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

Results

For the quarter ended December 31, 2010, revenues excluding reimbursable expenses increased $4.9 million or 4.9% to $103.2 million, compared to $98.3 million for the corresponding prior year quarter. Adjusted EBITDA (1) for the quarter was $18.7 million, representing 18.1% of revenues excluding reimbursable expenses, compared to $18.1 million for the corresponding prior year quarter, representing 18.4% of revenues excluding reimbursable expenses. Net income attributable to Duff & Phelps Corporation was $5.9 million, or $0.20 per share of Class A common stock on a fully diluted basis, compared to $4.6 million, or $0.18 per share for the corresponding prior year quarter. Adjusted Pro Forma Net Income (1) was $9.6 million, or $0.25 per share on a fully exchanged, fully diluted basis, compared to $9.3 million, or $0.24 per share, for the corresponding prior year quarter.

For the year ended December 31, 2010, revenues excluding reimbursable expenses decreased $5.4 million or 1.4% to $365.5 million, compared to $370.9 million for the corresponding prior year. Adjusted EBITDA (1) for the year was $61.0 million, representing 16.7% of revenues excluding reimbursable expenses, compared to $66.6 million for the corresponding prior year, representing 17.9% of revenues excluding reimbursable expenses. Adjusted EBITDA for the year ended December 31, 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 $16.8 million, or $0.60 per share of Class A common stock on a fully diluted basis, compared to $11.6 million, or $0.54 per share for the corresponding prior year. Adjusted Pro Forma Net Income (1) was $29.7 million, or $0.77 per share on a fully exchanged, fully diluted basis, compared to $32.7 million, or $0.88 per share, for the corresponding prior year. Adjusted Pro Forma Net Income (1) per fully-exchanged share excludes a $0.05 per share charge related to the departure of our former president and one of our segment leaders (2).

“Duff & Phelps reported record revenues during the fourth quarter, driven by sequential growth in all three of our segments, including 60.7% gains in Investment Banking and double-digit increases in Financial Advisory and Corporate Finance Consulting,” said Noah Gottdiener, chief executive officer. “Overall, the improving economic environment and heightened level of M&A activity plays to our strengths as we pursue both organic growth opportunities and complementary acquisitions.”

“During the quarter, the firm demonstrated continued expense discipline and cash flow generation as well as improvements in key productivity measures,” said Jacob Silverman, chief financial officer. “Given our confidence in the cash flow characteristics of Duff & Phelps, I am pleased to announce a 33% increase in our quarterly dividend from $0.06 to $0.08 per share.”

Declaration of Quarterly Dividend

The Company also announced today that its board of directors has increased the quarterly dividend by 33% to $0.08 per share on its outstanding Class A common stock. The dividend is payable on March 25, 2011 to shareholders of record on March 15, 2011. Concurrent with the payment of the dividend, the Company will also be distributing $0.08 per unit to holders of New Class A Units.

Renaming Corporate Finance Consulting to Alternative Asset Advisory

The Company recently renamed its Corporate Finance Consulting segment Alternative Asset Advisory. This new name more appropriately defines the services offered in this segment and will create heightened awareness in the marketplace and with our investors. Concurrent with this change, our Financial Engineering service line has been renamed Complex Asset Solutions to more clearly describe the nature of services offered. We will report our first quarter 2011 results under these new conventions.

__________
(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 primarily 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 $3.1 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, February 23, 2011, at 5:00 p.m. EST to discuss the Company’s financial results. Interested parties can access the webcast for this call through http://ir.duffandphelps.com/.

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 has determined 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) cash severance and equity-compensation expense from the acceleration of vesting of restricted stock awards due to the realignment of our senior management, (h) acquisition retention expenses and (i) merger and acquisition costs:
Reconciliation of Adjusted EBITDA
             
Quarter Ended Year Ended
December 31, December 31, December 31, December 31,
2010 2009 2010 2009
Revenues (excluding reimbursable expenses) $ 103,213 $ 98,345 $ 365,546 $ 370,903
 
