Duff & Phelps Corporation (NYSE: DUF), a leading independent financial advisory and investment banking firm, today announced financial results for its second quarter of 2010 and declared a quarterly dividend.

Results

For the quarter ended June 30, 2010, Duff & Phelps generated revenues excluding reimbursable expenses of $88.7 million, compared to $90.1 million for the corresponding prior year quarter. Adjusted EBITDA (1) for the quarter was $14.6 million, representing 16.5% of revenues excluding reimbursable expenses, compared to $16.8 million for the corresponding prior year quarter, representing 18.6% of revenues excluding reimbursable expenses. Adjusted EBITDA (1) for the quarter excludes a $3.6 million charge related to the departure of our former president and one of our segment leaders (2). Net income attributable to Duff & Phelps Corporation was $2.5 million, or $0.09 per share of Class A common stock on a fully diluted basis, compared to $1.7 million, or $0.09 for the corresponding prior year quarter. Adjusted Pro Forma Net Income (1) was $7.2 million, or $0.19 per share on a fully exchanged, fully diluted basis, compared to $8.1 million, or $0.22 per share, for the corresponding prior year quarter. Adjusted Pro Forma Net Income (1) per share excludes a $0.05 per share charge related to the departure of our former president and one of our segment leaders (2).

For the six months ended June 30, 2010, Duff & Phelps generated revenues excluding reimbursable expenses of $177.9 million, compared to $179.3 million for the corresponding prior year period. Adjusted EBITDA (1) for the period was $30.1 million, representing 16.9% of revenues excluding reimbursable expenses, compared to $32.0 million for the corresponding prior year period, representing 17.8% of revenues excluding reimbursable expenses. Adjusted EBITDA for the six months ended June 30, 2010 excludes a $3.6 million charge related to the departure of our former president and one of our segment leaders (2). Net income attributable to Duff & Phelps Corporation was $6.8 million, or $0.25 per share of Class A common stock on a fully diluted basis, compared to $3.5 million, or $0.20 for the corresponding prior year period. Adjusted Pro Forma Net Income (1) was $14.5 million, or $0.37 per share on a fully exchanged, fully diluted basis, compared to $15.1 million, or $0.42 per share, for the corresponding prior year period. Adjusted Pro Forma Net Income (1) per share excludes a $0.05 per share charge related to the departure of our former president and one of our segment leaders (2).

"We began to see modest improvements in certain areas of our business relating to M&A activity, and our Global Restructuring Advisory business continued to exhibit growth in the second quarter as a result of recent economic volatility,” said Noah Gottdiener, chief executive officer. “While other businesses, such as Portfolio Valuation, have experienced lower growth in recent quarters, we believe that meaningful opportunities exist to develop new offerings and further penetrate existing markets for these types of services.”

“Given the strength of our balance sheet, we have been more active with respect to capital deployment to grow our business and enhance shareholder returns,” commented Jacob Silverman, chief financial officer. “This was evident in our acquisition of Cole & Partners in June as well as the increase in our quarterly dividend and implementation of our stock repurchase program."

Declaration of Quarterly Dividend

The Company also announced today that its board of directors has declared a quarterly dividend of $0.06 per share on its outstanding Class A common stock. The dividend is payable on August 27, 2010 to shareholders of record on August 17, 2010.
__________
(1)   Adjusted EBITDA, Adjusted Pro Forma Net Income and Adjusted Pro Forma Net Income per share are non-GAAP financial measures. See definitions and disclosures herein.
(2)

On April 22, 2010, the Company announced certain management changes related to the departure of our former president and one of our segment leaders. The Company incurred a onetime charge associated with these changes of approximately $3.6 million in its second quarter of 2010 related to cash severance and the accounting impact of accelerated vesting of equity-based awards. Of this amount, approximately $3.0 million primarily resulted from cash severance and a charge from the accelerated vesting of restricted stock awards which is added back to Adjusted EBITDA and Adjusted Pro Forma Net Income (as defined below). The remaining approximately $0.5 million related to a charge from the accelerated vesting of Legacy Units and IPO Options, which is also added back to Adjusted EBITDA and Adjusted Pro Forma Net Income (as defined below) consistent with prior presentation.

Earnings Call Webcast

As previously announced, Duff & Phelps will host a conference call today, July 29, 2010, at 8:30 a.m. EDT to discuss the Company’s financial results. Interested parties can access the webcast for this call through http://ir.duffandphelps.com/events.cfm.

