Korn/Ferry International Announces First Quarter Fiscal 2014 Results of Operations

Key highlights for the first quarter of fiscal 2014 are as follows:
-- Korn/Ferry reports Q1 FY'14 fee revenue of $228.4 million, an increase of 22% compared to Q1 FY'13. Excluding the prior year acquisitions, quarterly fee revenue increased 7% (8% on a constant currency basis) from Q1 FY'13.
-- Fee revenue in Executive Recruitment grew 7% (8% on a constant currency basis), from Q1 FY'13 to Q1 FY'14 and, excluding the prior year acquisitions, first quarter fee revenue in Leadership & Talent Consulting services grew 11% (12% on a constant currency basis) compared to the year-ago quarter.
-- Fee revenue in Futurestep grew 3% from Q1 FY'13 to Q1 FY'14.
-- Q1 FY'14 adjusted EBITDA margin was 14% compared to adjusted EBITDA margin of 11% in Q1 FY'13.
-- Q1 FY'14 adjusted diluted earnings per share was $0.33 compared to adjusted diluted earnings per share of $0.22 in Q1 FY'13, excluding restructuring, separation and integration/acquisition costs of $6.6 million in Q1 FY'14. No such costs were incurred in Q1 FY'13. Including such costs, Q1 FY'14 diluted earnings per share was $0.24.

PR Newswire

LOS ANGELES, Sept. 5, 2013 /PRNewswire/ -- Korn/Ferry International (KFY), a premier global provider of talent management solutions, announced first quarter fee revenue of $228.4 million and adjusted diluted earnings per share of $0.33, excluding restructuring, separation and integration/acquisition costs of $6.6 million.  Including such costs, diluted earnings per share was $0.24 in the three months ended July 31, 2013.

"I am pleased with our continued momentum and operating results during the first quarter. With our leadership team effectively driving our strategy, we have increased revenue within our flagship Search business and broader talent management offering year over year – most important with strong margin expansion and earnings per share growth in the quarter, on an adjusted basis," said Gary D. Burnison, CEO, Korn/Ferry International. "We are making our brand more elastic with 40 percent of the revenue mix from broader talent management offerings in the quarter. Today's businesses are increasingly borderless and knowledge-based, and asking their workforce to do much more, with much less. Irrespective of industry or geography, talent is a driver of success. Accordingly, Korn/Ferry is transforming its business, helping organizations navigate this complex environment by linking their business and talent strategies."

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



First Quarter



FY'14


FY'13


Fee revenue

$                     228.4


$                   186.7


Total revenue

$                     237.6


$                   196.0


Operating income

$                       16.6


$                     17.0


Operating margin

7.3%


9.1%


Net income

$                       11.4


$                     10.4


Basic earnings per share

$                       0.24


$                     0.22


Diluted earnings per share

$                       0.24


$                     0.22







EBITDA Results (a):

First Quarter



FY'14


FY'13


EBITDA

$                       25.3


$                     20.4


EBITDA margin

11.1%


10.9%





Adjusted Results (b):

First Quarter



FY'14


FY'13


Operating income

$                       23.2


$                     17.0


Operating margin

10.2%


9.1%


EBITDA (a)

$                       31.9


$                     20.4


EBITDA margin (a)

14.0%


10.9%


Net income

$                       16.0


$                     10.4


Basic earnings per share

$                       0.34


$                     0.22


Diluted earnings per share

$                       0.33


$                     0.22


____________

(a) 

EBITDA refers to earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA to exclude restructuring charges (net of recoveries) and/or transaction, integration/acquisition 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):


First Quarter



FY'14


FY'13


Restructuring charges

$                           3.7


$                          —


Separation costs

$                           2.5


$                          —


Integration/acquisition costs

$                           0.4


$                          —


Fee revenue was $228.4 million in Q1 FY'14, an increase of $41.7 million, or 22% (23% on a constant currency basis), compared to Q1 FY'13, primarily driven by a $31.7 million and a $9.2 million increase in fee revenue in Leadership & Talent Consulting and Executive Recruitment, respectively.  The overall fee revenue increase was driven by fee revenue growth in the industrial, life science/healthcare, financial services and consumer sectors.  Excluding the PDI Ninth House and Global Novations acquisitions (the "prior year acquisitions"), fee revenue was $199.9 million in Q1 FY'14, an increase of 7% compared to the year-ago quarter (8% on a constant currency basis).

