Huron Consulting Group Inc.

And now I would like to turn the call over to Jim Roth, Chief Executive Officer and President of Huron Consulting Group. Mr.

Roth, please go ahead.

Thank you. Good afternoon, and welcome to Huron Consulting Group’s third quarter 2012 earnings call.

With me today are Mark Hussey, our Executive Vice President and Chief Financial Officer and Patty Olsen, our Vice President of Human Resources.

We know that the last few days have been quite disruptive for some of our shareholders in the New York and Mid-Atlantic regions. All of us at Huron are hopeful that life begins to return to normal for those affected and that the families and loved ones in the region are safe as the storm moves on.

Our third quarter results reflected revenues that were the second highest in the company’s history. During the first 2 quarters of this year we expected that revenues would be stronger in the second half of the year with the third quarter being better than the second and the fourth quarter being better than the third.

The third quarter results announced today are consistent with our expectations and reflective of a favorable growth environment across all of our segments. I will now provide additional segment by segment insight into our quarterly results.

I will start with health and education consulting segment. The health care practice which represents approximately 2/3rds of the segment had a strong quarter.

As anticipated, our performance based revenues were much higher in the third quarter coming in at just under $27 million as compared to nearly $14 million in the second quarter.

We indicated in prior quarters that high levels of utilization and a low net fee per hour were consistent with an environment where we were building towards the realization of contingent revenue in subsequent quarters. This proved to be true in the third quarter and we expect a similar level of contingent revenue in the fourth quarter although as we have indicated in the past some portion of those contingent revenues may be recognized in the first quarter of 2013.

Contingent revenue in the health care practice continues to dominant the questions among investors and analysts. So I would like to take a few minutes to provide some added perspective on the timing and degree of certainty surrounding contingent revenue.

There are 2 key points that I would like to make about how we view contingent revenue. The first point is that the realization of revenues from contingent contracts is far more certain than is typically understood.

For the vast majority of engagements with performance based fees, we complete an opportunity assessment over a 2 to 3 month timeframe prior to initiating a project. The assessment provides a basis for establishing the performance criteria that will form the contractual agreement.

Once the work begins we track our progress against performance milestones in order to measure how well we’re delivering on the clients expectations.

We also internally track our actual performance against our anticipated performance. Our historical performance in achieving the mid-point of the anticipated client savings and contingent fees is very high.

A review of our projects over the past 3 years showed that we have exceeded on average the anticipated mid-point of client savings expectations across all performance based engagements. Put another way, our performance based engagements on average result in savings or revenue increases for our clients greater than the mid-point of client and Huron expectations.

These results reflect a value we provide to our clients and also result in Huron receiving greater than anticipated contingent revenue. The second point I want to make around contingent revenue has to do with timing.

Our contingent agreements arrangements while providing a great deal of certainty as to recoverability are less predictable as to when they will be realized.

When we sign a contingent agreement, our history suggests there is little uncertainty over the amount to be realized. Instead the primary uncertainty relates to which quarter the contingent revenue will be recognized.

Our clients decide whether they would like the contingent fee or fixed fee agreement. We recognize that the investment community prefers consistency in earnings.

We do as well, however if requested by our clients we will readily accept a contingent arrangement with a strong likelihood of increased profitability at the risk of some loss of precision as to when that profitability will be recognized. Our typical health care engagements last 12 to 18 months and in some instances up to 24 months.

Contingent revenue can begin to be recognized as early as the second quarter of an engagement, rarely will the recognition of contingent revenue be deferred more than 2 quarters beyond our anticipated timeframe.

If a project takes longer than anticipated it is often the result of one or 2 sets of circumstances, either the effort required to meet our performance metric is more complex than we anticipated or we see additional upside and it makes sense for us to purpose the additional contingent revenue.

In either case, deferred recognition of contingent revenue rarely results in reduced margins and often results in greater than anticipated margin. I don’t expect this to answer all questions regarding contingent revenue but I hope it provides some clarity supporting our decisions and results around contingent arrangements.

Getting back to the third quarter results, our utilization rates in the health care practice dipped slightly in the third quarter due to a practice wide meeting held in early September. While taking nearly 1,000 of our personnel out of the market clearly has an impact on our financial results, the long term benefit of bringing this group together on an annual basis far outweighs the cost.

Our higher education and life sciences practice which represents 1/3 of the segment had another very strong quarter.