About Duff & Phelps

As a leading global independent provider of financial advisory and investment banking services, Duff & Phelps delivers trusted advice to our clients principally in the areas of valuation, transactions, financial restructuring, dispute and taxation. Our world class capabilities and resources, combined with an agile and responsive delivery, distinguish our clients' experience in working with us. With offices in North America, Europe and Asia, Duff & Phelps is committed to fulfilling its mission to protect, recover and maximize value for its clients. Investment banking services in the United States are provided by Duff & Phelps Securities, LLC. Investment banking services in the United Kingdom and Germany are provided by Duff & Phelps Securities Ltd. Duff & Phelps Securities Ltd. is authorized and regulated by the Financial Services Authority. Investment banking services in France are provided by Duff & Phelps SAS. For more information, visit www.duffandphelps.com. (NYSE: DUF)

Non-GAAP Financial Measures

Adjusted EBITDA, Adjusted Pro Forma Net Income and Adjusted Pro Forma Net Income per share are non-GAAP financial measures. We believe that Adjusted EBITDA provides a relevant and useful alternative measure of our ongoing profitability and performance, when viewed in conjunction with GAAP measures, as it adjusts net income or loss attributable to Duff & Phelps Corporation for (a) net income or loss attributable to noncontrolling interest, (b) provision for income taxes, (c) interest expense and depreciation and amortization (a significant portion of which relates to debt and capital investments that have been incurred as the result of acquisitions and investments in stand-alone infrastructure which we do not expect to incur at the same levels in the future), (d) equity-based compensation associated with the Legacy Units of D&P Acquisitions, a significant portion of which is due to certain onetime grants associated with acquisitions prior to our IPO, and options to purchase shares of the Company’s Class A common stock granted in connection with the IPO, (e) impairment charges, acquisition retention expenses and other merger and acquisition costs, which are generally non-recurring in nature or are related to deferred payments associated with prior acquisitions, and (f) costs incurred from the realignment of our senior management which are generally non-recurring in nature and primarily include cash severance and charges from the accounting impact of the acceleration of vesting of restricted stock awards.

Given the level of acquisition activity during the period prior to our IPO, and related capital investments and one time equity grants associated with acquisitions during the this period (which we do not expect to incur at the same levels post IPO) and the IPO, and our belief that, as a professional services organization, our operations are not capital intensive on an ongoing basis, we believe the Adjusted EBITDA measure, in addition to GAAP financial measures, provides a relevant and useful benchmark for investors, in order to assess our financial performance and comparability to other companies in our industry. The Adjusted EBITDA measure is utilized by our senior management to evaluate our overall performance and operating expense characteristics and to compare our performance to that of certain of our competitors. A measure similar to Adjusted EBITDA is the principal measure that determines the compensation of our senior management team. In addition, a measure similar to Adjusted EBITDA is a key measure that determines compliance with certain financial covenants under our credit facility. Management compensates for the inherent limitations associated with using the Adjusted EBITDA measure through disclosure of such limitations, presentation of our financial statements in accordance with GAAP and reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, net income or loss. Furthermore, management also reviews GAAP measures, and evaluates individual measures that are not included in Adjusted EBITDA such as our level of capital expenditures, equity issuance and interest expense, among other measures.

Adjusted EBITDA, as defined by the Company and reconciled below, consists of net income or loss attributable to Duff & Phelps Corporation before (a) net income or loss attributable to the noncontrolling interest, (b) provision for income taxes, (c) other expense/(income), net, (d) depreciation and amortization, (e) charges from impairment of intangible assets, (f) equity-based compensation associated with Legacy Units and IPO Options included in both compensation and benefits and in selling, general and administrative expenses, (g) acquisition retention expenses, (h) cash severance and equity-compensation expense from the acceleration of vesting of restricted stock awards due to the realignment of our senior management, and (i) merger and acquisition costs:
 
Reconciliation of Adjusted EBITDA
         
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
Revenues (excluding client reimbursables) $ 88,742 $ 90,053 $ 177,906 $ 179,318
 
Net income attributable to Duff & Phelps Corporation $ 2,507 $ 1,734 $ 6,780 $ 3,499
Net income attributable to noncontrolling interest 2,111 3,465 5,406 8,281
Provision for income taxes 2,506 2,421 6,156 4,533
Other expense/(income), net 270 2,137 323 2,795
Depreciation and amortization 2,350 2,556 4,843 5,118
Charge from impairment of certain intangible assets - - 674 -
Equity-based compensation associated
with Legacy Units and IPO Options 1,494 4,481 2,577 7,733
Charge from realignment of senior management (not
included in equity-based compensation from Legacy
Units and IPO Options above) 3,040 - 3,040 -
Merger and acquisition costs   321     -     321     -  
 
Adjusted EBITDA $ 14,599   $ 16,794   $ 30,120   $ 31,959  
 
Adjusted EBITDA as a percentage of revenues 16.5 % 18.6 % 16.9 % 17.8 %

Adjusted Pro Forma Net Income, as defined by Duff & Phelps and reconciled below, consists of net income or loss attributable to Duff & Phelps Corporation before (a) net income or loss attributable to the noncontrolling interest, (b) a non-recurring charge from the repayment and subsequent termination of our former credit agreement, (c) equity-based compensation associated with Legacy Units and IPO Options included in both compensation and benefits and in selling, general and administrative expenses, (d) acquisition retention expenses, (e) cash severance and equity-compensation expense from the acceleration of vesting of restricted stock awards due to the realignment of our senior management, (f) merger and acquisition costs, and less (g) pro forma corporate income tax applied at an assumed rate as specified in the applicable footnote (such assumed pro forma corporate income tax rate may fluctuate between periods and may include true-ups relating to prior periods, based on management estimates and judgments). Adjusted Pro Forma Net Income per share, as defined by Duff & Phelps, consists of Adjusted Pro Forma Net Income divided by the weighted average number of the Company's Class A and Class B shares for the applicable period, giving effect to the dilutive impact, if any, of stock options and restricted stock awards.
 
