false Q2 NAVIGANT CONSULTING INC 0001019737 Yes Yes --12-31 Large Accelerated Filer false false false true false P3Y9M18D P2Y P3Y P3Y8M12D P6Y 0001019737 2019-01-01 2019-06-30 xbrli:shares 0001019737 2019-06-30 iso4217:USD 0001019737 2018-12-31 0001019737 2019-04-01 2019-06-30 0001019737 2018-04-01 2018-06-30 0001019737 2018-01-01 2018-06-30 iso4217:USD xbrli:shares 0001019737 us-gaap:CommonStockMember 2019-03-31 0001019737 us-gaap:TreasuryStockMember 2019-03-31 0001019737 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001019737 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0001019737 us-gaap:RetainedEarningsMember 2019-03-31 0001019737 us-gaap:NoncontrollingInterestMember 2019-03-31 0001019737 2019-03-31 0001019737 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-04-01 2019-06-30 0001019737 us-gaap:RetainedEarningsMember 2019-04-01 2019-06-30 0001019737 us-gaap:NoncontrollingInterestMember 2019-04-01 2019-06-30 0001019737 us-gaap:CommonStockMember 2019-04-01 2019-06-30 0001019737 us-gaap:AdditionalPaidInCapitalMember 2019-04-01 2019-06-30 0001019737 us-gaap:TreasuryStockMember 2019-04-01 2019-06-30 0001019737 us-gaap:CommonStockMember 2019-06-30 0001019737 us-gaap:TreasuryStockMember 2019-06-30 0001019737 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0001019737 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0001019737 us-gaap:RetainedEarningsMember 2019-06-30 0001019737 us-gaap:NoncontrollingInterestMember 2019-06-30 0001019737 us-gaap:CommonStockMember 2018-12-31 0001019737 us-gaap:TreasuryStockMember 2018-12-31 0001019737 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001019737 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0001019737 us-gaap:RetainedEarningsMember 2018-12-31 0001019737 us-gaap:NoncontrollingInterestMember 2018-12-31 0001019737 us-gaap:NoncontrollingInterestMember 2019-01-01 2019-06-30 0001019737 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-06-30 0001019737 us-gaap:RetainedEarningsMember 2019-01-01 2019-06-30 0001019737 us-gaap:CommonStockMember 2019-01-01 2019-06-30 0001019737 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-06-30 0001019737 us-gaap:TreasuryStockMember 2019-01-01 2019-06-30 0001019737 us-gaap:CommonStockMember 2018-03-31 0001019737 us-gaap:TreasuryStockMember 2018-03-31 0001019737 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 0001019737 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-31 0001019737 us-gaap:RetainedEarningsMember 2018-03-31 0001019737 2018-03-31 0001019737 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-04-01 2018-06-30 0001019737 us-gaap:RetainedEarningsMember 2018-04-01 2018-06-30 0001019737 us-gaap:CommonStockMember 2018-04-01 2018-06-30 0001019737 us-gaap:AdditionalPaidInCapitalMember 2018-04-01 2018-06-30 0001019737 us-gaap:TreasuryStockMember 2018-04-01 2018-06-30 0001019737 us-gaap:CommonStockMember 2018-06-30 0001019737 us-gaap:TreasuryStockMember 2018-06-30 0001019737 us-gaap:AdditionalPaidInCapitalMember 2018-06-30 0001019737 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-30 0001019737 us-gaap:RetainedEarningsMember 2018-06-30 0001019737 2018-06-30 0001019737 us-gaap:CommonStockMember 2017-12-31 0001019737 us-gaap:TreasuryStockMember 2017-12-31 0001019737 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0001019737 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0001019737 us-gaap:RetainedEarningsMember 2017-12-31 0001019737 2017-12-31 0001019737 us-gaap:RetainedEarningsMember 2018-01-01 2018-06-30 0001019737 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 2018-06-30 0001019737 us-gaap:CommonStockMember 2018-01-01 2018-06-30 0001019737 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-06-30 0001019737 us-gaap:TreasuryStockMember 2018-01-01 2018-06-30 0001019737 srt:ParentCompanyMember nci:IsaacMergerSubIncMember 2019-01-01 2019-06-30 0001019737 srt:ParentCompanyMember us-gaap:SubsequentEventMember 2019-08-02 0001019737 us-gaap:AccountingStandardsUpdate201602Member 2019-06-30 0001019737 us-gaap:RetainedEarningsMember us-gaap:AccountingStandardsUpdate201409Member 2018-01-01 2018-01-01 0001019737 nci:SaleCoMember 2018-08-24 2018-08-24 0001019737 nci:SaleCoMember 2019-01-01 2019-06-30 nci:Segment 0001019737 us-gaap:AccountingStandardsUpdate201409Member 2019-06-30 0001019737 us-gaap:AccountingStandardsUpdate201409Member 2018-12-31 0001019737 us-gaap:AccountingStandardsUpdate201409Member 2019-04-01 2019-06-30 0001019737 us-gaap:AccountingStandardsUpdate201409Member 2019-01-01 2019-06-30 0001019737 2020-07-01 us-gaap:CorporateJointVentureMember 2019-06-30 0001019737 nci:ManagedServicesMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2019-04-01 2019-06-30 0001019737 nci:ManagedServicesMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2019-01-01 2019-06-30 0001019737 nci:ManagedServicesMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2018-04-01 2018-06-30 0001019737 nci:ManagedServicesMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2018-01-01 2018-06-30 xbrli:pure 0001019737 us-gaap:HealthCareMember 2019-04-01 2019-06-30 0001019737 us-gaap:HealthCareMember 2018-04-01 2018-06-30 0001019737 us-gaap:HealthCareMember 2019-01-01 2019-06-30 0001019737 us-gaap:HealthCareMember 2018-01-01 2018-06-30 0001019737 nci:EnergyMember 2019-04-01 2019-06-30 0001019737 nci:EnergyMember 2018-04-01 2018-06-30 0001019737 nci:EnergyMember 2019-01-01 2019-06-30 0001019737 