Form: 8-K

Current report filing

March 7, 2012

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 Third Quarter Fiscal 2012

Results of Operations

Highlights

 

  •  

Q3 FY’12 fee revenue was essentially flat at $185.9 million, compared to $186.5 million in the same quarter last year.

 

  •  

Q3 FY’12 diluted earnings per share was $0.25 compared to diluted earnings per share of $0.30 in Q3 FY’11. Excluding net adjustments to previously recorded restructuring charges of $0.9 million, diluted earnings per share was $0.26 in Q3 FY’12.

Los Angeles, CA, March 7, 2012—Korn/Ferry International (NYSE: KFY), a premier global provider of talent management solutions, announced Q3 FY’12 diluted earnings per share of $0.25 compared to diluted earnings per share of $0.30 in Q3 FY’11. Excluding net adjustments to previously recorded restructuring charges of $0.9 million, diluted earnings per share was $0.26 in Q3 FY’12.

“We had a solid seasonal quarter despite an uneven economic recovery,” said Gary Burnison, CEO of Korn/Ferry International.” As the recovery carries forward, we will continue to drive our differentiated strategy and solutions to help our clients not only attract, but engage, develop and retain the talent needed to effectively execute their business strategy.”


Financial Results

(dollars in millions, except per share amounts)

 

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

Fee revenue

     $ 185.9      $ 186.5      $ 592.4      $ 547.0   

Total revenue

     $ 194.6      $ 194.1      $ 619.2      $ 570.5   

Operating income

     $ 16.2      $ 20.5      $ 67.5      $ 59.6   

Operating margin

       8.7     11.0     11.4     10.9

Net income

     $ 11.7      $ 13.9      $ 42.3      $ 38.5   

Basic earnings per share

     $ 0.25      $ 0.31      $ 0.91      $ 0.86   

Diluted earnings per share

     $ 0.25      $ 0.30      $ 0.90      $ 0.84   

 

September 30, September 30, September 30, September 30,
Adjusted Results (a):      Third Quarter     Year to Date  
        FY’12     FY’11     FY’12     FY’11  

Operating income

     $ 17.1      $ 20.5      $ 68.4      $ 61.7   

Operating margin

       9.2     11.0     11.6     11.3

Net income

     $ 12.3      $ 13.9      $ 42.9      $ 39.8   

Basic earnings per share

     $ 0.26      $ 0.31      $ 0.93      $ 0.88   

Diluted earnings per share

     $ 0.26      $ 0.30      $ 0.91      $ 0.87   

 

(a) Adjusted results are non-GAAP financial measures that exclude restructuring charges, net, of $0.9 million during the three and nine months ended January 31, 2012. Comparative results exclude restructuring charges, net, of $2.1 million during the nine months ended January 31, 2011 (see attached reconciliations). No restructuring costs were incurred during the three months ended January 31, 2011.

Fee revenue was $185.9 million in Q3 FY’12 compared to $186.5 million in Q3 FY’11, a decrease of $0.6 million. The decrease in fee revenue was driven by a 3% decrease in the overall number of engagements billed, which was offset by a 2% increase 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, and fluctuating foreign currencies. On a constant currency basis, fee revenue decreased $1.1 million, or 1%.

Compensation and benefit expenses were $125.7 million in Q3 FY’12, a decrease of $0.4 million, compared to $126.1 million in Q3 FY’11. The decrease is attributable mainly to a reduction in the variable component of compensation, partially offset by an increase in other components of compensation expense. On a constant currency basis, compensation and benefits decreased $1.0 million, or 1%.

General and administrative expenses were $35.2 million in Q3 FY’12, an increase of $3.7 million from $31.5 million in Q3 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 offset by a decrease in travel and meeting expenses. On a constant currency basis, general and administrative expenses increased $3.5 million, or 11%.

Operating income was $16.2 million in Q3 FY’12 compared to operating income of $20.5 million in Q3 FY’11, a decrease of $4.3 million, or 21%. Excluding restructuring charges of $0.9 million in Q3 FY’12, operating income was $17.1 million, a decrease of $3.4 million, or 17%.


