Form: 8-K

Current report filing

December 8, 2011

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 2012

Results of Operations

Highlights

 

  •  

Q2 FY’12 fee revenue increased 8% to $200.2 million, compared to $185.4 million in the same quarter last year.

 

  •  

Q2 FY’12 diluted earnings per share was $0.32 compared to diluted earnings per share of $0.30 in Q2 FY’11. Excluding net adjustments to previously recorded restructuring charges, diluted earnings per share was $0.33 in Q2 FY’11.

Los Angeles, CA, December 8, 2011 — Korn/Ferry International (NYSE: KFY), a premier global provider of talent management solutions, announced Q2 FY’12 diluted earnings per share of $0.32 compared to diluted earnings per share of $0.30 in Q2 FY’11. Excluding net adjustments to previously recorded restructuring charges of $2.1 million, diluted earnings per share was $0.33 in Q2 FY’11.

“I am proud of Korn/Ferry’s accomplishments during the quarter, which includes eight percent year over year growth and an operating margin of 12.7 percent,” said Gary D. Burnison, CEO of Korn/Ferry International. “With regard to talent, the business world continues to operate a two-speed labor cycle. Businesses today are doing more with less, placing ever-increasing demands on leaner, skilled workforces highlighting the universal need to attract, develop and retain top people. Through our diversified business, we are well positioned to not only assist our clients in solving these complex human capital needs but by doing so, ensure their competitive success.”


Financial Results

(dollars in millions, except per share amounts)

 

September 30, September 30, September 30, September 30,
       Second Quarter     Year to Date  
       FY’12     FY’11     FY’12     FY’11  

Fee revenue

     $ 200.2      $ 185.4      $ 406.5      $ 360.5   

Total revenue

     $ 210.0      $ 193.2      $ 424.6      $ 376.4   

Operating income

     $ 25.4      $ 19.8      $ 51.3      $ 39.1   

Operating margin

       12.7     10.7     12.6     10.8

Net income

     $ 15.2      $ 13.7      $ 30.6      $ 24.6   

Basic earnings per share

     $ 0.33      $ 0.30      $ 0.66      $ 0.55   

Diluted earnings per share

     $ 0.32      $ 0.30      $ 0.65      $ 0.53   

 

Adjusted Results (a):

     Second Quarter     Year to Date  
       FY’12     FY’11     FY’12     FY’11  

Operating income

     $ 25.4      $ 21.9      $ 51.3      $ 41.2   

Operating margin

       12.7     11.8     12.6     11.4

Net income

     $ 15.2      $ 15.0      $ 30.6      $ 25.9   

Basic earnings per share

     $ 0.33      $ 0.33      $ 0.66      $ 0.58   

Diluted earnings per share

     $ 0.32      $ 0.33      $ 0.65      $ 0.56   

 

(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 (see attached reconciliations). No restructuring costs were incurred during the three and six months ended October 31, 2011.

Fee revenue was $200.2 million in Q2 FY’12 compared to $185.4 million in Q2 FY’11, an increase of $14.8 million or 8%. This increase reflects increases in fee revenue from all operating segments of the business driven primarily by a 10% increase in the overall number of engagements billed, which was partially offset by a 2% decrease in the weighted-average fee billed per engagement compared to the year-ago fiscal quarter. Weighted-average fee billed is impacted by the mix of engagements by segment, fluctuating foreign currencies and in the current quarter was driven by growth in Futurestep which has lower average fees than Executive Recruitment. On a constant currency basis, fee revenue increased $9.2 million, or 5%.

Compensation and benefit expenses were $131.5 million in Q2 FY’12, an increase of $3.9 million, or 3%, compared to $127.6 million in Q2 FY’11. The increase is attributable mainly to a 17% increase in salaries and benefits due in large part to a 14% increase in worldwide average headcount compared to the year-ago fiscal quarter, partially offset by a reduction in the variable component of compensation. The increase in worldwide headcount is primarily driven by the growth in Futurestep. On a constant currency basis, compensation and benefits decreased $0.3 million.

General and administrative expenses were $34.2 million in Q2 FY’12, an increase of $6.8 million from $27.4 million in Q2 FY’11. This increase is largely attributable to an increase in legal and other professional fees, and to a lesser extent, an increase in premise and office expenses (due primarily to the timing of renewals of existing leases) and business development expenses. On a constant currency basis, general and administrative expenses increased $5.5 million.