nci:EnergyMember 2018-01-01 2018-06-30 0001019737 nci:FinancialServicesAdvisoryAndComplianceMember 2019-04-01 2019-06-30 0001019737 nci:FinancialServicesAdvisoryAndComplianceMember 2018-04-01 2018-06-30 0001019737 nci:FinancialServicesAdvisoryAndComplianceMember 2019-01-01 2019-06-30 0001019737 nci:FinancialServicesAdvisoryAndComplianceMember 2018-01-01 2018-06-30 0001019737 us-gaap:HealthCareMember 2019-06-30 0001019737 us-gaap:HealthCareMember 2018-12-31 0001019737 nci:EnergyMember 2019-06-30 0001019737 nci:EnergyMember 2018-12-31 0001019737 nci:FinancialServicesAdvisoryAndComplianceMember 2019-06-30 0001019737 nci:FinancialServicesAdvisoryAndComplianceMember 2018-12-31 0001019737 nci:UnallocatedAssetsMember 2019-06-30 0001019737 nci:UnallocatedAssetsMember 2018-12-31 0001019737 us-gaap:HealthCareMember 2017-12-31 0001019737 nci:EnergyMember 2017-12-31 0001019737 nci:FinancialServicesAdvisoryAndComplianceMember 2017-12-31 0001019737 us-gaap:HealthCareMember 2018-01-01 2018-12-31 0001019737 nci:EnergyMember 2018-01-01 2018-12-31 0001019737 nci:FinancialServicesAdvisoryAndComplianceMember 2018-01-01 2018-12-31 0001019737 2018-01-01 2018-12-31 0001019737 2019-05-31 2019-05-31 0001019737 us-gaap:HealthCareMember 2019-05-31 0001019737 nci:EnergyMember 2019-05-31 0001019737 nci:FinancialServicesAdvisoryAndComplianceMember 2019-05-31 0001019737 srt:MaximumMember 2019-01-01 2019-06-30 0001019737 nci:CustomerListsAndRelationshipsMember 2019-01-01 2019-06-30 0001019737 us-gaap:NoncompeteAgreementsMember 2019-01-01 2019-06-30 0001019737 us-gaap:OtherIntangibleAssetsMember 2019-01-01 2019-06-30 0001019737 nci:CustomerListsAndRelationshipsMember 2019-06-30 0001019737 us-gaap:NoncompeteAgreementsMember 2019-06-30 0001019737 us-gaap:OtherIntangibleAssetsMember 2019-06-30 0001019737 us-gaap:EmployeeStockOptionMember 2019-04-01 2019-06-30 0001019737 us-gaap:EmployeeStockOptionMember 2018-04-01 2018-06-30 0001019737 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-06-30 0001019737 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-06-30 0001019737 us-gaap:RestrictedStockUnitsRSUMember 2019-04-01 2019-06-30 0001019737 us-gaap:RestrictedStockUnitsRSUMember 2018-04-01 2018-06-30 0001019737 us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-06-30 0001019737 us-gaap:RestrictedStockUnitsRSUMember 2018-01-01 2018-06-30 0001019737 nci:CostOfServicesBeforeReimbursableExpensesMember 2019-04-01 2019-06-30 0001019737 nci:CostOfServicesBeforeReimbursableExpensesMember 2018-04-01 2018-06-30 0001019737 nci:CostOfServicesBeforeReimbursableExpensesMember 2019-01-01 2019-06-30 0001019737 nci:CostOfServicesBeforeReimbursableExpensesMember 2018-01-01 2018-06-30 0001019737 us-gaap:GeneralAndAdministrativeExpenseMember 2019-04-01 2019-06-30 0001019737 us-gaap:GeneralAndAdministrativeExpenseMember 2018-04-01 2018-06-30 0001019737 us-gaap:GeneralAndAdministrativeExpenseMember 2019-01-01 2019-06-30 0001019737 us-gaap:GeneralAndAdministrativeExpenseMember 2018-01-01 2018-06-30 0001019737 nci:FurnitureFixturesAndEquipmentMember 2019-06-30 0001019737 nci:FurnitureFixturesAndEquipmentMember 2018-12-31 0001019737 us-gaap:SoftwareDevelopmentMember 2019-06-30 0001019737 us-gaap:SoftwareDevelopmentMember 2018-12-31 0001019737 us-gaap:LeaseholdImprovementsMember 2019-06-30 0001019737 us-gaap:LeaseholdImprovementsMember 2018-12-31 0001019737 nci:ComputerEquipmentAndSoftwareMember 2019-06-30 0001019737 us-gaap:AccumulatedTranslationAdjustmentMember 2019-03-31 0001019737 us-gaap:AccumulatedTranslationAdjustmentMember 2018-03-31 0001019737 us-gaap:AccumulatedTranslationAdjustmentMember 2018-12-31 0001019737 us-gaap:AccumulatedTranslationAdjustmentMember 2017-12-31 0001019737 us-gaap:AccumulatedTranslationAdjustmentMember 2019-04-01 2019-06-30 0001019737 us-gaap:AccumulatedTranslationAdjustmentMember 2018-04-01 2018-06-30 0001019737 us-gaap:AccumulatedTranslationAdjustmentMember 2019-01-01 2019-06-30 0001019737 us-gaap:AccumulatedTranslationAdjustmentMember 2018-01-01 2018-06-30 0001019737 us-gaap:AccumulatedTranslationAdjustmentMember 2019-06-30 0001019737 us-gaap:AccumulatedTranslationAdjustmentMember 2018-06-30 0001019737 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2018-03-31 0001019737 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2017-12-31 0001019737 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2018-04-01 2018-06-30 0001019737 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2018-01-01 2018-06-30 0001019737 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2018-06-30 0001019737 srt:MinimumMember 2019-06-30 0001019737 srt:MaximumMember 2019-06-30 0001019737 us-gaap:LetterOfCreditMember 2019-06-30 0001019737 us-gaap:LondonInterbankOfferedRateLIBORMember 2019-01-01 2019-06-30 0001019737 us-gaap:BaseRateMember 2019-01-01 2019-06-30 0001019737 us-gaap:LondonInterbankOfferedRateLIBORMember srt:MinimumMember 2019-01-01 2019-06-30 0001019737 us-gaap:LondonInterbankOfferedRateLIBORMember srt:MaximumMember 2019-01-01 2019-06-30 0001019737 us-gaap:BaseRateMember srt:MinimumMember 2019-01-01 2019-06-30 0001019737 us-gaap:BaseRateMember srt:MaximumMember 2019-01-01 2019-06-30 0001019737 us-gaap:RevolvingCreditFacilityMember 2019-01-01 2019-06-30 0001019737 us-gaap:RevolvingCreditFacilityMember srt:MinimumMember 2019-01-01 2019-06-30 0001019737 nci:OtherAcquisitionsMember 2018-01-01 2018-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 1-12173

