Investor Relations

Press Release

Korn/Ferry International Announces Fiscal 2012 and Fourth Quarter Results of Operations

June 13, 2012
Highlights
- FY'12 fee revenue increased $46.2 million, or 6%, to $790.5 million from $744.3 million in FY'11.
- FY'12 diluted earnings per share was $1.15 and excluding separation and restructuring charges, net, adjusted diluted earnings per share was $1.19 in FY'12.
- Cash and marketable securities increased $48.6 million, or 13%, to $417.7 million as of April 30, 2012, in comparison to $369.1 million as of April 30, 2011.
- Fee revenue from industrial, consumer goods, and life sciences/healthcare sectors, increased in FY'12 compared to FY'11, offset by declines in the financial services and technology sectors.
- Fee revenue in Futurestep and LTC services grew 26% and 16%, respectively, from FY'11 to FY'12, further substantiating the success of our diversified mod

LOS ANGELES, June 13, 2012/PRNewswire/ --  Korn/Ferry International (NYSE: KFY), a premier global provider of talent management solutions, announced near record FY'12 fee revenue of $790.5 millioncompared to fee revenue of $744.3 millionin FY'11. 

"I am pleased with our results for the fiscal year and our overall progress in making the Korn/Ferry brand synonymous with talent management," said Gary Burnison, CEO of Korn/Ferry International .  For the fiscal year, we increased our global revenue 6% to $790 million, with an adjusted operating margin of almost 11 percent. "We have continued to elevate our business.  For Executive Search, we have now increased our average fee nearly 50% over the past five years.  Our newer offerings, Futurestep and Leadership and Talent Consulting , experienced double digit growth for the fiscal year, further validating our differentiated strategy.  Looking forward, most businesses are fighting seemingly increasing headwinds.  Nevertheless, driven by our diversified strategy, we will continue to build a brand for Korn/Ferry that is strongly tied to the attraction, engagement, development and retention of an organization's talent."

Financial Results
(dollars in millions, except per share amounts)


Fourth Quarter


Year to Date



FY'12


FY'11


FY'12


FY'11


Fee revenue

$          198.1


$        197.3


$       790.5


$         744.3


Total revenue

$          207.6


$        205.8


$       826.8


$         776.3


Operating income

$            15.4


$           26.2


$         82.9


$           85.8


Operating margin

7.8%


13.3%


10.5%


11.5%


Net income

$            12.0


$           20.4


$         54.3


$           58.9


Basic earnings per share

$            0.26


$           0.45


$         1.17


$           1.30


Diluted earnings per share

$            0.25


$           0.43


$         1.15


$           1.27











Adjusted Results (a):

Fourth Quarter


Year to Date



FY'12


FY'11


FY'12


FY'11


Operating income

$            17.3


$           26.2


$         85.7


$           87.9


Operating margin

8.7%


13.3%


10.8%


11.8%


Net income

$            13.3


$           18.3


$         56.2


$           58.1


Basic earnings per share

$            0.28


$           0.40


$         1.21


$           1.28


Diluted earnings per share

$            0.28


$           0.39


$         1.19


$           1.25











(a) Adjusted results are non-GAAP financial measures that exclude the following:



Fourth Quarter


Year to Date



FY'12


FY'11


FY'12


FY'11


Separation charges related to leadership positions

$             1.9


$              —


$            1.9


$              —


Restructuring charges, net

$              —


$              —


$            0.9


$             2.1


Certain tax adjustments  (1)

$              —


$           (2.1)


$             —


$           (2.1)











(1) In fiscal year 2011, adjusted results include reversal of reserves previously taken against an uncertain tax position.


 



Fiscal 2012 results

Fee revenue was $790.5 millionin FY'12 compared to $744.3 millionin FY'11, an increase of $46.2 million, or 6%, with increases in fee revenue in all regions of Executive Recruitment, due to increases  in our leadership and talent consulting services, and an increase in Futurestep.  The increase in fee revenue was driven by a 4% increase in the weighted-average fee billed per engagement during FY'12 as compared to FY'11 and a 2% increase in the overall number of engagements billed during the same period.  Weighted-average fees billed are impacted by the mix of engagements by geography and segment, and fluctuating foreign currencies.  On a constant currency basis, fee revenue increased $27.9 million, or 4%.