Reconciliation of Adjusted Pro Forma Net Income
         
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
Net income attributable to Duff & Phelps Corporation $ 2,507 $ 1,734 $ 6,780 $ 3,499
Net income attributable to noncontrolling interest(a) 2,111 3,465 5,406 8,281
Loss on early extinguishment of debt(b) - 1,737 - 1,737
Equity-based compensation associated
with Legacy Units and IPO Options(c) 1,494 4,481 2,577 7,733
Charge from realignment of senior management (not 3,040 - 3,040 -
included in equity-based compensation from Legacy
Units and IPO Options above)(d)
Merger and acquisition costs 321 - 321 -
Adjustment to provision for income taxes(e)   (2,270 )   (3,333 )   (3,639 )   (6,167 )
 
Adjusted Pro Forma Net Income, as defined $ 7,203   $ 8,084   $ 14,485   $ 15,083  
 
Pro forma fully exchanged, fully diluted shares outstanding(f)   38,681     36,780     38,850     35,818  
 
Adjusted Pro Forma Net Income per fully exchanged,
fully diluted shares outstanding $ 0.19   $ 0.22   $ 0.37   $ 0.42  
 
_________________
(a)   Represents elimination of the noncontrolling interest associated with the ownership by existing unitholders of D&P Acquisitions (excluding D&P Corporation), as if such unitholders had fully exchanged their partnership units and Class B common stock of the Company for shares of Class A common stock of the Company.
(b) Represents a non-recurring charge from the repayment and subsequent termination of our credit agreement.
(c) Represents elimination of equity-based compensation associated with Legacy Units and IPO Options.
(d) Represents elimination of a charge from the departure of our former president and one of our segment leaders which is not included in equity-based compensation from Legacy Units and IPO Options.
(e)

Represents an adjustment to reflect an assumed effective corporate tax rate of approximately 40.3% and 41.5% for the full year, as applied to the three months ended June 30, 2010 and 2009, respectively, which includes a provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state, local and/or foreign jurisdiction.  For the three months ended June 30, 2010 and 2009, the pro forma tax rates of 39.8% and 41.6% reflect a true-up adjustment relating to the three months ended March 31, 2010 and 2009, respectively.  Assumes full exchange of existing unitholders' partnership units and Class B common stock of the Company into Class A common stock of the Company.
(f) Based on the weighted-average number of aggregated Class A and Class B shares of common stock outstanding, excluding Ongoing RSAs, and dilutive effect of Ongoing RSAs for the three and six months ended June 30, 2010 and 2009, respectively. The Company believes that IPO Options would not be considered dilutive when applying the treasury method.

Both Adjusted EBITDA and Adjusted Pro Forma Net Income are non-GAAP financial measures which are not prepared in accordance with, and should not be considered alternatives to, measurements required by GAAP, such as operating income, net income or loss, net income or loss per share, cash flow from continuing operating activities or any other measure of performance or liquidity derived in accordance with GAAP. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. In addition, it should be noted that companies calculate Adjusted EBITDA and Adjusted Pro Forma Net Income differently and, therefore, Adjusted EBITDA and Adjusted Pro Forma Net Income as presented for us may not be comparable to Adjusted EBITDA and Adjusted Pro Forma Net Income reported by other companies.

Disclosure Regarding Forward-Looking Statements

Statements in this press release contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), which reflect the Company’s current views with respect to, among other things, future events and financial performance. The Company generally identifies forward looking statements by terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “could,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this discussion are based upon our historical performance and on our current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us, or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and the risk factors section that are included in our Annual Report on Form 10-K for the year ended December 31, 2009 and any subsequent filings of our Quarterly Reports on Form 10-Q. The forward-looking statements included in this press release are made only as of the date this press release was issued. The Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

DUF-E

 
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
     
Three Months Ended Six Months Ended
June 30,   June 30, June 30,   June 30,
2010 2009 2010 2009
 
Revenues $ 88,742 $ 90,053 $ 177,906 $ 179,318
Reimbursable expenses   1,962     2,626     4,760     4,663  
Total revenues   90,704     92,679     182,666     183,981  
 
Direct client service costs
Compensation and benefits (includes $4,215 and $5,075
of equity-based compensation for the three months ended
June 30, 2010 and 2009, respectively, and $7,932 and $9,338
for the six months ended June 30, 2010 and 2009, respectively) 50,415 51,698 99,013 102,828
Other direct client service costs 1,881 1,543 3,869 2,847
Reimbursable expenses   2,039     2,637     4,893     4,652  
  54,335     55,878     107,775     110,327  
 
Operating expenses
Selling, general and administrative (includes $2,005 and $1,665
of equity-based compensation for the three months ended
June 30, 2010 and 2009, respectively, and $3,458 and $3,556
for the six months ended June 30, 2010 and 2009, respectively) 26,304 24,488 50,388 49,428
Depreciation and amortization 2,350 2,556 4,843 5,118
Charge from impairment of certain intangible assets - - 674 -
Merger and acquisition costs   321     -     321     -  
  28,975     27,044     56,226     54,546  
 
