Korn/Ferry International Announces Fourth Quarter and Fiscal 2013 Results of Operations Highlights

- Korn/Ferry reports record quarterly fee revenue of $227.9 million in the fourth quarter of 2013, an increase of 17% compared to Q4 FY'12, on a constant currency basis. Excluding current year acquisitions, quarterly fee revenues increased 2% on a constant currency basis.

- Fee revenue in Leadership & Talent Consulting services grew 92% from Q4 FY'12 to Q4 FY'13 on a constant currency basis. Excluding current year acquisitions, fourth quarter revenues were essentially flat year-over-year, on a constant currency basis.

- Fee revenue in Futurestep grew 7 %, from Q4 FY'12 to Q4 FY'13, on a constant currency basis.

- For the full year of FY'13, Korn/Ferry reports record annual fee revenue of $812.8 million, an increase of 5% over FY'12, on a constant currency basis. Excluding current year acquisitions, annual fee revenues were down 1% on a constant currency basis.

LOS ANGELES, June 17, 2013 /PRNewswire/ -- Korn/Ferry International (NYSE: KFY), a premier global provider of talent management solutions, announced record quarterly and annual fee revenues of $227.9 million and $812.8 million for the fourth quarter and full year of FY'13, respectively.  Fourth quarter adjusted diluted earnings per share were $0.32, excluding restructuring and transaction and integration costs of $3.5 million.  Full year adjusted diluted earnings per share were $1.10, excluding restructuring, transaction and integration, and separation costs of $26.5 million.  Including such costs, diluted earnings per share was $0.25 and $0.70 in the three months and year ended April 30, 2013, respectively.

"I am pleased with our strategic progress and operating results for the fourth quarter, which includes accelerating the integration of our recent acquisitions as well as further diversifying and differentiating our Company.  In the fourth quarter, Korn/Ferry's broader talent management offerings accounted for 40% of fee revenue which reflects the Company's transformation as a talent management consultancy," said Gary D. Burnison, CEO of Korn/Ferry International.  "As global companies fight for growth and relevancy in this decade, talent will be the differentiator - Korn/Ferry is the bridge between a client's business and talent strategy - delivering solutions that help our clients with the design, building and attraction of that talent."

 

Financial Results

(dollars in millions, except per share amounts)

 



Fourth Quarter


Year to Date



FY'13


FY'12


FY'13


FY'12


Fee revenue

$         227.9


$        198.1


$       812.8


$         790.5


Total revenue

$         238.6


$        207.6


$       849.7


$         826.8


Operating income

$           15.4


$          15.4


$         43.9


$           82.9


Operating margin

6.8%


7.8%


5.4%


10.5%


Net income

$           12.2


$          12.0


$         33.3


$           54.3


Basic earnings per share

$           0.26


$          0.26


$         0.71


$           1.17


Diluted earnings per share

$           0.25


$          0.25


$         0.70


$           1.15


EBITDA Results (a):

Fourth Quarter


Year to Date



FY'13


FY'12


FY'13


FY'12


EBITDA

$            24.3


$          22.4


$         71.3


$           98.5


EBITDA margin

10.7%


11.3%


8.8%


12.5%







Adjusted Results (b):

Fourth Quarter


Year to Date



FY'13


FY'12


FY'13


FY'12


Operating income

$            18.9


$          17.3


$         70.4


$           85.7


Operating margin

8.3%


8.7%


8.7%


10.8%


EBITDA (a)

$            27.8


$          24.3


$         97.8


$         101.3


EBITDA margin (a)

12.2%


12.2%


12.0%


12.8%


Net income

$            15.6


$          13.3


$         52.8


$           56.2


Basic earnings per share

$            0.33


$          0.28


$         1.12


$           1.21


Diluted earnings per share

$            0.32


$          0.28


$         1.10


$           1.19


____________

(a)

EBITDA refers to earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA to exclude restructuring charges, transaction and integration costs and separation costs.  EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliation). 



(b)

Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations):




Fourth Quarter


Year to Date



FY'13


FY'12


FY'13


FY'12


Restructuring charges, net of recoveries

$         2.9


$           -


$     22.8


$       0.9


Transaction and integration costs

$         0.6


$           -


$       3.1


$           -


Separation costs

$             -


$       1.9


$       0.6


$       1.9


Fiscal 2013 Fourth Quarter Results  

Fee revenue was $227.9 million in Q4 FY'13, an increase of $29.8 million, or 15%, compared to the year-ago quarter (foreign exchange rates negatively impacted fee revenue by $2.9 million), primarily driven by a $28.5 million and a $1.7 million increase in fee revenue in Leadership & Talent Consulting and Futurestep.  Excluding the PDI Ninth House and Global Novations acquisitions (the "current year acquisitions"), fee revenue was $199.1 million in Q4 FY'13, an increase of 1% compared to the year-ago quarter (2% on a constant currency basis) driven by all market sectors with the largest increases in life science/healthcare, technology and the industrial sector.

