SOURCE: LECG Corporation

LECG Corporation

October 27, 2009 16:00 ET

LECG Corporation Reports Third Quarter 2009 Results

EMERYVILLE, CA--(Marketwire - October 27, 2009) - LECG Corporation (NASDAQ: XPRT), a global expert services firm, today reported financial results for the third quarter ended September 30, 2009.

"Our third quarter performance largely reflected the ongoing industry-wide weakness in demand, a condition that we believe may persist into the fourth quarter," said Michael Jeffery, LECG's chief executive officer. "Although we see encouraging activity in some of our business sectors, the overall environment led us to further reduce our costs during the quarter. We remain enthusiastic about LECG's future, particularly with the proposed SMART/LECG merger. We believe the anticipated combination of synergies from cost savings and cross-selling along with LECG's portfolio of highly regarded experts should position us well for a return to revenue growth and profitability."

Third Quarter 2009 Financial Results

Third quarter 2009 revenues decreased 7.6 percent to $62.7 million compared with $67.9 million in the second quarter of 2009, and fell 27.1 percent versus $86.1 million in the third quarter 2008.

Results for the third quarter of 2009 reflect pre-tax charges of $4.0 million in restructuring charges, $8.7 million in other impairments, $0.1 million in divestiture charges, $0.9 million in merger-related costs and a $2.2 million net benefit from the reversal of equity-based compensation. In addition, the company has re-assessed its ability to realize its deferred tax assets in light of the current economic environment and the loss position of the company. During the quarter, the company recorded a valuation allowance of $51.8 million against its net deferred tax assets. Including these net charges, the third quarter net loss was $63.5 million or $2.48 per share. This compares to a net loss of $6.5 million or $0.25 per share in the second quarter of 2009, and net income of $2.0 million or $0.08 per diluted share in the third quarter of 2008. Excluding these net charges, adjusted net loss was $3.8 million or $0.15 per share for the quarter.

Adjusted EBITDA for the third quarter of 2009 was a loss of $3.8 million, compared to a loss of $1.8 million for the second quarter of 2009, and income of $5.0 million for the third quarter of 2008.

Third Quarter 2009 Segment Results

Economics Services (Economics)

LECG's Economics segment consists of the company's global competition, securities, regulated industries, energy and environment, and labor sectors. Economics revenues were $25.6 million in the third quarter of 2009, representing 40.8 percent of total revenues versus 42.7 percent of total revenues in the second quarter of 2009. Net fee-based revenues for the segment were $24.8 million in the quarter, down from $28.2 million in the second quarter of 2009, driven by the continued decline in global competition and partially offset by strength in regulated industries. Economics gross profit was $6.2 million, or 41.0 percent of total gross profit in the quarter. Direct profit margin was 25.0 percent, down from 30.9 percent in the second quarter of 2009. Professional staff utilization was 64.6 percent.

Finance and Accounting Services (FAS)

LECG's FAS segment consists of the company's forensic accounting, intellectual property, healthcare, higher education, international FAS, financial services, and electronic discovery sectors. FAS revenues were $37.2 million in the third quarter of 2009, or 59.2 percent of total revenues versus 57.3 percent of total revenues in the second quarter of 2009. Net fee-based revenues for the segment were $35.4 million in the quarter, down $1.9 million from the second quarter of 2009, as weakness in forensic accounting and intellectual property offset our strength in financial services, healthcare and electronic discovery. FAS gross profit was $8.9 million, or 59.0 percent of total gross profit in the quarter. The direct profit margin was 25.1 percent, up from 23.2 percent in the second quarter of 2009. Professional staff utilization was 70.1 percent.

Nine Month Financial Results

Revenues for the nine months ended September 30, 2009 decreased 25.9 percent to $196.9 million from $265.6 million for the same period in 2008.

Net loss for the nine months ended September 30, 2009 was $73.8 million compared to net income of $8.6 million reported for the same period last year. Net loss per share was $2.89 for the first nine months of 2009 versus net income of $0.34 per diluted share for the same period a year ago. Adjusted net loss per share was $0.41 for the first nine months of 2009 compared with adjusted net income per diluted share of $0.35 for the first nine months of 2008.

Adjusted EBITDA for the nine months ended September 30, 2009 was a loss of $10.3 million compared to income of $19.5 million of adjusted EBITDA for the same period of 2008.

