Exhibit 99.1
For Immediate Release
Contacts:
Investor Relations: Gregg Kvochak, (310) 556-8550
For Media: Mike Distefano, (310) 843-4199
Korn/Ferry International Announces Third Quarter Fiscal
2010 Results of Operations
Highlights
| | • | | Third quarter fiscal 2010 fee revenue was $146.8 million, compared to $136.2 million in the same quarter last year. |
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| | • | | Q3 FY’10 diluted earnings per share was $0.11, compared to $0.08 in Q3 FY’09 excluding certain adjustments discussed below. Third quarter fiscal 2010 diluted earnings per share was $0.17 compared to diluted loss per share of $0.52 in Q3 FY’09. |
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| | • | | Cash and marketable securities were $251 million at January 31, 2010. |
Los Angeles, CA, March 9, 2010— Korn/Ferry International (NYSE: KFY), a premier global provider of talent management solutions, announced third quarter fiscal 2010 diluted earnings per share of $0.11 (excluding a $2.8 million tax benefit) compared to diluted earnings per share of $0.08 in Q3 FY’09 (excluding restructuring charges of $16.8 million and an impairment charge on marketable securities of $15.3 million). On a GAAP basis, diluted earnings per share was $0.17 in Q3 FY’10, compared to diluted loss per share of $0.52 in Q3 FY’09.
“We are encouraged by our results during the quarter, which included our third consecutive sequential fee revenue increase and a year-over-year fee revenue increase of eight percent,” said Gary D. Burnison, Chief Executive Officer of Korn/Ferry International. “Although our growth rate continues to outpace the industry, the macroeconomic environment remains challenging. Korn/Ferry, however, is well positioned with $251 million in cash and marketable securities and a clear vision for the future. We have a focused and differentiated business model, a systematic approach to client service that has been institutionalized throughout our Firm and high caliber colleagues who are helping Korn/Ferry capture market share across the globe.”
Financial Results
(dollars in millions, except per share amounts)
| | | | | | | | | | | | | | | | | |
| | | Third Quarter | | | Year to Date | |
| | | FY’10 | | | FY’09 | | | FY’10 | | | FY’09 | |
| Fee revenue | | $ | 146.8 | | | $ | 136.2 | | | $ | 403.7 | | | $ | 531.2 | |
| Total revenue | | $ | 152.9 | | | $ | 144.5 | | | $ | 422.7 | | | $ | 561.7 | |
| Operating income (loss) | | $ | 6.4 | | | $ | (11.3 | ) | | $ | (16.3 | ) | | $ | 34.0 | |
| Operating margin | | | 4.3 | % | | | (8.3 | )% | | | (4.1 | )% | | | 6.4 | % |
| Net income (loss) | | $ | 7.9 | | | $ | (22.4 | ) | | $ | (3.6 | ) | | $ | 7.1 | |
| Basic earnings (loss) per share | | $ | 0.18 | | | $ | (0.52 | ) | | $ | (0.08 | ) | | $ | 0.16 | |
| Diluted earnings (loss) per share | | $ | 0.17 | | | $ | (0.52 | ) | | $ | (0.08 | ) | | $ | 0.16 | |
Adjusted Results (a):
| | | | | | | | | | | | | | | | | |
| | | Third Quarter | | | Year to Date | |
| | | FY’10 | | | FY’09 | | | FY’10 | | | FY’09 | |
| Operating income | | $ | 6.0 | | | $ | 5.5 | | | $ | 4.2 | | | $ | 50.8 | |
| Operating margin | | | 4.1 | % | | | 4.1 | % | | | 1.1 | % | | | 9.6 | % |
| Net income | | $ | 4.8 | | | $ | 3.5 | | | $ | 6.8 | | | $ | 33.4 | |
| Basic earnings per share | | $ | 0.11 | | | $ | 0.08 | | | $ | 0.15 | | | $ | 0.77 | |
| Diluted earnings per share | | $ | 0.11 | | | $ | 0.08 | | | $ | 0.15 | | | $ | 0.75 | |
| | | |
| (a) | | Adjusted results are non-GAAP financial measures that exclude the following: |
| | | | | | | | | | | | | | | | | |
| | | Third Quarter | | | Year to Date | |
| | | FY’10 | | | FY’09 | | | FY’10 | | | FY’09 | |
| Restructuring (reductions) charges | | $ | (0.3 | ) | | $ | 16.8 | | | $ | 20.6 | | | $ | 16.8 | |
| Certain tax adjustments (b) | | $ | (2.8 | ) | | $ | — | | | $ | (2.8 | ) | | $ | — | |
| Impairment charge on marketable securities | | $ | — | | | $ | 15.3 | | | $ | — | | | $ | 15.9 | |
| | | |
| (b) | | Includes reversal of a reserve previously taken against an uncertain tax position and an increased valuation allowance related to cash repatriations and foreign tax credits. |
Fee revenue was $146.8 million in Q3 FY’10 compared to $136.2 million in Q3 FY’09, an increase of 7.8% (or an increase of 2.0% or $2.7 million, on a constant currency basis), which reflects the improving revenue trends in all executive recruitment geographic locations in which we operate. During the same period, the weighted-average fee billed per engagement decreased by 2.0% (a decrease of 3.3% excluding the impact of exchange rates). Furthermore, the number of engagements opened increased 28.9% during the period. The Company experienced a 4.8% increase in fee revenue compared to Q2 FY’10.