Compensation and benefit expenses were $154.4 million in Q4 FY'13, an increase of $14.8 million, or 11%, compared to the year-ago quarter.  The current year acquisitions contributed $18.6 million to the increase in compensation and benefit expenses, offset by a reduction of $3.8 million primarily in salaries and related payroll taxes due to lower average headcount in Executive Recruitment. 

General and administrative expenses were $40.1 million in Q4 FY'13, an increase of $5.4 million, or 16%, from the year-ago quarter, resulting primarily from the current year acquisitions. 

As previously disclosed, during Q4 FY'13, the Company took steps to integrate PDI Ninth House by consolidating and eliminating redundant office space around the world. As a result, the Company recorded net restructuring charges of $2.9 million in Q4 FY'13 and incurred transaction and integration costs of $0.6 million in Q4 FY'13.  Excluding these costs, adjusted EBITDA was $27.8 million during Q4 FY'13, an increase of $3.5 million, or 14%, compared to Q4 FY'12.  Adjusted EBITDA margin was 12.2% in both periods.

On a GAAP basis, operating income was $15.4 million in both Q4 FY'13 and Q4 FY'12 resulting in a margin of 6.8% in the current quarter compared to 7.8% in the year-ago quarter. 

Fiscal 2013 Results  

Fee revenue was $812.8 million in FY'13, an increase of $22.3 million, or 3%, compared to FY'12 (foreign exchange rates negatively impacted fee revenue by $15.1 million).  Excluding current year acquisitions, fee revenue was $767.2 million in FY'13, a decrease of 3% (1% on a constant currency basis) compared to FY'12. 

As previously disclosed, during FY'13, the Company took steps to rationalize its cost structure and to integrate the current year acquisitions.  As a result, the Company recorded restructuring charges of $22.8 million to reduce its workforce and consolidate premises and incurred acquisition-related transaction and integration costs of $3.1 million in FY'13.

Adjusted EBITDA was $97.8 million during FY'13, a decrease of $3.5 million, or 3%, compared to FY'12.  Adjusted EBITDA margin was 12.0%, down 80 basis points from the prior year.  This decrease was primarily associated with the change in business mix and costs associated with incremental infrastructure and support services relating to the newly acquired businesses.

On a GAAP basis, operating income was $43.9 million in FY'13, a decrease of $39.0 million, or 47%, compared to FY'12 resulting in an operating margin of 5.4% in the current year compared to 10.5% in the prior year.

Balance Sheet and Liquidity

Cash and marketable securities were $366.0 million at April 30, 2013, compared to $417.7 million at April 30, 2012.  Cash and marketable securities include $98.0 million held in trust for deferred compensation plans at April 30, 2013, compared to $82.2 million at April 30, 2012.  Cash and marketable securities decreased by $51.7 million from April 30, 2012, mainly due to the payment of FY'12 annual bonuses in Q1 FY'13 and the payment for the current year acquisitions, partially offset by cash provided by operating activities.

Results by Segment

In Q1 FY'13, the Company began reporting its Leadership & Talent Consulting business as a separate segment.  The Company reports its results in three global business segments: Executive Recruitment, Leadership & Talent Consulting and Futurestep.  This change has no impact on previously reported consolidated net income or earnings per share.

 

 

Selected Executive Recruitment Data

(dollars in millions)

 



Fourth Quarter


Year to Date



FY'13


FY'12


FY'13


FY'12


Fee revenue

$         136.8


$       137.2


$       522.5


$         561.2


Total revenue

$         142.8


$       143.4


$       544.8


$         586.5


Operating income

$           26.5


$         22.4


$         81.0


$         109.9


Operating margin

19.4%


16.3%


15.5%


19.6%











Ending number of consultants

399


400


399


400


Average number of consultants

395


399


400


420


Engagements billed

2,718


2,692


7,554


7,879


New engagements (a)

1,231


1,175


4,750


4,963


 

EBITDA Results (b):

Fourth Quarter


Year to Date



FY'13


FY'12


FY'13


FY'12


EBITDA

$        29.4


$      24.9


$       91.2


$      118.1


EBITDA margin

21.5%


18.2%


17.5%


21.0%








Adjusted Results (c):

Fourth Quarter


Year to Date



FY'13


FY'12


FY'13


FY'12


Operating income

$         23.9


$        22.4


$      89.7


$      110.7


Operating margin

17.5%


16.3%


17.2%


19.7%


EBITDA (a)

$         26.8


$        24.9


$      99.9


$      118.9


EBITDA margin (a)

19.6%


18.2%


19.1%


21.2%


____________

(a)   

Represents new engagements opened in the respective period.