Operating income was $25.4 million in Q2 FY’12 compared to operating income of $19.8 million in Q2 FY’11, an increase of $5.6 million, or 28%. After excluding restructuring charges of $2.1 million in Q2 FY’11, operating income was $21.9 million, an increase of $3.5 million, or 16%, compared to Q2 FY’12.


Balance Sheet and Liquidity

Cash and marketable securities were $318.1 million at October 31, 2011 compared to $369.1 million at April 30, 2011. Cash and marketable securities include $78.4 million and $71.4 million held in trust for deferred compensation plans at October 31, 2011 and April 30, 2011, respectively. Cash and marketable securities decreased by $51.0 million from April 30, 2011, mainly due to payment of FY’11 annual bonuses paid in Q1 FY’12, partially offset by cash provided by operating activities.

Results by Segment

Selected Executive Recruitment Data

(dollars in millions)

 

September 30, September 30, September 30, September 30,
       Second Quarter     Year to Date  
       FY’12     FY’11     FY’12     FY’11  

Fee revenue

     $ 171.6      $ 164.1      $ 347.7      $ 319.0   

Total revenue

     $ 179.7      $ 170.5      $ 362.6      $ 331.9   

Operating income

     $ 36.8      $ 23.9      $ 72.4      $ 51.6   

Operating margin

       21.5     14.6     20.8     16.2

Ending number of consultants

       461        475        461        475   

Average number of consultants

       468        477        469        475   

Engagements billed

       4,312        3,795        6,995        6,324   

New engagements (a)

       2,029        1,970        3,994        3,860   

 

Adjusted Results (b):

     Second Quarter     Year to Date  
       FY’12     FY’11     FY’12     FY’11  

Operating income

     $ 36.8      $ 26.1      $ 72.4      $ 53.8   

Operating margin

       21.5     15.9     20.8     16.9

 

(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 (see attached reconciliations). No restructuring costs were incurred during the three and six months ended October 31, 2011.

Fee revenue was $171.6 million in Q2 FY’12, an increase of $7.5 million, or 5%, when compared to fee revenue of $164.1 million in Q2 FY’11. Fee revenue increased in all regions due to a 14% increase in the number of executive recruitment engagements billed, which was partially offset by an 8% decrease in the weighted-average fee per engagement billed when compared to Q2 FY’11. Weighted-average fee billed is impacted by the mix of engagements by region and fluctuating foreign currencies. The decrease in weighted-average fee per engagement was due to strong growth in leadership and talent consulting services which have a lower average fee per engagement. On a constant currency basis, fee revenue increased $3.0 million, or 2%.

Operating income was $36.8 million in Q2 FY’12 compared to operating income of $23.9 million in Q2 FY’11, an increase of $12.9 million. After excluding $2.2 million of restructuring charges in Q2 FY’11, operating income in Q2 FY’12 increased $10.7 million, or 41%, from Q2 FY’11. This increase is primarily attributed to the $7.5 million increase in fee revenue and a $5.5 million decrease in compensation and benefits expense in Q2 FY’12 as compared to Q2 FY’11, which was partially offset by a $1.6 million increase in general and administrative expenses. The decrease in compensation and benefits expense primarily resulted from a decrease in the variable component of compensation when compared to prior year which was partially offset by an increase in salaries and benefits. The increase in general and administrative expense was primarily driven by an increase in premise and office expense, which was due to an increase in overall business activities.

The total number of consultants at October 31, 2011 and 2010 was 461 and 475, respectively.


Selected Futurestep Data

(dollars in millions)

 

September 30, September 30, September 30, September 30,
       Second Quarter     Year to Date  
       FY’12     FY’11     FY’12     FY’11  

Fee revenue

     $ 28.6      $ 21.3      $ 58.8      $ 41.5   

Total revenue

     $ 30.3      $ 22.7      $ 62.0      $ 44.5   

Operating income

     $ 2.3      $ 1.2      $ 4.6      $ 2.2   

Operating margin

       7.9     5.6     7.8     5.2

 

Adjusted Results (a):

     Second Quarter     Year to Date  
       FY’12     FY’11     FY’12     FY’11  

Operating income

     $ 2.3      $ 1.1      $ 4.6      $ 2.1   

Operating margin

       7.9     5.1     7.8     5.0

 

(a) Adjusted results are non-GAAP financial measures that exclude recoveries of restructuring charges of $0.1 million during the three and six months ended October 31, 2010 (see attached reconciliations). No restructuring costs were incurred during the three and six month ended October 31, 2011.

