SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
As of and for the quarterly period ended September 30, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No. 0-28830
Navigant Consulting, Inc.
(Exact name of Registrant as specified in its charter)
| Delaware | 36-4094854 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
615 North Wabash Avenue, Chicago, Illinois 60611
(Address of principal executive offices, including zip code)
(312) 573-5600
(Registrant’s telephone number, including area code)
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 x NO ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x NO ¨
As of November 5, 2004, 47.7 million shares of the Registrant’s common stock, par value $.001 per share (“Common Stock”), were outstanding.
AS OF AND FOR THE QUARTER ENDED SEPTEMBER 30, 2004
INDEX
| Page | ||||
| Item 1. |
3 | |||
| 7 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 | ||
| Item 3. |
21 | |||
| Item 4. |
22 | |||
| Item 1. |
23 | |||
| Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
23 | ||
| Item 3. |
23 | |||
| Item 4. |
23 | |||
| Item 5. |
23 | |||
| Item 6. |
23 | |||
| 25 | ||||
“Navigant” is a service mark of Navigant International, Inc. The Company is not affiliated, associated, or in any way connected with Navigant International, Inc. and the Company’s use of “Navigant” is made under license from Navigant International, Inc.
2
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
| September 30, 2004 |
December 31, 2003 |
|||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 15,860 | $ | 38,402 | ||||
| Accounts receivable, net |
121,347 | 68,715 | ||||||
| Prepaid expenses and other current assets |
7,008 | 5,741 | ||||||
| Deferred income taxes |
6,113 | 3,805 | ||||||
| Total current assets |
150,328 | 116,663 | ||||||
| Property and equipment, net |
27,173 | 19,958 | ||||||
| Goodwill and intangible assets, net |
209,860 | 112,075 | ||||||
| Deferred income taxes, non-current |
2,547 | 4,326 | ||||||
| Other assets |
1,248 | 2,294 | ||||||
| Total assets |
$ | 391,156 | $ | 255,316 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Bank borrowings |
$ | 18,000 | $ | — | ||||
| Accounts payable and accrued liabilities |
13,518 | 7,015 | ||||||
| Accrued compensation-related costs |
53,314 | 35,552 | ||||||
| Income taxes payable |
325 | 2,539 | ||||||
| Other current liabilities |
31,335 | 19,691 | ||||||
| Total current liabilities |
116,492 | 64,797 | ||||||
| Non-current liabilities |
11,005 | 1,761 | ||||||
| Total liabilities |
127,497 | 66,558 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock |
52 | 51 | ||||||
| Preferred stock |
— | — | ||||||
| Additional paid-in capital |
435,654 | 398,699 | ||||||
| Deferred stock issuance, net |
14,273 | 4,375 | ||||||
| Deferred compensation—restricted stock, net |
(9,940 | ) | (4,917 | ) | ||||
| Treasury stock |
(64,033 | ) | (68,100 | ) | ||||
| Accumulated deficit |
(112,419 | ) | (141,645 | ) | ||||
| Accumulated other comprehensive income |
72 | 295 | ||||||
| Total stockholders’ equity |
263,659 | 188,758 | ||||||
| Total liabilities and stockholders’ equity |
$ | 391,156 | $ | 255,316 | ||||
See accompanying notes to the unaudited consolidated financial statements.
3
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
| For the three months ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| Revenues before reimbursements |
$ | 111,183 | $ | 70,807 | ||||
| Reimbursements |
15,106 | 10,569 | ||||||
| Total revenues |
126,289 | 81,376 | ||||||
| Cost of services before reimbursable expenses |
64,892 | 40,326 | ||||||
| Reimbursable expenses |
15,106 | 10,569 | ||||||
| Total cost of services |
79,998 | 50,895 | ||||||
| Stock-based compensation expense |
2,285 | 1,860 | ||||||
| General and administrative expenses |
21,508 | 15,890 | ||||||
| Depreciation expense |
2,149 | 1,642 | ||||||
| Amortization expense |
1,118 | 495 | ||||||
| Restructuring costs |
200 | — | ||||||
| Operating income |
19,031 | 10,594 | ||||||
| Other income (expense), net |
(451 | ) | 87 | |||||
| Income before income taxes |
18,580 | 10,681 | ||||||
| Income tax expense |
7,628 | 4,559 | ||||||
| Net income |
$ | 10,952 | $ | 6,122 | ||||
| Basic net income per share |
$ | 0.23 | $ | 0.14 | ||||
| Shares used in computing basic net income per share |
47,779 | 43,795 | ||||||
| Diluted net income per share |
$ | 0.22 | $ | 0.13 | ||||
| Shares used in computing diluted net income per share |
50,656 | 47,330 | ||||||
| Comprehensive income: |
||||||||
| Net income |
$ | 10,952 | $ | 6,122 | ||||
| Foreign currency translation adjustment |
38 | (93 | ) | |||||
| Comprehensive income |
$ | 10,990 | $ | 6,029 | ||||
See accompanying notes to the unaudited consolidated financial statements.
