Investor Relations

Press Release

Korn/Ferry International Announces Third Quarter Fiscal 2010 Results of Operations

March 9, 2010
--Highlights - Third quarter fiscal 2010 fee revenue was $146.8 million, compared to $136.2 million in the same quarter last year. - Q3 FY'10 diluted earnings per share was $0.11, compared to $0.08 in Q3 FY'09 excluding certain adjustments discussed below. Third quarter fiscal 2010 diluted earnings per share was $0.17 compared to diluted loss per share of $0.52 in Q3 FY'09. - Cash and marketable securities were $251 million at January 31, 2010.
LOS ANGELES, March 9, 2010 /PRNewswire via COMTEX/ -- Korn/Ferry International (NYSE: KFY), a premier global provider of talent management solutions, announced third quarter fiscal 2010 diluted earnings per share of $0.11 (excluding a $2.8 million tax benefit) compared to diluted earnings per share of $0.08 in Q3 FY'09 (excluding restructuring charges of $16.8 million and an impairment charge on marketable securities of $15.3 million). On a GAAP basis, diluted earnings per share was $0.17 in Q3 FY'10, compared to diluted loss per share of $0.52 in Q3 FY'09.

"We are encouraged by our results during the quarter, which included our third consecutive sequential fee revenue increase and a year-over-year fee revenue increase of eight percent," said Gary D. Burnison, Chief Executive Officer of Korn/Ferry International. "Although our growth rate continues to outpace the industry, the macroeconomic environment remains challenging. Korn/Ferry, however, is well positioned with $251 million in cash and marketable securities and a clear vision for the future. We have a focused and differentiated business model, a systematic approach to client service that has been institutionalized throughout our Firm and high caliber colleagues who are helping Korn/Ferry capture market share across the globe."





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

                              Third Quarter             Year to Date
                              -------------             ------------
                           FY'10         FY'09       FY'10         FY'09
                           -----         -----       -----         -----
    Fee revenue           $146.8        $136.2      $403.7        $531.2
    Total revenue         $152.9        $144.5      $422.7        $561.7
    Operating income
     (loss)                 $6.4        $(11.3)     $(16.3)        $34.0
    Operating margin         4.3%         (8.3)%      (4.1)%         6.4%
    Net income (loss)       $7.9        $(22.4)      $(3.6)         $7.1
    Basic earnings (loss)
     per share             $0.18        $(0.52)     $(0.08)        $0.16
    Diluted earnings
     (loss) per share      $0.17        $(0.52)     $(0.08)        $0.16

    Adjusted Results (a):     Third Quarter             Year to Date
                              -------------             ------------
                           FY'10         FY'09       FY'10         FY'09
                           -----         -----       -----         -----
    Operating income        $6.0          $5.5        $4.2         $50.8
    Operating margin         4.1%          4.1%        1.1%          9.6%
    Net income              $4.8          $3.5        $6.8         $33.4
    Basic earnings per
     share                 $0.11         $0.08       $0.15         $0.77
    Diluted earnings per
     share                 $0.11         $0.08       $0.15         $0.75

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



                              Third Quarter             Year to Date
                              -------------             ------------
                           FY'10         FY'09       FY'10         FY'09
                           -----         -----       -----         -----
    Restructuring
     (reductions)
     charges               $(0.3)        $16.8       $20.6         $16.8
    Certain tax
     adjustments  (b)      $(2.8)           $-       $(2.8)           $-
    Impairment charge
     on marketable
     securities               $-         $15.3          $-         $15.9

    (b) Includes reversal of a reserve previously taken against an uncertain
        tax position and an increased valuation allowance related to cash
        repatriations and foreign tax credits.



Fee revenue was $146.8 million in Q3 FY'10 compared to $136.2 million in Q3 FY'09, an increase of 7.8% (or an increase of 2.0% or $2.7 million, on a constant currency basis), which reflects the improving revenue trends in all executive recruitment geographic locations in which we operate. During the same period, the weighted-average fee billed per engagement decreased by 2.0% (a decrease of 3.3% excluding the impact of exchange rates). Furthermore, the number of engagements opened increased 28.9% during the period. The Company experienced a 4.8% increase in fee revenue compared to Q2 FY'10.

