Form: 8-K

Current report filing

December 8, 2010

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 Second Quarter Fiscal
2011 Results of Operations
Highlights
  •   Second quarter fiscal 2011 fee revenue increased 32% to $185.4 million, compared to $140.1 million in the same quarter last year.
 
  •   Q2 FY’11 diluted earnings per share, excluding net adjustments to previously recorded restructuring charges was $0.33, compared to diluted earnings per share of $0.09 in Q2 FY’10. Including net restructuring charges, Q2 FY’11 diluted earnings per share was $0.30 compared to $0.06 in Q2 FY’10.
Los Angeles, CA, December 8, 2010 — Korn/Ferry International (NYSE: KFY), a premier global provider of talent management solutions, announced Q2 FY’11 diluted earnings per share of $0.33 compared to $0.09 in Q2 FY’10 (excluding net adjustments to previously recorded restructuring charges of $2.1 million and $2.8 million, respectively). Diluted earnings per share was $0.30 and $0.06 in Q2 FY’11 and Q2 FY’10, respectively.
“As evidenced by our sixth consecutive sequential fee revenue increase, our clients are increasingly turning to Korn/Ferry for a variety of their most important human capital needs,” said Gary D. Burnison, CEO of Korn/Ferry International. “After meeting with many of our clients’ CEOs over the last several months, it’s evident that we are experiencing a two-speed labor recovery – global vs. local. Global enterprises are investing, hiring and expanding, while organizations more reliant on Western economies for growth have remained more cautious. Overall, I’m very pleased with our organization’s results this quarter, which validate our strategy of helping clients achieve extraordinary performance through people.”

 

 


 

Financial Results
(dollars in millions, except per share amounts)
                                 
    Second Quarter     Year to Date  
    FY’11     FY’10     FY’11     FY’10  
Fee revenue
  $ 185.4     $ 140.1     $ 360.5     $ 256.9  
Total revenue
  $ 193.2     $ 146.5     $ 376.4     $ 269.8  
Operating income (loss)
  $ 19.8     $ 2.3     $ 39.1     $ (22.7 )
Operating margin
    10.7 %     1.6 %     10.8 %     (8.8 )%
Net income (loss)
  $ 13.7     $ 2.8     $ 24.6     $ (11.5 )
Basic earnings (loss) per share
  $ 0.30     $ 0.06     $ 0.55     $ (0.26 )
Diluted earnings (loss) per share
  $ 0.30     $ 0.06     $ 0.53     $ (0.26 )
Adjusted Results (a):
                                 
    Second Quarter     Year to Date  
    FY’11     FY’10     FY’11     FY’10  
Operating income (loss)
  $ 21.9     $ 5.0     $ 41.2     $ (1.8 )
Operating margin
    11.8 %     3.6 %     11.4 %     (0.7 )%
Net income
  $ 15.0     $ 4.3     $ 25.9     $ 2.0  
Basic earnings per share
  $ 0.33     $ 0.10     $ 0.58     $ 0.05  
Diluted earnings per share
  $ 0.33     $ 0.09     $ 0.56     $ 0.04  
 
