Surprise goodbyes fuel FTI stock dive

Some senior executives, key professionals resign

Shares tumble 36%, to $14.75

January 29, 2004|By William Patalon III | William Patalon III,SUN STAFF

Shares in FTI Consulting Inc. took a 36 percent drubbing yesterday after the Annapolis-based company announced that employees responsible for as much as 21 percent of the company's cash flow had resigned.

The departures of some senior executives had been expected, but the resignations of unidentified professionals in FTI's corporate finance/restructuring unit weren't expected, making it too soon to tell how much the overall exodus will crimp its bottom line, the company said in its announcement.

Executives of FTI, which had $224 million in sales in 2002, did not return telephone calls seeking comment yesterday. The company, which provides consulting services to businesses, operates in 24 cities and has 1,000 employees.

FTI shares plunged $8.24, or 35.8 percent, to close at $14.75 on the New York Stock Exchange yesterday, less than half their 52-week high of $32.45. Nearly 10.3 million shares - about a quarter of FTI's outstanding stock - changed hands yesterday, compared with an average daily trading volume of slightly more than 830,000 shares, according to Bloomberg News.

"With this kind of a hiccup in its business, it's going to be an uphill battle for the stock, and for the company," said Mayank Tandon, director of research in the Boston branch of brokerage Janney Montgomery Scott LLC and an analyst who follows FTI. "They're obviously surprised and are now on a [steep] uphill incline."

Yesterday's revelation was the latest in a series of up-and-down developments for the consulting company.

FTI shares have experienced a general decline since peaking in April. They plunged 22 percent Sept. 22, when the company cut second-half profit forecasts after anticipated business failed to materialize. The shares then rallied from $17 after FTI announced moves that investors expected would improve the company's business.

In late September, days after revising downward its earnings forecast, FTI announced that it was buying the Lexecon unit of Nextera Inc., for about $130 million, a move that was expected to boost overall company earnings this year. Lexecon provides economic consulting services to law firms.

That deal did not close until Dec. 1, but FTI made other apparently upbeat moves in the interim.

On Oct. 1, FTI announced the launch of a corporate-restructuring business in Europe. In mid-October, the U.S. audit firm KPMG LLP announced that it was selling its dispute-advisory services unit to FTI for $89 million.

Then, in late October, FTI announced the recruitment of several nationally known, senior-level experts in corporate restructuring, transactions and taxes and business valuations, hirings that were expected to enable FTI to broaden its business offerings and perhaps entice new clients. The company reported revenue of $279.5 million for the first nine months of last year.

During that period, the company's chairman and another substantial shareholder bought about 234,000 shares for $18 to $21, according to services that track such transactions.

Insiders and beneficial holders - those who typically have the most intimate knowledge of a company's prospects - usually make such large purchases when they are optimistic about the near- and longer-term outlooks.

FTI's prospects appeared to improve during that period, Janney Montgomery's Tandon said. The developments announced yesterday apparently surprised insiders, too, he said.

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