Operating income 7,394 9,757 18,665 19,108
 
Other expense/(income), net
Interest income (53 ) (3 ) (77 ) (17 )
Interest expense 76 333 168 988
Loss on early extinguishment of debt - 1,737 - 1,737
Other expense   247     70     232     87  
  270     2,137     323     2,795  
 
Income before income taxes 7,124 7,620 18,342 16,313
 
Provision for income taxes   2,506     2,421     6,156     4,533  
 
Net income 4,618 5,199 12,186 11,780
 
Less: Net income attributable to noncontrolling interest   2,111     3,465     5,406     8,281  
 
Net income attributable to Duff & Phelps Corporation $ 2,507   $ 1,734   $ 6,780   $ 3,499  
 
Weighted average shares of Class A common stock outstanding
Basic 25,058 17,356 25,022 15,428
Diluted 25,754 18,111 25,903 16,045
 
Net income per share attributable to stockholders of Class A
common stock of Duff & Phelps Corporation
Basic $ 0.10 $ 0.10 $ 0.26 $ 0.21
Diluted $ 0.09 $ 0.09 $ 0.25 $ 0.20
 
Cash dividends declared per common share $ 0.06 $ 0.05 $ 0.11 $ 0.05
                       
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
YEAR-OVER-YEAR SUMMARY OF REVENUE BY SEGMENT
(In thousands)
(Unaudited)
 
Variance Variance
2009 2010 Q2 2010 vs Q2 2009 H1 2010 vs H1 2009
Q1 Q2 Q3 Q4 Total Q1 Q2 Total Dollar Percent Dollar Percent
Financial Advisory
Valuation Advisory $ 40,370 $ 33,772 $ 29,692 $ 34,676 $ 138,510 $ 35,020 $ 32,829 $ 67,849 $ (943 ) (2.8 %) $ (6,293 ) (8.5 %)
Tax Services 10,878 11,972 15,045 10,007 47,902 9,447 12,089 21,536 117 1.0 % (1,314 ) (5.8 %)
Dispute & Legal
Management Consulting   9,643   12,162   12,897   12,518   47,220   9,415   9,316   18,731   (2,846 ) (23.4 %)   (3,074 ) (14.1 %)
  60,891   57,906   57,634   57,201   233,632   53,882   54,234   108,116   (3,672 ) (6.3 %)   (10,681 ) (9.0 %)
 
Corporate Finance Consulting
Portfolio Valuation 6,295 4,338 5,858 5,662 22,153 5,482 4,642 10,124 304 7.0 % (509 ) (4.8 %)
Financial Engineering 4,148 5,159 5,201 4,663 19,171 4,126 3,355 7,481 (1,804 ) (35.0 %) (1,826 ) (19.6 %)
Strategic Value Advisory 2,620 3,588 4,034 3,208 13,450 3,158 2,883 6,041 (705 ) (19.6 %) (167 ) (2.7 %)
Due Diligence   1,553   1,893   2,352   2,384   8,182   2,170   2,439   4,609   546   28.8 %   1,163   33.7 %
  14,616   14,978   17,445   15,917   62,956   14,936   13,319   28,255   (1,659 ) (11.1 %)   (1,339 ) (4.5 %)
 
Investment Banking
Global Restructuring Advisory 5,578 8,614 11,038 12,164 37,394 9,841 12,004 21,845 3,390 39.4 % 7,653 53.9 %
Transaction Opinions 6,101 6,180 2,714 6,081 21,076 6,823 6,041 12,864 (139 ) (2.2 %) 583 4.7 %
M&A Advisory   2,079   2,375   4,409   6,982   15,845   3,682   3,144   6,826   769   32.4 %   2,372   53.3 %
  13,758   17,169   18,161   25,227   74,315   20,346   21,189   41,535   4,020   23.4 %   10,608   34.3 %
 
Total Revenues $ 89,265 $ 90,053 $ 93,240 $ 98,345 $ 370,903 $ 89,164 $ 88,742 $ 177,906 $ (1,311 ) (1.5 %) $ (1,412 ) (0.8 %)
 
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(In thousands, except headcount data)
(Unaudited)
    Three Months Ended   Six Months Ended
June 30,   June 30, June 30,   June 30,
2010 2009 2010 2009
Financial Advisory
Revenues (excluding reimbursables) $ 54,234 $ 57,906 $ 108,116 $ 118,797
Segment operating income $ 8,449 $ 10,339 $ 15,987 $ 20,688
Segment operating income margin 15.6 % 17.9 % 14.8 % 17.4 %
 
Corporate Finance Consulting
Revenues (excluding reimbursables) $ 13,319 $ 14,978 $ 28,255 $ 29,594
Segment operating income $ 1,177 $ 3,178 $ 4,159 $ 6,430
Segment operating income margin 8.8 % 21.2 % 14.7 % 21.7 %
 
Investment Banking
Revenues (excluding reimbursables) $ 21,189 $ 17,169 $ 41,535 $ 30,927
Segment operating income $ 5,050 $ 3,288 $ 10,107 $ 4,831
Segment operating income margin 23.8 % 19.2 % 24.3 % 15.6 %
 