     
(a)   Adjusted results are non-GAAP financial measures that exclude restructuring charges, net of recoveries, of $2.1 million during the three and six months ended October 31, 2010. Comparative results exclude restructuring charges, net of recoveries, of $2.8 million and $21.0 million during the three and six months ended October 31, 2009, respectively (see attached reconciliations).
Fee revenue was $185.4 million in Q2 FY’11 compared to $140.1 million in Q2 FY’10, an increase of 32% (or an increase of 33%, or $45.7 million, on a constant currency basis), which reflects increases in revenue from all segments of the business driven primarily by a 28% increase in the number of executive recruitment engagements billed as well as a 4% (5% excluding the impact of exchange rates) increase in the weighted-average fee billed per executive recruitment engagement compared to the year-ago fiscal quarter. Furthermore, the Company experienced a 6% increase in fee revenue compared to Q1 FY’11.
Compensation and benefits were $127.6 million in Q2 FY’11, an increase of $25.5 million, or 25%, compared to $102.1 million in Q2 FY’10. This increase is attributable mainly to an increase in the variable component of compensation when compared to the year-ago fiscal quarter. Compensation and benefits were lower in Q2 FY’10 compared to Q2 FY’11 due to the challenging economic conditions in Q2 FY’10.
General and administrative expenses were $27.4 million in Q2 FY’11, an increase of $0.2 million, or 1% from $27.2 million in Q2 FY’10. This increase is due primarily to an increase in bad debt provisions as a result of higher revenues and accounts receivable, a decrease in unrealized net foreign exchange gains, partially offset by a fair value contingent consideration adjustment from a prior acquisition. Changes in exchange rates impacted general and administrative expenses in Q2 FY’11 favorably by $0.4 million compared to Q2 FY’10.
Operating income was $19.8 million in Q2 FY’11 compared to $2.3 million in Q2 FY’10, an increase of $17.5 million. Excluding restructuring charges of $2.1 million in Q2 FY’11 and $2.8 million in Q2 FY’10, operating income was $21.9 million in Q2 FY’11 and $5.0 million in Q2 FY’10, an increase of $16.9 million.

 

 


 

Balance Sheet and Liquidity
Cash and marketable securities were $264.7 million at October 31, 2010 compared to $296.5 million at April 30, 2010. Cash and marketable securities include $67.0 million and $69.0 million, held in trust for deferred compensation plans, at October 31, 2010 and April 30, 2010, respectively. Cash and marketable securities decreased by $31.8 million from April 30, 2010, mainly due to the payment of FY’10 annual bonuses in Q1 FY’11, partially offset by cash provided by operating activities in Q2 FY’11.
Results by Segment
Selected Executive Recruitment Data
(dollars in millions)
                                 
    Second Quarter     Year to Date  
    FY’11     FY’10     FY’11     FY’10  
Fee revenue
  $ 164.1     $ 123.3     $ 319.0     $ 224.6  
Total revenue
  $ 170.5     $ 128.3     $ 331.9     $ 234.9  
Operating income (loss)
  $ 23.9     $ 9.7     $ 51.6     $ (3.4 )
Operating margin
    14.6 %     7.8 %     16.2 %     (1.5 )%
 
                               
Ending number of consultants
    475       497       475       497  
Average number of consultants
    477       499       475       486  
Engagements billed
    3,795       2,981       6,324       4,643  
New engagements (a)
    1,970       1,578       3,860       2,896  
Adjusted Results (b):
                                 
    Second Quarter     Year to Date  
    FY’11     FY’10     FY’11     FY’10  
Operating income
  $ 26.1     $ 14.9     $ 53.8     $ 20.0  
Operating margin
    15.9 %     12.1 %     16.9 %     8.9 %
 
     
(a)   Represents new engagements opened in the respective period.
 
(b)   Adjusted results are non-GAAP financial measures that exclude restructuring charges, net of recoveries, of $2.2 million during the three and six months ended October 31, 2010. Comparative results exclude restructuring charges, net of recoveries, of $5.3 million and $23.4 million during the three and six months ended October 31, 2009, respectively (see attached reconciliations).
Fee revenue was $164.1 million in Q2 FY’11, an increase of $40.8 million ($41.2 million on a constant currency basis), or 33%, when compared to fee revenue of $123.3 million in Q2 FY’10. Fee revenue increased in all regions due to a 28% increase in the overall number of engagements billed and a 4% (5% excluding the impact of exchange rates) increase in the weighted-average fee per engagement billed when compared to Q2 FY’10.
Operating income was $23.9 million in Q2 FY’11 compared to $9.7 million in Q2 FY’10. Excluding restructuring charges of $2.2 million in Q2 FY’11 and $5.3 million in Q2 FY’10, operating income was $26.1 million and $14.9 million, respectively, an increase of $11.2 million compared to Q2 FY’10.
The total number of consultants at October 31, 2010 was 475, a decrease of 22 from October 31, 2009.

