Exhibit 99.1
HEIDRICK & STRUGGLES
NEWS FOR IMMEDIATE RELEASE
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HEIDRICK & STRUGGLES REPORTS
2003 FIRST QUARTER FINANCIAL RESULTS
Bottom Line Continues to Improve Despite Decline in Revenue
Charges Taken in Quarter for Revised Estimate for Cost of Unused Office Space
and Deferred Tax Asset Write-off
Initial View on 2003 Second Quarter Also Provided
CHICAGO (April 30, 2003)--Heidrick & Struggles International, Inc. (Nasdaq:
HSII), the world's premier executive search and leadership consulting firm,
today announced its financial results for the 2003 first quarter.
2003 First Quarter Overview
. Consolidated net revenue was $77.3 million, a decrease of 16 percent
from $91.7 million in the 2002 first quarter.
. On a U.S. GAAP basis, Heidrick & Struggles reported a loss per share
of $0.37, compared to a loss per share of $0.98 last year.
. The operating loss was $4.9 million, compared to an operating loss of
$28.2 million last year.
. Results in the 2003 first quarter include a $5.5 million pre-tax
charge to increase the previously established accruals for unused
office space and, in the 2002 first quarter, a $23.2 million special
charge related to a workforce reduction and the closing or
consolidation of offices.
. Excluding the charges in both years, operating income was $599,000,
compared to an operating loss of $5.0 million last year, which the
company believes more accurately reflects its core operations.
. Income tax expense includes a $3.1 million write-off of a deferred tax
asset.
. The net loss was $6.7 million, compared to a net loss of $17.7 million
last year.
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Revenue in the quarter was affected by continuing low levels of business
confidence related to the economy. However, the company did report improvement
in its bottom line, due in part to significantly lower operating expenses and a
substantial reduction in special charges. Performance benefited from the effects
of foreign currency exchange rate fluctuations. Excluding the positive impact of
currency of approximately $5 million, net revenue decreased 21 percent from the
2002 first quarter.
"We are encouraged by the continuing improvement to our bottom line, thanks in
large part to an improved and more disciplined cost structure," said Gerard R.
Roche, Senior Chairman and Acting Chief Executive Officer of Heidrick &
Struggles. "One thing is clear in this cloudy business environment, however - we
must focus more of our attention and resources on revenue generation, building
relationships with clients, and investing in growth-oriented programs."
Consolidated salaries and employee benefits expense in the 2003 first quarter
was $54.2 million, down 21 percent from $68.9 million in the comparable quarter
last year. The decrease was primarily due to reductions in the company's
workforce and lower bonus accruals related to the lower revenue levels.
Consolidated general and administrative expenses declined 19 percent to $22.6
million in the 2003 first quarter, compared to $27.8 million in the 2002 first
quarter. Reduced spending on discretionary items, lower bad debt expense, and
lower infrastructure costs resulting from the company's restructuring activities
all contributed to the declines.
In the 2003 first quarter, the number of confirmed executive searches decreased
16 percent from the 2002 first quarter. As of March 31, 2003 the company
employed 337 executive search consultants, compared to 337 as of December 31,
2002, and 414 as of March 31, 2002.
Special Items
The company reported a special charge of $5.5 million in the 2003 first quarter
as the previously established accruals associated with unused office space were
increased to reflect the expectation that longer vacancy periods will result in
costs that are higher than originally anticipated.
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In addition, the company's 2003 first quarter income tax expense includes a
$3.1 million non-cash write-off of a deferred tax asset, representing the excess
of expense for accounting purposes over the related deduction for tax purposes,
that occurred upon the vesting of restricted stock units in the 2003 first
quarter. The change in value is related to the significant difference in the
common stock price between the date of issuance and the date of vesting of the
restricted stock units.
Results by Geographic Region
Net revenue in North America was $41.8 million, a decrease of 16 percent from
$49.8 million in the 2002 first quarter. The Health Care, Industrial, and
Professional Services practice groups reported higher revenue in the 2003 first
quarter compared to the 2002 first quarter, while the Financial Services and
Technology practice groups reported significant declines. Operating income for
the region increased 96 percent to $5.9 million from $3.0 million in last year's
first quarter primarily because of a lower headcount and reductions in
discretionary spending. The operating margin increased to 14.1 percent from
6.0 percent in the 2002 first quarter.
In Latin America, net revenue was $2.3 million, a decrease of 21 percent from
$2.9 million in the 2002 first quarter. There was an operating loss of $123,000
in the 2003 first quarter, compared to an operating loss of $353,000 in the 2002
first quarter.
Net revenue in Europe was $28.3 million, a decrease of 16 percent from $33.4
million in the 2002 first quarter. Excluding the positive impact of currency of
approximately $5 million, net revenue decreased 30 percent from the same quarter
in 2002. The Consumer, Education/Nonprofit, and Professional Services practice
groups reported higher revenue in the 2003 first quarter compared to the 2002
first quarter, while the Financial Services and Industrial practice groups
reported the most significant declines. Operating income was $565,000 in the
2003 first quarter, compared to an operating loss of $957,000 in last year's
first quarter. The improvement was primarily because of the reduction in the
number of employees in the region.
