First Consulting Group Reports Second Quarter 2001 Results.

Business Editors

LONG BEACH, Calif.--(BUSINESS WIRE)--July 26, 2001

First Consulting Group, Inc. (Nasdaq:FCGI):

-- Reports Revenues of $66.2 million, Net Loss of $0.02 Per Share Before
One-Time Charge Related to Further Cost Reduction Actions

-- Stronger New Business Pipeline Signals Increasing Demand for Refined Service
Offerings

-- Business Unit Focus, Organization Resizing Drives Improved Profitability
Outlook for Third Quarter 2001 and Beyond

First Consulting Group, Inc. (Nasdaq:FCGI), a leading provider of information-based consulting, integration and management services to the health-related industries, today reported financial results for the second quarter ended June 30, 2001.

Second Quarter 2001 Performance

Net revenue for the second quarter of 2001 was $66.2 million, an increase of four percent over net revenue of $63.7 million in the second quarter of 2000. As expected, revenues were down from the first quarter of 2001, largely as a result of the uncertain overall economy that impacted some of the company's business units. The six percent decrease was specifically due to slowdowns in the Health Plans and Life Sciences business units, which also affected Doghouse Technology Services.

FCG reported a net loss of $458,000, or $0.02 per share, in the second quarter of 2001, excluding a one-time restructuring charge of $4.3 million related to staff reductions and facility resizing. This compares to a net loss of $1.5 million, or $0.06 per share (excluding restructuring), in the second quarter of 2000, and a net income of $891,000 or $0.04 per share in the first quarter of 2001. Including the one-time restructuring charge of $4.3 million, the company reported a net loss of $3.0 million, or $0.13 per share, in the second quarter of 2001.

"Our business has faced significant challenges for much of the last two years due to rapidly changing and weaker markets, and a lackluster economy. However, we have taken aggressive moves to better position the company to capture the market going forward. Although it may take us a few more quarters to get our service offerings fully aligned with the market opportunities, we have taken necessary actions to strengthen our market position and to achieve sustained profitability," said Luther Nussbaum, FCG's chairman and chief executive officer.

"In a broad sense, we have accomplished two major initiatives that will lead to our success. We have reduced our cost structure by matching our resource capacity to market demand, and we have refined our service offerings to a select portfolio that is relevant and impactful to our clients. This improved alignment will allow us to more rapidly grow a more profitable revenue stream," Nussbaum continued.

The company reported gross margins of 36.4 percent in the second quarter of 2001, compared to 36.0 percent in the same period a year ago and 37.6 percent in the first quarter of 2001. Within our consulting and systems integration practice our gross margins increased during the quarter in each practice area. The increase in outsourcing as a percentage of revenue for the firm caused the firm gross margin to decline somewhat from the first quarter of 2001.

General and administrative expenses during the quarter were $16.9 million, or 25.5 percent of revenues, compared to $17.4 million, or 24.8 percent in the first quarter of 2001. Selling expenses for the quarter were 12.3 percent of revenue compared to 11.2 percent of revenue last quarter. Combined selling, general and administrative expenses decreased by $240,000 quarter over quarter, while these expenses as a percentage of revenue increased from 36.0 percent in the first quarter of 2001 to 37.8 percent in the second quarter of 2001 due to lower revenues.

Headcount decreased to 1,921 as of June 30, 2001 from 2,027 at the end of the first quarter of 2001. FCG finished the second quarter with 1,023 billable associates in consulting and systems integration practices, as well as 531 associates in outsourcing.

Total cash and cash equivalents increased to $36.3 million at the end of the second quarter of 2001 from $33.5 million at the end of the first quarter of 2001. The increase in cash was primarily due to a $5.0 million federal tax refund from prior years. FCG's collection improvement initiative remained strong despite an increase in days sales outstanding from last quarter's record low of 67 days to 71 days in the second quarter of 2001, which was still below the company's 72-day target.

