EX-99.1 2 d593052dex991.htm EX-99.1 EX-99.1

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 First Quarter Fiscal 2014

Results of Operations

Key highlights for the first quarter of fiscal 2014 are as follows:

 

  •   Korn/Ferry reports Q1 FY’14 fee revenue of $228.4 million, an increase of 22% compared to Q1 FY’13. Excluding the prior year acquisitions, quarterly fee revenue increased 7% (8% on a constant currency basis) from Q1 FY’13.

 

  •   Fee revenue in Executive Recruitment grew 7% (8% on a constant currency basis), from Q1 FY’13 to Q1 FY’14 and, excluding the prior year acquisitions, first quarter fee revenue in Leadership & Talent Consulting services grew 11% (12% on a constant currency basis) compared to the year-ago quarter.

 

  •   Fee revenue in Futurestep grew 3% from Q1 FY’13 to Q1 FY’14.

 

  •   Q1 FY’14 adjusted EBITDA margin was 14% compared to adjusted EBITDA margin of 11% in Q1 FY’13.

 

  •   Q1 FY’14 adjusted diluted earnings per share was $0.33 compared to adjusted diluted earnings per share of $0.22 in Q1 FY’13, excluding restructuring, separation and integration/acquisition costs of $6.6 million in Q1 FY’14. No such costs were incurred in Q1 FY’13. Including such costs, Q1 FY’14 diluted earnings per share was $0.24.

Los Angeles, CA, September 5, 2013 - Korn/Ferry International (NYSE: KFY), a premier global provider of talent management solutions, announced first quarter fee revenue of $228.4 million and adjusted diluted earnings per share of $0.33, excluding restructuring, separation and integration/acquisition costs of $6.6 million. Including such costs, diluted earnings per share was $0.24 in the three months ended July 31, 2013.

“I am pleased with our continued momentum and operating results during the first quarter. With our leadership team effectively driving our strategy, we have increased revenue within our flagship Search business and broader talent management offering year over year – most important with strong margin expansion and earnings per share growth in the quarter, on an adjusted basis” said Gary D. Burnison, CEO, Korn/Ferry International. “We are making our brand more elastic with 40 percent of the revenue mix from broader talent management offerings in the quarter. Today’s businesses are increasingly borderless and knowledge-based, and asking their workforce to do much more, with much less. Irrespective of industry or geography, talent is a driver of success. Accordingly, Korn/Ferry is transforming its business, helping organizations navigate this complex environment by linking their business and talent strategies.”

Financial Results

(dollars in millions, except per share amounts)

 

     First Quarter  
     FY’14     FY’13  

Fee revenue

    $ 228.4      $ 186.7   

Total revenue

    $ 237.6      $ 196.0   

Operating income

    $ 16.6      $ 17.0   

Operating margin

      7.3 %      9.1 % 

Net income

    $ 11.4      $ 10.4   

Basic earnings per share

    $ 0.24      $ 0.22   

Diluted earnings per share

    $ 0.24      $ 0.22   
EBITDA Results (a):    First Quarter  
     FY’14     FY’13  

EBITDA

    $ 25.3      $ 20.4   

EBITDA margin

      11.1 %      10.9 % 
Adjusted Results (b):    First Quarter  
     FY’14     FY’13  

Operating income

    $ 23.2      $ 17.0   

Operating margin

      10.2 %      9.1 % 

EBITDA (a)

    $ 31.9      $ 20.4   

EBITDA margin (a)

      14.0 %      10.9 % 

Net income

    $ 16.0      $ 10.4   

Basic earnings per share

    $ 0.34      $ 0.22   

Diluted earnings per share

    $ 0.33      $ 0.22   

 

(a) EBITDA refers to earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA to exclude restructuring charges (net of recoveries) and/or transaction, integration/acquisition 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):

 

     First Quarter  
     FY’14      FY’13  

Restructuring charges

    $ 3.7       $  —     

Separation costs

    $ 2.5       $ —     

Integration/acquisition costs

    $ 0.4       $  —     

Fee revenue was $228.4 million in Q1 FY’14, an increase of $41.7 million, or 22% (23% on a constant currency basis), compared to Q1 FY’13, primarily driven by a $31.7 million and a $9.2 million increase in fee revenue in Leadership & Talent Consulting and Executive Recruitment, respectively. The overall fee revenue increase was driven by fee revenue growth in the industrial, life science/healthcare, financial services and consumer sectors. Excluding the PDI Ninth House and Global Novations acquisitions (the “prior year acquisitions”), fee revenue was $199.9 million in Q1 FY’14, an increase of 7% compared to the year-ago quarter (8% on a constant currency basis).

