UNITED STATES
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 |
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 number: 000-50976
HURON CONSULTING GROUP INC.
(Exact name of registrant as specified in its charter)
| Delaware | 01-0666114 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification Number) |
550 West Van Buren Street
Chicago, Illinois
60607
(Address of principal executive offices)
(Zip Code)
(312) 583-8700
(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 ¨ No x
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of November 5, 2004, 16,362,700 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.
Huron Consulting Group Inc.
HURON CONSULTING GROUP INC.
| Page | ||||
| Part I – Financial Information |
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| Item 1. |
Consolidated Financial Statements |
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| 1 | ||||
| 2 | ||||
| 3 | ||||
| 4 | ||||
| 5 – 9 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 –22 | ||
| Item 3. |
22 | |||
| Item 4. |
22 | |||
| Part II – Other Information |
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| 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. |
24 | |||
| 25 | ||||
Huron Consulting Group Inc.
PART I — FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
| September 30, 2004 |
December 31, 2003 |
|||||||
| (Unaudited) | (Audited) | |||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 5,922,094 | $ | 4,251,097 | ||||
| Receivables from clients |
20,862,624 | 16,151,667 | ||||||
| Unbilled services |
12,773,067 | 8,704,057 | ||||||
| Allowance for doubtful accounts and unbilled services |
(2,988,995 | ) | (1,791,720 | ) | ||||
| Net receivables from clients and unbilled services |
30,646,696 | 23,064,004 | ||||||
| Income tax receivable |
1,711,434 | 2,286,015 | ||||||
| Deferred income taxes |
2,466,906 | 1,945,932 | ||||||
| Other current assets |
4,295,634 | 836,868 | ||||||
| Total current assets |
45,042,764 | 32,383,916 | ||||||
| Property and equipment, net |
7,192,785 | 4,498,251 | ||||||
| Other assets: |
||||||||
| Deferred income taxes |
2,664,662 | 2,332,543 | ||||||
| Deposits |
648,580 | 674,000 | ||||||
| Total other assets |
3,313,242 | 3,006,543 | ||||||
| Total assets |
$ | 55,548,791 | $ | 39,888,710 | ||||
| Liabilities and stockholders’ equity (deficit) |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,613,019 | $ | 1,396,265 | ||||
| Accrued expenses |
3,943,194 | 3,821,527 | ||||||
| Accrued payroll and related benefits |
18,451,258 | 13,914,391 | ||||||
| Deferred revenue |
2,255,827 | 2,272,886 | ||||||
| Interest payable to HCG Holdings LLC |
609,025 | 819,624 | ||||||
| Total current liabilities |
26,872,323 | 22,224,693 | ||||||
| Non-current liabilities: |
||||||||
| Accrued expenses |
677,974 | — | ||||||
| Deferred lease incentives |
1,955,798 | — | ||||||
| Total non-current liabilities |
2,633,772 | — | ||||||
| Commitments and contingencies |
||||||||
| Notes payable to HCG Holdings LLC |
10,075,764 | 10,075,764 | ||||||
| 8% preferred stock, $1,000 per share stated value plus accrued 8% annual cumulative dividends; 106,840 shares authorized; 12,500 shares issued and outstanding at September 30, 2004 (unaudited) and December 31, 2003 |
15,069,153 | 14,212,000 | ||||||
| Stockholders’ equity (deficit) |
||||||||
| Class A common stock*; $0.01 par value; 500,000,000 shares authorized; 11,285,756 and 11,281,243 shares issued and outstanding at September 30, 2004 (unaudited) and December 31, 2003, respectively |
112,858 | 259,469 | ||||||
| Class B common stock*; $0.01 par value; 6,486,715 shares authorized; 898,802 and 682,348 shares issued and outstanding at September 30, 2004 (unaudited) and December 31, 2003, respectively |
8,988 | 15,694 | ||||||
| Additional paid-in capital |
1,481,699 | 41,519 | ||||||
| Retained deficit |
(705,766 | ) | (6,940,429 | ) | ||||
| Total stockholders’ equity (deficit) |
897,779 | (6,623,747 | ) | |||||
| Total liabilities and stockholders equity (deficit) |
$ | 55,548,791 | $ | 39,888,710 | ||||
| * | Adjusted to reflect a 1 for 2.3 reverse stock split effected on October 5, 2004. |
The accompanying notes are an integral part of the consolidated financial statements.