Compensation and benefits were $102.7 million in Q3 FY'10, an increase of $8.7 million, or 9.3%, compared to $94.0 million in Q3 FY'09. This increase is attributable mainly to an increase in the variable component of compensation when compared to the prior year, which was lower than normal due to the challenging economic conditions. Changes in exchange rates impacted compensation and benefits in Q3 FY'10 unfavorably by $5.3 million from Q3 FY'09.

General and administrative expenses were $31.6 million in Q3 FY'10, an increase of $0.6 million, or 1.9% from $31.0 million in Q3 FY'09. This increase is attributable to a $1.5 million increase in unrealized foreign exchange loss, which was partially offset by a reduction in premises and office expenses. Changes in exchange rates impacted general and administrative expenses in Q3 FY'10 unfavorably by $1.7 million from Q3 FY'09.

Operating income was $6.4 million in Q3 FY'10 compared to operating loss of $11.3 million in Q3 FY'09, an increase of $17.7 million. Excluding restructuring charges of $16.8 million incurred in Q3 FY'09, operating income was $6.0 million, an increase of $0.5 million as compared to Q3 FY'09.

Balance Sheet and Liquidity

Cash and marketable securities were $251.2 million at January 31, 2010 compared to $330.3 million at April 30, 2009. Cash and marketable securities include $64.5 million and $60.8 million, held in trust for deferred compensation plans, at January 31, 2010 and April 30, 2009, respectively. Cash and marketable securities decreased by $79.1 million from Q4 FY'09, mainly due to the payment of annual bonuses in Q1 FY'10 and payments on previously disclosed acquisitions in this fiscal year.




    Results by Segment

    Selected Executive Recruitment Data
    (dollars in millions)

                                  Third Quarter              Year to Date
                                  -------------              ------------
                                FY'10        FY'09        FY'10         FY'09
                                -----        -----        -----         -----
    Fee revenue                $129.2       $116.6       $353.8        $451.4
    Total revenue              $134.3       $123.3       $369.2        $474.0
    Operating income            $18.5         $5.2        $15.1         $63.5
    Operating margin             14.3%         4.5%         4.3%         14.1%
    Ending number of
     consultants                  483          497          483           497
    Average number of
     consultants                  490          516          486           521
    New engagements (a)         1,683        1,217        4,580         4,806


    Adjusted Results (b):          Third Quarter              Year to Date
                                   -------------              ------------
                                 FY'10        FY'09        FY'10         FY'09
                                 -----        -----        -----         -----
    Operating income            $18.5        $16.3        $38.5         $74.6
    Operating margin             14.3%        14.0%        10.9%         16.5%

    (a) Represents new engagements opened in the respective period.

    (b) Adjusted results are non-GAAP financial measures that exclude
        restructuring charges (net of reductions) of $23.4 million during the
        nine months ended January 31, 2010 and none during the three months
        ended January 31, 2010 (see attached reconciliations).  Comparative
        results exclude restructuring charges of $11.1 million during the
        three and nine months ended January 31, 2009.



Fee revenue was $129.2 million in Q3 FY'10, an increase of $12.6 million, or 10.8%, when compared to revenue of $116.6 million in Q3 FY'09. On a constant currency basis, fee revenue increased by $6.5 million or 5.6%, when compared to the same quarter a year ago. Fee revenue increased in all regions due to a 12.5% increase in the overall number of engagements billed and a decrease in the average fee per engagement billed of 1.5% when compared to Q3 FY'09 (a decrease of 6.3% excluding the impact of exchange rates).

Operating income was $18.5 million in Q3 FY'10 compared to operating income of $5.2 million in Q3 FY'09. Excluding restructuring charges of $11.1 million incurred in Q3 FY'09, operating income was $16.3 million compared to $18.5 million in Q3 FY'10.

The total number of consultants at January 31, 2010 was 483, a decrease of 14 from January 31, 2009.