Net income attributable to Duff & Phelps Corporation $ 5,876 $ 4,617 $ 16,765 $ 11,568
Net income attributable to noncontrolling interest 4,087 4,683 12,581 17,100
Provision for income taxes 5,337 4,732 13,503 12,264
Other expense/(income), net 56 37 373 2,956
Depreciation and amortization 2,506 2,532 9,916 10,244
Charge from impairment of certain intangible assets - - 674 -
Equity-based compensation associated
with Legacy Units and IPO Options 431 1,474 3,399 12,437
Charge from realignment of senior management (not

included in equity-based compensation from Legacy
Units and IPO Options above) 60 - 3,100 -
Acquisition retention expenses 11 - 11 -
Merger and acquisition costs   307     -     704     -  
 
Adjusted EBITDA $ 18,671   $ 18,075   $ 61,026   $ 66,569  
 
Adjusted EBITDA as a percentage of revenues 18.1 % 18.4 % 16.7 % 17.9 %
 

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 and units issued in connection with the Company’s ongoing long-term compensation program (“Ongoing RSAs”).
Reconciliation of Adjusted Pro Forma Net Income
             
Quarter Ended Year Ended
December 31, December 31, December 31, December 31,
2010 2009 2010 2009
Net income attributable to Duff & Phelps Corporation $ 5,876 $ 4,617 $ 16,765 $ 11,568
Net income attributable to noncontrolling interest(a) 4,087 4,683 12,581 17,100
Loss on early extinguishment of debt(b) - - - 1,737
Equity-based compensation associated
with Legacy Units and IPO Options(c) 431 1,474 3,399 12,437
Charge from realignment of senior management (not
included in equity-based compensation from Legacy
Units and IPO Options above)(d) 60 - 3,100 -
Acquisition retention expenses(e) 11 - 11 -
Merger and acquisition costs(f) 307 - 704 -
Adjustment to provision for income taxes(g)   (1,217 )   (1,506 )   (6,823 )   (10,131 )
 
Adjusted Pro Forma Net Income, as defined $ 9,555   $ 9,268   $ 29,737   $ 32,711  
 
Pro forma fully exchanged, fully diluted shares outstanding(h)   38,830     38,829     38,792     37,338  
 

Adjusted Pro Forma Net Income per fully exchanged,
fully diluted shares outstanding $ 0.25   $ 0.24   $ 0.77   $ 0.88  
 

_________________
(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 elimination of acquisition retention expenses. In 2010, these expenses resulted from expense incurred from certain restricted stock awards that were granted in conjunction with the closing of our acquisition of the U.S. advisory business of Dynamic Capital Partners. The grants were made as a retention incentive to certain former principals of Dynamic who became managing directors of the Company. The grants are subject to certain annual and cliff vesting provisions over three years. These grants may be in addition to future grants awarded as a component of incentive compensation.
(f) Represents elimination of merger and acquisition costs.
(g) Represents an adjustment to reflect an assumed effective corporate tax rate of approximately 40.6% for the years ended December 31, 2010 and 2009, as applied to the quarters ended December 31, 2010 and 2009, 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 quarters ended December 31, 2010 and 2009, the pro forma tax rates of 40.7% and 40.2% reflect a true-up adjustment relating to the nine months ended September 30, 2010 and 2009, respectively. Assumes (i) full exchange of existing unitholders' partnership units and Class B common stock of the Company into Class A common stock of the Company, (ii) the Company has adopted a conventional corporate tax structure and is taxed as a C Corporation in the U.S. at prevailing corporate rates, and (iii) all deferred tax assets related to foreign operations are fully realizable.
(h) 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. 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, 2010 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.
 
 

DUFF & PHELPS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)
         
Quarter Ended Year Ended
December 31,   December 31, December 31,   December 31,
2010 2009 2010 2009
 
Revenues $ 103,213 $ 98,345 $ 365,546 $ 370,903
Reimbursable expenses   2,322     3,026     9,485     11,083  
Total revenues   105,535     101,371     375,031     381,986  
 
Direct client service costs
Compensation and benefits (includes $3,529 and $2,801 of equity-
based compensation for the quarters ended December 31, 2010
30, 2010 and 2009, respectively, and $14,891 and $16,432 for the
years ended December 31, 2010 and 2009, respectively) 58,576 55,187 205,958 210,302
Other direct client service costs 2,337 1,431 7,548 7,232
Acquisition retention expenses (includes $11 of equity-based
compensation for the quarter and year ended December 31, 2010) 11 - 11 -
Reimbursable expenses   2,324     3,038     9,547     11,158  
  63,248     59,656     223,064     228,692  
 