Compensation and benefits were $102.7 million in Q3 FY’10, an increase of $8.7 million, or 9.3%, compared to $94.0 million in Q3 FY’09. This increase is attributable mainly to an increase in the variable component of compensation when compared to the prior year, which was lower than normal due to the challenging economic conditions. Changes in exchange rates impacted compensation and benefits in Q3 FY’10 unfavorably by $5.3 million from Q3 FY’09.
General and administrative expenses were $31.6 million in Q3 FY’10, an increase of $0.6 million, or 1.9% from $31.0 million in Q3 FY’09. This increase is attributable to a $1.5 million increase in unrealized foreign exchange loss, which was partially offset by a reduction in premises and office expenses. Changes in exchange rates impacted general and administrative expenses in Q3 FY’10 unfavorably by $1.7 million from Q3 FY’09.
Operating income was $6.4 million in Q3 FY’10 compared to operating loss of $11.3 million in Q3 FY’09, an increase of $17.7 million. Excluding restructuring charges of $16.8 million incurred in Q3 FY’09, operating income was $6.0 million, an increase of $0.5 million as compared to Q3 FY’09.
Balance Sheet and Liquidity
Cash and marketable securities were $251.2 million at January 31, 2010 compared to $330.3 million at April 30, 2009. Cash and marketable securities include $64.5 million and $60.8 million, held in trust for deferred compensation plans, at January 31, 2010 and April 30, 2009, respectively. Cash and marketable securities decreased by $79.1 million from Q4 FY’09, mainly due to the payment of annual bonuses in Q1 FY’10 and payments on previously disclosed acquisitions in this fiscal year.
Results by Segment
Selected Executive Recruitment Data
(dollars in millions)
| | | | | | | | | | | | | | | | | |
| | | Third Quarter | | | Year to Date | |
| | | FY’10 | | | FY’09 | | | FY’10 | | | FY’09 | |
| Fee revenue | | $ | 129.2 | | | $ | 116.6 | | | $ | 353.8 | | | $ | 451.4 | |
| Total revenue | | $ | 134.3 | | | $ | 123.3 | | | $ | 369.2 | | | $ | 474.0 | |
| Operating income | | $ | 18.5 | | | $ | 5.2 | | | $ | 15.1 | | | $ | 63.5 | |
| Operating margin | | | 14.3 | % | | | 4.5 | % | | | 4.3 | % | | | 14.1 | % |
| Ending number of consultants | | | 483 | | | | 497 | | | | 483 | | | | 497 | |
| Average number of consultants | | | 490 | | | | 516 | | | | 486 | | | | 521 | |
| New engagements (a) | | | 1,683 | | | | 1,217 | | | | 4,580 | | | | 4,806 | |
Adjusted Results (b):
| | | | | | | | | | | | | | | | | |
| | | Third Quarter | | | Year to Date | |
| | | FY’10 | | | FY’09 | | | FY’10 | | | FY’09 | |
| Operating income | | $ | 18.5 | | | $ | 16.3 | | | $ | 38.5 | | | $ | 74.6 | |
| Operating margin | | | 14.3 | % | | | 14.0 | % | | | 10.9 | % | | | 16.5 | % |
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| (a) | | Represents new engagements opened in the respective period. |
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| (b) | | Adjusted results are non-GAAP financial measures that exclude restructuring charges (net of reductions) of $23.4 million during the nine months ended January 31, 2010 and none during the three months ended January 31, 2010 (see attached reconciliations). Comparative results exclude restructuring charges of $11.1 million during the three and nine months ended January 31, 2009. |
Fee revenue was $129.2 million in Q3 FY’10, an increase of $12.6 million, or 10.8%, when compared to revenue of $116.6 million in Q3 FY’09. On a constant currency basis, fee revenue increased by $6.5 million or 5.6%, when compared to the same quarter a year ago. Fee revenue increased in all regions due to a 12.5% increase in the overall number of engagements billed and a decrease in the average fee per engagement billed of 1.5% when compared to Q3 FY’09 (a decrease of 6.3% excluding the impact of exchange rates).
