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Huron Consulting Group Announces Third Quarter 2012 Financial Results

Stocks in this article: HURN

(2) The goodwill impairment charge is not allocated at the segment level because the underlying goodwill asset is reflective of our corporate investment in the segments. We do not include the impact of goodwill impairment charges in our evaluation of segment performance.

(3) Consists of our full-time professionals who provide consulting services and generate revenues based on the number of hours worked.

(4) Utilization rate for our full-time billable consultants is calculated by dividing the number of hours all our full-time billable consultants worked on client assignments during a period by the total available working hours for all of these consultants during the same period, assuming a forty-hour work week, less paid holidays and vacation days.

(5) Average billing rate per hour for our full-time billable consultants is calculated by dividing revenues for a period by the number of hours worked on client assignments during the same period.

(6) Consists of consultants who work variable schedules as needed by our clients, as well as contract reviewers and other professionals who generate revenues primarily based on number of hours worked and units produced, such as pages reviewed and data processed. Also includes full-time employees who provide software support and maintenance services to our clients.

HURON CONSULTING GROUP INC.

RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS TO

ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (7)

(In thousands)

(Unaudited)

 
Three Months Ended September 30,   Nine Months Ended September 30,
  2012       2011     2012       2011  
Revenues $ 161,888   $ 153,579   $ 445,196   $ 443,270  
 
Net income from continuing operations $ 10,416 $ 1,052 $ 17,308 $ 13,690
Add back:
Income tax expense (benefit) 7,972 (681 ) 15,707 12,727
Interest and other expenses 2,176 3,333 5,887 10,401
Depreciation and amortization   5,666     6,316     16,656     17,700  
Earnings before interest, taxes, depreciation and amortization (EBITDA) (7) 26,230 10,020 55,558 54,518
Add back:
Restatement related expenses 68 845 1,785 3,870
Restructuring charges 2,194 394 3,253 1,379
Goodwill impairment charge 13,083 21,973 13,083 21,973
Litigation settlements           1,150     1,096  
Adjusted EBITDA (7) $ 41,575   $ 33,232   $ 74,829   $ 82,836  
Adjusted EBITDA as a percentage of revenues (7)   25.7 %   21.6 %   16.8 %   18.7 %
 

HURON CONSULTING GROUP INC.

RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS

TO ADJUSTED NET INCOME FROM CONTINUING OPERATIONS (7)

(In thousands)

(Unaudited)

 

     
Three Months Ended September 30, Nine Months Ended September 30,
  2012     2011     2012     2011  
Net income from continuing operations $ 10,416   $ 1,052  

 

$ 17,308   $ 13,690  
Weighted average shares - diluted 22,326

 

21,968

 

22,247

 

 

21,535

Diluted earnings per share from continuing operations $ 0.47  

 

$

0.05

 

 

$

0.78

 

$

0.64

 
Add back:
Amortization of intangible assets 1,923 1,986

 

5,149 6,270
Restatement related expenses 68 845

 

1,785 3,870
Restructuring charges 2,194 394

 

3,253 1,379
Litigation settlements

 

1,150 1,096
Goodwill impairment charge 13,083 21,973

 

13,083 21,973
Tax effect   (6,840 )   (10,079 )

 

  (9,701 )   (13,835 )
Total adjustments, net of tax   10,428     15,119  

 

  14,719     20,753  
Adjusted net income from continuing operations (7) $ 20,844   $ 16,171  

 

$ 32,027   $ 34,443  
Adjusted diluted earnings per share from continuing operations (7) $ 0.93   $ 0.74  

 

$ 1.44   $ 1.60  

(7) In evaluating the Company’s financial performance, management uses earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA, adjusted EBITDA as a percentage of revenues, adjusted net income from continuing operations, and adjusted diluted earnings per share from continuing operations, which are non-GAAP measures. Our management uses these non-GAAP financial measures to gain an understanding of our comparative operating performance (when comparing such results with previous periods or forecasts). These non-GAAP financial measures are used by management in their financial and operating decision-making because management believes they reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons. Management also uses these non-GAAP financial measures when publicly providing our business outlook, for internal management purposes, and as a basis for evaluating potential acquisitions and dispositions. We believe that these non-GAAP financial measures provide useful information to investors and others (a) in understanding and evaluating Huron’s current operating performance and future prospects in the same manner as management does, if they so choose, (b) in comparing in a consistent manner Huron’s current financial results with Huron’s past financial results and (c) in understanding the Company’s ability to generate cash flows from operations that are available for taxes, capital expenditures, and debt repayment. Investors should recognize that these non-GAAP measures might not be comparable to similarly titled measures of other companies. These measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flows or liquidity prepared in accordance with accounting principles generally accepted in the United States.

HURON CONSULTING GROUP INC.

 

RECONCILIATION OF NON-GAAP MEASURES FOR FULL YEAR 2012 OUTLOOK

 

RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS TO

ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (9)

(In millions)

(Unaudited)

 
Year Ending December 31, 2012
Guidance Range
Low   High
Projected revenues – GAAP $ 615.0     $ 625.0  
Projected net income from continuing operations – GAAP $ 34.5   $ 36.0
Add back:
Income tax expense 28.0 29.5
Interest and other expenses 7.5 7.5
Depreciation and amortization   22.5       22.5  
Projected earnings before interest, taxes, depreciation and amortization (EBITDA) (9) 92.5 95.5
Add back:
Restructuring charges, restatement related expenses, and litigation settlement (8) 7.0 7.0
Goodwill impairment   13.0       13.0  
Projected adjusted EBITDA (9) $ 112.5     $ 115.5  
Projected adjusted EBITDA as a percentage of projected revenues (9)   18.3 %     18.5 %
 

RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS

TO ADJUSTED NET INCOME FROM CONTINUING OPERATIONS (9)

(In millions)

(Unaudited)

 
Year Ending December 31, 2012
Guidance Range
Low   High
Projected net income from continuing operations – GAAP $ 34.5     $ 36.0  
Projected diluted earnings per share from continuing operations – GAAP $ 1.55     $ 1.65  
Add back:  
Amortization of intangible assets 7.0 7.0
Restructuring charges, restatement related expenses, and litigation settlement (8) 7.0 7.0
Goodwill impairment 13.0 13.0
Tax effect   (11.0 )     (11.0 )
Total adjustments, net of tax 16.0 16.0
Projected adjusted net income from continuing operations (9) $ 50.5     $ 52.0  
Projected adjusted diluted earnings per share from continuing operations (9) $ 2.25     $ 2.35  

(8) Restatement related expenses reflect legal fees, indemnity obligations to former employees, and other costs incurred in connection with the restatement, the Company’s inquiries into the facts and circumstances underlying the restatement, the SEC investigation, the SEC settlement, and the derivative lawsuits. On July 19, 2012, the Company reached a final settlement with the SEC resolving the SEC investigation into the restatement. The SEC imposed a monetary penalty of $1 million on the Company. In the fourth quarter of 2011, the Company established a reserve in that amount for the potential settlement of this matter. The SEC also reached settlements with two former employees of the Company with respect to the restatement. The Company is obligated to indemnify its former employees for their defense costs in connection with this matter, but is not obligated to reimburse them for the monetary penalties imposed on them by the SEC in connection with the settlements. Following the settlements reached with these two former employees, the Company does not expect to incur additional material indemnity costs for former employees in connection with the restatement. See the Company’s Form 10-K for the year ended December 31, 2011 and Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012, filed on February 23, 2012, April 26, 2012, and July 30, 2012, respectively, for additional information about the SEC investigation, the SEC settlement, and the derivative lawsuits.

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