Operating expenses
Selling, general and administrative (includes $1,080 and $1,649 of
equity-based compensation for the quarters ended December 31,
2010 and 2009, respectively, and $5,542 and $7,223 for the
years ended December 31, 2010 and 2009, respectively) 24,118 25,114 97,451 99,162
Depreciation and amortization 2,506 2,532 9,916 10,244
Charge from impairment of certain intangible assets - - 674 -
Merger and acquisition costs   307     -     704     -  
  26,931     27,646     108,745     109,406  
 
Operating income 15,356 14,069 43,222 43,888
 
Other expense/(income), net
Interest income (6 ) (19 ) (112 ) (53 )
Interest expense 78 52 312 1,131
Loss on early extinguishment of debt - - - 1,737
Other expense   (16 )   4     173     141  
  56     37     373     2,956  
 
Income before income taxes 15,300 14,032 42,849 40,932
 
Provision for income taxes   5,337     4,732     13,503     12,264  
 
Net income 9,963 9,300 29,346 28,668
 
Less: Net income attributable to noncontrolling interest   4,087     4,683     12,581     17,100  
 
Net income attributable to Duff & Phelps Corporation $ 5,876   $ 4,617   $ 16,765   $ 11,568  
 
Weighted average shares of Class A common stock outstanding
Basic 25,758 23,451 25,170 19,013
Diluted 26,807 24,375 26,089 19,795
 
Net income per share attributable to stockholders of Class A
common stock of Duff & Phelps Corporation
Basic $ 0.21 $ 0.18 $ 0.62 $ 0.57
Diluted $ 0.20 $ 0.18 $ 0.60 $ 0.54
 
Cash dividends declared per common share $ 0.06 $ 0.05 $ 0.23 $ 0.15
 
 

DUFF & PHELPS CORPORATION AND SUBSIDIARIES

YEAR-OVER-YEAR SUMMARY OF REVENUE BY SEGMENT

(In thousands)

(Unaudited)
                                   
Sequential Quarter/Quarter Year/Year
2009 2010 Q4 2010 vs Q3 2010 Q4 2010 vs Q4 2009 2010 vs 2009
Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Dollar   Percent Dollar Percent Dollar Percent
Financial Advisory
Valuation Advisory $ 40,370 $ 33,772 $ 29,692 $ 34,676 $ 138,510 $ 35,020 $ 32,829 $ 31,173 $ 36,054 $ 135,076 $ 4,881 15.7 % $ 1,378 4.0 % $ (3,434 ) (2.5 %)
Tax Services 10,878 11,972 15,045 10,007 47,902 9,447 12,089 11,157 10,631 43,324 (526 ) (4.7 %) 624 6.2 % (4,578 ) (9.6 %)
Dispute & Legal
Management Consulting   9,643   12,162   12,897   12,518   47,220   9,415   9,316   10,571   11,760   41,062   1,189   11.2 %   (758 ) (6.1 %)   (6,158 ) (13.0 %)
  60,891   57,906   57,634   57,201   233,632   53,882   54,234   52,901   58,445   219,462   5,544   10.5 %   1,244   2.2 %   (14,170 ) (6.1 %)
 
Corporate Finance Consulting
Portfolio Valuation 6,295 4,338 5,858 5,662 22,153 5,482 4,642 4,455 5,216 19,795 761 17.1 % (446 ) (7.9 %) (2,358 ) (10.6 %)
Financial Engineering 4,148 5,159 5,201 4,663 19,171 4,126 3,355 2,481 3,512 13,474 1,031 41.6 % (1,151 ) (24.7 %) (5,697 ) (29.7 %)
Strategic Value Advisory 2,620 3,588 4,034 3,208 13,450 3,158 2,883 2,840 2,938 11,819 98 3.5 % (270 ) (8.4 %) (1,631 ) (12.1 %)
Due Diligence   1,553   1,893   2,352   2,384   8,182   2,170   2,439   3,072   3,085   10,766   13   0.4 %   701   29.4 %   2,584   31.6 %
  14,616   14,978   17,445   15,917   62,956   14,936   13,319   12,848   14,751   55,854   1,903   14.8 %   (1,166 ) (7.3 %)   (7,102 ) (11.3 %)
 
