Huron Consulting Group Inc. - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by Huron Consulting Group Inc. on October 6, 2009, covering events occurring on September 30, 2009. The filing primarily addresses an amendment to the Company's credit agreement and updates regarding ongoing regulatory investigations and litigation stemming from a financial restatement.
Key Financial Metrics and Debt Status
As of September 30, 2009, the Company's debt position and credit facility status are as follows:
- Total Principal Outstanding: $301.5 million ($109.0 million revolving; $192.5 million term loan).
- Weighted-Average Interest Rate: 3.9%.
- Remaining Borrowing Capacity: $65.4 million (after accounting for the amendment and outstanding letters of credit).
- Goodwill Balances (as of June 30, 2009): $73.3 million (Accounting and Financial Consulting) and $73.1 million (Corporate Consulting).
The filing does not provide specific revenue, profit, or cash flow figures for the period, as this is a current report focused on material agreements and events rather than a periodic financial statement.
Material Changes: Credit Agreement Amendment
On September 30, 2009, the Company entered into an Eighth Amendment to its Credit Agreement with a syndicate led by Bank of America, N.A. Key changes include:
- Reduced Capacity: The revolving credit facility maximum was reduced by $60 million from $240 million to $180 million. The $60 million accordion feature was eliminated.
- Increased Costs: LIBOR spread, base rate spread, and letters of credit fees increased by 75 basis points. The non-use fee was raised to a flat 50 basis points.
- Modified Covenants: The maximum leverage ratio was lowered to 2.75:1.00 (effective December 31, 2010). The minimum fixed charge coverage ratio was lowered to 2.35:1.00 (effective September 30, 2009).
- EBITDA Definition: The definition of consolidated EBITDA was modified to allow add-backs for non-cash goodwill impairment charges, acquisition-related intangible asset impairments, restructuring charges, and compensation charges for periods ending through September 30, 2009.
- Security Agreement: A new Security Agreement was executed, granting lenders a first-priority lien on substantially all personal property assets of the Company and its subsidiaries.
- SEC Investigation: The SEC is investigating the circumstances leading to the financial restatement and inquiring into time allocation in certain practice groups.
- USAO Inquiry: The United States Attorney's Office for the Northern District of Illinois has requested documents previously provided to the SEC.
- Class Action Litigation: A new purported class action complaint (Thomas Fisher v. Huron Consulting Group Inc.) was filed on September 2, 2009, alleging false statements regarding financial results.
- Derivative Suits: Two derivative suits (Peters and Hacias) have been consolidated in the Circuit Court of Cook County, alleging breach of fiduciary duty, gross mismanagement, and waste of corporate assets.
- Verify the final amount of the expected goodwill impairment charge in the upcoming 10-Q for the quarter ended September 30, 2009.
- Monitor the status of the SEC investigation and USAO document requests for potential regulatory penalties.
- Review the consolidated class action and derivative lawsuits for updates on settlement discussions or court rulings.
- Assess the impact of the reduced borrowing capacity ($65.4 million remaining) on the Company's liquidity and ability to fund operations or acquisitions.
- Confirm the Company's compliance with the new, stricter leverage and coverage ratios under the amended credit agreement.
Outlook, Risks, and Contingencies
Goodwill Impairment: Management expects to record a material non-cash goodwill impairment charge for the quarter ended September 30, 2009, following a significant decline in stock price and an ongoing impairment analysis. This charge will impact the Accounting and Financial Consulting and Corporate Consulting segments.
Regulatory and Legal Proceedings:
Liability Estimate: The Company states it is unable to predict the ultimate outcome of these "restatement matters" or make a reasonable estimate of potential liabilities, which could be material.