Compensation and benefit expenses were $534.2 millionin FY'12, an increase of $26.8 million, or 5%, compared to $507.4 millionin FY'11.  The increase in compensation and benefit expenses was primarily due to a 14% increase in salaries and related payroll taxes in FY'12 as compared to FY'11 due in large part to a 12% growth in average worldwide headcount, and to a lesser extent, $1.9 millionof separation charges related to changes in certain Corporate and Futurestep leadership positions recorded in FY'12.  The growth in average worldwide headcount was primarily due to an increase in execution and support staff to support our growth in Futurestep and other business activities.  The increase in compensation and benefits expense was partially offset by a decrease in performance related bonus expense, which was impacted by a change in the mix of business.  On a constant currency basis, compensation and benefit expenses increased $13.6 million, or 3%.

General and administrative expenses were $138.9 millionin FY'12, an increase of $22.4 million, or 19%, from $116.5 millionin FY'11.  The increase was attributable to an increase in legal and other professional fees, premise and office expenses, and business development expenses, which includes costs associated with social media initiatives.  Also contributing to the increase in general and administrative expenses were foreign exchange transaction losses in FY'12 compared to foreign exchange transaction gains in FY'11.  Partially, offsetting these increases was a decrease in bad debt expense due to greater than anticipated collections in FY'12.  On a constant currency basis, general and administrative expenses increased $18.4 million, or 16%.

Operating income was $82.9 millionin FY'12 compared to operating income of $85.8 millionin FY'11, a decrease of $2.9 million, or 3%.

Fiscal 2012 Fourth Quarter Results   

Fee revenue was $198.1 millionin Q4 FY'12 compared to $197.3 millionin Q4 FY'11, an increase of $0.8 million, which reflects a $4.0 millionincrease in fee revenue in Futurestep offset by a $3.2 milliondecrease in Executive Recruitment fee revenue.  The increase in fee revenue was driven by a 7% increase in the weighted-average fee billed per engagement, which was partially offset by a 6% decrease in the overall number of engagements billed compared to the year-ago fiscal quarter.  Weighted-average fee billed per engagement is impacted by the mix of engagements by geography and segment, and fluctuating foreign currencies.  On a constant currency basis, fee revenue increased $2.0 million.

Compensation and benefit expenses were $139.6 millionin Q4 FY'12, an increase of $6.1 million, or 5%, compared to $133.5 millionin Q4 FY'11.  The increase in compensation and benefit expenses was primarily due to an increase in salaries and related payroll taxes in Q4 FY'12 compared to Q4 FY'11 due in large part to an increase in the worldwide headcount to support the growth in Futurestep.  Compensation and benefits during Q4 FY'12 included $1.9 millionof separation charges related to changes in certain corporate and Futurestep leadership positions.  On a constant currency basis, compensation and benefits increased $7.3 million, or 5%.

General and administrative expenses were $34.7 millionin Q4 FY'12, an increase of $5.7 million, or 20%, from $29.0 millionin Q4 FY'11.  This increase was attributable to an increase in legal and other professional fees and a foreign exchange transaction loss in Q4 FY'12 compared to a gain in the same quarter last year.  Offsetting these increases was a decrease in bad debt expense due to greater than anticipated collections in Q4 FY'12.  Also in Q4 FY'11, we decreased the fair value contingent consideration from a prior acquisition, which reduced general and administrative expenses.  There was no corresponding reduction in fair value of contingent consideration in Q4 FY'12.  On a constant currency basis, general and administrative expenses increased $5.9 million, or 20%.

Operating income was $15.4 millionin Q4 FY'12 compared to operating income of $26.2 millionin Q4 FY'11, a decrease of $10.8 million, or 41%. 