Total
Revenues (excluding reimbursables) $ 88,742 $ 90,053 $ 177,906 $ 179,318
 
Segment operating income $ 14,676 $ 16,805 $ 30,253 $ 31,949
Net client reimbursable expenses (77 ) (11 ) (133 ) 11
Equity-based compensation from
Legacy Units and IPO Options (1,494 ) (4,481 ) (2,577 ) (7,734 )
Depreciation and amortization (2,350 ) (2,556 ) (4,843 ) (5,118 )
Charge from impairment of certain intangible assets - - (674 ) -
Charge from realignment of senior management (not
included in equity-based compensation from Legacy
Units and IPO Options above) (3,040 ) - (3,040 ) -
Merger and acquisition costs   (321 )   -     (321 )   -  
Operating income $ 7,394   $ 9,757   $ 18,665   $ 19,108  
 
_____________________________________________
 
 
Average Client Service Professionals
Financial Advisory 566 658 587 679
Corporate Finance Consulting 113 134 119 133
Investment Banking   127     135     129     135  
Total   806     927     835     947  
 
End of Period Client Service Professionals
Financial Advisory 548 640 548 640
Corporate Finance Consulting 109 136 109 136
Investment Banking   125     131     125     131  
Total   782     907     782     907  
 
Revenue per Client Service Professional
Financial Advisory $ 96 $ 88 $ 184 $ 175
Corporate Finance Consulting $ 118 $ 112 $ 237 $ 223
Investment Banking $ 167 $ 127 $ 322 $ 229
Total $ 110 $ 97 $ 213 $ 189
 
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT – CONTINUED
(In thousands, except utilization, rate-per-hour and headcount data)
(Unaudited)
       
Three Months Ended Six Months Ended
June 30,   June 30, June 30,   June 30,
2010 2009 2010 2009
Utilization(1)
Financial Advisory 63.9 % 62.3 % 64.6 % 64.8 %
Corporate Finance Consulting 56.7 % 60.2 % 57.5 % 57.9 %
 
Rate-Per-Hour(2)
Financial Advisory $ 356 $ 328 $ 341 $ 316
Corporate Finance Consulting $ 438 $ 393 $ 452 $ 410
 
_____________________________________________
 
 
Revenues (excluding reimbursables)
Financial Advisory $ 54,234 $ 57,906 $ 108,116 $ 118,797
Corporate Finance Consulting 13,319 14,978 28,255 29,594
Investment Banking   21,189     17,169     41,535     30,927  
Total $ 88,742   $ 90,053   $ 177,906   $ 179,318  
 
Average Number of Managing Directors
Financial Advisory 91 99 92 100
Corporate Finance Consulting 30 30 31 30
Investment Banking   41     39     41     37  
Total   162     168     164     167  
 
End of Period Managing Directors
Financial Advisory 94 96 94 96
Corporate Finance Consulting 29 31 29 31
Investment Banking   40     38     40     38  
Total   163     165     163     165  
 
Revenue per Managing Director
Financial Advisory $ 596 $ 585 $ 1,175 $ 1,188
Corporate Finance Consulting $ 444 $ 499 $ 911 $ 986
Investment Banking $ 517 $ 440 $ 1,013 $ 836
Total $ 548 $ 536 $ 1,085 $ 1,074
 
____________________________________

(1)
  The utilization rate for any given period is calculated by dividing the number of hours incurred by client service professionals who worked on client assignments (including internal projects for the Company) during the period by the total available working hours for all of such client service professionals during the same period, assuming a 40 hour work week, less paid holidays and vacation days. Financial Advisory utilization excludes approximately 60 client service professionals associated with Rash & Associates, L.P. (“Rash”), a wholly-owned subsidiary of the Company, due to the nature of the work performed.

(2)
Average billing rate-per-hour is calculated by dividing applicable revenues for the period by the number of hours worked on client assignments (including internal projects for the Company) during the same period. Financial Advisory revenues used to calculate rate-per-hour exclude approximately $1,798 and $2,430 of revenues associated with Rash in the three months ended June 30, 2010 and 2009, respectively, and $3,381 and $4,322 of revenues associated with Rash in the six months ended June 30, 2010 and 2009, respectively.
 
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
SUMMARY OF CLIENT SERVICE PROFESSIONALS BY SEGMENT
(Unaudited)
                 
2009 2010
Q1 Q2 Q3 Q4 YTD Q1 Q2 YTD
Average Client Service Professionals
Financial Advisory 700 658 642 627 657 607 566 587
Corporate Finance Consulting 131 134 133 130 132 124 113 119
Investment Banking 136 135 130 131 133 131 127 129
967 927 905 888 922 862 806 835
 
End of Period Client Service Professionals
Financial Advisory 681 640 641 618 585 548
Corporate Finance Consulting 130 136 131 129 117 109
Investment Banking 137 131 130 131 128 125
948 907 902 878 830 782
 
 
2009 2010
Q1 Q2 Q3 Q4 YTD Q1 Q2 YTD
Average Managing Directors
Financial Advisory 101 99 95 93 97 91 91 92
Corporate Finance Consulting 30 30 31 29 30 32 30 31
Investment Banking 36 39 40 40 39 40 41 41
167 168 166 162 166 163 162 164
 