For the second quarter in a row this practice produced record revenues, like the health care industry the higher education and life sciences markets are going through unprecedented change. In particular, higher education and spacing a confluence of rapidly emerging technological disruption and public pressure to reduce cost and improve efficiency.

While our hospital clients are being forced to improve quality while reducing costs our education clients are facing nearly identical pressure.

However, educational institutions often find it more difficult to create institution wide change. Our core services are primed for this kind of environment and I expect the favorable conditions in this practice to continue for the foreseeable future.

Academic medical centers are ground zero for the collective set of services we offer within our health and education segment. These institutions are being buffeted by the collective forces that are impacting hospitals and economic medical centers.

Our revenues is generated by clients with economic medical centers are at an all-time high and we expect this trend to continue as we go to market with our clinical, academic and operational improvement services for this complex and challenging segment of the industry.

Let me now turn to our legal consulting segment. Revenues for the segment increased year-over-year and were flat as compared to the second quarter.

We continued to make significant strides in expanding our client base, one of our primary objectives as we diversify our services to an increasing array of companies, industries and law firms. Segment margins were negatively impacted in third quarter for 2 reasons.

First we had a slight decrease in demand during the quarter among several of our clients without immediate replacement revenue. Second, following the AdamsGrayson acquisition, we took a restructuring charge due to overlapping Washington DC facilities.

As a reminder in the legal consulting segment document review space is charged directly to the practice. We don’t expect similar occurrences in the fourth quarter.

Finally as you’re aware this morning we announced our integrated analytics offering and legal consulting. Integrated analytics is expected to fundamentally change the way market approach is e-discovery providing significantly improved accuracy at a lower and more predictable cost with lower and more predictable cost to the client.

While the public announcement of this service just occurred, we are very encouraged by the response of our existing clients, some of whom have successfully tested the integrated analytic services over the past several months. They and we view integrated analytics as a significant improvement in terms of cost and accuracy and we’re comfortable that this new service offering will yield solid performance for this practice beginning later in 2013.

Turning now to the financial consulting segment, the third quarter saw an improvement in revenues and margins over recent quarters. While this practice is still operating below our expectations we believe that the trend for this practice is positive and that we will return to more acceptable metrics in the coming quarters.

Mark will talk about the third quarter goodwill impairment charge and financial consulting when he goes through the financials. Finally we’re reducing and narrowing our annual revenue guidance to $615 million to $625 million.

This reduction is a result of the issues we have discussed on the call today including an anticipated deferral of some contingent revenue from health care practice into the first quarter and the timing of certain engagements within legal consulting during the third quarter.

We remain confident that the revenue for the fourth quarter will be better than the recently completed third quarter irrespective of whether there is some contingent revenue slippage into the first quarter of 2013. To the extent that some revenue slips into Q1 we’re also confident that the deferred revenue will be incremental to a healthy organic growth rate anticipated for 2013.

We will be entering 2013 with larger backlog in the health and education consulting segment than we have ever had before.

Stemming from strong demand across our performance, clinical, higher education and life sciences businesses. Now let me turn it over to Mark for a more detailed discussion of our third quarter results.

Thank you, Jim, and good afternoon, everyone. Let me begin by discussing a few housekeeping items.

Consistent with previous quarters, I’ll be discussing our financial results primarily in a context of continuing operations. I will also be discussing non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income and adjusted EPS.

Our press release, website and 1O-Q each have reconciliations of these non-GAAP measures to the most comparable GAAP measures as well as a discussion of why management uses these non-GAAP measures. Before I walk you through some key financial results for the quarter I want to highlight a couple of items.

As discussed in the earnings release we recorded a non-cash pretax, goodwill impairment charge of $13.1 million or $0.35 per diluted share related to the financial consulting segment.

In the third quarter of last year we recorded a non-cash pretax charge of $22 million or $0.60 per diluted share also related to the financial consulting segment. This charge impacted a variety of reported numbers but it does not affect our liquidity or debt covenants under our credit agreement.

As additional background on the 2012 impairment charge, our financial consulting reporting unit reported substantially improved Q3 results compared to Q2 but did not make sufficient progress on longer term initiatives intended to broaden the reporting unit’s service offerings and return the unit's financial performance to historical levels. Therefore in connection with the preparation of our Q3 financial statements we performed a goodwill impairment test resulting in the aforementioned charge.

