<PAGE>
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark
One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-28830
Navigant Consulting, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 36-4094854
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
615 North Wabash Avenue
Chicago, Illinois 60611
(Address of principal executive office, including zip code)
(312) 573-5600
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [_]
As of November 14, 2000, 39.8 million shares of the Registrant's common
stock, par value $.001 per share ("Common Stock"), were outstanding.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>
NAVIGANT CONSULTING, INC.
PERIOD ENDED SEPTEMBER 30, 2000
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements............................................ 3
Notes to Unaudited Consolidated Financial Statements.................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................. 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk...... 17
PART II--OTHER INFORMATION
Item 1. Legal Proceedings............................................... 19
Item 6. Exhibits and Reports on Form 8-K................................ 19
SIGNATURES................................................................ 20
</TABLE>
2
<PAGE>
NAVIGANT CONSLUTING, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
(Unaudited) (Audited)
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 34,798 $ 42,345
Accounts receivable, net.............................. 68,380 116,100
Prepaid expense and other current assets.............. 5,233 7,364
Notes receivable (Note 6)............................. 8,000 --
Income taxes receivable................................. 4,041 8,211
Deferred income taxes................................. -- 2,385
Net assets of discontinued operations (Note 6)........ 4,249 --
--------- --------
Total current assets................................ 124,701 176,405
Property and equipment, net........................... 20,835 33,763
Intangible assets, net................................ 26,633 202,096
Deferred income taxes................................. 4,195 --
Other assets.......................................... 1,252 2,412
--------- --------
Total assets $ 177,616 $414,676
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Short-term debt....................................... $ 8,950 $ 10,000
Accounts payable and accrued liabilities.............. 13,361 20,709
Accrued compensation and project costs................ 18,775 58,425
Deferred income taxes................................. 461 --
Other current liabilities............................. 5,610 19,673
--------- --------
Total current liabilities........................... 47,157 108,807
Deferred income taxes................................... -- 725
Other non-current liabilities........................... 5,732 4,475
--------- --------
Total liabilities................................... 52,889 114,007
Stockholders' equity:
Common stock.......................................... 43 43
Additional paid-in capital............................ 343,256 340,528
Treasury stock........................................ (52,811) (52,811)
Notes receivable from stockholders.................... (816) (2,583)
Retained earnings (Accumulated deficit)............... (164,557) 15,650
Accumulated other comprehensive loss.................. (388) (158)
--------- --------
Total stockholders' equity.......................... 124,727 300,669
--------- --------
Total liabilities and stockholders' equity.......... $ 177,616 $414,676
========= ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
NAVIGANT CONSULTING, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
September 30,
--------------------
2000 1999
--------- ---------
<S> <C> <C>
Revenues.................................................. $ 61,259 $ 54,956
Cost of services (excluding value sharing retention
expense)............................................... 38,760 29,917
Value sharing retention expense (Note 11)............... 1,559 --
--------- --------
Gross profits............................................. 20,940 25,039
General and administrative expenses..................... 14,843 10,054
Value sharing retention expense (Note 11)............... 117 --
Depreciation expense.................................... 1,653 1,296
Amortization expense.................................... 1,222 --
Restructuring costs (credits) (Note 5).................. 944 (881)
Litigation settlement provision (Note 7)................ 500 --
Stock option compensation expense....................... 102 1,064
--------- --------
Operating income from continuing operations............... 1,559 13,506
Other income (loss), net................................ (240) 1,054
--------- --------
Income from continuing operations before income taxes..... 1,319 14,560
Income tax expense...................................... 1,087 6,166
--------- --------
Net income from continuing operations................. 232 8,394
--------- --------
Loss from discontinued operations, net of income tax (Note
6)....................................................... -- (533)
Loss on disposition of discontinued operations, net of
income tax (Note 6)...................................... (10,264) --
--------- --------
Net income (loss)................................... $(10,032) $ 7,861
========= ========
Net income from continuing operations per common share:
Net income per basic share.............................. $ 0.01 $ 0.20
Net income per diluted share............................ $ 0.01 $ 0.19
Net income (loss) per common share:
Net income (loss) per basic share....................... $ (0.24) $ 0.18
Net income (loss) per diluted share..................... $ (0.24) $ 0.17
Shares used in computing net income (loss) per basic
share.................................................... 41,348 42,665
Shares used in computing net income (loss) per diluted
share.................................................... 41,348 45,357
Other comprehensive income (loss):
Foreign currency translation adjustment................. $ (107) $ (27)
Comprehensive income (loss)............................. $(10,139) $ 7,834
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
NAVIGANT CONSULTING, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------------
2000 1999
--------- --------
<S> <C> <C>
Revenues.................................................. $ 185,566 $161,436
Cost of services (excluding value sharing retention
expense)............................................... 120,252 88,256
Value sharing retention expense (Note 11)............... 1,559 --
--------- --------
Gross profits............................................. 63,755 73,180
General and administrative expenses..................... 46,164 31,205
Value sharing retention expense (Note 11)............... 117 --
Depreciation expense.................................... 4,997 3,777
Amortization expense.................................... 3,482 --
Restructuring costs (credits) (Note 5).................. 10,229 (881)
Litigation settlement provision (Note 7)................ 16,500 --
Stock option compensation expense....................... 423 3,294
--------- --------
Operating (loss) income from continuing operations........ (18,157) 35,785
Other income (loss), net................................ (2,128) 3,021
--------- --------
Income (loss) from continuing operations before income
taxes.................................................... (20,285) 38,806
Income tax (benefit) expense............................ (6,452) 16,745
--------- --------
Net income (loss) from continuing operations.......... (13,833) 22,061
--------- --------
Income (loss) from discontinued operations, net of income
tax (Note 6)............................................. (10,193) 1,163
Loss on disposition of discontinued operations, net of
income tax (Note 6)...................................... (156,181) --
--------- --------
Net income (loss)................................... $(180,207) $ 23,224