Compensation and benefit expenses were $152.8 million in Q1 FY'14, an increase of $24.8 million, or 19%, compared to Q1 FY'13.  The prior year acquisitions contributed $17.2 million to the increase in compensation and benefit expenses.  The remainder of the increase was due to an increase in performance related bonus expense, separation costs and an increase in the fair value of amounts owed under certain deferred compensation plans, which amounts were offset by an increase in the fair value of marketable securities classified as trading in other income (loss), net.   

General and administrative expenses were $39.9 million in Q1 FY'14, an increase of $6.5 million, or 19%, compared to Q1 FY'13.   The prior year acquisitions contributed $4.5 million to the increase in general and administrative expenses in Q1 FY'14 compared to Q1 FY'13.  The rest of the increase was due to increases in legal and professional fees and marketing and business development expenses. 

As previously disclosed, during Q1 FY'14, the Company continued with the integration of PDI Ninth House by consolidating and eliminating redundant office space in select offices and consolidating certain overhead functions.  As a result, the Company recorded net restructuring charges and incurred integration/acquisition costs, as well as separation costs in Q1 FY'14.  Adjusted EBITDA was $31.9 million in Q1 FY'14, an increase of $11.5 million, or 56%, compared to Q1 FY'13.  Adjusted EBITDA margin was 14.0% and 10.9% in Q1 FY'14 and Q1 FY'13, respectively.

On a GAAP basis, operating income was $16.6 million in Q1 FY'14, a decrease of $0.4 million, or 2% compared to Q1 FY'13 resulting in a margin of 7.3% in the current quarter compared to 9.1% in the year-ago quarter. 

Balance Sheet and Liquidity

Cash and marketable securities were $280.4 million at July 31, 2013, compared to $366.0 million at April 30, 2013.  Cash and marketable securities include $111.7 million held in trust for deferred compensation plans at July 31, 2013, compared to $98.0 million at April 30, 2013.  Cash and marketable securities decreased by $85.6 million from April 30, 2013, mainly due to the payment of FY'13 annual bonuses in Q1 FY'14 and the contingent consideration paid to selling shareholders of PDI Ninth House partially offset by cash provided by operating activities.

                                                              

Results by Segment


Selected Executive Recruitment Data 
(dollars in millions)



First Quarter



FY'14


FY'13


Fee revenue

$                    136.6


$                 127.4


Total revenue

$                    142.5


$                 133.2


Operating income

$                      28.3


$                   22.4


Operating margin

20.7%


17.6%







Ending number of consultants

416


415


Average number of consultants

408


408


Engagements billed

2,790


2,631


New engagements (a)

1,216


1,210




EBITDA Results (b):

First Quarter



FY'14


FY'13


EBITDA

$                      30.5


$                   24.9


EBITDA margin

22.3%


19.6%




Adjusted Results (c):

First Quarter



FY'14


FY'13


Operating income

$                      29.6


$              22.4


Operating margin

21.7%


17.6%


EBITDA (b)

$                      31.8


$              24.9


EBITDA margin (b)

23.3%


19.6%



____________

(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):


First Quarter



FY'14


FY'13


Restructuring charges

$                             1.3


$                         —


Executive Recruitment

Fee revenue was $136.6 million in Q1 FY'14, an increase of $9.2 million, or 7% (8% on a constant currency basis), compared to Q1 FY'13.  The increase in fee revenue was driven by fee revenue increases in Europe, Asia, and North America partially offset by a decrease in Latin America.  This increase is primarily attributed to a 6% increase in the number of executive recruitment engagements billed and a 1% increase in the weighted-average fee billed per engagement compared to the year-ago quarter. 

On a GAAP basis, operating income was $28.3 million in Q1 FY'14, an increase of $5.9 million, or 26%, compared to Q1 FY'13 resulting in an operating margin of 20.7% in the current quarter compared to 17.6% in the year-ago quarter.  This increase is primarily attributed to the $9.2 million increase in fee revenue in Q1 FY'14 as compared to Q1 FY'13 and a decrease of $1.6 million in general and administrative expenses offset by an increase of $3.8 million in compensation and benefit expenses driven by an increase in performance related bonus expense and we incurred restructuring expenses of $1.3 million in Q1 FY'14, and none in Q1 FY'13.  The decrease in general and administrative expenses was due to a decrease in legal and professional fees and travel expenses as a result of cost control initiatives and a reduction in the foreign exchange loss in Q1 FY'14 compared to Q1 FY'13.