Fee revenue was $28.6 million in Q2 FY’12, an increase of $7.3 million, or 34%, from $21.3 million in Q2 FY’11. The improvement in fee revenue was driven by a 33% increase in the weighted-average fee billed per engagement, as well as a 1% increase in the number of engagements billed. The increase in fee revenue was also positively impacted by an increase in engagement activity for existing clients in Q2 FY’12 compared to Q2 FY’11. On a constant currency basis, fee revenue increased $6.2 million, or 29%.

Operating income was $2.3 million in Q2 FY’12 compared to operating income of $1.2 million in Q2 FY’11, an increase of $1.1 million, or 92%. Excluding $0.1 million in recoveries of restructuring charges in Q2 FY’11, operating income was $1.1 million. This increase is primarily attributed to the $7.3 million increase in fee revenue in Q2 FY’12 as compared to Q2 FY’11, which was partially offset by a $6.1 million increase in compensation and benefits expenses. The increase in compensation and benefits expense was attributable to a 45% increase in average headcount when compared to the year-ago fiscal quarter.

Outlook

Given the uncertainty caused by the global economy and financial markets, it is particularly challenging to accurately forecast business results. However, assuming economic conditions, financial markets and foreign exchange rates do remain steady; Q3 FY’12 fee revenue is likely to be in the range of $183 million to $203 million and diluted earnings per share is likely to be in the range of $0.25 to $0.33.

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, deploy, develop and reward their talent. Visit www.kornferry.com for more information on the Korn/Ferry International family of companies, and www.kornferryinstitute.com for thought leadership, intellectual property and research.


Forward-Looking Statements

Statements in this press release and our conference call that relate to future results and events (“forward-looking statements”) are based on Korn/Ferry’s current expectations. These statements, which include words such as “believes”, “expects” or “likely” include references to our outlook. Readers are cautioned not to place undue reliance on such statements. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties that are beyond the control of Korn/Ferry. The potential risks and uncertainties include those relating to competition, the dependence on attracting and retaining qualified and experienced consultants, 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, our ability to enhance and develop new technology, the successful integration of acquired businesses, our ability to develop new products and services, impairment of goodwill and other intangible assets, deferred tax assets and employment liability risk. For a detailed description of risks and uncertainties that could cause differences, please refer to Korn/Ferry’s periodic filings with the Securities and Exchange Commission. Korn/Ferry disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Use of Non-GAAP Financial Measures

This press release contains financial information calculated other than in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). In particular, it includes:

 

  •  

adjusted operating income and operating margin;

 

  •  

adjusted net income;

 

  •  

adjusted basic and diluted earnings 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 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)

 

September 30, September 30, September 30, September 30,
       Three Months Ended      Six Months Ended  
       October 31,      October 31,  
       2011      2010      2011      2010  
       (unaudited)  

Fee revenue

     $ 200,136       $ 185,350       $ 406,467       $ 360,462   

Reimbursed out-of-pocket engagement expenses

       9,852         7,854         18,111         15,904   
    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

       209,988         193,204         424,578         376,366   
    

 

 

    

 

 

    

 

 

    

 

 

 

Compensation and benefits

       131,481         127,555         268,852         247,763   

General and administrative expenses

       34,189         27,363         68,962         55,978   

Out-of-pocket engagement expenses

       15,436         13,237         28,571         25,336   

Depreciation and amortization

       3,475         3,144         6,844         6,112   

Restructuring charges, net

       —           2,130         —           2,130   
    

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

       184,581         173,429         373,229         337,319   
    

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

       25,407         19,775         51,349         39,047   

Other (loss) income, net

       (2,617      2,915         (4,639      1,414   

Interest expense, net

       (389      (1,258      (970      (2,066
    

 