========= ========
Net income (loss) from continuing operations per common
share:
Net income (loss) per basic share....................... $ (0.34) $ 0.52
Net income (loss) per diluted share..................... $ (0.34) $ 0.51
Net income (loss) per common share:
Net income (loss) per basic share....................... $ (4.37) $ 0.55
Net income (loss) per diluted share..................... $ (4.37) $ 0.53
Shares used in computing net income (loss) per basic
share.................................................... 41,244 42,582
Shares used in computing net income (loss) per diluted
share.................................................... 41,244 43,550
Other comprehensive income (loss):
Foreign currency translation adjustment................. $ (230) $ (35)
Comprehensive income (loss)............................. $(180,437) $ 23,189
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
NAVIGANT CONSULTING, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------------
2000 1999
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $(180,207) $ 23,224
Adjustments to reconcile net income (loss) to net cash
provided by continuing activities, net of acquisitions
and dispositions:
Loss from discontinued operations..................... 10,193 --
Loss on disposition of discontinued operations........ 156,181 --
Depreciation expense.................................. 4,997 6,191
Amortization expense.................................. 3,482 16,460
Impairment of stockholders' notes..................... 1,737 --
Stock option compensation expense..................... 424 3,294
Deferred income taxes................................. (3,868) (4,380)
Other, net............................................ (352) --
Changes in assets and liabilities:
Accounts receivable..................................... (211) (12,977)
Prepaid expenses and other current assets............... (1,263) 786
Accounts payable and accrued liabilities................ (5,965) (6,289)
Accrued compensation and project costs.................. (10,043) (14,604)
Income taxes receivable................................. 4,171 1,807
Other current liabilities............................... (10,914) (700)
--------- --------
Net cash provided by (used in) operating activities of:
Continuing operations................................... (31,638) 12,812
Discontinued operations................................. (15,225) --
--------- --------
Net cash provided by (used in) operating activities... (46,863) 12,812
--------- --------
Cash flows from investing activities:
Purchase of property and equipment...................... (6,455) (12,065)
Acquisition of businesses, net of cash acquired......... -- (29,810)
Divestitures of businesses, net of cash................. 46,527 --
Other, net.............................................. (822) 389
--------- --------
Net cash provided by (used in) investing activities of:
Continuing operations................................... 39,250 (41,486)
Discontinued operations................................. (1,217) --
--------- --------
Net cash provided by (used in) investing activities... 38,033 (41,486)
--------- --------
Cash flows from financing activities:
Issuance of common stock................................ 2,333 19,481
Stock repurchases, net of obligations for deferred
settlements............................................ -- (5,128)
Issuance of notes receivable from stockholders.......... -- (20,550)
Payment of short-term debt.............................. (1,050) (1,466)
--------- --------
Net cash provided by (used in) financing activities--
continuing operations 1,283 (7,663)
--------- --------
Net decrease in cash and cash equivalents................. (7,547) (36,337)
Cash and cash equivalents at beginning of the period...... 42,345 119,704
--------- --------
Cash and cash equivalents at end of the period............ $ 34,798 $ 83,367
========= ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE>
NAVIGANT CONSULTING, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying unaudited interim consolidated financial statements of
Navigant Consulting, Inc., formerly The Metzler Group, Inc. (the "Company"),
have been prepared pursuant to the rules of the Securities and Exchange
Commission for quarterly reports on Form 10-Q and do not include all of the
information and note disclosures required by accounting principles generally
accepted in the United States of America. The information furnished herein
includes all adjustments, consisting of normal recurring adjustments except
where indicated, which are, in the opinion of management, necessary for a fair
presentation of results of operations for these interim periods.
The results of operations for the three and nine months ended September 30,
2000 are not necessarily indicative of the results to be expected for the
entire year ending December 31, 2000.
These financial statements should be read in conjunction with the Company's
audited consolidated financial statements and notes thereto as of and for the
year ended December 31, 1999 included in the Annual Report on Form 10-K, as
filed by the Company with the Securities and Exchange Commission on March 29,
2000, and as subsequently amended.
Note 2. Business Combinations
During 1999, the Company completed eleven acquisitions (collectively, the
"1999 Acquisitions") in exchange for Company stock and cash having an
aggregate value of $235.7 million (valued at the time of acquisition). On
February 7, 1999, the Company issued 2.4 million shares of common stock
(valued at the time of closing at approximately $123.7 million) for
substantially all of the outstanding common stock of Strategic Decisions
Group, Inc. and acquired the remaining minority interest in exchange for $13.3
million in cash. On March 31, 1999, the Company completed the acquisitions of
all of the outstanding stock of Triad International, Inc., GeoData Solutions,
Inc., and Dowling Associates, Inc. in exchange for 1.8 million shares of the
Company's common stock (valued at the time of closing at approximately $57.3
million). On September 30, 1999, the Company completed its acquisition of the
business operations and certain assets of PENTA Advisory Services LLC (PENTA),
and the stock of Scope International, Inc. (Scope), for a total cash purchase
price of $15.1 million. The purchase agreements for PENTA and Scope also
provide for additional payments, payable in cash or Company common stock, over
the next two to five years contingent on future revenue growth and gross
margin targets. The additional payments, if any, will be accounted for as
additional goodwill. On October 1, 1999, the Company completed the acquisition
of the stock of Brooks International AB, Brooks International Consulting OY,
and Brooks International SPRL, for an aggregate cash purchase price of $3.3
million. On November 1, 1999, the Company completed the acquisition of the
stock of The Barrington Consulting Group, Inc. (Barrington) in exchange for
$14.4 million in cash paid at closing and total deferred cash payments of $7.8
million, payable in two equal annual installments. The purchase agreement for
Barrington also provides for additional cash payments of up to $7.7 million in
the aggregate, which are contingent on continued employment by the Company of
certain Barrington stockholders and are payable in cash in two annual
installments. The contingent payments are charged to expense ratably over the
period of employment. The Company's cost of services for the three quarters of
2000 included $1.6 million of compensation expense in each quarter related to
this employment-related contingency. On December 1, 1999, the Company
completed the acquisition of all of the assets of Glaze Creek Partners, LLC in
exchange for $0.8 million in cash paid at closing and total deferred cash
payments of $0.8 million, payable in quarterly installments starting on the
anniversary of the closing date. There were no pre-acquisition intercompany
transactions between the Company and the 1999 Acquisitions.
