Losses, losses, losses
Navigant Consulting Announces Third Quarter Results
Third Quarter 2000 Highlights -- Quarterly revenues of $61.3 million and EBITDA of $6.0 million reflecting core business performance stabilization and improvement -- Substantially completed divestiture of non-core business units, with gross proceeds expected in excess of $90 million -- Adopted comprehensive 5-year "Value Sharing Retention Program" to retain and motivate senior level employees -- Board of Directors authorized purchase of up to 5 million shares
CHICAGO, Oct 26, 2000 /PRNewswire via COMTEX/ -- Navigant Consulting, Inc. (NYSE: NCI chart, msgs).
Third Quarter 2000 versus Second Quarter 2000 and YTD Financial Results
Revenues from the Company's core Financial & Claims and Energy & Water operations in the third quarter 2000 were $61.3 million, compared to $58.5 million in the previous quarter, an increase of 4.8%. EBITDA in the third quarter was $6.0 million, compared to $2.4 million in the previous quarter, an increase of 150%.
Proforma earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter were $10.3 million, or 16.8% of revenues, compared to $5.7 million in the second quarter, or 9.7% of revenues. This represented a quarter over quarter proforma EBITDA increase of $4.6 million, or 81%.
Revenues from continuing core operations for the nine months ended September 30, 2000 were $185.6 million, compared to proforma revenues of $180.9 million for the same period in 1999. Proforma results include the 1999 fourth quarter acquisitions of PENTA Advisory Services and The Barrington Consulting Group.
William M. Goodyear, Chairman and Chief Executive Officer of Navigant Consulting said, "We have worked hard to focus the continuing core operations over the last quarter and are pleased that our revenue and EBITDA results are indicative of progress made. Our core businesses are positioned to capitalize on attractive markets and we are looking forward to further strengthening our results in subsequent quarters and expanding our operations in these markets."
Continuing Core Operations
The Company's two core business units, Financial & Claims and Energy & Water, have focused their energies on enhancing client service offerings, broadening their client base and investing in their human capital.
The Financial & Claims business unit has been a leader in providing objective, problem-solving consulting services to a diverse and expanding client base. This business unit encompasses the skills and experience of recognized industry leaders Peterson Consulting, The Barrington Consulting Group and Penta Advisory Services. Our team of over 650 professionals is dedicated to assisting clients and their counsel with the financial, economic, accounting, engineering and information aspects of disputes, bankruptcy, regulation and change. Major industries served include banking and financial services, construction, energy, federal, state and municipal governmental units, healthcare, government contracts and aerospace, insurance, manufacturing and utilities.
Clients, which include Fortune 500 companies, government agencies and law firms, value the high quality, cost effective solutions that produce measurable results. When businesses are faced with newly identified problems, the Financial & Claims' Group specializes in creating processes where none previously existed. With a blend of project management and analytical expertise, clients' unique needs are quickly evaluated and solutions are developed and implemented. Doug Reichert, Executive Managing Director of the unit remarked, "Peterson Consulting pioneered the litigation consulting industry 20 years ago. As a natural extension to our litigation consulting services, we have expanded into the broader, associated field of operations and claims-related consulting, emphasizing technological solutions. With the increasing changes in technology, combined with our reputation, skills and longevity in the profession, our ability to grow is outstanding."
The Energy & Water business unit provides consulting and transaction-related services to all segments of the energy industry (generation or production, transmission, distribution and retail supply), and is a leading provider of planning and engineering services to the water industry. These industries are capital intensive and undergoing rapid change, driven by the introduction of competition and the new information economy. As markets transform themselves, competitive generation, supply and third-party service providers turn to Navigant Consulting's Energy & Water practice because of the firm's extensive industry content and track record in delivering value to our clients.
Navigant Consulting is a recognized leader in generation asset divestiture, financial advisory, distribution company reliability, strategy and resource allocation, regulatory and litigation support, customer care and energy market assessment services. Robert C. Yardley, Jr., Executive Managing Director, commented on the outlook for the Energy & Water practice, "Throughout this past year, our professionals have been serving our clients and their expanding needs in a rapidly changing business environment. We have provided some very big wins for our clients in our generation asset divestiture and distribution reliability practice areas. We are more excited than ever about our prospects for building upon these successes and expanding the scale and scope of our services in this space."
Disposition of Business Units
The definitive agreement has been executed to complete the previously announced sale of the Strategic Decisions Group (SDG) subsidiary to its management and professional staff. Final closing is expected to take place in the next several days. Total consideration to Navigant Consulting, not including liabilities assumed by SDG, will be approximately $22 million.
The SDG transaction essentially completes the Company's previously announced divestiture and disposition activity, which included the LECG and GeoData Solutions transactions and 10 additional business units. The Company has recorded an additional loss on these dispositions, net of tax, of $10.3 million. This amount principally relates to a reduction in the LECG and SDG transaction proceeds, net of tax, from the amounts reflected in the second quarter results of discontinued operations.
The non-core businesses that have been sold or otherwise discontinued generated revenues of $110.5 million and an operating (EBIT) loss of $12.6 million, as recorded prior to sale or disposition.