Navigant Consulting, Inc.

(Exact name of registrant as specified in its charter)



Delaware	36-4094854
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

150 North Riverside Plaza, Suite 2100, Chicago, Illinois 60606

(Address of principal executive offices, including zip code)

(312) 573-5600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	NCI	New York Stock Exchange

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 ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. YES ☐ NO ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

As of June 30, 2019, 38,466,024 shares of the registrant’s common stock, par value $.001 per share, were outstanding.

INDEX

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements	5
Notes to Unaudited Consolidated Financial Statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3. Quantitative and Qualitative Disclosures About Market Risk	35
Item 4. Controls and Procedures	35
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	37
Item 1A. Risk Factors	37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 6. Exhibits	39
SIGNATURES	41

Forward-Looking Statements

Statements included in this report which are not historical in nature are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may generally be identified by words such as “anticipate,” “believe,” “may,” “should,” “could,” “intend,” “estimate,” “expect,” “likely,” “continue,” “plan,” “projects,” “positioned,” “outlook” and similar expressions. These statements are based upon management’s current expectations and speak only as of the date of this report. The Company cautions readers that there may be events in the future that the Company is not able to accurately predict or control and the information contained in the forward-looking statements is inherently uncertain and subject to a number of risks that could cause actual results to differ materially from those contained in or implied by the forward-looking statements including, without limitation: the satisfaction of the conditions precedent to the consummation of the proposed merger, including, without limitation, the receipt of stockholder and regulatory approvals; unanticipated difficulties or expenditures relating to the proposed merger; legal proceedings, judgments or settlements, including those that may be instituted against the Company, the Company’s board of directors, executive officers and others following the announcement of the proposed merger; disruptions of current plans and operations caused by the announcement and pendency of the proposed merger; potential difficulties in employee retention due to the announcement and pendency of the proposed merger; the response of customers, suppliers, business partners and regulators to the announcement of the proposed merger; the risk of unanticipated costs, liabilities or an adverse impact on the Company’s business operations arising from the Company’s provision of post-divestiture transition services and support in connection with the sale of the Company’s Disputes, Forensics and Legal Technology segment and the transaction advisory services practice within the Company’s Financial Services Advisory and Compliance segment; the execution of the Company’s long-term growth objectives and margin improvement initiatives; risks inherent in international operations, including foreign currency fluctuations; ability to make acquisitions and divestitures and complete such acquisitions and divestitures in the time anticipated; pace, timing and integration of acquisitions; operational risks associated with new or expanded service areas, including business process management services; impairments; changes in accounting standards or tax rates, laws or regulations; management of professional staff, including dependence on key personnel, recruiting, retention, attrition and the ability to successfully integrate new consultants into the Company’s practices; utilization rates; conflicts of interest; potential loss of clients or large engagements and the Company’s ability to attract new business; brand equity; competition; accurate pricing of engagements, particularly fixed fee and multi-year engagements; clients’ financial condition and their ability to make payments to the Company; risks inherent with litigation; higher risk client assignments; government contracting; professional liability; information security; the adequacy of our business, financial and information systems and technology; maintenance of effective internal controls; potential legislative and regulatory changes; continued and sufficient access to capital; compliance with covenants in our credit agreement; interest rate risk; and market and general economic and political conditions. Further information on these and other potential factors that could affect the Company’s business and financial condition and the results of operations are included in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and elsewhere in the Company’s filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website or at investors.navigant.com. The Company cannot guarantee any future results, levels of activity, performance or achievement and undertakes no obligation to update any of its forward-looking statements.