Balance Sheet and Liquidity

Cash and marketable securities were $417.7 millionat April 30, 2012compared to $369.1 millionat April 30, 2011.  Cash and marketable securities include $82.2 millionand $71.4 millionheld in trust for deferred compensation plans at April 30, 2012and 2011, respectively.  Cash and marketable securities increased by $48.6 millionfrom April 30, 2011, mainly due to cash provided by operating activities, partially offset by the payment of FY'11 annual bonuses paid in Q1 FY'12.

Results by Segment

Selected Executive Recruitment Data
(dollars in millions)


Fourth Quarter


Year to Date



FY'12


FY'11


FY'12


FY'11


Fee revenue

$       168.8


$       172.0


$       676.6


$         654.1


Total revenue

$       176.6


$       178.8


$       706.8


$         680.3


Operating income

$         28.0


$         30.7


$       128.5


$         111.4


Operating margin

16.6%


17.9%


19.0%


17.0%











Ending number of consultants

442


471


442


471


Average number of consultants

441


472


458


474


Engagements billed

3,863


4,096


11,656


11,501


New engagements (a)

1,938


2,131


7,753


7,905











Adjusted Results (b):

Fourth Quarter


Year to Date



FY'12


FY'11


FY'12


FY'11


Operating income

$         28.0


$         30.7


$       129.3


$         113.6


Operating margin

16.6%


17.9%


19.1%


17.4%








(a)

Represents new engagements opened in the respective period



(b)

Adjusted results are non-GAAP financial measures that exclude restructuring charges, net, of $0.8 million and $2.2 million during the year ended April 30, 2012 and 2011, respectively (see attached reconciliations). No restructuring costs were incurred during the three months ended April 30, 2012 and 2011

Fiscal 2012 Results - Executive Recruitment

Fee revenue was $676.6 millionin FY'12 compared to $654.1 millionin FY'11, an increase of $22.5 million, or 3%, mainly due to an increase in fee revenue in our leadership and talent consulting services.  The increase in fee revenue was driven by a 2% increase in the weighted-average fee billed per engagement in FY'12 as compared to FY'11 and a 1% increase in the number of executive recruitment engagements billed during the same period.  Weighted-average fees billed are impacted by the mix of engagements by geography and fluctuating foreign currencies.  On a constant currency basis, fee revenue increased $9.1 million, or 1%.

Operating income was $128.5 millionin FY'12 compared to operating income of $111.4 millionin FY'11, an increase of $17.1 million, or 15%.  The increase is primarily attributable to a $22.5 millionincrease in fee revenue and a decrease of restructuring charges, net of $1.4 million, which was offset by an increase in compensation and benefit expenses and general and administrative expenses of $3.2 millionand $2.8 million, respectively, during FY'12 compared to FY'11.  The increase in compensation and benefit expenses primarily resulted from a 7% increase in salaries and related payroll taxes due in large part to a 5% growth in average executive recruitment headcount.  The increase in general and administrative expenses was primarily due to increases in premise and office expenses and an increase in foreign exchange transaction losses, partially offset by a decrease in bad debt expense due to greater than anticipated collections in FY'12. 

Fiscal 2012 Fourth Quarter Results

Fee revenue was $168.8 millionin Q4 FY'12, a decrease of $3.2 million, or 2%, when compared to fee revenue of $172.0 millionin Q4 FY'11.  Fee revenue decreased primarily due to a 6% decrease in the number of executive recruitment engagements billed driven by decreases in engagements opened in the Asian and European regions, which was partially offset by a 4% increase in the weighted-average fee per engagement billed when compared to Q4 FY'11.  Weighted-average fee billed per engagement is impacted by the mix of engagements by geography and fluctuating foreign currencies.  On a constant currency basis, fee revenue decreased $2.2 million, or 1%. 

Operating income was $28.0 millionin Q4 FY'12 compared to operating income of $30.7 millionin Q4 FY'11, a decrease of $2.7 million.  This decrease is primarily attributed to the $3.2 milliondecrease in fee revenue and an increase in compensation and benefit expenses of $0.8 million, offset by a $0.9 milliondecrease in general and administrative expenses, in Q4 FY'12 as compared to Q4 FY'11.  The increase in compensation and benefits expense primarily resulted from an increase in the variable component of compensation when compared to prior year.  The decrease in general and administrative expenses was due to a reduction in bad debt expense due to greater than anticipated collections in Q4 FY'12, offset by a foreign exchange transaction loss in Q4 FY'12 compared to a gain in the same quarter last year.