End of Period Managing Directors
Financial Advisory 101 96 93 93 88 94
Corporate Finance Consulting 30 31 29 30 31 29
Investment Banking 38 38 40 40 39 40
169 165 162 163 158 163
 
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(Unaudited)
      June 30,   December 31,
2010 2009
ASSETS
Current assets
Cash and cash equivalents $ 79,231 $ 107,311
Restricted cash 3,156 -
Accounts receivable (net of allowance for doubtful accounts
of $1,279 at June 30, 2010 and $1,690 at December 31, 2009) 51,812 55,079
Unbilled services 27,743 22,456
Prepaid expenses and other current assets 8,962 6,100
Net deferred income taxes, current   566     4,601
Total current assets   171,470     195,547
 
Property and equipment (net of accumulated depreciation
of $23,111 at June 30, 2010 and $20,621 at December 31, 2009) 28,387 27,413
Goodwill 129,636 122,876
Intangible assets (net of accumulated amortization
of $22,054 at June 30, 2010 and $16,881 at December 31, 2009) 30,818 27,907
Other assets 2,889 3,218
Investments related to deferred compensation plan 20,295 17,807
Net deferred income taxes, non-current   111,221     112,265
Total non-current assets   323,246     311,486
 
Total assets $ 494,716   $ 507,033
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,038 $ 2,459
Accrued expenses 5,805 11,609
Accrued compensation and benefits 18,345 35,730
Deferred revenues 3,683 3,633
Other current liabilities 170 993
Current portion due to noncontrolling unitholders   4,303     4,303
Total current liabilities   34,344     58,727
 
Liability related to deferred compensation plan, less current portion 20,237 18,051
Other long-term liabilities 15,715 15,400
Due to noncontrolling unitholders, less current portion   101,382     101,098
Total non-current liabilities   137,334     134,549
 
Total liabilities   171,678     193,276
 
Commitments and contingencies
 
Stockholders' equity
Preferred stock (50,000 shares authorized; zero issued and outstanding) - -
Class A common stock, par value $0.01 per share (100,000 shares authorized; 28,208 and
27,290 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively) 282 273
Class B common stock, par value $0.0001 per share (50,000 shares authorized; 12,909 and
12,974 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively) 1 1
Additional paid-in capital 213,921 207,210
Accumulated other comprehensive income/(loss) (1,395 ) 693
Retained earnings   10,381     6,709
Total stockholders' equity of Duff & Phelps Corporation 223,190 214,886
Noncontrolling interest   99,848     98,871
Total stockholders' equity   323,038     313,757
Total liabilities and stockholders' equity $ 494,716   $ 507,033
     
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Six Months Ended
June 30,   June 30,
2010 2009
Cash flows from operating activities:
Net income $ 12,186 $ 11,780
 
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 4,843 5,118
Equity-based compensation 11,390 12,894
Bad debt expense 809 1,362
Net deferred income taxes 5,364 5,784
Charge from impairment of certain intangible assets 674 -
Loss on early extinguishment of debt - 1,674
Other 127 (357 )
Changes in assets and liabilities providing/(using) cash:
Accounts receivable 5,316 (5,189 )
Unbilled services (4,823 ) (8,936 )
Prepaid expenses and other current assets (1,699 ) 1,515
Other assets

728
(1,221 )
Accounts payable and accrued expenses (6,901 ) (2,019 )
Accrued compensation and benefits (18,704 ) (21,329 )
Deferred revenues (121 ) 1,226
Other liabilities   (27 )   -  
Net cash provided by operating activities  

9,162
    2,302  
 
Cash flows from investing activities:
Purchase of property and equipment (3,561 ) (3,872 )
Business acquisitions, net of cash acquired (11,807 ) -
Purchase of investments for deferred compensation plan   (2,975 )   (5,684 )
Net cash used in investing activities   (18,343 )   (9,556 )
 
Cash flows from financing activities:
Repurchases of Class A common stock (8,177 ) (740 )
Increase in restricted cash (3,156 ) (4,043 )
Dividends (3,141 ) (1,197 )
Distributions and other payments to noncontrolling unitholders (2,135 ) (12,370 )
Proceeds from exercises of IPO Options 82 343
Other (3 ) -
Net proceeds from sale of Class A common stock - 111,871
Redemption of noncontrolling unitholders - (67,112 )
Repayments of debt - (42,763 )
Fees associated with early extinguishment of debt   -     (63 )
Net cash used in financing activities   (16,530 )   (16,074 )
 
Effect of exchange rate on cash and cash equivalents  

(2,369
)   535  
 
Net decrease in cash and cash equivalents (28,080 ) (22,793 )
Cash and cash equivalents at beginning of period   107,311     81,381  
Cash and cash equivalents at end of period $ 79,231   $ 58,588  
 
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
ADJUSTED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
   
Three Months Ended June 30, 2010
As   Adjusted
Reported Adjustments   Pro Forma
 
Revenues $ 88,742 $ - $ 88,742
Reimbursable expenses   1,962     -     1,962  
Total revenues   90,704     -     90,704  
 