Compensation and benefit expenses were $152.8 million in Q1 FY’14, an increase of $24.8 million, or 19%, compared to Q1 FY’13. The prior year acquisitions contributed $17.2 million to the increase in compensation and benefit expenses. The remainder of the increase was due to an increase in performance related bonus expense, separation costs and an increase in the fair value of amounts owed under certain deferred compensation plans, which amounts were offset by an increase in the fair value of marketable securities classified as trading in other income (loss), net.

General and administrative expenses were $39.9 million in Q1 FY’14, an increase of $6.5 million, or 19%, compared to Q1 FY’13. The prior year acquisitions contributed $4.5 million to the increase in general and administrative expenses in Q1 FY’14 compared to Q1 FY’13. The rest of the increase was due to increases in legal and professional fees and marketing and business development expenses.

As previously disclosed, during Q1 FY’14, the Company continued with the integration of PDI Ninth House by consolidating and eliminating redundant office space in select offices and consolidating certain overhead functions. As a result, the Company recorded net restructuring charges and incurred integration/acquisition costs, as well as separation costs in Q1 FY’14. Adjusted EBITDA was $31.9 million in Q1 FY’14, an increase of $11.5 million, or 56%, compared to Q1 FY’13. Adjusted EBITDA margin was 14.0% and 10.9% in Q1 FY’14 and Q1 FY’13, respectively.

On a GAAP basis, operating income was $16.6 million in Q1 FY’14, a decrease of $0.4 million, or 2% compared to Q1 FY’13 resulting in a margin of 7.3% in the current quarter compared to 9.1% in the year-ago quarter.

Balance Sheet and Liquidity

Cash and marketable securities were $280.4 million at July 31, 2013, compared to $366.0 million at April 30, 2013. Cash and marketable securities include $111.7 million held in trust for deferred compensation plans at July 31, 2013, compared to $98.0 million at April 30, 2013. Cash and marketable securities decreased by $85.6 million from April 30, 2013, mainly due to the payment of FY’13 annual bonuses in Q1 FY’14 and the contingent consideration paid to selling shareholders of PDI Ninth House partially offset by cash provided by operating activities.

Results by Segment

Selected Executive Recruitment Data

(dollars in millions)

 

     First Quarter  
     FY’14     FY’13  

Fee revenue

    $ 136.6      $ 127.4   

Total revenue

    $ 142.5      $ 133.2   

Operating income

    $ 28.3      $ 22.4   

Operating margin

      20.7 %      17.6 % 

Ending number of consultants

      416        415   

Average number of consultants

      408        408   

Engagements billed

      2,790        2,631   

New engagements (a)

      1,216        1,210   
EBITDA Results (b):    First Quarter  
     FY’14     FY’13  

EBITDA

    $ 30.5      $ 24.9   

EBITDA margin

      22.3 %      19.6 % 
Adjusted Results (c):    First Quarter  
     FY’14     FY’13  

Operating income

    $ 29.6      $ 22.4   

Operating margin

      21.7 %      17.6 % 

EBITDA (b)

    $ 31.8      $ 24.9   

EBITDA margin (b)

      23.3 %      19.6 % 

 

(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):

 

     First Quarter  
     FY’14      FY’13  

Restructuring charges

    $ 1.3       $  —     

Executive Recruitment

Fee revenue was $136.6 million in Q1 FY’14, an increase of $9.2 million, or 7% (8% on a constant currency basis), compared to Q1 FY’13. The increase in fee revenue was driven by fee revenue increases in Europe, Asia, and North America partially offset by a decrease in Latin America. This increase is primarily attributed to a 6% increase in the number of executive recruitment engagements billed and a 1% increase in the weighted-average fee billed per engagement compared to the year-ago quarter.

On a GAAP basis, operating income was $28.3 million in Q1 FY’14, an increase of $5.9 million, or 26%, compared to Q1 FY’13 resulting in an operating margin of 20.7% in the current quarter compared to 17.6% in the year-ago quarter. This increase is primarily attributed to the $9.2 million increase in fee revenue in Q1 FY’14 as compared to Q1 FY’13 and a decrease of $1.6 million in general and administrative expenses offset by an increase of $3.8 million in compensation and benefit expenses driven by an increase in performance related bonus expense and we incurred restructuring expenses of $1.3 million in Q1 FY’14, and none in Q1 FY’13. The decrease in general and administrative expenses was due to a decrease in legal and professional fees and travel expenses as a result of cost control initiatives and a reduction in the foreign exchange loss in Q1 FY’14 compared to Q1 FY’13.