Balance Sheet and Liquidity

Cash and marketable securities were $352.4 million at January 31, 2012 compared to $369.1 million at April 30, 2011. Cash and marketable securities include $80.5 million and $71.4 million held in trust for deferred compensation plans at January 31, 2012 and April 30, 2011, respectively. Cash and marketable securities decreased by $16.7 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,
       Third Quarter     Year to Date  
       FY’12     FY’11     FY’12     FY’11  

Fee revenue

     $ 160.1      $ 163.1      $ 507.8      $ 482.1   

Total revenue

     $ 167.6      $ 169.6      $ 530.2      $ 501.5   

Operating income

     $ 28.1      $ 29.1      $ 100.5      $ 80.7   

Operating margin

       17.5     17.8     19.8     16.7
          

Ending number of consultants

       441        474        441        474   

Average number of consultants

       451        475        462        475   

Engagements billed

       3,811        3,930        9,255        8,853   

New engagements (a)

       1,821        1,914        5,815        5,774   

 

September 30, September 30, September 30, September 30,
Adjusted Results (b):      Third Quarter     Year to Date  
        FY’12     FY’11     FY’12     FY’11  

Operating income

     $ 28.9      $ 29.1      $ 101.3      $ 82.9   

Operating margin

       18.0     17.8     20.0     17.2

 

(a) Represents new engagements opened in the respective period, which declined in the three months ended January 31, 2012 compared to the three months ended January 31, 2011 driven by the European region.

 

(b) Adjusted results are non-GAAP financial measures that exclude restructuring charges, net, of $0.8 million during the three and nine months ended January 31, 2012. Comparative results exclude restructuring charges, net, of $2.2 million during the nine months ended January 31, 2011 (see attached reconciliations). No restructuring costs were incurred during the three months ended January 31, 2011.

Fee revenue was $160.1 million in Q3 FY’12, a decrease of $3.0 million, or 2%, when compared to fee revenue of $163.1 million in Q3 FY’11. Fee revenue decreased primarily due to a 3% decrease in the number of executive recruitment engagements billed, which was partially offset by a 1% increase in the weighted-average fee per engagement billed when compared to Q3 FY’11. Weighted-average fee billed is impacted by the mix of engagements by region and fluctuating foreign currencies. The decrease in fee revenue was due to a decrease in fee revenue in the North American region partially offset by an increase in fee revenue in all other regions. On a constant currency basis, fee revenue decreased $3.3 million, or 2%.

Operating income was $28.1 million in Q3 FY’12 compared to operating income of $29.1 million in Q3 FY’11, a decrease of $1.0 million. This decrease is primarily attributed to the $3.0 million decrease in fee revenue and $0.8 million in restructuring charges, which was partially offset by a $2.2 million decrease in compensation and benefits expense in Q3 FY’12 as compared to Q3 FY’11. 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 other components of compensation expense.

The total number of consultants at January 31, 2012 and 2011 was 441 and 474, respectively.


Selected Futurestep Data

(dollars in millions)

 

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

Fee revenue

     $ 25.8      $ 23.4      $ 84.6      $ 64.9   

Total revenue

     $ 27.0      $ 24.5      $ 89.0      $ 69.0   

Operating income

     $ 0.9      $ 1.3      $ 5.5      $ 3.5   

Operating margin

       3.4     5.4     6.5     5.3

 

September 30, September 30, September 30, September 30,
Adjusted Results (a):      Third Quarter     Year to Date  
        FY’12     FY’11     FY’12     FY’11  

Operating income

     $ 1.0      $ 1.3      $ 5.6      $ 3.4   

Operating margin

       4.0     5.4     6.6     5.2

 

(a) Adjusted results are non-GAAP financial measures that exclude restructuring charges, net, of $0.1 million during the three and nine months ended January 31, 2012. Adjusted results for the nine months ended January 31, 2011 exclude recoveries of restructuring charges of $0.1 million (see attached reconciliations). No restructuring costs were incurred during the three months ended January 31, 2011.