Also during the third quarter and as previously announced we successfully refinanced our current debt, the amendment and extension of our credit facility increased our borrowing capacity by $120 million. This refinancing provides us with liquidity needed to effectively manage our short term cash requirements as well as the flexibility and capacity to meet our strategic long term goals as we look to grow our businesses.

It also allowed us to take advantage of a strong pro rata senior bank market and obtain more favorable pricing.

So with that as background I will now provide some key financial results for the quarter unless otherwise noted the figures I will discuss reflect the goodwill impairment charges in both Q3 periods. Revenues for the third quarter of 2012 over a $161.9 million or 5.4% increase above the $153.6 million reported in the same quarter of last year and an 11.9% sequential increase from revenues of $144.7 million in Q2 of 2012.

EBITDA for the third quarter of 2012 was $26.2 million compared to $10 million a year ago. Adjusted EBITDA increased 25.1% to $41.6 million in Q3, 2012 or 25.7% of revenues compared to $33.2 million in Q3 of 2011 or 21.6% of revenues.

Adjusted EBITDA excludes a number of items which are listed in our press release including the goodwill impairment charge in both quarters.

Operating income was $20.6 million or 12.7% of revenues in Q3, 2012 compared to $3.7 million or 2.4% of revenues in Q3, 2011. Net income from continuing operations was $10.4 million or $0.47 per diluted share in the third quarter of 2012 compared to $1.1 million or $0.05 per diluted share in the same period of 2011.

On an adjusted basis which excludes the goodwill impairment charges, non-GAAP net income from continuing operations increased almost 29% to $20.8 million or $0.93 per diluted share in the third quarter of 2012 compared to $16.2 million or $0.74 per diluted share in the same period of 2011.

For the third quarter of 2012 we recognized income tax expense for continuing operations of $8 million on income from continuing operations of $18.4 million. Our effective income tax rate for the third quarter of 2012 was 43.4%; the effective rate for the third quarter was slightly higher than the statutory rate due primarily to the impact of foreign losses with no tax benefit.

Now let’s look at how each of our business segments did in the quarter, the health and education consulting segment represented 67% of our revenues. The segment posted quarterly revenues of $109.0 million for the third quarter of this year, 7.4% higher than the $101.5 million reported for the third quarter of 2011.

The strong performance this quarter reflected an increase in overall demand for this segment services and a higher number of full time billable consultants which averaged 11 61 during the third quarter of 2012 almost 17% higher than in the same period last year.

This growth was partially offset by declines in average billing rate and consultant utilization versus last year’s quarter. Utilization was lower due to the health care all practice meeting that Jim referenced in his remarks which had in approximate 2% impact on utilization for this segment.

As anticipated and discussed last quarter performance based fees rose significantly on a sequential basis totaling $26.9 million for Q3, 2012 and also contributed to this quarter’s strong performance. Performance based fees were $28.9 million in Q3 of 2011.

The operating income margin for the health and education consulting segment came in at 42% for Q3, 2012 compared to 34.7% for the comparable quarter in 2011.

The increase in this segment’s operating margin was primarily attributable to a lower incentive based compensation accrual partially offset by expenses associated with the health care meeting that I mentioned earlier.

As Jim pointed out we’re very positive about the segments outlook based on the size and strength of the hard and the soft backlog. Our legal consulting segment generated nearly 29% of total company revenues during the third quarter of 2012.

This segment posted revenues of $46.2 million in the quarter up 6.1% from $43.5 million in the comparable quarter in 2011. This growth was primarily driven by continued momentum in our advisory business partially offset by a slight decrease in demand or a document review and electronic data discovery businesses which were affected by a temporary ramp down in one of our larger client’s projects.

Also the AdamsGrayson business acquired in July was a bit slower out of the blocks than anticipated but we are pleased with this recent progress. Segment operating income margin decreased to 24.9% for the third quarter of 2012 from 29.4% in the same period last year.

The decrease in this segment’s operating margin was partially attributable to a $900,000 restructuring charge for duplicate facilities associated with the AdamsGrayson acquisition. In addition margins were affected by higher technology expenses and increases in salaries, bonuses and related expenses for both our revenue generating professionals and our support personnel.

As Jim pointed out, our recent acquisitions in this segment and our new integrated analytics offering make us positive about the legal consulting segments prospects and performance. During the third quarter of 2012 our financial consulting segment generated about 4% of total company revenues.