Operating income was $18.5 million in Q3 FY’10 compared to operating income of $5.2 million in Q3 FY’09. Excluding restructuring charges of $11.1 million incurred in Q3 FY’09, operating income was $16.3 million compared to $18.5 million in Q3 FY’10.
The total number of consultants at January 31, 2010 was 483, a decrease of 14 from January 31, 2009.
Selected Futurestep Data
(dollars in millions)
| | | | | | | | | | | | | | | | | |
| | | Third Quarter | | | Year to Date | |
| | | FY’10 | | | FY’09 | | | FY’10 | | | FY’09 | |
| Fee revenue | | $ | 17.6 | | | $ | 19.6 | | | $ | 49.9 | | | $ | 79.8 | |
| Total revenue | | $ | 18.6 | | | $ | 21.2 | | | $ | 53.5 | | | $ | 87.7 | |
| Operating income (loss) | | $ | 0.6 | | | $ | (8.3 | ) | | $ | 2.4 | | | $ | (4.2 | ) |
| Operating margin | | | 3.2 | % | | | (42.5 | )% | | | 4.7 | % | | | (5.3 | )% |
Adjusted Results (a):
| | | | | | | | | | | | | | | | | |
| | | Third Quarter | | | Year to Date | |
| | | FY’10 | | | FY’09 | | | FY’10 | | | FY’09 | |
| Operating income (loss) | | $ | 0.2 | | | $ | (2.5 | ) | | $ | (0.5 | ) | | $ | 1.5 | |
| Operating margin | | | 1.1 | % | | | (12.9 | )% | | | (1.0 | )% | | | 1.9 | % |
| | | |
| (a) | | Adjusted results are non-GAAP financial measures that exclude restructuring reductions of $0.3 million and $2.8 million during the three and nine months ended January 31, 2010, respectively (see attached reconciliations). Comparative results exclude restructuring charges of $5.8 million during the three and nine months ended January 31, 2009. |
Fee revenue was $17.6 million in Q3 FY’10, a decrease of $2.0 million, or 10.2%, from $19.6 million in Q3 FY’09. On a constant currency basis, fee revenue declined by $3.8 million in Q3 FY’10, compared to the same quarter a year ago. Reductions in fee revenue were driven by an 8.1% decrease in the number of engagements billed and to a lesser extent by a 1.6% decrease in the average fee per engagement billed.
Q3 FY’10 operating income includes reductions in restructuring costs of $0.3 million, which relate to recoveries of premise costs; without such recoveries, operating income would have been $0.2 million. Operating income was $0.6 million in Q3 FY’10 compared to an operating loss of $8.3 million in Q3 FY’09.
Outlook
Assuming constant foreign exchange rates, Q4 FY’10 fee revenue is likely to be in the range of $145 million to $155 million and diluted earnings per share is likely to be in the range of $0.10 to $0.16.
Earnings Conference Call Webcast
The earnings conference call will be held today at 2:00 PM (EST) and hosted by Gary Burnison, Chief Executive Officer, Mike DiGregorio, Chief Financial Officer and Gregg Kvochak, Vice President of Finance. The conference call will be webcast and available online at www.kornferry.com, accessible through the Investor Relations section.
Korn/Ferry International (NYSE: KFY), with a presence throughout the Americas, Asia Pacific, Europe, the Middle East and Africa, is a premier global provider of talent management solutions celebrating 40 years in business. Based in Los Angeles, the firm delivers an array of solutions that help clients to attract, develop, retain and sustain their talent. Visit www.kornferry.com for more information on the Korn/Ferry International family of companies, and www.kornferryinstitute.com for thought leadership, intellectual property and research.