Adjusted EBITDA was $31.8 million during Q1 FY'14, an increase of $6.9 million, or 28%, compared to Q1 FY'13.  Adjusted EBITDA margin was 23.3%, in Q1 FY'14 compared to 19.6% in Q1 FY'13 due to an increase in fee revenue and lower incremental operating costs.

Selected Leadership & Talent Consulting Data 
(dollars in millions)



First Quarter



FY'14


FY'13

Fee revenue

$                      60.1


$                   28.4


Total revenue

$                      62.1


$                   29.8


Operating income

$                        4.3


$                     4.3


Operating margin

7.2%


15.0%







Ending number of consultants (a)

134


48


Staff utilization (b)

65%


64%







EBITDA Results (c):

First Quarter



FY'14


FY'13


EBITDA

$                         7.2


$                     4.9


EBITDA margin

12.1%


17.2%





Adjusted Results (d):

First Quarter



FY'14


FY'13

Operating income

$                         5.5


$                     4.3


Operating margin

9.1%


15.0%


EBITDA (c)

$                         8.4


$                     4.9


EBITDA margin (c)

14.0%


17.2%







____________

(a) 

Represents number of employees originating consulting services. FY'14 includes approximately 76 consultants from the prior 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.



(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):


First Quarter



FY'14


FY'13


Restructuring charges

$                             1.2


$                          —


Leadership & Talent Consulting

Fee revenue was $60.1 million in Q1 FY'14, an increase of $31.7 million, or 112% (113% on a constant currency basis), from the year-ago quarter.   Excluding the prior year acquisitions, the increase in fee revenue in Q1 FY'14 was $3.2 million, or 11% (12% on a constant currency basis) compared to Q1 FY'13.  The increase in fee revenue (excluding the prior year acquisitions) was primarily due to an increase in consulting fee revenue driven by a 14% increase in the number of clients in Q1 FY'14 compared to Q1 FY'13.

On a GAAP basis, operating income was $4.3 million in both Q1 FY'14 and Q1 FY'13, resulting in an operating margin of 7.2% in the current quarter compared to 15.0% in the year-ago quarter.  This decrease in operating margin is primarily attributed to acquisition related increases in operating expenses offset by an increase in fee revenue. 

Adjusted EBITDA was $8.4 million during Q1 FY'14, an increase of $3.5 million, or 71%, compared to Q1 FY'13, primarily due to the prior year acquisitions.  Adjusted EBITDA margin was 14.0% compared to 17.2% in Q1 FY'13 and was negatively impacted, in part by incremental infrastructure and support services costs related to the prior year acquisitions as previously discussed in Q4 FY'13. 

Selected Futurestep Data 
(dollars in millions)



First Quarter




FY'14


FY'13



Fee revenue

$                      31.7


$                   30.9



Total revenue

$                      33.0


$                   33.0



Operating income

$                        2.5


$                     3.2



Operating margin

8.0%


10.3%









Engagements billed

1,230


1,234



New engagements (a)

625


645




EBITDA Results (b):

First Quarter



FY'14


FY'13


EBITDA

$                        3.5


$                     3.5



EBITDA margin

11.1%


11.3%





Adjusted Results (c):

First Quarter



FY'14


FY'13


Operating income

$                       3.7


$                       3.2


Operating margin

11.6%


10.3%


EBITDA (b)

$                       4.7


$                       3.5


EBITDA margin (b)

14.7%


11.3%



____________

(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):


First Quarter



FY'14


FY'13


Restructuring charges

$                             1.2


$                          —


Futurestep

Fee revenue was $31.7 million in Q1 FY'14, an increase of $0.8 million, or 3%, compared to the year-ago quarter.  The increase in fee revenue was driven by a 3% increase in weighted-average fee billed per engagement in Q1 FY'14 compared to Q1 FY'13, which was driven by increases in recruitment process outsourcing and recruitment.

On a GAAP basis, operating income was $2.5 million in Q1 FY'14, a decrease of $0.7 million, compared to Q1 FY'13 resulting in an operating margin of 8.0% in the current quarter compared to 10.3% in the year-ago quarter.  The decrease in operating income was due to restructuring expenses of $1.2 million and an increase in costs to execute resource process outsourcing engagements offset by an increase in fee revenue.

Adjusted EBITDA was $4.7 million during Q1 FY'14, an increase of $1.2 million, or 34%, compared to Q1 FY'13, due primarily to the increase in fee revenue.  Adjusted EBITDA margin increased to 14.7% in Q1 FY'14 compared to 11.3% in Q1 FY'13 due to an 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 $225 million to $237 million in Q2 FY'14 and diluted earnings per share are likely to be in the range of $0.32 to $0.38.