The segment posted revenues of $6.7 million in Q3, 2012 compared to $8.6 million in the same quarter of last year.

Sequentially financial consulting revenue improved 56% compared with $4.3 million reported in Q2 of 2012.

The overall decrease in revenues reflects a lower number of fulltime billable consultants and lower consultant utilization partially offset by an increase in average billing rates during the quarter. Segment operating income margin decreased to 26.4% for the third quarter of 2012 from 32.9% in the same period last year primarily due to increased salaries and related expense for our revenue generating professionals as a percentage of revenues.

As we have previously discussed, the financial consulting segment has several initiatives underway to improve the segments financial performance and broaden its service offerings.

Although the progress of these initiatives has been slower than we expected, they are productive and gaining momentum. We believe these professionals and service offerings remain relevant in the marketplace and we expect performance to continue to improve during the balance of this year and into 2013.

Briefly now let me make a couple of highlights from the balance sheet and cash flow statement. DSO for the third quarter came in at 73 days partially reflecting timing of contingent fee billing and collections.

Cash flows from operations for the first 9 months were $40 million. For the full year we expect cash flows from operations to be about $75 million.

Our full year guidance revenue range as Jim mentioned in his opening remarks has been updated based on our current best estimates.

For full year 2012 we anticipate revenues before reimbursable expenses in a range of $615 million to $625 million. We anticipate EBITDA in a range from $92.5 million to $95.5 million and adjusted EBITDA in a range of $112.5 million to $115.5 million.

We expect 2012 GAAP diluted earnings per share in a range of $1.55 to $1.65 and non-GAAP adjusted diluted earnings per share in a range of $2.25 to $2.35.

Weighted average diluted shares for 2012 are estimated to be approximately 22.4 million and finally our guidance on the full year effective tax rate continues to be approximately 45%. I would now like to open up the call for questions.

I wanted to ask your favorite topic contingent fees to start off. Probably you made a comment during the call here that you thought Q4 would be a similar level of contingent fees.

Can you just clarify that and then the updated guidance, I guess what kind of relative to what you’re assuming earlier in the year. I know there is range of outcomes here but what are you’re expecting in terms of contingent fees getting pushed out in 2013 at this point.

Tim, it's Jim, it's part of our challenge right now is as we sit here at the end of October and we don’t have real clarity, we’re reasonably confident that the contingent revenue for Q4 is going to be roughly where it is for Q3. It could be bigger, it could be larger, it could be smaller.

Our sense is it is going to be about where it is but there have been and they continue to be some potential big swings that could accelerate or push out and I tell you we are just reluctant to get in a game. Our current sense right now is that it's going to be roughly in the same range as it was in Q3.

Okay, so what would have that have been relative to what you’re assuming before? If it's similar to Q3 its lot lower than I would have thought for the year and so just kind of, can you update I know as you said you don’t know but there is obviously an assumption embedded in the guidance here.

Tim, this is Mark. I think the assumption is that contingent fees as a percentage of overall revenues is going to be at a certain range, I think that’s how analysts often think of it and I made the comment in earlier remarks as well that we think about total revenue and while there is some movement in contingent fees it is in fact what’s embedded in the guidance and really is a portion of what is reflected in our updated guidance range.

As we look out to tie that up, the overall demand environment here -- is there anything in terms of the projects that you’re working on that made you come to that conclusion, that those fees will get pushed I mean I guess that you can bring to a high level. I know obviously individual issues with different projects drove that but is there anything happening that’s causing you to kind of expect a slower ramp in projects or some sort of high level trend that we can take away from it.

So again we keep going back to the details which I think is important on what drives some of this uncertainty. So we have as you can expect some fairly large projects, some of them including some academic medical centers and what we have found is that the projects in the AMCs and even some of our larger jobs in smaller hospitals, less complex hospitals perhaps that the series of events that has to take place for us to achieve our expectations for the metrics that we sign-up to, sometimes get to be a little bit more elongated for a variety of reasons either because the organization is big and requires more people to sign-off.

In some cases there is just more complexity in the overall operating environment and I think to some extent we have had, we tend to have some bigger projects and the complexity of those bigger projects I think we’re learning teaches us that these things may not go on a timeframe that we originally anticipate and so as we tried to be clear in the comments we really don’t have a problem with getting the revenue that we are looking for or achieving the client results that the clients are looking for, that in fact has been incredibly steady. What the challenge is when is it going to come in and we recognize that that’s a very big issue and so we are doing the best we can to manage it but there is really only so much we can do to begin to manage that process.

