2011 Annual Report on Form 10-K of FTI Consulting, Inc
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EXPANDING GLOBAL CAPABILITIES ANNUAL REPORT 2011 777 South Flagler Drive, Phillips Point, Suite 1500 West Tower, West Palm Beach, FL 33401 +1 561-515-1900 fticonsulting.com NYSE: FCN CORPORATE TEAM BOARD OF DIRECTORS CORPORATE INFORMATION Jack B. Dunn, IV Dennis J. Shaughnessy Executive Offi ce President and Chief Executive Offi cer Chairman of the Board 777 South Flagler Drive, Phillips Point, Suite 1500 West Tower, Dennis J. Shaughnessy Jack B. Dunn, IV West Palm Beach, FL 33401 Chairman of the Board President and Chief Executive Offi cer +1 561-515-1900 David G. Bannister Brenda J. Bacon Principal Place of Business Executive Vice President and President and Chief Executive Offi cer 909 Commerce Road Chairman of the North American Region of Brandywine Senior Living Annapolis, Maryland 21401 Roger D. Carlile Mark H. Berey Annual Stockholders’ Meeting Executive Vice President and President of MHB Ventures LLC The 2012 Annual Meeting of Chief Financial Offi cer Stockholders will be held on Denis J. Callaghan June 6, 2012, at 9:30 a.m. at Eric B. Miller Retired Former Director of our executive offi ces at Executive Vice President, North American Equity Research for 777 South Flagler Drive, General Counsel and Chief Risk Offi cer Deutsche Bank Alex. Brown Phillips Point, Suite 1500 West Tower, West Palm Beach, FL 33401 Adam Bendell James W. Crownover Senior Vice President, Retired Former Head of McKinsey & Independent Registered Strategic Development Company’s Southwest Practice and Public Accounting Firm Co-headed McKinsey’s Worldwide KPMG LLP Catherine M. Freeman Energy Practice Baltimore, Maryland Senior Vice President, Controller and Chief Accounting Offi cer Gerard E. Holthaus Transfer Agent Chairman of the Board of Directors American Stock Transfer & Joanne F. Catanese of Algeco Scotsman Trust Company Associate General Counsel and New York, New York Corporate Secretary Matthew F. McHugh Retired Former Nine-Term Stock United States Congressman FTI’s stock trades on the New York Stock Exchange (NYSE) George P. Stamas under the symbol FCN. Partner at Kirkland & Ellis LLP Investor Relations Offi ce Wall Street Plaza 88 Pine Street, 32nd Floor New York, NY 10005 +1 212-850-5600 Stockholder Information Our internet website is www.fticonsulting.com. We make available, free of charge on our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports and proxy statements as soon as reasonably practicable after we electronically fi le 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 for the Audit, Compensation, and Nominating and Corporate Governance Committees of our Board of Directors, other corporate governance documents, and any amendments to those documents. DEAR FELLOW STOCKHOLDERS: 2011 was an exceptional year for FTI Consulting. We extended our global presence, deepened our pool of talent and delivered strong fi nancial and operational performance across our consulting platform. This past year, we produced 12% revenue growth and 22% growth in adjusted earnings per diluted share1, marking our 29th year of consecutive profi table growth. We also made signifi cant strides in realizing our strategic objective of building the world’s leading event-driven management consulting fi rm. With a rapidly changing legal, regulatory and business environment as a backdrop, the alignment of our professional services will better assist our clients as they seek to protect and enhance the value of their respective enterprises globally. As our clients face turbulence and opportunity in their home markets, venture into new markets in pursuit of higher returns and brace for an accelerating pace of change, FTI Consulting is best positioned to provide the senior advisory services they will require. The challenges and opportunities our clients face are becoming increasingly complex. FTI Consulting’s ability to provide seamless strategic services across multiple geographies and professional disciplines will grow in demand, a trend we are already experiencing. Additionally, as we focus on expanding our global leadership position, we took a bold step in 2011 by completing our One Brand transition. We successfully migrated nearly 30 brands to a single unifi ed global brand, enhancing our ability to present our consulting services to the market in a more powerful and consistent manner. Most importantly, we continued to deliver on our core business objectives in 2011. Success was driven by continued execution of our strategic initiatives, strong performance from our procyclical businesses and the increasing volume of cross-segment and cross-border opportunities that our new matrixed organizational structure generated across the globe. 