    Selected Futurestep Data
    (dollars in millions)

                              Third Quarter                Year to Date
                              -------------                ------------
                         FY'10              FY'09        FY'10         FY'09
                         -----              -----        -----         -----
    Fee revenue          $17.6              $19.6        $49.9         $79.8
    Total
     revenue             $18.6              $21.2        $53.5         $87.7
    Operating
     income
     (loss)               $0.6              $(8.3)        $2.4         $(4.2)
    Operating
     margin                3.2%             (42.5)%        4.7%         (5.3)%

    Adjusted Results (a):     Third Quarter                Year to Date
                               ------------                ------------
                         FY'10              FY'09        FY'10         FY'09
                         -----              -----        -----         -----
    Operating
     income
     (loss)               $0.2              $(2.5)       $(0.5)         $1.5
    Operating
     margin                1.1%             (12.9)%       (1.0)%         1.9%

    (a) Adjusted results are non-GAAP financial measures that exclude
        restructuring reductions of $0.3 million and $2.8 million during the
        three and nine months ended January 31, 2010, respectively (see
        attached reconciliations).  Comparative results exclude restructuring
        charges of $5.8 million during the three and nine months ended January
        31, 2009.



Fee revenue was $17.6 million in Q3 FY'10, a decrease of $2.0 million, or 10.2%, from $19.6 million in Q3 FY'09. On a constant currency basis, fee revenue declined by $3.8 million in Q3 FY'10, compared to the same quarter a year ago. Reductions in fee revenue were driven by an 8.1% decrease in the number of engagements billed and to a lesser extent by a 1.6% decrease in the average fee per engagement billed.

Q3 FY'10 operating income includes reductions in restructuring costs of $0.3 million, which relate to recoveries of premise costs; without such recoveries, operating income would have been $0.2 million. Operating income was $0.6 million in Q3 FY'10 compared to an operating loss of $8.3 million in Q3 FY'09.

Outlook

Assuming constant foreign exchange rates, Q4 FY'10 fee revenue is likely to be in the range of $145 million to $155 million and diluted earnings per share is likely to be in the range of $0.10 to $0.16.

Earnings Conference Call Webcast

The earnings conference call will be held today at 2:00 PM (EST) and hosted by Gary Burnison, Chief Executive Officer, Mike DiGregorio, Chief Financial Officer and Gregg Kvochak, Vice President of Finance. 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 celebrating 40 years in business. Based in Los Angeles, the firm delivers an array of solutions that help clients to attract, develop, retain and sustain 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. 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 relate to competition, the dependence on attracting and retaining qualified and experienced consultants, the portability of client relationships, local political or economic developments in or affecting countries where we have operations, including fluctuations in exchange rates, risks related to the growth and results of Futurestep, global economic developments, restrictions imposed by off-limits agreements, reliance on information systems, the successful integration of acquired businesses 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"). These non-GAAP financial measures include:

  • adjusted operating income (loss) and operating margin, adjusted to exclude restructuring (reductions) charges,
  • adjusted net income (loss), basic and diluted earnings (loss) per share, adjusted to exclude restructuring (reductions) charges, certain tax adjustments and an impairment charge on marketable securities 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 it is 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.




                                (Tables attached)



                    KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except per share amounts)

                                      Three Months Ended   Nine Months Ended
                                          January 31,         January 31,
                                         -------------       -------------
                                        2010      2009      2010      2009
                                        ----      ----      ----      ----
                                                    (unaudited)
     Fee revenue                      $146,742  $136,210  $403,690  $531,243
     Reimbursed out-of-pocket
      engagement expenses                6,158     8,283    19,054    30,459
                                         -----     -----    ------    ------
               Total revenue           152,900   144,493   422,744   561,702
                                       -------   -------   -------   -------

     Compensation and benefits         102,654    93,978   295,115   365,849
     General and administrative
      expenses                          31,635    30,963    86,853    97,316
     Out-of-pocket engagement
      expenses                           9,837    11,041    28,090    39,071
     Depreciation and amortization       2,755     2,924     8,444     8,637
     Restructuring (reductions)
      charges                             (364)   16,845    20,593    16,845
                                          ----    ------    ------    ------
               Total operating
                expenses               146,517   155,751   439,095   527,718
                                       -------   -------   -------   -------

     Operating income (loss)             6,383   (11,258)  (16,351)   33,984

     Interest and other income
      (loss), net                          893   (16,061)    5,364   (16,865)
                                           ---   -------     -----   -------
               Income (loss) before
                (benefit) provision for
                income taxes and equity
                in earnings of
                unconsolidated
                subsidiaries             7,276   (27,319)  (10,987)   17,119
     Income tax (benefit) provision       (244)   (4,549)   (6,730)   12,327
     Equity in earnings of
      unconsolidated subsidiaries,
      net                                  390       414       639     2,316
                                           ---       ---       ---     -----
                Net income (loss)       $7,910  $(22,356)  $(3,618)   $7,108
                                        ======  ========   =======    ======