So what we try to do is we just try to stay focused in the market to bring in as much work as we can and to some extent we just cannot always control the organizational or operational issues that may cause revenue to be deferred and so when we had a slightly smaller practice that was a little bit easier perhaps to do but some of the engagements we have right now are taking place in very complex environments and if you go to an academic medical center for example you find that there are, it's just that you have got multiple missions taking place under one umbrella -- under one organizational umbrella and it's just a very different environment in terms of getting everyone else there to agree and sign-off on what’s being accomplished and only when that happens that’s really the only time that we get a chance to go ahead and submit and receive contingent revenue. So it's a long way of saying what we tried to mention in the call and that is it really has not at all been an issue with us in terms of hitting the clients targets and therefore getting the fees that we are looking at, it's a question of when and the larger our clients, the more complex they are, to some degree the more uncertainty there is going to be over timing.

Okay and last question would just be and the mid-point of the queue or the kind of full year guidance implies at the mid-point it's called $13 million of kind of sequentially higher revenue in Q4, if it's not contingent fees, what are you expecting in the underlying business that’s going to be much better in the Q4 than Q3.

Our expectations Tim is that there are run-rate opportunities in the health care practice as an example that may not be contingent in nature and that we are looking to ramp up in various engagements and then looking for a slightly better quarter as we have got a slower start on AdamsGrayson coming into Q4, feeling like the LC practice will have a little bit better results as well. So that’s really underlying, those 2 practices in particular as we look into the mid-point implications if you will of the guidance.

One other thing I will point out, it's Jim, that also has an impact on timing is that as I said if you went back and looked at our engagements I would say on average they are probably be an increase in size over the last several years and not surprisingly when a client comes to us and is looking for assistance whether it be in the clinical transformation area or whether it be in revenue cycle or performance improvement. I mean the end result some of the work that they are asking us to do tends to be fairly invasive and I think what it takes for the clients forget about us for a second, what it takes for the clients to get to the point where they can organizationally get their people around what’s going to be done within the organization, who is going to participate, what kind of expectations they have, it takes some time and I think we’re trying to allow for a little bit of that as well.

In old days there were engagements 2 years ago where we would get a call on a Friday and start work on a Monday and while that still happens occasionally those would happen very often and in fact the larger engagement and in fact the more invasive it needs to be and again it's invasive because there because we have said on prior calls their business model is changing very rapidly because of that invasiveness. It really take some time for them to get their institution to a point in a time where they are ready to take on the work that we are going to be doing.

I’m still trying to get clear on everything that’s moving on in SG&A. If you had something of a bonus accrual kind of bleed down, I didn’t think that SG&A was really significantly different than my expectations especially given the -- where revenues came in, just trying to get a better idea what’s going on there?

The SG&A is going to be the indirect expenses and so most of the bonus expense is going to be in the direct portion and so you’re not going to see the SG&A.

In the legal consulting environment, can you characterize with more detail what business didn’t come in as expected. I mean in terms of type of client or type of activity?

It was not limited to one client at all, we had one large engagement that had a slight ramp down for a period of time and then has picked up again. I mean part of what’s going to happen but it was just really a series of during the quarter we had a series of clients that just had some temporary lows that we didn’t have immediate replacements for, I think it was simple as that.

You said temporary lows entered the fourth quarter at a higher level of activity?

Yes, so if you look at like our work station utilization, we had a little dip in the middle of that quarter and that basically has been recovered and it came as Jim said from a number of different clients.

I will also add that on many of our clients, we actually have more than one project going on and so you may have a dip or actually a drop or a complete stoppage of one particular project but it doesn’t mean that work for that client is dropping off. So that’s just another fact, when we saw a variety of those things, it was really nothing of any substance for many of them; it was just a series of things that occurred during the quarter that we didn’t have immediate replacements for.

I was hoping you could provide some detail about what the new integrated analytics offering achieves for the company in the legal consulting area. Many years ago you developed kind of a cost certain approach that was innovative for the industry and I’m wondering what this new offering achieves in that regard?

