FTI Consulting Inc (FCN) 2008 Q4 法說會逐字稿

Good day, and welcome to the FTI Consulting 2008 fourth quarter conference call. As a reminder, today's call is being recorded. For opening remarks and introductions I would like to turn the call over to Eric Boyriven. Please go ahead, sir.

Good morning, and welcome to the FTI Consulting conference call to discuss the Company's 2008 fourth quarter and full-year results which were reported this morning. Management will begin with formal remarks after which they will take your questions. Before we begin, I would like to remind everyone that this conference call may include all statements other than statements of historical fact made during this call including without limitation, statements regarding our future financial position, business strategy, budgets, projected costs and plans, future industry growth, and objectives of management for future operations, are forward-looking statements that involve uncertainties and risks. There can be no assurance that actual results will not differ from the Company's expectation. The Company has experienced fluctuating revenue, operating income, and cash flow in prior periods and expects that this may occur from time to time in the future. As a result of these possible fluctuations the Company's actual results may differ from our projection. Further, preliminary results are subjected to normal year-end adjustments. A number of factors could cause such differences including the pace and timing of additional acquisitions, the Company's ability to realize cost savings and efficiencies, competitive and general economic conditions, retention of staff and clients and other risks described in the Company's filings with the Securities and Exchange Commission. Investors are cautioned not to place undue reliance on any forward-looking statements which speak only as of the date of this earnings call. The Company does not undertake to update any of these statements in light of new information or future events.

We use EBITDA in evaluating financial perform. We define EBITDA as operating income before depreciation and amortization of intangible assets plus litigation settlement. Although EBITDA is not a measure of financial condition or performance determined in accordance with GAAP, we believe that it can be a useful operating performance measure for evaluating our results of operation as compared from period to period and as compared to our competitors. EBITDA is a common alternative measure of operating performance used by investors, financial analysts, and rating agencies to value and compare the financial performance of companies in our industry. We use EBITDA to evaluate and compare the operating performance of our segments, and it is one of the primary measures used to determine employee bonuses. We also use EBITDA to value the businesses we acquire or anticipate acquiring. EBITDA is not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies unless the definition is the same. This non-GAAP measure should be considered in addition to but not as a substitute for or superior to the information contained in our statements of income. Reconciliations of EBITDA to net income and segment EBITDA to segment operating income are included in the accompanies tables to today's press release available at www.fticonsulting.com. With these formalities out of the way, I'd like to turn the call over to Jack Dunn, President and Chief Executive Officer of FTI Consulting. Jack?

Thank you. Good morning, and thank you for joining to us this morning to discuss our fourth quarter and year-end results. I hope you have had a chance to read and review the press release. If you have not as Eric said it is available on our web site at www.fticonsulting.com. With me this morning on the call are Dennis Shaughnessy, our Chairman, Jorge Celaya , our Chief Financial Officer, David Bannister, our Chief Administrative Officer, Dom DiNapoli, our Chief Operating Officer, and Declan Kelly, our Chief Integration Officer. 2008 was another very important year for our Company. Despite global financial chaos, we invested even more heavily in our future, diversifying our business, expanding our platform, building our brand and generating cash. Organic growth was strong at 17% while contributions from key strategic acquisitions brought our total growth to 29%. Our international expansion continued as London became our second largest operation posting the full complement of all of our segments.

Most importantly, though chaos continued to reign in the fourth quarter of 2008, as we have seen in every previous cycle paralysis began to give way to action, and our markets began to stir. In Forensic Litigation, the names ripped from today's headlines appear to be setting the stage for an excellent year. Likewise, in Economic Consulting, we have seen the major matters of the last 12 months begin to devolve into a dispute resolution phase. And in Technology, we believe we have seen the beginnings of the return of the big case phenomenon as regulatory and enforcement agencies got not only a burst of energy but a kick in the pants from an activist President, an energized Congress, and an outraged public.

It is in Corporate Finance Restructuring, however, where the results are even more dramatic. Since the beginning of the year, we have opened an average of almost four cases per day. And if FLC is seeing the prospects for its best market in some time. In Restructuring, it is seeing the prospects for the best market of all time. Truly, if our goal is celebrated in our recent global branding initiative is to be the firm you call when the game changes, never before has the game changed so much.

Our performance in the year underscores the diversity of our platform both from a geographic and skill sets perspective, and the relevance of all of our segments to the events that threaten the well-being of our clients. We have built this Company to be able to advise our clients on the toughest issues to threaten their businesses, their reputation, their enterprise value, and in some cases, even their very existence. In the current environment, these threats run rampant, and as the Company behind the headlines, FTI is at the crux of all of them.

For example, with one of the largest restructuring practices by any measure be it lead table, head count, active cases or volume, we are involved in many of the front page bankruptcies across a broad range of industries. These include Circuit City in retail, Tribune Newspaper Group in media, Lehman and WaMu in Financial Services and [Landell Bissell] in industrials. We have been called into the major fraud cases arising almost daily it seems from the credit crisis and market meltdown of the last 14 months. Our involvement in a few of these has already been made public including the Madoff investigation, the Dryer Law Firm case, and the Stanford Financial affair. We were involved in many of the landscape-changing transactions that reshaped key industries. Examples include -- Northwest Airlines-Delta merger in the airlines industry, the purchase by Tata of Jaguar from Ford in the automotive industry, and the recent Chinalco-Rio Tinto transaction in natural resources.

We are active in advising some of the world's premiere companies as they battle challenges to their reputations from the adverse circumstances that are impacting their operations. Companies like AIG, Northern Rock, MF Global, RBS, and Societe Generale are just a few. It is the unique combination of the positioning of our businesses, our global platform, and the superb talent we are so fortunate to have, that are the keys to our performance in 2008, a year that included two of the worst quarters in US business history. And why, as I'll discuss in a few minutes, we are so enthusiastic about 2009 and beyond.

With respect to the year just ended, our revenue increased 29% to $1.29 billion, with organic growth of 17% contributing the bulk of the increase. Our EBITDA increased 31% on higher margins compared to the prior year. And EPS $2.34 was up 17%, this despite a 17% increase in the number of shares outstanding. Both revenue and EPS for the year were records and at the top of the range of our recent guidance.

In addition to our outstanding organic growth, we continued our program of making selective key strategic acquisitions in 2008 that added over $96 million in revenue for the year. Critical elements of our growth strategy are to expand our range of capabilities, deepen our industry expertise and build on the global platform which we operate. And our M&A activity this past year was instrumental in furthering all of those objectives.

An example of how we expanded our activity outside the US was the completion of our full service platform in UK as I mentioned, through the combination of acquisitions and organic hiring of key professionals. London now represents our second largest office globally and serves as the hub of our European operation. London is important to us not only as a market in its own right but as a bridge beyond. And to achieve this bridge head in a little more than two years was a significant step for FTI.

This is a global credit crisis and recession and our global platform allows to us service our clients wherever they may be around the world. In 2008, about 18% of revenues were generated outside the US, and we see activity beyond our borders significantly expanding in the future, though the exact proportion as measured in US Dollars is somewhat depends on exchange rates.

In summary, as you have seen again in 2008, our people set ambitious goals and then strive to meet them. We are a Company that is realistic about market conditions and what we see in front of us. We are a Company that now has a global platform that is sufficiently diverse in principal to ensure that we are true a Company for all seasons. And finally, we are a Company that is in a strong growth mode with internally generated capital to support it, and we expect that growth to continue in 2009.