Stronger New Business Pipeline

Nussbaum said, "Although the soft market environment creates a somewhat uncertain outlook, there are two key factors that give us confidence in the near-term recovery of our business. First, our business unit structure is beginning to pay off. We are better able to align our offerings with market needs, while sizing our cost structure to service this demand profitably. Second, and perhaps more importantly, the strength of our pipeline indicates that the markets we serve are beginning to rebound. During the second quarter of 2001, our pipeline of new business prospects grew substantially in Life Sciences and Health Delivery."

FCG provided a summary of performance for each business unit as follows:

Life Sciences: The Life Sciences pipeline is now stronger and more diverse than it has been in over a year. The company's content management practice remains Life Sciences' strongest offering, with numerous projects beginning in September 2001 among large pharmaceutical companies, biotech firms and clinical research organizations (CROs). In addition, FCG's IT strategy projects are also beginning to yield large program management and implementation opportunities across discovery, research, clinical development and marketing and sales. Sales efforts initiated as long as a year ago in large scale custom development solutions are beginning to yield new business.

Healthcare Group: Healthcare Delivery has significant new opportunities for large-scale implementation projects generated by FCG's agreement with Cerner, clinical transformations and outsourcing. FCG's investments in its focused set of services are gaining traction, with increasing demand for portal development, ERP, revenue cycle, patient safety, clinical transformations, digital imaging and HIPAA applications. The company said that it closed three engagements valued at over $1 million and has several engagements in the multi-year, multi-million dollar range.

After a slow first half of 2001, Health Plan opportunities are expected to increase again in the second half of 2001. The Health Plan unit enters the third quarter of 2001 with 45 opportunities in the pipeline, including HIPAA assessments, portal development projects, software transformation projects, as well as general consulting and implementation services. FCG also has initiated lead generation programs to target new healthcare accounts for implementation services, revenue cycle, HIPAA and other consulting services.

Government: While FCG's Government pipeline is temporarily impacted by the change in administration, the company is expanding its new business prospects to include partnering with leading government systems integrators for larger, longer-term engagements with a much lower cost of selling.

FCG Management Services (FCGMS): FCGMS is in the process of completing the transition of two new accounts and supporting the procurement process associated with three new outsourcing opportunities. The company's outsourcing business enters the quarter with committed contracts representing $65 million in annual revenues, up 60 percent from the $40 million at the end of 2000. Going forward, FCG expects to benefit from its agreement with VHA Inc., with activity increasing during the second half of 2001. Additionally, the company is working with the top 4 outsourcing brokers. Finally, FCG is engaged in assessment and proposal activities with three accounts.

Doghouse Technology Services (DHTS): FCG said demand for technology and Internet services is mixed and characterized by long sales cycles as competition intensifies with the dramatic drop in the e-services demand. FCG expects continued softness in the third quarter of 2001 within this sector. However, with its repositioning and cost cutting efforts, the company expects improved financial performance in the near-term.

Nussbaum concluded, "Throughout this difficult market environment, our focus has been on fostering new leadership within our organization, ensuring that we are providing highly impactful service offerings in line with market demand, and sizing our business to promote profitability as soon as the third quarter of 2001. Combined, all of these proactive steps enhance our ability to turn our new business pipeline into improved financial performance as the market returns."

Outlook

FCG provided the following guidance for investors regarding its expected financial performance, while noting that readers should reference the section at the end of the release regarding the company's forward-looking statements in this section and elsewhere in this release. The company expects that:

-- Net revenue in the third quarter of 2001 is expected to

increase by $2.0 million to $4.0 million over the second

quarter of 2001. FCG also expects to return to profitability

in the third quarter, with expected net income of $0.05 per

share.

-- Net revenue in the fourth quarter of 2001, taking into account

seasonality issues, is expected to increase by an additional

$1.0 million to $2.0 million over the third quarter of 2001.