Conference Call Webcast Information

LECG Corporation will host a conference call and live webcast to discuss these results at 5:00 p.m. Eastern time today. Domestic callers may access this conference call by dialing 877-719-9796. International callers may access the call by dialing 719-325-4830. For a replay of this teleconference, please call 888-203-1112 or 719-457-0820, and enter the passcode 8548175. The replay will be available through November 2, 2009. The webcast will be accessible through the investor relations section of the company's website, www.lecg.com.

Forward-Looking Statements

Statements in this press release and the related conference call concerning the proposed transaction and future business, operating and financial condition of the company, including expectations regarding revenues and net income for future periods, statements concerning the plans and objectives of LECG's management for future operations, statements of the assumptions underlying or relating to any forward looking statement, statements regarding the timing or completion of the transactions, and statements using the terms "believes," "expects," "will," "could," "plans," "anticipates," "estimates," "predicts," "intends," "potential," "continue," "should," "may," or the negative of these terms or similar expressions are "forward-looking" statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based upon management's current expectations. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expectations. Risks that may affect actual performance include the ongoing economic downturn and adverse economic conditions, dependence on key personnel, the cost and contribution of acquisitions, risks inherent in international operations, management of professional staff, dependence on growth of the company's service offerings, the company's ability to integrate new experts successfully, intense competition, and potential professional liability, the company's ability to integrate the operations of SMART, the failure to achieve the costs savings and other synergies LECG expects to result for the transactions, the outcome of any legal proceedings instituted against the company, SMART and others in connection with the transactions, the failure of the transactions to close for any reason, the amount of the costs, fees, expenses and charges relating to the transactions, business uncertainty and contractual restrictions prior to the closing of the transactions, the effect of war, terrorism or catastrophic events, stock price, foreign currency exchange and interest rate volatility. Further information on these and other potential risk factors that could affect the company's financial results is included in the company's filings with the Securities and Exchange Commission. The company undertakes no obligation to update any of its forward-looking statements after the date of this press release.

About LECG

LECG, a global expert services and consulting firm, with approximately 700 experts and professionals in 31 offices around the world, provides independent expert testimony, financial advisory services, original authoritative studies, and strategic advisory services to clients including Fortune Global 500 corporations, major law firms, and local, state, and federal governments and agencies worldwide. LECG's highly credentialed experts and professional staff conduct economic and financial analyses to provide objective opinions and advice regarding complex disputes and inform legislative, judicial, regulatory, and business decision makers. LECG's experts are renowned academics, former senior government officials, experienced industry leaders, and seasoned consultants.

Additional information and where to find it

LECG has filed a preliminary proxy statement with the Securities and Exchange Commission and intends to file a revised proxy statement and other relevant materials in connection with the transactions. When finalized, the proxy statement will be mailed to the stockholders of LECG. Before making any voting or investment decision with respect to the transactions, investors and stockholders of LECG are urged to carefully read the final proxy statement and the other relevant materials when they become available because they will contain important information about the proposed transactions. The proxy statement and other relevant materials (when they become available), and any other documents filed by LECG with the SEC, may be obtained free of charge at the SEC's website at www.sec.gov. In addition, investors and stockholders of LECG may obtain free copies of the proxy statement (when available) and other documents filed by LECG with the SEC from LECG's website at www.lecg.com.

Participants in the solicitation

LECG and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the LECG's stockholders in connection with the transactions. Information about LECG's directors and executive officers is set forth in the preliminary proxy statement on Schedule 14A for LECG filed with the SEC on September 25, 2009, in the proxy statement on Schedule 14A for LECG's 2008 Annual Meeting of Stockholders filed on April 25, 2008 and in the amended Annual Report on Form 10-K filed on April 29, 2009. Additional information regarding the interests of participants in the solicitation of proxies in connection with the transactions will be included in the proxy statement that LECG intends to file with the SEC. Stockholders may obtain additional information regarding the direct and indirect interests of LECG and its directors and executive officers with respect to the transactions by reading the proxy statement once it is available and the other filings referred to above.

No offer or solicitation

This is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction.