Investment Banking
M&A Advisory 2,079 2,375 4,409 6,982 15,845 3,682 3,144 4,604 11,289 22,719 6,685 145.2 % 4,307 61.7 % 6,874 43.4 %
Transaction Opinions 6,101 6,180 2,714 6,081 21,076 6,823 6,041 6,711 9,328 28,903 2,617 39.0 % 3,247 53.4 % 7,827 37.1 %
Global Restructuring Advisory   5,578   8,614   11,038   12,164   37,394   9,841   12,004   7,363   9,400   38,608   2,037   27.7 %   (2,764 ) (22.7 %)   1,214   3.2 %
  13,758   17,169   18,161   25,227   74,315   20,346   21,189   18,678   30,017   90,230   11,339   60.7 %   4,790   19.0 %   15,915   21.4 %
 
Total Revenues $ 89,265 $ 90,053 $ 93,240 $ 98,345 $ 370,903 $ 89,164 $ 88,742 $ 84,427 $ 103,213 $ 365,546 $ 18,786   22.3 % $ 4,868   4.9 % $ (5,357 ) (1.4 %)
 
 

DUFF & PHELPS CORPORATION AND SUBSIDIARIES

RESULTS OF OPERATIONS BY SEGMENT

(In thousands, except headcount data)

(Unaudited)
           
Quarter Ended Year Ended
December 31,   December 31, December 31, December 31,
2010 2009 2010 2009
Financial Advisory
Revenues (excluding reimbursables) $ 58,445 $ 57,201 $ 219,462 $ 233,632
Segment operating income $ 6,962 $ 8,014 $ 28,692 $ 37,557
Segment operating income margin 11.9 % 14.0 % 13.1 % 16.1 %
 
Corporate Finance Consulting
Revenues (excluding reimbursables) $ 14,751 $ 15,917 $ 55,854 $ 62,956
Segment operating income $ 3,422 $ 2,035 $ 10,335 $ 13,854
Segment operating income margin 23.2 % 12.8 % 18.5 % 22.0 %
 
Investment Banking
Revenues (excluding reimbursables) $ 30,017 $ 25,227 $ 90,230 $ 74,315
Segment operating income $ 8,289 $ 8,038 $ 22,061 $ 15,233
Segment operating income margin 27.6 % 31.9 % 24.4 % 20.5 %
 
Total
Revenues (excluding reimbursables) $ 103,213 $ 98,345 $ 365,546 $ 370,903
 
Segment operating income $ 18,673 $ 18,087 $ 61,088 $ 66,644
Net client reimbursable expenses (2 ) (12 ) (62 ) (75 )
Equity-based compensation from
Legacy Units and IPO Options (431 ) (1,474 ) (3,399 ) (12,437 )
Depreciation and amortization (2,506 ) (2,532 ) (9,916 ) (10,244 )
Charge from impairment of certain intangible assets - - (674 ) -
Charge from realignment of senior management (60 ) - (3,100 ) -
Acquisition retention expenses (11 ) - (11 ) -
Merger and acquisition costs   (307 )   -     (704 )   -  
Operating income $ 15,356   $ 14,069   $ 43,222   $ 43,888  
 
_____________________________________________
 
Average Client Service Professionals
Financial Advisory 546 627 567 657
Corporate Finance Consulting 104 130 112 132
Investment Banking   129     131     128     133  

Total
  779     888     807     922  
 
End of Period Client Service Professionals
Financial Advisory 548 618 548 618
Corporate Finance Consulting 109 129 109 129
Investment Banking   128     131     128     131  
Total   785     878     785     878  
 
Revenue per Client Service Professional
Financial Advisory $ 107 $ 91 $ 387 $ 356
Corporate Finance Consulting $ 142 $ 122 $ 499 $ 477
Investment Banking $ 233 $ 193 $ 705 $ 559
Total $ 132 $ 111 $ 453 $ 402
 
 

DUFF & PHELPS CORPORATION AND SUBSIDIARIES

RESULTS OF OPERATIONS BY SEGMENT – CONTINUED

(In thousands, except utilization, rate-per-hour and headcount data)

(Unaudited)
         
Quarter Ended Year Ended
December 31,   December 31, December 31,   December 31,
2010 2009 2010 2009
Utilization(1)
Financial Advisory 76.4 % 71.3 % 67.8 % 65.7 %
Corporate Finance Consulting 67.7 % 70.4 % 60.9 % 64.0 %
 
Rate-Per-Hour(2)
Financial Advisory $ 340 $ 316 $ 342 $ 321
Corporate Finance Consulting $ 480 $ 385 $ 453 $ 401
 