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements.

NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	June 30,			December 31,
	2019			2018

ASSETS
Current assets:
Cash and cash equivalents	$	90,626		$	206,920
Accounts receivable, net and contract assets		200,820			179,923
Prepaid expenses and other current assets		25,199			22,512
Total current assets		316,645			409,355
Non-current assets:
Property and equipment, net		62,672			63,025
Operating lease right-of-use assets		80,780			-
Intangible assets, net		14,129			14,166
Goodwill		426,060			422,357
Other assets		7,945			8,644
Total assets	$	908,231		$	917,547
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	15,219		$	13,302
Accrued liabilities		17,641			15,558
Accrued compensation-related costs		46,316			69,555
Income tax payable		3,362			13,357
Operating lease liabilities		22,735			-
Other current liabilities		23,879			34,044
Total current liabilities		129,152			145,816
Non-current liabilities:
Deferred income tax liabilities		39,258			33,901
Operating lease liabilities		81,166			-
Other non-current liabilities		2,818			25,277
Total non-current liabilities		123,242			59,178
Total liabilities		252,394			204,994
Stockholders' equity:
Common stock		50			49
Additional paid-in capital		671,153			664,473
Treasury stock		(235,216	)		(160,972	)
Retained earnings		220,983			211,543
Accumulated other comprehensive loss		(5,929	)		(6,529	)
Total Navigant Consulting, Inc. stockholders' equity		651,041			708,564
Non-controlling interest		4,796			3,989
Total stockholders' equity		655,837			712,553
Total liabilities and stockholders' equity	$	908,231		$	917,547

See accompanying notes to unaudited consolidated financial statements.

NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share data (1))

	For the three months ended						For the six months ended
	June 30,						June 30,
	2019			2018			2019			2018
Revenues before reimbursements	$	196,567		$	165,224		$	382,696		$	326,669
Reimbursements		26,489			19,489			43,222			36,112
Total revenues		223,056			184,713			425,918			362,781
Cost of services before reimbursable expenses		140,405			113,121			275,761			230,057
Reimbursable expenses		26,489			19,489			43,222			36,112
Total cost of services		166,894			132,610			318,983			266,169
General and administrative expenses		35,968			34,912			71,135			71,991
Depreciation expense		4,262			4,943			8,848			9,940
Amortization expense		1,393			1,665			2,765			3,417
Other operating costs		-			2,295			32			3,278
Operating income		14,539			8,288			24,155			7,986
Interest expense		317			911			635			1,739
Interest income		(375	)		(77	)		(1,064	)		(196	)
Other (income) expense, net		(10	)		(183	)		122			178
Income from continuing operations before income tax expense		14,607			7,637			24,462			6,265
Income tax expense		3,682			1,509			6,729			1,734
Net income from continuing operations		10,925			6,128			17,733			4,531
Income from discontinued operations, net of tax		523			22,698			34			36,148
Net income		11,448			28,826			17,767			40,679
Less: Income attributable to non-controlling interest, net of tax		(2,369	)		-			(4,407	)		-
Net income attributable to Navigant Consulting, Inc.	$	9,079		$	28,826		$	13,360		$	40,679
Basic net income per share
Net income from continuing operations attributable to Navigant Consulting, Inc.	$	0.22		$	0.14		$	0.34		$	0.10
Income from discontinued operations, net of tax		0.01			0.50			-			0.80
Net income attributable to Navigant Consulting, Inc. (1)	$	0.23		$	0.64		$	0.34		$	0.90
Shares used in computing basic per share data		38,654			45,106			39,436			45,113

Diluted net income per share
Net income from continuing operations attributable to Navigant Consulting, Inc.	$	0.22		$	0.13		$	0.33		$	0.10
Income from discontinued operations, net of tax		0.01			0.49			-			0.77
Net income attributable to Navigant Consulting, Inc. (1)	$	0.23		$	0.62		$	0.33		$	0.87
Shares used in computing diluted per share data		39,616			46,549			40,512			46,692