Forward-Looking Statements
Statements in this press release and our conference call that relate to future results and events (“forward-looking statements”) are based on Korn/Ferry’s current expectations. Readers are cautioned not to place undue reliance on such statements. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties that are beyond the control of Korn/Ferry. The potential risks and uncertainties relate to competition, the dependence on attracting and retaining qualified and experienced consultants, the portability of client relationships, local political or economic developments in or affecting countries where we have operations, including fluctuations in exchange rates, risks related to the growth and results of Futurestep, global economic developments, restrictions imposed by off-limits agreements, reliance on information systems, the successful integration of acquired businesses and employment liability risk. For a detailed description of risks and uncertainties that could cause differences, please refer to Korn/Ferry’s periodic filings with the Securities and Exchange Commission. Korn/Ferry disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Use of Non-GAAP Financial Measures
This press release contains financial information calculated other than in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). These non-GAAP financial measures include:
| | • | | adjusted operating income (loss) and operating margin, adjusted to exclude restructuring (reductions) charges, |
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| | • | | adjusted net income (loss), basic and diluted earnings (loss) per share, adjusted to exclude restructuring (reductions) charges, certain tax adjustments and an impairment charge on marketable securities and; |
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| | • | | constant currency amounts that represent the outcome that would have resulted had exchange rates in the reported period been the same as those in effect in the comparable prior year period. |
This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for financial information determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.
Management believes the presentation of non-GAAP financial measures in this press release provides meaningful supplemental information regarding Korn/Ferry’s performance by excluding certain charges that may not be indicative of Korn/Ferry’s ongoing operating results. The use of these non-GAAP financial measures facilitate comparisons to Korn/Ferry’s historical performance. Korn/Ferry includes these non-GAAP financial measures because management believes it is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its evaluation of Korn/Ferry’s ongoing operations and financial and operational decision-making.
[Tables attached]
KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | January 31, | | | January 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | (unaudited) | |
| Fee revenue | | $ | 146,742 | | | $ | 136,210 | | | $ | 403,690 | | | $ | 531,243 | |
| Reimbursed out-of-pocket engagement expenses | | | 6,158 | | | | 8,283 | | | | 19,054 | | | | 30,459 | |
| | | | | | | | | | | | | |
| Total revenue | | | 152,900 | | | | 144,493 | | | | 422,744 | | | | 561,702 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Compensation and benefits | | | 102,654 | | | | 93,978 | | | | 295,115 | | | | 365,849 | |
| General and administrative expenses | | | 31,635 | | | | 30,963 | | | | 86,853 | | | | 97,316 | |
| Out-of-pocket engagement expenses | | | 9,837 | | | | 11,041 | | | | 28,090 | | | | 39,071 | |
| Depreciation and amortization | | | 2,755 | | | | 2,924 | | | | 8,444 | | | | 8,637 | |
| Restructuring (reductions) charges | | | (364 | ) | | | 16,845 | | | | 20,593 | | | | 16,845 | |
| | | | | | | | | | | | | |
| Total operating expenses | | | 146,517 | | | | 155,751 | | | | 439,095 | | | | 527,718 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Operating income (loss) | | | 6,383 | | | | (11,258 | ) | | | (16,351 | ) | | | 33,984 | |
| | | | | | | | | | | | | | | | | |
| Interest and other income (loss), net | | | 893 | | | | (16,061 | ) | | | 5,364 | | | | (16,865 | ) |