_____________________________________________
 
Revenues (excluding reimbursables)
Financial Advisory $ 58,445 $ 57,201 $ 219,462 $ 233,632
Corporate Finance Consulting 14,751 15,917 55,854 62,956
Investment Banking   30,017     25,227     90,230     74,315  
Total $ 103,213   $ 98,345   $ 365,546   $ 370,903  
 
Average Number of Managing Directors
Financial Advisory 89 93 91 97
Corporate Finance Consulting 29 29 30 30
Investment Banking   39     40     40     39  
Total   157     162     161     166  
 
End of Period Managing Directors
Financial Advisory 88 93 88 93
Corporate Finance Consulting 31 30 31 30
Investment Banking   38     40     38     40  
Total   157     163     157     163  
 
Revenue per Managing Director
Financial Advisory $ 657 $ 615 $ 2,412 $ 2,409
Corporate Finance Consulting $ 509 $ 549 $ 1,862 $ 2,099
Investment Banking $ 770 $ 631 $ 2,256 $ 1,906
Total $ 657 $ 607 $ 2,270 $ 2,234

____________________________________
(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. Utilization excludes client service professionals associated with certain property tax services, due to the nature of the work performed, and client service professionals from certain acquisitions prior to their transition to the Company’s financial system.
(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 revenues associated with certain property tax engagements. The average billing rate also excludes certain hours from our acquisitions prior to their transition to the Company’s financial system.
 
 
 

DUFF & PHELPS CORPORATION AND SUBSIDIARIES

SUMMARY OF CLIENT SERVICE PROFESSIONALS BY SEGMENT

(Unaudited)
         
2009 2010
Q1   Q2   Q3   Q4   YTD Q1   Q2   Q3   Q4   YTD
Average Client Service Professionals
Financial Advisory 700 658 642 627 657 607 566 546 546 567
Corporate Finance Consulting 131 134 133 130 132 124 113 107 104 112
Investment Banking 136 135 130 131 133 131 127 124 129 128
967 927 905 888 922 862 806 777 779 807
 
End of Period Client Service Professionals
Financial Advisory 681 640 641 618 585 548 555 548
Corporate Finance Consulting 130 136 131 129 117 109 106 109
Investment Banking 137 131 130 131 128 125 128 128
948 907 902 878 830 782 789 785
 
2009 2010
Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD
Average Managing Directors
Financial Advisory 101 99 95 93 97 91 91 92 89 91
Corporate Finance Consulting 30 30 31 29 30 32 30 29 29 30
Investment Banking 36 39 40 40 39 40 41 40 39 40
167 168 166 162 166 163 162 161 157 161
 
End of Period Managing Directors
Financial Advisory 101 96 93 93 88 94 90 88
Corporate Finance Consulting 30 31 29 30 31 29 28 31
Investment Banking 38 38 40 40 39 40 40 38
169 165 162 163 158 163 158 157
 
 

DUFF & PHELPS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)
             
December 31, December 31,
2010 2009
ASSETS
Current assets
Cash and cash equivalents $ 113,328 $ 107,311
Accounts receivable (net of allowance for doubtful accounts
of $1,347 and $1,690 at December 31, 2010 and 2009, respectively) 60,358 55,079
Unbilled services 23,101 22,456
Prepaid expenses and other current assets 7,479 6,100
Net deferred income taxes, current   2,555   4,601
Total current assets   206,821   195,547
 
Property and equipment (net of accumulated depreciation
of $26,375 and $20,621 at December 31, 2010 and 2009, respectively) 29,250 27,413
Goodwill 139,170 122,876
Intangible assets (net of accumulated amortization
of $20,656 and $16,881 at December 31, 2010 and 2009, respectively) 30,407 27,907
Other assets 2,638 3,218
Investments related to deferred compensation plan 23,151 17,807
Net deferred income taxes, non-current   116,789   112,265
Total non-current assets   341,405   311,486
 
Total assets $ 548,226 $ 507,033
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,397 $ 2,459
Accrued expenses 11,254 11,609
Accrued compensation and benefits 39,875 35,730
Liability related to deferred compensation plan, current portion 1,314 -
Deferred revenues 2,427 3,633
Other current liabilities 430 993
Due to noncontrolling unitholders, current portion   5,640   4,303
Total current liabilities   63,337   58,727
 