Now, looking at the fourth quarter. Our performance in the quarter came in at the top end of where we thought it would when we spoke to you in early November. Revenue in the quarter was $322.9 million, an increase of 15% over an extremely strong performance a year ago. Our organic growth in the quarter was 4.4%, which included a negative currency impact of over $11 million in revenue, that reduced the measurement of organic growth in the quarter by about one half.

The organic growth in the quarter was even more impressive considering that it was on top of an outstanding 24% growth in the fourth quarter a year ago when we were experiencing an unusual confluence of positive demand drivers. So, we were somewhat up against some very tough comparisons. The trends that drove our revenue performance in the quarter were similar to those that were in play in the third quarter. As you would expect, we continued to derive a growing proportion of work from the fallout of the credit crisis and recession which caused the Corporate Finance segment to have yet another outstanding performance. The Economic Consulting segment also benefited as expected from an increasing amount of work and the anticipation of anti-trust litigation which always follows a vibrant period of mergers and acquisitions as we have experienced over the last several years. The influx of clients having to assess the impact of the credit crisis also continued, and as is apparent from the press, the Network Industries practice, especially in railroads, energy and telecom, continued to develop momentum.

While the fourth quarter did not suffer from the same deer in the headlights paralysis that impacted the third quarter, we did see the lingering effects of a lame duck administration and a desperate economy on levels of activity in litigation and regulatory and enforcement activities. These factors particularly impacted the performance of FLC and Technology, although we believe they performed well under these conditions. The foreign exchange impact in the quarter was most acutely felt in the Strategic Communications segment, which was also affected by the continued volatile capital markets, dramatically reduced levels of M&A activity, the virtual disappearance of the IPO for a while, and the impact of the recession on discretionary client spending. Notwithstanding the considerable headwinds affecting these segments, the diversified and countercyclical nature of our business enabled to us record EBITDA in the quarter of $71.3 million, up from $64.3 million a year ago. This was the second highest EBITDA we have ever achieved. The EBITDA margin, while lower than last year, was improved from the third quarter due especially to the the strong performances by Econ and Corporate Finance.

Net income increased slightly, and we reported EPS of $0.58 compared to $0.60 a year ago. We had about two million more shares in the share count in the quarter than we did last year which accounted for the year-over-year decline in earnings per share.

In this environment, we believe liquidity is king, and we had a very strong period for cash conversion, generating approximately $91 million in cash from operations in the quarter. Almost double the $47 million of a year ago. Helped by a very good period for receivables collection where we equaled last year's DSOs at 74 days. For the full-year, we generated $200 million in cash from operations, which is well in excess of the $125 million in net income we reported. This strong cash flow enabled us to exit the year with cash and equivalents of about $192 million, even after an extremely active year we had on the investment front. And, with no increase in debt. We think this financial flexibility puts us in a tremendous position to take advantage of growth opportunities that might arise in the course of this year and enhances our ability to attract and retain the most talented professionals in our industries.

In summary, I am pleased to be able report a fourth quarter that completes an extremely strong year for our business where we continued high double-digit growth in both revenues and operating income. There are not many companies who can turn in such a performance in this market environment, and it is a tribute to the commitment and contribution of all of our people around the world who enabled FTI to do so.

Now, some brief comments on the key drivers of the segment performance in the quarter. The worsening global credit and liquidity crisis and general economic recession continued to benefit our Corporate Finance Restructuring segment which is firing on all four cylinders. Revenue increased 46% to $107.3 million from $73.6 million in the prior year period. Organic growth was a very robust 33% with the balance of revenue for the most part contributed by the Schonbraun McCann Group acquired during the year. EBITDA increased 66% to $37.2 million. During the year, we added capacity in the UK restructuring practice to meet the rapidly growing demand which has enabled them to more than double revenues over the past year. We now have over 40 professionals in London with another six arriving in late March or early April. We expect our European Corporate Finance Group to increase further to 65 professionals by year-end helped by expansion on to the continent where we plan to build a CF presence in the next few months. We also launched a restructuring practice in Toronto with the hiring of seasoned professionals there that extends our capabilities to Canada as well as Mexico and South America where we expect to see a continued significant expansion. That practice has gotten off to a very strong start in the few months that they have been with us.

The growing impact of the recession and lack of credit availability is propelling restructuring across a multitude of industry sectors. Despite the amount of time that has passed since we warned you of the first signs of stress in the sub-prime mortgage market, the Financial Services sector continues to drive a lot of business for us. We won 18 new significant engagements in the sector in Q4, the most notable of which was WaMu. We noted on our last call that we anticipated that plummeting consumer confidence would cause a weak holiday season and hurt the retail sector. And that came to pass. We also picked up 17 assignments in this sector in the quarter, including Circuit City, KB Toys, and Gottschalks.

The chemical industry also has seen its challenges as commodity prices whipsaw, and we received an assignment for [Landell Bissell].

Finally, we believe that the ongoing structural challenges in the media and telecom sector will provide sources of opportunity for some time. To enhance our ability to serve these opportunities such as Tribune, at the end of the quarter we acquired CXO, a firm with a team of experienced turnaround and interim management professionals with a particular focus on the media, telecom, and cable industries. We already had the largest team of restructuring and turnaround professionals in the space, and this underscores how we are building our platform of skill sets to leverage all powerful domain expertise in areas where we see sustainable sources of demand.

The strength of Corporate Finance is best reflected in our momentum. As I mentioned since January 1st, we have seen our new assignments accelerate at a rate of four per day. This is a staggering number. I'll talk more about that when I get to my discussion on our outlook.

The Economic Consulting segment had another excellent quarter. Revenue increased almost 20% to $53.3 million, virtually all of which was organic growth. A stronger market for work on anti-trust litigation, which as I said, always follows a period of intense M&A, was a key driver in the quarter as was continued demand building from companies starting to prepare for litigation arising out of the credit crisis. Network Strategies is benefiting from a very robust amount of railroad litigation which should continue throughout the year and into next. We are also seeing increased activity in the public policy arena.

Econ's EBITDA rose almost 36% to $16 million or 30% of revenue, from $11.8 million or 26.4% of revenue in the prior year. It was also an extremely productive quarter for Econ from a strategic perspective. We launched our auction solutions practice headed by two of the most esteemed experts on auction design, Dr. Paul Milgrom and Dr. David Salant. . The practice has gotten off to a rapid start having already won two engagements with a prominent telecom company to help them bid in an upcoming 3G Spectrum Auction. While our Economics Consulting practice has long been involved in significant European cases, having a local market presence has been a priority for us. And, I'm pleased to announce that at the end of the quarter we achieved that goal when we launched our London-based Economics practice with Chris Osborne. The tremendous moment we've begun to generate in this office has led to excellent success in attracting new talent, and we would hope to have a team of at least 30 new economic professionals by year-end.

The pipeline of opportunities in Econ is strong. There are a lot of new engagements in financial economics arising out of the credit crisis from people considering legal action, and those who are worried about defending themselves. There is also substantial interest in retaining our Econ practice for strategic M&A work in industries undergoing consolidation from severe economic stress.