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 (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, 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 (net of recoveries) and/or transaction, integration/acquisition and separation costs;
  • adjusted net income, adjusted to exclude restructuring (net of recoveries) and/or transaction, integration/acquisition and separation costs, net of income tax effect;
  • adjusted basic and diluted earnings per share, adjusted to exclude restructuring (net of recoveries) and/or transaction,  integration/acquisition 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 (net of recoveries) and/or transaction, integration/acquisition 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 



 July 31, 



2013


2012



 (unaudited) 

 Fee revenue 


$ 228,437


$ 186,694

 Reimbursed out-of-pocket engagement expenses 


9,150


9,329

           Total revenue 


237,587


196,023






 Compensation and benefits 


152,770


128,036

 General and administrative expenses 


39,871


33,443

 Reimbursed expenses 


9,150


9,329

 Cost of services 


9,509


4,464

 Depreciation and amortization 


5,944


3,742

 Restructuring charges, net 


3,682


-

           Total operating expenses 


220,926


179,014






 Operating income  


16,661


17,009

 Other income (loss), net 


2,267


(1,017)

 Interest expense, net 


(591)


(599)

           Income before provision for income taxes 

               and equity in earnings of unconsolidated subsidiaries 






18,337


15,393

 Income tax provision  


7,385


5,605

 Equity in earnings of unconsolidated subsidiaries, net 


465


630

            Net income 


$   11,417


$   10,418






 Earnings per common share: 





      Basic 


$       0.24


$       0.22

      Diluted 


$       0.24


$       0.22






 Weighted-average common shares outstanding: 





      Basic 


47,665


46,810

      Diluted 


48,519


47,655

 

 

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

FINANCIAL SUMMARY BY SEGMENT

(in thousands)

 (unaudited) 















Three Months Ended July 31,



2013




2012


% Change










Fee Revenue:








Executive recruitment:









North America

$   74,147




$   72,106


3%


EMEA 

34,377




29,823


15%


Asia Pacific

21,128




17,383


22%


South America

7,003




8,134


(14%)

Total executive recruitment

136,655




127,446


7%

Leadership & Talent Consulting

60,062




28,392


112%

Futurestep

31,720




30,856


3%


Total fee revenue

228,437




186,694


22%

 Reimbursed out-of-pocket engagement expenses 

9,150




9,329


(2%)


Total revenue

$ 237,587




$ 196,023


21%










Reconciliation of Operating Income (GAAP) to Adjusted Operating Income

















Operating Income:



Margin




Margin

Executive recruitment:









North America

$   16,324


22.0%


$   18,074


25.1%


EMEA

5,960


17.3%


1,788


6.0%


Asia Pacific

4,500


21.3%


498


2.9%


South America

1,496


21.4%


2,089


25.7%

Total executive recruitment

28,280


20.7%


22,449


17.6%

Leadership & Talent Consulting

4,335


7.2%


4,262


15.0%

Futurestep

2,545


8.0%


3,182


10.3%

Corporate

(18,499)




(12,884)




 Total operating income

$   16,661


7.3%


$   17,009


9.1%



















Restructuring, Separation, and Integration/Acquisition Costs, net:








Executive recruitment:









North America

$        816


1.1%


$          -


-


EMEA

460


1.4%


-


-


Asia Pacific

60


0.3%


-


-


South America

-


-


-


-

Total executive recruitment

1,336


1.0%


-


-

Leadership & Talent Consulting

1,149


1.9%


-


-

Futurestep

1,134


3.6%


-


-

Corporate

2,957




-




 Total restructuring, separation, and integration/acquisition costs, net

$     6,576


2.9%


$          -


-



















Adjusted Operating Income:








  (Excluding Restructuring, Separation, and Integration/Acquisition Costs, net)



Margin




Margin

Executive recruitment:









North America

$   17,140


23.1%


$   18,074


25.1%


EMEA

6,420


18.7%


1,788


6.0%


Asia Pacific

4,560


21.6%


498


2.9%


South America

1,496


21.4%


2,089


25.7%

Total executive recruitment

29,616


21.7%


22,449


17.6%

Leadership & Talent Consulting

5,484


9.1%


4,262


15.0%

Futurestep

3,679


11.6%


3,182


10.3%

Corporate 

(15,542)




(12,884)




 Total adjusted operating income 

$   23,237


10.2%


$   17,009


9.1%

 

 

 

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 (in thousands, except per share amounts) 













