UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 17, 2013
KORN/FERRY INTERNATIONAL
(Exact name of registrant as specified in its charter)
| Delaware | 001-14505 | 95-2623879 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
1900 Avenue of the Stars, Suite 2600
Los Angeles, California 90067
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (310) 552-1834
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Explanatory Note
The sole purpose of this Amendment to Form 8-K is to correct a typographical error in the press release included as Exhibit 99.1 to Korn/Ferry International’s Current Report on Form 8-K furnished with the Securities and Exchange Commission on June 17, 2013 (the “Original Report”). The final sentence of the Outlook section of Exhibit 99.1 should read “Excluding these charges, adjusted diluted earnings per share in the first quarter are likely to be in the range of $0.26 to $0.32 with diluted earnings per share as measured by generally accepted accounting principles likely to be in the range of $0.19 to $0.27.” Other than correcting this error, all other information included in the Original Report is unchanged. For convenience, we have included in this Amendment the Original Report, as amended.
Item 2.02 Results of Operations and Financial Condition.
On June 17, 2013, Korn/Ferry International issued a press release announcing its fourth quarter fiscal year 2013 results. A copy of the press release is attached hereto as Exhibit 99.1. The information in this Item 2.02 and the exhibit hereto are furnished to, but not filed with, the Securities and Exchange Commission.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit 99.1 | Press Release, dated June 17, 2013 (as corrected). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| KORN/FERRY INTERNATIONAL | ||
| (Registrant) | ||
| Date: June 18, 2013 |
||
| /s/ Robert P. Rozek | ||
| (Signature) | ||
| Name: Robert P. Rozek | ||
| Title: Executive Vice President and Chief Financial Officer | ||
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 | Press release, dated June 17, 2013 (as corrected). | |
Exhibit 99.1
CORRECTION
For Immediate Release
Contacts:
Investor Relations: Gregg Kvochak, (310) 556-8550
For Media: Mike Distefano, (310) 843-4199
Korn/Ferry International Announces Fourth Quarter and Fiscal 2013
Results of Operations
Highlights
| • | Korn/Ferry reports record quarterly fee revenue of $227.9 million in the fourth quarter of 2013, an increase of 17% compared to Q4 FY’12, on a constant currency basis. Excluding current year acquisitions, quarterly fee revenues increased 2% on a constant currency basis. |
| • | Fee revenue in Leadership & Talent Consulting services grew 92% from Q4 FY’12 to Q4 FY’13 on a constant currency basis. Excluding current year acquisitions, fourth quarter revenues were essentially flat year-over-year, on a constant currency basis. |
| • | Fee revenue in Futurestep grew 7 %, from Q4 FY’12 to Q4 FY’13, on a constant currency basis. |
| • | For the full year of FY’13, Korn/Ferry reports record annual fee revenue of $812.8 million, an increase of 5% over FY’12, on a constant currency basis. Excluding current year acquisitions, annual fee revenues were down 1% on a constant currency basis. |
Los Angeles, CA, June 17, 2013 - Korn/Ferry International (NYSE: KFY), a premier global provider of talent management solutions, announced record quarterly and annual fee revenues of $227.9 million and $812.8 million for the fourth quarter and full year of FY’13, respectively. Fourth quarter adjusted diluted earnings per share were $0.32, excluding restructuring and transaction and integration costs of $3.5 million. Full year adjusted diluted earnings per share were $1.10, excluding restructuring, transaction and integration, and separation costs of $26.5 million. Including such costs, diluted earnings per share was $0.25 and $0.70 in the three months and year ended April 30, 2013, respectively.
“I am pleased with our strategic progress and operating results for the fourth quarter, which includes accelerating the integration of our recent acquisitions as well as further diversifying and differentiating our Company. In the fourth quarter, Korn/Ferry’s broader talent management offerings accounted for 40% of fee revenue which reflects the Company’s transformation as a talent management consultancy,” said Gary D. Burnison, CEO of Korn/Ferry International. “As global companies fight for growth and relevancy in this decade, talent will be the differentiator—Korn/Ferry is the bridge between a client’s business and talent strategy—delivering solutions that help our clients with the design, building and attraction of that talent.”
Financial Results
(dollars in millions, except per share amounts)
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’13 | FY’12 | FY’13 | FY’12 | |||||||||||||
| Fee revenue |
$ | 227.9 | $ | 198.1 | $ | 812.8 | $ | 790.5 | ||||||||
| Total revenue |
$ | 238.6 | $ | 207.6 | $ | 849.7 | $ | 826.8 | ||||||||
| Operating income |
$ | 15.4 | $ | 15.4 | $ | 43.9 | $ | 82.9 | ||||||||
| Operating margin |
6.8 | % | 7.8 | % | 5.4 | % | 10.5 | % | ||||||||
| Net income |
$ | 12.2 | $ | 12.0 | $ | 33.3 | $ | 54.3 | ||||||||
| Basic earnings per share |
$ | 0.26 | $ | 0.26 | $ | 0.71 | $ | 1.17 | ||||||||
| Diluted earnings per share |
$ | 0.25 | $ | 0.25 | $ | 0.70 | $ | 1.15 | ||||||||
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’13 | FY’12 | FY’13 | FY’12 | |||||||||||||
| EBITDA Results (a): |
||||||||||||||||
| EBITDA |
$ | 24.3 | $ | 22.4 | $ | 71.3 | $ | 98.5 | ||||||||
| EBITDA margin |
10.7 | % | 11.3 | % | 8.8 | % | 12.5 | % | ||||||||
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’13 | FY’12 | FY’13 | FY’12 | |||||||||||||
| Adjusted Results (b): |
||||||||||||||||
| Operating income |
$ | 18.9 | $ | 17.3 | $ | 70.4 | $ | 85.7 | ||||||||
| Operating margin |
8.3 | % | 8.7 | % | 8.7 | % | 10.8 | % | ||||||||
| EBITDA (a) |
$ | 27.8 | $ | 24.3 | $ | 97.8 | $ | 101.3 | ||||||||
| EBITDA margin (a) |
12.2 | % | 12.2 | % | 12.0 | % | 12.8 | % | ||||||||
| Net income |
$ | 15.6 | $ | 13.3 | $ | 52.8 | $ | 56.2 | ||||||||
| Basic earnings per share |
$ | 0.33 | $ | 0.28 | $ | 1.12 | $ | 1.21 | ||||||||
| Diluted earnings per share |
$ | 0.32 | $ | 0.28 | $ | 1.10 | $ | 1.19 | ||||||||
| (a) | EBITDA refers to earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA to exclude restructuring charges, transaction and integration costs and separation costs. EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliation). |
| (b) | Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations): |
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’13 | FY’12 | FY’13 | FY’12 | |||||||||||||
| Restructuring charges, net of recoveries |
$ | 2.9 | $ | — | $ | 22.8 | $ | 0.9 | ||||||||
| Transaction and integration costs |
$ | 0.6 | $ | — | $ | 3.1 | $ | — | ||||||||
| Separation costs |
$ | — | $ | 1.9 | $ | 0.6 | $ | 1.9 | ||||||||
Fiscal 2013 Fourth Quarter Results
Fee revenue was $227.9 million in Q4 FY’13, an increase of $29.8 million, or 15%, compared to the year-ago quarter (foreign exchange rates negatively impacted fee revenue by $2.9 million), primarily driven by a $28.5 million and a $1.7 million increase in fee revenue in Leadership & Talent Consulting and Futurestep. Excluding the PDI Ninth House and Global Novations acquisitions (the “current year acquisitions”), fee revenue was $199.1 million in Q4 FY’13, an increase of 1% compared to the year-ago quarter (2% on a constant currency basis) driven by all market sectors with the largest increases in life science/healthcare, technology and the industrial sector.