Revenue in the Forensic and Litigation Consulting segment increased 7% to $58.6 million from $54.8 million in the prior year. Acquisitions contributed revenues of slightly more than $8 million in the quarter. FLC saw a continuation in a slow market for litigation and regulatory investigations by the government which obviously negatively impacted utilization. However, the segment saw continued strong performances from our regulated and special industries groups centered on insurance, healthcare, and pharmaceuticals, as well as IP and construction. This bodes well for the segment's 2009 performance as more traditional litigation and investigation and regulatory work is expected to pick up.

FLCs EBITDA was $12.2 million or 20.8% of segment revenue. Operations in the quarter were negatively impacted by lower utilization, some foreign exchange fluctuation, and certain non-recurring integration expenses of our recent acquisitions. We feel we have reached an inflection point in demand that began very late in the quarter when we were hired to work on the Madoff investigation. And since then, we have become increasingly busy with the growing roster of engagements investigating the fraud allegations that are being reported daily on the front page as the market declines. As a result in this current quarter, we are seeing improving trends in utilization and revenue.

Revenue in the Technology segment in the fourth quarter increased 10% to $52.2 million from $47.5 million in the prior year period. This was primarily due to contributions from a Attenex and [SDI] of about $8 million. As in the third quarter, Technology continued to be affected by a lack of big litigation and M & A matters, as well as a slowdown in certain large product liability matters and some pricing pressure. On the bright side, however, we believe that the same factors driving FLC toward an inflection point apply to Technology. Like FLC, in the first quarter, Technology has experienced an upturn in demand resulting from increased litigation and investigation activity, especially with respect to larger matters which are its bread and butter.

Segment EBITDA was $13.6 million or 26.1% of segment revenue compared to $19.6 million or 41.1% of segment revenue in the prior year. The primary drivers of the lower margins were continued pricing pressure in certain parts of the business, increased planned R&D spending and non-recurring integration expenses. As we had planned early in 2009, the segment successfully completed the interests gracious of the market-leading and award-winning Attenex and Ringtail platforms and launched a single E-discovery system of record combining the visual analysis and rapid review capabilities of Attenex with the enterprise-class case management redaction and production features of Ringtail Legal. The Tech segment will continue to pursue its research and development initiatives to further leverage the Attenex-Ringtail platform with new generation technology. We are committed to being the technology leader in our industry.

The Strategic Communications segment, as I mentioned earlier, faced the headwinds of silent capital markets and a lack of M&A work. The segment also experienced a negative currency impact of almost $8 million and felt some pressure on its traditional retain business from clients reining in their budgets due to the recession. Revenue declined 14% to $51.6 million from $60 million in the prior year period, almost entirely due to the impact of foreign exchange.

FD has been able to offset a good deal of the downward pressure by developing additional crisis work, collaborating with CorpFin to work on restructurings, and with contributions from acquired businesses. We are delighted that they have been able to move so adroitly to shift the business to the current climate. FD is emerging as the clear go-to firm for truly strategic assignments of critical performance as witnessed by its work for clients such as AIG, Circuit City, Northern Rock and RBS. As well as work on behalf of a number of foreign governments directly affected reputationally by the current economic crisis.

EBITDA was $12.9 million or 24.9% of segment revenue, compared to $16 million or 26.9% of revenue last year. Margins were somewhat impacted by the lack of significantly highly profitable M&A work. The segment leadership has taken proactive steps to manage expenses to preserve margins under a lower revenue base. Notwithstanding the weak M&A environment, the Communications segment has maintain its leadership position in the market and has recently been recognized as the Number One M&A Communications Firm in 2008 based on the volume of deals they have advised during the year, including several of the world's biggest and most high profile transactions.

In summary, the overview of the segments underscores our strategy in building the Company as we have over the last 10 years. It is designed as an integrated portfolio of complementary practices where negative performance in one segment can be offset through the improved performance of the other segments with a countercyclical bias. This is the value proposition of that strategy, and the fundamental strength of FTI's business plan going forward.

Now, let's take a look at our outlook for 2009. In short, we expect to have a very good year, and one which we think will definitively separate FTI as the leader in event-driven consulting. Top line, we are guiding to revenue of between $1.45 million and $1.55 billion, which represents a growth of between 12% and 20%, assuming as we always do for purposes of guidance, existing currency exchange rates and no contribution from acquisitions. In terms of the trajectory of the year, we expect all quarters to be sequentially higher beginning in Q1, driven by the expansion of our restructuring and economic staff and continued increases in litigation and government regulatory activity. The year-over-year comparisons get easier as we proceed through the year because as you'll remember in Q1 and Q2 of 2008 represented off-the-chart performances for several of our segments, and you just can't do that all the time. We expect slightly higher EBITDA margins in 2009 as we continue to leverage CorpFin through the restructuring cycle and momentum of FLC and Technology picks up in the second half.

For the year, we are guiding to earning per share in a range of $2.55 to $2.70. Included in that guidance is a $0.05 non-cash cost from the required implementation of FASB staff position APB 14-1 which relates to how you account for convertible notes. It has the effect of increasing our hypothetical non-cash interest expense. I would be remiss if I didn't remind you that we have the usual first quarter impact of higher Social Security and other front-end loaded benefit costs which typically have a sequential impact of around 250 to 300 basis points on the margin compared to the prior fourth quarter. As we said last year, when we reported Q1 of 2008, the seasonal impact of these costs in that quarter was offset by two large engagements which caused the period to be exceptionally strong.

Now, I'd like to just take a few minutes and tell you what supports our confidence in our outlook for this year. First, we strongly believe that the Company has never been more appropriately aligned with the demands of the marketplace than it is now. As I said earlier, we have positioned ourselves to be the firm that our clients turn to when the going gets rough, and we are now most definitely living in the type of environment for which the Company was built. As you all know, the key drivers of our business are restructuring, litigation, regulatory activity, and capital markets activity. Let me talk about 2009 in the context of these drivers. First, when we first warned you about a global pandemic of crisis in the financial markets about this time last year, we believed it would be painful. But, no one could have foreseen the events of the last 12 months. This is longer, deeper, more painful, and more pervasive than anything we have ever seen before. Our professionals believe we are in this jackpot for years to come with a major fallout continuing at least for the next five years. The fractures in the global economic system are more pervasive, and the American consumer is no longer standing by to bail out the country, much less the world. While the market for high-grade debt has improved lately, there has not been a commensurate improvement in the speculative grade market. And, there are literally over $500 billion of debt in private equity deals that are coming due and will need to be financed in the next few years. Moody's is forecasting the default rate on a speculative grade debt to more than triple from 4% at the end of 2008 to over 14% by the year-end 2009, which dwarfs anything that happened in the last period of 2000 to 2002.

This is serious stuff. This is no celebratory assessment of being right, but a sober one. This goes beyond input for financial models or market predictions. The world is in the trenches, and we are lucky that we have built a Company that we think can help our clients as they face many of these challenges going forward.

With regard to FLC as we have said for some time, we expect the pace of regulatory investigations to accelerate once the new political appointees in the Obama administration get settled in their positions and build momentum for FLC and Technology. There has been so much value destroyed during this financial meltdown and an unprecedented amount of alleged fraud being revealed that if the current meltdown at all follows past patterns, litigation, regulatory, and enforcement action will be follow. There is little question that the government and regulators will want to know how we got into this mess, who knew about it when, and who was responsible. This is also reflected in the pick-up in activity we have already seen inside our own FLC segment in the first quarter of 2009 with the segment being called into work on several of the major fraud investigations that you are reading about in the newspapers every day.