| | | | | | | | | | | | | |
| Income (loss) before (benefit) provision for income taxes and equity in earnings of unconsolidated subsidiaries | | | 7,276 | | | | (27,319 | ) | | | (10,987 | ) | | | 17,119 | |
| Income tax (benefit) provision | | | (244 | ) | | | (4,549 | ) | | | (6,730 | ) | | | 12,327 | |
| Equity in earnings of unconsolidated subsidiaries, net | | | 390 | | | | 414 | | | | 639 | | | | 2,316 | |
| | | | | | | | | | | | | |
| Net income (loss) | | $ | 7,910 | | | $ | (22,356 | ) | | $ | (3,618 | ) | | $ | 7,108 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Earnings (loss) per common share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.18 | | | $ | (0.52 | ) | | $ | (0.08 | ) | | $ | 0.16 | |
| | | | | | | | | | | | | |
| Diluted | | $ | 0.17 | | | $ | (0.52 | ) | | $ | (0.08 | ) | | $ | 0.16 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Weighted-average common shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 44,622 | | | | 43,406 | | | | 44,290 | | | | 43,538 | |
| | | | | | | | | | | | | |
| Diluted | | | 45,811 | | | | 43,406 | | | | 44,290 | | | | 44,352 | |
| | | | | | | | | | | | | |
KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
FINANCIAL SUMMARY BY SEGMENT
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | | | | | Nine Months Ended | | | | | |
| | | January 31, | | | | | | | January 31, | | | | | |
| | | 2010 | | | | | | | 2009 | | | | | | | 2010 | | | | | | | 2009 | | | | | |
Fee Revenue: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Executive recruitment: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | $ | 70,187 | | | | | | | $ | 66,978 | | | | | | | $ | 193,709 | | | | | | | $ | 252,649 | | | | | |
| EMEA | | | 36,643 | | | | | | | | 30,423 | | | | | | | | 101,240 | | | | | | | | 122,499 | | | | | |
| Asia Pacific | | | 16,503 | | | | | | | | 13,591 | | | | | | | | 42,437 | | | | | | | | 56,181 | | | | | |
| South America | | | 5,829 | | | | | | | | 5,650 | | | | | | | | 16,396 | | | | | | | | 20,063 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total executive recruitment | | | 129,162 | | | | | | | | 116,642 | | | | | | | | 353,782 | | | | | | | | 451,392 | | | | | |
| Futurestep | | | 17,580 | | | | | | | | 19,568 | | | | | | | | 49,908 | | | | | | | | 79,851 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total fee revenue | | | 146,742 | | | | | | | | 136,210 | | | | | | | | 403,690 | | | | | | | | 531,243 | | | | | |
| Reimbursed out-of-pocket engagement expenses | | | 6,158 | | | | | | | | 8,283 | | | | | | | | 19,054 | | | | | | | | 30,459 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total revenue | | $ | 152,900 | | | | | | | $ | 144,493 | | | | | | | $ | 422,744 | | | | | | | $ | 561,702 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted Operating Income (Loss): | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Excluding Restructuring Charges) | | | | | | Margin | | | | | | | Margin | | | | | | | Margin | | | | | | | Margin | |
| Executive recruitment: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | $ | 13,353 | | | | 19.0 | % | | $ | 13,324 | | | | 19.9 | % | | $ | 28,810 | | | | 14.9 | % | | $ | 48,158 | | | | 19.1 | % |
| EMEA | | | 2,935 | | | | 8.0 | % | | | 315 | | | | 1.0 | % | | | 5,909 | | | | 5.8 | % | | | 14,711 | | | | 12.0 | % |
| Asia Pacific | | | 1,203 | | | | 7.3 | % | | | 1,314 | | | | 9.7 | % | | | 2,239 | | | | 5.3 | % | | | 8,057 | | | | 14.3 | % |
| South America | | | 1,010 | | | | 17.3 | % | | | 1,329 | | | | 23.5 | % | | | 1,526 | | | | 9.3 | % | | | 3,623 | | | | 18.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total executive recruitment | | | 18,501 | | | | 14.3 | % | | | 16,282 | | | | 14.0 | % | | | 38,484 | | | | 10.9 | % | | | 74,549 | | | | 16.5 | % |
| Futurestep | | | 191 | | | | 1.1 | % | | | (2,530 | ) | | | (12.9 | %) | | | (483 | ) | | | (1.0 | %) | | | 1,546 | | | | 1.9 | % |
