—
3,264
—
—
—
1,383
1,881
—
—
1,263
3,171
360
1,246
1,292
260
17
1,879
100
120,456
81,906
38,550
124,530
78,010
46,520
Amortizing intangible assets
Customer relationships
Non-competition agreements (1)
Acquired software
Trade names (1)
Non-amortizing intangible assets
Trade names
Total
Indefinite
5,600
—
5,600
5,600
—
5,600
$ 126,056
$
81,906
$ 44,150
$130,130
$
78,010
$ 52,120
(1)
These intangible assets were fully amortized and written off during the year ended December 31, 2017.
Other intangible assets with finite lives are amortized over their estimated useful lives. We recorded amortization
expense of $10.6 million, $10.3 million and $11.7 million during the years ended December 31, 2017, 2016 and 2015,
respectively.
We estimate our future amortization expense for our intangible assets with a finite life to be as follows:
Year
2018
2019
2020
2021
2022
Thereafter
As of
December 31, 2017 (1)
$
$
8,252
7,589
7,413
6,797
4,973
3,526
38,550
(1)
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.
83
11. Notes Receivable from Employees
The table below summarizes the changes in the carrying amount of our notes receivable from employees.
Notes receivable from employees — beginning
Notes granted
Repayments
Amortization expense
Cumulative translation adjustment and other
Notes receivable from employees — ending
Less: current portion
December 31,
2017
136,388
$
2016
142,997
$
18,247
(7,394)
(26,821)
3,376
123,796
(25,691)
33,943
(12,985)
(25,566)
(2,001)
136,388
(31,864)
Notes receivable from employees, net of current portion
$
98,105
$
104,524
As of December 31, 2017 and 2016, there were 251 and 307 notes outstanding, respectively. Total amortization expense
for the years ended December 31, 2017, 2016 and 2015 was $26.8 million, $25.6 million and $26.0 million, respectively.
12. Long-Term Debt
The table below summarizes the components of the Company’s long-term debt.
6% senior notes due 2022
Credit facility
Total debt
Less: unamortized deferred debt issue costs
Long-term debt, net (1)
December 31,
2017
300,000
$
$
100,000
400,000
(3,716)
2016
300,000
70,000
370,000
(4,472)
$
396,284
$
365,528
(1)
There were no current portions of long-term debt as of December 31, 2017 and 2016.
6% Senior Notes Due 2022. The 2022 Notes have been registered with the Securities and Exchange Commission
("SEC"). Cash interest is payable semiannually on May 15 and November 15 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 Credit Facility, 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).
The 2022 Notes are subject to redemption at our option at any time, in whole or in part, upon not less than 30 nor more
than 60 days prior notice at the redemption price (expressed as a percentage of the principal amount to be redeemed) set forth
below plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
Year
2018
2019
2020 and thereafter
Redemption Price
102.000%
101.000%
100.000%
Credit Facility. On June 26, 2015, we entered into a credit agreement (the “2015 Credit Agreement”), which provides
for a $550.0 million senior secured revolving line of credit maturing on June 26, 2020. At the Company’s option, borrowings
84
under the Credit Facility will bear interest at either one-, two- or three-month London Inter-Bank Offered Rate ("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 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 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 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 as 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 Credit Facility and the indenture governing our 2022 Notes contain
covenants that, 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 Credit Facility includes financial covenants that require us (i) not to exceed a maximum consolidated
total leverage ratio (the ratio of total funded debt to adjusted EBITDA) and (ii) to exceed a minimum consolidated interest
coverage ratio (the ratio of adjusted EBITDA less capital expenditures and cash taxes to cash interest expense).
There were $100.0 million in borrowings outstanding under the Company’s Credit Facility as of December 31, 2017.
The Company has classified these borrowings as long-term debt in the accompanying Consolidated Balance Sheets as the
amounts due are not contractually required or expected to be liquidated for more than one year from the applicable balance
sheet date. Additionally, $1.0 million of the borrowing limit was used (and, therefore, unavailable) as of December 31, 2017 for
letters of credit.
There were $3.1 million and $4.3 million of unamortized debt issue costs related to the Credit Facility as of
December 31, 2017 and 2016, respectively. These amounts were included in “Other assets” on our Consolidated Balance
Sheets.
13. Commitments and Contingencies
Operating Lease Commitments
Rental expense, net of rental income was $56.0 million, $54.8 million and $56.1 million during the years ended
December 31, 2017, 2016 and 2015, respectively. For years subsequent to December 31, 2017, future minimum payments for
all operating lease obligations that have initial non-cancelable lease terms exceeding one year, net of rental income from
subleases are as follows.
2018
2019
2020
2021
2022
Thereafter
Total
Operating
Leases
Sublease Rental
Income
$
44,193
$
41,386
38,877
36,942
21,355
85,237
267,990
$
$
2,000
2,164
1,604
1,556
781
1,774
9,878
85
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
On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was signed into law. The 2017 Tax Act includes
a number of changes to existing U.S. Internal Revenue Code, including a reduction of the U.S. corporate income tax rate from
35% to 21% for tax years beginning after December 31, 2017. The 2017 Tax Act also provides for a one-time transition tax on
certain foreign earnings (the “Transition Tax”). In addition, the 2017 Tax Act contains prospective changes beginning in 2018,
which impose limitations on the deductibility of executive compensation and interest, a general elimination of U.S. federal
income taxes on dividends from foreign subsidiaries, and a new provision designed to tax global intangible low-taxed income
("GILTI"). The Company has not yet made a policy decision on how it intends to account for this in 2018.
In response to the requirements of the 2017 Tax Act, the SEC staff issued Staff Accounting Bulletin ("SAB") No. 118,
which provides guidance for the application of Accounting Standards Codification ("ASC") Topic 740, Income Taxes, in the
reporting period in which the 2017 Tax Act was signed into law. SAB No. 118 provides guidance regarding the recording of tax
impacts where uncertainty exists, in the period of adoption of the 2017 Tax Act. In accordance with this guidance, the
Company’s financial results reflect provisional amounts for those specific income tax effects of the 2017 Tax Act for which the
accounting under ASC Topic 740 is incomplete but a reasonable estimate could be determined. The Company did not identify
items for which the income tax effects of the 2017 Tax Act have not been completed and a reasonable estimate could not be
determined.