Here are some precursors of what could be coming. A Sub-Committee of Senate Homeland Security and Governmental Affairs will hold a hearing on March 9th on the topic of where were the watchdogs, systematic risk, and the break down of financial governance. President Obama recently named Interior Department Inspector General Earl Devaney to lead a new board charged with monitoring potential waste, fraud and abuse of economic stimulus funds. You may remember that Devaney led the high profile investigation of the Jack Abramoff lobbying scandal.

Last month, Senator Lieberman appointed Senator Claire McCaskill to lead a commission responsible for investigating Federal contracting. Congressman Edolphus Towns, the new Chairman of the House Investigative Committee, laid out a meeting hosted by FTI, an agenda that includes an accounting of Financial Services firms of how they spent the first $350 billion in bailout funds and an examination into executive bonuses at firms that receive bailout money. Senators Leahy and Grassley have introduced legislation to provide more resources to law enforcement as they try to prosecute fraud. The bill will provide about $420 million over the next two years for extra agents, investigators, and prosecutions. Finally under the President's budget proposal, the SEC would receive a 13% increase in funding, Chairman Shapiro said the agency would use the funds to better detect fraud and ensure stronger oversight of the nations's security markets.

Based on the activity that we have seen so far, we are confident that this Administration will be much more hands-on and an aggressive pursuer of misdeeds. In every cycle of investigations, we get more than our fair share of the cases and this should be no exception. We have been using the slack period to strengthen our resources and make some key hires who will enhance our position. We have already been engaged in many of the headline fraud investigations that have come to the fore, and the pipeline of opportunities that are coming to us is filling up. It's interesting that the current environment for litigation and investigations feels very much like the turn of the restructuring market a year ago when momentum was starting to build, and we saw how that exploded. The risk of the year is obviously the health of the capital markets this year, and whether the availability of credit and investor psychology will cover enough to allow for the resumption of M&A and even IPOs. This, of course, has significant bearing on whether strategic communications reverts back to its traditional growth. I made the point in my segment discussion that they are market leaders in M&A communications so when the credit environment thaws and transactions begin to happen, we would expect them to participate in the upturn and even increase market share. With their presence in so many of the world's capital markets and financial markets they offer us the infrastructure to leverage our global opportunities even more, as we did in the UK.

To ensure that we take full advantage of the current demand environment, we are making a significant investment in the integration of our businesses around the world and strengthening of the FTI brand in the markets where we operate globally. We are dedicated with a renewed vigor to use the platform we built to share and leverage our greatest resources, expertise and relationships across the firm to expand client relationships and development major business opportunities.

On the branding side, we have launched our When the Game Changes and our Company Behind the Headlines marketing campaigns which represent the first globally coordinated and far reaching brand development initiatives in our history. The reaction to these initiatives and our marketing outreach has already been very strong. We believe the time to invest proactively in our brand and to focus heavily on how we can expand our services and presence in multiple new markets around the world is when others won't where others can't.

This time last year, I spoke to you of the spread of the global credit crisis into what I termed a full-blown and financial economic pandemic. As I said, ironically that has been proved to be more accurate than we even predicted. While the world is struggling with one of the most challenging times in a generation or more, FTI was built to prosper in both good and bad times. This is due to our vision and especially to our people who are the trusted advisors to our clients in their times of need. We have never been in a better position to serve that market and to make returns for our shareholders, and at the same, time attract the very best talent that is interested in participating in our future.

So to conclude, I'd just like to say that we feel we had a very good 2008. I'd like to thank our people for their contributions, and we look forward to another great year in 2009. And, we believe we have the momentum to reach those objectives. At that, I would like to turn it over to

(Operator Instructions) We will go first to Paul Ginnochio with Deutsche Bank.

Thank you for the time. First one is, could you maybe break out the difference in Tech between pricing and investment on the margin? Thanks.

You mean the impact -- hi, Paul, it's Dennis, you mean the impact of pricing competition to margin spend? I'd say the majority would be pricing. And, significant minority would be R&D spend.

Then R&D spend is not going away? I think you've gone through some investments or some integration spend -- ?

We were very happy to announce at Legal Tech the successful integration of the Attenex-RingTail platforms, and we are continuing that spend rate in order to add what we think will be dramatic increases to the efficiencies of that new platform over the next twelve months.

Thanks, just one more. In the fourth quarter, was there any significant success fees in your CorpFin restructuring practices, or was that mainly -- just underlying business?

There were success fees, but it was business as usual.

Okay, and has there been any issue -- I know there was one high profile where the creditors pushed back on some success fees in a retail you were trying to get. Was there any issue with getting success fees in this cycle?

Not so far.

Thank you.

Your next question comes from Jim [Demasi] with Stifel Nicolaus.

Yes, as first as a follow up to the Tech margin question. You had talked about getting back to the low 30% margins over time, and you had also talked about some momentum with some recent wins in the cases. Do I assume if those revenues do come online that we would have natural margin expansion despite the pricing pressure and the continued spend on R&D?

Yes, Jim, it's Dennis. We will see margins move back up even though we have made a conscious decision to continue the spend rate of R&D. As Jack had enumerated, we are being brought into very large complex challenges with a global reach, and the pricing pressure tends to abate the more complex the issues. And a lot of the once you have either been reading about or have heard about are extremely complex, require very sophisticated data management collection and analysis. So, we would definitely expect to see some margin expansion, especially in the second half.

Okay. And, some of these larger cases that you've won recently. You talked about Satyam and Madoff and Dryer. Are they flowing through multiple segments within the Company?

Madoff, Dryer, are multiple segments, yes.

Okay. And when we look at the seasonality of earnings other than -- Jack, you did point out about the pressure in the first quarter because of payroll resets and such. That combined with these cases building throughout 2009, would I also assume that the earnings will build as the year progresses?

Yes, that would be a good assumption.

Okay. Then, two final questions for Jorge. Could you talk about what interest expense you would expect for the year, and what tax rate you would expect?

I think the tax rate should stay about flat at around 39%. The interest expense, if you include the change in the convert that Jack mentioned in his opening remarks, that should add about $4.6 million to interest expense. So, combining interest expense with that, interest expense normally would be flat. You add 4.6 million in interest income should be down a bit. So, we are probably looking at net interest combined probably -- sorry, the interest expense about $1.2 million hire per quarter,.

$1.2 million per quarter, okay.

About $4.7 million for the year.

It's a function of real tool things, the cash interest expense should be slightly down. You can almost model it off the last year down a little bit, and then you have to add a non-cash charge for the new rules on how you calculate convertible interest. And, that's going to add about $0.05 per share, $0.012 per quarter to the interest charge.

For comparison purposes, Jorge, will that be also subtracted from the prior year?

Yes, part what if the accounting will do is that as we report our 2009 first quarter and so forth, we will be for comparative purposes, restating the comparable quarters of 2008 which has a similar effect of about $0.012 per quarter.

Okay. Great. Thanks for the heads up. Appreciate it.

We will go next, to Arnie Ursaner with CJS Securities.

Hi. First question I have relates to your headcount. You mentioned you would you increase it by about 14% in 2009. Is that from the year-end levels, and how much would you expect to get through either just hiring individuals or through acquisitions or practices?