| Corporate | | | (12,673 | ) | | | | | | | (8,165 | ) | | | | | | | (33,759 | ) | | | | | | | (25,266 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total adjusted operating income | | $ | 6,019 | | | | 4.1 | % | | $ | 5,587 | | | | 4.1 | % | | $ | 4,242 | | | | 1.1 | % | | $ | 50,829 | | | | 9.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Restructuring (Reductions) Charges: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Executive recruitment: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | $ | — | | | | 0.0 | % | | $ | 2,557 | | | | 3.8 | % | | $ | (1,279 | ) | | | (0.6 | %) | | $ | 2,557 | | | | 1.1 | % |
| EMEA | | | — | | | | 0.0 | % | | | 6,606 | | | | 21.7 | % | | | 24,798 | | | | 24.5 | % | | | 6,606 | | | | 5.4 | % |
| Asia Pacific | | | — | | | | 0.0 | % | | | 947 | | | | 7.0 | % | | | 87 | | | | 0.2 | % | | | 947 | | | | 1.6 | % |
| South America | | | — | | | | 0.0 | % | | | 956 | | | | 16.9 | % | | | (173 | ) | | | (1.1 | %) | | | 956 | | | | 4.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total executive recruitment | | | — | | | | 0.0 | % | | | 11,066 | | | | 9.5 | % | | | 23,433 | | | | 6.6 | % | | | 11,066 | | | | 2.4 | % |
| Futurestep | | | (364 | ) | | | (2.1 | %) | | | 5,779 | | | | 29.6 | % | | | (2,840 | ) | | | (5.7 | %) | | | 5,779 | | | | 7.2 | % |
| Corporate | | | — | | | | | | | | — | | | | | | | | — | | | | | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total restructuring (reductions) charges | | $ | (364 | ) | | | (0.2 | %) | | $ | 16,845 | | | | 12.4 | % | | $ | 20,593 | | | | 5.2 | % | | $ | 16,845 | | | | 3.2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating Income (Loss): | | | | | | Margin | | | | | | | Margin | | | | | | | Margin | | | | | | | Margin | |
| Executive recruitment: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | $ | 13,353 | | | | 19.0 | % | | $ | 10,767 | | | | 16.1 | % | | $ | 30,089 | | | | 15.5 | % | | $ | 45,601 | | | | 18.0 | % |
| EMEA | | | 2,935 | | | | 8.0 | % | | | (6,291 | ) | | | (20.7 | %) | | | (18,889 | ) | | | (18.7 | %) | | | 8,105 | | | | 6.6 | % |
| Asia Pacific | | | 1,203 | | | | 7.3 | % | | | 367 | | | | 2.7 | % | | | 2,152 | | | | 5.1 | % | | | 7,110 | | | | 12.7 | % |
| South America | | | 1,010 | | | | 17.3 | % | | | 373 | | | | 6.6 | % | | | 1,699 | | | | 10.4 | % | | | 2,667 | | | | 13.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total executive recruitment | | | 18,501 | | | | 14.3 | % | | | 5,216 | | | | 4.5 | % | | | 15,051 | | | | 4.3 | % | | | 63,483 | | | | 14.1 | % |
| Futurestep | | | 555 | | | | 3.2 | % | | | (8,309 | ) | | | (42.5 | %) | | | 2,357 | | | | 4.7 | % | | | (4,233 | ) | | | (5.3 | %) |
| Corporate | | | (12,673 | ) | | | | | | | (8,165 | ) | | | | | | | (33,759 | ) | | | | | | | (25,266 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total operating income (loss) | | $ | 6,383 | | | | 4.3 | % | | $ | (11,258 | ) | | | (8.3 | %) | | $ | (16,351 | ) | | | (4.1 | %) | | $ | 33,984 | | | | 6.4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
| | | | | | | | | |
| | | January 31, | | | April 30, | |
| | | 2010 | | | 2009 | |
| | | (unaudited) | | | | |
ASSETS | | | | | | | | |
| Cash and cash equivalents | | $ | 175,811 | | | $ | 255,000 | |
| Marketable securities | | | 3,928 | | | | 4,263 | |
| Receivables due from clients, net of allowance for doubtful accounts of $8,924 and $11,197, respectively | | | 108,098 | | | | 67,308 | |
| Income taxes and other receivables | | | 6,466 | | | | 9,001 | |
| Deferred income taxes | | | 20,249 | | | | 14,583 | |
| Prepaid expenses and other assets | | | 26,851 | | | | 21,442 | |
| | | | | | | |
| Total current assets | | | 341,403 | | | | 371,597 | |
| | | | | | | |
| | | | | | | | | |
| Marketable securities, non-current | | | 71,475 | | | | 70,992 | |
| Property and equipment, net | | | 25,618 | | | | 27,970 | |
| Cash surrender value of company owned life insurance policies, net of loans | | | 65,988 | | | | 63,108 | |
| Deferred income taxes | | | 50,355 | | | | 45,141 | |
| Goodwill | | | 171,001 | | | | 133,331 | |
| Intangible assets, net | | | 26,091 | | | | 16,928 | |
| Investments and other assets | | | 16,308 | | | | 11,812 | |
| | | | | | | |
| Total assets | | $ | 768,239 | | | $ | 740,879 | |
| | | | | | | |
| | | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
| Accounts payable | | $ | 10,519 | | | $ | 10,282 | |
| Income taxes payable | | | 4,698 | | | | 2,059 | |