Compensation and benefit expenses were $154.4 million in Q4 FY’13, an increase of $14.8 million, or 11%, compared to the year-ago quarter. The current year acquisitions contributed $18.6 million to the increase in compensation and benefit expenses, offset by a reduction of $3.8 million primarily in salaries and related payroll taxes due to lower average headcount in Executive Recruitment.
General and administrative expenses were $40.1 million in Q4 FY’13, an increase of $5.4 million, or 16%, from the year-ago quarter, resulting primarily from the current year acquisitions.
As previously disclosed, during Q4 FY’13, the Company took steps to integrate PDI Ninth House by consolidating and eliminating redundant office space around the world. As a result, the Company recorded net restructuring charges of $2.9 million in Q4 FY’13 and incurred transaction and integration costs of $0.6 million in Q4 FY’13. Excluding these costs, adjusted EBITDA was $27.8 million during Q4 FY’13, an increase of $3.5 million, or 14%, compared to Q4 FY’12. Adjusted EBITDA margin was 12.2% in both periods.
On a GAAP basis, operating income was $15.4 million in both Q4 FY’13 and Q4 FY’12 resulting in a margin of 6.8% in the current quarter compared to 7.8% in the year-ago quarter.
Fiscal 2013 Results
Fee revenue was $812.8 million in FY’13, an increase of $22.3 million, or 3%, compared to FY’12 (foreign exchange rates negatively impacted fee revenue by $15.1 million). Excluding current year acquisitions, fee revenue was $767.2 million in FY’13, a decrease of 3% (1% on a constant currency basis) compared to FY’12.
As previously disclosed, during FY’13, the Company took steps to rationalize its cost structure and to integrate the current year acquisitions. As a result, the Company recorded restructuring charges of $22.8 million to reduce its workforce and consolidate premises and incurred acquisition-related transaction and integration costs of $3.1 million in FY’13.
Adjusted EBITDA was $97.8 million during FY’13, a decrease of $3.5 million, or 3%, compared to FY’12. Adjusted EBITDA margin was 12.0%, down 80 basis points from the prior year. This decrease was primarily associated with the change in business mix and costs associated with incremental infrastructure and support services relating to the newly acquired businesses.
On a GAAP basis, operating income was $43.9 million in FY’13, a decrease of $39.0 million, or 47%, compared to FY’12 resulting in an operating margin of 5.4% in the current year compared to 10.5% in the prior year.
Balance Sheet and Liquidity
Cash and marketable securities were $366.0 million at April 30, 2013, compared to $417.7 million at April 30, 2012. Cash and marketable securities include $98.0 million held in trust for deferred compensation plans at April 30, 2013, compared to $82.2 million at April 30, 2012. Cash and marketable securities decreased by $51.7 million from April 30, 2012, mainly due to the payment of FY’12 annual bonuses in Q1 FY’13 and the payment for the current year acquisitions, partially offset by cash provided by operating activities.
Results by Segment
In Q1 FY’13, the Company began reporting its Leadership & Talent Consulting business as a separate segment. The Company reports its results in three global business segments: Executive Recruitment, Leadership & Talent Consulting and Futurestep. This change has no impact on previously reported consolidated net income or earnings per share.
Selected Executive Recruitment Data
(dollars in millions)
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’13 | FY’12 | FY’13 | FY’12 | |||||||||||||
| Fee revenue |
$ | 136.8 | $ | 137.2 | $ | 522.5 | $ | 561.2 | ||||||||
| Total revenue |
$ | 142.8 | $ | 143.4 | $ | 544.8 | $ | 586.5 | ||||||||
| Operating income |
$ | 26.5 | $ | 22.4 | $ | 81.0 | $ | 109.9 | ||||||||
| Operating margin |
19.4 | % | 16.3 | % | 15.5 | % | 19.6 | % | ||||||||
| Ending number of consultants |
399 | 400 | 399 | 400 | ||||||||||||
| Average number of consultants |
395 | 399 | 400 | 420 | ||||||||||||
| Engagements billed |
2,718 | 2,692 | 7,554 | 7,879 | ||||||||||||
| New engagements (a) |
1,231 | 1,175 | 4,750 | 4,963 | ||||||||||||
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’13 | FY’12 | FY’13 | FY’12 | |||||||||||||
| EBITDA Results (b): |
||||||||||||||||
| EBITDA |
$ | 29.4 | $ | 24.9 | $ | 91.2 | $ | 118.1 | ||||||||
| EBITDA margin |
21.5 | % | 18.2 | % | 17.5 | % | 21.0 | % | ||||||||
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’13 | FY’12 | FY’13 | FY’12 | |||||||||||||
| Adjusted Results (c): |
||||||||||||||||
| Operating income |
$ | 23.9 | $ | 22.4 | $ | 89.7 | $ | 110.7 | ||||||||
| Operating margin |
17.5 | % | 16.3 | % | 17.2 | % | 19.7 | % | ||||||||
| EBITDA (a) |
$ | 26.8 | $ | 24.9 | $ | 99.9 | $ | 118.9 | ||||||||
| EBITDA margin (a) |
19.6 | % | 18.2 | % | 19.1 | % | 21.2 | % | ||||||||
| (a) | Represents new engagements opened in the respective period. |
| (b) | EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations). |
| (c) | Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations): |
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’13 | FY’12 | FY’13 | FY’12 | |||||||||||||
| Restructuring charges, net of recoveries |
$ | (2.6 | ) | $ | — | $ | 8.1 | $ | 0.8 | |||||||
| Separation costs |
$ | — | $ | — | $ | 0.6 | $ | — | ||||||||
Executive Recruitment
Fee revenue was $136.8 million in Q4 FY’13, essentially flat with the year-ago quarter (foreign exchange rates negatively impacted fee revenue by $1.9 million). Fee revenue increases in North America were offset by decreases in Europe, Asia and Latin America. Fee revenues were impacted by a 1% decrease in the weighted-average fee billed per engagement, offset by a 1% increase in the number of executive recruitment engagements billed compared to the year-ago quarter.