That would be fairly much what we would look at on an organic rate to support the organic growth that we have. We don't include any impact of acquisitions in our guidance. We would also expect, obviously, some opportunities to have some group hires and things like that which we are gaining a lot of momentum. And as we open up new areas, especially in Europe, or we mentioned that we are fortunate to have a group join us in Canada that has a significant impact on our ability also to service Mexico and Latin America. We think in those areas we see a large opportunity for people.

Well, with, including acquisitions, the headcount grew almost 30%, a little over 29% and the difference between the organic, obviously, and that number was the headcount acquired through acquisitions. And we will grow headcount, and as you know we don't budget acquisitions. But as Jack mentioned, headcount is planned to grow in the area of 14%.

Organic. And that is from last year -- from the end of the year.

Perfect. Thank you. The second question I have relates to thinking about all of your businesses combined for the upcoming year. Obviously, the piece related to restructuring seems like it's doing extraordinarily well with tremendous backlogs, but the problem areas -- FLC and Tech -- it sounds like you are poised for a pretty good cyclical pick-up. Is that another way to think about this?

I think -- Arnie, it's Dennis. I would say -- let me go through them this way. CorpFin is obviously going to have a tremendous year. Tech and FLC have come out of the gate in the first quarter much faster than we had planned. We thought they would have very strong second half of the year. If the momentum continues -- it's too early to declare victory. Obviously, they are going to do very well. Econ, as we said, is moving along very nicely being engaged in some really interesting new assignments. They are adding capacity. They are one of the groups that's definitely adding capacity on an organic and a group hire basis. The one division that we think will have the most headwind to go through not only on an FX basis because so much of their operations are offshore, but just in an internal market basis would be the Strategic Communications. So, great -- phenomenal year in Restructuring. We think very good years in Tech and FLC, continued excellent performance by Econ, tough year ahead for Strategic Communications.

Recently, some people have done some historical perspective analysis on litigation. They've gone back and looked at, for example, Foreign Corrupt Practices Act cases. And if you go back to 1992, every year before an election -- presidential election, they have dwindled to the eight single-digits level. And every year following the election, they have exploded to make up for what was probably a lame duck view toward enforcement. We truly believe -- certainly our experience her over the last twenty years has been seeing that kind of renewed vigor and enforcement in regulation follow. I think it's exacerbated by the fact that you have -- as the great man said, the tide is going out and you are seeing who is swimming naked. And the amount of fraud we are seeing is starting at a much earlier time in the cycle than it did back in 2001-2002. 2001, you saw the explosion -- the capital markets, this [intermediation] there, you saw the explosion of the litigation and regulatory happen in 2003-2004. Here it is starting almost immediately. That bodes well for that marketplace, again, over the next three to five years.

I think what I'm trying to do is equate your 14% headcount growth. You had acquisitions that are still contributing into '09, in line with your 12% to 20% revenue growth. Unless you have some material giveback on fees or something else, it would seem to me your revenue growth would be certainly towards the higher end of that range just based on headcount.

Yes, the one thing we are lapping, Arnie, don't forget -- we are lapping a tough, tough currency. This time last year, the Pound and the Euro were significant premium to the dollar. I think it was about GBP 2.1 to $1 was the Pound exchange rate. It is down to GBP 1.4. What is happening is, if we showed you the growth in constant currencies, you would be right on in your assessment. It would be at the upper end if not even through the upper end. But, we have -- given the good news about being global is the assignments we're getting. The bad news about being global is you have FX issues, and it's clearly affecting the topline growth.

We are also hiring more than ever at the lower level so the staff, the headcount increase is more skewed than ever at the lower level.

If I can ask one more. Can you give us a feel for the shape of how business has evolved so far this quarter? Meaning, walk us through the very early part of January. I know when you were at our conference things were still very -- didn't pick up immediately after year-end. But, perhaps give us a feel for how the last eight weeks or so have shaped up?

Building momentum. Large assignments. Incredible amount of new engagement acquisitions in Corp Fin, as Jack said, about -- averaging about four per day. And again, I think the biggest surprise is very, very large fraud investigation assignments.

I think -- you can probably use as a benchmark, January 20th. Things after that in terms of political hearings, in terms of people at the government being sent back to their desks and finding that they better do something picked up dramatically when you really had the investiture of the new Administration.

Thank you very much.

We'll go next to Andrew Fones with UBS.

Yes, thanks. Just following on from the question earlier about revenue growth guidance and the fact that it appears from the headcount growth that you might go through the high-end of the range. I was wondering if you could also talk a little bit about the relative revenue per consultant for international versus US? And of that 14% growth, what you expect to come internationally versus in the US? Thanks.

I don't think we've seen a particularly a different view of the revenue per consultant. When you look at economic consulting because it's built on a system where you have a highly reputationed economist, they typically have a lot of revenue for the senior people and their revenue per professional has been pretty much the same. So, I don't think we've noticed a big change in that number. Per professional, we would expect that to stay relatively the same.

Okay, thanks. In terms of the hiring, can you give us a sense of how much of that will come internationally? You mentioned you would be adding people in Economic Consulting and in Corporate Finance internationally.

Percentage-wise, the bulk of the people will be where our businesses already are because they need to sustain the growth that they have. But on at a percentage basis, we are starting with a very small base. We are hopeful that we will significantly expand the capacity, both in Restructuring and in Economic Consulting in London. We would hope to move Economic Consulting and also Restructuring on to the Continent. Those would be smaller, step-out acquisitions there. And then in -- we continue very strong in South America, Latin America, on both the Investigation side and with the Restructuring side. And then, we would continue to explore Asia for Technology, for Investigations where Steve Vickers is out there in Hong Kong running our operations. So, that's kind of the pattern.

Okay. Thanks. And then, if you could, since rolling out the new technology platform, can you give any thoughts on clients' reaction to the new platform? And whether you think there was any kind of delay in projects ahead of that launch? In order for people to be able to take advantage of the new platform, and what kind of trends you've seen post the launch? Thanks.

I think the response that we got from participants in Legal Tech where the combined platform has rolled out has been excellent. I think the window that some of our technologies gave the constituencies on the applications that we are working on and developing ourselves and partnering with other technology firms I think caused a lot of excitement. I think, as we said, we are seeing Technology begin to build momentum. A lot of that is just simply a pick-up of very large engagements. But we are seeing the applications of the technology broaden and used by a wider constituency. So, we are pleased so far, Andrew.

Thank you. Thanks a lot.

Our next question comes from Tim McHugh with William Blair & Company.

Yes, I was wondering if you could give some more context to your comments about four cases per day in the Restructuring segment. Just if you can talk about how many did you have at the end of '08? And, what type of growth rate that might set you up for as you think about '09 here in your guidance?

This is Dom DiNapoli. We have -- in the first quarter so far we've almost up almost 160 new cases. So, that's an unprecedented amount of new cases. When you look at the way we look at the economy and the opportunities there, you've got the three pillars of the consumer confidence really under attack. Unemployment is growing to almost 9%. You have got retirement savings down 30%, 40%, 50%. And then, you have home values declining 10% to 30% depending on the market you're in. Unless we have the consumer come back, this economy is not going to correct itself. So, we see this as a pretty long, deep recession, at least through some time in 2010.