4
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
| For the nine months ended September 30, | |||||||
| 2004 |
2003 | ||||||
| Revenues before reimbursements |
$ | 312,107 | $ | 204,713 | |||
| Reimbursements |
40,706 | 31,876 | |||||
| Total revenues |
352,813 | 236,589 | |||||
| Cost of services before reimbursable expenses |
180,998 | 117,838 | |||||
| Reimbursable expenses |
40,706 | 31,876 | |||||
| Total cost of services |
221,704 | 149,714 | |||||
| Stock-based compensation expense |
6,885 | 8,099 | |||||
| General and administrative expenses |
63,402 | 48,553 | |||||
| Depreciation expense |
6,198 | 5,634 | |||||
| Amortization expense |
2,372 | 1,485 | |||||
| Restructuring costs |
1,091 | — | |||||
| Litigation and settlements |
385 | — | |||||
| Operating income |
50,776 | 23,104 | |||||
| Other income (expense), net |
(1,355 | ) | 189 | ||||
| Income before income taxes |
49,421 | 23,293 | |||||
| Income tax expense |
20,195 | 9,661 | |||||
| Net income |
$ | 29,226 | $ | 13,632 | |||
| Basic net income per share |
$ | 0.62 | $ | 0.32 | |||
| Shares used in computing basic net income per share |
46,785 | 42,740 | |||||
| Diluted net income per share |
$ | 0.58 | $ | 0.29 | |||
| Shares used in computing diluted net income per share |
50,024 | 46,710 | |||||
| Comprehensive income: |
|||||||
| Net income |
$ | 29,226 | $ | 13,632 | |||
| Foreign currency translation adjustment |
(223 | ) | 44 | ||||
| Comprehensive income |
$ | 29,003 | $ | 13,676 | |||
See accompanying notes to the unaudited consolidated financial statements.
5
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| For the nine months ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 29,226 | $ | 13,632 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation expense |
6,198 | 5,634 | ||||||
| Amortization expense |
2,372 | 1,485 | ||||||
| Stock-based compensation expense |
6,885 | 8,099 | ||||||
| Tax benefit of issuances of common stock |
9,152 | 7,608 | ||||||
| Accretion of consultants’ non-solicitation agreements |
1,339 | 1,354 | ||||||
| Payments related to consultants’ non-solicitation agreements |
(1,064 | ) | (1,290 | ) | ||||
| Amortization of discount on deferred obligations |
749 | — | ||||||
| Deferred income taxes |
(529 | ) | 1,285 | |||||
| Changes in assets and liabilities, net effect after acquisitions: |
||||||||
| Accounts receivable |
(52,806 | ) | (12,364 | ) | ||||
| Prepaid expenses and other current assets |
(1,118 | ) | (387 | ) | ||||
| Accounts payable and accrued liabilities |
5,289 | (2,280 | ) | |||||
| Accrued compensation-related costs |
20,199 | 12,400 | ||||||
| Income taxes payable |
(2,214 | ) | (5,480 | ) | ||||
| Other current liabilities |
8,075 | (1,601 | ) | |||||
| Net cash provided by operating activities |
31,753 | 28,095 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
(11,639 | ) | (6,766 | ) | ||||
| Acquisition of businesses, net of cash acquired |
(53,303 | ) | (280 | ) | ||||
| Payment of acquisition liabilities |
(12,834 | ) | (8,816 | ) | ||||
| Payment of notes payable related to acquisition |
— | (1,500 | ) | |||||
| Other, net |
(201 | ) | (52 | ) | ||||
| Net cash used in investing activities |
(77,977 | ) | (17,414 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Issuances of common stock |
5,682 | 6,488 | ||||||
| Stock repurchases |
— | (6,081 | ) | |||||
| Borrowings from banks, net |
18,000 | (6,500 | ) | |||||