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Navigant Consulting Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: July 30, 2010 12:16PM

Navigant Consulting Inc. (NCI) filed Quarterly Report for the period ended 2010-06-30. Navigant Consulting Inc. has a market cap of $479.7 million; its shares were traded at around $9.48 with a P/E ratio of 15.1 and P/S ratio of 0.7. Navigant Consulting Inc. had an annual average earning growth of 24.5% over the past 10 years.

NCI is in the portfolios of Columbia Wanger of Columbia Wanger Asset Management, RS Investment Management, Paul Tudor Jones of The Tudor Group, Bruce Kovner of Caxton Associates, Steven Cohen of SAC Capital Advisors, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Overall utilization was flat for the three months ended June 30, 2010 compared to the corresponding period in 2009 and increased slightly for the six months ended June 30, 2010 compared to the corresponding period in 2009. Average bill rate increased 6.4% and 5.2% over the same periods. Excluding recent acquisitions, average full time equivalent consultants decreased 15.0% for the three months ended June 30, 2010 from the corresponding period in 2009 to 1,660 and decreased 16.0% for the six months ended June 30, 2010 from the corresponding period in 2009 to 1,669. The decrease in average full-time equivalent consultants was a result of staffing reductions made during 2009, certain late 2009 and early 2010 departures, and the redeployment of certain service areas. The increase in bill rate reflected an improved business climate, a higher mix of more senior consultant utilization and overall efforts to increase rates in 2010.

Revenues before Reimbursements. For the three months ended June 30, 2010, revenues before reimbursements decreased 1.7% compared to the corresponding period in 2009. Excluding the impact of recent acquisitions, average full time equivalent consultants decreased 15.0% compared to the corresponding period in 2009 due to the repositioning of several service lines and other late 2009 and early 2010 departures. Our utilization rate was flat over the same periods. The decrease in average full-time equivalent consultants was partially offset by a 6.4% increase in bill rate. Incremental revenue from acquisitions and performance fees partially offset the decrease in revenues before reimbursements. Projects contingent on the attainment of performance objectives were $6.0 million and $3.1 million for the three months ended June 30, 2010 and 2009, respectively. On a pro forma basis to include the impact of our recent acquisitions, our revenues before reimbursement would have decreased 6.1%.

For the six months ended June 30, 2010, revenues before reimbursements decreased 4.9% compared to the corresponding period in 2009. Excluding the impact of recent acquisitions, average full time equivalent consultants decreased 16.0% as a result of above mentioned reductions. The decrease was partially offset by improvements in our utilization and bill rate and the impact of our recent acquisitions. The overall consultant utilization rate was 75% and 74% for the six months ended June 30, 2010 and 2009, respectively. Bill rate increased 5.2% for the six months ended June 30, 2010 compared to the corresponding period in 2009, which partially offset the decrease due to headcount. On a pro forma basis to include the impact of our recent acquisitions, our revenues before reimbursement would have decreased 8.3%.

General and Administrative Expenses. General and administrative expenses decreased 13.2% to $29.1 million for the three months ended June 30, 2010 compared to the corresponding period in 2009 and decreased 12.9% to $59.5 million for the six months ended June 30, 2010 compared to the corresponding period in 2009. The decrease in general and administrative expenses was the result of reduced bad debt expense and cost-saving initiatives which included lower discretionary spending, lower facility expenses as a result of our office consolidations and the benefit of headcount reductions enacted after the first quarter of 2009. Average full-time equivalent employees for the three months ended June 30, 2010 and 2009 were 519 and 541, respectively and were 518 and 561 for the six months ended June 30, 2010 and 2009, respectively. General and administrative expenses were approximately 19% and 21% of revenues before reimbursements for the three months ended June 30, 2010 and 2009, respectively and approximately 19% and 21% of revenues before reimbursements for the six months ended June 30, 2010 and 2009, respectively, reflecting the cost-saving initiatives discussed above. Bad debt expense decreased by $2.0 million for the three months ended June 30, 2010 compared to the corresponding period in 2009 and represented approximately 1.5% and 2.8% of revenues before reimbursement for those periods, respectively. Similarly, bad debt expense decreased by $4.2 million for the six months ended June 30, 2010 compared to the corresponding period in 2009 and represented approximately 1.3% and 2.5% of revenues before reimbursement for those periods, respectively. These reductions reflected improved aging of our accounts receivable and the negative impact of the financial crisis on our receivables in the first half of 2009. Our allowance for doubtful accounts receivable is based on historical experience and management judgment and may change based on market conditions or specific client circumstances.

Interest Expense. Interest expense decreased 11.2% and 11.8% for the three and six months ended June 30, 2010, respectively, compared to the corresponding periods in 2009. The decreases primarily related to lower average borrowing balances under our credit agreement and our term loan. During the quarter ended March 31, 2010, using our excess cash, we made an unscheduled repayment on our term loan of $40.0 million. Our average borrowing rate under our credit agreement (including the impact of our interest rate swap agreements) was 6.1% and 5.5% for the six months ended June 30, 2010 and 2009, respectively, and 6.2% and 5.3% for the three months ended June 30, 2010 and 2009, respectively.

Revenues before reimbursements for this segment decreased 13.3% during the six months ended June 30, 2010 compared to the corresponding period in 2009. The decrease reflects the 18.2% decrease in average full-time equivalent consultants, as discussed above. Utilization decreased 1.4% mainly due to lower demand in our construction market. Bill rates increased 6.9% for the six months ended June 30, 2010 compared to the corresponding period in 2009. The increase was mainly a result of efforts to increase rates over the prior year as well as change in consultant mix with higher billable rates. Segment operating profit decreased $9.6 million and segment operating profit margin decreased 1.7 percentage points, primarily as result of lower utilization.

Read the The complete Report



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