Net income	$	11,448		$	28,826		$	17,767		$	40,679
Other comprehensive income (loss), net of tax:
Unrealized net gain (loss), foreign currency translation		1,042			(3,406	)		600			(2,037	)
Unrealized net gain on interest rate derivatives		-			112			-			362
Reclassification adjustment on interest rate derivatives included in interest expense and income tax expense		-			(39	)		-			(32	)
Other comprehensive income (loss), net of tax		1,042			(3,333	)		600			(1,707	)
Total comprehensive income, net of tax		12,490			25,493			18,367			38,972
Income attributable to non-controlling interest, net of tax		(2,369	)		-			(4,407	)		-
Total comprehensive income attributable to Navigant Consulting, Inc., net of tax	$	10,121		$	25,493		$	13,960		$	38,972
(1) Earnings per share may not foot due to rounding.

See accompanying notes to unaudited consolidated financial statements.

NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

	Navigant Consulting, Inc. Shareholders
	Common Stock Shares		Treasury Stock Shares			Common Stock Par Value		Additional Paid-In Capital			Treasury Stock Cost			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Non-Controlling Interest		Total Stock-holders' Equity
Balance at March 31, 2019		49,546		(10,431	)		49		666,794			(214,465	)		(6,971	)		213,830			2,427		661,664
Comprehensive income		-		-			-		-			-			1,042			9,079			2,369		12,490
Dividends paid ($0.05 per share)		-		-			-		-			-			-			(1,926	)		-		(1,926	)
Issuances of common stock		29		-			-		608			-			-			-			-		608
Vesting of restricted stock units, net of forfeitures and tax withholdings		302		-			1		(2,543	)		-			-			-			-		(2,542	)
Share-based compensation expense		-		-			-		4,212			-			-			-			-		4,212
Additional paid-in capital recorded through compensation expense		-		-			-		2,082			-			-			-			-		2,082
Repurchases of common stock		-		(983	)		-		-			(20,751	)		-			-			-		(20,751	)
Balance at June 30, 2019		49,877		(11,414	)	$	50	$	671,153		$	(235,216	)	$	(5,929	)	$	220,983		$	4,796	$	655,837

	Navigant Consulting, Inc. Shareholders
	Common Stock Shares		Treasury Stock Shares			Common Stock Par Value		Additional Paid-In Capital			Treasury Stock Cost			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Non-Controlling Interest			Total Stock-holders' Equity
Balance at December 31, 2018		49,387		(8,114	)		49		664,473			(160,972	)		(6,529	)		211,543			3,989			712,553
Distributions to non-controlling interests		-		-			-		-			-			-			-			(3,600	)		(3,600	)
Comprehensive income		-		-			-		-			-			600			13,360			4,407			18,367
Dividends paid ($0.10 per share)		-		-			-		-			-			-			(3,920	)		-			(3,920	)
Issuances of common stock		98		-			-		1,464			-			-			-			-			1,464
Vesting of restricted stock units, net of forfeitures and tax withholdings		392		-			1		(3,847	)		-			-			-			-			(3,846	)
Share-based compensation expense		-		-			-		6,981			-			-			-			-			6,981
Additional paid-in capital recorded through compensation expense		-		-			-		2,082			-			-			-			-			2,082
Repurchases of common stock		-		(3,300	)		-		-			(74,244	)		-			-			-			(74,244	)
Balance at June 30, 2019		49,877		(11,414	)	$	50	$	671,153		$	(235,216	)	$	(5,929	)	$	220,983		$	4,796		$	655,837

See accompanying notes to unaudited consolidated financial statements.

	Navigant Consulting, Inc. Shareholders
	Common Stock Shares		Treasury Stock Shares			Common Stock Par Value		Additional Paid-In Capital			Treasury Stock Cost			Accumulated Other Comprehensive Loss			Retained Earnings		Total Stock-holders' Equity
Balance at March 31, 2018		58,230		(13,230	)		58		662,924			(235,723	)		(17,552	)		282,999		692,706
Comprehensive loss		-		-			-		-			-			(3,333	)		28,826		25,493
Issuances of common stock		59		-			1		935			-			-			-		936
Vesting of restricted stock units, net of forfeitures and tax withholdings		388		-			-		(3,532	)		-			-			-		(3,532	)
Share-based compensation expense		-		-			-		2,089			-			-			-		2,089
Repurchases of common stock		-		(342	)		-		-			(7,490	)		-			-		(7,490	)
Balance at June 30, 2018		58,677		(13,572	)	$	59	$	662,416		$	(243,213	)	$	(20,885	)	$	311,825	$	710,202