Direct client service costs
Compensation and benefits 50,415 (1,176 ) (a) 49,239
Other direct client service costs 1,881 - 1,881
Acquisition retention expenses - - -
Reimbursable expenses   2,039     -     2,039  
  54,335     (1,176 )   53,159  
 
Operating expenses
Selling, general and administrative 26,304 (3,358 ) (a) 22,946
Depreciation and amortization 2,350 - 2,350
Merger and acquisition costs   321     (321 )   -  
  28,975     (3,679 )   25,296  
 
Operating income 7,394 4,855 12,249
 
Other expense/(income), net
Interest income (53 ) - (53 )
Interest expense 76 - 76
Other expense   247     -     247  
  270     -     270  
 
Income before income taxes 7,124 4,855 11,979
-
Provision for income taxes   2,506     2,270   (b)   4,776  
 
Net income 4,618 2,585 7,203
 
Less: Net income attributable to the noncontrolling interest   2,111     (2,111 ) (c)   -  
 
Net income attributable to Duff & Phelps Corporation $ 2,507   $ 4,696   $ 7,203  
 
 
Pro forma fully exchanged, fully diluted shares outstanding (d)   38,681  
 
Adjusted Pro Forma Net Income per fully exchanged, fully diluted shares outstanding $ 0.19  
____________________
(a)   Represents elimination of equity-based compensation associated with Legacy Units and IPO Options and a charge from the departure of our former president and one of our segment leaders.
(b)

Represents an adjustment to reflect an assumed effective corporate tax rate of approximately 40.3% for the full year, which includes a provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state, local and/or foreign jurisdiction. For the quarter ended June 30, 2010, the pro forma tax rate of 39.9% reflects a true-up adjustment relating to the three months ended March 31, 2010. Assumes full exchange of existing unitholders' partnership units and Class B common stock of the Company into Class A common stock of the Company.
(c) Represents elimination of the noncontrolling interest associated with the ownership by existing unitholders of D&P Acquisitions (excluding D&P Corporation), as if such unitholders had fully exchanged their partnership units and Class B common stock of the Company for shares of Class A common stock of the Company.
(d) Based on the weighted-average number of aggregated Class A and Class B shares of common stock outstanding, excluding Ongoing RSAs, and dilutive effect of Ongoing RSAs for the quarter ended June 30, 2010. The Company believes that IPO Options would not be considered dilutive when applying the treasury method.
 
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
ADJUSTED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
    Three Months Ended June 30, 2009
As   Adjusted
Reported Adjustments Pro Forma
 
Revenues $ 90,053 $ - $ 90,053
Reimbursable expenses   2,626     -     2,626  
Total revenues   92,679     -     92,679  
 
Direct client service costs
Compensation and benefits 51,698 (3,548 ) (a) 48,150
Other direct client service costs 1,543 - 1,543
Acquisition retention expenses - - -
Reimbursable expenses   2,637     -     2,637  
  55,878     (3,548 )   52,330  
 
Operating expenses
Selling, general and administrative 24,488 (933 ) (a) 23,555
Depreciation and amortization   2,556     -     2,556  
  27,044     (933 )   26,111  
 
Operating income 9,757 4,481 14,238
 
Other expense/(income), net
Interest income (3 ) - (3 )
Interest expense 333 - 333
Loss on early extinguishment of debt 1,737 (1,737 ) (b) -
Other expense   70     -     70  
  2,137     (1,737 )   400  
 
Income before income taxes 7,620 6,218 13,838
-
Provision for income taxes   2,421     3,333   (c)   5,754  
 
Net income 5,199 2,885 8,084
 
Less: Net income attributable to the noncontrolling interest   3,465     (3,465 ) (d)   -  
 
Net income attributable to Duff & Phelps Corporation $ 1,734   $ 6,350   $ 8,084  
 
 
Pro forma fully exchanged, fully diluted shares outstanding (e)   36,780  
 
Adjusted Pro Forma Net Income per fully exchanged, fully diluted shares outstanding $ 0.22  
 
____________________
(a)   Represents elimination of equity-based compensation associated with Legacy Units and IPO Options.
(b) Represents a non-recurring charge from the repayment and subsequent termination of our credit agreement.
(c) Represents an adjustment to reflect an assumed effective corporate tax rate of approximately 41.4% for the full year, which includes a provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state, local and/or foreign jurisdiction. Assumes full exchange of existing unitholders' partnership units and Class B common stock of the Company into Class A common stock of the Company.
(d) Represents elimination of the noncontrolling interest associated with the ownership by existing unitholders of D&P Acquisitions (excluding D&P Corporation), as if such unitholders had fully exchanged their partnership units and Class B common stock of the Company for shares of Class A common stock of the Company.
(e) Based on the weighted-average number of aggregated Class A and Class B shares of common stock outstanding, excluding Ongoing RSAs, and dilutive effect of Ongoing RSAs for the quarter ended June 30, 2009. The Company believes that IPO Options would not be considered dilutive when applying the treasury method.
 