Selected Futurestep Data
(dollars in millions)


Fourth Quarter


Year to Date



FY'12


FY'11


FY'12


FY'11


Fee revenue

$           29.3


$         25.3


$       113.9


$           90.2


Total revenue

$           31.0


$         27.0


$       120.0


$           96.0


Operating income

$             0.8


$           1.5


$           6.3


$             5.0


Operating margin

2.7%


6.0%


5.5%


5.5%











Adjusted Results (a):

Fourth Quarter


Year to Date



FY'12


FY'11


FY'12


FY'11


Operating income

$              1.7


$            1.5


$            7.3


$              4.9


Operating margin

5.8%


6.0%


6.4%


5.4%











(a) Adjusted results are non-GAAP financial measures that exclude the following:



Fourth Quarter


Year to Date



FY'12


FY'11


FY'12


FY'11


Separation charges

$             0.9


$               —


$          0.9


$                —


Restructuring charges, net

$               —


$               —


$          0.1


$             (0.1)


Fiscal 2012 Results - Futurestep

Fee revenue was $113.9 millionin FY'12, an increase of $23.7 million, or 26%, from $90.2 millionin FY'11.  The increase in Futurestep's fee revenue was driven by a 23% increase in the weighted-average fee billed per engagement, driven by revenue growth in recruitment process outsourcing engagements which have higher average fees per engagement and middle-management recruitment, and a 3% increase in the number of engagements billed in FY'12 compared to FY'11.  On a constant currency basis, fee revenue increased $18.8 million, or 21%.

Operating income was $6.3 millionin FY'12 compared to operating income of $5.0 millionin FY'11, an increase of $1.3 million, primarily due to the $23.7 millionincrease in Futurestep fee revenue during FY'12, as compared to FY'11, which was offset by increases of $19.1 millionand $3.1 millionin Futurestep compensation and benefit expenses and general and administrative expenses, respectively.  The increase in compensation and benefit expenses was primarily due to a 30% increase in average headcount.  The increase in general and administrative expenses was due to an increase in premise and office expense and an increase in business development related to the increase in the overall business activities.

Fiscal 2012 Fourth Quarter Results

Fee revenue was $29.3 millionin Q4 FY'12, an increase of $4.0 million, or 16%, from $25.3 millionin Q4 FY'11.  The improvement in fee revenue was driven by a 24% increase in the weighted-average fee billed per engagement, which was driven by revenue growth in recruitment process outsourcing engagements, which have higher average fees per engagement, and partially offset by a 7% decrease in the number of engagements billed.  On a constant currency basis, fee revenue increased $4.2 million, or 17%.

Operating income was $0.8 millionin Q4 FY'12 compared to operating income of $1.5 millionin Q4 FY'11, a decrease of $0.7 million, primarily due to a decrease in operating income in the European region, partially offset by an increase in operating income in the other Futurestep regions.  This decrease was primarily attributed to separation charges related to changes in certain leadership positions of $0.9 millionoffset by $0.2 millionin incremental margin relating to the increase in fee revenue.

Outlook

Given the uncertainty and challenges facing the global economy and financial markets, it is particularly difficult to accurately forecast business results.  Assuming economic conditions, financial markets and foreign exchange rates remain steady, Q1 FY'13 fee revenue is likely to be in the range of $172 million to $188 millionand diluted earnings per share is likely to be in the range of $0.14 to $0.22

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 http://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 Eastand 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 http://www.kornferry.com/ for more information on the Korn/Ferry International family of companies, and http://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, 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, the successful integration of acquired businesses, our ability to develop new products and services, 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 CommissionKorn/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 separation and restructuring charges, net;
  • adjusted net income, adjusted to exclude separation and restructuring charges, net of the income tax effect, and certain tax adjustments;
  • adjusted basic and diluted earnings per share, adjusted to exclude separation and restructuring charges, net, and certain tax adjustments; and
  • constant currency amounts that represent the outcome that would have resulted had exchange rates in the reported period been the same as those in effect in the comparable prior year period.