	Navigant Consulting, Inc. Shareholders
	Common Stock Shares		Treasury Stock Shares			Common Stock Par Value		Additional Paid-In Capital			Treasury Stock Cost			Accumulated Other Comprehensive Loss			Retained Earnings		Total Stock-holders' Equity
Balance at December 31, 2017		58,047		(12,661	)		58		659,825			(224,366	)		(19,178	)		270,995		687,334
Cumulative-effect adjustment resulting from the adoption of ASU 2014-09 (Note 4)		-		-			-		-			-			-			151		151
Comprehensive loss		-		-			-		-			-			(1,707	)		40,679		38,972
Issuances of common stock		148		-			1		2,173			-			-			-		2,174
Vesting of restricted stock units, net of forfeitures and tax withholdings		482		-			-		(5,048	)		-			-			-		(5,048	)
Share-based compensation expense		-		-			-		5,466			-			-			-		5,466
Repurchases of common stock		-		(911	)		-		-			(18,847	)		-			-		(18,847	)
Balance at June 30, 2018		58,677		(13,572	)	$	59	$	662,416		$	(243,213	)	$	(20,885	)	$	311,825	$	710,202

See accompanying notes to unaudited consolidated financial statements.

NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	For the six months ended
	June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	17,767		$	40,679
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation expense		8,848			13,613
Amortization expense		2,765			3,628
Share-based compensation expense		6,981			5,466
Deferred income taxes		4,808			(5,633	)
Allowance for doubtful accounts receivable		1,167			6,894
Loss from disposition of discontinued operations		(49	)		-
Other, net		297			39
Changes in assets and liabilities (net of acquisitions):
Accounts receivable, net and contract assets		(21,974	)		(18,192	)
Prepaid expenses and other assets		(2,431	)		2,372
Accounts payable		1,916			(1,507	)
Accrued liabilities		2,145			4,086
Accrued compensation-related costs		(23,270	)		(27,124	)
Income taxes payable		(9,476	)		2,324
Lease liabilities and right-of-use assets		(1,410	)		-
Other liabilities		(5,769	)		(7,949	)
Net cash (used in) provided by operating activities		(17,685	)		18,696
Cash flows from investing activities:
Purchases of property and equipment		(8,454	)		(7,455	)
Acquisitions of businesses, net of cash acquired		(6,120	)		-
Other, net		-			(19	)
Net cash used in investing activities		(14,574	)		(7,474	)
Cash flows from financing activities:
Issuances of common stock		1,464			2,174
Repurchases of common stock		(74,244	)		(18,847	)
Dividend payments		(3,920	)		-
Repayments to banks		-			(172,479	)
Borrowings from banks		-			187,248
Distributions to non-controlling interest holder		(3,600	)		-
Other, net		(3,847	)		(6,218	)
Net cash used in financing activities		(84,147	)		(8,122	)
Effect of exchange rate changes on cash and cash equivalents		112			(409	)
Net (decrease) increase in cash and cash equivalents		(116,294	)		2,691
Cash and cash equivalents at beginning of the period		206,920			8,449
Cash and cash equivalents at end of the period	$	90,626		$	11,140

Supplemental Unaudited Consolidated Cash Flow Information

(In thousands)

	For the six months ended
	June 30,
	2019		2018
Interest paid	$	303	$	2,610
Income taxes paid, net of refunds	$	10,378	$	5,726

See accompanying notes to unaudited consolidated financial statements.

NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.	DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Navigant Consulting, Inc. (“Navigant,” the “Company,” “we,” “us,” or “our”) (NYSE: NCI) is a specialized, global professional services firm that helps clients take control of their future. Navigant’s professionals apply deep industry knowledge, substantive technical expertise, and an enterprising approach to help clients build, manage, and protect their business interests. With a focus on markets and clients facing transformational change and significant regulatory or legal pressures, Navigant primarily serves clients in the healthcare, energy, and financial services industries. Across a range of advisory, consulting, outsourcing, and technology/analytics services, we believe our practitioners bring sharp insights that pinpoint opportunities and deliver powerful results.

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The information contained herein includes all adjustments, consisting of normal and recurring adjustments except where indicated, which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods presented.

The results of operations for the six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the entire year ending December 31, 2019.

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes as of and for the year ended December 31, 2018 included in our Annual Report on Form 10-K filed with the SEC on February 28, 2019 (“2018 Form 10-K”).

The preparation of unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and the related notes. Actual results could differ from those estimates and may affect future results of operations and cash flows. We have evaluated events and transactions occurring after the balance sheet date and prior to the date of the filing of this report.

Merger Agreement with Guidehouse LLP

On August 2, 2019, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among Guidehouse LLP, a Delaware limited liability partnership (“Parent”), Isaac Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Sub”), and Navigant. Pursuant to the Merger Agreement, Sub will be merged with and into Navigant (the “Merger”), with Navigant continuing as the surviving corporation in the Merger. As a result of the Merger, Navigant would become a wholly owned subsidiary of Parent. Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of our common stock, par value $0.001 per share, issued and outstanding immediately prior to the Effective Time will be cancelled and automatically converted into the right to receive $28.00 in cash, without interest thereon, other than (i) shares that are held in our treasury or owned of record by any of our subsidiaries, (ii) shares owned of record by Parent, Sub or any of their respective subsidiaries, and (iii) shares held by stockholders who have not voted in favor of or consented to the adoption of the Merger Agreement and who have properly demanded appraisal of such shares and complied in all respects with all the provisions of the Delaware General Corporation Law concerning the right of holders of shares to require appraisal.

2. RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

Effective January 1, 2019, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02, Leases (“Topic 842”). This update amends the accounting requirements for leases by requiring recognition of lease liabilities and related right-of-use assets on the balance sheet. Lessees are required to recognize a lease liability measured on a discounted basis, which is the lessee’s obligation to make lease payments arising from a lease, and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. We adopted Topic 842 using the modified retrospective approach as of the effective date, January 1, 2019. We have recorded the cumulative effects on our balance sheet as of the effective date. No adjustments were made to prior comparative periods. As a result of the adoption, there was no impact on net income or net assets. Due to the number of leases we are party to, the related obligations and right-of-use assets did have a material impact on gross assets and liabilities on our unaudited consolidated balance sheets (see Note 11 – Leases). The right-of-use asset balance reflects the impact of other liability amounts, specifically deferred rent that has been effectively reclassified. As part of the adoption, we elected the package of practical expedients permitted under the transition guidance within Topic 842, which among other

things, allowed us to carry forward the historical lease classification. Further, we also applied the practical expedient to combine, when applicable, lease and non-lease components. Leases with a term of 12 months or less are not recorded on the balance sheet.

On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”). As a result of the adoption, we recorded a net increase to retained earnings as of January 1, 2018 of $0.2 million, net of tax, with the impact primarily relating to certain contracts that include variable consideration. For further discussion about our revenue recognition policy, see Note 4 – Revenue Recognition.

On January 1, 2018, we adopted ASU 2016-15, Statement of Cash Flow (“Topic 230”). This update is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The update provided new guidance regarding the classification of debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies including bank-owned life insurance policies, distributions received from equity method investments, beneficial interests in securitized transactions, and separately identifiable cash flows and application of the predominance principle. We determined that the manner in which we previously classified our contingent acquisition liability payments in the unaudited consolidated statement of cash flows would change. Based on our evaluation, adoption of this standard required a reclassification of a portion of the payments previously reported as financing activities for comparative periods in the statement of cash flows within our unaudited consolidated financial statements issued for periods beginning on or after January 1, 2018. Under this guidance, portions of these payments have been reclassified from financing activities to operating activities. We applied this change retrospectively, and it did not have a material impact on our unaudited consolidated financial statements.

On January 1, 2018, we adopted ASU 2017-01, Business Combinations: Clarifying the Definition of a Business (“Topic 805”), which provides a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. We applied this change prospectively, and it did not have a material impact on our unaudited consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The new guidance provides financial statement users with improved information about the expected credit losses on trade receivables and other financial instruments held by a reporting entity at each reporting date. The amendments in this update replace the incurred loss methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Navigant is currently evaluating the impact of adopting ASU 2016-13 but does not expect it to have a material impact on its consolidated financial statements.

3.	DISPOSITIONS AND DISCONTINUED OPERATIONS

On August 24, 2018, we completed the disposition of our former Disputes, Forensics and Legal Technology segment and the transaction advisory services practice within our Financial Services Advisory and Compliance segment (collectively, “SaleCo”) to Ankura Consulting Group, LLC (“Ankura”) for total proceeds of $462.8 million net of working capital adjustments. The operations of SaleCo have been presented in accordance with ASC Topic 205 “Discontinued Operations” for all periods presented. All other operations are considered “continuing operations” and have been presented in three segments. See Note 5 – Segment Information.

The amounts attributable to each category of discontinued operations were as follows (in thousands):

	For the three months ended					For the six months ended
	June 30,					June 30,
	2019		2018			2019		2018
Revenues before reimbursements	$	-	$	87,169		$	-	$	169,603
Total revenues		-		91,013			-		177,465
Cost of services including reimbursable expenses		-		60,168			-		118,655
General and administrative expenses		-		8,770			-		16,053
Amortization and depreciation expense		-		1,931			-		3,884
Interest expense		-		600			-		1,088
Income from disposition of discontinued operations		721		-			49		-
Other expense, net		-		28			-		57
Income from discontinued operations before income tax expense		721		19,516			49		37,728
Income tax (benefit) expense from discontinued operations		198		(3,182	)		15		1,580
Income from discontinued operations, net of tax		523		22,698			34		36,148

Amounts recorded to discontinued operations in the six months ended June 30, 2019 were due to settlements of certain working capital amounts, as well as changes in estimates of other transaction related contingencies. Certain contingencies remain unresolved and are subject to finalization and settlement, which may result in further adjustments to the gain (loss) on disposition.

In addition to the purchase agreement for SaleCo, we entered into a Transition Services Agreement (the “TSA”) pursuant to which we provide Ankura with certain services to enable Ankura to operate SaleCo (the “TSA Services”). The TSA Services include information technology, finance and accounting, human resources and other corporate support services. Pursuant to the terms of the SaleCo transaction, the TSA Services were required to be provided to Ankura for a period of up to 6 months after the closing date for certain services, and then certain services were extended at Ankura’s option through August 31, 2019. Ankura has requested that we further extend certain of the TSA Services through February 29, 2020. Income related to the TSA Services has been recorded in general and administrative expenses.