                         LECG CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                       (in thousands, except per share data)
                                   (unaudited)


                                 Three months ended     Nine months ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                   2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Fee-based revenues, net         $  60,192  $  83,221  $ 189,578  $ 255,751
Reimbursable revenues               2,531      2,829      7,319      9,880
                                ---------  ---------  ---------  ---------
      Revenues                     62,723     86,050    196,897    265,631
Direct costs                       45,116     55,581    142,844    169,929
Reimbursable costs                  2,512      3,058      7,703     10,069
                                ---------  ---------  ---------  ---------
      Cost of services             47,628     58,639    150,547    179,998
Gross profit                       15,095     27,411     46,350     85,633
Operating expenses:
  General and administrative
   expenses                        17,518     21,831     55,125     65,297
  Depreciation and amortization     1,239      1,498      3,849      4,459
  Other impairments                 8,719          -      9,939          -
  Restructuring charges             4,019          -      5,479          -
  Divestiture charges                 124          -      1,863          -
                                ---------  ---------  ---------  ---------
Operating (loss) income           (16,524)     4,082    (29,905)    15,877
Interest income                        32        113        122        350
Interest expense                     (659)      (122)    (1,617)      (533)
Other expense, net                   (135)      (716)      (581)    (1,233)
                                ---------  ---------  ---------  ---------
(Loss) income before income
 taxes                            (17,286)     3,357    (31,981)    14,461
Income tax expense                 46,229      1,362     41,784      5,870
                                ---------  ---------  ---------  ---------
Net (loss) income               $ (63,515) $   1,995  $ (73,765) $   8,591
                                =========  =========  =========  =========

Earnings per share:
   Basic                        $   (2.48) $    0.08  $   (2.89) $    0.34
   Diluted                      $   (2.48) $    0.08  $   (2.89) $    0.34

Shares used in calculating
 earnings per share
   Basic                           25,654     25,340     25,515     25,316
   Diluted                         25,654     25,526     25,515     25,528



                         LECG CORPORATION AND SUBSIDIARIES
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                         (in thousands, except share data)
                                   (unaudited)


                                              September 30,  December 31,
                                                  2009           2008
Assets                                        -------------  -------------
Current assets:
  Cash and cash equivalents                   $       7,246  $      19,510
  Accounts receivable, net                           86,791         87,122
  Prepaid expenses                                    5,494          5,996
  Deferred tax assets, net - current portion              -         14,123
  Signing, retention and performance bonuses
   - current portion                                 14,499         15,282
  Income taxes receivable                            13,614          7,662
  Other current assets                                4,392          2,447
  Note receivable - current portion                     540            518
                                              -------------  -------------
    Total current assets                            132,576        152,660
Property and equipment, net                           8,456         11,011
Goodwill                                              1,800              -
Other intangible assets, net                          3,256          3,790
Signing, retention and performance bonuses           21,633         34,976
Deferred compensation plan assets                     9,711          9,684
Note receivable                                       1,503          1,946
Deferred tax assets, net                                  -         36,952
Other long-term assets                                5,320          5,188
                                              -------------  -------------
Total assets                                  $     184,255  $     256,207
                                              =============  =============

Liabilities and stockholders' equity
Current liabilities:
  Accrued compensation                        $      36,740  $      49,313
  Accounts payable and other accrued
   liabilities                                       10,865         11,493
  Payable for business acquisitions - current
   portion                                            1,700          3,846
  Borrowings under line of credit                    16,000              -
  Deferred revenue                                    2,741          2,450
  Liability associated with divestiture                   -          2,642
                                              -------------  -------------
    Total current liabilities                        68,046         69,744
Payable for business acquisitions                     1,155          1,055
Deferred compensation plan obligations                9,900          9,632
Deferred rent                                         6,412          6,601
Other long-term liabilities                           1,374            569
                                              -------------  -------------
    Total liabilities                                86,887         87,601
                                              -------------  -------------

Commitments and contingencies                             -              -

Stockholders' equity
Common stock, $.001 par value, 200,000,000
 shares authorized, 25,841,017 and 25,559,253
 shares outstanding at September 30, 2009 and
 December 31, 2008, respectively                         26             26
Additional paid-in capital                          173,679        172,005
Accumulated other comprehensive loss                   (554)        (1,407)
Accumulated deficit                                 (75,783)        (2,018)
                                              -------------  -------------
    Total stockholders' equity                       97,368        168,606
                                              -------------  -------------
Total liabilities and stockholders' equity    $     184,255  $     256,207
                                              =============  =============



