| Item 1.01 | Entry into a Material Definitive Agreement. |
In anticipation of the Plan (as defined and discussed below), on June 8, 2018, Korn/Ferry International (the “Company”) entered into an amendment (the “Amendment”) to its senior secured credit agreement with Wells Fargo Bank, National Association as administrative agent, and other lender parties thereto. The Amendment permits the KF Merger (as defined below), and will become effective when certain conditions set forth therein, including consummation of the KF Merger, are satisfied.
A copy of the Amendment is attached hereto as Exhibit 10.1 and is incorporated herein by reference. The foregoing description is qualified in its entirety by reference to the Amendment.
| Item 2.02 | Results of Operations and Financial Condition. |
On June 13, 2018, the Company issued a press release announcing its fourth quarter fiscal year 2018 results. A copy of the press release is attached hereto as Exhibit 99.1. The information in this Item 2.02 and Exhibit 99.1 hereto are furnished to, but not filed with, the Securities and Exchange Commission.
| Item 2.06 | Material Impairments. |
In connection with the Plan (as defined and discussed below), the Company intends to offer all of the Company’s current products and services using the “Korn Ferry” name, branding and trademarks, and sunset allsub-brands, including Futurestep, Hay Group and Lominger, among others. The Hay Group and Lominger brands came to the Company through acquisitions and, in connection with the accounting for those acquisitions, $106 million of the purchase price was allocated to indefinite lived tradename intangible assets. On June 12, 2018, the Company concluded that as a result of the decision to discontinue the use of suchsub-brands in the near term, the Company will be required under U.S. generally accepted accounting principles to record in the first quarter of fiscal year 2019 aone-time,non-cash intangible asset impairment charge of $106 million, or $79 million on an after-tax basis. This impairment charge will not result in any future cash expenditures.
The Plan
On June 12, 2018, the Company’s Board of Directors approved a plan (the “Plan”) to go to market under a single, master brand architecture and to simplify the Company’s organizational structure by eliminating and/or consolidating certain of the Company’s legal entities and implementing a rebranding of the Company to offer the Company’s current products and services using the “Korn Ferry” name, branding and trademarks. In connection with the Plan, the Company intends to sunset allsub-brands, including Futurestep, Hay Group and Lominger, among others.
In connection with the Plan, the Company intends to pursue a holding company reorganization (the “KF Merger”), after which a new public holding company, Korn Ferry, will own all of the stock of the Company. The Company will initially form Korn Ferry as a direct, wholly-owned subsidiary of the Company. Then, pursuant to the KF Merger, the Company will merge with and into another newly formed entity—Merger Sub, a Delaware corporation, and a direct, wholly-owned subsidiary of Korn Ferry and indirect, wholly-owned subsidiary of the Company—with the Company surviving as a direct, wholly-owned subsidiary of Korn Ferry and operating under the legal name “Korn Ferry US.” Each share of Company stock issued and outstanding immediately prior to the KF Merger will be converted into an equivalent corresponding share of Korn Ferry stock, having the same designations, rights, powers and preferences and the qualifications, limitations and restrictions as the corresponding share of Company stock being converted. The Company’s current stockholders will become stockholders of Korn Ferry upon the consummation of the KF Merger and will not recognize gain or loss for U.S. federal income tax purposes upon the conversion of their shares.
The Company plans to conduct the KF Merger pursuant to Section 251(g) of the Delaware General Corporation Law (“DGCL”), which permits the creation of a holding company through a merger