Total proceeds from all divestitures are in excess of $90 million, with possible additional performance-related proceeds of up to $10 million. Ben W. Perks, Executive Vice President and Chief Financial Officer stated, "We are very pleased with the cumulative results of the dispositions of non-core business units. We now have significant financial liquidity and firepower to reinvest in and expand our core businesses. In addition, we have no bank debt at this time, as we repaid all of our bank indebtedness on October 2, the first business day after receipt of the proceeds from the LECG transaction. The Company completed the quarter with $34.8 million in cash and cash equivalents reflected on the balance sheet."
"Value Sharing Retention" program
Navigant Consulting also announced the adoption of a new retention program that provides senior level employees with a substantial financial stake in the future success of the Company and further aligns their interests with stockholders. The "Value Sharing Retention" program was developed jointly by the Company and SCA Consulting, a management-consulting firm that specializes in aligning the interests of shareholders and managers by designing compensation systems that reinforce business objectives.
Mr. Goodyear said, "We recognize that a key factor in the success of a professional services organization is an energized human capital base. This new program provides retention power in a high demand market for consultants and motivates our key contributors to drive performance over the long term."
In September, the Company committed to grant cash and equity awards to approximately 380 senior level employees out of a base employee population of 1270. These awards include approximately $20 million in cash, 2.1 million restricted shares and 5.3 million options. The equity awards were available for grant under the Company's existing Long-Term Incentive Plan. Of the 7.4 million shares and options granted in the retention program, approximately 7.0 million were "recycled" as a result of the previously announced option exchange program, and the previously described divestitures and restructuring initiatives.
The cash and equity awards are designed to vest in stages over a 4 1/2 year period to provide continuous and growing retention power. The cash awards vest over a 12-month period, commencing on September 1, 2000. The restricted stock grants vest 33% per year, beginning in September 2001, and the option grants vest 10% on the date of grant and 5% per quarter thereafter through March of 2004. Additionally, to further the program's retentive value, the Company also obtained extensions in current non-compete covenants and/or new non-competes for a majority of the participants.
Julie M. Howard, Vice President and Human Capital Officer stated, "We are very excited about the adoption of this innovative program. Human capital is our most important asset and we believe this program properly motivates our senior level employees to deliver value to our clients, the Company and ultimately, the stockholders."
Board Approves Purchase of Shares
The Board of Directors has authorized the purchase of up to 5 million shares, which is equivalent to over 10% of the Company's shares outstanding. Mr. Goodyear stated, "Given the Company's existing and projected liquidity position, we believe that this use of capital would represent outstanding value for the Company and be an excellent use of our funds." The Company has not yet purchased any shares pursuant to this authority.
Litigation
As previously disclosed, in August 2000, the Company settled for $23 million the 21 consolidated securities law class actions then pending before Judge Castillo in the Northern District of Illinois (the "Consolidated Class Actions"), subject to court approval and certain other conditions. The court is expected to rule on the fairness and approval of such settlement in the first quarter of 2001. In connection with the settlement agreement, the Company has contributed $16.5 million into escrow pending final court approval, and one of its insurers has contributed $6.5 million under an agreement reached with the Company which is also subject to certain conditions. The Company expects to receive from this insurer an additional $.5 million as reimbursement for certain attorneys' fees. The Company is seeking to recover additional funds under a policy issued by a second insurer, and it has agreed to share any such recovery with the class on a 50/50 basis.
In September 2000, the Company was served with another purported shareholder class action complaint containing factual allegations very similar to the factual allegations in the Consolidated Class Actions, except that the plaintiff seeks to extend the class period through January 24, 2000. Also in September 2000, the Company and its former Chief Executive Officer, Robert P. Maher, were named in a complaint filed by the former principal shareholders and officers of GeoData Solutions, Inc., alleging, among other things, violations of securities laws and regulations in connection with the Company's acquisition of GeoData in a stock-for-stock exchange in the first quarter of 1999. The Company will vigorously defend these actions.
Webcast of Company's announcement of Third Quarter results
A live webcast of the Company's announcement of its third quarter results is available by visiting the Company's website at www.navigantconsulting.com. To access the call, click the Investor Relations button and then select Conference Calls. This webcast will be available through November 9, 2000.
About Navigant Consulting
Navigant Consulting, Inc. (www.navigantconsulting.com) is a globally-focused management consulting firm providing consulting services to Fortune 100 companies, government agencies, law firms, and regulated and network industries. The Company is comprised of two business units -- Financial & Claims and Energy & Water. The Financial & Claims unit provides consultation to clients facing the challenges of litigation, bankruptcy, claims, regulation and change in analyzing complex accounting, finance, economic, engineering, system and information management and technology issues. The Energy & Water practice provides consulting services to the energy and electric, gas, and water utility industries, focusing on M&A/divestiture financial advisory services, reliability regulatory and optimization reviews, electric generation and transmission assessments, including energy market assessments, and energy regulatory-related litigation support.
Statements included in this press release, which are not historical in nature, are intended to be, and are hereby identified as, "forward-looking statements" for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended by Public Law 104-67. Forward-looking statements may be identified by words including "anticipate," "believe," "intends," "estimates," "expect" and similar expressions. The Company cautions readers that forward-looking statements, including without limitation, those relating to the Company's future business prospects, revenues, working capital, liquidity, income and margins, are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements, due to several important factors including those identified from time to time in the Company's reports filed with the SEC. Such risk factors include, but are not limited to: Acquisitions and acquisitions under consideration, follow-on offerings, revenues and financial estimates, significant client assignments, recruiting and new business solicitation efforts, regulatory changes, and general economic conditions. |