Fee revenue was $25.8 million in Q3 FY’12, an increase of $2.4 million, or 10%, from $23.4 million in Q3 FY’11. The improvement in fee revenue was driven by a 12% increase in the weighted-average fee billed per engagement, which was driven by growth in recruitment process outsourcing engagements, which have higher average fees per engagement and partially offset by a 2% decrease in the number of engagements billed. On a constant currency basis, fee revenue increased $2.2 million, or 9%.

Operating income was $0.9 million in Q3 FY’12 compared to operating income of $1.3 million in Q3 FY’11, a decrease of $0.4 million, primarily due to a decrease in operating income in the European region, partially offset by an increase in operating income in the other Futurestep regions. This decrease is primarily attributed to a $2.0 million increase in compensation and benefits expenses and a $0.8 million increase in general and administrative expenses, which was partially offset by a $2.4 million increase in fee revenue in Q3 FY’12 as compared to Q3 FY’11. The increase in compensation and benefits expense was attributable to a 38% increase in average headcount when compared to the year-ago fiscal quarter while the increase in general and administrative expense was due to an increase in premise and office expenses and an increase in marketing expense.

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; Q4 FY’12 fee revenue is likely to be in the range of $182 million to $196 million and adjusted diluted earnings per share is likely to be in the range of $0.24 to $ 0.30, excluding $0.03 to $0.04 of estimated non-recurring compensation costs or $0.21 to $0.27 as measured by generally accepted accounting principles.

Earnings Conference Call Webcast

The earnings conference call will be held today at 5:00 PM (EST) and hosted by CEO Gary Burnison, CFO Robert Rozek and SVP Finance Gregg Kvochak. The conference call will be webcast and available online at www.kornferry.com, accessible through the Investor Relations section.

Korn/Ferry International (NYSE: KFY), with a presence throughout the Americas, Asia Pacific, Europe, the Middle East and Africa, is a premier global provider of talent management solutions. Based in Los Angeles, the firm delivers an array of solutions that help clients to attract, deploy, develop and reward their talent. Visit www.kornferry.com for more information on the Korn/Ferry International family of companies, and www.kornferryinstitute.com for thought leadership, intellectual property and research.


Forward-Looking Statements

Statements in this press release and our conference call that relate to future results and events (“forward-looking statements”) are based on Korn/Ferry’s current expectations. These statements, which include words such as “believes”, “expects” or “likely” include references to our outlook. Readers are cautioned not to place undue reliance on such statements. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties that are beyond the control of Korn/Ferry. The potential risks and uncertainties include those relating to competition, the dependence on attracting and retaining qualified and experienced consultants, 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 to exclude restructuring charges, net;

 

  •  

adjusted net income, adjusted to exclude restructuring charges, net of the income tax effect;

 

  •  

adjusted basic and diluted earnings per share, adjusted to exclude restructuring charges, net;

 

  •  

adjusted diluted earnings per share, adjusted to exclude non-recurring compensation costs; 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
January 31,
     Nine Months Ended
January 31,
 
       2012      2011      2012      2011  
       (unaudited)  

Fee revenue

     $ 185,951       $ 186,489       $ 592,418       $ 546,951   

Reimbursed out-of-pocket engagement expenses

       8,672         7,620         26,783         23,524   
    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

       194,623         194,109         619,201         570,475   
    

 

 

    

 

 

    

 

 

    

 

 

 

Compensation and benefits

       125,741         126,088         394,593         373,851   

General and administrative expenses

       35,242         31,534         104,204         87,512   

Engagement expenses

       13,023         12,756         41,594         38,092   

Depreciation and amortization

       3,523         3,239         10,367         9,351   

Restructuring charges, net

       929         —           929         2,130   
    

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

       178,458         173,617         551,687         510,936   
    

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

       16,165         20,492         67,514         59,539   

Other income (loss), net

       1,607         1,948         (3,032      3,362   

Interest expense, net

       (310      (401      (1,280      (2,467
    

 

 

    

 

 

    

 

 

    

 

 

 

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

       17,462         22,039         63,202         60,434   

Income tax provision

       6,038         8,598         22,199         23,407   

Equity in earnings of unconsolidated subsidiaries, net

       293         534         1,272         1,508   
    

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     $ 11,717       $ 13,975       $ 42,275       $ 38,535   
    