It is first of all I think the way we have characterized this, it's actually quite a very different approach to what we’re, the way we look at this -- goes kind of far beyond just the normal predictive coding which I think a lot of organizations are using today but it really allows us to have a much more statistically based approach to eliminating -- efficiently eliminating the number of documents that could potentially be relevant and I think as we all know the real key is to take a large amount of documents and get it down as narrow as possible in a manner that’s going to be acceptable to the courts and acceptable within a legal process and our current the integrated analytics enables us to have actually far greater accuracy which results in far more efficiency in terms of eliminating the set of documents that are going to eliminating the number of documents that will not be relevant therefore we end up focusing on a much smaller amount. And on top of it this is very important, we do that in a way that really caps the cost for the client that makes up with the cost portion of it far more predictable.

So the net result of the client is that they get greater efficiency, in some cases very substantially greater efficiency at a cost that is going to be much more predictable and very likely is going to be significantly lower than they historically would have paid.

Where is the limiting factor on driving statistics into the process, is it the court's acceptance and kind of where judges sit in their level of comfort with statistics and technology, supplanting human intervention.

Well, defensibility is no question, defensibility is an important part of that there is no question about that. But I think there is other aspects as well I think if there was -- the way you go through these documents and the way that our approach now, the integrated analytics approaches these things, it really looks at collective set of documents in a very different way than it's ever happened before and I think the combination is and the statistical analytics that go into that whole process really make this very unique.

It all has to go through the defensibility structure which we know is going to be important. That’s why we work so closely with legal counsel, outside legal counsel that actually has a lot of experience in defensibility matters.

We work with academics and statisticians and we have really begun to isolate all of this into a center where we are going to focus exclusively on this and I think, I have seen it work, I have seen it applied to historical cases that we have worked on where we had, we looked at -- we took a historical cases that went through the much more traditional route and then we apply them the exact set of data to this integrated analytics and it came up with very incredible results not just in terms of efficiency but also in terms of cost and I think again this is, it would be [indiscernible] this is going to be a great product. We have worked with clients in pilot mode to evaluate this, we have been bringing this to market and I think it's going to be incredibly effective.

I think you gave a comment about the tax rate for the full year, could you nail that down and imply what that would be mean for the fourth quarter?

Well, Tobey year-to-date I think we are right now sitting -- I think around, I don’t have the numbers, it's on the top of my head but I think it's 48. So we should see some improvement partially because some of the earlier impacts of the foreign losses are taken discreetly in earlier quarters and so that shouldn't blend down the fourth quarter in terms of the tax rate for the year.

What was the figure for the full year?

45%.

Okay, so 48% year-to-date going to 45%. Okay and just 2 other things I wanted to get your comment on, what if any inclusion or impact of the weather perhaps impinging and curbing utilization here in the fourth quarter with the storm.

Do you have in your guidance and then do you anticipate the upcoming political election influencing demand in your key higher ed and health segments.

Yes, I think in terms of the -- I will take the second part of it first, in terms of the elections we don’t see anything happening in the short or even intermediate term that would impact them. We continue to see a very strong activity in our markets so I will come back to that in a second.

With respect to the storm, I think it's too early to tell. I mean we closed down some of our offices on Monday and Tuesday, we are going to be opening up everywhere except one of our offices tomorrow so we will back in to some extent.

We have been able to get work down remotely on a number of cases, I suspect there is going to be some deferral but I’m hoping it's just going to be deferral for one month and the next. At this stage we have no reason to believe this is going to be anything substantial.

I don’t think it will be 0 but I don’t think it will be anything that will impact at this stage that would impact our guidance.

My first question here I think you talked about the impact to utilization being around 2% of taking people or having a get together in health care practice. Was that built into annual guidance or is that something that you weren’t necessarily expecting to do and maybe you could just a talk a little bit about what the quarterly impact is on that.

In terms of revenues it's been built into what we really -- what we are expecting to see, I think if you look over time when you see the numbers pop in, we know we are going to have people out of the marketplace. It certainly does not come as any surprise.

And then if you looked at the contingent fees I know you talked about there being potential slippage into the first quarter, can you give us some idea of and maybe you can wrap a number around it but do you have any early ideas on what the first quarter contingent fees would like on a relative basis, in other words is there going to be a slip down in 1Q versus 4Q, are we talking about a little bit of a slippage that maybe necessarily wouldn’t skew that number. I just think it will be helpful to get a little bit more color around what how we should think about the sequential change.