(b)  

EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations).



(c)   

Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations):




Fourth Quarter


Year to Date



FY'13


FY'12


FY'13


FY'12


Restructuring charges, net of recoveries

$        (2.6)


$        -


$     8.1


$       0.8


Separation costs

$             -


$        -


$     0.6


$           -


Executive Recruitment

Fee revenue was $136.8 million in Q4 FY'13, essentially flat with the year-ago quarter (foreign exchange rates negatively impacted fee revenue by $1.9 million).  Fee revenue increases in North America were offset by decreases in Europe, Asia and Latin America.  Fee revenues were impacted by a 1% decrease in the weighted-average fee billed per engagement, offset by a 1% increase in the number of executive recruitment engagements billed compared to the year-ago quarter. 

On a GAAP basis, operating income was $26.5 million in Q4 FY'13, an increase of $4.1 million, or 18%, compared to Q4 FY'12 resulting in an operating margin of 19.4% in the current quarter compared to 16.3% in the year-ago quarter.

Adjusted EBITDA was $26.8 million during Q4 FY'13, an increase of $1.9 million, or 8%, compared to Q4 FY'12.   This increase is primarily attributable to a decrease in the average headcount and associated compensation and benefits costs during the quarter compared to the year-ago quarter.  For the full year, adjusted EBITDA declined by $19.0 million due to a 5% decrease in fee revenue on a constant currency basis offset by reduced compensation and benefits and general and administrative expenses.

 

Selected Leadership & Talent Consulting Data

(dollars in millions)

 



Fourth Quarter


Year to Date



FY'13


FY'12


FY'13


FY'12


Fee revenue

$      60.1


$    31.6


$    168.1


$      115.4


Total revenue

$      63.1


$    33.2


$    176.6


$      120.3


Operating (loss) income

$       (1.3)


$      5.0


$        6.4


$        16.4


Operating margin

(2.1)%


15.7%


3.8%


14.2%











Ending number of consultants (a)

133


51


133


51


Staff utilization (b)

67%


67%


64%


62%


 

EBITDA Results (c):

Fourth Quarter


Year to Date



FY'13


FY'12


FY'13


FY'12


EBITDA

$         1.2


$      5.6


$       12.4


$        19.1


EBITDA margin

2.0%


17.9%


7.4%


16.6%







 

Adjusted Results (d):

Fourth Quarter


Year to Date



FY'13


FY'12


FY'13


FY'12


Operating income

$         3.8


$        5.0


$      16.6


$        16.4


Operating margin

6.3%


15.7%


9.9%


14.2%


EBITDA (c)

$         6.3


$        5.6


$      22.6


$        19.1


EBITDA margin (c)

10.4%


17.9%


13.4%


16.6%











____________

(a)

Represents number of employees originating consulting services. FY'13 includes approximately 81 consultants from the current year acquisitions.



(b)

Calculated by dividing the number of hours of our full-time LTC professional staff, who recorded time to an engagement during the period, by the total available working hours during the same period.  Excluding the current year acquisitions, staff utilization was 64% and 63% for the three months and year ended April 30, 2013, respectively.



(c)

EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations).



(d)

Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations):

 


Fourth Quarter


Year to Date



FY'13


FY'12


FY'13


FY'12


Restructuring charges, net of recoveries

$           5.1


$         —


$     10.2


$           —


Leadership & Talent Consulting

Fee revenue was $60.1 million in Q4 FY'13, an increase of $28.5 million, or 90%, from the year-ago quarter.   Excluding the current year acquisitions, fee revenue in Q4 FY'13 was essentially flat compared to Q4 FY'12.  

On a GAAP basis, operating loss was $1.3 million, a decrease of $6.3 million compared to the year-ago quarter resulting in an operating margin of (2.1%) in the current quarter compared to 15.7% in the year-ago quarter. 

Adjusted EBITDA was $6.3 million during Q4 FY'13, an increase of $0.7 million, or 13%, compared to Q4 FY'12, primarily due to the current year acquisitions.  Adjusted EBITDA margin was 10.4% compared to 17.9% in Q4 FY'12 and was negatively impacted, in part, by the incremental infrastructure and support services costs related to the current year acquisitions.  For the full year, adjusted EBITDA increased from $19.1 million in FY'12 to $22.6 million in FY'13 due to the current year acquisitions, offset by the incremental infrastructure costs described above.