4.	REVENUE RECOGNITION

Recently Adopted Accounting Pronouncements

On January 1, 2018, we adopted Topic 606 and all the related amendments (“the new revenue standard”) for all contracts with customers not completed as of the adoption date using the cumulative catch-up transition (modified retrospective) method. Topic 606 requires us to estimate and recognize the revenue from certain event-based variable fees over the period of performance to the extent that it is probable that a significant reversal will not occur.

Contract Assets and Liabilities

We define contract assets as revenues recognized for fixed-fee, event-based or performance-based arrangements for which we are not currently contractually able to bill. These contract assets are included in accounts receivable, net and contract assets within the unaudited consolidated balance sheets. As of June 30, 2019 and December 31, 2018, our contract assets were not material. In most cases, our typical fixed fee contracts allow for monthly billing.

We define contract liabilities as retainers and advance payments from or billings to our customers for services that have not yet been performed or earned. These liabilities are recorded within other current liabilities and are recognized as services are provided. Any taxes assessed on revenues relating to services provided to our clients are recorded on a net basis. As of June 30, 2019 and December 31, 2018, our contract liabilities were $21.6 million and $27.2 million, respectively. During the three and six months ended June 30, 2019, $5.3 million and $23.0 million were recognized into revenue from the opening balance. The remaining change related to amounts billed or payments received for work not yet performed.

Performance Obligations

For disclosure purposes, we apply the practical expedient to exclude the value of unsatisfied performance obligations for contracts with an enforceable duration of one year or less. We also apply the practical expedient to exclude those amounts for contracts in which we apply the right to invoice. The majority of our contracts include termination for convenience clauses which generally require 30 days’ notice with no penalty. The notice period required determines the contract duration resulting in very few agreements which are contractually enforceable beyond one year. As of June 30, 2019, we had approximately $127.3 million of remaining performance obligations of which approximately $52.9 million are expected to be satisfied beyond one year. These obligations mainly relate to Health System Solutions, LLC (“HSS”).

Service Types

As part of our professional service offerings, we provide managed services. Our managed services revenue is predominantly generated by our Healthcare segment and includes revenue generated through HSS. Managed services revenue for the three and six months ended June 30, 2019 was $60.6 million and $117.4 million, respectively and was $31.9 million and $63.3 million for the three and six months ended June 30, 2018. Managed services made up 31% of total revenue before reimbursements for both the three and six months ended June 30, 2019, and 19% for both the three and six months ended June 30, 2018.

5.	SEGMENT INFORMATION

Our business is assessed and resources are allocated based on the following three reportable segments:

•

The Healthcare segment provides strategic, performance improvement, and business process management solutions. Clients of this segment include healthcare providers, physician enterprises, payers, government agencies and life sciences companies. We help clients respond to market legislative changes such as the shift to an outcomes and value-based reimbursements model, ongoing industry consolidation and reorganization, Medicaid expansion, the implementation of an electronic health records system, and product planning and commercialization expertise.

•

The Energy segment provides full lifecycle solutions that help clients transform their businesses in a rapidly changing energy environment, manage complexity and accelerate operational performance, meet compliance requirements, and transform their organizations and systems. In addition, we provide a broad array of benchmarking, data and market research capabilities related to the energy sector.

•

The Financial Services Advisory and Compliance segment provides strategic, operational, risk management, investigative and compliance advisory services to clients primarily in the highly-regulated financial services industry, including major financial and insurance institutions. This segment also provides anti-corruption solutions and anti-money laundering consulting, litigation support and tax compliance services to clients in a broad variety of industries.

The following information includes segment revenues before reimbursements, segment total revenues and segment operating profit. Certain unallocated expense amounts related to specific reporting segments have been excluded from segment operating profit to be consistent with the information used by management to evaluate segment performance. Segment operating profit represents total revenues less cost of services excluding long-term compensation expense attributable to client-service employees. Long-term compensation expense attributable to client-service employees includes share-based compensation expense and compensation expense attributed to certain retention incentives (see Note 8 — Share-Based Compensation Expense and Note 9 — Supplemental Consolidated Balance Sheet Information).

The information presented does not necessarily reflect the results of segment operations that would have occurred had the reporting segments been stand-alone businesses.

Information on the segment operations has been summarized as follows (in thousands):

	For the three months ended				For the six months ended
	June 30,				June 30,
	2019		2018		2019		2018
Revenues before reimbursements:
Healthcare	$	127,431	$	91,594	$	246,434	$	181,743
Energy		40,002		36,644		76,251		70,348
Financial Services Advisory and Compliance		29,134		36,986		60,011		74,578
Total revenues before reimbursements	$	196,567	$	165,224	$	382,696	$	326,669

Total revenues:
Healthcare	$	136,502	$	100,250	$	263,071	$	198,962
Energy		55,450		44,183		99,150		81,820
Financial Services Advisory and Compliance		31,104		40,280		63,697		81,999
Total revenues	$	223,056	$	184,713	$	425,918	$	362,781

Segment operating profit:

NAVIGANT CONSULTING INC 10-Q