We have not prepared our 2013 operating plans but all of that said, I think it's reasonable to think that Q1 contingent fees are going to be a very strong number without putting any dollars or cents around that, at this point we will update guidance when we release in February but it would not be surprising to see a good solid quarter out of the gate on contingent.

And I would only add to that solid number will be reflective of what would be the normal kind of contingent revenue run-rate that you would expect to see plus whatever stoppage rolls over into Q1 and again it's too early to tell. I think we may still be sitting here at the end of December, still not certain exactly what’s going hit and what’s not going to hit, this is just the way these contingent revenues have done but I think at this point it is fair to say what will be a fairly strong number.

Okay, can you remind me what you think the normal run-rate contingent fees side is, I mean it's obviously spiked in, moved around and backend loaded and we saw very strong numbers last year, maybe you can just give us some color on what you think the normal run-rate is?

I think the way that we look at them over time when we’re talking trends, you can’t really talk on any individual quarter because we do as everyone knows on the call bounces around quite a bit. The way we think about them as we look in a 12 to 18 month trailing period and look at those as a percentage of revenues.

In general while we have some volatility in any given quarter they have tended to be inching up a little bit over time and we can certainly go back and give you the numbers in terms of what they have been over the last 12 or 18 months so you can, because those numbers have certainly been disclosed.

Just 2 more quick ones for me, on 2013 I know it's too early to give guidance but I think you have talked about and correct me if I’m wrong a 10% growth rate in the health care practice. I believe that includes contingency fees.

Is that still the target growth rate and is there any reason to think of that any differently as we look out next year and beyond that?

At this stage we are still trying to be relatively conservative. I think we feel at this stage reasonably comfortable with mid to upper, single digit growth rates across the company for 2013.

We as I indicated at the end of my initial comments in just the health and education consulting segment, we’re entering 2013 with very strong backlog, stronger than we have had before and again what that tells me is that we have slightly better visibility into the year than we have had before. It's across all aspects of our health and education practices and that gives us some comfort that we are going to have a decent year but it's again, there are so many factors that can still impact it.

We will be working on our budgets and plans over the next month actually, and we will be in a much better position to talk about this when we release fourth quarter but suffice it to say I think we entered this year thinking that the markets were very strong, I think the reality is we -- the markets have been strong, the work that we wanted to get we have been getting. Some of it as we have indicated has taken us a little longer to get than we thought was going to be the case and so that was certainly the part of the issue in health care, financial consulting certainly saw was much lower than we entered the year thinking it was going to be and I think those were 2 of the biggest deltas that we have between our original guidance and where we’re at right now.

But as we look at where we’re in the market and I’ll include financial consulting in this. I think things are on an upward trend and that we actually feel very good about kind of where we’re positioned right now, the kinds of work we’re being asked to do but the number of clients that are asking us to do work and we feel pretty good about it and we just along if I’m sure a lot of you are hoping that we can work with some of the timing issues here and try to find them to be in a little bit more predictable pattern but as we indicated when we can’t be predicable we are often still getting to the point where we are recovering the cost, we’re recovering the revenue rather it's just a question of when and that may be part of what we need to live with for right now.

But we are comfortable where we’re at the market, very comfortable with our competitor position and very comfortable with what we believe is going to be the needs in our core market places.

Great, and then I think you lead just into my last question and on the backlog side, maybe you can just give us some color as to how you measure backlog, what you’re looking at and how it numerically changed versus last year at this time. I think that might shed some light on sort of your kind of bullish position headed into 2013, if you can give any color on that.

I won't give numbers but I’ll tell you how we calculate it and it's essentially our backlog, what we view backlog right now is a combination of what we call hard backlog which is signed agreements and soft backlog and soft backlog for us basically means things that are close to being signed but are not quite signed but we have a very good sense if they are going to start. We don’t always know when but we have a very good sense if they are going to start and so that combination of hard and very strong soft backlog gives us what the way we kind of collectively look at backlog going into the year and the numbers that we are showing for health care and higher education in -- as we enter the end of 2012 those numbers are stronger than they were at the same point in 2011 and that’s what probably gives us our confidence.

I would appreciate if you gave some color on the turn of events with financial consulting and how you’re kind of assessing the visibility or whether there is a revenue figure or trend line yet?