The Company recorded a net tax benefit of $44.9 million in 2017, related to the 2017 Tax Act, consisting largely of the
following amounts:
Reduction of the U.S. Corporate Income Tax Rate: The 2017 Tax Act reduces the U.S. federal corporate tax rate from
35% to 21% for tax years beginning after December 31, 2017. Under Topic ASC 740, the Company must remeasure its
deferred tax assets and liabilities using enacted rates that will apply in the years in which the temporary differences are
expected to be recovered or paid. The Company has evaluated these changes and has recorded a provisional reduction to
income tax expense of $65.1 million with a corresponding reduction to net deferred tax liabilities as of December 31, 2017.
Transition Tax on Unrepatriated Foreign Earnings: The Transition Tax on unrepatriated foreign earnings is a tax on
previously untaxed accumulated and current earnings and profits ("E&P") of the Company's foreign subsidiaries. To determine
the amount of the Transition Tax, the Company must determine, among other factors, the amount of post-1986 E&P of its
foreign subsidiaries, as well as the amount of non-U.S. income taxes paid on those earnings. The Company recorded a
provisional Transition Tax expense of $18.7 million. Under the provisions of the 2017 Tax Act, a company is permitted to elect
to pay this liability over an eight-year period. The Company plans to make that election and estimates that $2.5 million of this
Transition Tax liability will be paid within the next 12 months.
We expect to finalize the deferred tax and Transition Tax calculations in the second half of 2018.
86
The table below summarizes significant components of deferred tax assets and liabilities.
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 and credits
Foreign net operating loss carryforward
Future foreign tax credit asset and foreign tax credit carryforward
Deferred compensation
Other, net
Total deferred tax assets
Deferred tax liabilities
Revenue recognition
Property, equipment and capitalized software
Goodwill and other intangible asset amortization
Total deferred tax liabilities
Foreign withholding tax
Valuation allowance
Net deferred tax liabilities
Year Ended December 31,
2017
2016
$
11,279
$
23,896
8,491
15,108
12,879
3,586
12,075
7,403
2,688
7,159
17,220
38,596
12,034
24,783
21,010
4,169
12,437
2,545
3,084
5,284
104,564
141,162
(7,227)
(2,308)
(190,638)
(200,173)
(1,035)
(21,621)
(11,590)
(6,527)
(273,990)
(292,107)
—
(18,900)
$
(118,265) $
(169,845)
As of December 31, 2017 and 2016, 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 $21.6 million and $18.9 million were recorded against the Company’s
net deferred tax assets as of December 31, 2017 and 2016, respectively.
In 2016 and prior years, the Company did not provide deferred tax on the undistributed non-U.S. subsidiary earnings
that were considered indefinitely reinvested. These earnings were subject to taxation in 2017 under the Transition Tax rules of
the 2017 Tax Act. While all of our undistributed non-U.S. subsidiary earnings have been subjected to U.S. federal tax, such
earnings could still potentially be subject to foreign withholding taxes. The Company is still evaluating the impact of the 2017
Tax Act on its assertion to indefinitely reinvest the earnings from certain of its foreign jurisdictions and therefore continues to
assert that such earnings will be indefinitely reinvested.
As of December 31, 2017, we have not recorded a $13.4 million deferred tax liability related to the tax basis difference
in the investment in our foreign subsidiaries, as the investment is considered permanent in nature.
The table below summarizes the components of income before income tax provision from continuing operations.
Domestic
Foreign
Total
Year Ended December 31,
2017
2016
2015
$
$
30,013
57,092
87,105
$
$
66,202
61,601
127,803
$
$
59,408
45,978
105,386
87
The table below summarizes the components of income tax provision from continuing operations.
Year Ended December 31,
2017
2016
2015
Current
Federal
State
Foreign
Deferred
Federal
State
Foreign
$
15,164
$
(3,326) $
742
14,816
30,722
(47,820)
(152)
(3,607)
(51,579)
1,686
13,864
12,224
23,182
8,284
(1,407)
30,059
Income tax provision
$
(20,857) $
42,283
$
23,957
1,943
10,029
35,929
1,546
1,265
593
3,404
39,333
Our income tax provision (benefit) from continuing operations resulted in effective tax rates that varied from the
statutory federal income tax rate as summarized below.
Income tax expense at federal statutory rate
State income taxes, net of federal benefit
Benefit from lower foreign tax rates
Valuation allowance on foreign tax credits and
net operating loss carryforward
Other expenses not deductible for tax purposes
Adjustment to reserve for uncertain tax positions
Impact of 2017 U.S. tax reform — deferred tax
Impact of 2017 U.S. tax reform — transition tax
Other adjustments, net
Income tax provision (benefit)
Year Ended December 31,
2017
2016
2015
$
30,487
$
44,731
$
781
(8,500)
253
2,466
456
(63,525)
18,655
(1,930)
6,075
(7,827)
254
3,082
(3,547)
—
—
(485)
$
(20,857) $
42,283
$
36,885
1,587
(5,973)
2,326
2,719
658
—
—
1,131
39,333
The income tax benefit for 2017 was $20.9 million, as compared with income tax expense of $42.3 million in 2016. The
lower expense is primarily attributable to lower pre-tax income in 2017 as compared with 2016 and the impact of the discrete
income tax benefit of $44.9 million recorded in connection with the 2017 Tax Act.
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 no longer subject to U.S. federal income tax examinations for years prior to 2013. We are also
no longer subject to state and local or foreign tax examinations by tax authorities for years prior to 2011.
Our liability for uncertain tax positions was $2.7 million as of December 31, 2017 and 2016, respectively. As of
December 31, 2017, our accrual for the payment of tax-related interest and penalties was not significant.
15. Stockholders’ Equity
2016 Stock Repurchase Program
On June 2, 2016, our Board of Directors authorized a stock repurchase program of up to $100.0 million (the
“Repurchase Program”). On May 18, 2017 and December 1, 2017, our Board of Directors authorized an additional $100.0
million, respectively, increasing the Repurchase Program to an aggregate authorization of $300.0 million. No time limit has
been established for the completion of the program, and the program may be suspended, discontinued or replaced by the Board
88
of Directors at any time without prior notice. As of December 31, 2017, we have $113.3 million available under this program to
repurchase additional shares.
The following table details our stock repurchases under the Repurchase Program:
Shares of common stock repurchased and retired
Average price per share
Total cost
2015 Stock Repurchase Program
Year Ended December 31,
2017
2016
4,674
35.94
168,001
$
$
$
$
452
41.06
18,577
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”). The 2015 Repurchase Program expired on May 5, 2016.