Liability related to deferred compensation plan, less current portion 21,764 18,051
Other long-term liabilities 16,676 15,400
Due to noncontrolling unitholders, less current portion   103,885   101,098
Total non-current liabilities   142,325   134,549
 
Total liabilities   205,662   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; 30,166 and 27,290
shares issued and outstanding at December 31, 2010 and 2009, respectively) 302 273
Class B common stock, par value $0.0001 per share (50,000 shares authorized; 11,151 and 12,974
shares issued and outstanding at December 31, 2010 and 2009, respectively) 1 1
Additional paid-in capital 232,644 207,210
Accumulated other comprehensive income 1,400 693
Retained earnings   16,923   6,709
Total stockholders' equity of Duff & Phelps Corporation 251,270 214,886
Noncontrolling interest   91,294   98,871
Total stockholders' equity   342,564   313,757
Total liabilities and stockholders' equity $ 548,226 $ 507,033
 
 

DUFF & PHELPS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)
     
Year Ended
December 31,     December 31,
2010 2009
Cash flows from operating activities:
Net income $ 29,346 $ 28,668
 
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 9,916 10,244
Equity-based compensation 20,444 23,655
Bad debt expense 2,074 2,386
Net deferred income taxes 3,050 (941 )
Charge from impairment of certain intangible assets 674 -
Loss on early extinguishment of debt - 1,674
Other 932 368
Changes in assets and liabilities providing/(using) cash:
Accounts receivable (3,231 ) (1,492 )
Unbilled services (12 ) (4,518 )
Prepaid expenses and other current assets (930 ) 452
Other assets (1,802 ) (3,639 )
Accounts payable and accrued expenses (1,933 ) 4,515
Accrued compensation and benefits 6,157 9,839
Deferred revenues (1,378 ) 352
Other liabilities 734 (1,487 )
Due to noncontrolling unitholders from payments
pursuant to the Tax Receivable Agreement   (4,267 )   (3,090 )
Net cash provided by operating activities   59,774     66,986  
 
Cash flows from investing activities:
Purchase of property and equipment (7,080 ) (5,517 )
Business acquisitions, net of cash acquired (18,217 ) (5,291 )
Purchase of investments for deferred compensation plan (3,175 ) (6,658 )
Proceeds from sale of investments in deferred compensation plan   -     -  
Net cash used in investing activities   (28,472 )   (17,466 )
 
Cash flows from financing activities:
Distributions to noncontrolling unitholders (9,833 ) (21,976 )
Repurchases of Class A common stock (8,897 ) (915 )
Dividends (6,618 ) (3,757 )
Net proceeds from sale of Class A common stock (3 ) 148,840
Proceeds from exercise of IPO Options 144 1,202
Redemption of noncontrolling unitholders - (104,612 )
Repayments of debt - (42,763 )
Payment of costs for debt issuance and extinguishment   -     (471 )
Net cash used in financing activities   (25,207 )   (24,452 )
 
Effect of exchange rate on cash and cash equivalents   (78 )   862  
 
Net increase in cash and cash equivalents 6,017 25,930
Cash and cash equivalents at beginning of period   107,311     81,381  
Cash and cash equivalents at end of period $ 113,328   $ 107,311  
 
 

DUFF & PHELPS CORPORATION AND SUBSIDIARIES

ADJUSTED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)
     
Quarter Ended December 31, 2010
As           Adjusted
Reported Adjustments Pro Forma
 
Revenues $ 103,213 $ - $ 103,213
Reimbursable expenses   2,322     -     2,322  
Total revenues   105,535     -     105,535  
 
Direct client service costs
Compensation and benefits 58,576 (158 ) (a) 58,418
Other direct client service costs 2,337 - 2,337
Acquisition retention expenses 11 (11 ) (b) -
Reimbursable expenses   2,324     -     2,324  
  63,248     (169 )   63,079  
-
Operating expenses
Selling, general and administrative 24,118 (333 ) (c) 23,785
Depreciation and amortization 2,506 - 2,506
Merger and acquisition costs   307     (307 ) (d)   -  
  26,931     (640 )   26,291  
 
Operating income 15,356 809 16,165
 
Other expense/(income), net
Interest income (6 ) - (6 )
Interest expense 78 - 78
Other expense   (16 )   -     (16 )
  56     -     56  
 
