A Significant Improvement At CTPartners
A Significant Improvement At CTPartners
CTPartners Executive Search Inc. Announces Fourth Quarter and Full Year 2012 Financial Results
Fourth quarter revenue grows 11% to $30.2 million full year revenue increases 6% to $128 million
New search assignments up 23% in fourth quarter, year-over-year
Company announces restatement of quarterly financial statements related to Latin America acquisition to account for a post combination compensation charge
Fourth quarter GAAP net loss of $0.21 per share $0.02 net loss on adjusted basis, excluding certain non-recurring charges
Full year GAAP net loss of $0.51 per share $0.16 diluted earnings per share on adjusted basis, excluding certain non-recurring charges, from $0.45 loss per share in 2011
CTPartners Executive Search Inc. has announced its financial results for the fourth quarter and year ended December 31, 2012. The Company also announced its intention to restate its 2012 quarterly financial statements for the interim periods through September 30th to account for the acquisition of its Latin American licensee, completed on January 2, 2012. The restatement reclassifies $7.2 million from purchase consideration to post-combination compensation.
“Our fourth quarter net revenue was consistent with the financial guidance we provided on February 26th. We successfully executed our strategic growth plan in 2012 and added more clients and experienced executive search consultants to our team, while expanding our geographic footprint. Excluding the non-recurring post-combination compensation charge and the reorganization charge taken in the third quarter, we generated an adjusted $0.16 in earnings per share, a significant improvement over the prior year,” said Brian Sullivan, Chief Executive Officer.
In a Form 8-K filing, CTPartners announced its intention to restate its 2012 quarterly financial statements for the interim periods through September 30th to account for the acquisition of its Latin American licensee. Financial Accounting Standards Codification Topic 805 “Business Combinations” (“ASC 805”) states that a contingent consideration arrangement in which the payments are automatically forfeited if employment terminates is compensation for post-combination services, which must be recognized over the measurement period of the contingent payment. The purchase agreement provides that the selling shareholders are required to repay to the company up to the aggregate amount of $7.2 million if their employment terminates prior to the 36-month anniversary of the closing of the transaction. To comply with ASC 805, the Company will restate its previously issued financial statements to reflect the contingent purchase consideration as compensation expense for post-combination services rather than a component of purchase price consideration. The restatement reclassifies $7.2 million of the contingent purchase consideration as compensation for post-combination services, which must be recognized over 36 months from the time of acquisition.
The Company also completed an acquisition of Cheverny CEO Search in the fourth quarter of 2012, with similar provisions. Similarly, the acquisition resulted in an additional $1.0 million of deferred post-combination compensation, recognizable over 20 months.
Total estimated post-combination compensation expense for the full year 2012 is $6.3 million, or $4.2 million net of tax. The Company intends to amend certain provisions of the purchase agreements to eliminate all employment contingencies. These amendments will result in a charge in the first quarter of 2013 of approximately $1.9 million to write off the remaining deferred post-combination compensation assets.
In commenting on the financial restatement, Mr. Sullivan said, “It was not the Company's intention, nor the Company's belief that the purchase documents would be interpreted to trigger post-combination compensation, but because of the application of the accounting rules, we were required to restate our financial reports. On an operating basis, Latin America has delivered significant strategic value and continues to make a positive contribution to our financial results.”
Fourth Quarter 2012 Results
In evaluating the Company's performance, the Company has adopted the use of certain non-GAAP measures for a comparison to prior periods. A reconciliation of reported to adjusted results is included in this press release.
Revenue for the fourth quarter was $30.2 million an increase of 11.0% from $27.2 million reported in last year's fourth quarter. Latin America contributed $3.5 million of net revenue, offset by decreases in North America and Asia Pacific. On a GAAP basis, the net loss for the quarter was $1.5 million, or $0.21 per share. Excluding the non-recurring post-combination compensation charge, the net loss was $153,800, or $0.02 per share.