The following table details our stock repurchases under the 2015 Stock Repurchase Program:
Shares of common stock repurchased and retired
Average price per share
Total cost
16. Employee Benefit Plans
Year Ended December 31,
2016
2015
85
34.16
2,902
$
$
765
34.68
26,516
$
$
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 $11.6 million, $11.4 million and $10.9 million during the years ended December 31, 2017,
2016 and 2015, respectively.
We also maintain several defined contribution pension plans for our employees in the United Kingdom and other foreign
countries. We contributed to these plans $6.4 million, $6.3 million and $6.1 million during the years ended December 31, 2017,
2016 and 2015, respectively.
17. Segment Reporting
We manage our business in five reportable segments: 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 our
clients around the world and delivers a wide range of service offerings related to restructuring, business transformation and
transaction support. Our restructuring practice includes corporate restructuring, including bankruptcy and interim management
services. Our business transformation and transaction support practices include financings, mergers and acquisitions (“M&A”),
M&A integration, valuations and tax advice, as well as financial, operational and performance improvement services.
Our Forensic and Litigation Consulting segment provides law firms, companies, government clients and other interested
parties with multidisciplinary, independent dispute advisory, investigations, data analytics, forensic accounting, business
intelligence 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.
89
Our Technology segment offers a comprehensive portfolio of information governance and electronic discovery ("e-
discovery") software, services and consulting support to companies, law firms, courts and government agencies worldwide.
Our services allow our clients to control the risk and expense of e-discovery events more confidently, as well as manage their
data in the context of compliance and risk.
Our Strategic Communications segment designs and executes communications strategies for management teams and
boards of directors to help them seize opportunities, manage financial, regulatory and reputational challenges, navigate market
disruptions, articulate their brand, stake a competitive position, and preserve and grow their operations.
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, a non-GAAP financial measure, as the total of Adjusted Segment EBITDA for all segments,
which excludes unallocated corporate expenses. We use Adjusted Segment EBITDA to internally evaluate the financial
performance of our segments because we believe it 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, 2017, 2016 and 2015.
Revenues
Corporate Finance & Restructuring
Forensic and Litigation Consulting
Economic Consulting
Technology
Strategic Communications
Total revenues
Adjusted Segment EBITDA
Corporate Finance & Restructuring
Forensic and Litigation Consulting
Economic Consulting
Technology
Strategic Communications
Year Ended December 31,
2017
2016
2015
$
482,041
$
483,269
$
$
$
462,324
496,029
174,850
192,488
1,807,732
82,863
72,705
61,964
22,171
27,732
$
$
457,734
500,487
177,720
191,184
1,810,394
97,688
57,882
74,102
25,814
30,458
$
$
440,398
482,269
447,909
218,599
189,974
1,779,149
90,101
64,267
62,330
39,010
27,727
Total Adjusted Segment EBITDA
$
267,435
$
285,944
$
283,435
90
The table below reconciles Net income to Total Adjusted Segment EBITDA. Unallocated corporate expenses primarily
include indirect costs related to centrally managed administrative functions that 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.
Net income
Add back:
Income tax provision (benefit)
Interest income and other
Interest expense
Loss on early extinguishment of debt
Unallocated corporate expenses
Segment depreciation expense
Amortization of intangible assets
Segment special charges
Remeasurement of acquisition-related contingent consideration
Year Ended December 31,
2017
107,962
$
2016
2015
$
85,520
$
66,053
(20,857)
(3,752)
25,358
—
83,140
27,112
10,563
37,207
702
42,283
(10,466)
24,819
—
88,182
34,064
10,306
9,833
1,403
39,333
(3,232)
42,768
19,589
81,348
27,717
11,726
—
(1,867)
Total Adjusted Segment EBITDA
$
267,435
$
285,944
$
283,435
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.
Corporate Finance & Restructuring
Forensic and Litigation Consulting
Economic Consulting
Technology
Strategic Communications
Total segment assets
Unallocated Corporate assets
Total assets
December 31,
2017
726,176
$
2016
681,919
$
401,905
501,471
195,399
215,083
2,040,034
217,207
400,047
496,757
189,704
214,160
1,982,587
242,781
$
2,257,241
$
2,225,368
The table below details information on our revenues for the years ended December 31, 2017, 2016 and 2015.
Revenues have been attributed to location based on the location of the legal entity generating the revenues.
United States
United Kingdom
All other foreign countries
Total revenues
Year Ended December 31,
2017
1,262,682
$
2016
1,298,492
$
2015
1,281,444
$
251,843
293,207
246,236
265,666
236,925
260,780
$
1,807,732
$
1,810,394
$
1,779,149
We do not have a single customer that represents 10% or more of our consolidated revenues.
91
The table below details information on our long-lived assets and net assets attributed to geographic location based on the
location of the legal entity holding the assets.