On a GAAP basis, operating income was $26.5 million in Q4 FY’13, an increase of $4.1 million, or 18%, compared to Q4 FY’12 resulting in an operating margin of 19.4% in the current quarter compared to 16.3% in the year-ago quarter.
Adjusted EBITDA was $26.8 million during Q4 FY’13, an increase of $1.9 million, or 8%, compared to Q4 FY’12. This increase is primarily attributable to a decrease in the average headcount and associated compensation and benefits costs during the quarter compared to the year-ago quarter. For the full year, adjusted EBITDA declined by $19.0 million due to a 5% decrease in fee revenue on a constant currency basis offset by reduced compensation and benefits and general and administrative expenses.
Selected Leadership & Talent Consulting Data
(dollars in millions)
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’13 | FY’12 | FY’13 | FY’12 | |||||||||||||
| Fee revenue |
$ | 60.1 | $ | 31.6 | $ | 168.1 | $ | 115.4 | ||||||||
| Total revenue |
$ | 63.1 | $ | 33.2 | $ | 176.6 | $ | 120.3 | ||||||||
| Operating (loss) income |
$ | (1.3 | ) | $ | 5.0 | $ | 6.4 | $ | 16.4 | |||||||
| Operating margin |
(2.1 | )% | 15.7 | % | 3.8 | % | 14.2 | % | ||||||||
| Ending number of consultants (a) |
133 | 51 | 133 | 51 | ||||||||||||
| Staff utilization (b) |
67 | % | 67 | % | 64 | % | 62 | % | ||||||||
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’13 | FY’12 | FY’13 | FY’12 | |||||||||||||
| EBITDA Results (c): |
||||||||||||||||
| EBITDA |
$ | 1.2 | $ | 5.6 | $ | 12.4 | $ | 19.1 | ||||||||
| EBITDA margin |
2.0 | % | 17.9 | % | 7.4 | % | 16.6 | % | ||||||||
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’13 | FY’12 | FY’13 | FY’12 | |||||||||||||
| Adjusted Results (d): |
||||||||||||||||
| Operating income |
$ | 3.8 | $ | 5.0 | $ | 16.6 | $ | 16.4 | ||||||||
| Operating margin |
6.3 | % | 15.7 | % | 9.9 | % | 14.2 | % | ||||||||
| EBITDA (c) |
$ | 6.3 | $ | 5.6 | $ | 22.6 | $ | 19.1 | ||||||||
| EBITDA margin (c) |
10.4 | % | 17.9 | % | 13.4 | % | 16.6 | % | ||||||||
| (a) | Represents number of employees originating consulting services. FY’13 includes approximately 81 consultants from the current year acquisitions. |
| (b) | Calculated by dividing the number of hours of our full-time LTC professional staff, who recorded time to an engagement during the period, by the total available working hours during the same period. Excluding the current year acquisitions, staff utilization was 64% and 63% for the three months and year ended April 30, 2013, respectively. |
| (c) | EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations). |
| (d) | Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations): |
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’13 | FY’12 | FY’13 | FY’12 | |||||||||||||
| Restructuring charges, net of recoveries |
$ | 5.1 | $ | — | $ | 10.2 | $ | — | ||||||||
Leadership & Talent Consulting
Fee revenue was $60.1 million in Q4 FY’13, an increase of $28.5 million, or 90%, from the year-ago quarter. Excluding the current year acquisitions, fee revenue in Q4 FY’13 was essentially flat compared to Q4 FY’12.
On a GAAP basis, operating loss was $1.3 million, a decrease of $6.3 million compared to the year-ago quarter resulting in an operating margin of (2.1%) in the current quarter compared to 15.7% in the year-ago quarter.
Adjusted EBITDA was $6.3 million during Q4 FY’13, an increase of $0.7 million, or 13%, compared to Q4 FY’12, primarily due to the current year acquisitions. Adjusted EBITDA margin was 10.4% compared to 17.9% in Q4 FY’12 and was negatively impacted, in part, by the incremental infrastructure and support services costs related to the current year acquisitions. For the full year, adjusted EBITDA increased from $19.1 million in FY’12 to $22.6 million in FY’13 due to the current year acquisitions, offset by the incremental infrastructure costs described above.