 

 

Selected Futurestep Data

(dollars in millions)

 



Fourth Quarter


Year to Date



FY'13


FY'12


FY'13


FY'12


Fee revenue

$       31.0


$     29.3


$    122.2


$   113.9


Total revenue

$       32.7


$     31.0


$    128.3


$   120.0


Operating income

$         3.9


$       1.4


$      11.0


$       8.5


Operating margin

12.4%


4.6%


9.0%


7.4%











Engagements billed

1,703


1,611


5,605


4,916


New engagements (a)

863


998


4,434


3,924


 

EBITDA Results (b):

Fourth Quarter


Year to Date




FY'13


FY'12


FY'13


FY'12


EBITDA

$         4.1


$        1.7


$      12.2


$          9.6


EBITDA margin

13.3%


5.6%


10.0%


8.4%








 

Adjusted Results (c):

Fourth Quarter


Year to Date




FY'13


FY'12


FY'13


FY'12


Operating income

$          4.3


$          2.3


$      14.5


$          9.5


Operating margin

13.8%


7.7%


11.9%


8.4%


EBITDA (b)

$          4.5


$          2.6


$      15.7


$        10.6


EBITDA margin (b)

14.7%


8.7%


12.9%


9.3%














____________

(a)  

Represents new engagements opened in the respective period.



(b)

EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures (see attached reconciliations).



(c)

Adjusted results are non-GAAP financial measures that exclude the following (see attached reconciliations):

 


Fourth Quarter


Year to Date



FY'13


FY'12


FY'13


FY'12


Restructuring charges, net of recoveries

$        0.4


$          -


$     3.5


$       0.1


Separation costs

$            -


$      0.9


$         -


$       0.9


Futurestep

Fee revenue was $31.0 million in Q4 FY'13, an increase of $1.7 million, or 6%, compared to the year-ago quarter (foreign exchange rates negatively impacted fee revenue by $0.4 million).  The increase in fee revenue was due to an increase in recruitment process outsourcing and recruitment.

On a GAAP basis, operating income was $3.9 million in Q4 FY'13, an increase of $2.5 million, compared to Q4 FY'12 resulting in an operating margin of 12.4% in the current quarter compared to 4.6% in the year-ago quarter.

Adjusted EBITDA was $4.5 million during Q4 FY'13, an increase of $1.9 million, or 73%, compared to Q4 FY'12, due primarily to the increase in fee revenue and a decrease in performance related bonus expenses.  For the full year, adjusted EBITDA increased $5.1 million due to the $8.3 million increase in fee revenue.

Outlook                                                         

Assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, fee revenue is expected to be in the range of $215 million to $227 million in Q1 FY'14.  Also during FY'14, we are continuing with our efforts to integrate the newly acquired businesses and to reduce the incremental infrastructure and support services costs in an effective and thoughtful manner, which will be enabled through investments to align and enhance our technology platform.  In line with this, in Q1 FY'14, we expect to incur charges associated with these cost reduction efforts in the range of $3.8 million to $5.0 million which will yield $4.7 million to $5.5 million in annual savings starting late in the fiscal first quarter.  Excluding these charges, adjusted diluted earnings per share in the first quarter are likely to be in the range of $0.26 to $0.32 with diluted earnings per share as measured by generally accepted accounting principles likely to be in the range of $0.19 to $0.27.

Earnings Conference Call Webcast

The earnings conference call will be held today at 5:00 PM (EDT) and hosted by CEO Gary Burnison, CFO Robert Rozek and SVP Finance Gregg Kvochak.  The conference call will be webcast and available online at 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, our ability to successfully integrate acquired businesses, including current year acquisitions, maintaining our brand name and professional reputation, potential legal liability, the portability of client relationships, global and local political or economic developments in or affecting countries where we have operations, currency fluctuations in our international operations, risks related to the growth, alignment of our cost structure with our growth, restrictions imposed by off-limits agreements, reliance on information processing systems, cyber security vulnerabilities, limited protection of our intellectual property, our ability to enhance and develop new technology, our ability to develop new products and services, consolidation of industries we serve, our ability to successfully recover from a disaster or other business continuity problems, changes in our accounting estimates/assumptions, impairment of goodwill and other intangible assets, deferred tax assets and employment liability risk.  For a detailed description of risks and uncertainties that could cause differences, please refer to Korn/Ferry's periodic filings with the Securities and Exchange 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, transaction and integration and separation costs;
  • adjusted net income, adjusted to exclude restructuring, transaction and integration and separation costs, net of income tax effect;
  • adjusted basic and diluted earnings per share, adjusted to exclude restructuring, transaction and integration and separation costs, net of income tax effect;
  • 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;
  • EBITDA, or earnings before interest, taxes, depreciation and amortization and EBITDA margin; and
  • adjusted EBITDA, which is EBITDA further adjusted to exclude restructuring, transaction and integration and separation costs, and adjusted EBITDA margin.