This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for financial information determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Management believes the presentation of non-GAAP financial measures in this press release provides meaningful supplemental information regarding Korn/Ferry 's performance by excluding certain charges that may not be indicative of Korn/Ferry 's ongoing operating results.  The use of these non-GAAP financial measures facilitate comparisons to Korn/Ferry 's historical performance.  Korn/Ferry includes these non-GAAP financial measures because management believes 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 amount 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, 



2012


2011


2012


2011



 (unaudited) 





 Fee revenue 


$    198,087


$    197,298


$    790,505


$    744,249

 Reimbursed out-of-pocket engagement expenses 


9,471


8,478


36,254


32,002

           Total revenue 


207,558


205,776


826,759


776,251










 Compensation and benefits 


139,593


133,554


534,186


507,405

 General and administrative expenses 


34,668


28,982


138,872


116,494

 Engagement expenses 


14,295


13,674


55,889


51,766

 Depreciation and amortization 


3,650


3,320


14,017


12,671

 Restructuring charges, net 


-


-


929


2,130

           Total operating expenses 


192,206


179,530


743,893


690,466










 Operating income  


15,352


26,246


82,866


85,785

 Other income (loss), net 


2,761


3,092


(271)


6,454

 Interest expense, net 


(511)


(68)


(1,791)


(2,535)










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


17,602


29,270


80,804


89,704

 Income tax provision  


6,152


9,285


28,351


32,692

 Equity in earnings of unconsolidated subsidiaries, net 


578


354


1,850


1,862

            Net income 


$      12,028


$      20,339


$      54,303


$      58,874










 Earnings per common share: 









      Basic 


$          0.26


$          0.45


$          1.17


$          1.30

      Diluted 


$          0.25


$          0.43


$          1.15


$          1.27










 Weighted-average common shares outstanding: 









      Basic 


46,591


45,700


46,397


45,205

      Diluted 


47,524


47,165


47,261


46,280










KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

 (unaudited) 




















Three Months Ended


Year Ended



April 30,


April 30,



2012




2011


% Change


2012




2011


% Change


















Fee Revenue:
















Executive recruitment:
















    North America

$   95,545




$     96,939


(1%)


$  381,483




$  375,971


1%

    EMEA 

40,142




42,022


(4%)


164,161




155,782


5%

    Asia Pacific

23,327




24,661


(5%)


95,206




90,346


5%

    South America

9,798




8,357


17%


35,759




31,959


12%

Total executive recruitment

168,812




171,979


(2%)


676,609




654,058


3%

Futurestep

29,275




25,319


16%


113,896




90,191


26%

        Total fee revenue

198,087




197,298


0%


790,505




744,249


6%

 Reimbursed out-of-pocket engagement expenses 

9,471




8,478


12%


36,254




32,002


13%

        Total revenue

$ 207,558




$   205,776


1%


$  826,759




$  776,251


7%


















Reconciliation of Operating Income (GAAP) to Adjusted Operating Income




























Operating Income:



Margin




Margin




Margin




Margin

Executive recruitment:
















    North America

$   20,619


21.6%


$    19,765


20.4%


$    89,424


23.4%


$    80,685


21.5%

    EMEA

1,031


2.6%


5,131


12.2%


17,171


10.5%


11,628


7.5%

    Asia Pacific

3,741


16.0%


4,494


18.2%


13,084


13.7%


11,611


12.9%

    South America

2,549


26.0%


1,339


16.0%


8,815


24.7%


7,475


23.4%

Total executive recruitment

27,940


16.6%


30,729


17.9%


128,494


19.0%


111,399


17.0%

Futurestep

783


2.7%


1,515


6.0%


6,245


5.5%


4,955


5.5%

Corporate (1)

(13,371)




(5,998)




(51,873)




(30,569)



         Total operating income

$   15,352


7.8%


$     26,246


13.3%


$    82,866


10.5%


$    85,785


11.5%



































Separation and Restructuring Charges, net:














Executive recruitment:
















    North America

$            -


-


$             -


-


$         (15)


(0.0%)


$       (340)


(0.1%)

    EMEA

-


-


-


-


897


0.5%


2,569


1.6%

    Asia Pacific

-


-


-


-


-


-


-


-

    South America

-


-


-


-


(99)


(0.3%)


-


-

Total executive recruitment

-


-


-


-


783


0.1%


2,229


0.4%

Futurestep

920


3.1%


-


-


1,066


0.9%


(99)


(0.1%)

Corporate

999




-




999




-



        Total separation and restructuring charges, net

$     1,919


0.9%


$             -


-


$      2,848


0.3%


$      2,130


0.3%



































Adjusted Operating Income:
















  (Excluding Separation and Restructuring Charges, net)



Margin




Margin




Margin




Margin

Executive recruitment:
















    North America

$   20,619


21.6%


$     19,765


20.4%


$    89,409


23.4%


$    80,345


21.4%

    EMEA

1,031


2.6%


5,131


12.2%


18,068


11.0%


14,197


9.1%

    Asia Pacific

3,741


16.0%


4,494


18.2%


13,084


13.7%


11,611


12.9%

    South America

2,549


26.0%


1,339


16.0%


8,716


24.4%


7,475


23.4%

Total executive recruitment

27,940


16.6%


30,729


17.9%


129,277


19.1%


113,628


17.4%

Futurestep

1,703


5.8%


1,515


6.0%


7,311


6.4%


4,856


5.4%

Corporate (1)

(12,372)




(5,998)




(50,874)




(30,569)



        Total adjusted operating income 

$   17,271


8.7%


$     26,246


13.3%


$    85,714


10.8%


$    87,915


11.8%


















_________________________

















(1)

The Company recorded an adjustment to reduce the fair value of contingent consideration for a prior acquisition, of $2.2 million and $4.9 million during the year ended April 30, 2012 and 2011, respectively, and $3.0 million during the three months ended April 30, 2011.









KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 (in thousands, except per share amounts) 













 April 30, 



2012


2011

ASSETS





Cash and cash equivalents


$     282,005


$     246,856

Marketable securities


40,936


20,868

Receivables due from clients, net of allowance for doubtful accounts 





of $9,437 and $9,977 respectively


126,579


128,859

Income taxes and other receivables


11,902


5,138

Deferred income taxes


10,830


10,214

Prepaid expenses and other assets


27,815


29,662

Total current assets


500,067


441,597






Marketable securities, non-current


94,798


101,363

Property and equipment, net


49,808


43,142

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


77,848


70,987

Deferred income taxes


57,290


64,418

Goodwill


176,338


183,952

Intangible assets, net


20,413


22,289

Investments and other assets


38,127


43,932

Total assets


$  1,014,689


$     971,680






LIABILITIES AND STOCKHOLDERS' EQUITY





Accounts payable


$       14,667


$       12,504

Income taxes payable


8,720


4,674

Compensation and benefits payable


154,398


173,097

Other accrued liabilities


37,527


43,591

Total current liabilities


215,312


233,866






Deferred compensation and other retirement plans


148,989


139,558

Other liabilities


20,912


19,919

Total liabilities


385,213


393,343






Stockholders' equity





Common stock: $0.01 par value, 150,000 shares authorized, 59,975 and 





59,101 shares issued and 47,913 and 47,003 shares outstanding, respectively


419,998


404,703

Retained earnings


202,797


148,494

Accumulated other comprehensive income, net


7,191


25,660

Stockholders' equity


629,986


578,857

Less:  notes receivable from stockholders


(510)


(520)

Total stockholders' equity


629,476


578,337

Total liabilities and stockholders' equity


$  1,014,689


$     971,680






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, 2012


April 30, 2011



As Reported


Adjustments


As Adjusted


As Reported


Adjustments


As Adjusted














Fee revenue 


$     198,087




$     198,087


$     197,298




$        197,298

Reimbursed out-of-pocket engagement expenses 


9,471




9,471


8,478




8,478

    Total revenue 


207,558




207,558


205,776




205,776














Compensation and benefits 


139,593


(1,919)