| Compensation and benefits payable | | | 102,055 | | | | 116,705 | |
| Other accrued liabilities | | | 44,014 | | | | 44,301 | |
| | | | | | | |
| Total current liabilities | | | 161,286 | | | | 173,347 | |
| | | | | | | |
| | | | | | | | | |
| Deferred compensation and other retirement plans | | | 107,238 | | | | 99,238 | |
| Other liabilities | | | 18,554 | | | | 9,195 | |
| | | | | | | |
| Total liabilities | | | 287,078 | | | | 281,780 | |
| | | | | | | | | |
| Stockholders’ equity | | | | | | | | |
| Common stock: $0.01 par value, 150,000 shares authorized, 57,528 and 56,185 shares issued and 45,982 and 44,729 shares outstanding, respectively | | | 381,232 | | | | 368,430 | |
| Retained earnings | | | 81,304 | | | | 84,922 | |
| Accumulated other comprehensive income, net | | | 19,156 | | | | 6,285 | |
| | | | | | | |
| Stockholders’ equity | | | 481,692 | | | | 459,637 | |
| Less: notes receivable from stockholders | | | (531 | ) | | | (538 | ) |
| | | | | | | |
| Total stockholders’ equity | | | 481,161 | | | | 459,099 | |
| | | | | | | |
| Total liabilities and stockholders’ equity | | $ | 768,239 | | | $ | 740,879 | |
| | | | | | | |
KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
RECONCILIATION OF AS REPORTED (GAAP) TO AS ADJUSTED (NON-GAAP)
JANUARY 31, 2010
(in thousands, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | January 31, 2010 | | | January 31, 2010 | |
| | | As Reported | | | Adjustments | | | As Adjusted | | | As Reported | | | Adjustments | | | As Adjusted | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Fee revenue | | $ | 146,742 | | | | | | | $ | 146,742 | | | $ | 403,690 | | | | | | | $ | 403,690 | |
| Reimbursed out-of-pocket engagement expenses | | | 6,158 | | | | | | | | 6,158 | | | | 19,054 | | | | | | | | 19,054 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total revenue | | | 152,900 | | | | | | | | 152,900 | | | | 422,744 | | | | | | | | 422,744 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Compensation and benefits | | | 102,654 | | | | | | | | 102,654 | | | | 295,115 | | | | | | | | 295,115 | |
| General and administrative expenses | | | 31,635 | | | | | | | | 31,635 | | | | 86,853 | | | | | | | | 86,853 | |
| Out-of-pocket engagement expenses | | | 9,837 | | | | | | | | 9,837 | | | | 28,090 | | | | | | | | 28,090 | |
| Depreciation and amortization | | | 2,755 | | | | | | | | 2,755 | | | | 8,444 | | | | | | | | 8,444 | |
| Restructuring (reductions) charges | | | (364 | ) | | | 364 | | | | — | | | | 20,593 | | | | (20,593 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | |
| Total operating expenses | | | 146,517 | | | | 364 | | | | 146,881 | | | | 439,095 | | | | (20,593 | ) | | | 418,502 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating income (loss) | | | 6,383 | | | | (364 | ) | | | 6,019 | | | | (16,351 | ) | | | 20,593 | | | | 4,242 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest and other income, net | | | 893 | | | | | | | | 893 | | | | 5,364 | | | | | | | | 5,364 | |
| | | | | | | | | | | | | | | | | | | |
| Income (loss) before (benefit) provision for income taxes and equity in earnings of unconsolidated subsidiaries | | | 7,276 | | | | (364 | ) | | | 6,912 | | | | (10,987 | ) | | | 20,593 | | | | 9,606 | |
| Income tax (benefit) provision (1) (2) | | | (244 | ) | | | 2,698 | | | | 2,454 | | | | (6,730 | ) | | | 10,140 | | | | 3,410 | |
| Equity in earnings of unconsolidated subsidiaries, net | | | 390 | | | | | | | | 390 | | | | 639 | | | | | | | | 639 | |
| | | | | | | | | | | | | | | | | | | |
| Net income (loss) | | $ | 7,910 | | | $ | (3,062 | ) | | $ | 4,848 | | | $ | (3,618 | ) | | $ | 10,453 | | | $ | 6,835 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Earnings (loss) per common share: | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.18 | | | | | | | $ | 0.11 | | | $ | (0.08 | ) | | | | | | $ | 0.15 | |
| | | | | | | | | | | | | | | | | | | | | |
| Diluted | | $ | 0.17 | | | | | | | $ | 0.11 | | | $ | (0.08 | ) | | | | | | $ | 0.15 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted-average common shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 44,622 | | | | | | | | 44,622 | | | | 44,290 | | | | | | | | 44,290 | |