In Asia Pacific, net revenue was $5.0 million, a decrease of 11 percent from
$5.6 million in the 2002 first quarter. Operating income declined 33 percent to
$439,000 in the 2003 first quarter, compared to $659,000 in the 2002 first
quarter.
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Outlook
For the 2003 second quarter, net revenue is anticipated to be in the range of
$75 million to $85 million, as the business environment remains soft and the
timing of a meaningful recovery in the economy is still unclear. At those
revenue levels, the company estimates that the corresponding results would range
from a loss per share of $0.10 to diluted earnings per share of $0.07, excluding
any charges for the separation terms related to the April 8, 2003 resignation of
the CEO, and any write-offs of deferred tax assets.
Webcast of Investor Call Available Today
To review its 2003 first quarter financial results, the company will provide a
real-time webcast of the related investor call on Wednesday, April 30, 2003 at
9:00 a.m. Chicago Time. The call will last up to one hour and will feature
remarks by Chairman Piers Marmion and Chief Financial Officer Kevin Smith. The
webcast will be available online at www.heidrick.com or through CCBN's
individual investor center at www.companyboardroom.com. Listeners should log on
approximately ten minutes in advance to ensure they are set up to receive the
webcast. A replay will be available for up to 30 days following the investor
call.
About Heidrick & Struggles International, Inc.
Heidrick & Struggles International, Inc. is the world's premier provider of
executive search and leadership consulting services. Currently, approximately
1,300 Heidrick & Struggles search professionals and employees operate from
locations primarily in North America, Latin America, Europe, and Asia Pacific.
For 50 years, Heidrick & Struggles has specialized in chief executive, board
member and senior-level management search assignments for a broad spectrum of
clients: multi-national corporations, mid-cap and start-up companies, nonprofit
entities, educational institutions, foundations, associations and governmental
units. The company is expanding its range of complementary services to offer
solutions to senior management teams for their leadership needs, including
executive assessment, interim executive placement, and professional development.
For more information about Heidrick & Struggles, visit www.heidrick.com.
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Safe Harbor Statement
This news release contains forward-looking statements. The forward-looking
statements are based on current expectations, estimates, forecasts and
projections about the industry in which we operate and management's beliefs and
assumptions. Forward-looking statements may be identified by the use of words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," and similar expressions. Forward-looking statements are not
guarantees of future performance and involve certain known and unknown risks,
uncertainties and assumptions that are difficult to predict. Actual outcomes and
results may differ materially from what is expressed, forecasted or implied in
the forward-looking statements. Factors that may affect the outcome of the
forward-looking statements include, among other things, our ability to attract
and retain qualified executive search consultants; further deterioration of the
economies in the United States, Europe, or elsewhere; social or political
instability in markets where we operate; price competition; an inability to
achieve the planned cost savings from our cost-reduction initiatives; an
inability to sublease or assign unused office space; our ability to generate
profits in order to ensure that our deferred tax assets are realizable; and
delays in the development and/or implementation of new technology and systems.
We undertake no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise.
# # #
Contact
Eric Sodorff (media)
312-496-1613 or esodorff@heidrick.com
Lynn McHugh (analysts)
312-496-1593 or lmchugh@heidrick.com
Heidrick & Struggles International, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended March 31,
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2003 2002 % Change
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Revenue:
Revenue before reimbursements (net revenue) $77,311 $ 91,723 -15.7%
Reimbursements (1) 5,665 6,483 -12.6%
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Total revenue 82,976 98,206 -15.5%
Operating expenses:
Salaries and employee benefits 54,150 68,897 -21.4%
General and administrative expenses 22,562 27,813 -18.9%
Reimbursed expenses (1) 5,665 6,483 -12.6%
Special charges (2) 5,500 23,169 -76.3%
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Total operating expenses 87,877 126,362 -30.5%
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Operating income (loss) (4,901) (28,156)
Non-operating income (expense):
Interest income 492 528 -6.8%
Interest expense (37) (51)
Net realized and unrealized gains (losses) on equity
and warrant portfolio (3) 227 143 58.7%
Other, net (822) 251
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Net non-operating income (expense) (140) 871
Income (loss) before income taxes (5,041) (27,285)
Provision for (benefit from) income taxes (4) 1,696 (9,550)
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Net income (loss) $(6,737) $(17,735)
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Basic earnings (loss) per common share $ (0.37) $ (0.98)
Basic weighted average common shares outstanding 18,157 18,050
Diluted earnings (loss) per common share $ (0.37) $ (0.98)
Diluted weighted average common shares outstanding 18,157 18,050
Salaries and employee benefits margin 70.0% 75.1%
General and administrative expense margin 29.2% 30.3%
Effective tax rate - 35.0%
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
SEGMENT INFORMATION
(In thousands)
Three Months Ended March 31,
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2003 2002
2003 2002 $ Change % Change Margin Margin
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Net Revenue
North America $41,818 $ 49,835 $ (8,017) -16.1%
Latin America 2,278 2,896 (618) -21.3%
Europe 28,259 33,428 (5,169) -15.5%
Asia Pacific 4,956 5,564 (608) -10.9%
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Revenue before reimbursements
(net revenue) 77,311 91,723 (14,412) -15.7%
Reimbursements (1) 5,665 6,483 (818) -12.6%
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Total $82,976 $ 98,206 $(15,230) -15.5%
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Operating Income (Loss)
North America $ 5,881 $ 3,002 $ 2,879 95.9% 14.1% 6.0%
Latin America (123) (353) 230 65.2%
Europe 565 (957) 1,522 2.0%
Asia Pacific 439 659 (220) -33.4% 8.9% 11.8%
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Total regions 6,762 2,351 4,411 8.7% 2.6%
Corporate (6,163) (7,338) 1,175 16.0%
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Operating income (loss) before
special charges 599 (4,987) 5,586 0.8%
Special charges (2) (5,500) (23,169) 17,669 76.3%
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Total $(4,901) $(28,156) $ 23,255 82.6%
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Schedule Notes:
(1) Emerging Issues Task Force Issue No. 01-14, "Income Statement
Characterization of Reimbursements Received for `Out-of-Pocket' Expenses
Incurred," establishes that reimbursements received for certain
out-of-pocket expenses should be reported as revenue. Historically, the
Company classified reimbursements of out-of-pocket expenses as a reduction
of operating expenses. The Company adopted this guidance in 2002.