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 and other items 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 information provides meaningful supplemental information regarding Korn/Ferry's performance as excluding the impact of exchange rate changes on Korn/Ferry's financial performance allows investors to make more meaningful period-to-period comparisons of the Company's operating results, to better identify operating trends that may otherwise be masked or distorted by exchange rate changes and to perform related trend analysis, and provides a higher degree of transparency of information used by management in its evaluation of Korn/Ferry's ongoing operations and financial and operational decision-making.

[Tables attached]










KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF INCOME 

 (in thousands, except per share amounts) 













 Three Months Ended 


 Year Ended 



 April 30, 


 April 30, 



2013


2012


2013


2012



 (unaudited) 





 Fee revenue 


$ 227,902


$ 198,087


$ 812,831


$ 790,505

 Reimbursed out-of-pocket engagement expenses 


10,705


9,471


36,870


36,254

           Total revenue 


238,607


207,558


849,701


826,759










 Compensation and benefits 


154,487


139,593


555,346


534,186

 General and administrative expenses 


40,096


34,668


142,771


138,872

 Engagement expenses 


19,834


14,295


65,847


55,889

 Depreciation and amortization 


5,877


3,650


19,004


14,017

 Restructuring charges, net 


2,921


-


22,857


929

           Total operating expenses 


223,215


192,206


805,825


743,893










 Operating income  


15,392


15,352


43,876


82,866

 Other income (loss), net 


2,501


2,761


6,309


(271)

 Interest expense, net 


(644)


(511)


(2,365)


(1,791)

           Income before provision for income taxes 









               and equity in earnings of unconsolidated subsidiaries 


17,249


17,602


47,820


80,804

 Income tax provision  


5,595


6,152


16,637


28,351

 Equity in earnings of unconsolidated subsidiaries, net 


543


578


2,110


1,850

            Net income 


$   12,197


$   12,028


$   33,293


$   54,303










 Earnings per common share: 









      Basic 


$       0.26


$       0.26


$       0.71


$       1.17

      Diluted 


$       0.25


$       0.25


$       0.70


$       1.15










 Weighted-average common shares outstanding: 









      Basic 


47,452


46,591


47,224


46,397

      Diluted 


48,345


47,524


47,883


47,261

 


















KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

 (unaudited) 

























Three Months Ended April 30,


Year Ended April 30,



2013




2012


% Change


2013




2012


% Change


















Fee Revenue:
















Executive recruitment:

















North America

$   77,511




$   76,268


2%


$ 290,317




$ 305,717


(5%)


EMEA 

32,242




32,728


(1%)


128,807




141,409


(9%)


Asia Pacific

19,199




19,524


(2%)


73,221




82,230


(11%)


South America

7,839




8,642


(9%)


30,134




31,846


(5%)

Total executive recruitment

136,791




137,162


(0%)


522,479




561,202


(7%)

Leadership & Talent Consulting

60,116




31,650


90%


168,115




115,407


46%

Futurestep

30,995




29,275


6%


122,237




113,896


7%


Total fee revenue

227,902




198,087


15%


812,831




790,505


3%

 Reimbursed out-of-pocket engagement expenses 

10,705




9,471


13%


36,870




36,254


2%


Total revenue

$ 238,607




$ 207,558


15%


$ 849,701




$ 826,759


3%


















Reconciliation of Operating Income (GAAP) to Adjusted Operating Income

































Operating Income:



Margin




Margin




Margin




Margin

Executive recruitment:

















North America

$   17,104


22.1%


$   17,148


22.5%


$   58,832


20.3%


$   75,580


24.7%


EMEA

4,137


12.8%


(266)


(0.8%)


9,173


7.1%


13,288


9.4%


Asia Pacific

3,482


18.1%


3,001


15.4%


6,973


9.5%


11,859


14.4%


South America

1,761


22.5%


2,536


29.3%


5,987


19.9%


9,207


28.9%

Total executive recruitment

26,484


19.4%


22,419


16.3%


80,965


15.5%


109,934


19.6%

Leadership & Talent Consulting

(1,292)


(2.1%)


4,971


15.7%


6,424


3.8%


16,360


14.2%

Futurestep

3,834


12.4%


1,333


4.6%


10,975


9.0%


8,445


7.4%

Corporate

(13,634)




(13,371)




(54,488)




(51,873)




 Total operating income

$   15,392


6.8%


$   15,352


7.8%


$   43,876


5.4%


$   82,866


10.5%



































Restructuring, Transaction and Integration, and Separation Costs, net:
















Executive recruitment:

















North America

$   (1,853)


(2.4%)


$          -


-


$     3,583


1.2%


$        (15)


(0.0%)


EMEA

(770)


(2.4%)