Selected Futurestep Data
(dollars in millions)
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’13 | FY’12 | FY’13 | FY’12 | |||||||||||||
| Fee revenue |
$ | 31.0 | $ | 29.3 | $ | 122.2 | $ | 113.9 | ||||||||
| Total revenue |
$ | 32.7 | $ | 31.0 | $ | 128.3 | $ | 120.0 | ||||||||
| Operating income |
$ | 3.9 | $ | 1.4 | $ | 11.0 | $ | 8.5 | ||||||||
| Operating margin |
12.4 | % | 4.6 | % | 9.0 | % | 7.4 | % | ||||||||
| Engagements billed |
1,703 | 1,611 | 5,605 | 4,916 | ||||||||||||
| New engagements (a) |
863 | 998 | 4,434 | 3,924 | ||||||||||||
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’13 | FY’12 | FY’13 | FY’12 | |||||||||||||
| EBITDA Results (b): |
||||||||||||||||
| EBITDA |
$ | 4.1 | $ | 1.7 | $ | 12.2 | $ | 9.6 | ||||||||
| EBITDA margin |
13.3 | % | 5.6 | % | 10.0 | % | 8.4 | % | ||||||||
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’13 | FY’12 | FY’13 | FY’12 | |||||||||||||
| Adjusted Results (c): |
||||||||||||||||
| Operating income |
$ | 4.3 | $ | 2.3 | $ | 14.5 | $ | 9.5 | ||||||||
| Operating margin |
13.8 | % | 7.7 | % | 11.9 | % | 8.4 | % | ||||||||
| EBITDA (b) |
$ | 4.5 | $ | 2.6 | $ | 15.7 | $ | 10.6 | ||||||||
| EBITDA margin (b) |
14.7 | % | 8.7 | % | 12.9 | % | 9.3 | % | ||||||||
| (a) | Represents new engagements opened in the respective period. |
| (b) | EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations). |
| (c) | Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations): |
| Fourth Quarter | Year to Date | |||||||||||||||
| FY’13 | FY’12 | FY’13 | FY’12 | |||||||||||||
| Restructuring charges, net of recoveries |
$ | 0.4 | $ | — | $ | 3.5 | $ | 0.1 | ||||||||
| Separation costs |
$ | — | $ | 0.9 | $ | — | $ | 0.9 | ||||||||
Futurestep
Fee revenue was $31.0 million in Q4 FY’13, an increase of $1.7 million, or 6%, compared to the year-ago quarter (foreign exchange rates negatively impacted fee revenue by $0.4 million). The increase in fee revenue was due to an increase in recruitment process outsourcing and recruitment.
On a GAAP basis, operating income was $3.9 million in Q4 FY’13, an increase of $2.5 million, compared to Q4 FY’12 resulting in an operating margin of 12.4% in the current quarter compared to 4.6% in the year-ago quarter.
Adjusted EBITDA was $4.5 million during Q4 FY’13, an increase of $1.9 million, or 73%, compared to Q4 FY’12, due primarily to the increase in fee revenue and a decrease in performance related bonus expenses. For the full year, adjusted EBITDA increased $5.1 million due to the $8.3 million increase in fee revenue.
Outlook
Assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, fee revenue is expected to be in the range of $215 million to $227 million in Q1 FY’14. Also during FY’14, we are continuing with our efforts to integrate the newly acquired businesses and to reduce the incremental infrastructure and support services costs in an effective and thoughtful manner, which will be enabled through investments to align and enhance our technology platform. In line with this, in Q1 FY’14, we expect to incur charges associated with these cost reduction efforts in the range of $3.8 million to $5.0 million which will yield $4.7 million to $5.5 million in annual savings starting late in the fiscal first quarter. Excluding these charges, adjusted diluted earnings per share in the first quarter are likely to be in the range of $0.26 to $0.32 with diluted earnings per share as measured by generally accepted accounting principles likely to be in the range of $0.19 to $0.27.
Earnings Conference Call Webcast
The earnings conference call will be held today at 5:00 PM (EDT) and hosted by CEO Gary Burnison, CFO Robert Rozek and SVP Finance Gregg Kvochak. 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. Based in Los Angeles, the firm delivers an array of solutions that help clients to attract, deploy, develop and reward 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. These statements, which include words such as “believes”, “expects” or “likely” include references to our outlook. 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 include those relating to competition, the dependence on attracting and retaining qualified and experienced consultants, our ability to successfully integrate acquired businesses, including current year acquisitions, maintaining our brand name and professional reputation, potential legal liability, the portability of client relationships, global and local political or economic developments in or affecting countries where we have operations, currency fluctuations in our international operations, risks related to the growth, alignment of our cost structure with our growth, restrictions imposed by off-limits agreements, reliance on information processing systems, cyber security vulnerabilities, limited protection of our intellectual property, our ability to enhance and develop new technology, our ability to develop new products and services, consolidation of industries we serve, our ability to successfully recover from a disaster or other business continuity problems, changes in our accounting estimates/assumptions, impairment of goodwill and other intangible assets, deferred tax assets 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”). In particular, it includes:
| • | adjusted operating income and operating margin, adjusted to exclude restructuring, transaction and integration and separation costs; |
| • | adjusted net income, adjusted to exclude restructuring, transaction and integration and separation costs, net of income tax effect; |
| • | adjusted basic and diluted earnings per share, adjusted to exclude restructuring, transaction and integration and separation costs, net of income tax effect; |
| • | 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; |
| • | EBITDA, or earnings before interest, taxes, depreciation and amortization and EBITDA margin; and |
| • | adjusted EBITDA, which is EBITDA further adjusted to exclude restructuring, transaction and integration and separation costs, and adjusted EBITDA margin. |