Income before income taxes 15,300 809 16,109
 
Provision for income taxes   5,337     1,217   (e)   6,554  
 
Net income 9,963 (408 ) 9,555
 
Less: Net income attributable to the noncontrolling interest   4,087     (4,087 ) (f)   -  
 
Net income attributable to Duff & Phelps Corporation $ 5,876   $ 3,679   $ 9,555  
 
 
Pro forma fully exchanged, fully diluted shares outstanding (g)   38,830  
 
Adjusted Pro Forma Net Income per fully exchanged, fully diluted shares outstanding $ 0.25  

____________________
(a)   Represents elimination of equity-based compensation associated with Legacy Units and IPO Options.
(b) Represents elimination of acquisition retention expenses. In 2010, these expenses resulted from expense incurred from certain restricted stock awards that were granted in conjunction with the closing of our acquisition of the U.S. advisory business of Dynamic Capital Partners. The grants were made as a retention incentive to certain former principals of Dynamic who became managing directors of the Company. The grants are subject to certain annual and cliff vesting provisions over three years. These grants may be in addition to future grants awarded as a component of incentive compensation.
(c) Represents elimination of equity-based compensation associated with Legacy Units and IPO Options of $273 and a true-up of the charge from the departure of our former president of $60.
(d) Represents elimination of merger and acquisitions costs.
(e) Represents an adjustment to reflect an assumed effective corporate tax rate of approximately 40.6% 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 December 31, 2010, the pro forma tax rate of approximately 40.7% reflects a true-up adjustment relating to the nine months ended September 30, 2010. Assumes (i) full exchange of existing unitholders' partnership units and Class B common stock of the Company into Class A common stock of the Company, (ii) the Company has adopted a conventional corporate tax structure and is taxed as a C Corporation in the U.S. at prevailing corporate rates and (iii) all deferred tax assets related to foreign operations are fully realizable.
(f) 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.
(g) 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. 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)
     
Quarter Ended December 31, 2009
As           Adjusted
Reported Adjustments Pro Forma
 
Revenues $ 98,345 $ - $ 98,345
Reimbursable expenses   3,026     -     3,026  
Total revenues   101,371     -     101,371  
 
Direct client service costs
Compensation and benefits 55,187 (732 ) (a) 54,455
Other direct client service costs 1,431 - 1,431
Acquisition retention expenses - - -
Reimbursable expenses   3,038     -     3,038  
  59,656     (732 )   58,924  
 
Operating expenses
Selling, general and administrative 25,114 (742 ) (a) 24,372
Depreciation and amortization   2,532     -     2,532  
  27,646     (742 )   26,904  
 
Operating income 14,069 1,474 15,543
 
Other expense/(income), net
Interest income (19 ) - (19 )
Interest expense 52 - 52
Other expense   4     -     4  
  37     -     37  
 
Income before income taxes 14,032 1,474 15,506
 
Provision for income taxes   4,732     1,506   (b)   6,238  
 
Net income 9,300 (32 ) 9,268
 
Less: Net income attributable to the noncontrolling interest   4,683     (4,683 ) (c)   -  
 
Net income attributable to Duff & Phelps Corporation $ 4,617   $ 4,651   $ 9,268  
 
 
Pro forma fully exchanged, fully diluted shares outstanding (d)   38,829  
 
Adjusted Pro Forma Net Income per fully exchanged, fully diluted shares outstanding $ 0.24  

____________________
(a)   Represents elimination of equity-based compensation associated with Legacy Units and IPO Options.
(b) Represents an adjustment to reflect an assumed effective corporate tax rate of approximately 40.6% 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 December 31, 2009, the pro forma tax rate of 40.2% reflects a true-up adjustment relating to the nine months ended September 30, 2009. Assumes (i) full exchange of existing unitholders' partnership units and Class B common stock of the Company into Class A common stock of the Company and (ii) the Company has adopted a conventional corporate tax structure and is taxed as a C Corporation in the U.S. at prevailing corporate rates.
(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. 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)
     
Year Ended December 31, 2010
As         Adjusted
Reported Adjustments Pro Forma
 
Revenues $ 365,546 $ - $ 365,546
Reimbursable expenses   9,485     -     9,485  
Total revenues   375,031     -     375,031  
 
Direct client service costs
Compensation and benefits 205,958 (1,848 ) (a) 204,110
Other direct client service costs 7,548 - 7,548
Acquisition retention expenses 11 (11 ) (b) -
Reimbursable expenses   9,547     -     9,547  
  223,064     (1,859 )   221,205  
 