Yes, I think the two other things you should focus on as well is we are only now just beginning to see the impact on this economic crisis on commercial real estate. It's happening quickly. It's happening in major metropolitan marketplaces, and the hold level of people of commercial real estate paper is very, very high. It hasn't been securitized. So, we think that will clearly yield new engagements. Finally as Jack said, there's about $0.5 trillion dollars worth of structured finance that was put in place earlier in the decade on very large, prominent, private equity led deals. Even though it was covenant-light, it does have maturities. The maturities commence this year and run for the next three years. And that finance cannot be rolled over in this current credit market, so they clearly would be candidates for restructuring.

Is it fair to assume relative to the 33% organic growth rate in the fourth quarter, that your guidance would assume a further acceleration in that business as we look to '09?

It's hard to take what is clearly extraordinary new engagement numbers and annualize them if -- I guess the caveat would be, if it continues at that rate then, yes, you're right. If it slows down, it would be more in line with what our thinking was when we put the budgets together the end of last year.

Okay. And then, just more broadly versus that segment. Can you talk about the low end or the high end of the guidance range? What some of the assumptions are that would take you up to the high end versus what would take you down to the low end? And more so, in terms of the revenue?

It's timing. I think when we put the budget together we didn't anticipate some of these large cases breaking so quickly early in the year. We are early in most of them, except for one. So, we really just don't know how it's going to play out yet. I think that from the view of currency it's very difficult to predict. It's been going one way, and that's against us. We modeled using the currency numbers at the end of the year. We are already down. So, the dollar has strengthened even more. Clearly, a negative factor would be, it's difficult to understand where the currencies are because it's such a fluctuating marketplace. So, I guess it would be a combination of two things. If the momentum that we are beginning to see continues, and some of the reach into some of these accounts. And then finally, FD is difficult to model this year. They've done a tremendous job of being adroit and allocating capital markets talent into crisis communication work, but they have such a high percentage already of large crisis communications cases that it's difficult to forecast a lot of growth there. And clearly, you can tell me better we don't foresee very much, if any, capital markets work this year. So, I think they would be another anchor to windward to, obviously, the very good news we are getting in some of the other areas.

Okay. Then lastly can you -- the headcount in technology seemed to be down quite a bit sequentially. Just, what were you doing in the quarter there? And then at this point, what would be -- ?

I think what we told you was that we were not going to attempt to integrate the Attenex acquisition until the beginning of this year. Mainly, because we wanted to do the integration of two platforms. We have commenced the integration efforts of the acquisition into Tech, and as a result you do -- when do you these integrations you be fortunately there were redundancies that we had always planned to eliminate. And, that's the main reason for it.

Does that part of the margin left, you would expect for '09?

I think the margin will primarily come from, will you get a little bit certainly some of the integration expenses that are non-recurring will burn off over the next two to three quarters so that will influence margin. We think the main increase to margin will be somewhat of a slowdown in the R&D spend towards the back end and much bigger impact from the larger assignments that we are getting.

Okay. Great. Thank you.

We Will Take Our Next Question From Toby Summer With SunTrust Robinson.

I wanted to ask a question just stepping back and looking at the cyclicality of the business. Judging from what you are saying, it looks like CorpFin Restructuring has a multi-year tailwind. And, I'm wondering from your perspective, if there's going to be an opportunity where we are going to have a period of time where restructuring CorpFin is still going full-bore? And some of the pro-cyclical elements of your business could actually start performing better as well.

Yes, I think probably the last time we went through the cycles instructive, from our perspective the good caveat that we think this restructuring market has a lot of legs to it. This is -- we are in such a jackpot right now that our professionals are seeing this as a five-year run. Typically, it takes longer for the collateral damage that you would experience in Econ and in FLC takes a little longer. So, you would think that we are still seeing litigation now that relates to the 2001, 2002 period. We would think two years out, that you would have the beginning of those segments clicking -- Technology, Restructuring, and FLC clicking on all their cylinders together at the same time. FD's return to its glory days of last year which would tend a little bit on the return of the capital markets. But there, they will be increasing their market share. And then in terms of our Econ, they are beneficiaries of the litigation phase for sure, and they would also be the beneficiary of continued M&A-type work. So, I think that we have a platform that's put together to take care of periods like this where there's a real imbalance on what the economy is doing. But when we have a period where there are funding returns where you can actually get restructuring done you still have to do the restructuring and where the litigation starts to follow as [HealthSouth] and even Enron that only wrapped up last year. You are looking at a pretty good five-year run for FTI, if not longer.

Thank you very much. I wanted to ask a specific question with commercial real estate issues maybe coming to the fore, how your real estate business is doing? And if there's opportunity for liquification of some investments? If you can give us a thought for what the sovereign funds may be thinking at this stage? Thanks.

It's starting to pick up. Without a doubt, it's doing very well now. Over in Europe, it's been one of our best cross-sell opportunities in combination with the restructuring people as well as the FD people. We've won some very big assignments in the Middle East in partnering with some of the other groups. I think we are now up to three or four assignments in the Gulf area and Saudi Arabia. We won some large assignments in Dublin as you are probably well aware. Commercial real estate has been one of the major drags on their economy. They are being viewed by some of the key people in Ireland right now as a very valuable resource in potentially navigating Ireland's economy out of some of these messes. Dom, locally, you might want to comment.

We have the SMG acquisition working closely and being integrated into the Corporate Finance practice where the Corporate Finance professionals are really the guys that are driving the bank negotiations. But, we can bring in the real estate expertise from the SMG acquisition to really provide the valuation and all the other components that are necessary in the commercial real estate debacle. That's really just beginning. That's the news that I think we are going to be reading about over the next six months. But to date, you haven't seen the big ones. You've seen some of the industries like the casinos collapsing and a lot of the large resorts really under stresses. Tourism and vacation spend is down and dropping. So, stay tuned for a lot of real estate workouts in '09 and 2010.

Toby, SMG has a unique position in the REIT world. They have a very broad client base there, number one, an experienced base. So, as the REITs come under pressure in a lot of their investments, they are uniquely positioned to go in and help the REITs handle some of those problems.

There are some REITS that have cash that they want to invest so SMG would be the first call there to help them structure the deals and value the acquisitions.

Am I right in thinking that from a margin perspective the last several quarters, SMG probably has underperformed it's historical margin. And perhaps looking out over the next year or two, there's an opportunity to go back to that margin with success fees driving that?

That's the plan. With the M& A down, that's the largest part of the margin pick-up that we would expect going forward.

We will take our next question from David Gold with Sidoti.

Hi, good morning. First, on resource growth, the 14% headcount. You spoke a little bit about adding in corporate finance and economic consulting. But curious, if you can give a little bit more color as to where we should look for the headcount adds to be weighted toward, one. And then, two, coupled with that, utilization at the corporate finance practice presumably still leaves some room for progress. So, impressed with margins there, but could we expect that some of that would be from say higher utilization near-term?

Margins, the utilizations increasing was the increasing pace of business. I remember fourth quarter we digest a lot of our new hires from the universities that come in late third quarter. So, while margin is up, utilization was down a little bit, and that was again mainly again -- SMG, because of the real estate market. And two, just digesting all of these new entries. So, utilization will increase as a result of increasing momentum. Dom, real numbers?

And as far as adds, we are going to be adding across all the practices. Notwithstanding in 2008, we had a slower FLC overall practice. There are pockets within FLC as Jack mentioned that did extremely well even in 2008 that we would expect to go forward in 2009. And as Dennis mentioned, the margin expansion in CorpFin is possible with the higher utilization. If we ended the year at around 75%, there's clearly room to increase that utilization. And with the younger staff that we are bringing on, our margin rates are the highest at the lower level versus the senior level professionals.