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 and other items 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 they are 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. In the case of constant currency amounts, management believes the presentation of such information provides meaningful supplemental information regarding Korn/Ferry’s performance as excluding the impact of exchange rate changes on Korn/Ferry’s financial performance allows investors to make more meaningful period-to-period comparisons of the Company’s operating results, to better identify operating trends that may otherwise be masked or distorted by exchange rate changes and to perform related trend analysis, and provides a higher degree of transparency of 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 INCOME
(in thousands, except per share amounts)
| Three Months Ended | Year Ended | |||||||||||||||
| April 30, | April 30, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| (unaudited) | ||||||||||||||||
| Fee revenue |
$ | 227,902 | $ | 198,087 | $ | 812,831 | $ | 790,505 | ||||||||
| Reimbursed out-of-pocket engagement expenses |
10,705 | 9,471 | 36,870 | 36,254 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenue |
238,607 | 207,558 | 849,701 | 826,759 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Compensation and benefits |
154,487 | 139,593 | 555,346 | 534,186 | ||||||||||||
| General and administrative expenses |
40,096 | 34,668 | 142,771 | 138,872 | ||||||||||||
| Engagement expenses |
19,834 | 14,295 | 65,847 | 55,889 | ||||||||||||
| Depreciation and amortization |
5,877 | 3,650 | 19,004 | 14,017 | ||||||||||||
| Restructuring charges, net |
2,921 | — | 22,857 | 929 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
223,215 | 192,206 | 805,825 | 743,893 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income |
15,392 | 15,352 | 43,876 | 82,866 | ||||||||||||
| Other income (loss), net |
2,501 | 2,761 | 6,309 | (271 | ) | |||||||||||
| Interest expense, net |
(644 | ) | (511 | ) | (2,365 | ) | (1,791 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
17,249 | 17,602 | 47,820 | 80,804 | ||||||||||||
| Income tax provision |
5,595 | 6,152 | 16,637 | 28,351 | ||||||||||||
| Equity in earnings of unconsolidated subsidiaries, net |
543 | 578 | 2,110 | 1,850 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income |
$ | 12,197 | $ | 12,028 | $ | 33,293 | $ | 54,303 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings per common share: |
||||||||||||||||
| Basic |
$ | 0.26 | $ | 0.26 | $ | 0.71 | $ | 1.17 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted |
$ | 0.25 | $ | 0.25 | $ | 0.70 | $ | 1.15 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||
| Basic |
47,452 | 46,591 | 47,224 | 46,397 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted |
48,345 | 47,524 | 47,883 | 47,261 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
FINANCIAL SUMMARY BY SEGMENT
(in thousands)
(unaudited)
| Three Months Ended April 30, | Year Ended April 30, | |||||||||||||||||||||||||||||||
| 2013 | 2012 | % Change | 2013 | 2012 | % Change | |||||||||||||||||||||||||||
| Fee Revenue: |
||||||||||||||||||||||||||||||||
| Executive recruitment: |
||||||||||||||||||||||||||||||||
| North America |
$ | 77,511 | $ | 76,268 | 2 | % | $ | 290,317 | $ | 305,717 | (5 | %) | ||||||||||||||||||||
| EMEA |
32,242 | 32,728 | (1 | %) | 128,807 | 141,409 | (9 | %) | ||||||||||||||||||||||||
| Asia Pacific |
19,199 | 19,524 | (2 | %) | 73,221 | 82,230 | (11 | %) | ||||||||||||||||||||||||
| South America |
7,839 | 8,642 | (9 | %) | 30,134 | 31,846 | (5 | %) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total executive recruitment |
136,791 | 137,162 | (0 | %) | 522,479 | 561,202 | (7 | %) | ||||||||||||||||||||||||
| Leadership & Talent Consulting |
60,116 | 31,650 | 90 | % | 168,115 | 115,407 | 46 | % | ||||||||||||||||||||||||
| Futurestep |
30,995 | 29,275 | 6 | % | 122,237 | 113,896 | 7 | % | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total fee revenue |
227,902 | 198,087 | 15 | % | 812,831 | 790,505 | 3 | % | ||||||||||||||||||||||||
| Reimbursed out-of-pocket engagement expenses |
10,705 | 9,471 | 13 | % | 36,870 | 36,254 | 2 | % | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total revenue |
$ | 238,607 | $ | 207,558 | 15 | % | $ | 849,701 | $ | 826,759 | 3 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Reconciliation of Operating Income (GAAP) to Adjusted Operating Income |
||||||||||||||||||||||||||||||||
| Margin | Margin | Margin | Margin | |||||||||||||||||||||||||||||
| Operating Income: |
||||||||||||||||||||||||||||||||
| Executive recruitment: |
||||||||||||||||||||||||||||||||
| North America |
$ | 17,104 | 22.1 | % | $ | 17,148 | 22.5 | % | $ | 58,832 | 20.3 | % | $ | 75,580 | 24.7 | % | ||||||||||||||||
| EMEA |
4,137 | 12.8 | % | (266 | ) | (0.8 | %) | 9,173 | 7.1 | % | 13,288 | 9.4 | % | |||||||||||||||||||
| Asia Pacific |
3,482 | 18.1 | % | 3,001 | 15.4 | % | 6,973 | 9.5 | % | 11,859 | 14.4 | % | ||||||||||||||||||||
| South America |
1,761 | 22.5 | % | 2,536 | 29.3 | % | 5,987 | 19.9 | % | 9,207 | 28.9 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total executive recruitment |
26,484 | 19.4 | % | 22,419 | 16.3 | % | 80,965 | 15.5 | % | 109,934 | 19.6 | % | ||||||||||||||||||||
| Leadership & Talent Consulting |
(1,292 | ) | (2.1 | %) | 4,971 | 15.7 | % | 6,424 | 3.8 | % | 16,360 | 14.2 | % | |||||||||||||||||||
| Futurestep |
3,834 | 12.4 | % | 1,333 | 4.6 | % | 10,975 | 9.0 | % | 8,445 | 7.4 | % | ||||||||||||||||||||
| Corporate |
(13,634 | ) | (13,371 | ) | (54,488 | ) | (51,873 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total operating income |
$ | 15,392 | 6.8 | % | $ | 15,352 | 7.8 | % | $ | 43,876 | 5.4 | % | $ | 82,866 | 10.5 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Restructuring, Transaction and Integration, and Separation Costs, net: |
||||||||||||||||||||||||||||||||
| Executive recruitment: |
||||||||||||||||||||||||||||||||