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per common share:

             

Basic

     $ 0.25       $ 0.31       $ 0.91       $ 0.86   
    

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

     $ 0.25       $ 0.30       $ 0.90       $ 0.84   
    

 

 

    

 

 

    

 

 

    

 

 

 

Weighted-average common shares outstanding:

             

Basic

       46,528         45,349         46,332         45,040   
    

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

       47,345         46,720         47,193         46,026   
    

 

 

    

 

 

    

 

 

    

 

 

 


KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

(unaudited)

 

     Three Months Ended
January 31,
    Nine Months Ended
January 31,
 
     2012           2011     % Change     2012           2011     % Change  

Fee Revenue:

                

Executive recruitment:

                

North America

   $ 90,002        $ 94,991        (5 %)    $ 285,938        $ 279,032        2

EMEA

     40,508          40,068        1     124,019          113,760        9

Asia Pacific

     20,938          20,445        2     71,879          65,685        9

South America

     8,664          7,638        13     25,961          23,602        10
  

 

 

     

 

 

     

 

 

     

 

 

   

Total executive recruitment

     160,112          163,142        (2 %)      507,797          482,079        5

Futurestep

     25,839          23,347        11     84,621          64,872        30
  

 

 

     

 

 

     

 

 

     

 

 

   

Total fee revenue

     185,951          186,489        (0 %)      592,418          546,951        8

Reimbursed out-of-pocket engagement expenses

     8,672          7,620        14     26,783          23,524        14
  

 

 

     

 

 

     

 

 

     

 

 

   

Total revenue

   $   194,623        $   194,109        0   $   619,201        $   570,475        9
  

 

 

     

 

 

     

 

 

     

 

 

   
Adjusted Operating Income:
(Excluding Restructuring Charges)
         Margin           Margin           Margin           Margin  

Executive recruitment:

                

North America

   $ 19,067        21.2   $ 21,650        22.8   $ 68,790        24.1   $ 60,580        21.7

EMEA

     6,210        15.3     3,360        8.4     17,037        13.7     9,066        8.0

Asia Pacific

     1,638        7.8     2,487        12.2     9,343        13.0     7,117        10.8

South America

     1,934        22.3     1,559        20.4     6,167        23.8     6,136        26.0
  

 

 

     

 

 

     

 

 

     

 

 

   

Total executive recruitment

     28,849        18.0     29,056        17.8     101,337        20.0     82,899        17.2

Futurestep

     1,037        4.0     1,268        5.4     5,608        6.6     3,341        5.2

Corporate (1)

     (12,792       (9,832       (38,502       (24,571  
  

 

 

     

 

 

     

 

 

     

 

 

   

Total adjusted operating income

   $ 17,094        9.2   $ 20,492        11.0   $ 68,443        11.6   $ 61,669        11.3
  

 

 

     

 

 

     

 

 

     

 

 

   

Restructuring Charges (Reductions), net:

                

Executive recruitment:

                

North America

   $ (15     (0.0 %)    $ —          0.0   $ (15     (0.0 %)    $ (340     (0.1 %) 

EMEA

     897        2.2     —          0.0     897        0.7     2,569        2.3

Asia Pacific

     —          0.0     —          0.0     —          0.0     —          0.0

South America

     (99     (1.2 %)      —          0.0     (99     (0.3 %)      —          0.0
  

 

 

     

 

 

     

 

 

     

 

 

   

Total executive recruitment

     783        0.5     —          0.0     783        0.2     2,229        0.5

Futurestep

     146        0.6     —          0.0     146        0.1     (99     (0.1 %) 

Corporate

     —            —            —            —       
  

 

 

     

 

 

     

 

 

     

 

 

   

Total restructuring charges (reductions), net

   $ 929        0.5   $ —          0.0   $ 929        0.2   $ 2,130        0.4
  

 

 

     

 

 

     

 

 

     

 

 

   
Operating Income:          Margin           Margin           Margin           Margin  

Executive recruitment:

                