 

 


 

Selected Futurestep Data
(dollars in millions)
                                 
    Second Quarter     Year to Date  
    FY’11     FY’10     FY’11     FY’10  
Fee revenue
  $ 21.3     $ 16.8     $ 41.5     $ 32.3  
Total revenue
  $ 22.7     $ 18.2     $ 44.5     $ 34.9  
Operating income
  $ 1.2     $ 2.6     $ 2.2     $ 1.8  
Operating margin
    5.6 %     15.5 %     5.2 %     5.6 %
Adjusted Results (a):
                                 
    Second Quarter     Year to Date  
    FY’11     FY’10     FY’11     FY’10  
Operating income (loss)
  $ 1.1     $ 0.1     $ 2.1     $ (0.7 )
Operating margin
    5.1 %     0.8 %     5.0 %     (2.1 )%
 
     
(a)   Adjusted results are non-GAAP financial measures that exclude recoveries of restructuring charges of $0.1 million during each of the three and six months ended October 31, 2010. Comparative results exclude restructuring charges, net of recoveries, of $2.5 million during each of the three and six months ended October 31, 2009, respectively (see attached reconciliations).
Fee revenue was $21.3 million in Q2 FY’11, an increase of $4.5 million (also $4.5 million on a constant currency basis), or 27%, from $16.8 million in Q2 FY’10. The improvement in fee revenue was driven by a 30% increase in the overall number of engagements billed, partially offset by a 3% decrease in the weighted-average fee billed per engagement.
Operating income was $1.2 million in Q2 FY’11 compared to $2.6 million in Q2 FY’10. Operating income includes recovery of restructuring costs of $0.1 million and $2.5 million, during Q2 FY’11 and Q2 FY’10, respectively, which in Q2 FY’10 primarily relates to lower facility lease costs than originally recorded; without which operating income would have been $1.1 million and $0.1 million, respectively.
Outlook
Assuming constant foreign exchange rates, stable economic conditions and steady financial markets, Q3 FY’11 fee revenue is likely to be in the range of $175 million to $190 million and diluted earnings per share is likely to be in the range of $0.25 to $0.32.
Earnings Conference Call Webcast
The earnings conference call will be held today at 9:00 AM (EST) and hosted by CEO Gary Burnison, CFO Mike DiGregorio 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, 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 include those relating 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 the following (each of which has been adjusted to exclude restructuring charges):
  •   adjusted operating income (loss) and operating margin;
 
  •   adjusted net income (loss);
 
  •   adjusted basic and diluted earnings (loss) per share; 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     Six Months Ended  
    October 31,     October 31,  
    2010     2009     2010     2009  
    (unaudited)  
Fee revenue
  $ 185,350     $ 140,145     $ 360,462     $ 256,948  
Reimbursed out-of-pocket engagement expenses
    7,854       6,411       15,904       12,896  
 
                       
Total revenue
    193,204       146,556       376,366       269,844  
 
                       
 
                               
Compensation and benefits
    127,555       102,076       247,763       192,461  
General and administrative expenses
    27,363       27,164       55,978       55,218  
Out-of-pocket engagement expenses
    13,237       9,464       25,336       18,253  
Depreciation and amortization
    3,144       2,860       6,112       5,689  
Restructuring charges, net
    2,130       2,774       2,130       20,957  
 
                       
Total operating expenses
    173,429       144,338       337,319       292,578  
 
                       
 
                               
Operating income (loss)
    19,775       2,218       39,047       (22,734 )
 
                               
Interest and other income (loss), net
    1,657       1,180       (652 )     4,471  
 
                       
Income (loss) before provision (benefit) for income taxes and equity in earnings of unconsolidated subsidiaries
    21,432       3,398       38,395       (18,263 )
Income tax provision (benefit)
    8,288       879       14,809       (6,486 )
Equity in earnings of unconsolidated subsidiaries, net
    512       226       974       249  
 
                       
Net income (loss)
  $ 13,656     $ 2,745     $ 24,560     $ (11,528 )
 
                       
 
                               
Earnings (loss) per common share:
                               
Basic
  $ 0.30     $ 0.06     $ 0.55     $ (0.26 )
 
                       
Diluted
  $ 0.30     $ 0.06     $ 0.53     $ (0.26 )
 
                       
 
                               
Weighted-average common shares outstanding:
                               
Basic
    45,130       44,470       44,886       44,123  
 
                       
Diluted
    45,918       45,291       46,061       44,123  
 
                       