1 See pages 53-54 of the attached form 10K for consolidated reconciliations of non-GAAP measures, including Operating Income to Adjusted EBITDA and Net In- come and Earnings Per Share to Adjusted Net Income and Adjusted Earnings Per Share, respectively. Consolidated adjusted earnings per diluted share for 2011 included a $0.23 revaluation gain from the reduction of estimated future contingent consideration payments. Segment results can be found on the following pages: Corporate Finance/Restructuring – page 58; Forensic and Litigation Consulting – page 60; Economic Consulting – page 62; Technology – page 63; and Strategic Communications – page 65. In terms of fi nancial results: Geographically, we added 186 professionals in Asia-Pacifi c, • Revenues reached a new record of $1.57 billion, Latin America and EMEA, driving our growth in these regions. representing 12% year-over-year growth, 5% organic; Created a new organizational structure. We implemented a new matrixed organizational model emphasizing both 1 • Adjusted earnings per diluted share increased 22% geographic and segment leadership roles. We have organized year-over-year to $2.60, while our adjusted EBITDA our business segments within four geographic regions: North 1 margin was 17%; America, Asia-Pacifi c, Latin America, and EMEA. Our goal is to • Revenues from our procyclical Economic Consulting, push down responsibility for developing business, supporting Technology, and Forensic and Litigation Consulting our professionals through regional administrative services, business segments grew at rates of 39%, 24%, and and sharing responsibility for the delivery of services across 13%, respectively; business segments and industry lines to better meet our clients’ needs. • Revenues from our operations in Asia-Pacifi c, Latin Driving long-term value for our shareholders. During America and Europe, Middle East and Africa (EMEA) 2011, we received, purchased and retired 5,733,205 shares at grew a robust 75%, 61%, and 25%, respectively; a total acquisition cost of $209.4 million and an average price • 24% of our revenues were generated internationally, per share of $36.52. The $500 million share buyback, which compared with 21% in 2010; and, was completed in 2011, underscores our confi dence in the • Net cash provided by operating activities was a strong unique and attractive value proposition that is FTI Consulting $174 million. today. As of December 31, 2011, with a cumulative fi ve-year total return of 52%, FTI Consulting outperformed both the We ended 2011 with $264 million in cash. Our strong S&P 500 and our peer group by 53% and 78%, respectively2. cash fl ow and robust balance sheet create a signifi cant competitive advantage for our business, and provide us with SEGMENT REVIEW an excellent platform for 2012. Our Economic Consulting segment had an outstanding In addition, FTI Consulting’s fi nancial strength allowed us year. Revenue for the year was $354.0 million and adjusted to take advantage of a consolidating marketplace, meet the segment EBITDA1 was $67.0 million, representing growth of critical needs of our clients and continue our relentless focus 39% and 35%, respectively. Economic Consulting especially on building the world’s leading event-driven management benefi ted from strength in M&A and antitrust matters. consulting fi rm. A few highlights include: With the increasing trends toward cross-border M&A and The successful acquisition and integration of certain collaboration among regulatory bodies, our ability to Economic Consulting, Forensic and Litigation and advise in multiple jurisdictions greatly enhances our ability Corporate Finance/Restructuring practices from LECG. to service our global clients with a competitive advantage These transactions added signifi cant new expertise and and further differentiates us from our competitors. In revenue opportunities for our business. These acquisitions addition, the Financial Economics practice within the expand and strengthen our geographic footprint, not segment continues to perform extremely well, breaking new only internationally, but also in the U.S., increasing our engagement records during 2011. domain expertise in key industries that are undergoing Consistent with our growth in cross-segment assignments, transformational change. Approximately 200 professionals FTI Consulting was recently presented with the Business from LECG were seamlessly integrated into our Economic Strategy award at the 2012 Association of Management Consulting, Forensic and Litigation Consulting and Corporate Consulting Firms (AMCF) Awards, which highlight the most Finance/Restructuring