The 1999 Acquisitions were accounted for by the purchase method of
accounting and, accordingly, the results of operations were included in the
accompanying consolidated financial statements from the dates of acquisition.
Certain assets acquired of $46.2 million and liabilities assumed of $36.9
million were recorded at their estimated fair values. The excess of cost over
the net assets acquired of approximately $226.4 million was
7
<PAGE>
recorded as intangible assets, including goodwill. The allocation of the
excess cost over the net assets acquired to identifiable intangible assets and
goodwill was based upon independent appraisals, as were the estimated useful
lives. The estimated useful lives range from between one and 20 years, and
approximate, on a straight-line basis, an average life of 7 years.
As discussed further in Note 6, the Company committed to the disposition of
certain businesses that management has determined should be discontinued.
Discontinued operations include the following 1999 Acquisitions discussed
above: Strategic Decisions Group, Triad International, GeoData Solutions,
Dowling Associates, Brooks International AB, Brooks International Consulting
OY and Brooks International SPRL and Glaze Creek. The remaining 1999
Acquisitions, Barrington, PENTA and Scope are included in continuing
operations.
The following unaudited pro forma financial information presents the
combined results of continuing operations as if the acquisitions of
Barrington, PENTA and Scope had occurred as of January 1, 1999, after giving
effect to certain adjustments. The adjustments include the amortization of
goodwill and other intangibles, acquisition-related compensation, and a
reduction in interest income and related income tax effects. The pro forma
information is for informational purposes only. The information presented does
not necessarily reflect the results of continuing operations that would have
occurred had the acquisitions been completed as of January 1, 1999, nor are
they indicative of future results.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, 1999 September 30, 1999
------------------ ------------------
(In thousands, except per share data)
<S> <C> <C>
Revenues........................... $62,059 $180,945
Net income from continuing
operations........................ $ 6,255 $ 15,830
Net income from continuing
operations per diluted share...... $ .14 $ .36
</TABLE>
Note 3. Accounts Receivable
The components of accounts receivable were as follows:
<TABLE>
<CAPTION>
Sept.
30, December 31,
2000 1999
------- ------------
(In thousands)
<S> <C> <C>
Billed amounts...................................... $46,594 $ 86,849
Engagements in process.............................. 29,988 45,581
Allowance for uncollectible accounts................ (8,202) (16,330)
------- --------
$68,380 $116,100
======= ========
</TABLE>
Engagements in process represent balances accrued by the Company for
services that have been performed and earned but have not been billed to
clients. Billings are generally done on a monthly basis for the prior month's
services.
Note 4. Segment Information
Beginning January 1, 2000, the Company adopted a management reporting
structure with five operating divisions which represent three reportable
segments: Financial and Claims Consulting, Economics and Policy Consulting,
Energy and Water Consulting, Strategic Consulting and IT Solutions. (The
latter three operating divisions were combined as one reportable segment in
the unaudited quarterly financial statement notes for March 31, 2000). As
discussed further in Note 6, the Company has committed to disposition of three
of these operating divisions (Economics and Policy-LECG, Strategic Consulting
and IT Solutions) and, accordingly, amounts in the financial statements and
related notes have been restated to reflect discontinued operations accounting
for these divisions. Operating results from continuing operations for the
three and nine months ended September 30, 1999 have been restated to reflect
the Financial and Claims and Energy and Water reportable segments.
8
<PAGE>
The Financial and Claims segment provides information management,
technology services, damages analysis, business and property valuation,
regulatory compliance, process operations management and litigation support
services. The Energy and Water segment provides management consulting services
to clients in the utility and energy industries.
The Company currently evaluates segment performance and allocates resources
based upon revenues and operating results. The basis of measurement of segment
operating results is consistent between periods. All intercompany transactions
between segments have been eliminated. Information on the Company's operations
for the three and nine months ended September 30, 2000 and 1999 is summarized
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ------------------
2000 1999 2000 1999
--------- --------- --------- --------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
Financial and Claims Consulting..... $ 38,983 $ 31,064 $115,925 $ 89,438
Energy and Water Consulting 22,276 23,892 69,641 71,998
--------- --------- --------- --------
Combined segment revenues......... $61,259 $54,956 $185,566 $161,436
========= ========= ========= ========
Operating profit:
Financial and Claims Consulting..... $ 4,850 $ 8,682 $ 15,741 $ 22,903
Energy and Water Consulting......... 3,765 5,945 8,353 17,719
--------- --------- --------- --------
Combined segment operating profit. $ 8,615 $ 14,627 $ 24,094 $ 40,622
--------- --------- --------- --------
OPERATING PROFIT AND INCOME STATEMENT RECONCILIATION:
Unallocated:
Corporate general and administrative
expenses previously allocable to
discontinued operations............ $ 0 $ 938 $ 2,537 $ 2,424
Other non-recurring corporate ex-
penses............................. 1,050 0 2,717 0
Acquisition related compensation ex-
pense.............................. 1,562 0 4,687 0
Value sharing retention expense..... 1,676 0 1,676 0
Amortization expense................ 1,222 0 3,482 0
Restructuring costs................. 944 (881) 10,229 (881)
Litigation settlement provision..... 500 0 16,500 0
Stock option compensation expense... 102 1,064 423 3,294
Other expense (income).............. 240 (1,054) 2,128 (3,021)
--------- --------- --------- --------
Sub-total......................... 7,296 67 44,379 1,816
--------- --------- --------- --------
Income (loss) from continuing opera-
tions before income tax expense...... $ 1,319 $ 14,560 $(20,285) $ 38,806
========= ========= ========= ========
</TABLE>
Certain general and administrative expenses, which relate to general
corporate costs, were allocated to operating divisions generally on the basis
of consulting fee revenue. The Company incurred $1.1 million and $2.7 million
of non-recurring legal and infrastructure-related computer costs in the three
months and nine months ended September 30, 2000, respectively, which were not
allocated to any operating divisions. The Company expects to significantly
reduce and eliminate other non-recurring corporate expenses in future periods.