     Earnings (loss) per common share:
          Basic                          $0.18    $(0.52)   $(0.08)    $0.16
                                         =====    ======    ======     =====
          Diluted                        $0.17    $(0.52)   $(0.08)    $0.16
                                         =====    ======    ======     =====

     Weighted-average common shares
      outstanding:
          Basic                         44,622    43,406    44,290    43,538
                                        ======    ======    ======    ======
          Diluted                       45,811    43,406    44,290    44,352
                                        ======    ======    ======    ======



                KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
                       FINANCIAL SUMMARY BY SEGMENT
                              (in thousands)
                               (unaudited)

                                      Three Months Ended
                                         January 31,
                                   -----------------------
                                   2010               2009
                                   ----               ----
    Fee Revenue:
    Executive recruitment:
      North America              $70,187            $66,978
      EMEA                        36,643             30,423
      Asia Pacific                16,503             13,591
      South America                5,829              5,650
                                   -----              -----
    Total executive recruitment  129,162            116,642
    Futurestep                    17,580             19,568
                                  ------             ------
      Total fee revenue          146,742            136,210
    Reimbursed out-of-pocket
     engagement expenses           6,158              8,283
                                   -----              -----
      Total revenue             $152,900           $144,493
                                ========           ========


    Adjusted Operating Income
    (Loss):
      (Excluding Restructuring
     Charges)                              Margin             Margin
                                           ------             ------
    Executive recruitment:
      North America              $13,353    19.0%   $13,324    19.9%
      EMEA                         2,935     8.0%       315     1.0%
      Asia Pacific                 1,203     7.3%     1,314     9.7%
      South America                1,010    17.3%     1,329    23.5%
                                   -----              -----
    Total executive recruitment   18,501    14.3%    16,282    14.0%
    Futurestep                       191     1.1%    (2,530)  (12.9%)
    Corporate                    (12,673)            (8,165)
                                 -------             ------
       Total adjusted operating
        income                    $6,019     4.1%    $5,587     4.1%
                                  ======             ======


    Restructuring (Reductions)
     Charges:
    Executive recruitment:
      North America                   $-     0.0%    $2,557     3.8%
      EMEA                             -     0.0%     6,606    21.7%
      Asia Pacific                     -     0.0%       947     7.0%
      South America                    -     0.0%       956    16.9%
                                       -                ---
    Total executive recruitment        -     0.0%    11,066     9.5%
    Futurestep                      (364)   (2.1%)    5,779    29.6%
    Corporate                          -                  -
                                     ---                ---
       Total restructuring
        (reductions) charges       $(364)   (0.2%)  $16,845    12.4%
                                   =====            =======


    Operating Income (Loss):              Margin             Margin
                                          ------             ------
    Executive recruitment:
      North America              $13,353    19.0%   $10,767    16.1%
      EMEA                         2,935     8.0%    (6,291)  (20.7%)
      Asia Pacific                 1,203     7.3%       367     2.7%
      South America                1,010    17.3%       373     6.6%
                                   -----                ---
    Total executive recruitment   18,501    14.3%     5,216     4.5%
    Futurestep                       555     3.2%    (8,309)  (42.5%)
    Corporate                    (12,673)            (8,165)
                                 -------             ------
       Total operating income
        (loss)                    $6,383     4.3%  $(11,258)   (8.3%)
                                  ======           ========


                                     Nine Months Ended
                                         January 31,
                                  -----------------------
                                  2010               2009
                                  ----               ----
    Fee Revenue:
    Executive recruitment:
      North America             $193,709           $252,649
      EMEA                       101,240            122,499
      Asia Pacific                42,437             56,181
      South America               16,396             20,063
                                  ------             ------
    Total executive recruitment  353,782            451,392
    Futurestep                    49,908             79,851
                                  ------             ------
      Total fee revenue          403,690            531,243
    Reimbursed out-of-pocket
     engagement expenses          19,054             30,459
                                  ------             ------
      Total revenue             $422,744           $561,702
                                ========           ========