 

 


 

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
FINANCIAL SUMMARY BY SEGMENT
(in thousands)
(unaudited)
                                                                 
    Three Months Ended     Six Months Ended  
    October 31,     October 31,  
    2010             2009     % Change     2010             2009     % Change  
 
                                                               
Fee Revenue:
                                                               
Executive recruitment:
                                                               
North America
  $ 94,066             $ 68,230       38 %   $ 184,041             $ 123,522       49 %
EMEA
    37,424               35,376       6 %     73,692               64,597       14 %
Asia Pacific
    24,098               13,563       78 %     45,240               25,934       74 %
South America
    8,478               6,122       38 %     15,964               10,567       51 %
 
                                                       
Total executive recruitment
    164,066               123,291       33 %     318,937               224,620       42 %
Futurestep
    21,284               16,854       26 %     41,525               32,328       28 %
 
                                                       
Total fee revenue
    185,350               140,145       32 %     360,462               256,948       40 %
Reimbursed out-of-pocket engagement expenses
    7,854               6,411       23 %     15,904               12,896       23 %
 
                                                       
Total revenue
  $ 193,204             $ 146,556       32 %   $ 376,366             $ 269,844       39 %
 
                                                       
 
                                                               
            Margin             Margin             Margin             Margin  
Adjusted Operating Income (Loss):
(Excluding Restructuring Charges)
                                                               
Executive recruitment:
                                                               
North America
  $ 19,255       20.5 %   $ 11,250       16.5 %   $ 38,930       21.2 %   $ 15,457       12.5 %
EMEA
    2,653       7.1 %     2,411       6.8 %     5,706       7.7 %     2,974       4.6 %
Asia Pacific
    1,561       6.5 %     61       0.4 %     4,630       10.2 %     1,036       4.0 %
South America
    2,698       31.8 %     1,202       19.6 %     4,577       28.7 %     516       4.9 %
 
                                                       
Total executive recruitment
    26,167       15.9 %     14,924       12.1 %     53,843       16.9 %     19,983       8.9 %
Futurestep
    1,084       5.1 %     141       0.8 %     2,073       5.0 %     (674 )     (2.1 %)
Corporate (1)
    (5,346 )             (10,073 )             (14,739 )             (21,086 )        
 
                                                       
Total adjusted operating income (loss)
  $ 21,905       11.8 %   $ 4,992       3.6 %   $ 41,177       11.4 %   $ (1,777 )     (0.7 %)
 
                                                       
 
                                                               
Restructuring Charges (Reductions), net:
                                                               
Executive recruitment:
                                                               
North America
  $ (340 )     (0.3 %)   $ (1,279 )     (1.9 %)   $ (340 )     (0.1 %)   $ (1,279 )     (1.0 %)
EMEA
    2,569       6.9 %     6,615       18.7 %     2,569       3.4 %     24,798       38.4 %
Asia Pacific
    —       0.0 %     87       0.6 %     —       0.0 %     87       0.3 %
South America
    —       0.0 %     (173 )     (2.9 %)     —       0.0 %     (173 )     (1.6 %)
 
                                                       
Total executive recruitment
    2,229       1.3 %     5,250       4.3 %     2,229       0.7 %     23,433       10.4 %
Futurestep
    (99 )     (0.5 %)     (2,476 )     (14.7 %)     (99 )     (0.2 %)     (2,476 )     (7.7 %)
Corporate
    —               —               —               —          
 
                                                       
Total restructuring charges (reductions), net
  $ 2,130       1.1 %   $ 2,774       2.0 %   $ 2,130       0.6 %   $ 20,957       8.1 %
 
                                                       
 
                                                               
            Margin             Margin             Margin             Margin  
Operating Income (Loss):
                                                               
Executive recruitment:
                                                               
North America
  $ 19,595       20.8 %   $ 12,529       18.4 %   $ 39,270       21.3 %   $ 16,736       13.5 %
EMEA
    84       0.2 %     (4,204 )     (11.9 %)     3,137       4.3 %     (21,824 )     (33.8 %)
Asia Pacific
    1,561       6.5 %     (26 )     (0.2 %)     4,630       10.2 %     949       3.7 %
South America
    2,698       31.8 %     1,375       22.5 %     4,577       28.7 %     689       6.5 %
 