9
<PAGE>
The following unaudited pro forma financial information presents the
combined revenues and operating profits for each segment as if the 1999
Acquisitions included in continuing operations had occurred as of January 1,
1999. Accordingly, the Financial and Claims Consulting segment includes
Barrington, PENTA, and Scope.
<TABLE>
<CAPTION>
Three months ended Nine months ended
Sept. 30, 1999 Sept. 30, 1999
------------------ -----------------
(In thousands) (In thousands)
<S> <C> <C>
Revenues:
Financial and Claims Consulting $38,166 $108,947
Energy and Water Consulting....... 23,893 71,998
------- --------
Combined pro forma revenues..... $62,059 $180,945
======= ========
Operating Profit:
Financial and Claims Consulting... $10,010 $ 27,577
Energy and Water Consulting....... 5,945 17,719
------- --------
Combined pro forma segment
operating profit............... $15,955 $ 45,296
======= ========
</TABLE>
Note 5. Restructuring Costs
In May 2000, the Company retained outside financial advisors and announced
a managerial reorganization to complete plans to discontinue and dispose of
certain operations, and to restructure the remaining operating businesses. In
the nine months ended September 30, 2000, the Company recorded a restructuring
charge of $10.2 million. As part of this plan, the Company dissolved the
Office of the Chief Executive, which included three officers. In addition, the
Company offered involuntary severance packages to 133 consulting and
administrative employees in its continuing operations. The Company recognized
$1.9 million in severance-related costs associated with these reductions in
force. The Company increased previously recorded restructuring charges by $2.5
million associated with facility closings and space reductions in its
continuing operations units. The Company also incurred costs associated with
workforce reductions and facility closures and space reductions in its
discontinued operations.
The restructuring charges were determined based on formal plans approved by
the Company's management. The amounts the Company may ultimately incur may
change as the balance of the Company's restructuring plan is executed. The
activity affecting the accrual for restructuring costs, which is included in
accrued liabilities, for the nine months ended September 30, 2000 is as
follows:
<TABLE>
<CAPTION>
Facilities Workforce
costs reductions Total
---------- ---------- -------
(In thousands)
<S> <C> <C> <C>
Balance at December 31,
1999..................... $2,824 $ 536 $ 3,360
Charges to operations... 2,459 7,770 10,229
Utilized................ (1,245) (2,820) (4,065)
Reclassified to
discontinued
operations............. (1,312) -- (1,312)
------ ------- -------
Balance at September 30,
2000..................... $2,726 $ 5,486 $ 8,212
====== ======= =======
</TABLE>
Note 6. Discontinued Operations
In May 2000, the Company developed plans and identified operating divisions
and other entities for disposition, and implemented plans to restructure the
remaining operating units. The Company's executive management committed to the
disposition of the following businesses: Economics & Policy (LECG), Strategic
Consulting and IT Solutions.
Economics & Policy
The Company has completed the sale of LECG to a team of senior LECG
professionals in a management buy-out for $45 million, principally in cash and
notes receivable, on September 29, 2000. The agreement
10
<PAGE>
provides for other consideration, including a $5 million contingent-deferred
purchase price payment. No value was given to contingent deferred payments
when calculating the loss on disposition. This deferred purchase price payment
is based the retention of certain employee retention on, or prior to, the
first anniversary of the closing date.
Strategic Consulting
In October 2000, the Company completed a nontaxable exchange of SDG stock
for Navigant Consulting stock of approximately $6.2 million. In addition, the
Company received $16.0 million in cash related to this transaction.
The Company has shut down the operations of Triad International through
employee terminations and has sold certain Triad International assets to the
remaining employees, including client engagements in process. The purchasers
also assumed certain liabilities in connection with this disposition, which
was completed in June 2000. In consideration for the sale, the Company is
entitled to $2.5 million in contingent-deferred payments. No value was given
to the contingent deferred payments when calculating the loss on disposition.
The Company is attempting to sell to either management or various
interested third parties the operations of Brooks International AB, Brooks
International Consulting OY and Brooks International SPRL, and expects this
process to be completed during the fourth quarter 2000.
IT Solutions
In July 2000, the Company sold GeoData Solutions for $9 million cash, and
retained all accounts receivable, which had a net realizable value of
approximately $4.1 million at July 1, 2000. The Company shut down the
operations of SSC and Dowling Associates during the third quarter of 2000.
The Economics & Policy, Strategic Consulting and IT Solutions operating
segments are accounted for as discontinued operations and, accordingly,
amounts in the financial statements and related notes have been restated to
reflect discontinued operations accounting. Summarized results of discontinued
businesses are shown separately as discontinued operations in the accompanying
consolidated financial statements. The investment in discontinued operations
consists primarily of expected net proceeds from actual and pending sales as
of September 30, 2000, as well as receivables and fixed assets of other
dispositions, net of liabilities, including provisions for severance,
facilities and other shutdown expenses.
Certain information with respect to discontinued operations is summarized
as follows:
<TABLE>
<CAPTION>
Three months Nine months
ended Sept. 30, ended Sept. 30,
---------------- -----------------
2000 1999 2000 1999
------- ------- -------- -------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Revenues:
LECG..................................... $17,626 $19,042 $ 60,029 $58,803
SDG...................................... 7,895 19,145 34,029 49,866
Other.................................... 920 14,308 16,485 26,465
------- ------- -------- -------
Total revenues............................. 26,441 52,495 110,543 135,134
Income (loss) from discontinued operations. (2,420) 3,611 (12,679) 12,934
Income tax expense (benefit)............... (968) 4,144 (983) 11,771
------- ------- -------- -------
Net income (loss)...................... $(1,452) $ (533) $(11,696) $ 1,163
======= ======= ======== =======
</TABLE>
Results of discontinued operations for the three and nine months ended
September 30, 2000 only includes amortization of associated intangible assets
through the measurement date of April 30, 2000. The above results include $1.5
million of net loss (excludes amortization expenses) for the period May 1,
2000 through September 30, 2000. These results are included in the calculation
of the loss on disposition of discontinued operations. Additional after tax
costs of $10.3 million were recorded in the third quarter of 2000 primarily
due to revised estimates of expected discontinued business proceeds.
