UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8 – K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported)
Huron
Consulting Group Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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000-50976
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01-0666114
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(State
or other jurisdiction
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(Commission
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(IRS
Employer
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of
incorporation)
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File Number)
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Identification
Number)
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550
West Van Buren Street
Chicago,
Illinois
60607
(Address
of principal executive offices)
(Zip
Code)
(312)
583-8700
(Registrant’s
telephone number, including area code)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
1.01.
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Entry
into a Material Definitive
Agreement.
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Amendment to Credit
Agreement
On
September 30, 2009, the Company entered into an eighth amendment to the
credit agreement that was dated June 7, 2006 (the “Eighth Amendment to the
Credit Agreement”) with a syndicate of financial institutions, including Bank of
America, N.A. (“Bank of America”) as Administrative Agent. The credit
agreement consists of a revolving credit facility and a term loan
facility. Fees and interest on borrowings vary based on the Company’s
total debt to earnings before interest, taxes, depreciation and amortization
(“EBITDA”) ratio as set forth in the credit agreement. Interest is
based on a spread over the London Interbank Offered Rate (“LIBOR”) or a spread
over the base rate (which is the greater of the Federal Funds Rate plus 0.50% or
the Prime Rate), as selected by the Company. The Eighth Amendment to
the Credit Agreement amended, among other items, the following
terms:
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1.
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Reduced
the maximum amount of principal that may be borrowed under the revolving
credit facility by $60 million from $240 million to
$180 million, and eliminated the $60 million accordion feature
that was available under the credit agreement. The borrowing
capacity continues to be reduced by any outstanding letters of
credit.
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2.
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Increased
the LIBOR spread, base rate spread and letters of credit fee by 75 basis
points in each case and increased the non-use fee from a range of 30 to 50
basis points to a flat 50 basis
points.
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3.
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Decreased
the maximum leverage ratio from 3.00:1.00 to 2.75:1.00 effective
December 31, 2010 and lowered the minimum fixed charge coverage ratio
from 2.50:1.00 to 2.35:1.00 effective September 30,
2009.
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4.
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Modified
the definition of consolidated EBITDA by, among other items, allowing for
the add back of non-cash goodwill impairment charges and other
acquisition-related intangible asset impairment charges, non-cash
restructuring charges, and non-cash compensation charges for the periods
ending up to and including September 30,
2009.
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As
previously disclosed, as a result of the significant decline in the price of the
Company’s common stock following the announcement by the Company of its
intention to restate certain of its historical financial statements, the Company
is engaging in an impairment analysis with respect to the carrying value of its
goodwill in connection with the preparation of its financial statements for the
quarter ended September 30, 2009.
The
analysis of goodwill is a complex process that requires the use of multiple
valuation methodologies and involves considerable management judgment and
estimates. While the impairment analysis has not yet been finalized,
based on management’s preliminary analysis as of October 6, 2009, the Company
expects that it will record a non-cash goodwill impairment charge for the
quarter ended September 30, 2009, which is expected to materially impact the
Company’s financial condition and its results of operations for the quarter
ended September 30, 2009 and the fiscal year ended December 31,
2009. The expected goodwill impairment charge will impact the
Company’s Accounting and Financial Consulting segment and Corporate Consulting
segment, which had goodwill balances of $73.3 million and
$73.1 million, respectively, as of June 30, 2009. As
described above, under the definition of consolidated EBITDA in the
Eighth
Amendment
to the Credit Agreement, such expected goodwill impairment charge will be an add
back for the period ended September 30, 2009.
As of
September 30, 2009, the principal amount outstanding under the credit
facility totaled $301.5 million, consisting of $109.0 million under
the revolving credit facility and $192.5 million under the term loan
facility, and carried a weighted-average interest rate of 3.9%. Taking into
account the amendment and the letters of credit outstanding, the borrowing
capacity remaining available under the credit agreement was $65.4 million
as of September 30, 2009.
A copy of
the Eighth Amendment to the Credit Agreement is attached to this Current Report
on Form 8-K as Exhibit 10.1 and is incorporated by reference
herein. The foregoing description of the Eighth Amendment to the
Credit Agreement is qualified in its entirety by reference to the full text of
the Eighth Amendment to the Credit Agreement.
Security
Agreement
Also on September 30, 2009, the Company
entered into a security agreement (the “Security Agreement”) with Bank of
America as Administrative Agent. The Security Agreement is required
by the terms of the Eighth Amendment to the Credit Agreement in order to secure
the obligations thereunder, and grants Bank of America, for the ratable benefit
of the lenders under the Eighth Amendment to the Credit Agreement, a
first-priority lien, subject to permitted liens, on substantially all of the
personal property assets of the Company and the subsidiary
grantors. A copy of the Security Agreement is attached to this
Current Report on Form 8-K as Exhibit 10.2 and is incorporated by reference
herein. The foregoing description of the Security Agreement is
qualified in its entirety by reference to the full text of the Security
Agreement.
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Item
2.03.
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Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant.
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The
information from Item 1.01 above is incorporated herein by reference in its
entirety.
As
previously disclosed, the Securities and Exchange Commission (“SEC”) has
commenced an investigation with respect to the circumstances that led to the
restatement and is conducting an inquiry with respect to the allocation of time
in certain practice groups. The Company is cooperating fully with the
SEC. As often happens in these circumstances, the United States
Attorney’s Office (“USAO”) for the Northern District of Illinois has contacted
the Company’s counsel. The USAO made a telephonic request for copies of certain
documents that the Company previously provided to the SEC, which the Company has
voluntarily provided to the USAO.