The company anticipates profitability to continue in the

fourth quarter, with expected net income of $0.07 per share.

-- In fiscal 2002, the company expects to return to 25 percent

revenue growth and anticipates earnings per share of $0.45 for

the full year. The company targets exiting fiscal 2002 with a

$0.60 per share run rate.

"In summary, we continue to make significant improvement to our practices. We have refined service offerings, improved accountability, and developed or recruited stronger practice leadership. Each business unit has a plan, a leader, and clear objectives. However, we remain cautious about market conditions and recognize that achieving our expectations is highly dependent upon our ability to secure new business in an uncertain market and economy," Nussbaum concluded.

Company Web Cast

FCG will broadcast its second quarter 2001 investor conference call live over the Internet today at 8:30 a.m. EDT (5:30 a.m. PDT). This call will contain additional details about the company's second quarter 2001 results and performance outlook. The broadcast will be hosted on the company's Investor Relations Web site located at www.fcg.com. Participants should allow approximately five minutes prior to the call's start time to visit the site and download any streaming media software needed to listen to the Internet broadcast. An online archive of the broadcast will be available approximately four hours following the live call.

About First Consulting Group

First Consulting Group is a leading provider of information-based consulting, integration and management services for healthcare, pharmaceutical and other life sciences organizations in North America and Europe. The firm's services are designed to increase its clients' operations effectiveness, resulting in reduced costs, improved customer service, enhanced quality of patient care and the more rapid introduction of new pharmaceutical compounds. More information about FCG is available through the FCG World Wide Web site at www.fcg.com or by calling the toll free number 800-345-0957.

Forward-Looking Statements

This news release includes forward-looking statements based on First Consulting Group's (FCG) current expectations, estimates and projections about its industry, management's beliefs and certain assumptions made by the company. These forward-looking statements can typically be identified by use of words such as "believes," "anticipates" or "expects" and include statements regarding (i) the prospective growth and profitability of FCG's business units in life sciences, health delivery, outsourcing, e-services, advanced technology services and health plans, (ii) potential values of and negotiations on future outsourcing and other services agreements, (iii) the effectiveness of restructuring its business units, and (iv) FCG's anticipated revenues and earnings per share for the third quarter of 2001 and calendar year 2001, as well as its outlook for fiscal 2002. These forward-looking statements involve known and unknown risks which may cause the company's actual results and performance to be materially different from the future results and performance stated or implied by the forward-looking statements. Some of the risks investors should consider include the following: (a) the unpredictable nature of the company's pipeline of potential business and of negotiations with clients on new outsourcing and other engagements, resulting in uncertainty as to whether and when FCG will enter into new agreements and whether those agreements will be on terms favorable to FCG; (b) the unpredictable nature of the business of FCG's clients and the markets that they serve, particularly in the current economic climate, which could result in clients canceling, modifying or delaying current or prospective engagements with FCG; (c) the importance of FCG's personnel to its operations, including whether FCG can attract and retain qualified personnel and keep those personnel utilized on client engagements in order to achieve projected growth, revenue and earnings; (d) the ability of FCG to operate effectively with its restructured business units, and (e) other risk factors referenced in the company's most recent Forms 10-K, 10-Q and other periodic reports filed with the Securities and Exchange Commission.

             First Consulting Group, Inc. and Subsidiaries
                 Consolidated Statements of Operations
                 (in thousands except per share data)

                     3 Months Ended June 30,   6 Months Ended June 30,
                     -----------------------  -----------------------
                        2001         2000         2001         2000
                        ----         ----         ----         ----