11
<PAGE>
The loss on disposition for the nine months ended September 30, 2000
includes the following (in thousands):
<TABLE>
<S> <C>
Book value of net assets in excess of anticipated proceeds,
including intangible assets of $162,346....................... $136,742
Net pre-tax loss on discontinued operations for the period May
1, 2000 through the expected disposition dates................ 2,470
Expenses associated with asset disposals (including $7,019 in
severance-related expenses)................................... 9,511
--------
Pre-tax loss on disposition.................................... 148,723
Income tax provision........................................... 7,458
--------
Loss on disposition............................................ $156,181
========
</TABLE>
Note 7. Litigation Settlement Provision
In August 2000, the Company announced it had executed a Memorandum of
Understanding containing the essential terms of a settlement for the
consolidated securities-related class actions lawsuits that were originally
filed against the Company and certain former directors and officers in
November 1999. See further discussion under Item 1, Legal Proceedings.
Accordingly, the Company has included a provision of $16.5 million for its
share of the settlement amount in its consolidated statement of operations.
Under the final settlement agreement subject to court approval, the Company
has contributed $16.5 million into escrow pending such approval, and Genesis
Insurance Company, one of its insurers, ("Genesis") has contributed $6.5
million under an agreement reached with the Company which is also subject to
certain conditions. The Company is seeking to recover from Genesis an
additional $.5 million as reimbursement for certain attorneys fees. The
Company is seeking to recover additional funds under a policy issued by a
second insurer, and it has agreed to share any such recovery with the class on
a 50/50 basis net of costs. The Company has not recorded any expected
reimbursement or recovery of such fees or funds.
Note 8. Stock Option Exchange
In July 2000, the Company completed an employee stock option exchange that
had been offered to all current employees, other than executive management,
for employee retention purposes. Employees tendered 6.4 million options, with
an average exercise price of approximately $28 per share. These employees were
granted 2.7 million options in exchange for the tendered options. The number
of exchanged options granted each employee was based on, among other factors,
a formula that considered the exercise prices of the tendered options. The new
options have an exercise price of $5.9375, which was $1.00 above the market
price as of the tender offer date in June 2000. The new options will vest 10%
each quarter beginning March 31, 2001.
Note 9. Basic and Diluted Shares
The components of basic and diluted shares were as follows:
<TABLE>
<CAPTION>
Three months Nine months
ended ended
September 30, September 30,
------------- -------------
2000 1999 2000 1999
------ ------ ------ ------
(In (In
thousands) thousands)
<S> <C> <C> <C> <C>
Weighted average shares outstanding................. 41,348 42,665 41,244 42,582
Employee stock options.............................. 0 2,692 0 968
------ ------ ------ ------
Diluted shares...................................... 41,348 45,357 41,244 43,550
====== ====== ====== ======
</TABLE>
For the three and nine months ended September 30, 2000, the weighted
average effect of employee stock options was less than .1 million. However,
the Company incurred a loss for these periods and inclusion of these common
stock equivalents in the diluted shares would be anti-dilutive.
12
<PAGE>
Note 10. Supplemental Cash Flow Information
Total interest paid during the nine months ended September 30, 2000 and
1999 were $.6 million and $.2 million, respectively. Total income taxes paid
during the nine months ended September 30, 2000 and 1999 were $5.6 million and
$27.2 million, respectively.
With respect to the short-term debt reflected on the September 30, 2000
balance sheet, the Company repaid said debt of $8.9 million on October 2,
2000, the first business day after receipts of the cash proceed from the LECG
transaction.
In September 2000, the Company received a $8 million note receivable as
part of the exchange for the LECG divestiture.
During the first quarter of 1999 the Company issued 4.2 million shares of
common stock (valued at the time at approximately $181.0 million) for
substantially all of the outstanding common stock of four companies acquired
in transactions accounted for by the purchase method of accounting. See also
Note 2, "Business Combinations".
Note 11. Value Sharing Retention Program
During the third quarter of 2000, the Company adopted a comprehensive
monetary and equity incentive program to retain senior level employees.
Approximately 30% of the employee population is covered under this program.
The incentives include approximately $20.4 million in cash, 2.1 million
restricted shares and 5.3 million options at an exercise price of $3.94.
The cash and equity incentives are designed to vest in stages over a 4 1/2
year period. The cash incentives vest over a 12-month period commencing on
September 1, 2000 and will be paid in four equal installments beginning
December 1, 2000 and continuing every three months to September 1, 2001. The
restricted stock grants vest 33% per year beginning September 2001, and the
option grants vest 10% on the date of grant and 5% per quarter thereafter
through March 2004.
The Company obtained new non-compete covenants and extensions of current
non-compete covenants for the majority of the participants under this
incentive retention program.
As of September 30, 2000, the Company had 8.7 million options outstanding
with an average exercise price of $7.06 per share.
Note 12. Treasury Stock Repurchases
In October 2000, the Company announced that the Board of Directors had
authorized the repurchase of up to 5 million shares, approximately 13%, of the
Company's outstanding shares. The Company has not yet purchased any shares
pursuant to this authorization.
13
<PAGE>
Item 2.
NAVIGANT CONSULTING, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations which are not historical in nature, are
intended to be, and are hereby identified as, "forward-looking statements" for
purposes of the safe harbor provided by Section 21E of the Securities Exchange
Act of 1934, as amended by Public Law 104-67. Forward-looking statements may
be identified by words including "anticipate," "believe," "intends,"
"estimates," "expect" and similar expressions. The Company cautions readers
that forward-looking statements, including without limitation, those relating
to the Company's future business prospects, revenues, working capital,
liquidity, and income, are subject to risks and uncertainties that could cause
actual results to differ materially from those indicated in the forward-
looking statements, due to important risks and factors herein identified or
identified from time to time in the Company's reports filed with the SEC.