Adjusted EBITDA was $31.8 million during Q1 FY’14, an increase of $6.9 million, or 28%, compared to Q1 FY’13. Adjusted EBITDA margin was 23.3%, in Q1 FY’14 compared to 19.6% in Q1 FY’13 due to an increase in fee revenue and lower incremental operating costs.

Selected Leadership & Talent Consulting Data

(dollars in millions)

 

     First Quarter  
     FY’14     FY’13  

Fee revenue

    $ 60.1      $ 28.4   

Total revenue

    $ 62.1      $ 29.8   

Operating income

    $ 4.3      $ 4.3   

Operating margin

      7.2 %      15.0 % 

Ending number of consultants (a)

      134        48   

Staff utilization (b)

      65 %      64 % 
EBITDA Results (c):    First Quarter  
     FY’14     FY’13  

EBITDA

    $ 7.2      $ 4.9   

EBITDA margin

      12.1 %      17.2 % 
Adjusted Results (d):    First Quarter  
     FY’14     FY’13  

Operating income

    $ 5.5      $ 4.3   

Operating margin

      9.1 %      15.0 % 

EBITDA (c)

    $ 8.4      $ 4.9   

EBITDA margin (c)

      14.0 %      17.2 % 

 

(a) Represents number of employees originating consulting services. FY’14 includes approximately 76 consultants from the prior 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.
(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):

 

     First Quarter  
     FY’14      FY’13  

Restructuring charges

    $ 1.2       $  —     

Leadership & Talent Consulting

Fee revenue was $60.1 million in Q1 FY’14, an increase of $31.7 million, or 112% (113% on a constant currency basis), from the year-ago quarter. Excluding the prior year acquisitions, the increase in fee revenue in Q1 FY’14 was $3.2 million, or 11% (12% on a constant currency basis) compared to Q1 FY’13. The increase in fee revenue (excluding the prior year acquisitions) was primarily due to an increase in consulting fee revenue driven by a 14% increase in the number of clients in Q1 FY’14 compared to Q1 FY’13.

On a GAAP basis, operating income was $4.3 million in both Q1 FY’14 and Q1 FY’13, resulting in an operating margin of 7.2% in the current quarter compared to 15.0% in the year-ago quarter. This decrease in operating margin is primarily attributed to acquisition related increases in operating expenses offset by an increase in fee revenue.

Adjusted EBITDA was $8.4 million during Q1 FY’14, an increase of $3.5 million, or 71%, compared to Q1 FY’13, primarily due to the prior year acquisitions. Adjusted EBITDA margin was 14.0% compared to 17.2% in Q1 FY’13 and was negatively impacted, in part by incremental infrastructure and support services costs related to the prior year acquisitions as previously discussed in Q4 FY’13.

Selected Futurestep Data

(dollars in millions)

 

     First Quarter  
     FY’14     FY’13  

Fee revenue

    $ 31.7      $ 30.9   

Total revenue

    $ 33.0      $ 33.0   

Operating income

    $ 2.5      $ 3.2   

Operating margin

      8.0 %      10.3 % 

Engagements billed

      1,230        1,234   

New engagements (a)

      625        645   
EBITDA Results (b):    First Quarter  
     FY’14     FY’13  

EBITDA

    $ 3.5      $ 3.5   

EBITDA margin

      11.1 %      11.3 % 
Adjusted Results (c):    First Quarter  
     FY’14     FY’13  

Operating income

    $ 3.7      $ 3.2   

Operating margin

      11.6 %      10.3 % 

EBITDA (b)

    $ 4.7      $ 3.5   

EBITDA margin (b)

      14.7 %      11.3 % 

 

(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):

 

     First Quarter  
     FY’14      FY’13  

Restructuring charges

    $ 1.2       $  —     

Futurestep

Fee revenue was $31.7 million in Q1 FY’14, an increase of $0.8 million, or 3%, compared to the year-ago quarter. The increase in fee revenue was driven by a 3% increase in weighted-average fee billed per engagement in Q1 FY’14 compared to Q1 FY’13, which was driven by increases in recruitment process outsourcing and recruitment.

On a GAAP basis, operating income was $2.5 million in Q1 FY’14, a decrease of $0.7 million, compared to Q1 FY’13 resulting in an operating margin of 8.0% in the current quarter compared to 10.3% in the year-ago quarter. The decrease in operating income was due to restructuring expenses of $1.2 million and an increase in costs to execute resource process outsourcing engagements offset by an increase in fee revenue.