We feel pretty good. I mean we came obviously off a very, very weak quarter in Q2 and we had a nice improvement back, we definitely think that as we look at our -- again we look at our hard and soft backlog there and even coming into the fourth quarter we have a very large percentage of our fourth quarter under hard backlog and feeling like we have got some nice longer term engagements that have not been present in some of the earlier quarters.

So the team has done a very, very good job of transitioning to address a tougher marketplace and there is some additional initiatives that we have been working on to expand some of the offerings which have started to be productive as well. So, we think that the practice right now on a run-rate basis gets back on track nicely versus where it was this year and now without a whole lot else needing to happen.

The positive thing was we have had good relevant market facing people for the whole area, we have continued to save all year but that’s been the case and they have really adjusted and done a great job of getting the practice results more in line with where they need to be.

And so, Mark, what would be the one or 2 most important focuses, even the practices if you would that are kind of creating this momentum?

We have been doing a lot more Bill on the operational improvement side where we have perhaps not a specific bankruptcy or turnaround situation but places where our expertise from just understanding the marketplace and performance improvement across the company have helped us position additional work in various clients and perhaps a little bit different in terms of some of the channels that we have been getting our work from, not necessarily strictly alone the banks but also from little bit more from private equity and the like as well. So combination of just being industrious as well as persistent around the marketplace and finding ways to be relevant for those engagements has given us some good results.

Great. I don’t have the head count numbers in front of me but will you be expanding head count and then on terms of operating margin or the segment margin, is that something that’s going to become a baseline or something you improve on from here?

Yes, historically this segment has done the 30% plus range in and we would like to get it back into that range. We think we have a good plan to do that in that, all that many quarters out ahead of us.

The marketplace is going to continue to be tough just because of the number of bankruptcies and the level of competition as you see some larger competitors coming down into our middle market areas of expertise, so but I think that will help drive revenue and in this particular practice is the most important thing. I think from a hiring standpoint more than likely to be a handful but not a significant percentage growth in that particular practice.

Okay, and then finally overall hiring in the quarter, did you increase the amount of junior hiring, campus [ph] hiring in the quarter above the last year?

It's been primarily again if you look at our MD count and like it's a lot of our hiring has been highly leveraged this year which has certainly helped us just from lending down our overall rate per hour, I would expect that to continue but also we’re certainly in a marketplace where some managing director talent as well.

Couple first for Jim, on legal, any of the third quarter sort of slowdown do you think, is that related to the economy whatsoever then, second, did you give a higher education growth rate and how much faster is it growing in health care and then I have a couple of follow-ups for Mark.

I don’t think anything in the LC business was impacted by the economy. I think this is just the nuance of the jobs that we are working to be honest.

I think it's largely unimpacted, has been and probably will continue to be by the economy. We just don’t see that kind of results on a quarter by quarter basis.

With respect to higher ed, we don’t give separate growth rates, although I think that they are really going to be pretty similar. I think they are both going strong and the markets are facing almost identical pressures and we just happen to be very well-positioned in them, so again I would expect the collective segment to be in the mid to upper single digits for the coming year.

And is there anything legal, I wouldn’t expect there is, is there anything legal that’s contingent on the election?

No.

Great. And then, Mark, the free cash flow guidance it looks like it came down maybe a little bit more than the EBITDA guidance, what else is impacting that and second build rate in financial consulting has gone up quite a bit in the third quarter relative to trends in the first half of the year.

is that a good number for the fourth quarter?

Probably need to take a look at that one Paul. I think that actually we’re optimistic that maybe the 75 is a little bit on the conservative side, as you saw we had a little bit higher DSO at the end of Q3; we are hoping to bring that down back on a normal basis.

So maybe some potential improvement on that side but probably I think the second part of your question could repeat that again?

I think you reported 368 for your build rate and financial consulting was up 13% year-on-year and versus being down year-on-year in the first half of 2012. Should we expect it to be up again in the fourth quarter or I just trying to understand that build rate for the fourth quarter for financial consulting.

I think it's going to be a similar range, I would hope it's actually going to improve a little bit. We have actually got some better mix of engagements and it was helped a little bit in Q3, we had a minor amount of contingent fees, success fees associated with that.

I mean we are talking a few 100,000, nothing material.

My questions have been answered.

Thank you for spending time with us this afternoon. We look forward to speaking with you again in February when we announce our fourth quarter and year end results.

Good evening.