Results of Continuing Operations
Three months ended September 30, 2000 compared to three months ended
September 30, 1999
Revenues. Revenues increased $6.3 million, or 11.5%, to $61.3 million in
the three months ended September 30, 2000, from $55.0 million for the same
period in 1999. The growth in revenues is primarily due to acquisitions.
During 1999, the Company made acquisitions consistent with its strategy of
acquiring consulting companies that provide complementary services or broaden
the Company's geographic presence. Had the 1999 acquisitions been included in
the results of continuing operations of the Company as of January 1, 1999, the
Company's pro forma revenues would have been $62.1 million for the quarter
ended September 30, 1999. On a pro forma basis, revenues decreased $.8
million, or 1.2%, in the three months ended September 30, 2000 from $62.1
million for the same period in 1999.
On a pro forma basis, revenues in the Company's Financial and Claims
consulting segment increased $.8 million, or 2%, from $38.2 million to $39.0
million in the third quarter of 2000 due to increased billing rates. Revenues
in the Energy and Water consulting segment decreased $1.6 million, or 7%, from
$23.9 million to $22.3 million due to reduction of staffing.
Gross Profit. Gross profit consists of revenues less cost of services,
which includes consultant salaries, benefits and travel-related direct project
expenses. Gross profit decreased $4.1 million, or 16.4%, to $20.9 million in
the third quarter of 2000 from $25.0 million in the corresponding period in
1999. The change in the gross profit as a percentage of revenue was a decrease
to 34% in 2000, from 46% in 1999. The decline in gross margin was due to $10.4
million of increased costs of services, partially offset by $6.3 million of
higher revenues. The higher third quarter 2000 costs of services were
primarily due to $8.2 million of consultant salaries and benefits, $1.6
million of acquisition related compensation of a 1999 Acquisition (Note 2),
and $2.8 million of performance and retention incentives.
General and Administrative Expenses. General and administrative expenses
include salaries and benefits of management and support personnel, facilities
costs, training, outside professional fees and all other corporate costs.
General and administrative expenses for the three months ended September 30,
2000 increased $4.8 million to $14.8 million, or 24% of revenues, from $10.0
million, or 18% of revenues, in the prior corresponding period. The increase
in general and administrative expenses as a percentage of revenue was
primarily due to $1.7 million of higher bad debt expenses, $1.5 million of
higher salary, benefit and retention incentive costs, and $0.5 of higher legal
expense.
For the quarter ended September 30, 2000, operating profit margins as a
percentage of revenues declined for both of the Company's reportable segments.
The operating profit margin in the Financial and Claims
14
<PAGE>
Consulting segment declined to 12% of revenues, or $4.9 million, from 28% of
revenues in the prior year period, due to increased cost and lower utilization
levels in the current period. The operating profit margin in the Energy and
Water Consulting segment declined to 17% of revenues, or $3.8 million, from
25% of revenues in the prior year, due to increased costs.
Amortization Expense. The excess of cost over the net assets acquired for
the 1999 acquisitions included in continuing operations of approximately $32.2
million has been recorded as intangible assets, including goodwill, and is
being amortized on a straight-line basis over 7 years. There was no
amortization expense associated with continuing operations recorded in the
third quarter of 1999. Amortization would have been approximately $1.1 million
for the third quarter of 1999 had the 1999 acquisitions occurred as of January
1, 1999.
Stock Option Compensation Expense. The Company recorded $.1 million for
stock option compensation expense for the three months ended September 30,
2000 versus $1.1 million for the same period in 1999.
Other Income (Loss), Net. Other income (loss), net, includes interest
expense, interest income and other non-operating income and expenses. Other
income, net, for the third quarter of 2000 decreased $1.3 million to a $.2
million loss from $1.1 million income in the comparable quarter last year. The
decrease is primarily due to decreased interest income as the average daily
cash balance for the third quarter of 2000 was significantly lower than the
comparable quarter last year.
Income Tax Expense (Benefit). Income tax expense decreased $5.1 million to
$1.1 million for the three months ended September 30, 2000 from $6.2 million
in the prior year quarter. The high income tax rate of 82% in 2000 is
primarily due to the non-deductible amortization expense. The decrease in
income tax expense in 2000 primarily resulted from the decrease in pre-tax
income in 2000.
Net Income from Continuing Operations. Net income from continuing
operations decreased $8.2 million, to net income of $.2 million in the three
months ended September 30, 2000, from net income of $8.4 million in the same
period the previous year. The increase in revenues of $6.3 million was offset
by a $10.4 million increase in cost of services resulting in a net decrease in
gross profit of $4.1 million. The decrease in gross profit was further
exacerbated by $4.8 million of higher general and administrative expenses, $.4
million of higher depreciation expense, $1.2 million in amortization expenses,
$1.8 million in restructuring charges, $.5 million litigation settlement
provision and $1.3 million lower other income. The net income for the third
quarter of 2000 was increased by $1.1 million of lower stock option
compensation expense and $5.1 million of lower income tax expenses.
Nine months ended September 30, 2000 compared to nine months ended
September 30, 1999
Revenues. Revenues increased $24.1 million, or 15%, to $185.6 million in
the nine months ended September 30, 2000, from $161.4 million for the same
period in 1999. The growth in revenue is primarily due to acquisitions,
expansion of services provided to existing clients, engagements with new
clients, and increased selling and business development efforts. During 1999,
the Company made acquisitions consistent with its strategy of acquiring
consulting companies that provide complementary services or broaden the
Company's geographic presence. Had the 1999 acquisitions been included in the
results of continuing operations of the Company as of January 1, 1999, the
Company's pro forma revenues would have been $180.9 million for the nine
months ended September 30, 1999. On a pro forma basis, revenues increased $4.7
million, or 3%, in the nine months ended September 30, 2000, from $180.9
million for the same period in 1999.
On a pro forma basis, revenues in the Company's Financial and Claims
consulting segment increased $7.0 million, or 6%, to $115.9 million in the
first nine months of 2000 due to expansion of services provided to existing
clients, engagements with new clients, and increased billing rates. Revenues
in the Energy and Water consulting segment decreased $2.4 million, or 3%, to
$69.6 million.