    Adjusted Operating Income
     (Loss):
      (Excluding Restructuring
       Charges)                            Margin             Margin
                                           ------             ------
    Executive recruitment:
      North America              $28,810    14.9%   $48,158    19.1%
      EMEA                         5,909     5.8%    14,711    12.0%
      Asia Pacific                 2,239     5.3%     8,057    14.3%
      South America                1,526     9.3%     3,623    18.0%
                                   -----              -----
    Total executive recruitment   38,484    10.9%    74,549    16.5%
    Futurestep                      (483)   (1.0%)    1,546     1.9%
    Corporate                    (33,759)           (25,266)
                                 -------            -------
       Total adjusted operating
        income                    $4,242     1.1%   $50,829     9.6%
                                  ======            =======


    Restructuring (Reductions)
     Charges:
    Executive recruitment:
      North America              $(1,279)   (0.6%)   $2,557     1.1%
      EMEA                        24,798    24.5%     6,606     5.4%
      Asia Pacific                    87     0.2%       947     1.6%
      South America                 (173)   (1.1%)      956     4.7%
                                    ----                ---
    Total executive recruitment   23,433     6.6%    11,066     2.4%
    Futurestep                    (2,840)   (5.7%)    5,779     7.2%
    Corporate                          -                  -
                                     ---                ---
       Total restructuring
        (reductions) charges     $20,593     5.2%   $16,845     3.2%
                                 =======            =======


    Operating Income (Loss):               Margin             Margin
                                           ------             ------
    Executive recruitment:
      North America              $30,089    15.5%   $45,601    18.0%
      EMEA                       (18,889)  (18.7%)    8,105     6.6%
      Asia Pacific                 2,152     5.1%     7,110    12.7%
      South America                1,699    10.4%     2,667    13.3%
                                   -----              -----
    Total executive recruitment   15,051     4.3%    63,483    14.1%
    Futurestep                     2,357     4.7%    (4,233)   (5.3%)
    Corporate                    (33,759)           (25,266)
                                 -------            -------
       Total operating income
        (loss)                  $(16,351)   (4.1%)  $33,984     6.4%
                                ========            =======



                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                    (in thousands, except per share amounts)


                                                    January 31,   April 30,
                                                       2010         2009
                                                       ----         ----
    ASSETS                                          (unaudited)
    ------
    Cash and cash equivalents                        $175,811     $255,000
    Marketable securities                               3,928        4,263
    Receivables due from clients, net of allowance
     for doubtful accounts of $8,924 and
     $11,197, respectively                            108,098       67,308
    Income taxes and other receivables                  6,466        9,001
    Deferred income taxes                              20,249       14,583
    Prepaid expenses and other assets                  26,851       21,442
                                                       ------       ------
              Total current assets                    341,403      371,597
                                                      -------      -------

    Marketable securities, non-current                 71,475       70,992
    Property and equipment, net                        25,618       27,970
    Cash surrender value of company owned life
     insurance policies, net of loans                  65,988       63,108
    Deferred income taxes                              50,355       45,141
    Goodwill                                          171,001      133,331
    Intangible assets, net                             26,091       16,928
    Investments and other assets                       16,308       11,812
                                                       ------       ------
              Total assets                           $768,239     $740,879
                                                     ========     ========

    LIABILITIES AND STOCKHOLDERS' EQUITY
    ------------------------------------
    Accounts payable                                  $10,519      $10,282
    Income taxes payable                                4,698        2,059
    Compensation and benefits payable                 102,055      116,705
    Other accrued liabilities                          44,014       44,301
                                                       ------       ------
              Total current liabilities               161,286      173,347
                                                      -------      -------

    Deferred compensation and other retirement
     plans                                            107,238       99,238
    Other liabilities                                  18,554        9,195
                                                       ------        -----
              Total liabilities                       287,078      281,780

    Stockholders' equity
        Common stock: $0.01 par value, 150,000
         shares authorized, 57,528 and
         56,185 shares issued and 45,982
         and 44,729 shares outstanding,
         respectively                                 381,232      368,430
        Retained earnings                              81,304       84,922
        Accumulated other comprehensive
         income, net                                   19,156        6,285
                                                       ------        -----
              Stockholders' equity                    481,692      459,637
        Less:  notes receivable from
         stockholders                                    (531)        (538)
                                                         ----         ----
              Total stockholders' equity              481,161      459,099
                                                      -------      -------
              Total liabilities and
               stockholders' equity                  $768,239     $740,879
                                                     ========     ========