                         LECG CORPORATION AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

                                                        Nine months ended
                                                          September 30,
                                                      --------------------
                                                         2009       2008
                                                      ---------  ---------
Cash flows from operating activities
Net (loss) income                                     $ (73,765) $   8,591
  Adjustments to reconcile net (loss) income to net
   cash used in operating activities:
  Bad debt expense                                           99         99
  Depreciation and amortization of property and
   equipment                                              3,315      3,370
  Amortization of intangible assets                         534      1,089
  Amortization of signing, retention and performance
   bonuses                                               13,338     12,391
  Deferred taxes                                         51,775          -
  Non cash restructuring charges                          1,234          -
  Divestiture charges                                     1,739          -
  Other impairments                                       9,939          -
  Equity-based compensation                               2,463      4,900
  Excess tax benefits from equity-based compensation          -        (40)
  Other                                                       -         58
Changes in assets and liabilities:
  Accounts receivable                                    (1,679)    (8,422)
  Signing, retention and performance bonuses paid        (9,804)   (14,983)
  Prepaid and other current assets                        1,778        401
  Accounts payable and other accrued liabilities         (1,872)     3,146
  Income taxes                                           (7,544)    (1,550)
  Accrued compensation                                  (11,890)    (6,838)
  Deferred revenue                                          345        134
  Deferred compensation plan assets, net of
   liabilities                                              241       (613)
  Deferred rent                                            (875)      (668)
  Other assets                                              894     (3,913)
  Other liabilities                                         608        282
                                                      ---------  ---------
    Net cash used in operating activities               (19,127)    (2,566)
                                                      ---------  ---------
Cash flows from investing activities
Business acquisitions earn out payments                  (3,885)    (4,736)
Divestiture payments                                     (3,210)         -
Purchase of property and equipment                       (1,053)    (2,156)
Proceeds from note receivable                               422        399
Proceeds from divestiture                                   619          -
Other                                                         8        (46)
                                                      ---------  ---------
    Net cash used in investing activities                (7,099)    (6,539)
                                                      ---------  ---------
Cash flows from financing activities
Borrowings under revolving credit facility               43,000     55,000
Repayments under revolving credit facility              (27,000)   (55,000)
Payment of loan fees                                     (2,243)         -
Proceeds from exercise or issuance of stock to
 employee and other                                           -         43
Excess tax benefits from equity-based compensation            -         40
Proceeds from issuance of stock - employee stock
 purchase plan                                               30         66
                                                      ---------  ---------
    Net cash provided by financing activities            13,787        149
                                                      ---------  ---------
Effect of exchange rates on changes in cash                 175       (341)
                                                      ---------  ---------
Decrease in cash and cash equivalents                   (12,264)    (9,297)
Cash and cash equivalents, beginning of year             19,510     21,602
                                                      ---------  ---------
Cash and cash equivalents, end of period              $   7,246  $  12,305
                                                      =========  =========
Supplemental disclosure
  Cash paid for interest                              $   1,014  $     381
                                                      =========  =========
  Cash paid for income taxes                          $   1,900  $   7,327
                                                      ---------  ---------



                         LECG CORPORATION AND SUBSIDIARIES
                             SEGMENT OPERATING RESULTS
                       ($ in thousands, except rate amounts)
                                    (unaudited)


                             Three months ended September 30,
                ----------------------------------------------------------
                            2009                          2008
                ----------------------------  ----------------------------
                         Finance and                   Finance and
               Economics Accounting  Total   Economics Accounting  Total
                --------  --------  --------  --------  --------  --------
Fee-based
 revenues, net  $ 24,808  $ 35,384  $ 60,192  $ 36,658  $ 46,563  $ 83,221
Reimbursable
 revenues            765     1,766     2,531       745     2,084     2,829
                --------  --------  --------  --------  --------  --------
  Revenues        25,573    37,150    62,723    37,403    48,647    86,050

Direct costs      18,598    26,518    45,116    23,525    32,056    55,581
Reimbursable
 costs               752     1,760     2,512       945     2,113     3,058
                --------  --------  --------  --------  --------  --------
  Gross profit  $  6,223  $  8,872  $ 15,095  $ 12,933  $ 14,478  $ 27,411

Direct profit
 margin (1)         25.0%     25.1%     25.0%     35.8%     31.2%     33.2%
Gross margin        24.3%     23.9%     24.1%     34.6%     29.8%     31.9%

Operating statistics
Paid days             66        66        66        66        66        66
Billable
 headcount,
 period end          239       447       686       298       503       801
Billable
 headcount,
 period average      246       449       695       296       490       786
Billable FTEs,
 period average (2)  200       365       565       241       379       620
Average
 billable rate  $    349  $    280  $    305  $    358  $    319  $    335
Paid utilization
 rate of billable
 FTEs (3)           67.4%     65.5%     66.2%     80.6%     73.0%     75.9%