December 31, 2017
December 31, 2016
United States
United
Kingdom
All Other
Foreign
Countries
United States
United
Kingdom
All Other
Foreign
Countries
Property and equipment, net of
accumulated depreciation
Net assets
$
$
52,709
654,010
$
$
14,761
207,885
$
$
7,605
330,076
$
$
39,584
709,634
$
$
15,312
193,276
$
$
6,960
304,448
18. Supplemental Condensed Consolidating Guarantor and Non-Guarantor Financial Information
Substantially all of our domestic subsidiaries are guarantors of borrowings under our 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, 2017
FTI
Consulting
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
Total assets
Liabilities
Intercompany payables
Other current liabilities
Total current liabilities
Long-term debt, net
Other liabilities
Total liabilities
Stockholders' equity
Total liabilities and stockholders' equity
—
81,340
794,179
75,075
1,204,803
44,150
—
$
10,186
$
159
$
179,616
$
155,124
156,859
— 1,093,211
31,933
21,840
210,895
32,695
27,567
(1,125,906)
—
— $
—
189,961
522,878
197,243
1,272,069
450,773
(1,125,906)
39,137
570,876
18,426
2,175,362
13,572
416,053
11,251
566,911
22,366
217,874
29,441
—
—
(14,968)
— (2,742,273)
34,454
$3,035,498
60,566
$2,340,422
44,014
$
764,468
—
139,034
$ (3,883,147) $ 2,257,241
$1,125,906
127,295
1,253,201
396,284
194,042
1,843,527
$
— $
— $ (1,125,906) $
—
144,474
144,474
—
14,753
159,227
138,559
138,559
—
49,863
188,422
576,046
$
764,468
—
(1,125,906)
—
—
410,328
410,328
396,284
258,658
(1,125,906)
1,065,270
(2,757,241)
1,191,971
$ (3,883,147) $ 2,257,241
1,191,971
$3,035,498
2,181,195
$2,340,422
92
Condensed Consolidating Balance Sheet Information as of December 31, 2016
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
Total assets
Liabilities
Intercompany payables
Other current liabilities
Total current liabilities
Long-term debt, net
Other liabilities
Total liabilities
Stockholders' equity
FTI
Consulting
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Consolidated
$
47,420
$
156
$
168,582
$
137,523
163,820
173,554
— $
216,158
—
474,897
— 1,029,800
— (1,029,800)
44,708
24,944
22,464
—
229,651
1,218,720
364,600
(1,029,800)
25,466
558,978
21,959
2,065,819
47,308
14,118
416,053
13,393
490,634
65,398
22,272
204,970
34,725
—
—
(17,957)
— (2,556,453)
—
92,116
783,171
61,856
1,180,001
52,120
—
35,514
—
148,220
$2,949,181
$2,218,316
$
662,081
$ (3,604,210) $ 2,225,368
$1,027,050
$
— $
2,750
$ (1,029,800) $
—
137,710
1,164,760
365,528
211,535
1,741,823
129,810
129,810
—
16,411
146,221
1,207,358
2,072,095
110,935
113,685
—
46,081
159,766
502,315
—
(1,029,800)
—
—
378,455
378,455
365,528
274,027
(1,029,800)
1,018,010
(2,574,410)
1,207,358
Total liabilities and stockholders' equity
$2,949,181
$2,218,316
$
662,081
$ (3,604,210) $ 2,225,368
93
Condensed Consolidating Statement of Comprehensive Income for the Year Ended December 31, 2017
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
Other income (expense)
Income (loss) before income tax provision
(benefit)
Income tax provision (benefit)
Equity in net earnings of subsidiaries
FTI
Consulting
$ 652,604
Guarantor
Subsidiaries
$ 603,294
Non-
Guarantor
Subsidiaries
$
561,250
Eliminations
$
Consolidated
(9,416) $ 1,807,732
438,395
181,713
15,414
279
4,393
640,194
12,410
(23,684)
(11,274)
11,070
130,306
421,826
125,552
13,010
2,012
2,141
564,541
38,753
(5,932)
32,821
(43,846)
42,990
364,545
122,667
12,461
—
7,018
506,691
54,559
8,010
62,569
11,919
(9,206)
1,215,560
(210)
429,722
—
—
(2,989)
40,885
2,291
10,563
(12,405)
1,699,021
2,989
—
2,989
—
108,711
(21,606)
87,105
(20,857)
—
—
(173,296)
Net income
$ 107,962
$ 119,657
$
50,650
$
(170,307) $
107,962
Other comprehensive loss, net of tax:
Foreign currency translation adjustments,
net of tax expense of $0
$
Other comprehensive loss, net of tax
— $
—
— $
—
Comprehensive income
$ 107,962
$ 119,657
$
30,664
30,664
81,314
$
$
— $
—
30,664
30,664
(170,307) $
138,626
Condensed Consolidating Statement of Comprehensive Income for the Year Ended December 31, 2016
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
Other income (expense)
Income (loss) before income tax provision
Income tax provision
Equity in net earnings of subsidiaries
FTI
Consulting
$ 671,408
Guarantor
Subsidiaries
$ 625,950
Non-
Guarantor
Subsidiaries
$
522,757
Eliminations
$
Consolidated
(9,721) $ 1,810,394
447,254
190,546
2,916
6
3,903
644,625
26,783
(27,228)
(445)
1,222
87,187
428,158
124,019
6,242
2,158
2,179
344,820
120,247
1,287
—
7,308
(9,461)
1,210,771
(260)
434,552
—
—
(3,084)
10,445
2,164
10,306
562,756
473,662
(12,805)
1,668,238
63,194
(2,811)
60,383
27,961
45,412
49,095
15,686
64,781
13,100
3,084
—
3,084
—
—
(132,599)
142,156
(14,353)
127,803
42,283
—
Net income
$
85,520
$
77,834
$
51,681
$
(129,515) $
85,520
Other comprehensive loss, net of tax:
Foreign currency translation adjustments,
net of tax expense of $0
Other comprehensive loss, net of tax
Comprehensive income
$
$
— $
—
— $
(41,884) $
— $
(41,884)
—
(41,884)
—
(41,884)
85,520
$
77,834
$
9,797
$
(129,515) $
43,636
94
Condensed Consolidating Statement of Comprehensive Income for the Year Ended December 31, 2015
Revenues
Operating expenses
Direct cost of revenues
Selling, general and administrative expenses
Acquisition-related contingent consideration
Amortization of other intangible assets
Operating income
Other income (expense)
Income (loss) before income tax provision
(benefit)
Income tax provision (benefit)
Equity in net earnings of subsidiaries
FTI
Consulting
$ 667,259
Guarantor
Subsidiaries
$ 754,458
Non-
Guarantor
Subsidiaries
$
504,429
Eliminations
$
Consolidated
(146,997) $ 1,779,149
428,356
189,607
(1,408)
3,944
620,499
46,760
(64,554)
(17,794)
(6,944)
76,903
551,829
121,112
208
2,861
337,856
122,348
—
8,442
(146,597)
1,171,444
(399)
—
(3,521)
432,668
(1,200)
11,726
676,010
468,646
(150,517)
1,614,638
78,448
(4,881)
73,567
35,579
31,744
35,783
10,310
46,093
10,698
3,520
—
3,520
—
—
(108,647)
164,511
(59,125)
105,386
39,333
—
Net income
$
66,053
$
69,732
$
35,395
$
(105,127) $
66,053
Other comprehensive loss, net of tax:
Foreign currency translation adjustments,
net of tax expense of $0
Other comprehensive loss, net of tax
Comprehensive income
$
$
— $
—
— $
(28,727) $
— $
(28,727)
—
(28,727)
—
(28,727)
66,053
$
69,732
$
6,668
$
(105,127) $
37,326
95
Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2017
Operating activities
Net cash provided by operating activities