Net Revenue          $  66,206    $  63,667    $ 136,506    $ 127,174
Cost of Services        42,094       40,735       85,947       82,751
                     ---------    ---------    ---------    ---------
  Gross Profit          24,112       22,932       50,559       44,423
Selling Expenses         8,138        7,838       15,997       15,266
General and
 Administrative
 Expenses               16,884       18,073       34,286       35,643
Restructuring
 Charges                 4,349        3,700        4,349        3,700
                     ---------    ---------    ---------    ---------
  Operating Income      (5,259)      (6,679)      (4,073)     (10,186)
Interest Income            299          630          710        1,348
Other Expense             (179)         (84)        (240)        (140)
                     ---------    ---------    ---------    ---------
  Pre-tax Income        (5,139)      (6,133)      (3,603)      (8,978)
Income Tax              (2,158)      (2,269)      (1,513)      (3,407)
                     ---------    ---------    ---------    ---------
  Net Income         $  (2,981)   $  (3,864)   $  (2,090)   $  (5,571)
                     =========    =========    =========    =========
Basic EPS            $   (0.13)   $   (0.16)   $   (0.09)   $   (0.23)
                     =========    =========    =========    =========
Diluted EPS          $   (0.13)   $   (0.16)   $   (0.09)   $   (0.23)
                     =========    =========    =========    =========
Basic Weighted
 Avg. Shares            23,397       24,293       23,485       24,189
Diluted Weighted
 Avg. Shares            23,397       24,293       23,485       24,189



              First Consulting Group, Inc. and Subsidiaries
                     Consolidated Balance Sheet Data
                  (in thousands, except per share data)

                                                June 30,      Dec. 31,
                                                  2001         2000
                                                  ----         ----

Cash, cash equivalents, short and
 long-term investments                          $ 36,260      $ 29,795
Accounts receivable, net                          38,041        38,637
Unbilled receivables                              21,386        17,465
Current assets                                    99,942        90,702
Total assets                                     146,263       141,996
Current liabilities                               33,021        27,912
Long-term debt                                      --              91
Total stockholders' equity                       106,128       105,262



Selected Business Metrics

                                    Q2 2001     Q1 2001     Q2 2000
                                    -------     -------     -------

Net revenue ($ millions)               66.2        70.3        63.7
Gross margin %                         36.4        37.6        36.0
Selling expense %                      12.3        11.2        12.3
General and admin expense %            25.5        24.8        28.4
Operating % (excl. restructuring)     (1.4)         1.7       (4.7)
Utilization %                          69.6        71.1        69.5
Total associates                       1921        2027        2020
Total billable associates              1023        1118        1231
Total outsourcing associates            531         527         382
Days sales outstanding                   71          67          85


Sales Mix as a % of Revenues

                                     Q2 2001    Q1 2001     Q2 2000
                                     -------    -------     -------

Health Plan                               21         26          18
Health Delivery                           21         19          26
FCG Management Services                   24         18          19
     (outsourcing clients)
Life Sciences                             28         30          31
Government                                 3          3           2
Other                                      3          4           3



Delivery Units Selected Financial Metrics

Healthcare                           Q2 2001     Q1 2001     Q2 2000
Net revenue ($ millions)                16.8        20.0        19.3
Gross margin %                          51.8        50.0        39.4
Utilization %                           66.1        71.2        64.1
Billable Associates                      266         277         377
Total Associates                         281         292         400

Life Sciences                        Q2 2001     Q1 2001     Q2 2000
Net revenue ($ millions)                17.0        19.8        19.7
Gross margin %                          34.1        32.9        42.2
Utilization %                           73.5        73.2        78.9
Billable Associates                      402         448         425
Total Associates                         486         546         520

DHTS                                 Q2 2001     Q1 2001     Q2 2000
Net revenue ($ millions)                16.6        18.6        13.8
Gross margin %                          40.9        38.9        31.3
Utilization %                           68.5        69.3        68.6
Billable Associates                      340         379         390
Total Associates                         388         427         446

Outsourcing                          Q2 2001     Q1 2001     Q2 2000
Net revenue ($ millions)                15.8        11.8        10.8
Gross margin %                          17.8        22.6        24.8
Total Associates                         531         527         382