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
ADJUSTED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
   
Six Months Ended June 30, 2010
As   Adjusted
Reported Adjustments Pro Forma
 
Revenues $ 177,906 $ - $ 177,906
Reimbursable expenses   4,760     -     4,760  
Total revenues   182,666     -     182,666  
 
Direct client service costs
Compensation and benefits 99,013 (1,774 ) (a) 97,239
Other direct client service costs 3,869 - 3,869
Acquisition retention expenses - - -
Reimbursable expenses   4,893     -     4,893  
  107,775     (1,774 )   106,001  
 
Operating expenses
Selling, general and administrative 50,388 (3,843 ) (a) 46,545
Depreciation and amortization 4,843 - 4,843
Charge from impairment of certain intangible assets 674 - 674
Merger and acquisition costs   321     (321 )   -  
  56,226     (4,164 )   52,062  
 
Operating income 18,665 5,938 24,603
 
Other expense/(income), net
Interest income (77 ) - (77 )
Interest expense 168 - 168
Other expense   232     -     232  
  323     -     323  
 
Income before income taxes 18,342 5,938 24,280
-
Provision for income taxes   6,156     3,639   (b)   9,795  
 
Net income 12,186 2,299 14,485
 
Less: Net income attributable to the noncontrolling interest   5,406     (5,406 ) (c)   -  
 
Net income attributable to Duff & Phelps Corporation $ 6,780   $ 7,705   $ 14,485  
 
 
Pro forma fully exchanged, fully diluted shares outstanding (d)   38,850  
 
Adjusted Pro Forma Net Income per fully exchanged, fully diluted shares outstanding $ 0.37  
 
____________________
(a)   Represents elimination of equity-based compensation associated with Legacy Units and IPO Options and a charge from the departure of our former president and one of our segment leaders.
(b)

Represents an adjustment to reflect an assumed effective corporate tax rate of approximately 40.3% for the full year, which includes a provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state, local and/or foreign jurisdiction. The pro forma tax rate has changed from prior levels as a result of true-up adjustments. Assumes full exchange of existing unitholders' partnership units and Class B common stock of the Company into Class A common stock of the Company.
(c) Represents elimination of the noncontrolling interest associated with the ownership by existing unitholders of D&P Acquisitions (excluding D&P Corporation), as if such unitholders had fully exchanged their partnership units and Class B common stock of the Company for shares of Class A common stock of the Company.
(d) Based on the weighted-average number of aggregated Class A and Class B shares of common stock outstanding, excluding Ongoing RSAs, and dilutive effect of Ongoing RSAs for the six months ended June 30, 2010. The Company believes that IPO Options would not be considered dilutive when applying the treasury method.
 
DUFF & PHELPS CORPORATION AND SUBSIDIARIES
ADJUSTED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
  Six Months Ended June 30, 2009
As   Adjusted
Reported Adjustments Pro Forma
 
Revenues $ 179,318 $ - $ 179,318
Reimbursable expenses   4,663     -     4,663  
Total revenues   183,981     -     183,981  
 
Direct client service costs
Compensation and benefits 102,828 (5,880 ) (a) 96,948
Other direct client service costs 2,847 - 2,847
Acquisition retention expenses - - -
Reimbursable expenses   4,652     -     4,652  
  110,327     (5,880 )   104,447  
 
Operating expenses
Selling, general and administrative 49,428 (1,853 ) (a) 47,575
Depreciation and amortization   5,118     -     5,118  
  54,546     (1,853 )   52,693  
 
Operating income 19,108 7,733 26,841
 
Other expense/(income), net
Interest income (17 ) - (17 )
Interest expense 988 - 988
Loss on early extinguishment of debt 1,737 (1,737 ) (b) -
Other expense   87     -     87  
  2,795     (1,737 )   1,058  
 
Income before income taxes 16,313 9,470 25,783
-
Provision for income taxes   4,533     6,167   (c)   10,700  
 
Net income 11,780 3,303 15,083
 
Less: Net income attributable to the noncontrolling interest   8,281     (8,281 ) (d)   -  
 
Net income attributable to Duff & Phelps Corporation $ 3,499   $ 11,584   $ 15,083  
 
 
Pro forma fully exchanged, fully diluted shares outstanding (e)   35,818  
 
Adjusted Pro Forma Net Income per fully exchanged, fully diluted shares outstanding $ 0.42  
 
____________________
(a)   Represents elimination of equity-based compensation associated with Legacy Units and IPO Options.
(b) Represents a non-recurring charge from the repayment and subsequent termination of our credit agreement.
(c) Represents an adjustment to reflect an assumed effective corporate tax rate of approximately 41.5% for the full year, which includes a provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state, local and/or foreign jurisdiction. Assumes full exchange of existing unitholders' partnership units and Class B common stock of the Company into Class A common stock of the Company.
(d) Represents elimination of the noncontrolling interest associated with the ownership by existing unitholders of D&P Acquisitions (excluding D&P Corporation), as if such unitholders had fully exchanged their partnership units and Class B common stock of the Company for shares of Class A common stock of the Company.
(e) Based on the weighted-average number of aggregated Class A and Class B shares of common stock outstanding, excluding Ongoing RSAs, and dilutive effect of Ongoing RSAs for the six months ended June 30, 2009. The Company believes that IPO Options would not be considered dilutive when applying the treasury method.

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