$
25,400
$
80,468
$
41,757
$
147,625
FTI
Consulting
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
(8,929)
(14,265)
295
—
(11,893)
—
Net cash used in investing activities
(22,899)
(11,893)
Financing activities
Borrowings under revolving line of credit, net
Deposits
Purchase and retirement of common stock
Net issuance of common stock under equity
compensation plans
Payments for acquisition-related contingent
consideration
Intercompany transfers
Net cash used in financing activities
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
30,000
—
(168,094)
(504)
—
98,863
(39,735)
—
(37,234)
47,420
Cash and cash equivalents, end of year
$
10,186
$
—
—
—
—
(5,161)
(63,411)
(68,572)
—
3
156
159
—
(5,846)
—
(5,846)
—
2,825
—
—
—
(35,452)
(32,627)
7,750
11,034
168,582
$
179,616
$
(8,929)
(32,004)
295
(40,638)
30,000
2,825
(168,094)
(504)
(5,161)
—
(140,934)
7,750
(26,197)
216,158
189,961
96
Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2016
Operating activities
Net cash provided by operating activities
$
46,908
$
123,101
$
63,479
$
233,488
FTI
Consulting
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
Deposits
Purchase and retirement of common stock
Net issuance of common stock under equity
compensation plans
Payments for acquisition-related contingent
consideration
Other
Intercompany transfers
Net cash (used in) provided by financing activities
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
—
(3,576)
54
(3,522)
(130,000)
—
(21,489)
21,708
(210)
1,331
97,483
(31,177)
—
12,209
35,211
Cash and cash equivalents, end of year
$
47,420
$
—
(20,185)
—
(20,185)
—
—
—
—
(656)
—
(102,269)
(102,925)
—
(9)
165
156
(1,251)
(5,174)
—
(6,425)
—
4,006
—
—
—
—
4,786
8,792
(11,648)
54,198
114,384
$
168,582
$
(1,251)
(28,935)
54
(30,132)
(130,000)
4,006
(21,489)
21,708
(866)
1,331
—
(125,310)
(11,648)
66,398
149,760
216,158
97
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
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
Payments for acquisition-related contingent
consideration
Other
Intercompany transfers
Net cash provided by (used in) financing activities
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
—
(9,192)
79
(9,113)
200,000
(425,671)
(3,843)
—
(26,532)
16,666
(451)
936
97,314
(141,581)
—
(135,879)
171,090
Cash and cash equivalents, end of year
$
35,211
$
—
(16,487)
—
(16,487)
—
—
—
—
—
—
(294)
—
(66,729)
(67,023)
—
6
159
165
(575)
(5,720)
158
(6,137)
—
—
—
3,227
—
—
—
—
(30,585)
(27,358)
(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
(745)
936
—
(235,962)
(6,141)
(133,920)
283,680
149,760
98
19. Quarterly Financial Data (unaudited)
2017
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 (benefit)
Income tax provision (benefit)
Net income
Earnings per common share — basic (1)
Earnings per common share — diluted (1)
Weighted average common shares outstanding
Basic
Diluted
2016
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 (1)
Earnings per common share — diluted (1)
Weighted average common shares outstanding
Basic
Diluted
March 31
June 30
September 30
December 31
Quarter Ended
$
446,344
$
444,715
$
448,962
$
467,711
309,072
107,295
—
395
2,493
419,255
27,089
605
(5,801)
21,893
7,877
14,016
0.35
0.34
40,527
41,245
$
$
$
304,071
107,342
30,074
777
2,422
444,686
29
1,592
(6,250)
(4,629)
527
(5,156) $
(0.13) $
(0.13) $
39,555
39,555
294,851
103,909
—
252
2,882
401,894
47,068
1,103
(6,760)
41,411
9,197
32,214
0.86
0.85
37,431
37,746
$
$
$
307,566
111,176
10,811
867
2,766
433,186
34,525
452
(6,547)
28,430
(38,458)
66,888
1.81
1.78
36,906
37,643
$
$
$
March 31
June 30
September 30
December 31
Quarter Ended
$
470,285
$
460,147
$
438,042
$
441,920
305,636
103,609
5,061
1,134
2,606
418,046
52,239
2,557
(6,229)
48,567
18,386
30,181
0.75
0.73
40,506
41,148
$
$
$
303,194
108,245
1,750
206
2,590
415,985
44,162
4,125
(6,303)
41,984
15,437
26,547
0.65
0.64
40,820
41,599
$
$
$
293,702
106,220
—
201
2,845
402,968
35,074
3,213
(6,304)
31,983
10,292
21,691
0.53
0.52
41,239
42,065
$
$
$
308,239
116,478
3,634
623
2,265
431,239
10,681
571
(5,983)
5,269
(1,832)
7,101
0.17
0.17
41,201
42,018
$
$
$
(1)
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 shares outstanding during each quarterly period.
99
ITEM 9.
FINANCIAL DISCLOSURE
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
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 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 (a) were 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 (b) included, 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 Part II, 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, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
ITEM 9B.
OTHER INFORMATION
None.
100
Certain information required in Part III is omitted from this report but is incorporated herein by reference from our
definitive proxy statement for the 2018 Annual Meeting of Stockholders to be filed within 120 days after the end of our fiscal
year ended December 31, 2017, 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, Chief Accounting Officer and
Controller, and our other financial professionals, as well as all our other executive officers, including chief strategy and
transformation officer, chief human resources officer, 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/~/media/Files/us-files/our-firm/guidelines/fti-code-of-conduct.pdf. 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, Chief Accounting Officer and 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., 6300 Blair Hill Lane, Suite 303, Baltimore, Maryland 21209.
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.
RELATED STOCKHOLDER MATTERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
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.
INDEPENDENCE
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
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.
101
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
Report of Independent Registered Public Accounting Firm — Consolidated Financial Statements
Consolidated Balance Sheets — December 31, 2017 and 2016
Consolidated Statements of Comprehensive Income— Years Ended December 31, 2017, 2016 and 2015
Consolidated Statements of Stockholders’ Equity — Years Ended December 31, 2017, 2016 and 2015
Consolidated Statements of Cash Flows — Years Ended December 31, 2017, 2016 and 2015
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.
