2009 Annual Report (PDF) - FTI Consulting

we make in other business sectors. Because technology companies often are high-growth businesses, theytypically can command higher purchase price multiples. As a result of these competitive dynamics, certainacquisitions with strategic importance to the future growth and profitability of our Technology segment may notbe accretive to our overall financial results in the near term.We may have a different system of governance and management from the companies we acquire or theirparents, which could cause professionals who join us from acquired companies to leave us.Our governance and management practices and policies do not mirror the policies and practices of acquiredcompanies or their parents. In some cases, different management practices and policies may lead to workplacedissatisfaction on the part of acquired professionals. Some professionals may choose not to join our company orleave after joining us. Existing professionals may leave us as well. The loss of key professionals may harm ourbusiness and results of operations and cause us not to realize the anticipated benefits of the acquisition.Due to fluctuations in our stock price, acquisition candidates may be reluctant to accept shares of ourcommon stock as purchase price consideration , use of our shares as purchase price consideration may bemore dilutive, and the owners of certain companies we seek to acquire may insist on stock price guarantees.We structure many acquisitions to pay a portion of the purchase price in shares of our common stock. Thenumber of shares issued as consideration is typically based on an average closing price per share of our commonstock for a number of days prior to the closing of such acquisition. We believe that payment in the form of FTIshares of common stock provides the acquired entity and its principals with a vested interest in the future successof the acquisition and FTI. The recent extreme volatility of stock markets and the recent decline and volatility ofthe price per share of FTI common stock may result in acquisition candidates being reluctant to accept our sharesas consideration. In such cases, we may have to issue more shares, if stock constitutes part of the consideration,pay the entire purchase price in cash, or negotiate an alternative price structure. The result may be an increase inthe cost of an acquisition.Certain acquisition related agreements contain stock price guarantees that may result in cash payments inthe future if our price per share falls below a specified per share market value on the date restrictions lapse.Acquisition candidates may continue to negotiate stock price guarantees, particularly in light of our recent stockprice volatility, which may increase the cash paid for an acquisition.Risks Related to Our IndebtednessOur substantial indebtedness could adversely affect our financial condition and business operations.We have a significant amount of indebtedness. As of December 31, 2009, the principal amount of ouroutstanding borrowings totaled $566.1 million of which $564.9 million is under our 7 5 ⁄8% senior notes due 2013,3 3 ⁄4% senior subordinated convertible notes due 2012 and 7 3 ⁄4% senior notes due 2016 (collectively, our notes)and $3.8 million of outstanding letters of credit under our senior secured bank revolving credit facility. We havean additional $171.2 million of revolving credit available under our senior secured bank credit facility.Our substantial indebtedness could have important consequences. For example, it could:• make it more difficult to satisfy our other financial obligations;• increase our vulnerability to adverse economic and industry conditions;• require us to dedicate a substantial portion of our cash flows from operations to payments on ourindebtedness, thereby reducing the availability of our cash flows to fund working capital, capitalexpenditures, research and development efforts and other general corporate purposes;• limit our ability to borrow additional funds; or• limit our ability to make future acquisitions.31