Gross Profit. Gross profit consists of revenues less cost of services,
which includes consultant salaries, benefits and travel-related direct project
expenses. Gross profit decreased $9.4 million, or 13%, to $63.8 million for
the nine months ended September 30, 2000 from $73.2 million in the
corresponding period in 1999. However,
15
<PAGE>
gross profit as a percentage of revenue decreased to 34% in 2000, from 45% in
1999. The decline in gross margin was due to $33.6 million of increased costs
of services, partially offset by $24.1 million of higher revenues. The higher
nine months ended September 30, 2000 costs of services were primarily due to
$23.0 million of consultant salaries and benefits, $4.7 million of acquisition
related compensation of a 1999 Acquisition (Note 2), $6.2 million of
performance and retention incentives (Note 11), and $3.1 million in selling,
recruiting and other non-billable expenses.
General and Administrative Expenses. General and administrative expenses
include salaries and benefits of management and support personnel, facilities
costs, training, outside professional fees and all other corporate costs.
General and administrative expenses for the nine months ended September 30,
2000 increased $15.1 million to $46.3 million, or 25% of revenues, from $31.2
million, or 19% of revenues, in the prior corresponding period. General and
administrative expenses, as a percentage of revenue, increased 6% which was
primarily due to $2.9 million of higher facilities and infrastructure costs,
$6.0 million of higher salary and benefit costs and $2.0 million of higher bad
debt expense, and $2.7 of higher legal cost.
For the nine months ended September 30, 2000, operating profit margins as a
percentage of revenues declined for both of the Company's reportable segments.
The operating profit margin in the Financial and Claims Consulting segment
declined to 14% of revenues, or $15.7 million, from 25% of revenues in the
prior year period, due to increased costs of services in the current period.
The operating profit margin in the Energy and Water Consulting segment
declined to 12% of revenues, or $8.4 million, from 25% of revenues in the
prior year, due to increased costs of services.
Amortization Expense. The excess of cost over the net assets acquired for
the 1999 acquisitions included in continuing operations of approximately $32.2
million has been recorded as intangible assets, including goodwill, and is
being amortized on a straight-line basis over 7 years. There was no
amortization expense associated with continuing operations recorded in the
first nine months of 1999. Amortization would have been approximately $3.5
million for the nine months ended September 30, 1999 had the 1999 acquisitions
occurred as of January 1, 1999.
Stock Option Compensation Expense. The Company recorded $.4 million for
stock option compensation expense in 2000 versus $3.3 million in 1999.
Other Income (Loss), Net. Other income (loss), net, includes interest
expense, interest income and other non-operating income and expenses. Other
income (loss), net, for the nine months ended September 30, 2000 decreased
$5.1 million to a loss of $ 2.1 million, from $3.0 million income in the
comparable nine month period last year. The decrease is the result of
decreased interest income, increased interest expense, and a $1.7 million
charge to reflect the impairment of stockholders' notes receivable.
Income Tax Expense (Benefit). Income tax expense decreased $23.2 million to
a tax benefit of $6.5 million for the nine months ended September 30, 2000,
from a tax expense of $16.7 million in the prior year. The tax benefit in 2000
primarily resulted from the $16.5 million litigation settlement provision and
the $10.2 million restructuring costs as well as lower income in 2000.
Net Income (Loss) from Continuing Operations. Net income (loss) from
continuing operations decreased $35.9 million to a net loss of $13.8 million
in the nine months ended September 30, 2000, from a net income of $22.1
million in the same period the previous year. The increase in revenues of
$24.1 million was offset by a $33.5 million increase in cost of services
resulting in a net decrease in gross profit of $9.4 million. The decrease in
gross profit was further effected by $15.1 million of higher general and
administrative expenses (excluding depreciation), $1.2 million of higher
depreciation expenses, $3.5 million of higher amortization expense, $11.1
million in restructuring costs, $16.5 million litigation settlement provision
and $5.1 million lower other income. The net loss for the nine months ended
September 30, 2000 was reduced by $2.9 million of lower stock option
compensation expense and $23.2 million of lower income tax expenses.
16
<PAGE>
Liquidity and Capital Resources
As of September 30, 2000, the Company had $34.8 million in cash and cash
equivalents and working capital of $77.5 million, including net assets of
discontinued operations. The Company's primary source of liquidity has been
cash provided by cash flows from operations and cash proceeds from
divestitures.
Net cash used in operating activities was $46.9 million during the nine
months ended September 30, 2000. For the period, the primary uses of the cash
provided by operating activities were for net compensation-related payments of
$10 million, a reduction of other current liabilities of $10.9 million, and
discontinued operations-related operating activities of $15.2 million.
Net cash provided by investing activities was $38 million. Net cash
proceeds from divestitures, net of notes receivable, was $46.5 million. The
Company has used $6.5 million for capital spending to support increases in
personnel and services for the nine months ended September 30, 2000. The
investments to support increases in personnel and services included leasehold
improvements, furniture and equipment for new leased facilities, additional
computers and related equipment for information management consulting
services.
Net cash used in financing activities was $1.3 million in the nine months
ended September 30, 2000. Net repayments from the unsecured revolving line of
credit were $1.0 million. During the nine months ended September 30, 2000, the
Company received $2.3 million primarily from the Company's employee stock
purchase plan.
The Company maintains an unsecured revolving line of credit with LaSalle
Bank that supports up to $50.0 million of borrowings and bears interest at
prime or LIBOR plus 1.0%. The line of credit expires on May 31, 2001. The
Company intends to utilize this line of credit to finance short-term cash
acquisition needs or to repurchase its common stock.
The Company believes that current projected levels of cash flows and the
availability of financing, including borrowings under the Company's credit
facility, will be adequate to fund its anticipated short-term and long-term
cash needs for normal operations, including commitments related to rental
expenses under operating leases, possible contingent payments resulting from
the purchases of Barrington, PENTA, and Scope, restructuring-related and other
severance costs, and settlement of the securities litigation. In the event
that the Company were to make significant cash expenditures in the future for
major acquisitions or other non-operating activities, the Company would seek
additional debt or equity financing, as appropriate. The Company had no plans
or intentions for such expenditures as of September 30, 2000.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133, as amended by SFAS Nos. 137
and 138, is effective for fiscal 2001. SFAS No. 133 requires companies to
record derivatives on the balance sheet as assets and liabilities, measured in
fair value. Gains or losses resulting from changes in the value of those
derivatives would be accounted for depending on the use of a derivative and
whether it qualifies for hedge accounting. The Company will adopt SFAS No.