                                                       
Total executive recruitment
    23,938       14.6 %     9,674       7.8 %     51,614       16.2 %     (3,450 )     (1.5 %)
Futurestep
    1,183       5.6 %     2,617       15.5 %     2,172       5.2 %     1,802       5.6 %
Corporate (1)
    (5,346 )             (10,073 )             (14,739 )             (21,086 )        
 
                                                       
Total operating income (loss)
  $ 19,775       10.7 %   $ 2,218       1.6 %   $ 39,047       10.8 %   $ (22,734 )     (8.8 %)
 
                                                       
     
(1)   Improvement primarily due to a decrease in net expenses related to the change in amounts due under deferred compensation plans determined by an increase (or decrease) in market values, and adjustment to the fair value of contingent consideration for a prior acquisition, totaling $4.3 million and $3.8 million during the three and six months ended October 31, 2010 compared to the three and six months ended October 31, 2009, respectively.

 

 


 

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
                 
    October 31,     April 30,  
    2010     2010  
    (unaudited)          
ASSETS
               
Cash and cash equivalents
  $ 151,118     $ 219,233  
Marketable securities
    16,189       4,114  
Receivables due from clients, net of allowance for doubtful accounts of $8,106 and $5,983, respectively
    145,043       107,215  
Income taxes and other receivables
    8,476       6,292  
Deferred income taxes
    21,375       20,844  
Prepaid expenses and other assets
    27,940       23,166  
 
           
Total current assets
    370,141       380,864  
 
           
 
               
Marketable securities, non-current
    97,410       73,105  
Property and equipment, net
    37,470       24,963  
Cash surrender value of company owned life insurance policies, net of loans
    71,929       69,069  
Deferred income taxes
    53,526       59,742  
Goodwill
    177,562       172,273  
Intangible assets, net
    24,310       25,425  
Investments and other assets
    31,931       21,657  
 
           
Total assets
  $ 864,279     $ 827,098  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Accounts payable
  $ 11,308     $ 11,148  
Income taxes payable
    8,487       6,323  
Compensation and benefits payable
    121,894       131,550  
Other accrued liabilities
    50,762       49,062  
 
           
Total current liabilities
    192,451       198,083  
 
           
 
               
Deferred compensation and other retirement plans
    131,009       123,794  
Other liabilities
    21,706       13,879  
 
           
Total liabilities
    345,166       335,756  
 
               
Stockholders’ equity
               
Common stock: $0.01 par value, 150,000 shares authorized, 58,548 and 57,614 shares issued and 46,388 and 45,979 shares outstanding, respectively
    387,909       388,717  
Retained earnings
    114,780       90,220  
Accumulated other comprehensive income, net
    16,949       12,934  
 
           
Stockholders’ equity
    519,638       491,871  
Less: notes receivable from stockholders
    (525 )     (529 )
 
           
Total stockholders’ equity
    519,113       491,342  
 
           
Total liabilities and stockholders’ equity
  $ 864,279     $ 827,098  
 
           

 

 


 

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
RECONCILIATION OF AS REPORTED (GAAP) TO AS ADJUSTED (NON-GAAP)
(in thousands, except per share amounts)
(unaudited)
                                                 
    Three Months Ended     Three Months Ended  
    October 31, 2010     October 31, 2009  
    As Reported     Adjustments     As Adjusted     As Reported     Adjustments     As Adjusted  
 
                                               
Fee revenue
  $ 185,350             $ 185,350     $ 140,145             $ 140,145  
Reimbursed out-of-pocket engagement expenses
    7,854               7,854       6,411               6,411  
 
                                       
Total revenue
    193,204               193,204       146,556               146,556  
 
                                       
 
                                               
Compensation and benefits
    127,555               127,555       102,076               102,076  
General and administrative expenses
    27,363               27,363       27,164               27,164  
Out-of-pocket engagement expenses
    13,237               13,237       9,464               9,464  
Depreciation and amortization
    3,144               3,144       2,860               2,860  
Restructuring charges, net
    2,130       (2,130 )     —       2,774       (2,774 )     —  
 