102
FTI Consulting, Inc. and Subsidiaries
Schedule II — Valuation and Qualifying Accounts
(in thousands)
Description
Year Ended December 31, 2017
Reserves and allowances deducted from asset
accounts:
Allowance for doubtful accounts and unbilled
services
Valuation allowance for deferred tax asset
Year Ended December 31, 2016
Reserves and allowances deducted from asset
accounts:
Allowance for doubtful accounts and unbilled
services
Valuation allowance for deferred tax asset
Year Ended December 31, 2015
Reserves and allowances deducted from asset
accounts:
Allowance for doubtful accounts and unbilled
services
Valuation allowance for deferred tax asset
Balance
at
Beginning
of Period
Additions
Charged
to
Expense
Charged
to Other
Accounts*
Deductions**
Balance
at End
of
Period
$ 178,819
$
18,900
$
$
15,386
2,721
$
$
9,656
$
23,174
$ 180,687
— $
— $ 21,621
$ 185,754
$
13,167
$
$
8,912
5,733
$
$
9,501
$
25,348
$ 178,819
— $
— $ 18,900
$ 144,825
$
14,442
$
$
15,564
$
42,134
$
16,769
$ 185,754
— $
— $
1,275
$ 13,167
* 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.
103
Exhibit
Number
Description of Exhibits
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3
4.4
4.5
4.6
4.7
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.)
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 the 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 incorporated 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 the 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
incorporated 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 24, 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.
4.8†
Fifth Supplemental Indenture relating to the 6.0% Senior Notes Due 2022, dated August 4, 2017, by and
among FTI Consulting, Inc., FTI Consulting Realty, Inc. and U.S. Bank National Association, as trustee.
104
Exhibit
Number
10.1 *
10.2 *
10.3 *
10.4 *
10.5 *
10.6 *
10.7 *
10.8 *
10.9 *
10.10 *
10.11 *
10.12 *
10.13 *
10.14 *
Description of Exhibits
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 29, 2006 and incorporated herein by
reference.)
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 6, 2006 and incorporated herein by reference.)
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 6, 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.)
105
Exhibit
Number
10.15 *
10.16 *
10.17 *
10.18 *
10.19 *
10.20 *
10.21 *
10.22 *
10.23 *
10.24 *
10.25 *
10.27 *
10.28 *
Description of Exhibits
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 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 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.)
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 the 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 the quarter ended March 31, 2008 and incorporated herein by reference.)
106
Exhibit
Number
10.29 *
10.30 *
10.31 *
10.32 *
10.33 *
10.34 *
10.36 *
10.37 *
10.38 *
10.39 *
10.40 *
10.41 *
Description of Exhibits
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 the 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 the 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 the 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 the 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 the 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 the 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.)
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.)
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.)
107
Exhibit
Number
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 *
Description of Exhibits
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.)
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.)
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.)
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.)
108
Exhibit
Number
10.55 *
10.56 *
10.57 *
10.58 *
10.59 *
10.60 **
10.61 **
10.62 **
10.63 *
10.64
10.65
10.66
10.67
Description of Exhibits
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). (Filed with the Securities and
Exchange Commission on February 25, 2016 as an exhibit to FTI Consulting, Inc.’s Annual Report on Form
10-K for the year ended December 31, 2015 and incorporated herein by reference.)
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). (Filed with the Securities and
Exchange Commission on February 25, 2016 as an exhibit to FTI Consulting, Inc.’s Annual Report on Form
10-K for the year ended December 31, 2015 and incorporated herein by reference.)
Form of Restricted Stock Award [or Restricted Stock Unit] Agreement under FTI Consulting, Inc. 2009
Omnibus Incentive Compensation Plan (Amended and Restated Effective as of June 3, 2015). (Filed with
the Securities and Exchange Commission on February 25, 2016 as an exhibit to FTI Consulting, Inc.’s
Annual Report on Form 10-K for the year ended December 31, 2015 and incorporated herein by reference.)
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 Exchange 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. (Filed with the Securities and Exchange Commission on February 25, 2016 as an exhibit to FTI
Consulting, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015 and incorporated
herein by reference.)
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.
(Filed with the Securities and Exchange Commission on February 25, 2016 as an exhibit to FTI Consulting,
Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015 and incorporated herein by
reference.)
Form of 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.
(Filed with the Securities and Exchange Commission on February 25, 2016 as an exhibit to FTI Consulting,
Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015 and incorporated herein by
reference.)
Form of Restricted Stock [or 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. (Filed with the Securities and Exchange Commission on February 25, 2016 as an exhibit
to FTI Consulting, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015 and
incorporated herein by reference.)
109
Exhibit
Number
10.68 *
10.69 *
10.70 *
10.71 *
10.72 *
10.73 *
10.74 *
10.75 *
10.76 *
10.77 *
10.78 *
10.79 *
10.80 *
Description of Exhibits
FTI Consulting, Inc. Incentive Compensation Plan. (Filed with the Securities and Exchange Commission as
Appendix A to FTI Consulting, Inc.’s Definitive Proxy Statement on Schedule 14A dated April 20, 2016
filed with the SEC on April 20, 2016 and incorporated herein by reference.)
Offer of Employment Letter dated as of July 5, 2016, by and between FTI Consulting, Inc. and Ajay
Sabherwal. (Filed with the Securities and Exchange Commission as an exhibit to FTI Consulting, Inc.’s
Current Report on Form 8-K dated July 14, 2016 filed with the SEC on July 18, 2016 and incorporated
herein by reference).
Amendment No. 1 dated as of December 5, 2016 to Employment Agreement made and entered into as of
December 13, 2013, by and between FTI Consulting, Inc. and Steven Gunby. (Filed with the Securities and
Exchange Commission as an exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated December
5, 2016 filed with the SEC on December 5, 2016 and incorporated herein by reference.)
Amendment dated as of March 1, 2016 to Employment Letter by and between FTI Consulting, Inc. and
Catherine M. Freeman.