| North America |
$ | (1,853 | ) | (2.4 | %) | $ | — | — | $ | 3,583 | 1.2 | % | $ | (15 | ) | (0.0 | %) | |||||||||||||||
| EMEA |
(770 | ) | (2.4 | %) | — | — | 4,498 | 3.5 | % | 897 | 0.6 | % | ||||||||||||||||||||
| Asia Pacific |
16 | 0.1 | % | — | — | 629 | 0.9 | % | — | — | ||||||||||||||||||||||
| South America |
— | — | — | — | — | — | (99 | ) | (0.3 | %) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total executive recruitment |
(2,607 | ) | (1.9 | %) | — | — | 8,710 | 1.7 | % | 783 | 0.1 | % | ||||||||||||||||||||
| Leadership & Talent Consulting |
5,080 | 8.4 | % | — | — | 10,198 | 6.1 | % | — | — | ||||||||||||||||||||||
| Futurestep |
441 | 1.4 | % | 920 | 3.1 | % | 3,527 | 2.9 | % | 1,066 | 1.0 | % | ||||||||||||||||||||
| Corporate |
598 | 999 | 4,044 | 999 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total restructuring, transaction and integration, and separation charges, net |
$ | 3,512 | 1.5 | % | $ | 1,919 | 0.9 | % | $ | 26,479 | 3.3 | % | $ | 2,848 | 0.3 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Adjusted Operating Income: (Excluding Restructuring, Transaction and Integration, and Separation Costs, net) |
|
|||||||||||||||||||||||||||||||
| Margin | Margin | Margin | Margin | |||||||||||||||||||||||||||||
| Executive recruitment: |
||||||||||||||||||||||||||||||||
| North America |
$ | 15,251 | 19.7 | % | $ | 17,148 | 22.5 | % | $ | 62,415 | 21.5 | % | $ | 75,565 | 24.7 | % | ||||||||||||||||
| EMEA |
3,367 | 10.4 | % | (266 | ) | (0.8 | %) | 13,671 | 10.6 | % | 14,185 | 10.0 | % | |||||||||||||||||||
| Asia Pacific |
3,498 | 18.2 | % | 3,001 | 15.4 | % | 7,602 | 10.4 | % | 11,859 | 14.4 | % | ||||||||||||||||||||
| South America |
1,761 | 22.5 | % | 2,536 | 29.3 | % | 5,987 | 19.9 | % | 9,108 | 28.6 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total executive recruitment (1) |
23,877 | 17.5 | % | 22,419 | 16.3 | % | 89,675 | 17.2 | % | 110,717 | 19.7 | % | ||||||||||||||||||||
| Leadership & Talent Consulting |
3,788 | 6.3 | % | 4,971 | 15.7 | % | 16,622 | 9.9 | % | 16,360 | 14.2 | % | ||||||||||||||||||||
| Futurestep (1) |
4,275 | 13.8 | % | 2,253 | 7.7 | % | 14,502 | 11.9 | % | 9,511 | 8.4 | % | ||||||||||||||||||||
| Corporate |
(13,036 | ) | (12,372 | ) | (50,444 | ) | (50,874 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total adjusted operating income |
$ | 18,904 | 8.3 | % | $ | 17,271 | 8.7 | % | $ | 70,355 | 8.7 | % | $ | 85,714 | 10.8 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| (1) | The Company revised the presentation for expenses that are not directly associated with Futurestep, resulting in an increase in Futurestep’s operating income of $0.6 million and $2.2 million offset by a decrease in Executive Recruitment operating income in the three months and year ended April 30, 2012, respectively. |
KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
| April 30, | ||||||||
| 2013 | 2012 | |||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ | 224,066 | $ | 282,005 | ||||
| Marketable securities |
20,347 | 40,936 | ||||||
| Receivables due from clients, net of allowance for doubtful accounts of $9,097 and $9,437 respectively |
161,508 | 126,579 | ||||||
| Income taxes and other receivables |
8,944 | 11,902 | ||||||
| Deferred income taxes |
3,511 | 10,830 | ||||||
| Prepaid expenses and other assets |
28,724 | 27,815 | ||||||
|
|
|
|
|
|||||
| Total current assets |
447,100 | 500,067 | ||||||
|
|
|
|
|
|||||
| Marketable securities, non-current |
121,569 | 94,798 | ||||||
| Property and equipment, net |
53,628 | 49,808 | ||||||
| Cash surrender value of company owned life insurance policies, net of loans |
85,873 | 77,848 | ||||||
| Deferred income taxes |
63,203 | 57,290 | ||||||
| Goodwill |
257,293 | 176,338 | ||||||
| Intangible assets, net |
58,187 | 20,413 | ||||||
| Investments and other assets |
28,376 | 38,127 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 1,115,229 | $ | 1,014,689 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Accounts payable |
$ | 19,460 | $ | 14,667 | ||||
| Income taxes payable |
5,502 | 8,720 | ||||||
| Compensation and benefits payable |
160,298 | 160,810 | ||||||
| Other accrued liabilities |
83,291 | 37,527 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
268,551 | 221,724 | ||||||
|
|
|
|
|
|||||
| Deferred compensation and other retirement plans |
159,706 | 142,577 | ||||||
| Other liabilities |
22,504 | 20,912 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
450,761 | 385,213 | ||||||
|
|
|
|
|
|||||
| Stockholders’ equity |
||||||||
| Common stock: $0.01 par value, 150,000 shares authorized, 61,022 and 59,975 shares issued and 48,734 and 47,913 shares outstanding, respectively |
431,508 | 419,998 | ||||||
| Retained earnings |
236,090 | 202,797 | ||||||
| Accumulated other comprehensive (loss) income, net |
(2,631 | ) | 7,191 | |||||
|
|
|
|
|
|||||
| Stockholders’ equity |
664,967 | 629,986 | ||||||
| Less: notes receivable from stockholders |
(499 | ) | (510 | ) | ||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
664,468 | 629,476 | ||||||
|
|
|
|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 1,115,229 | $ | 1,014,689 | ||||
|
|
|
|
|
|||||
KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
RECONCILIATION OF AS REPORTED (GAAP) TO AS ADJUSTED (NON-GAAP)
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||
| April 30, 2013 | April 30, 2012 | |||||||||||||||||||||||
| As Reported | Adjustments | As Adjusted | As Reported | Adjustments | As Adjusted | |||||||||||||||||||
| Fee revenue |
$ | 227,902 | $ | 227,902 | $ | 198,087 | $ | 198,087 | ||||||||||||||||
| Reimbursed out-of-pocket engagement expenses |
10,705 | 10,705 | 9,471 | 9,471 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total revenue |
238,607 | 238,607 | 207,558 | 207,558 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Compensation and benefits |
154,487 | 154,487 | 139,593 | (1,919 | ) | 137,674 | ||||||||||||||||||
| General and administrative expenses |
40,096 | (591 | ) | 39,505 | 34,668 | 34,668 | ||||||||||||||||||