                                   
Total operating expenses
    173,429       (2,130 )     171,299       144,338       (2,774 )     141,564  
 
                                   
 
                                               
Operating income
    19,775       2,130       21,905       2,218       2,774       4,992  
 
                                               
Interest and other income, net
    1,657               1,657       1,180               1,180  
 
                                   
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries
    21,432       2,130       23,562       3,398       2,774       6,172  
Income tax provision (1)
    8,288       821       9,109       879       1,260       2,139  
Equity in earnings of unconsolidated subsidiaries, net
    512               512       226               226  
 
                                   
Net income
  $ 13,656     $ 1,309     $ 14,965     $ 2,745     $ 1,514     $ 4,259  
 
                                   
 
                                               
Earnings per common share:
                                               
Basic
  $ 0.30             $ 0.33     $ 0.06             $ 0.10  
 
                                       
Diluted
  $ 0.30             $ 0.33     $ 0.06             $ 0.09  
 
                                       
 
                                               
Weighted-average common shares outstanding:
                                               
Basic
    45,130               45,130       44,470               44,470  
 
                                       
Diluted
    45,918               45,918       45,291               45,291  
 
                                       
     
Explanation of Non-GAAP Adjustments
 
(1)   Calculated using an annual effective tax rate of 39% and 35% on operating expenses, adjusted for the three months ended October 31, 2010 and 2009, respectively.

 

 


 

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
RECONCILIATION OF AS REPORTED (GAAP) TO AS ADJUSTED (NON-GAAP)
(in thousands, except per share amounts)
(unaudited)
                                                 
    Six Months Ended     Six Months Ended  
    October 31, 2010     October 31, 2009  
    As Reported     Adjustments     As Adjusted     As Reported     Adjustments     As Adjusted  
 
                                               
Fee revenue
  $ 360,462             $ 360,462     $ 256,948             $ 256,948  
Reimbursed out-of-pocket engagement expenses
    15,904               15,904       12,896               12,896  
 
                                       
Total revenue
    376,366               376,366       269,844               269,844  
 
                                       
 
                                               
Compensation and benefits
    247,763               247,763       192,461               192,461  
General and administrative expenses
    55,978               55,978       55,218               55,218  
Out-of-pocket engagement expenses
    25,336               25,336       18,253               18,253  
Depreciation and amortization
    6,112               6,112       5,689               5,689  
Restructuring charges, net
    2,130       (2,130 )     —       20,957       (20,957 )     —  
 
                                   
Total operating expenses
    337,319       (2,130 )     335,189       292,578       (20,957 )     271,621  
 
                                   
 
                                               
Operating income (loss)
    39,047       2,130       41,177       (22,734 )     20,957       (1,777 )
 
                                               
Interest and other (loss) income, net
    (652 )             (652 )     4,471       —       4,471  
 
                                   
Income (loss) before provision (benefit) for income taxes and equity in earnings of unconsolidated subsidiaries
    38,395       2,130       40,525       (18,263 )     20,957       2,694  
Income tax provision (benefit) (1)
    14,809       821       15,630       (6,486 )     7,442       956  
Equity in earnings of unconsolidated subsidiaries, net
    974               974       249               249  
 
                                   
Net income (loss)
  $ 24,560     $ 1,309     $ 25,869     $ (11,528 )   $ 13,515     $ 1,987  
 
                                   
 
                                               
Earnings (loss) per common share:
                                               
Basic
  $ 0.55             $ 0.58     $ (0.26 )           $ 0.05  
 
                                       
Diluted
  $ 0.53             $ 0.56     $ (0.26 )           $ 0.04  
 
                                       
 
                                               
Weighted-average common shares outstanding:
                                               
Basic
    44,886               44,886       44,123               44,123  
 
                                       
Diluted
    46,061               46,061       44,123               44,824  
 
                                       
     
Explanation of Non-GAAP Adjustments
 
(1)   Calculated using an annual effective tax rate of 39% and 35% on operating expenses, adjusted for the six months ended October 31, 2010 and 2009, respectively.