137,674


133,554




133,554

General and administrative expenses 


34,668




34,668


28,982




28,982

Engagement expenses 


14,295




14,295


13,674




13,674

Depreciation and amortization 


3,650




3,650


3,320




3,320

Restructuring charges, net 


-


-


-


-


-


-

     Total operating expenses 


192,206


(1,919)


190,287


179,530


-


179,530














Operating income 


15,352


1,919


17,271


26,246


-


26,246














Other income, net 


2,761




2,761


3,092




3,092

 Interest expense, net 


(511)




(511)


(68)




(68)














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


17,602


1,919


19,521


29,270


-


29,270

Income tax provision (1) (2) 


6,152


671


6,823


9,285


2,131


11,416

Equity in earnings of unconsolidated subsidiaries, net 


578




578


354




354

        Net income 


$       12,028


$          1,248


$       13,276


$       20,339


$         (2,131)


$          18,208














Earnings per common share: 













      Basic 


$           0.26




$           0.28


$           0.45




$              0.40

      Diluted 


$           0.25




$           0.28


$           0.43




$              0.39














Weighted-average common shares outstanding: 













      Basic 


46,591




46,591


45,700




45,700

      Diluted 


47,524




47,524


47,165




47,165


 Explanation of Non-GAAP Adjustments 

(1)

Calculated using an annual effective tax rate of 35% and 39% on operating expenses, adjusted for the three months ended April 30, 2012 and 2011, respectively.

(2)

The three months ended April 30, 2012 includes the tax effect on the separation charges related to changes in certain leadership positions while the three months ended April 30, 2011 includes a reversal of reserve previously taken against an uncertain tax position.


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, 2012


April 30, 2011



As Reported


Adjustments


As Adjusted


As Reported


Adjustments


As Adjusted














Fee revenue 


$ 790,505




$ 790,505


$  744,249




$ 744,249

Reimbursed out-of-pocket engagement expenses 


36,254




36,254


32,002




32,002

      Total revenue 


826,759




826,759


776,251




776,251














Compensation and benefits 


534,186


(1,919)


532,267


507,405




507,405

General and administrative expenses 


138,872




138,872


116,494




116,494

Engagement expenses 


55,889




55,889


51,766




51,766

Depreciation and amortization 


14,017




14,017


12,671




12,671

Restructuring charges, net 


929


(929)


-


2,130


(2,130)


-

     Total operating expenses 


743,893


(2,848)


741,045


690,466


(2,130)


688,336














Operating income 


82,866


2,848


85,714


85,785


2,130


87,915














Other (loss) income, net 


(271)




(271)


6,454




6,454

Interest expense, net 


(1,791)




(1,791)


(2,535)




(2,535)














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


80,804


2,848


83,652


89,704


2,130


91,834

Income tax provision (1) (2) 


28,351


999


29,350


32,692


2,952


35,644

Equity in earnings of unconsolidated subsidiaries, net 


1,850




1,850


1,862




1,862

     Net income  


$   54,303


$          1,849


$   56,152


$    58,874


$           (822)


$  58,052














Earnings per common share: 













      Basic 


$       1.17




$       1.21


$        1.30




$      1.28

      Diluted 


$       1.15




$       1.19


$        1.27




$      1.25














Weighted-average common shares outstanding: 













      Basic 


46,397




46,397


45,205




45,205

      Diluted 


47,261




47,261


46,280




46,280



Explanation of Non-GAAP Adjustments 

(1)

Calculated using an annual effective tax rate of 35% and 39% on operating expenses, adjusted for the year ended April 30, 2012 and 2011, respectively.

(2)

The year ended April 30, 2012 includes the tax effect on the separation charges related to changes in certain leadership positions and restructuring charges while the year ended April 30, 2011 includes a reversal which is the net of a reserve previously taken against an uncertain tax position and the tax effect of the restructuring charges.


SOURCE Korn/Ferry International

Investor Relations, Gregg Kvochak, +1-310-556-8550, or Media, Mike Distefano, +1-310-843-4199

 

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