| Engagement expenses |
19,834 | 19,834 | 14,295 | 14,295 | ||||||||||||||||||||
| Depreciation and amortization |
5,877 | 5,877 | 3,650 | 3,650 | ||||||||||||||||||||
| Restructuring charges, net |
2,921 | (2,921 | ) | — | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total operating expenses |
223,215 | (3,512 | ) | 219,703 | 192,206 | (1,919 | ) | 190,287 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating income |
15,392 | 3,512 | 18,904 | 15,352 | 1,919 | 17,271 | ||||||||||||||||||
| Other income, net |
2,501 | 2,501 | 2,761 | 2,761 | ||||||||||||||||||||
| Interest expense, net |
(644 | ) | (644 | ) | (511 | ) | (511 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
17,249 | 3,512 | 20,761 | 17,602 | 1,919 | 19,521 | ||||||||||||||||||
| Income tax provision (1) (2) |
5,595 | 119 | 5,714 | 6,152 | 671 | 6,823 | ||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries, net |
543 | 543 | 578 | 578 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income |
$ | 12,197 | $ | 3,393 | $ | 15,590 | $ | 12,028 | $ | 1,248 | $ | 13,276 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Earnings per common share: |
||||||||||||||||||||||||
| Basic |
$ | 0.26 | $ | 0.33 | $ | 0.26 | $ | 0.28 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Diluted |
$ | 0.25 | $ | 0.32 | $ | 0.25 | $ | 0.28 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||||||||||
| Basic |
47,452 | 47,452 | 46,591 | 46,591 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Diluted |
48,345 | 48,345 | 47,524 | 47,524 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Explanation of Non-GAAP Adjustments
| (1) | The adjustments result in an effective tax rate of 28% and 35% for the as adjusted amounts for the three months ended April 30, 2013 and 2012, respectively. |
| (2) | The three months ended April 30, 2013 includes the tax effect on restructuring charges and transaction & integration costs associated with the acquisition of PDI Ninth House, while the three months ended April 30, 2012 includes the tax effect on the separation costs related to changes in certain leadership positions. |
KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
RECONCILIATION OF AS REPORTED (GAAP) TO AS ADJUSTED (NON-GAAP)
(in thousands, except per share amounts)
(unaudited)
| Year Ended | Year Ended | |||||||||||||||||||||||
| April 30, 2013 | April 30, 2012 | |||||||||||||||||||||||
| As Reported | Adjustments | As Adjusted | As Reported | Adjustments | As Adjusted | |||||||||||||||||||
| Fee revenue |
$ | 812,831 | $ | 812,831 | $ | 790,505 | $ | 790,505 | ||||||||||||||||
| Reimbursed out-of-pocket engagement expenses |
36,870 | 36,870 | 36,254 | 36,254 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total revenue |
849,701 | 849,701 | 826,759 | 826,759 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Compensation and benefits |
555,346 | (516 | ) | 554,830 | 534,186 | (1,919 | ) | 532,267 | ||||||||||||||||
| General and administrative expenses |
142,771 | (3,106 | ) | 139,665 | 138,872 | 138,872 | ||||||||||||||||||
| Engagement expenses |
65,847 | 65,847 | 55,889 | 55,889 | ||||||||||||||||||||
| Depreciation and amortization |
19,004 | 19,004 | 14,017 | 14,017 | ||||||||||||||||||||
| Restructuring charges, net |
22,857 | (22,857 | ) | — | 929 | (929 | ) | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total operating expenses |
805,825 | (26,479 | ) | 779,346 | 743,893 | (2,848 | ) | 741,045 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating income |
43,876 | 26,479 | 70,355 | 82,866 | 2,848 | 85,714 | ||||||||||||||||||
| Other income (loss), net |
6,309 | 6,309 | (271 | ) | (271 | ) | ||||||||||||||||||
| Interest expense, net |
(2,365 | ) | (2,365 | ) | (1,791 | ) | (1,791 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
47,820 | 26,479 | 74,299 | 80,804 | 2,848 | 83,652 | ||||||||||||||||||
| Income tax provision (1) (2) |
16,637 | 6,953 | 23,590 | 28,351 | 999 | 29,350 | ||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries, net |
2,110 | 2,110 | 1,850 | 1,850 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income |
$ | 33,293 | $ | 19,526 | $ | 52,819 | $ | 54,303 | $ | 1,849 | $ | 56,152 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Earnings per common share: |
||||||||||||||||||||||||
| Basic |
$ | 0.71 | $ | 1.12 | $ | 1.17 | $ | 1.21 | ||||||||||||||||
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|
|
|
|
|
|
|
|
|||||||||||||||||
| Diluted |
$ | 0.70 | $ | 1.10 | $ | 1.15 | $ | 1.19 | ||||||||||||||||
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|
|
|
|
|
|
|
|||||||||||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||||||||||
| Basic |
47,224 | 47,224 | 46,397 | 46,397 | ||||||||||||||||||||
|
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|
|
|
|
|
|
|
|||||||||||||||||
| Diluted |
47,883 | 47,883 | 47,261 | 47,261 | ||||||||||||||||||||
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|
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|
|
|
|
|
|||||||||||||||||
Explanation of Non-GAAP Adjustments
| (1) | The adjustments result in an annual effective tax rate of 32% and 35% for the as adjusted amounts for the year ended April 30, 2013 and 2012, respectively. |
| (2) | The year ended April 30, 2013 includes the tax effect on restructuring charges, transaction and integration costs associated with the acquisition of PDI Ninth House, and separation costs, while the year ended April 30, 2012 includes the tax effect on the separation costs related to changes in certain leadership positions and restructuring charges. |
KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO
EBITDA AND ADJUSTED EBITDA (NON-GAAP)
(in thousands)
(unaudited)
| Three Months Ended April 30, 2013 | ||||||||||||||||||||
| Executive Recruitment |
Leadership & Talent Consulting |
Futurestep | Corporate | Consolidated | ||||||||||||||||
| Fee revenue |
$ | 136,791 | $ | 60,116 | $ | 30,995 | $ | — | $ | 227,902 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income |