 

    

 

 

    

 

 

    

 

 

 

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

       22,401         21,432         45,740         38,395   

Income tax provision

       7,726         8,288         16,161         14,809   

Equity in earnings of unconsolidated subsidiaries, net

       472         512         979         974   
    

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     $ 15,147       $ 13,656       $ 30,558       $ 24,560   
    

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per common share:

             

Basic

     $ 0.33       $ 0.30       $ 0.66       $ 0.55   
    

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

     $ 0.32       $ 0.30       $ 0.65       $ 0.53   
    

 

 

    

 

 

    

 

 

    

 

 

 

Weighted-average common shares outstanding:

             

Basic

       46,499         45,130         46,234         44,886   
    

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

       47,114         45,918         47,151         46,061   
    

 

 

    

 

 

    

 

 

    

 

 

 


KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

(unaudited)

 

     Three Months Ended
October 31,
    Six Months Ended
October 31,
 
     2011           2010     % Change     2011           2010     % Change  

Fee Revenue:

                

Executive recruitment:

                

North America

   $ 97,511        $ 94,066        4   $ 195,936        $ 184,041        6

EMEA

     40,269          37,424        8     83,511          73,692        13

Asia Pacific

     25,266          24,098        5     50,941          45,240        13

South America

     8,506          8,478        0     17,297          15,964        8
  

 

 

     

 

 

     

 

 

     

 

 

   

Total executive recruitment

     171,552          164,066        5     347,685          318,937        9

Futurestep

     28,584          21,284        34     58,782          41,525        42
  

 

 

     

 

 

     

 

 

     

 

 

   

Total fee revenue

     200,136          185,350        8     406,467          360,462        13

Reimbursed out-of-pocket engagement expenses

     9,852          7,854        25     18,111          15,904        14
  

 

 

     

 

 

     

 

 

     

 

 

   

Total revenue

   $ 209,988        $ 193,204        9   $ 424,578        $ 376,366        13
  

 

 

     

 

 

     

 

 

     

 

 

   
                
           Margin           Margin           Margin           Margin  

Adjusted Operating Income:

                

(Excluding Restructuring Charges)

                

Executive recruitment:

                

North America

   $ 25,697        26.4   $ 19,255        20.5   $ 49,723        25.4   $ 38,930        21.2

EMEA

     5,483        13.6     2,653        7.1     10,827        13.0     5,706        7.7

Asia Pacific

     3,771        14.9     1,561        6.5     7,705        15.1     4,630        10.2

South America

     1,950        22.9     2,698        31.8     4,233        24.5     4,577        28.7
  

 

 

     

 

 

     

 

 

     

 

 

   

Total executive recruitment

     36,901        21.5     26,167        15.9     72,488        20.8     53,843        16.9

Futurestep

     2,265        7.9     1,084        5.1     4,571        7.8     2,073        5.0

Corporate (1)

     (13,759       (5,346       (25,710       (14,739  
  

 

 

     

 

 

     

 

 

     

 

 

   

Total adjusted operating income

   $ 25,407        12.7   $ 21,905        11.8   $ 51,349        12.6   $ 41,177        11.4
  

 

 

     

 

 

     

 

 

     

 

 

   

Restructuring Charges (Reductions), net:

                

Executive recruitment:

                

North America

   $ —          0.0   $ (340     (0.3 %)    $ —          0.0   $ (340     (0.1 %) 

EMEA

     —          0.0     2,569        6.9     —          0.0     2,569        3.4

Asia Pacific

     —          0.0     —          0.0     —          0.0     —          0.0

South America

     —          0.0     —          0.0     —          0.0     —          0.0
  

 

 

     

 

 

     

 

 

     

 

 

   

Total executive recruitment

     —          0.0     2,229        1.3     —          0.0     2,229        0.7

Futurestep

     —          0.0     (99     (0.5 %)      —          0.0     (99     (0.2 %) 

Corporate

     —            —            —            —       
  

 

 

     

 

 

     

 

 

     

 

 

   

Total restructuring charges (reductions), net

   $ —          0.0   $ 2,130        1.1   $ —          0.0   $ 2,130        0.6
  

 

 

     

 

 

     

 

 

     

 

 