If we backtrack a little bit, you said no significant success fees in the fourth quarter and some margin potential in that business. How high could -- do we think the margin could get there?

I think what we said the large success fees are becoming standard operating procedure on the creditor side and the big creditor cases now they are the accepted way of doing business which helps the creditors keep their monthly fees and all at a reasonable level, and we get paid sharing in their success. I think there were, but I think we anticipate them throughout the year in these type of matters. There are -- those would be a permanent bake-in to the margin. I don't think that -- I think that we are seeing those cases and the others pretty healthy margins. So, I don't think it's a huge margin expansion from where they were in the fourth quarter. I think that every capability of sustaining that type of margin.

We clearly had more success fees in 2008, and they were predominantly in the corporate finance practice and the restructuring practice and the healthcare practice. And the larger the cases, and hopefully the cases in 2009 and forward will be larger, the more opportunities in both Company side and creditor side there will be for to us get success fees and transaction fees.

Okay. And then just one last one. Jack, with cash building you've always been good about giving us a little bit of a look as to what areas you might want to build in if the right acquisition came along.

Not to be facetious, but I don't mind building cash right now. It's a tough world out there as we are seeing four times a day. But in all seriousness, we are looking at -- we have an incredible opportunity to hire right now, and that's one of the areas where we get our biggest bang for the buck. So, I would think we would put a portion of that aside for signing bonuses. We would put in terms of -- we still are looking to -- I think it's critical the that we move on to the continent from London in both the economic consulting and the restructuring businesses. And I think we are looking to expands our domain expertise. When you look at the CXO acquisition where we picked up great capability in terms of being restructuring officers plus domain expertise in the telecom and media area. That's exactly the kind of thing we would like to be doing -- small, bite size thing like that. And, in no hurry as both the prices and the people seem to be coming our way.

I think also we are clearly building out our channel distribution in Asia. We are very aggressively looking at opportunities in Hong Kong, Mainland China, Korea and in Australia. We made numerous acquisitions out there over the last eighteen months, and we are in conversations with other people that would possibly like to join us.

Got you. Thank you.

We will take our next question from Scott Schneeberger with Oppenheimer.

Thanks, good morning. Two brief ones. Branding, strong initiative for you for this upcoming year. How variable a cost is that for you? Is that something where you can accelerate and decelerate as revenues go? And also if you could just discuss, is that more of an overall corporate push? Or, is it done on a segment by segment basis? Thanks.

Good morning, this is Declan Kelly. The answer to your question is yes, we have complete flexibility in the way that we are managing the program so we can accelerate and decelerate depending on each week, each month, just complete flexibility built into the plan. And as you've seen it spread across all of our businesses and all of our platforms and all of our geographies. So, we have a lot of flexibility in there, and we will manage that program as we should with any expense on an ongoing basis, quarter by quarter. The second part of your question?

Just, is it a corporate-wide initiative, meaning, the FTI brand? Or, is it more of a segment-by-segment brand initiative?

It's a corporate-wide initiative with two different aspects to it. There's When the Game Changes and also the Company Behind the Headlines. One is relating to brand-building around some of our sports activation in golf and in equestrian sports and baseball and a number of other places. And, the second is in (salt) leadership which is where we use the Behind the Headlines. We have an overall corporate theme and approach to the campaign, and each of the segments then has a tailored usage of those themes depending on the application. So, we have a full suite of materials and initiatives that apply both at a corporate level and then on a segment-by-segment basis.

And to be clear, this is a migration from brands and segments into one FTI. We think that, as we say, we don't mean to be presumptuous, but this is an opportunity to separate -- because of the platform that we have which is global and which has the diverse offerings. This is a chance to separate ourselves from being a parochial US company to really competing with the bigger brands in the world. And that's -- every intention we have is to do that.

Great. Thanks. And in tech consulting, you allude to some competitive pricing but at different levels of the business. And, you mentioned that the start to '09, you see some large initiatives where you are very competitive. One, how many others can compete with you at the high end? And, two, just if you could elaborate a little bit more on the pricing pressure.

Pricing pressure, again, tends to be smaller deals tends to be more price sensitive. I don't think tech buys are any different than a lot of other things. The more complex it is, the less people are concerned about price. And the more complex it is and the larger dollars involved, there tends to be a lot more enterprise risk. So, you have a risk management issue that's involved as well as a purchasing issue. So, clearly as you move up the chain of complexity of geography of risk, the pricing pressure tends to abate. So, it's clearly at the lower end. It's a lot of smaller companies coming in, trying to by trial or mindshare. A lot of them won't make it. A lot of them need the trial and mindshare in order to get their next rounds of funding. So clearly, we expect that to continue, but it doesn't really appear to be at the upper end. I think that technology, as you are well aware, goes through cycles where there's introduction, there's development, there's new development. And you see pricing pressure be sustained at the low end. We don't think anything is going to be different here. We think the lower end of the continuum will have continued pricing pressure. The upper end will trade at more of a premium. I think the more complex jobs that Jack referred to, clearly, are very demanding. I am not going to be arrogant enough to say we think we are the only one that can do it. But, the fact that we seem to be getting all of them to our knowledge says there's a lot of people out there that think we are the first people to go to on -- .

Dennis, that's the billion dollar question, who can compete with us at those levels? The two largest cases we have in technology last year came from cleaning up messes that they tried to go to the low-cost competitor. So, I think that -- we don't know yet who can compete with us. We are having a good sampling now because there are more entrants than there were last year at this time. And they are all going to be vying for it. But, we think that we can charge a fair price for us because we really are a technology Company. We are not just harnessing a few technological tools. So, we believe that we will be able to continue to compete with an edge for those big cases.

Great. Thanks.

Our next question comes from Bill Sutherland with Boenning and Scattergood.

Hey, good morning. It's mostly been asked, of course, but the economics group had a very nice operating margin for the quarter. Obviously, the bill rates look very strong but utilization was actually not as strong and just curious about the sustainability of that margin?

I think the margin is sustainable. I think Jack mentioned to you before, Bill, that it was like on January 20th, somebody flipped a switch. And, I think a lot of pent-up activity at Justice and the FTC was released. I don't believe it was the Democrats going in and creating it. I think the activity -- so, it's a broad range of very high profile clients. That it's a wide variety of anti-competition-type of investigation, subpoenas, pricing collusion, competition. I think that our feeling is we will add capacity in that group. As you add capacity, certainly you could see, just digesting the capacity -- could impact your margins downward slightly. But, it will be more than offset by the additional capacity going forward. We are looking for the group to have a very good year, not only here, but as Jack said, in Europe.

Oh, I know you are, Dom, I was just curious about that 30% margin. I had not seen that before and just didn't know whether to extrapolate on that or not.

I think we have also a phenomenon that we've never entered a period like this where we had both a strong global affairs business as we have in strategic communications, and the economic fire power we have in Econ combined. And there, you also see the opportunity for some fixed price projects. In this world, where you are changing not only administrations, but you are changing as some people warn, a way of life. You are going to see that really be something that can also help add fire to those margins as well.

I think in fairness we would plan that the division would see historic margins, not the fourth quarter margin over the year. So, we haven't -- we are happy with the fourth quarter. Nothing has happened that would change our mind on the trajectory of the division, but in our planning and our forecasting we used a traditional margin of that business to forecast the year.