$ | 12,197 | ||||||||||||||||||
| Other income, net |
2,501 | |||||||||||||||||||
| Interest expense, net |
(644 | ) | ||||||||||||||||||
| Income tax provision |
5,595 | |||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries, net |
543 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Operating income (loss) |
$ | 26,484 | $ | (1,292 | ) | $ | 3,834 | $ | (13,634 | ) | 15,392 | |||||||||
| Depreciation and amortization |
2,243 | 2,625 | 240 | 769 | 5,877 | |||||||||||||||
| Other income (loss), net |
518 | (146 | ) | 36 | 2,093 | 2,501 | ||||||||||||||
| Equity in earnings of unconsolidated subsidiaries, net |
129 | — | — | 414 | 543 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
29,374 | 1,187 | 4,110 | (10,358 | ) | 24,313 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA margin |
21.5 | % | 2.0 | % | 13.3 | % | 10.7 | % | ||||||||||||
| Restructuring (recoveries) charges, net |
(2,607 | ) | 5,080 | 441 | 7 | 2,921 | ||||||||||||||
| Transaction and integration costs |
— | — | — | 591 | 591 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA |
$ | 26,767 | $ | 6,267 | $ | 4,551 | $ | (9,760 | ) | $ | 27,825 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA margin |
19.6 | % | 10.4 | % | 14.7 | % | 12.2 | % | ||||||||||||
| Three Months Ended April 30, 2012 | ||||||||||||||||||||
| Executive Recruitment |
Leadership & Talent Consulting |
Futurestep | Corporate | Consolidated | ||||||||||||||||
| Fee revenue |
$ | 137,162 | $ | 31,650 | $ | 29,275 | $ | — | $ | 198,087 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income |
$ | 12,028 | ||||||||||||||||||
| Other income, net |
2,761 | |||||||||||||||||||
| Interest expense, net |
(511 | ) | ||||||||||||||||||
| Income tax provision |
6,152 | |||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries, net |
578 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Operating income (loss) |
$ | 22,419 | $ | 4,971 | $ | 1,333 | $ | (13,371 | ) | 15,352 | ||||||||||
| Depreciation and amortization |
2,103 | 671 | 285 | 591 | 3,650 | |||||||||||||||
| Other income, net |
218 | 18 | 9 | 2,516 | 2,761 | |||||||||||||||
| Equity in earnings of unconsolidated subsidiaries, net |
159 | — | — | 419 | 578 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
24,899 | 5,660 | 1,627 | (9,845 | ) | 22,341 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA margin |
18.2 | % | 17.9 | % | 5.6 | % | 11.3 | % | ||||||||||||
| Separation costs |
— | — | 920 | 999 | 1,919 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA |
$ | 24,899 | $ | 5,660 | $ | 2,547 | $ | (8,846 | ) | $ | 24,260 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA margin |
18.2 | % | 17.9 | % | 8.7 | % | 12.2 | % | ||||||||||||
KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO
EBITDA AND ADJUSTED EBITDA (NON-GAAP)
(in thousands)
(unaudited)
| Year Ended April 30, 2013 | ||||||||||||||||||||
| Executive Recruitment |
Leadership & Talent Consulting |
Futurestep | Corporate | Consolidated | ||||||||||||||||
| Fee revenue |
$ | 522,479 | $ | 168,115 | $ | 122,237 | $ | — | $ | 812,831 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income |
$ | 33,293 | ||||||||||||||||||
| Other income, net |
6,309 | |||||||||||||||||||
| Interest expense, net |
(2,365 | ) | ||||||||||||||||||
| Income tax provision |
16,637 | |||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries, net |
2,110 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Operating income (loss) |
$ | 80,965 | $ | 6,424 | $ | 10,975 | $ | (54,488 | ) | 43,876 | ||||||||||
| Depreciation and amortization |
8,991 | 6,012 | 1,180 | 2,821 | 19,004 | |||||||||||||||
| Other income (loss), net |
793 | (75 | ) | 51 | 5,540 | 6,309 | ||||||||||||||
| Equity in earnings of unconsolidated subsidiaries, net |
434 | — | — | 1,676 | 2,110 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
91,183 | 12,361 | 12,206 | (44,451 | ) | 71,299 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA margin |
17.5 | % | 7.4 | % | 10.0 | % | 8.8 | % | ||||||||||||
| Restructuring charges, net |
8,194 | 10,198 | 3,527 | 938 | 22,857 | |||||||||||||||
| Transaction and integration costs |
— | — | — | 3,106 | 3,106 | |||||||||||||||
| Separation costs |
516 | — | — | — | 516 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA |
$ | 99,893 | $ | 22,559 | $ | 15,733 | $ | (40,407 | ) | $ | 97,778 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA margin |
19.1 | % | 13.4 | % | 12.9 | % | 12.0 | % | ||||||||||||
| Year Ended April 30, 2012 | ||||||||||||||||||||
| Executive Recruitment |
Leadership & Talent Consulting |
Futurestep | Corporate | Consolidated | ||||||||||||||||
| Fee revenue |
$ | 561,202 | $ | 115,407 | $ | 113,896 | $ | — | $ | 790,505 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income |
$ | 54,303 | ||||||||||||||||||
| Other loss, net |
(271 | ) | ||||||||||||||||||
| Interest expense, net |
(1,791 | ) | ||||||||||||||||||
| Income tax provision |
28,351 | |||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries, net |
1,850 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| Operating income (loss) |
$ | 109,934 | $ | 16,360 | $ | 8,445 | $ | (51,873 | ) | 82,866 | ||||||||||
| Depreciation and amortization |
8,140 | 2,613 | 1,070 | 2,194 | 14,017 | |||||||||||||||
| Other (loss) income, net |
(145 | ) | 146 | 41 | (313 | ) | (271 | ) | ||||||||||||
| Equity in earnings of unconsolidated subsidiaries, net |
159 | — | — | 1,691 | 1,850 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
118,088 | 19,119 | 9,556 | (48,301 | ) | 98,462 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA margin |
21.0 | % | 16.6 | % | 8.4 | % | 12.5 | % | ||||||||||||
| Restructuring charges, net |
783 | — | 146 | — | 929 | |||||||||||||||
| Separation costs |
— | — | 920 | 999 | 1,919 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA |
$ | 118,871 | $ | 19,119 | $ | 10,622 | $ | (47,302 | ) | $ | 101,310 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA margin |
21.2 | % | 16.6 | % | 9.3 | % | 12.8 | % | ||||||||||||