Adjusted EBITDA was $4.7 million during Q1 FY’14, an increase of $1.2 million, or 34%, compared to Q1 FY’13, due primarily to the increase in fee revenue. Adjusted EBITDA margin increased to 14.7% in Q1 FY’14 compared to 11.3% in Q1 FY’13 due to an 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 $225 million to $237 million in Q2 FY’14 and diluted earnings per share are likely to be in the range of $0.32 to $0.38.

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, 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 (net of recoveries) and/or transaction, integration/acquisition and separation costs;

 

  •   adjusted net income, adjusted to exclude restructuring (net of recoveries) and/or transaction, integration/acquisition and separation costs, net of income tax effect;

 

  •   adjusted basic and diluted earnings per share, adjusted to exclude restructuring (net of recoveries) and/or transaction, integration/acquisition 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 (net of recoveries) and/or transaction, integration/acquisition 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
July 31,		  
     2013     2012  
     (unaudited)  

Fee revenue

    $ 228,437      $ 186,694   

Reimbursed out-of-pocket engagement expenses

      9,150        9,329   
  

 

 

    

 

 

  

Total revenue

      237,587        196,023   
  

 

 

    

 

 

  

Compensation and benefits

      152,770        128,036   

General and administrative expenses

      39,871        33,443   

Reimbursed expenses

      9,150        9,329   

Cost of services

      9,509        4,464   

Depreciation and amortization

      5,944        3,742   

Restructuring charges, net

      3,682        —     
  

 

 

    

 

 

  

Total operating expenses

      220,926        179,014   
  

 

 

    

 

 

  

Operating income

      16,661        17,009   

Other income (loss), net

      2,267        (1,017 ) 

Interest expense, net

      (591 )      (599 ) 
  

 

 

    

 

 

  

Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries

      18,337        15,393   

Income tax provision

      7,385        5,605   

Equity in earnings of unconsolidated subsidiaries, net

      465        630   
  

 

 

    

 

 

  

Net income

    $ 11,417      $ 10,418   
  

 

 

    

 

 

  

Earnings per common share:

     

Basic

    $ 0.24      $ 0.22   
  

 

 

    

 

 

  

Diluted

    $ 0.24      $ 0.22   
  

 

 

    

 

 

  

Weighted-average common shares outstanding:

     

Basic

      47,665        46,810   
  

 

 

    

 

 

  

Diluted

      48,519        47,655   
  

 

 

    

 

 

  

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

(unaudited)

 

     Three Months Ended July 31,  
     2013           2012     % Change  

Fee Revenue:

         

Executive recruitment:

         

North America

    $ 74,147        $ 72,106        3 % 

EMEA

      34,377          29,823        15 % 

Asia Pacific

      21,128          17,383        22 % 

South America

      7,003          8,134        (14 %) 
  

 

 

      

 

 

    

Total executive recruitment

      136,655          127,446        7 % 

Leadership & Talent Consulting

      60,062          28,392        112 % 

Futurestep

      31,720          30,856        3 % 
  

 

 

      

 

 

    

Total fee revenue

      228,437          186,694        22 % 

Reimbursed out-of-pocket engagement expenses

      9,150          9,329        (2 %) 
  

 

 

      

 

 

    

Total revenue

    $ 237,587        $ 196,023        21 % 
  

 

 

      

 

 

    

Reconciliation of Operating Income (GAAP) to Adjusted Operating Income

         
           Margin           Margin  

Operating Income:

         

Executive recruitment:

         

North America

    $ 16,324        22.0 %    $ 18,074        25.1 % 

EMEA

      5,960        17.3 %      1,788        6.0 % 

Asia Pacific

      4,500        21.3 %      498        2.9 % 

South America

      1,496        21.4 %      2,089        25.7 % 
  

 

 

      

 

 

    

Total executive recruitment

      28,280        20.7 %      22,449        17.6 % 

Leadership & Talent Consulting

      4,335        7.2 %      4,262        15.0 % 

Futurestep

      2,545        8.0 %      3,182        10.3 % 

Corporate

      (18,499 )        (12,884 )   
  

 

 

      

 

 

    

Total operating income

    $ 16,661        7.3 %    $ 17,009        9.1 % 
  

 

 

      

 

 

    

Restructuring, Separation, and Integration/Acquisition Costs, net:

         

Executive recruitment:

         