Operating expenses
Selling, general and administrative 97,451 (4,651 ) (c) 92,800
Depreciation and amortization 9,916 - 9,916
Charge from impairment of certain intangible assets 674 - 674
Merger and acquisition costs   704     (704 ) (d)   -  
  108,745     (5,355 )   103,390  
 
Operating income 43,222 7,214 50,436
 
Other expense/(income), net
Interest income (112 ) - (112 )
Interest expense 312 - 312
Other expense   173     -     173  
  373     -     373  
 
Income before income taxes 42,849 7,214 50,063
 
Provision for income taxes   13,503     6,823   (e)   20,326  
 
Net income 29,346 391 29,737
 
Less: Net income attributable to the noncontrolling interest   12,581     (12,581 ) (f)   -  
 
Net income attributable to Duff & Phelps Corporation $ 16,765   $ 12,972   $ 29,737  
 
 
Pro forma fully exchanged, fully diluted shares outstanding (g)   38,792  
 
Adjusted Pro Forma Net Income per fully exchanged, fully diluted shares outstanding $ 0.77  

____________________
(a)   Represents elimination of equity-based compensation associated with Legacy Units and IPO Options of $1,308 and a charge from the departure of one of our segment leaders of $540.
(b) Represents elimination of acquisition retention expenses. In 2010, these expenses resulted from expense incurred from certain restricted stock awards that were granted in conjunction with the closing of our acquisition of the U.S. advisory business of Dynamic Capital Partners. The grants were made as a retention incentive to certain former principals of Dynamic who became managing directors of the Company. The grants are subject to certain annual and cliff vesting provisions over three years. These grants may be in addition to future grants awarded as a component of incentive compensation.
(c) Represents elimination of equity-based compensation associated with Legacy Units and IPO Options of $2,091 and a charge from the departure of our former president of $2,560.
(d) Represents elimination of merger and acquisitions costs.
(e) Represents an adjustment to reflect an assumed effective corporate tax rate of approximately 40.6% 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 (i) full exchange of existing unitholders' partnership units and Class B common stock of the Company into Class A common stock of the Company, (ii) the Company has adopted a conventional corporate tax structure and is taxed as a C Corporation in the U.S. at prevailing corporate rates and (iii) all deferred tax assets related to foreign operations are fully realizable.
(f) 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.
(g) 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. 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)
     
Year Ended December 31, 2009
As           Adjusted
Reported Adjustments Pro Forma
 
Revenues $ 370,903 $ - $ 370,903
Reimbursable expenses   11,083     -     11,083  
Total revenues   381,986     -     381,986  
 
Direct client service costs
Compensation and benefits 210,302 (8,736 ) (a) 201,566
Other direct client service costs 7,232 - 7,232
Reimbursable expenses   11,158     -     11,158  
  228,692     (8,736 )   219,956  
 
Operating expenses
Selling, general and administrative 99,162 (3,701 ) (a) 95,461
Depreciation and amortization   10,244     -     10,244  
  109,406     (3,701 )   105,705  
 
Operating income 43,888 12,437 56,325
 
Other expense/(income), net
Interest income (53 ) - (53 )
Interest expense 1,131 - 1,131
Loss on early extinguishment of debt 1,737 (1,737 ) (b) -
Other expense   141     -     141  
  2,956     (1,737 )   1,219  
 
Income before income taxes 40,932 14,174 55,106
 
Provision for income taxes   12,264     10,131   (c)   22,395  
 
Net income 28,668 4,043 32,711
 
Less: Net income attributable to the noncontrolling interest   17,100     (17,100 ) (d)   -  
 
Net income attributable to Duff & Phelps Corporation $ 11,568   $ 21,143   $ 32,711  
 
 
Pro forma fully exchanged, fully diluted shares outstanding (e)   37,338  
 
Adjusted Pro Forma Net Income per fully exchanged, fully diluted shares outstanding $ 0.88  

____________________
(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 40.6% 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 (i) full exchange of existing unitholders' partnership units and Class B common stock of the Company into Class A common stock of the Company and (ii) the Company has adopted a conventional corporate tax structure and is taxed as a C Corporation in the U.S. at prevailing corporate rates.
(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. The Company believes that IPO Options would not be considered dilutive when applying the treasury method.
 

Copyright Business Wire 2010