North America

   $ 19,082        21.2   $ 21,650        22.8   $ 68,805        24.1   $ 60,920        21.8

EMEA

     5,313        13.1     3,360        8.4     16,140        13.0     6,497        5.7

Asia Pacific

     1,638        7.8     2,487        12.2     9,343        13.0     7,117        10.8

South America

     2,033        23.5     1,559        20.4     6,266        24.1     6,136        26.0
  

 

 

     

 

 

     

 

 

     

 

 

   

Total executive recruitment

     28,066        17.5     29,056        17.8     100,554        19.8     80,670        16.7

Futurestep

     891        3.4     1,268        5.4     5,462        6.5     3,440        5.3

Corporate (1)

     (12,792       (9,832       (38,502       (24,571  
  

 

 

     

 

 

     

 

 

     

 

 

   

Total operating income

   $ 16,165        8.7   $ 20,492        11.0   $ 67,514        11.4   $ 59,539        10.9
  

 

 

     

 

 

     

 

 

     

 

 

   

 

(1) The Company recorded an adjustment to reduce the fair value of contingent consideration for a prior acquisition, of $2.2 million and $1.9 million during the nine months ended January 31, 2012 and 2011, respectively.


KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

September 30, September 30,
       January 31,      April 30,  
       2012      2011  
       (unaudited)         

ASSETS

       

Cash and cash equivalents

     $ 218,196       $ 246,856   

Marketable securities

       42,079         20,868   

Receivables due from clients, net of allowance for doubtful accounts of $11,023 and $9,977 respectively

       136,090         128,859   

Income taxes and other receivables

       17,569         5,138   

Deferred income taxes

       10,267         10,214   

Prepaid expenses and other assets

       27,115         29,662   
    

 

 

    

 

 

 

Total current assets

       451,316         441,597   
    

 

 

    

 

 

 

Marketable securities, non-current

       92,129         101,363   

Property and equipment, net

       47,685         43,142   

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

       75,460         70,987   

Deferred income taxes

       50,828         64,418   

Goodwill

       174,562         183,952   

Intangible assets, net

       20,923         22,289   

Investments and other assets

       39,181         43,932   
    

 

 

    

 

 

 

Total assets

     $ 952,084       $ 971,680   
    

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

       

Accounts payable

     $ 11,383       $ 12,504   

Income taxes payable

       7,303         4,674   

Compensation and benefits payable

       117,069         173,097   

Other accrued liabilities

       41,434         43,591   
    

 

 

    

 

 

 

Total current liabilities

       177,189         233,866   
    

 

 

    

 

 

 

Deferred compensation and other retirement plans

       137,492         139,558   

Other liabilities

       20,861         19,919   
    

 

 

    

 

 

 

Total liabilities

       335,542         393,343   
    

 

 

    

 

 

 

Stockholders’ equity

       

Common stock: $0.01 par value, 150,000 shares authorized, 59,864 and 59,101 shares issued and 47,784 and 47,003 shares outstanding, respectively

       415,635         404,703   

Retained earnings

       190,769         148,494   

Accumulated other comprehensive income, net

       10,651         25,660   
    

 

 

    

 

 

 

Stockholders’ equity

       617,055         578,857   

Less: notes receivable from stockholders

       (513      (520
    

 

 

    

 

 

 

Total stockholders’ equity

       616,542         578,337   
    

 

 

    

 

 

 

Total liabilities and stockholders’ equity

     $ 952,084       $ 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      Three Months Ended  
       January 31, 2012      January 31, 2011  
       As Reported      Adjustments      As Adjusted      As Reported      Adjustments        As Adjusted  

Fee revenue

     $ 185,951          $ 185,951       $ 186,489            $ 186,489   

Reimbursed out-of-pocket engagement expenses

       8,672            8,672         7,620              7,620   
    

 

 

       

 

 

    

 

 

         

 

 

 

Total revenue

       194,623            194,623         194,109              194,109   
    

 

 

       

 

 

    

 

 

         

 

 

 