   
            Margin           Margin           Margin           Margin  

Operating Income:

                

Executive recruitment:

                

North America

   $ 25,697        26.4   $ 19,595        20.8   $ 49,723        25.4   $ 39,270        21.3

EMEA

     5,483        13.6     84        0.2     10,827        13.0     3,137        4.3

Asia Pacific

     3,771        14.9     1,561        6.5     7,705        15.1     4,630        10.2

South America

     1,950        22.9     2,698        31.8     4,233        24.5     4,577        28.7
  

 

 

     

 

 

     

 

 

     

 

 

   

Total executive recruitment

     36,901        21.5     23,938        14.6     72,488        20.8     51,614        16.2

Futurestep

     2,265        7.9     1,183        5.6     4,571        7.8     2,172        5.2

Corporate (1)

     (13,759       (5,346       (25,710       (14,739  
  

 

 

     

 

 

     

 

 

     

 

 

   

Total operating income

   $ 25,407        12.7   $ 19,775        10.7   $ 51,349        12.6   $ 39,047        10.8
  

 

 

     

 

 

     

 

 

     

 

 

   

 

(1) The Company recorded an adjustment to the fair value of contingent consideration for a prior acquisition, of $2.2 million and $1.9 million during the three and six months ended October 31, 2011 and 2010, respectively.


KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

September 30, September 30,
       October 31,
2011
     April 30,
2011
 
       (unaudited)         

ASSETS

       

Cash and cash equivalents

     $ 192,169       $ 246,856   

Marketable securities

       25,904         20,868   

Receivables due from clients, net of allowance for doubtful accounts of $11,032 and $9,977 respectively

       144,502         128,859   

Income taxes and other receivables

       5,900         5,138   

Deferred income taxes

       10,648         10,214   

Prepaid expenses and other assets

       31,579         29,662   
    

 

 

    

 

 

 

Total current assets

       410,702         441,597   
    

 

 

    

 

 

 

Marketable securities, non-current

       100,037         101,363   

Property and equipment, net

       46,392         43,142   

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

       72,240         70,987   

Deferred income taxes

       62,453         64,418   

Goodwill

       179,813         183,952   

Intangible assets, net

       21,166         22,289   

Investments and other assets

       43,824         43,932   
    

 

 

    

 

 

 

Total assets

     $ 936,627       $ 971,680   
    

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

       

Accounts payable

     $ 11,792       $ 12,504   

Income taxes payable

       6,744         4,674   

Compensation and benefits payable

       107,917         173,097   

Other accrued liabilities

       45,180         43,591   
    

 

 

    

 

 

 

Total current liabilities

       171,633         233,866   
    

 

 

    

 

 

 

Deferred compensation and other retirement plans

       135,884         139,558   

Other liabilities

       19,978         19,919   
    

 

 

    

 

 

 

Total liabilities

       327,495         393,343   
    

 

 

    

 

 

 

Stockholders’ equity

       

Common stock: $0.01 par value, 150,000 shares authorized, 59,846 and 59,101 shares issued and 47,756 and 47,003 shares outstanding, respectively

       412,018         404,703   

Retained earnings

       179,052         148,494   

Accumulated other comprehensive income, net

       18,577         25,660   
    

 

 

    

 

 

 

Stockholders’ equity

       609,647         578,857   

Less: notes receivable from stockholders

       (515      (520
    

 

 

    

 

 

 

Total stockholders’ equity

       609,132         578,337   
    

 

 

    

 

 

 

Total liabilities and stockholders' equity

     $ 936,627       $ 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)

 

September 30, September 30, September 30, September 30, September 30, September 30,
       Three Months Ended
October 31, 2011
     Three Months Ended
October 31, 2010
 
       As Reported      Adjustments        As Adjusted      As Reported      Adjustments      As Adjusted  

Fee revenue

     $ 200,136            $ 200,136       $ 185,350          $ 185,350   

Reimbursed out-of-pocket engagement expenses

       9,852              9,852         7,854            7,854   
    

 

 

         

 

 

    

 

 

       

 

 

 

Total revenue

       209,988              209,988         193,204            193,204   
    

 

 

         

 

 

    

 

 

       

 

 

 