                    KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
          RECONCILIATION OF AS REPORTED (GAAP) TO AS ADJUSTED (NON-GAAP)
                                 JANUARY 31, 2010
                     (in thousands, except per share amounts)
                                   (unaudited)

                                                  Three Months Ended
                                                   January 31, 2010
                                                   ----------------
                                         As Reported  Adjustments  As Adjusted
                                         -----------  -----------  -----------

      Fee revenue                          $146,742                  $146,742
      Reimbursed out-of-pocket
       engagement expenses                    6,158                     6,158
                                              -----                     -----
                Total revenue               152,900                   152,900
                                            -------                   -------

      Compensation and benefits             102,654                   102,654
      General and administrative
       expenses                              31,635                    31,635
      Out-of-pocket engagement
       expenses                               9,837                     9,837
      Depreciation and amortization           2,755                     2,755
      Restructuring (reductions)
       charges                                 (364)         364            -
                                               ----          ---            -
                Total operating
                 expenses                   146,517          364      146,881
                                            -------          ---      -------

      Operating income (loss)                 6,383         (364)       6,019

      Interest and other income, net            893                       893
                                                ---                       ---
                Income (loss) before
                 (benefit) provision for
                 income taxes
                 and equity in earnings of
                 unconsolidated
                 subsidiaries                 7,276         (364)       6,912
      Income tax (benefit) provision (1) (2)   (244)       2,698        2,454
      Equity in earnings of unconsolidated
       subsidiaries, net                        390                       390
                                                ---      -------          ---
                 Net income (loss)           $7,910      $(3,062)      $4,848
                                             ======      =======       ======

      Earnings (loss) per common share:
           Basic                              $0.18                     $0.11
                                              =====                     =====
           Diluted                            $0.17                     $0.11
                                              =====                     =====

      Weighted-average common shares
       outstanding:
           Basic                             44,622                    44,622
                                             ======                    ======
           Diluted                           45,811                    45,811
                                             ======                    ======



                                                  Nine Months Ended
                                                   January 31, 2010
                                                   ----------------
                                         As Reported  Adjustments  As Adjusted
                                         -----------  -----------  -----------

      Fee revenue                          $403,690                  $403,690
      Reimbursed out-of-pocket
       engagement expenses                   19,054                    19,054
                                             ------                    ------
                Total revenue               422,744                   422,744
                                            -------                   -------

      Compensation and benefits             295,115                   295,115
      General and administrative
       expenses                              86,853                    86,853
      Out-of-pocket engagement
       expenses                              28,090                    28,090
      Depreciation and amortization           8,444                     8,444
      Restructuring (reductions)
       charges                               20,593      (20,593)           -
                                             ------      -------            -
                Total operating
                 expenses                   439,095      (20,593)     418,502
                                            -------      -------      -------

      Operating income (loss)               (16,351)      20,593        4,242

      Interest and other income, net          5,364                     5,364
                                              -----                     -----
                Income (loss) before
                 (benefit) provision for
                 income taxes and equity
                 in earnings of
                 unconsolidated
                 subsidiaries               (10,987)      20,593        9,606
      Income tax (benefit) provision (1) (2) (6,730)      10,140        3,410
      Equity in earnings of unconsolidated
       subsidiaries, net                        639                       639
                                                ---      -------          ---
                 Net income (loss)          $(3,618)     $10,453       $6,835
                                            =======      =======       ======

      Earnings (loss) per common share:
           Basic                             $(0.08)                    $0.15
                                             ======                     =====
           Diluted                           $(0.08)                    $0.15
                                             ======                     =====

      Weighted-average common shares
     outstanding:
           Basic                             44,290                    44,290
                                             ======                    ======
           Diluted                           44,290                    45,209
                                             ======                    ======

    Explanation of Non-GAAP Adjustments
    -----------------------------------
    For the three and nine months ended January 31, 2010:
    (1) Calculated using an annual effective tax rate of 35.5% on operating
        expenses adjustments.
    (2) Includes reversal of a reserve previously taken against an uncertain
        tax position and an increased valuation allowance related to cash
        repatriations and foreign tax credits.