133, as amended, in the first quarter of 2001; however, the Company does not
believe that the adoption will have a material effect on its financial
statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's primary exposure to market risks relates to changes in
interest rates associated with its investment portfolio and its borrowings
under the line of credit. The Company's general investment policy is to limit
the risk of principal loss by limiting market and credit risks. As of
September 30, 2000, the Company's investments were primarily limited to fully
collateralized, A+ or better rated securities with maturity dates of
17
<PAGE>
49 days or less. If interest rates average 25 basis points less in fiscal year
2000 than they did in 1999, the Company's interest income would be decreased by
less than $0.1 million. This amount is determined by considering the impact of
this hypothetical interest rate on the Company's investment portfolio at
September 30, 2000. The Company does not expect any loss with respect to its
investment portfolio. The Company's market risk associated with its line of
credit relates to changes in interest rates. Borrowings under the line of
credit bear interest, at the Company's option, based on either the London
Interbank Offered Rate (LIBOR) or the prime rate. If interest rates average 25
basis points higher in 2000 than they did in 1999, the Company's interest
expense would increase by less than $0.1 million. This amount is determined
based on the amount of short-term debt at September 30, 2000. The Company does
not currently have any long-term debt, interest rate derivatives, forward
exchange agreements, firmly committed foreign currency sales transactions, or
derivative commodity instruments.
The Company operates in foreign countries which exposes it to market risk
associated with foreign currency exchange rate fluctuations; however, such risk
is immaterial at this time to the Company's consolidated financial statements.
18
<PAGE>
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
As previously disclosed, in August 2000 the Company agreed with the
appointed lead plaintiff, the Policemen and Firemen Retirement System of the
City of Detroit, to settle for $23 million the 21 consolidated securities law
class actions then pending before Judge Castillo in the Northern District of
Illinois (the "Consolidated Class Actions"), subject to court approval and
certain other conditions. The settlement agreement calls for the dismissal,
with prejudice, of the Consolidated Class Actions and a release of the Company
and the Company's former and current officers and directors, among others.
Under the final settlement agreement, the Company has contributed $16.5
million into escrow pending such approval, and Genesis Insurance Company, one
of its insurers ("Genesis"), has contributed $6.5 million under an agreement
reached with the Company which is also subject to certain conditions. The
Company is seeking to recover from Genesis an additional $.5 million as
reimbursement for certain attorneys' fees. The Company is seeking to recover
additional funds under a policy issued by a second insurer, and it has agreed
to share any such recovery with the class on a 50/50 basis, net of costs.
In October 2000, the lead plaintiff filed a motion for preliminary approval
of the proposed settlement of the Consolidated Class Actions. On October 30,
2000 the individual defendants (Messrs. Maher, Kingsbury, Cain, Demirjian and
Denari) filed objections to such motion. The Company will vigorously support
the terms of the proposed settlement of the Consolidated Class Actions and
will vigorously oppose the individual defendants' objections. If the court
preliminarily approves the settlement, the court is expected to issue a final
ruling on the fairness and approval of the proposed settlement in the first
calendar quarter of 2001.
In September 2000, the Company was served with another purported
shareholder class action complaint filed by Charles L. Grimes in the United
States District Court for the District of Delaware. The factual allegations in
Mr. Grimes' complaint are very similar to the factual allegations in the
Consolidated Class Actions, except that Mr. Grimes seeks to extend the class
period (which the parties in the Consolidated Class Actions have stipulated,
for purposes of settlement only, extends from January 1, 1999 through November
19, 1999) through January 24, 2000. Counsel for the Company and Mr. Grimes
have agreed jointly to seek the transfer of Mr. Grimes' action to the Northern
District of Illinois. The Company will vigorously defend the Grimes action.
Also in September 2000, the Company and its former Chief Executive Officer
Robert P. Maher were named in a complaint filed in the United States District
Court for the Northern District of Illinois by Russell D. Chandler, Andrew M.
Street and Scott Boocher. Messrs. Chandler, Street and Boocher were the
principal shareholders and officers of Geodata Solutions, Inc, a business
acquired by the Company in the first quarter of 1999 in a stock-for-stock
exchange, and subsequently sold in July 2000. Messrs. Chandler, Street and
Boocher allege violations of federal and Colorado securities laws and
regulations, common law fraud, and negligent misrepresentation in connection
with their acquisition of Company stock as part of that transaction. The
Company will vigorously defend the Chandler action.
Navigant International, Inc., a national travel agency headquartered in
Denver, Colorado, sued the Company in July 1999 in the United States District
Court for the District of Colorado claiming that the use of "Navigant" in our
name infringes on their use of and rights in such name. The complaint seeks
declaratory relief and an injunction against our use of "Navigant," attorneys'
fees and other related relief. The current schedule calls for a trial date in
January 2001. The Company believes it has meritorious defenses and intends to
vigorously defend this action.
In addition, from time to time, we are party to various other lawsuits and
claims in the ordinary course of business. While the outcome of those lawsuits
or claims cannot be predicted with certainty, we do not believe that any of
those lawsuits or claims will have a material adverse effect on the Company.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
(27) Financial Data Schedule
(b) Reports on Form 8-K.
On August 28, 2000, the Company filed a Current Report on Form 8-K in which
the Company established the date of the 2000 annual meeting of stockholders of
the Company.
19
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
Navigant Consulting, Inc.
/s/ William M. Goodyear
By: _________________________________
William M. Goodyear
Chairman and Chief Executive
Officer
/s/ Ben W. Perks
By: _________________________________
Ben W. Perks
Executive Vice President and Chief
Financial Officer
Date: November 14, 2000
20
