FTI Consulting Inc. (FCN), a global investment advisory firm, has recently redeemed $86.7 million worth of 7 3/4% senior notes due 2016, the redemption price of which was 102.58% of the principal amount plus accrued interests. The transaction was funded with the proceeds from the just-concluded debt offering of 6.0% senior notes due 2022 along with available cash in hand.
Owing to the debt redemption, the company is expected to incur a pre-tax charge of $4.5 million in fourth quarter 2012. This is likely to reduce its earnings by about 7 cents per share. The pre-tax charge is primarily intended to reflect an estimated loss on early extinguishment of debt and subsequent redemption of the senior notes.
Earlier in the previous month, FTI Consulting reported third quarter 2012 adjusted earnings of 60 cents per share, which beat the Zacks Consensus Estimate by a penny. The earnings, however, fell short of the year-ago earnings of 70 cents per share.
Total revenue in the last reported quarter slipped 6.7% year over year to $386.1 million and also lagged the Zacks Consensus Estimate of $389.0 million. Revenue dropped mostly due to the relatively weak performances of Technology, Forensic and Litigation Consulting, and the Strategic Communications segment.
Adjusted EBITDA slid 13.7% from the year-ago quarter to $62.3 million and Adjusted EBITDA margin decreased 150 basis points (bps) to 16.1%. As of September 30 2012, FTI Consulting’s cash and cash equivalents totaled $126.9 million, compared with $264.4 million as of December 31, 2011.
The company remains focused on investment in areas of domain expertise such as healthcare, energy, communications, media and entertainment, and insurance. FTI Consulting also aims to capitalize on geographic opportunities such as investment in the Australian restructuring practice. Further, though the insecurity over the Presidential election is over, overall uncertainty in the global market, looming fiscal cliff and the lingering impact of Hurricane Sandy prevail.
We maintain our Neutral recommendation on the stock, which presently has a Zacks #3 Rank that translates into a short-term Hold rating. We also have a Neutral recommendation and a Zacks #2 Rank (short-term Buy rating) for Navigant Consulting Inc. (NCI), one of the competitors of FTI Consulting.
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