-


-


4,498


3.5%


897


0.6%


Asia Pacific

16


0.1%


-


-


629


0.9%


-


-


South America

-


-


-


-


-


-


(99)


(0.3%)

Total executive recruitment

(2,607)


(1.9%)


-


-


8,710


1.7%


783


0.1%

Leadership & Talent Consulting

5,080


8.4%


-


-


10,198


6.1%


-


-

Futurestep

441


1.4%


920


3.1%


3,527


2.9%


1,066


1.0%

Corporate

598




999




4,044




999




 Total restructuring, transaction and integration, and separation charges, net

$     3,512


1.5%


$     1,919


0.9%


$   26,479


3.3%


$     2,848


0.3%



































Adjusted Operating Income:
















  (Excluding Restructuring, Transaction and Integration, and Separation Costs, net)


Margin




Margin




Margin




Margin

Executive recruitment:

















North America

$   15,251


19.7%


$   17,148


22.5%


$   62,415


21.5%


$   75,565


24.7%


EMEA

3,367


10.4%


(266)


(0.8%)


13,671


10.6%


14,185


10.0%


Asia Pacific

3,498


18.2%


3,001


15.4%


7,602


10.4%


11,859


14.4%


South America

1,761


22.5%


2,536


29.3%


5,987


19.9%


9,108


28.6%

Total executive recruitment (1)

23,877


17.5%


22,419


16.3%


89,675


17.2%


110,717


19.7%

Leadership & Talent Consulting

3,788


6.3%


4,971


15.7%


16,622


9.9%


16,360


14.2%

Futurestep (1)

4,275


13.8%


2,253


7.7%


14,502


11.9%


9,511


8.4%

Corporate 

(13,036)




(12,372)




(50,444)




(50,874)




 Total adjusted operating income 

$   18,904


8.3%


$   17,271


8.7%


$   70,355


8.7%


$   85,714


10.8%

 

(1)

The Company revised the presentation for expenses that are not directly associated with Futurestep, resulting in an increase in Futurestep's operating income of $0.6 million and $2.2 million offset by a decrease in Executive Recruitment operating income in the three months and year ended April 30, 2012, respectively. 

 






KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 (in thousands, except per share amounts) 













April 30,



2013


2012

ASSETS





Cash and cash equivalents


$    224,066


$    282,005

Marketable securities


20,347


40,936

Receivables due from clients, net of allowance for doubtful accounts 





of $9,097 and $9,437 respectively


161,508


126,579

Income taxes and other receivables


8,944


11,902

Deferred income taxes


3,511


10,830

Prepaid expenses and other assets


28,724


27,815

Total current assets


447,100


500,067






Marketable securities, non-current


121,569


94,798

Property and equipment, net


53,628


49,808

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


85,873


77,848

Deferred income taxes


63,203


57,290

Goodwill


257,293


176,338

Intangible assets, net


58,187


20,413

Investments and other assets


28,376


38,127

Total assets


$ 1,115,229


$ 1,014,689






LIABILITIES AND STOCKHOLDERS' EQUITY





Accounts payable


$      19,460


$      14,667

Income taxes payable


5,502


8,720

Compensation and benefits payable


160,298


160,810

Other accrued liabilities


83,291


37,527

Total current liabilities


268,551


221,724






Deferred compensation and other retirement plans


159,706


142,577

Other liabilities


22,504


20,912

Total liabilities


450,761


385,213






Stockholders' equity





Common stock: $0.01 par value, 150,000 shares authorized, 61,022 and 





59,975 shares issued and 48,734 and 47,913 shares outstanding, respectively


431,508


419,998

Retained earnings


236,090


202,797

Accumulated other comprehensive (loss) income, net


(2,631)


7,191

Stockholders' equity


664,967


629,986

Less:  notes receivable from stockholders


(499)


(510)

Total stockholders' equity


664,468


629,476

Total liabilities and stockholders' equity


$ 1,115,229


$ 1,014,689

 














KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF INCOME 

 RECONCILIATION OF AS REPORTED (GAAP) TO AS ADJUSTED (NON-GAAP) 

 (in thousands, except per share amounts) 

 (unaudited) 





























 Three Months Ended 


 Three Months Ended 



April 30, 2013


April 30, 2012



As Reported


Adjustments


As Adjusted


As Reported


Adjustments


As Adjusted














 Fee revenue 


$ 227,902




$ 227,902


$ 198,087




$ 198,087

 Reimbursed out-of-pocket engagement expenses 


10,705




10,705


9,471




9,471

           Total revenue 


238,607




238,607


207,558




207,558














 Compensation and benefits 


154,487




154,487


139,593


(1,919)


137,674

 General and administrative expenses 


40,096


(591)