Expert headcount,
 period end          105       200       305       121       208       329
Expert FTEs,
 period average (2)   60       127       187        64       110       174
Jr/SR staff
 paid utilization
 rate (3)           64.6%     70.1%     68.1%     78.2%     72.9%     75.0%




                         LECG CORPORATION AND SUBSIDIARIES
                       SEGMENT OPERATING RESULTS (CONTINUED)
                       ($ in thousands, except rate amounts)
                                   (unaudited)


                              Nine months ended September 30,
                ----------------------------------------------------------
                            2009                          2008
                ----------------------------  ----------------------------
                         Finance and                   Finance and
               Economics Accounting  Total   Economics Accounting  Total
                --------  --------  --------  --------  --------  --------
Fee-based
 revenues, net  $ 81,100  $108,478  $189,578  $114,280  $141,471  $255,751
Reimbursable
 revenues          2,379     4,940     7,319     3,558     6,322     9,880
                --------  --------  --------  --------  --------  --------
  Revenues        83,479   113,418   196,897   117,838   147,793   265,631

Direct costs      58,393    84,451   142,844    74,557    95,372   169,929
Reimbursable
 costs             2,607     5,096     7,703     3,818     6,251    10,069
                --------  --------  --------  --------  --------  --------
  Gross profit  $ 22,479  $ 23,871  $ 46,350  $ 39,463  $ 46,170  $ 85,633

Direct profit
 margin (1)         28.0%     22.1%     24.7%     34.8%     32.6%     33.6%
Gross margin        26.9%     21.0%     23.5%     33.5%     31.2%     32.2%

Operating statistics
Paid days            195       195       195       195       195       195
Billable
 headcount,
 period end          239       447       686       298       503       801
Billable
 headcount,
 period average      262       470       732       301       486       786
Billable FTEs,
 period average (2)  212       380       592       250       387       637
Average
 billable rate  $    354  $    283  $    310  $    364  $    320  $    338
Paid utilization
 rate of billable
 FTEs (3)           69.4%     64.6%     66.3%     80.5%     73.3%     76.1%

Expert headcount,
 period end          105       200       305       121       208       329
Expert FTEs,
 period average (2)   63       134       196        68       112       180
Jr/SR staff
 paid utilization
 rate (3)           66.7%     68.6%     67.9%     77.7%     72.1%     74.3%




                         LECG CORPORATION AND SUBSIDIARIES
                        RECONCILIATION OF NON-GAAP MEASURES
                       (in thousands, except per share data)


                              Three months ended      Nine months ended
                                 September 30,           September 30,
                            ----------------------  ----------------------
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------

Fee-based revenues, net     $   60,192  $   83,221  $  189,578  $  255,751

  Direct costs                  45,116      55,581     142,844     169,929
                            ----------  ----------  ----------  ----------

Direct profit               $   15,076  $   27,640  $   46,734  $   85,822
                            ==========  ==========  ==========  ==========
Direct profit margin (1)          25.0%       33.2%       24.7%       33.6%



                              Three months ended       Nine months ended
                                 September 30,           September 30,
                            ----------------------  ----------------------
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------

Net (loss) income           $  (63,515) $    1,995  $  (73,765) $    8,591

Adjustments to net (loss)
 income
  Other impairments              8,719           -       9,939           -
  Restructuring charges          4,019           -       5,479           -
  Divestiture charges              124           -       1,863           -
  Merger-related costs             942           -         942           -
  Deferred compensation plan        41         118         319         421
  Equity-based compensation
   benefit (8)                  (2,210)          -      (2,210)          -
  Deferred tax valuation
   allowance                    51,775           -      51,775           -
  Income tax benefit (4)        (3,743)        (48)     (4,734)       (170)
                            ----------  ----------  ----------  ----------

Adjusted (loss) income (5)  $   (3,848) $    2,065  $  (10,392) $    8,842
                            ==========  ==========  ==========  ==========

Adjusted (loss) income per
 diluted share (5)(7)       $    (0.15) $     0.08  $    (0.41) $     0.35

Shares used in calculating
 earnings per share
   Diluted                      25,654      25,526      25,515      25,528




                         LECG CORPORATION AND SUBSIDIARIES
                  RECONCILIATION OF NON-GAAP MEASURES (CONTINUED)
                                 ($ in thousands)