In
addition to the previously disclosed purported class action complaints filed in
connection with the Company’s restatement, the following purported class action
complaint has been filed in connection with the Company’s restatement in the
United States District Court for the Northern District of Illinois: a complaint
in the matter of Thomas Fisher v. Huron Consulting Group Inc., Gary E. Holdren,
Gary L. Burge, Wayne Lipski and PricewaterhouseCoopers LLP, filed on
September 2, 2009. Like the other purported class action
complaints filed in connection with the Company’s restatement, the complaint
asserts claims under Section 10(b) and Section 20(a) of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, contends that the
Company and the individual defendants issued false and misleading statements
regarding the Company’s financial results and compliance with generally accepted
accounting principles and seeks unspecified damages and reimbursement for
fees and expenses incurred in
connection
with the action, including attorneys’ fees. The Company intends to defend the
action vigorously.
The
Company has also been named as a nominal defendant in two derivative suits filed
in connection with the Company’s restatement, since consolidated in the Circuit
Court of Cook County, Illinois, Chancery Division on September 21,
2009: (1) a complaint in the matter of Curtis Peters, derivatively on
behalf of Huron Consulting Group Inc. v. Gary E. Holdren, Gary L. Burge, Wayne
Lipski, each of the members of the Board of Directors and PricewaterhouseCoopers
LLP, filed on August 28, 2009 (the “Peters suit”) and (2) a complaint in the
matter of Brian Hacias, derivatively on behalf of Huron Consulting Group Inc. v.
Gary E. Holdren, Gary L. Burge and Wayne Lipski, filed on August 28, 2009 (the
“Hacias suit”). A consolidated complaint is
forthcoming. The Peters suit was filed in the Circuit Court of Cook
County, Illinois, Law Division, and alleges claims for breach of fiduciary duty,
unjust enrichment, abuse of control, gross mismanagement and waste of corporate
assets. The Peters suit also alleges claims
for professional negligence against PricewaterhouseCoopers LLP, the Company’s
independent auditors. The Hacias suit was filed in the Circuit Court
of Cook County, Illinois, Chancery Division, and alleges claims for breach of
fiduciary duty, gross negligence, abuse of control, gross mismanagement, breach
of contract, waste of corporate assets, contribution and indemnification and
insider trading. Both plaintiffs seek unspecified damages
allegedly sustained by the Company resulting from the restatement and related
matters, disgorgement and reimbursement for fees and expenses incurred in
connection with the suits, including attorneys’ fees.
Given the
uncertain nature of the SEC investigation with respect to the circumstances that
led to the restatement, the SEC inquiry into the allocation of time in certain
practice groups, the USAO’s request for certain documents and the private
shareholder class action and derivative lawsuits in respect of the restatement
(collectively, the “restatement matters”), and the uncertainties related to the
incurrence and amount of loss, including with respect to the imposition of
fines, penalties, damages, administrative remedies and liabilities for
additional amounts, with respect to the restatement matters, the Company is
unable to predict the ultimate outcome of the restatement matters, determine
whether a liability has been incurred or make a reasonable estimate of the
liability that could result from an unfavorable outcome in the restatement
matters. Any such liability could be material.
Statements
in this filing, including any information incorporated by reference herein, that
are not historical in nature, including those concerning the Company’s current
expectations about its future results, are “forward-looking” statements as
defined in Section 21E of the Securities Exchange Act of 1934 and the
Private Securities Litigation Reform Act of 1995. Forward-looking statements are
identified by words such as “may,” “should,” “expects,” “plans,” “anticipates,”
“assumes,” “can,” “considers,” “could,” “intends,” “might,” “predicts,” “seeks,”
“would,” “believes,” “estimates” or “continues”. Risks, uncertainties and
assumptions that could impact the Company’s forward-looking statements relate,
among other things, to (i) the restatement, (ii) the SEC investigation
and related Company inquiries with respect to the circumstances that led to the
restatement and the related private litigation, (iii) the SEC and related
Company inquiries into the allocation of time in certain practice groups, (iv)
the USAO’s request for certain documents, (v) the Company’s projected
accounting treatment for acquisition-related payments after August 1, 2009,
(vi) management’s assessment of the Company’s internal control over
financial reporting and any required remediation and (vii) the Company’s
impairment analysis with respect to the carrying value of its goodwill. In
addition, these forward-looking statements reflect the
Company’s
current expectation about its future results, levels of activity, performance,
or achievements, including, without limitation, that the Company’s business
continues to grow at the current expectations with respect to, among other
factors, utilization rates, billing rates, and number of revenue-generating
professionals; that the Company is able to expand its service offerings; that
the Company successfully integrates the businesses it acquires; and that
existing market conditions, including those in the credit markets, do not
continue to deteriorate substantially. These statements involve known and
unknown risks, uncertainties and other factors that may cause actual results,
levels of activity, performance or achievements to be materially different from
any anticipated results, levels of activity, performance or achievements
expressed or implied by these forward-looking statements. Please see “Risk
Factors” in the Company’s 2008 Annual Report on Form 10K/A and in the Company’s
Quarterly Report on Form 10-Q for the period ended June 30, 2009 for a
description of the material risks the Company faces.
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Item
9.01.
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Financial
Statements and Exhibits.
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10.1
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Eighth
Amendment to Credit Agreement, dated as of September 30, 2009, by and
among Huron Consulting Group Inc., the guarantors and lenders listed on
the signature pages thereto, and Bank of America, N.A.
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10.2
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Security
Agreement, dated as of September 30, 2009, by and among the grantors
listed on the signature pages thereto, and Bank of America,
N.A.
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Huron
Consulting Group Inc.
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(Registrant)
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Date:
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October
6, 2009
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/s/
James K. Rojas
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Name:
James K. Rojas
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Title:
Chief Financial Officer
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