Compensation and benefits

       125,741            125,741         126,088              126,088   

General and administrative expenses

       35,242            35,242         31,534              31,534   

Engagement expenses

       13,023            13,023         12,756              12,756   

Depreciation and amortization

       3,523            3,523         3,239              3,239   

Restructuring charges, net

       929         (929      —           —           —             —     
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

      

 

 

 

Total operating expenses

       178,458         (929      177,529         173,617         —             173,617   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

      

 

 

 

Operating income

       16,165         929         17,094         20,492         —             20,492   

Other income, net

       1,607            1,607         1,948              1,948   

Interest expense, net

       (310         (310      (401           (401
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

      

 

 

 

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

       17,462         929         18,391         22,039         —             22,039   

Income tax provision (1)

       6,038         328         6,366         8,598         —             8,598   

Equity in earnings of unconsolidated subsidiaries, net

       293            293         534              534   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

      

 

 

 

Net income

     $ 11,717       $ 601       $ 12,318       $ 13,975       $ —           $ 13,975   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

      

 

 

 

Earnings per common share:

                     

Basic

     $ 0.25          $ 0.26       $ 0.31            $ 0.31   
    

 

 

       

 

 

    

 

 

         

 

 

 

Diluted

     $ 0.25          $ 0.26       $ 0.30            $ 0.30   
    

 

 

       

 

 

    

 

 

         

 

 

 

Weighted-average common shares outstanding:

                     

Basic

       46,528            46,528         45,349              45,349   
    

 

 

       

 

 

    

 

 

         

 

 

 

Diluted

       47,345            47,345         46,720              46,720   
    

 

 

       

 

 

    

 

 

         

 

 

 

Explanation of Non-GAAP Adjustments

 

(1) Calculated using an annual effective tax rate of 35% and 39% on operating expenses, adjusted for the three months

ended January 31, 2012 and 2011, 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,
       Nine Months Ended      Nine Months Ended  
       January 31, 2012      January 31, 2011  
       As Reported      Adjustments      As Adjusted      As Reported      Adjustments      As Adjusted  

Fee revenue

     $ 592,418          $ 592,418       $ 546,951          $ 546,951   

Reimbursed out-of-pocket engagement expenses

       26,783            26,783         23,524            23,524   
    

 

 

       

 

 

    

 

 

       

 

 

 

Total revenue

       619,201            619,201         570,475            570,475   
    

 

 

       

 

 

    

 

 

       

 

 

 

Compensation and benefits

       394,593            394,593         373,851            373,851   

General and administrative expenses

       104,204            104,204         87,512            87,512   

Engagement expenses

       41,594            41,594         38,092            38,092   

Depreciation and amortization

       10,367            10,367         9,351            9,351   

Restructuring charges, net

       929         (929      —           2,130         (2,130      —     
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

       551,687         (929      550,758         510,936         (2,130      508,806   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

       67,514         929         68,443         59,539         2,130         61,669   

Other (loss) income, net

       (3,032         (3,032      3,362            3,362   

Interest expense, net

       (1,280         (1,280      (2,467         (2,467
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

       63,202         929         64,131         60,434         2,130         62,564   

Income tax provision (1)

       22,199         328         22,527         23,407         821         24,228   

Equity in earnings of unconsolidated subsidiaries, net

       1,272            1,272         1,508            1,508   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     $ 42,275       $ 601       $ 42,876       $ 38,535       $ 1,309       $ 39,844   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per common share:

                   

Basic

     $ 0.91          $ 0.93       $ 0.86          $ 0.88   
    

 

 

       

 

 

    

 

 

       

 

 

 

Diluted

     $ 0.90          $ 0.91       $ 0.84          $ 0.87   
    

 

 

       

 

 

    

 

 

       

 

 

 

Weighted-average common shares outstanding:

                   

Basic

       46,332            46,332         45,040            45,040   
    

 

 

       

 

 

    

 

 

       

 

 

 

Diluted

       47,193            47,193         46,026            46,026   
    

 

 

       

 

 

    

 

 

       

 

 

 

Explanation of Non-GAAP Adjustments

 

(1) Calculated using an annual effective tax rate of 35% and 39% on operating expenses, adjusted for the nine months ended January 31, 2012 and 2011, respectively.