- 1 -
Huron Consulting Group Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
||||||||||||
| Revenues and reimbursable expenses: |
|||||||||||||||
| Revenues |
$ | 37,108,802 | $ | 25,548,760 | $ | 118,712,485 | $ | 72,472,105 | |||||||
| Reimbursable expenses |
3,224,809 | 2,104,712 | 10,315,193 | 6,011,189 | |||||||||||
| Total revenues and reimbursable expenses |
40,333,611 | 27,653,472 | 129,027,678 | 78,483,294 | |||||||||||
| Direct costs and reimbursable expenses: |
|||||||||||||||
| Direct costs |
22,265,992 | 19,036,616 | 69,671,651 | 48,356,101 | |||||||||||
| Stock-based compensation expense |
143,816 | 18,047 | 329,549 | 18,047 | |||||||||||
| Reimbursable expenses |
3,161,570 | 2,137,832 | 10,226,381 | 6,055,029 | |||||||||||
| Total direct costs and reimbursable expenses |
25,571,378 | 21,192,495 | 80,227,581 | 54,429,177 | |||||||||||
| Gross profit |
14,762,233 | 6,460,977 | 48,800,097 | 24,054,117 | |||||||||||
| Operating expenses: |
|||||||||||||||
| Selling, general and administrative |
10,632,221 | 6,606,667 | 28,411,722 | 17,700,174 | |||||||||||
| Stock-based compensation expense |
52,986 | 9,389 | 113,150 | 9,389 | |||||||||||
| Depreciation and amortization |
607,012 | 1,491,937 | 1,681,854 | 4,149,934 | |||||||||||
| Restructuring charges |
1,335,831 | — | 3,474,658 | — | |||||||||||
| Loss on lease abandonment |
— | 1,668,000 | — | 1,668,000 | |||||||||||
| Total operating expenses |
12,628,050 | 9,775,993 | 33,681,384 | 23,527,497 | |||||||||||
| Operating income (loss) |
2,134,183 | (3,315,016 | ) | 15,118,713 | 526,620 | ||||||||||
| Other expense: |
|||||||||||||||
| Interest expense |
219,088 | 216,861 | 735,103 | 635,431 | |||||||||||
| Other |
518 | (80 | ) | (206 | ) | 111,433 | |||||||||
| Total other expense |
219,606 | 216,781 | 734,897 | 746,864 | |||||||||||
| Net income (loss) before provision (benefit) for income taxes |
1,914,577 | (3,531,797 | ) | 14,383,816 | (220,244 | ) | |||||||||
| Provision (benefit) for income taxes |
805,320 | (1,367,007 | ) | 6,042,000 | 84,375 | ||||||||||
| Net income (loss) |
1,109,257 | (2,164,790 | ) | 8,341,816 | (304,619 | ) | |||||||||
| Accrued dividends on 8% preferred stock |
298,755 | 275,539 | 857,154 | 791,181 | |||||||||||
| Net income (loss) attributable to common stockholders |
$ | 810,502 | $ | (2,440,329 | ) | $ | 7,484,662 | $ | (1,095,800 | ) | |||||
| Net income (loss) attributable to common stockholders per share*: |
|||||||||||||||
| Basic |
$ | 0.06 | $ | (0.20 | ) | $ | 0.57 | $ | (0.09 | ) | |||||
| Diluted |
$ | 0.06 | $ | (0.20 | ) | $ | 0.53 | $ | (0.09 | ) | |||||
| Weighted average shares used in calculating net income (loss) attributable to common stockholders per share*: |
|||||||||||||||
| Basic |
12,179,654 | 11,926,623 | 12,068,064 | 11,870,399 | |||||||||||
| Diluted |
13,148,852 | 11,926,623 | 13,045,226 | 11,870,399 | |||||||||||
| * | Adjusted to reflect a 1 for 2.3 reverse stock split effected on October 5, 2004. |
The accompanying notes are an integral part of the consolidated financial statements.
- 2 -
Huron Consulting Group Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
| Class A Common Stock |
Class B Common Stock |
Additional Paid-In Capital |
Retained Deficit |
Stockholders’ Equity (Deficit) |
|||||||||||||||||||
| Shares* |
Amount |
Shares* |
Amount |
||||||||||||||||||||
| Balance at December 31, 2003 |
11,281,243 | $ | 259,469 | 682,348 | $ | 15,694 | $ | 41,519 | $ | (6,940,429 | ) | $ | (6,623,747 | ) | |||||||||
| Exercise of stock options |
4,513 | 45 | 216,454 | 2,165 | 38,302 | — | 40,512 | ||||||||||||||||
| Stock option compensation |
— | — | — | — | 442,699 | — | 442,699 | ||||||||||||||||
| Income tax benefit on stock options exercised |
— | — | — | — | 803,652 | — | 803,652 | ||||||||||||||||
| Accrued dividends on 8% preferred stock |
— | ||||||||||||||||||||||