39,505


34,668




34,668

 Engagement expenses 


19,834




19,834


14,295




14,295

 Depreciation and amortization 


5,877




5,877


3,650




3,650

 Restructuring charges, net 


2,921


(2,921)


-


-


-


-

           Total operating expenses 


223,215


(3,512)


219,703


192,206


(1,919)


190,287














 Operating income 


15,392


3,512


18,904


15,352


1,919


17,271














 Other income, net 


2,501




2,501


2,761




2,761

 Interest expense, net 


(644)




(644)


(511)




(511)

           Income before provision for income taxes 













                  and equity in earnings of unconsolidated subsidiaries 


17,249


3,512


20,761


17,602


1,919


19,521

 Income tax provision (1) (2) 


5,595


119


5,714


6,152


671


6,823

 Equity in earnings of unconsolidated subsidiaries, net 


543




543


578




578

            Net income 


$   12,197


$           3,393


$   15,590


$   12,028


$           1,248


$   13,276














 Earnings per common share: 













      Basic 


$       0.26




$       0.33


$       0.26




$       0.28

      Diluted 


$       0.25




$       0.32


$       0.25




$       0.28














 Weighted-average common shares outstanding: 













      Basic 


47,452




47,452


46,591




46,591

      Diluted 


48,345




48,345


47,524




47,524

 

Explanation of Non-GAAP Adjustments 

(1)

The adjustments result in an effective tax rate of 28% and 35% for the as adjusted amounts for the three months ended April 30, 2013 and 2012, respectively. 

(2)

The three months ended April 30, 2013 includes the tax effect on restructuring charges and transaction & integration costs associated with the acquisition of PDI Ninth House, while the three months ended April 30, 2012 includes the tax effect on the separation costs related to changes in certain leadership positions.



KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF INCOME 

 RECONCILIATION OF AS REPORTED (GAAP) TO AS ADJUSTED (NON-GAAP) 

 (in thousands, except per share amounts) 

 (unaudited) 





























 Year Ended 


 Year Ended 



April 30, 2013


April 30, 2012



As Reported


Adjustments


As Adjusted


As Reported


Adjustments


As Adjusted














 Fee revenue 


$        812,831




$        812,831


$        790,505




$        790,505

 Reimbursed out-of-pocket engagement expenses 


36,870




36,870


36,254




36,254

           Total revenue 


849,701




849,701


826,759




826,759














 Compensation and benefits 


555,346


(516)


554,830


534,186


(1,919)


532,267

 General and administrative expenses 


142,771


(3,106)


139,665


138,872




138,872

 Engagement expenses 


65,847




65,847


55,889




55,889

 Depreciation and amortization 


19,004




19,004


14,017




14,017

 Restructuring charges, net 


22,857


(22,857)


-


929


(929)


-

           Total operating expenses 


805,825


(26,479)


779,346


743,893


(2,848)


741,045














 Operating income 


43,876


26,479


70,355


82,866


2,848


85,714














 Other income (loss), net 


6,309




6,309


(271)




(271)

 Interest expense, net 


(2,365)




(2,365)


(1,791)




(1,791)

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


47,820


26,479


74,299


80,804


2,848


83,652

 Income tax provision (1) (2) 


16,637


6,953


23,590


28,351


999


29,350

 Equity in earnings of unconsolidated subsidiaries, net 


2,110




2,110


1,850




1,850

            Net income  


$          33,293


$          19,526


$          52,819


$          54,303


$            1,849


$          56,152














 Earnings per common share: 













      Basic 


$              0.71




$              1.12


$              1.17




$              1.21

      Diluted 


$              0.70




$              1.10


$              1.15




$              1.19














 Weighted-average common shares outstanding: 













      Basic 


47,224




47,224


46,397




46,397

      Diluted 


47,883




47,883


47,261




47,261














 Explanation of Non-GAAP Adjustments 










 (1) The adjustments result in an annual effective tax rate of 32% and 35% for the as adjusted amounts for the year ended April 30, 2013 and 2012, respectively. 

 (2) The year ended April 30, 2013 includes the tax effect on restructuring charges, transaction and integration costs associated with the acquisition of PDI Ninth House,  and separation costs, while the year ended April 30, 2012 includes the tax effect on the separation costs related to changes in certain leadership positions and restructuring charges. 































KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)






 Three Months Ended April 30, 2013 



 Executive Recruitment 


 Leadership & Talent Consulting 


 Futurestep 


 Corporate 


 Consolidated 












 Fee revenue 


$      136,791


$       60,116


$       30,995


$                -


$          227,902












 Net income 










$            12,197

       Other income, net 










2,501

       Interest expense, net 










(644)

       Income tax provision 










5,595

       Equity in earnings of unconsolidated subsidiaries, net 










543

 Operating income (loss) 


$        26,484


$       (1,292)


$         3,834


$    (13,634)


15,392

       Depreciation and amortization 


2,243


2,625


240


769


5,877

        Other income (loss), net 


518


(146)


36


2,093


2,501

       Equity in earnings of unconsolidated subsidiaries, net 


129


-


-


414


543

 EBITDA 


29,374


1,187


4,110


(10,358)


24,313

 EBITDA margin 


21.5%


2.0%


13.3%




10.7%












       Restructuring (recoveries) charges, net 


(2,607)


5,080


441


7


2,921

       Transaction and integration costs 


-


-


-


591


591

 Adjusted EBITDA 


$        26,767


$         6,267


$         4,551


$      (9,760)


$            27,825

 Adjusted EBITDA margin 


19.6%


10.4%


14.7%




12.2%

























 Three Months Ended April 30, 2012 



 Executive Recruitment 


 Leadership & Talent Consulting 


 Futurestep 


 Corporate 


 Consolidated 












 Fee revenue 


$      137,162


$       31,650


$       29,275


$                -


$          198,087












 Net income 










$            12,028

       Other income, net 










2,761

       Interest expense, net 










(511)

       Income tax provision 










6,152

       Equity in earnings of unconsolidated subsidiaries, net 










578

 Operating income (loss) 


$        22,419


$         4,971


$         1,333


$    (13,371)


15,352

       Depreciation and amortization 


2,103


671


285


591


3,650

       Other income, net 


218


18


9


2,516


2,761

       Equity in earnings of unconsolidated subsidiaries, net 


159


-


-


419


578

 EBITDA 


24,899


5,660


1,627


(9,845)


22,341

 EBITDA margin 


18.2%


17.9%


5.6%




11.3%












       Separation costs 


-


-


920


999


1,919

 Adjusted EBITDA 


$        24,899


$         5,660


$         2,547


$      (8,846)


$            24,260

 Adjusted EBITDA margin 


18.2%


17.9%


8.7%




12.2%

 












KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(in thousands)

(unaudited)






 Year Ended April 30, 2013 



 Executive Recruitment 


 Leadership & Talent Consulting 


 Futurestep 


 Corporate 


 Consolidated 












 Fee revenue 


$      522,479


$     168,115


$     122,237


$                -


$          812,831












 Net income 










$            33,293

       Other income, net 










6,309

       Interest expense, net 










(2,365)

       Income tax provision 










16,637

       Equity in earnings of unconsolidated subsidiaries, net 










2,110

 Operating income (loss) 


$        80,965


$         6,424


$       10,975


$    (54,488)


43,876

       Depreciation and amortization 


8,991


6,012


1,180


2,821


19,004

       Other income (loss), net 


793


(75)


51


5,540


6,309

       Equity in earnings of unconsolidated subsidiaries, net 


434


-


-


1,676


2,110

 EBITDA 


91,183


12,361


12,206


(44,451)


71,299

 EBITDA margin 


17.5%


7.4%


10.0%




8.8%












       Restructuring charges, net 


8,194


10,198


3,527


938


22,857

       Transaction and integration costs 


-


-


-


3,106


3,106

       Separation costs 


516


-


-


-


516

 Adjusted EBITDA 


$        99,893


$       22,559


$       15,733


$    (40,407)


$            97,778

 Adjusted EBITDA margin 


19.1%


13.4%


12.9%




12.0%

























 Year Ended April 30, 2012 



 Executive Recruitment 


 Leadership & Talent Consulting 


 Futurestep 


 Corporate 


 Consolidated 












 Fee revenue 


$      561,202


$     115,407


$     113,896


$                -


$          790,505












 Net income 










$            54,303

       Other loss, net 










(271)

       Interest expense, net 










(1,791)

       Income tax provision 










28,351

       Equity in earnings of unconsolidated subsidiaries, net 










1,850

 Operating income (loss) 


$      109,934


$       16,360


$         8,445


$    (51,873)


82,866

       Depreciation and amortization 


8,140


2,613


1,070


2,194


14,017

       Other (loss) income, net 


(145)


146


41


(313)


(271)

       Equity in earnings of unconsolidated subsidiaries, net 


159


-


-


1,691


1,850

 EBITDA 


118,088


19,119


9,556


(48,301)


98,462

 EBITDA margin 


21.0%


16.6%


8.4%




12.5%












       Restructuring charges, net 


783


-


146


-


929

       Separation costs 


-


-


920


999


1,919

 Adjusted EBITDA 


$      118,871


$       19,119


$       10,622


$    (47,302)


$          101,310

 Adjusted EBITDA margin 


21.2%


16.6%


9.3%




12.8%

 

SOURCE Korn/Ferry International



RELATED LINKS
http://www.kornferry.com

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.