| | | | | | | | | | | | | | | | | | | | | |
| Diluted | | | 45,811 | | | | | | | | 45,811 | | | | 44,290 | | | | | | | | 45,209 | |
| | | | | | | | | | | | | | | | | | | | | |
Explanation of Non-GAAP Adjustments
For the three and nine months ended January 31, 2010:
| | | |
| (1) | | Calculated using an annual effective tax rate of 35.5% on operating expenses adjustments. |
| |
| (2) | | Includes reversal of a reserve previously taken against an uncertain tax position and an increased valuation allowance related to cash repatriations and foreign tax credits. |
KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
RECONCILIATION OF AS REPORTED (GAAP) TO AS ADJUSTED (NON-GAAP)
JANUARY 31, 2009
(in thousands, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | January 31, 2009 | | | January 31, 2009 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | As Reported | | | Adjustments | | | As Adjusted | | | As Reported | | | Adjustments | | | As Adjusted | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Fee revenue | | $ | 136,210 | | | | | | | $ | 136,210 | | | $ | 531,243 | | | | | | | $ | 531,243 | |
| Reimbursed out-of-pocket engagement expenses | | | 8,283 | | | | | | | | 8,283 | | | | 30,459 | | | | | | | | 30,459 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total revenue | | | 144,493 | | | | | | | | 144,493 | | | | 561,702 | | | | | | | | 561,702 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Compensation and benefits | | | 93,978 | | | | | | | | 93,978 | | | | 365,849 | | | | | | | | 365,849 | |
| General and administrative expenses | | | 30,963 | | | | | | | | 30,963 | | | | 97,316 | | | | | | | | 97,316 | |
| Out-of-pocket engagement expenses | | | 11,041 | | | | | | | | 11,041 | | | | 39,071 | | | | | | | | 39,071 | |
| Depreciation and amortization | | | 2,924 | | | | | | | | 2,924 | | | | 8,637 | | | | | | | | 8,637 | |
| Restructuring charges | | | 16,845 | | | | (16,845 | ) | | | — | | | | 16,845 | | | | (16,845 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | |
| Total operating expenses | | | 155,751 | | | | (16,845 | ) | | | 138,906 | | | | 527,718 | | | | (16,845 | ) | | | 510,873 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating (loss) income | | | (11,258 | ) | | | 16,845 | | | | 5,587 | | | | 33,984 | | | | 16,845 | | | | 50,829 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest and other (loss) income, net (1) | | | (16,061 | ) | | | 15,348 | | | | (713 | ) | | | (16,865 | ) | | | 15,893 | | | | (972 | ) |
| | | | | | | | | | | | | | | | | | | |
| (Loss) income before (benefit) provision for income taxes and equity in earnings of unconsolidated subsidiaries | | | (27,319 | ) | | | 32,193 | | | | 4,874 | | | | 17,119 | | | | 32,738 | | | | 49,857 | |
| Income tax (benefit) provision (2) | | | (4,549 | ) | | | 6,381 | | | | 1,832 | | | | 12,327 | | | | 6,401 | | | | 18,728 | |
| Equity in earnings of unconsolidated subsidiaries, net | | | 414 | | | | | | | | 414 | | | | 2,316 | | | | | | | | 2,316 | |
| | | | | | | | | | | | | | | | | | | |
| Net (loss) income | | $ | (22,356 | ) | | $ | 25,812 | | | $ | 3,456 | | | $ | 7,108 | | | $ | 26,337 | | | $ | 33,445 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| (Loss) earnings per common share: | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | (0.52 | ) | | | | | | $ | 0.08 | | | $ | 0.16 | | | | | | | $ | 0.77 | |
| | | | | | | | | | | | | | | | | | | | | |
| Diluted | | $ | (0.52 | ) | | | | | | $ | 0.08 | | | $ | 0.16 | | | | | | | $ | 0.75 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted-average common shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 43,406 | | | | | | | | 43,406 | | | | 43,538 | | | | | | | | 43,538 | |
| | | | | | | | | | | | | | | | | | | | | |
| Diluted | | | 43,406 | | | | | | | | 43,917 | | | | 44,352 | | | | | | | | 44,352 | |
| | | | | | | | | | | | | | | | | | | | | |
Explanation of Non-GAAP Adjustments
For the three and nine months ended January 31, 2009:
| | | |
| (1) | | Asset impairment on marketable securities. |
| |
| (2) | | Calculated using an annual effective tax rate of 38% relating to operating expense adjustments. |