                    KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
          RECONCILIATION OF AS REPORTED (GAAP) TO AS ADJUSTED (NON-GAAP)
                                 JANUARY 31, 2009
                     (in thousands, except per share amounts)
                                   (unaudited)

                                                 Three Months Ended
                                                  January 31, 2009
                                                  ----------------
                                        As Reported  Adjustments  As Adjusted
                                        -----------  -----------  -----------

      Fee revenue                         $136,210                  $136,210
      Reimbursed out-of-pocket
       engagement expenses                   8,283                     8,283
                                             -----                     -----
                Total revenue              144,493                   144,493
                                           -------                   -------

      Compensation and benefits             93,978                    93,978
      General and administrative
       expenses                             30,963                    30,963
      Out-of-pocket engagement
       expenses                             11,041                    11,041
      Depreciation and amortization          2,924                     2,924
      Restructuring charges                 16,845      (16,845)           -
                                            ------      -------            -
                Total operating
                 expenses                  155,751      (16,845)     138,906
                                           -------      -------      -------

      Operating (loss) income              (11,258)      16,845        5,587

      Interest and other (loss) income,
       net (1)                             (16,061)      15,348         (713)
                                           -------       ------         ----
                (Loss) income before
                (benefit) provision for
                income taxes and equity
                in earnings of
                unconsolidated
                subsidiaries               (27,319)      32,193        4,874
      Income tax (benefit) provision (2)    (4,549)       6,381        1,832
      Equity in earnings of unconsolidated
       subsidiaries, net                       414                       414
                                               ---      -------          ---
                 Net (loss) income        $(22,356)     $25,812       $3,456
                                          ========      =======       ======

      (Loss) earnings per common share:
           Basic                            $(0.52)                    $0.08
                                            ======                     =====
           Diluted                          $(0.52)                    $0.08
                                            ======                     =====

      Weighted-average common shares
       outstanding:
           Basic                            43,406                    43,406
                                            ======                    ======
           Diluted                          43,406                    43,917
                                            ======                    ======


                                                 Nine Months Ended
                                                  January 31, 2009
                                                  ----------------
                                        As Reported  Adjustments  As Adjusted
                                        -----------  -----------  -----------

      Fee revenue                         $531,243                  $531,243
      Reimbursed out-of-pocket
       engagement expenses                  30,459                    30,459
                                            ------                    ------
                Total revenue              561,702                   561,702
                                           -------                   -------

      Compensation and benefits            365,849                   365,849
      General and administrative
       expenses                             97,316                    97,316
      Out-of-pocket engagement
       expenses                             39,071                    39,071
      Depreciation and amortization          8,637                     8,637
      Restructuring charges                 16,845      (16,845)           -
                                            ------      -------            -
                Total operating
                 expenses                  527,718      (16,845)     510,873
                                           -------      -------      -------

      Operating (loss) income               33,984       16,845       50,829

      Interest and other (loss) income,
       net (1)                             (16,865)      15,893         (972)
                                           -------       ------         ----
                (Loss) income before
                 (benefit) provision for
                 income taxes and equity
                 in earnings of
                 unconsolidated
                 subsidiaries               17,119       32,738       49,857
      Income tax (benefit) provision (2)    12,327        6,401       18,728
      Equity in earnings of unconsolidated
       subsidiaries, net                     2,316                     2,316
                                             -----      -------        -----
                 Net (loss) income          $7,108      $26,337      $33,445
                                            ======      =======      =======

      (Loss) earnings per common share:
           Basic                             $0.16                     $0.77
                                             =====                     =====
           Diluted                           $0.16                     $0.75
                                             =====                     =====

      Weighted-average common shares
       outstanding:
           Basic                            43,538                    43,538
                                            ======                    ======
           Diluted                          44,352                    44,352
                                            ======                    ======

    Explanation of Non-GAAP Adjustments
    -----------------------------------
    For the three and nine months ended January 31, 2009:
    (1) Asset impairment on marketable securities.
    (2) Calculated using an annual effective tax rate of 38% relating to
        operating expense adjustments.





SOURCE Korn/Ferry International

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