Amendment No. 2 effective as of March 21, 2017 to Employment Agreement dated as of December 13,
2013, as amended, by and between FTI Consulting, Inc. and Steven Gunby. (Filed with the Securities and
Exchange Commission as an exhibit to FTI Consulting, Inc.’s Current Report on form 8-K dated March 21,
2017, filed with the SEC on March 23, 2017 and incorporated herein by reference)
Amendment No. 1 effective as of March 21, 2017 to Offer of Employment Letter dated as of July 5, 2016,
by and between FTI Consulting, Inc. and Ajay Sabherwal. (Filed with the Securities and Exchange
Commission as an exhibit to FTI Consulting, Inc.’s Current Report on form 8-K dated March 21, 2017, filed
with the SEC on March 23, 2017 and incorporated herein by reference)
Amendment No. 1 effective as of March 21, 2017 to Offer of Employment Letter dated July 15, 2014, by
and between FTI Consulting, Inc. and Paul Linton. (Filed with the Securities and Exchange Commission as
an exhibit to FTI Consulting, Inc.’s Current Report on form 8-K dated March 21, 2017, filed with the SEC
on March 23, 2017 and incorporated herein by reference)
Amendment No. 1 effective as of March 21, 2017 to Employment Letter dated May 14, 2015, by and
between FTI Consulting, Inc. and Curtis Lu. (Filed with the Securities and Exchange Commission as an
exhibit to FTI Consulting, Inc.’s Current Report on form 8-K dated March 21, 2017, filed with the SEC on
March 23, 2017 and incorporated herein by reference)
Amendment No. 2 effective as of March 21, 2017 to Offer of Employment Letter dated July 15, 2014, by
and between FTI Consulting, Inc. and Holly Paul. (Filed with the Securities and Exchange Commission as
an exhibit to FTI Consulting, Inc.’s Current Report on form 8-K dated March 21, 2017, filed with the SEC
on March 23, 2017 and incorporated herein by reference)
FTI Consulting, Inc. 2017 Omnibus Incentive Compensation Plan (Effective as of June 7, 2017). (Included
as Appendix A to FTI Consulting, Inc.’s Definitive Proxy Statement on Schedule 14A filed on April 25,
2017 and incorporated herein by reference.)
Form of Executive Long-Term Incentive Pay Restricted Stock Award Agreement under the FTI Consulting,
Inc. 2017 Omnibus Incentive Compensation Plan. (Filed with the Securities and Exchange Commission as
an exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017,
filed with the SEC on July 27, 2017 and incorporated herein by reference.)
Form of Executive Long-Term Incentive Pay Incentive Stock Option Award Agreement under the FTI
Consulting, Inc. 2017 Omnibus Incentive Compensation Plan. (Filed with the Securities and Exchange
Commission as an exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2017, filed with the SEC on July 27, 2017 and incorporated herein by reference.)
Form of Executive Long-Term Incentive Pay Performance-Based Restricted Stock Unit Award Agreement
under the FTI Consulting, Inc. 2017 Omnibus Incentive Compensation Plan. (Filed with the Securities and
Exchange Commission as an exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2017, filed with the SEC on July 27, 2017 and incorporated herein by reference.)
110
Exhibit
Number
10.81 *
10.82 *
10.83 *
10.84 *
10.85 *
10.86 *
10.87 *
10.88 *
10.89 *
10.90 *
10.91 *
10.92 *
Form of General Restricted Stock Award Agreement under the FTI Consulting, Inc. 2017 Omnibus
Incentive Compensation Plan. (Filed with the Securities and Exchange Commission as an exhibit to FTI
Consulting, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the SEC
on July 27, 2017 and incorporated herein by reference.)
Description of Exhibits
Form of General Restricted Stock Unit Award Agreement under the FTI Consulting, Inc. 2017 Omnibus
Incentive Compensation Plan. (Filed with the Securities and Exchange Commission as an exhibit to FTI
Consulting, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the SEC
on July 27, 2017 and incorporated herein by reference.)
Form of General Incentive Stock Option Agreement under the FTI Consulting, Inc. 2017 Omnibus Incentive
Compensation Plan. (Filed with the Securities and Exchange Commission as an exhibit to FTI Consulting,
Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the SEC on July 27,
2017 and incorporated herein by reference.)
Form of General Nonstatutory Stock Option Agreement under the FTI Consulting, Inc. 2017 Omnibus
Incentive Compensation Plan. (Filed with the Securities and Exchange Commission as an exhibit to FTI
Consulting, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the SEC
on July 27, 2017 and incorporated herein by reference.)
Form of General Performance-Based Restricted Stock Unit Award Agreement under the FTI Consulting,
Inc. 2017 Omnibus Incentive Compensation Plan. (Filed with the Securities and Exchange Commission as
an exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017,
filed with the SEC on July 27, 2017 and incorporated herein by reference.)
Form of General Cash Unit Award Agreement under the FTI Consulting, Inc. 2017 Omnibus Incentive
Compensation Plan. (Filed with the Securities and Exchange Commission as an exhibit to FTI Consulting,
Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the SEC on July 27,
2017 and incorporated herein by reference.)
Form of General Cash -Based Stock Appreciation Right Award Agreement under the FTI Consulting, Inc.
2017 Omnibus Incentive Compensation Plan. (Filed with the Securities and Exchange Commission as an
exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed
with the SEC on July 27, 2017 and incorporated herein by reference.)
Form of General Cash-Based Performance Unit Award Agreement under the FTI Consulting, Inc. 2017
Omnibus Incentive Compensation Plan. (Filed with the Securities and Exchange Commission as an exhibit
to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the
SEC on July 27, 2017 and incorporated herein by reference.)
Form of Restricted Stock Award Agreement for Non-Employee Directors under the FTI Consulting, Inc.
2017 Omnibus Incentive Compensation Plan. (Filed with the Securities and Exchange Commission as an
exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed
with the SEC on July 27, 2017 and incorporated herein by reference.)
Form of Restricted Stock Unit Award Agreement for Non-Employee Directors under the FTI Consulting,
Inc. 2017 Omnibus Incentive Compensation Plan. (Filed with the Securities and Exchange Commission as
an exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017,
filed with the SEC on July 27, 2017 and incorporated herein by reference.)
Form of Deferred Stock Unit Award Agreement for Non-Employee Directors under the FTI Consulting, Inc.
2017 Omnibus Incentive Compensation Plan. (Filed with the Securities and Exchange Commission as an
exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed
with the SEC on July 27, 2017 and incorporated herein by reference.)
Form of Deferred Restricted Stock Unit Award Agreement for Non-Employee Directors under the FTI
Consulting, Inc. 2017 Omnibus Incentive Compensation Plan. (Filed with the Securities and Exchange
Commission as an exhibit to FTI Consulting, Inc.’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2017, filed with the SEC on July 27, 2017 and incorporated herein by reference.)