North America

    $ 816        1.1 %    $ —          —     

EMEA

      460        1.4 %      —          —     

Asia Pacific

      60        0.3 %      —          —     

South America

      —          —          —          —     
  

 

 

      

 

 

    

Total executive recruitment

      1,336        1.0 %      —          —     

Leadership & Talent Consulting

      1,149        1.9 %      —          —     

Futurestep

      1,134        3.6 %      —          —     

Corporate

      2,957          —       
  

 

 

      

 

 

    

Total restructuring, separation, and integration/acquisition costs, net

    $ 6,576        2.9 %    $ —          —     
  

 

 

      

 

 

    
           Margin           Margin  

Adjusted Operating Income:

    (Excluding Restructuring, Separation, and Integration/Acquisition Costs, net)

         

Executive recruitment:

         

North America

    $ 17,140        23.1 %    $ 18,074        25.1 % 

EMEA

      6,420        18.7 %      1,788        6.0 % 

Asia Pacific

      4,560        21.6 %      498        2.9 % 

South America

      1,496        21.4 %      2,089        25.7 % 
  

 

 

      

 

 

    

Total executive recruitment

      29,616        21.7 %      22,449        17.6 % 

Leadership & Talent Consulting

      5,484        9.1 %      4,262        15.0 % 

Futurestep

      3,679        11.6 %      3,182        10.3 % 

Corporate

      (15,542 )        (12,884 )   
  

 

 

      

 

 

    

Total adjusted operating income

    $ 23,237        10.2 %    $ 17,009        9.1 % 
  

 

 

      

 

 

    

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

     July 31,
2013		     April 30,
2013		  
     (unaudited)        

ASSETS

     

Cash and cash equivalents

    $ 150,426      $ 224,066   

Marketable securities

      9,720        20,347   

Receivables due from clients, net of allowance for doubtful accounts of $8,978 and $9,097 respectively

      182,177        161,508   

Income taxes and other receivables

      6,452        8,944   

Deferred income taxes

      4,051        3,511   

Prepaid expenses and other assets

      32,701        28,724   
  

 

 

    

 

 

  

Total current assets

      385,527        447,100   
  

 

 

    

 

 

  

Marketable securities, non-current

      120,253        121,569   

Property and equipment, net

      51,906        53,628   

Cash surrender value of company owned life insurance policies, net of loans

      87,583        85,873   

Deferred income taxes

      59,716        63,203   

Goodwill

      257,626        257,293   

Intangible assets, net

      56,027        58,187   

Investments and other assets

      29,554        28,376   
  

 

 

    

 

 

  

Total assets

    $ 1,048,192      $ 1,115,229   
  

 

 

    

 

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Accounts payable

    $ 20,045      $ 19,460   

Income taxes payable

      7,477        5,502   

Compensation and benefits payable

      95,596        160,298   

Other accrued liabilities

      65,542        83,291   
  

 

 

    

 

 

  

Total current liabilities

      188,660        268,551   
  

 

 

    

 

 

  

Deferred compensation and other retirement plans

      162,965        159,706   

Other liabilities

      20,776        22,504   
  

 

 

    

 

 

  

Total liabilities

      372,401        450,761   
  

 

 

    

 

 

  

Stockholders’ equity

     

Common stock: $0.01 par value, 150,000 shares authorized, 61,773 and 61,022 shares issued and 49,296 and 48,734 shares outstanding, respectively

      434,495        431,508   

Retained earnings

      247,507        236,090   

Accumulated other comprehensive loss, net

      (5,714 )      (2,631 ) 
  

 

 

    

 

 

  

Stockholders’ equity

      676,288        664,967   

Less: notes receivable from stockholders

      (497 )      (499 ) 
  

 

 

    

 

 

  

Total stockholders’ equity

      675,791        664,468   
  

 

 

    

 

 

  

Total liabilities and stockholders’ equity

    $ 1,048,192      $ 1,115,229   
  

 

 

    

 

 

  

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
July 31, 2013		     Three Months Ended
July 31, 2012		  
     As Reported     Adjustments     As Adjusted     As Reported     Adjustments      As Adjusted  

Fee revenue

    $ 228,437        $ 228,437      $ 186,694         $ 186,694   

Reimbursed out-of-pocket engagement expenses

      9,150          9,150        9,329           9,329   
  

 

 

      

 

 

    

 

 

       

 

 

  

Total revenue

      237,587          237,587        196,023           196,023   
  

 

 

      

 

 

    

 

 

       

 

 

  

