FTI Consulting moves to gain more flexibility

Company will enter public debt market for first time, sell $300 million in notes

July 20, 2005|By Lizzie Newland | Lizzie Newland,SUN STAFF

FTI Consulting Inc., an Annapolis-based consulting company in the hot field of forensic accounting, said yesterday that it will tap public debt markets for the first time by selling $300 million in notes.

Company officials said the offering will provide more financial flexibility by allowing FTI to refinance bank debt, while analysts said it would put FTI in good position to make acquisitions.

"I'd be surprised if we didn't see something before the end of the year," said David Gold, senior equity analyst at Sidoti & Co., a research firm in New York. He said possible acquisition targets include small consulting boutiques and some units of KPMG, the troubled tax, audit and advisory firm.

"We always have a pipeline of potential acquisitions and can never predict when one will close," said Ted Pincus, FTI executive vice president and chief financial officer.

FTI is likely to stick with consulting acquisitions, though expanding its reach to more industries, he said. Pincus noted the addition of Cambio Health Solutions in May and Ringtail Solutions Group, a technology consulting firm, in February as evidence of FTI's broadening horizons.

The company's stock soared 10.5 percent yesterday to $23.57 a share on the Nasdaq stock market.

FTI's forensic accounting business, which investigates a company's financial statements to detect fraud, has been especially hot in the wake of corporate scandals. The company also provides economic and litigation consulting and corporate finance and restructuring services.

Besides providing fuel for acquisitions, the $300 million from the debt offering would allow FTI to be much more aggressive in its stock repurchase program, which is set to end in October. The company said yesterday that it plans to repurchase at least $100 million worth of common shares. Repurchasing stock is intended to raise a company's stock price by decreasing supply, and is usually a sign that the company believes its stock is undervalued.

"This plan for stock repurchase ... speaks to the confidence of future prospects," Gold said.

By refinancing, FTI can "fix their interest at a reasonable rate, about 6.5 percent fixed," Gold said. Pincus added that $300 million in public debt is "well within our capacity for debt coverage."

FTI also said yesterday that it expects to report second-quarter revenue of $123.9 million, an increase of over 15 percent from last year's second quarter.

The company employs about 1,200 people with offices in 24 U.S. cities, London and Melbourne, Australia.

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