11.1†
Computation of Earnings Per Share (included in Note 3 to the Consolidated Financial Statements included
in Part II, Item 8 herein).
111
Exhibit
Number
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
Description of Exhibits
FTI Consulting, Inc. Code of Ethics and Business Conduct, as Amended and Restated effective September
17, 2014. (Filed with the Securities and Exchange Commission as an exhibit to FTI Consulting, Inc.’s
Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on Feburary 28,
2017 and incorporated herein by reference.)
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. (Filed with the
Securities and Exchange Commission as an exhibit to FTI Consulting, Inc.’s Annual Report on Form 10-K
for the year ended December 31, 2016, filed with the SEC on Feburary 28, 2017 and incorporated herein by
reference.)
Policy on Inside Information and Insider Trading, as Amended and Restated Effective January 1, 2016.
(Filed with the Securities and Exchange Commission as an exhibit to FTI Consulting, Inc.’s Annual Report
on Form 10-K for the year ended December 31, 2016, filed with the SEC on Feburary 28, 2017 and
incorporated herein by reference.)
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 18, 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-Q 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 the year ended December 31, 2009 and
incorporated herein by reference.)
Anti-Corruption Policy, as Amended and Restated Effective February 19, 2014. (Filed with the Securities
and Exchange Commission on May 2, 2014 as an exhibit to FTI Consulting, Inc.’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2014 and incorporated herein by reference.)
112
Exhibit
Number
101
Description of Exhibits
The following financial information from the Annual Report on Form 10-K of FTI Consulting, Inc. for the
year ended December 31, 2017, filed herewith, and formatted in XBRL (Extensible Business Reporting
Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Comprehensive Income; (iii)
Consolidated Statements 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.
† Filed herewith.
** With certain exceptions that were specified at the time of initial filing with the Securities and Exchange Commission,
exhibits and 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.
113
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 22nd day of February
2018.
SIGNATURES
FTI CONSULTING, INC.
By:
Name:
Title:
/s/ STEVEN H. GUNBY
Steven H. Gunby
President and Chief Executive Officer
SIGNATURE
CAPACITY IN WHICH SIGNED
DATE
/s/ STEVEN H. GUNBY
Steven H. Gunby
/s/ AJAY SABHERWAL
Ajay Sabherwal
/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/ VERNON ELLIS
Vernon Ellis
/s/ NICHOLAS C. FANANDAKIS
Nicholas C. Fanandakis
/s/ LAUREEN E. SEEGER
Laureen E. Seeger
President, Chief Executive Officer
and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
Senior Vice President, Controller
and Chief Accounting Officer
(Principal Accounting Officer)
February 22, 2018
February 22, 2018
February 22, 2018
Director and Chairman of the Board
February 22, 2018
February 22, 2018
February 22, 2018
February 22, 2018
February 22, 2018
February 22, 2018
February 22, 2018
Director
Director
Director
Director
Director
Director
114
Performance Graph
The following graph compares the cumulative total shareholder return on our common stock from December 31, 2012
through December 31, 2017, 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.,
Resources Connection, Inc., and Robert Half International Inc. collectively, the Peer Group. The Peer Group index was
compiled by the Company as of December 31, 2017. Our common stock price is published every weekday except certain
holidays.
Comparison of 5 Year Cumulative Total Return*
Among FTI Consulting, Inc., the S&P 500 Index, and a Peer Group
250
200
150
100
50
0
12/12
12/13
12/14
12/15
12/16
12/17
FTI Consulting, Inc.
S&P 500
Peer Group
*$100 invested on 12/31/12 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2018 Standard & Poor’s, a division of S&P Global. All rights reserved.
FTI Consulting, Inc.
S&P 500
Peer Group
12/12
100.00
100.00
100.00
12/13
124.67
132.39
147.92
12/14
117.06
150.51
169.41
12/15
105.03
152.59
150.80
12/16
136.61
170.84
162.29
12/17
130.18
208.14
189.32
Copyright© 2018 Standard & Poor’s, a division of S&P Global. All rights reserved.
Corporate Leadership
Business Leadership
Board of Directors
Corporate Information
Steven H. Gunby
President and Chief Executive
Officer
Michael C. Eisenband
Global Segment Co-Leader
Corporate Finance & Restructuring
Ajay Sabherwal
Chief Financial Officer
Jeffrey S. Amling
Chief Marketing Officer and Head of
Business Development
Catherine M. Freeman
Senior Vice President, Controller
and Chief Accounting Officer
John Klick
Senior Vice President
Paul Linton
Chief Strategy and Transformation
Officer
Curtis Lu
General Counsel
Carlyn R. Taylor
Global Segment Co-Leader
Corporate Finance & Restructuring,
FTI Industry Initiative Leader
Paul S. Ficca
Global Segment Leader
Forensic & Litigation Consulting
Charles D. Overstreet
Global Practice Leader
Health Solutions
Chris Osborne
Global Segment Leader
Economic Consulting
Sophie Ross
Global Segment Leader
Technology
Matthew Pachman
Vice President, Chief Ethics and
Compliance Officer and Chief Risk
Officer
Mark McCall
Global Segment Leader
Strategic Communications
Holly Paul
Chief Human Resources Officer
Les Moeller
Chairman of North and South
America
Kevin Hewitt
Chairman of Europe, Middle East &
Africa
Gerard E. Holthaus
Non-Executive Chairman of the
Board of FTI Consulting, Inc.
and Non-Executive Chairman of
WillScot Corp
Steven H. Gunby
President and Chief Executive
Officer of FTI Consulting, Inc.
Executive Office
555 12th Street NW
Washington, DC 20004
+1.202.312.9100
Principal Place of Business
16701 Melford Blvd.
Bowie, MD 20715
+1.800.334.5701
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.
Sir Vernon Ellis
Former Chair of the British Council
Nicholas C. Fanandakis
Executive Vice President of
DowDuPont Inc.
Laureen E. Seeger
Executive Vice President and
General Counsel of the
American Express Company
Annual Stockholders’ Meeting
The 2018 Annual Meeting of
Stockholders will be held on
June 6, 2018, at 9:30 a.m. at
our offices at 555 12th Street NW
Washington, DC 20004
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 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, 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.
555 12th Street NW
Washington, DC 20004
+1.202.312.9100
fticonsulting.com
NYSE: FCN
©2018 FTI Consulting, Inc. All Rights Reserved.