Compensation and benefits

       131,481              131,481         127,555            127,555   

General and administrative expenses

       34,189              34,189         27,363            27,363   

Out-of-pocket engagement expenses

       15,436              15,436         13,237            13,237   

Depreciation and amortization

       3,475              3,475         3,144            3,144   

Restructuring charges, net

       —           —             —           2,130         (2,130      —     
    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

       184,581         —             184,581         173,429         (2,130      171,299   
    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

       25,407         —             25,407         19,775         2,130         21,905   

Other (loss) income, net

       (2,617           (2,617      2,915            2,915   

Interest expense, net

       (389           (389      (1,258         (1,258
    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

 

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

       22,401         —             22,401         21,432         2,130         23,562   

Income tax provision (1)

       7,726         —             7,726         8,288         821         9,109   

Equity in earnings of unconsolidated subsidiaries, net

       472              472         512            512   
    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     $ 15,147       $ —           $ 15,147       $ 13,656       $ 1,309       $ 14,965   
    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per common share:

                     

Basic

     $ 0.33            $ 0.33       $ 0.30          $ 0.33   
    

 

 

         

 

 

    

 

 

       

 

 

 

Diluted

     $ 0.32            $ 0.32       $ 0.30          $ 0.33   
    

 

 

         

 

 

    

 

 

       

 

 

 

Weighted-average common shares outstanding:

                     

Basic

       46,499              46,499         45,130            45,130   
    

 

 

         

 

 

    

 

 

       

 

 

 

Diluted

       47,114              47,114         45,918            45,918   
    

 

 

         

 

 

    

 

 

       

 

 

 

Explanation of Non-GAAP Adjustments

 

(1) Calculated using an annual effective tax rate of 34% and 39% on operating expenses, adjusted for the three months ended October 31, 2011 and 2010, respectively.


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)

 

September 30, September 30, September 30, September 30, September 30, September 30,
       Six Months Ended
October 31, 2011
     Six Months Ended
October 31, 2010
 
       As Reported      Adjustments        As Adjusted      As Reported      Adjustments      As Adjusted  

Fee revenue

     $ 406,467            $ 406,467       $ 360,462          $ 360,462   

Reimbursed out-of-pocket engagement expenses

       18,111              18,111         15,904            15,904   
    

 

 

         

 

 

    

 

 

       

 

 

 

Total revenue

       424,578              424,578         376,366            376,366   
    

 

 

         

 

 

    

 

 

       

 

 

 

Compensation and benefits

       268,852              268,852         247,763            247,763   

General and administrative expenses

       68,962              68,962         55,978            55,978   

Out-of-pocket engagement expenses

       28,571              28,571         25,336            25,336   

Depreciation and amortization

       6,844              6,844         6,112            6,112   

Restructuring charges, net

       —           —             —           2,130         (2,130      —     
    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

       373,229         —             373,229         337,319         (2,130      335,189   
    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

       51,349         —             51,349         39,047         2,130         41,177   

Other (loss) income, net

       (4,639           (4,639      1,414            1,414   

Interest expense, net

       (970           (970      (2,066         (2,066
    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

 

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

       45,740         —             45,740         38,395         2,130         40,525   

Income tax provision (1)

       16,161         —             16,161         14,809         821         15,630   

Equity in earnings of unconsolidated subsidiaries, net

       979              979         974            974   
    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     $ 30,558       $ —           $ 30,558       $ 24,560       $ 1,309       $ 25,869   
    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per common share:

                     

Basic

     $ 0.66            $ 0.66       $ 0.55          $ 0.58   
    

 

 

         

 

 

    

 

 

       

 

 

 

Diluted

     $ 0.65            $ 0.65       $ 0.53          $ 0.56   
    

 

 

         

 

 

    

 

 

       

 

 

 

Weighted-average common shares outstanding:

                     

Basic

       46,234              46,234         44,886            44,886   
    

 

 

         

 

 

    

 

 

       

 

 

 

Diluted

       47,151              47,151         46,061            46,061   
    

 

 

         

 

 

    

 

 

       

 

 

 

Explanation of Non-GAAP Adjustments

 

(1) Calculated using an annual effective tax rate of 35% and 39% on operating expenses, adjusted for the six months ended October 31, 2011 and 2010, respectively.