Compensation and benefits

      152,770        (2,500 )      150,270        128,036           128,036   

General and administrative expenses

      39,871        (394 )      39,477        33,443           33,443   

Reimbursed expenses

      9,150          9,150        9,329           9,329   

Cost of services

      9,509          9,509        4,464           4,464   

Depreciation and amortization

      5,944          5,944        3,742           3,742   

Restructuring charges, net

      3,682        (3,682 )      —          —             —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Total operating expenses

      220,926        (6,576 )      214,350        179,014        —           179,014   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Operating income

      16,661        6,576        23,237        17,009        —           17,009   

Other income, net

      2,267          2,267        (1,017 )         (1,017 ) 

Interest expense, net

      (591 )        (591 )      (599 )         (599 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries

      18,337        6,576        24,913        15,393           15,393   

Income tax provision (1) (2)

      7,385        2,005        9,390        5,605           5,605   

Equity in earnings of unconsolidated subsidiaries, net

      465          465        630           630   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Net income

    $ 11,417      $ 4,571      $ 15,988      $ 10,418      $ —         $ 10,418   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Earnings per common share:

              

Basic

    $ 0.24        $ 0.34      $ 0.22         $ 0.22   
  

 

 

      

 

 

    

 

 

       

 

 

  

Diluted

    $ 0.24        $ 0.33      $ 0.22         $ 0.22   
  

 

 

      

 

 

    

 

 

       

 

 

  

Weighted-average common shares outstanding:

              

Basic

      47,665          47,665        46,810           46,810   
  

 

 

      

 

 

    

 

 

       

 

 

  

Diluted

      48,519          48,519        47,655           47,655   
  

 

 

      

 

 

    

 

 

       

 

 

  

Explanation of Non-GAAP Adjustments

 

(1) The adjustments result in an effective tax rate of 38% for the as adjusted amounts for the three months ended July 31, 2013.
(2) The three months ended July 31, 2013 includes the tax effect on restructuring charges, separation costs, and integration/acquisition costs associated with the acquisition of PDI Ninth House.

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 July 31, 2013  
     Executive
Recruitment		     Leadership
& Talent
Consulting		     Futurestep     Corporate     Consolidated  

Fee revenue

    $ 136,655      $ 60,062      $ 31,720      $ —        $ 228,437   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income

            $ 11,417   

Other income, net

              (2,267 ) 

Interest expense, net

              591   

Income tax provision

              7,385   

Equity in earnings of unconsolidated subsidiaries, net

              (465 ) 
          

 

 

  

Operating income (loss)

    $ 28,280      $ 4,335      $ 2,545      $ (18,499 )      16,661   

Depreciation and amortization

      1,778        2,897        408        861        5,944   

Other income, net

      381        8        565        1,313        2,267   

Equity in earnings of unconsolidated subsidiaries, net

      102        —          —          363        465   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

EBITDA

      30,541        7,240        3,518        (15,962 )      25,337   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

EBITDA margin

      22.3 %      12.1 %      11.1 %        11.1 % 

Restructuring charges, net

      1,336        1,149        1,134        63        3,682   

Separation costs

      —          —          —          2,500        2,500   

Integration/acquisition costs

      —          —          —          394        394   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA

    $ 31,877      $ 8,389      $ 4,652      $ (13,005 )    $ 31,913   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA margin

      23.3 %      14.0 %      14.7 %        14.0 % 
     Three Months Ended July 31, 2012  
     Executive
Recruitment		     Leadership
& Talent
Consulting		     Futurestep     Corporate     Consolidated  

Fee revenue

    $ 127,446      $ 28,392      $ 30,856      $ —        $ 186,694   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income

            $ 10,418   

Other loss, net

              1,017   

Interest expense, net

              599   

Income tax provision

              5,605   

Equity in earnings of unconsolidated subsidiaries, net

              (630 ) 
          

 

 

  

Operating income (loss)

    $ 22,449      $ 4,262      $ 3,182      $ (12,884 )      17,009   

Depreciation and amortization

      2,206        617        296        623        3,742   

Other income (loss), net

      58        15        9        (1,099 )      (1,017 ) 

Equity in earnings of unconsolidated subsidiaries, net

      227        —          —          403        630   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

EBITDA

      24,940        4,894        3,487        (12,957 )      20,364   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

EBITDA margin

      19.6 %      17.2 %      11.3 %        10.9 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA

    $ 24,940      $ 4,894      $ 3,487      $ (12,957 )    $ 20,364   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA margin

      19.6 %      17.2 %      11.3 %        10.9 %