And that's very largely dependent on mix, because the higher levels of margins are lower, and they seem to have the highest utilization. And, we also put in a price increase at the end of September that we started to feel the benefit of that in the fourth quarter.

That was another question I had, Dom, so the price increase was economic group-specific, or did it apply to other groups?

No, it was economic group-specific.

The pricing plans this year?

We usually -- it depends on the practices, but we usually have price increases of around 6%, 7%, 8%.

And, we are back to a traditional point where we introduce those in the early part of the year -- January, February. In some cases, where we have longer term arrangements they bleed in over the year. The others we are able to (inaudible) right away.

Okay. Just out of curiosity, the amazing rate of new cases per day right now, Jack. What's a typical world for those?

I would think -- going back a couple of years if you got three or four cases a week or even a couple of weeks that was a good thing. This is just unprecedented. I mean, I don't want to make too much of it. But it's just -- we continually try to get people and they are very interested in what kind of the level of activity is. And, I don't think any of our people who have been doing this a long, long time have seen something like this.

No, I have to agree. Thanks again, Jack.

Our last question comes from Kevin Wong with JMP Securities.

Good morning. A couple things. Looking at headcount for both FLC and Technology. Both, obviously, down sequentially. Should we look at those as low trough levels? And we will be building on those or all the segments from here?

I think tech in the first half, as we've said was the beneficiary of extraordinarily large cases last year. So, to a certain extent, you are seeing a little bit of the normalcy. I think those would be about the trough levels. As Jack said, we expect to see sequential growth going forward. There is nothing that we see in FLC or Tech that would say we shouldn't see sequential growth on a segment basis from them.

We consciously managed down FLCs headcount as we saw the end of the third quarter and the fourth quarter activity slow down. So, we can flex up and flex down the headcount depending upon the volume that we see coming in.

We are actively looking in those areas now because the pattern is becoming clearer as to where we think the insurance area is going to be a vibrant issue coming up. Obviously, from today's news. We look at the investigations area which has to be that way. The forensic accounting -- looking at some of the fraud areas and that kind of thing. So, we are out actively hiring now. So, I think your analysis of that as a trough is probably right.

IP is another big area that we have planned to expand in significantly.

Got you. Also looking at bill rates, I think you mentioned economics just had a price increase. For forensic and litigation, at least in the lawyer role, there seems to be a lot more pricing pressure coming in? Would you expect to be able to hold your rates around these levels? Is there going to be some pressure on these rates? What's your sort of thoughts on that.

It depends on the case. Some of the smaller cases, you get some fee pressures. But, we are not experiencing significant pressure where we think we are going to be reducing our rates. We hold our rates pretty patent, and as the larger cases roll in, there's a lot less fee pressure.

So, it sounds like your size or position is going to help you hold on to that, then?

We didn't forecast for decreasing rates in that area. We haven't seen that kind of pressure at all.

Excellent. On the corporate and the restructuring, this lingering issue, but the DIP finance issue. Has that started to become any kind of issue for you at all as far as being able to get debt financing. If not forcing people to liquidations to restructuring, what's sort of happening there?

There is DIP financing available. Certainly, it's not at the level as has been historically, but if you look at the credit worthiness of the borrowers -- that's really dropped. So, you can't provide funding to anybody that is so far underwater that there's no surety that the DIP funder is going to get repaid in full, which historically has been one of the safest loans you can make. You have got defensive DIPs that are going to continue to happen. Banks are going to have to step up and finance operations either to get a restructuring accomplished or to liquidate in an orderly fashion where they can maximize the recovery on their collateral. DIP financing doesn't really have a significant impact on us. And, we've got big cases that are liquidations. We have got large cases that are restructurings. One way or the other, the companies that have the operational problems -- that's not going to change by whether or not there's DIP financing available. If you look at the automotive industry, we have all heard a lot about it the government is going to have to spend in and backstop some of the DIP lending that is going to be necessary. Not only the Big Three, but all the suppliers to the Big Three.

Somebody has introduced into the mix the concept that if we work on a case, and it ends up going to liquidation that it's less work or less of an impact to us than if it goes into a restructuring. And, I would like to disabuse people of that. What you have is lenders and other equity players who have tremendous stakes in these things that want to get the maximum for those whether it's through a restructuring or whether in the sorry circumstance it has to be a liquidation. That's a lot of work. Sometimes it's harder in a liquidation scenario because you are not just talking -- we are not talking small retail things where what you do is sell off a rack of suits. We are talking about people that have operating subsidiaries. People who have major operations around the world. And that's a tremendous amount of work to do the cash flows from that to figure out how you can maximize values and all that. I would like to disabuse people that that is something that is a major concern for us.

And it could be a higher likelihood of litigation activity in liquidation. So, it would be more opportunities to cross-sell the forensic practice into the corporate finance practices.

Got you. With that, if there was a pick-up in liquidation versus restructuring, would that change -- I'm assuming the length of the contract where it would be shortened versus having multiple years where you are trying to bring someone back around to come off life support?

It depends when they decide to pull the plug and go liquidation. If it's - if it's a pre-packaged liquidation, there will be a lot of work because you still have to get through the Chapter Eleven. But the -- it would be a shorter period of time.

Probably more intense work, though. It's the complexity. The complexity issue really drives it. I think no one would argue that Lehman Brothers is anything but a liquidation, yet that's probably going to take three years start to finish to effectuate. So, I think the more complex and bigger they are, or even if it's a straight liquidation -- it's just very complex. It's a lot of work, and you still have to maximize the value and the assets on behalf of the constituents, as Jack said.

One last one here for you. With economic consulting, you talked about the demand for consulting on strategic M&A. Is that a positive reflection that -- positive signals as far as economy? Are a lot of companies basically lining up, getting ready to purchase companies out there because they are cheap. And, holding up to a certain period, how would you do that?

No, I would say it's more the distressed nature of a lot of the micromarkets has caused some competitors to be extremely weak. The stronger competitors in the markets see it as an opportunity to perhaps consolidate in a regulatory environment that's influenced by economic stresses to where they will let deals go through than normally they might turnaround and take objection to in order to save jobs, save companies, save positioning. So, I think unfortunately a lot of it is driven by companies under stress that need to find a strategic partner to stay alive.

Speaking on behalf of 3,700 employees, I don't think we've seen him positive signs of anything yet. It's pretty ugly out there, and I would say we are in a pretty good position to see.

Got you. That sounds like it's more from the distressed companies seeking work than people that are out there figuring out their targets of who they will pick up?

I think there are clearly companies that are targeting distressed companies. I didn't want to sound like it was one way. But, I think the catalyst to use that word is that you have competitors under stress and a regulatory group that is conflicted both here and in Europe of trying to look at the competitive or anti-competitive nature of deals versus trying to preserve jobs.

To your point, it's not all two distressed companies trying to get together to save the ranch. These are healthy companies looking for opportunities. So to that extent, it is good that they are thinking that way. I agree with you.

Got it. Perfect. Thank you. I appreciate it.

That concludes the question-and-answer session. At this time, I would turn the conference back over to Management for any closing remarks.

Great. Thank you all for joining us, and as you can see, we are optimistic about the prospects for our Company in 2009. Hope we can do some good while we are doing well and look forward to joining with you again when we report our first quarter results. Thank you.

That does conclude today's conference call. We thank you for your participation.