(2) In October 2002, October 2001 and June 2001 the Company announced
reductions in its workforce and the consolidation and closing of offices
and as a result recorded special charges of $48.5 million and $53.2 million
in 2002 and 2001, respectively. Of the special charges recorded in 2002 and
2001, $26.0 million and $28.1 million, respectively, relate to the
consolidation and closing of offices.
In the first quarter of 2003, the Company recorded an additional $5.5
million of special charges related to unused office space. By segment, the
special charges recorded in the 2003 first quarter are $0.4 million in
North America and $5.1 million in Europe.
In the first quarter of 2002, the Company recorded $23.2 million of special
charges related to reductions in its workforce and the consolidation and
closing of offices. The 2002 first quarter special charges include $10.4
million of severance and other employee-related costs and $12.8 million
related to the consolidation and closing of offices. By segment, the
special charges recorded in the first quarter of 2002 are as follows: North
America $13.3 million, Latin America $0.1 million, Europe $7.0 million,
Asia Pacific $0.3 million and Corporate $2.5 million.
(3) The Company receives warrants for equity securities in its client
companies, in addition to its cash fee, for services rendered on some
searches. The warrants are recorded at fair value, net of consultants'
bonuses.
Some of the warrants meet the definition of a derivative instrument under
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," and its subsequent amendments. In accordance with SFAS No.
133, changes in the fair value of the derivative instruments are recorded
in the Consolidated Statements of Operations.
Other warrants received and which do not meet the definition of a
derivative under SFAS No. 133 are regularly reviewed for declines in fair
value.
Upon a value event such as an initial public offering or an acquisition,
the equity securities arising from the exercise of the warrants are
monetized, resulting in a realized gain, net of consultants' bonuses and
other costs.
In the first quarter of 2003, the Company recorded realized gains of $0.3
million and unrealized losses of $0.1 million, net of consultants' bonuses
and other costs.
In the first quarter of 2002, the Company recorded an unrealized gain of
$0.1 million, net of consultants' bonuses and other costs.
(4) The Company's tax provision for the first quarter of 2003 includes the
write-off of $3.1 million of deferred tax assets related to the excess of
expense for accounting purposes over the related deduction for tax purposes
that occurred upon the vesting of restricted stock units in the first
quarter of 2003.
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2003 2002
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Current assets:
Cash and cash equivalents $ 78,719 $110,220
Accounts receivable, net of allowance
for doubtful accounts 51,051 41,774
Other receivables 3,576 3,552
Prepaid expenses 11,049 11,881
Income taxes recoverable - 6,125
Deferred income taxes, net 25,490 24,924
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Total current assets 169,885 198,476
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Property and equipment, net 36,443 38,230
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Other non-current assets:
Assets designated for pension plans 22,498 21,196
Investments 2,657 3,007
Other non-current assets 7,824 9,478
Deferred income taxes, net 31,679 32,176
Goodwill, net 50,399 50,271
Other intangibles, net 9,805 10,230
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Total other non-current assets 124,862 126,358
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Total assets $331,190 $363,064
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HEIDRICK & STRUGGLES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2003 2002
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Current liabilities:
Current maturities of long-term debt $ 1,155 $ 1,161
Accounts payable 7,585 8,887
Accrued expenses:
Salaries and employee benefits 45,319 67,514
Other 22,864 20,704
Current portion of accrued special charges 13,322 20,705
Income taxes payable 1,832 --
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Total current liabilities 92,077 118,971
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Non-current liabilities:
Long-term debt, less current maturities 320 294
Retirement and pension plans 26,342 25,234
Non-current portion of accrued special charges 22,462 18,531
Other non-current liabilities 293 323
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Total non-current liabilities 49,417 44,382
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Stockholders' equity 189,696 199,711
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Total liabilities and stockholders' equity $331,190 $363,064
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