                              Three months ended       Nine months ended
                                 September 30,           September 30,
                            ----------------------  ----------------------
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------

Net (loss) income           $  (63,515) $    1,995  $  (73,765) $    8,591
Income tax expense              46,229       1,362      41,784       5,870
Interest expense, net              627           9       1,495         183
Depreciation and
 amortization                    1,239       1,498       3,849       4,459
                            ----------  ----------  ----------  ----------
EBITDA (6)                     (15,420)      4,864     (26,637)     19,103

Adjustments to EBITDA
  Other impairments              8,719           -       9,939           -
  Restructuring charges          4,019           -       5,479           -
  Divestiture charges              124           -       1,863           -
  Merger-related costs             942           -         942           -
  Deferred compensation plan        41         118         319         421
  Equity-based compensation
   benefit (8)                  (2,210)          -      (2,210)          -
                            ----------  ----------  ----------  ----------

Adjusted EBITDA (6)         $   (3,785) $    4,982  $  (10,305) $   19,524
                            ==========  ==========  ==========  ==========

(1) Fee-based revenues, net less direct costs as a percentage of fee-based
    revenues, net.
(2) Full Time Equivalents (FTEs) are calculated by dividing actual total
    paid hours in the period by the number of paid days in the period times
    eight hours per day, assuming a forty-hour work week or 2,080 paid
    hours per year.
(3) Paid utilization rate is calculated by dividing the actual number of
    billed hours in the period by the actual number of paid hours in the
    period, assuming a forty-hour work week or 2,080 paid hours per year.
(4) Assumes a marginal tax rate of 35.0% and 40.4% in the three and nine
    months ended September 30, 2009 and 2008, respectively. The tax benefit
    for three and nine months ended September 2009 excludes non-deductible
    divestiture and merger-related charges.
(5) Adjusted (loss) income and adjusted (loss) income per diluted share are
    non-GAAP financial measures. Adjusted (loss) income excludes other
    impairments, restructuring charges, divestiture charges, acquisition
    costs, charges related to market fluctuations in the value of deferred
    compensation plan investments, equity-based compensation benefit and
    deferred tax valuation allowance. Adjusted (loss) income per diluted
    share is calculated using adjusted (loss) income divided by diluted
    shares. The Company regards adjusted (loss) income and adjusted (loss)
    income per diluted share as useful measures of financial performance of
    the business. Generally, a non-GAAP financial measure is a numerical
    measure of a company's performance, financial position or cash flow
    that either excludes or includes amounts that are not normally excluded
    or included in the most directly comparable measure calculated and
    presented in accordance with GAAP. This measure, however, should be
    considered in addition to, and not as a substitute or superior to,
    operating (loss) income, cash flows, or other measures of financial
    performance prepared in accordance with GAAP.
(6) EBITDA and Adjusted EBITDA are non-GAAP financial measures. EBITDA is
    defined as earnings before provision for income tax, interest, and
    depreciation and amortization. Adjusted EBITDA excludes other
    impairments, restructuring charges, divestiture charges, acquisition
    costs, charges related to market fluctuations in the value of deferred
    compensation plan investments and equity-based compensation benefit.
    The Company regards EBITDA and Adjusted EBITDA as useful measures of
    financial performance of the business. Generally, a non-GAAP financial
    measure is a numerical measure of a company's performance, financial
    position or cash flow that either excludes or includes amounts that are
    not normally excluded or included in the most directly comparable
    measure calculated and presented in accordance with GAAP. This measure,
    however, should be considered in addition to, and not as a substitute
    or superior to, operating (loss) income, cash flows, or other measures
    of financial performance prepared in accordance with GAAP.
(7) For the third quarter of 2009, diluted earnings per share and diluted
    shares are equal to basic earnings per share and basic shares,
    respectively, as the effect on net loss would be anti-dilutive if
    common stock equivalent shares were included in the weighted average
    number of common shares outstanding during the period.
(8) Equity-based compensation benefit consists of approximately $2.8
    million of stock-based compensation expense recovery related to
    previously recognized expense on the unvested portion of 7-year
    cliff-vesting options of a terminated employee, offset by approximately
    $0.6 million of accelerated expense related to the voluntary surrender
    of approximately 192,000 shares of stock options previously granted.

Contact Information

  • Investor Contacts:

    Steven R. Fife
    Chief Financial Officer
    510-985-6700

    Annie Leschin
    Investor Relations
    415-775-1788
    investor@lecg.com