July 31,


April 30,



2013


2013

ASSETS


 (unaudited) 



Cash and cash equivalents


$    150,426


$    224,066

Marketable securities


9,720


20,347

Receivables due from clients, net of allowance for doubtful accounts 

of $8,978 and $9,097 respectively






182,177


161,508

Income taxes and other receivables


6,452


8,944

Deferred income taxes


4,051


3,511

Prepaid expenses and other assets


32,701


28,724

Total current assets


385,527


447,100






Marketable securities, non-current


120,253


121,569

Property and equipment, net


51,906


53,628

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


87,583


85,873

Deferred income taxes


59,716


63,203

Goodwill


257,626


257,293

Intangible assets, net


56,027


58,187

Investments and other assets


29,554


28,376

Total assets


$ 1,048,192


$ 1,115,229






LIABILITIES AND STOCKHOLDERS' EQUITY





Accounts payable


$      20,045


$      19,460

Income taxes payable


7,477


5,502

Compensation and benefits payable


95,596


160,298

Other accrued liabilities


65,542


83,291

Total current liabilities


188,660


268,551






Deferred compensation and other retirement plans


162,965


159,706

Other liabilities


20,776


22,504

Total liabilities


372,401


450,761






Stockholders' equity





Common stock: $0.01 par value, 150,000 shares authorized, 61,773 and 

61,022 shares issued and 49,296 and 48,734 shares outstanding, respectively






434,495


431,508

Retained earnings


247,507


236,090

Accumulated other comprehensive loss, net


(5,714)


(2,631)

Stockholders' equity


676,288


664,967

Less:  notes receivable from stockholders


(497)


(499)

  Total stockholders' equity


675,791


664,468

  Total liabilities and stockholders' equity


$ 1,048,192


$ 1,115,229

 

 


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 



July 31, 2013


July 31, 2012



As Reported


Adjustments


As Adjusted


As Reported


Adjustments


As Adjusted














 Fee revenue 


$ 228,437




$ 228,437


$ 186,694




$ 186,694

 Reimbursed out-of-pocket engagement expenses 


9,150




9,150


9,329




9,329

       Total revenue 


237,587




237,587


196,023




196,023














 Compensation and benefits 


152,770


(2,500)


150,270


128,036




128,036

 General and administrative expenses 


39,871


(394)


39,477


33,443




33,443

 Reimbursed expenses 


9,150




9,150


9,329




9,329

 Cost of services 


9,509




9,509


4,464




4,464

 Depreciation and amortization 


5,944




5,944


3,742




3,742

 Restructuring charges, net 


3,682


(3,682)


-


-




-

       Total operating expenses 


220,926


(6,576)


214,350


179,014


-


179,014














 Operating income 


16,661


6,576


23,237


17,009


-


17,009














 Other income, net 


2,267




2,267


(1,017)




(1,017)

 Interest expense, net 


(591)




(591)


(599)




(599)

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














18,337


6,576


24,913


15,393




15,393

 Income tax provision (1) (2) 


7,385


2,005


9,390


5,605




5,605

 Equity in earnings of unconsolidated subsidiaries, net 


465




465


630




630

        Net income 


$   11,417


$           4,571


$   15,988


$   10,418


$                -


$   10,418














 Earnings per common share: 













   Basic 


$       0.24




$       0.34


$       0.22




$       0.22

   Diluted 


$       0.24




$       0.33


$       0.22




$       0.22














 Weighted-average common shares outstanding: 













   Basic 


47,665




47,665


46,810




46,810

   Diluted 


48,519




48,519


47,655




47,655


 Explanation of Non-GAAP Adjustments 

 (1) The adjustments result in an effective tax rate of 38% for the as adjusted amounts for the three months ended July 31, 2013. 

 (2) The three months ended July 31, 2013 includes the tax effect on restructuring charges, separation costs, and integration/acquisition costs associated with the acquisition of PDI Ninth House. 

 

 

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 July 31, 2013 



 Executive Recruitment 


 Leadership & Talent Consulting 


 Futurestep 


 Corporate 


 Consolidated 












 Fee revenue 


$      136,655


$       60,062


$       31,720


$                -


$          228,437












 Net income 










$            11,417

       Other income, net 










(2,267)

       Interest expense, net 










591

       Income tax provision 










7,385

       Equity in earnings of unconsolidated subsidiaries, net 










(465)

 Operating income (loss) 


$        28,280


$         4,335


$         2,545


$    (18,499)


16,661

       Depreciation and amortization 


1,778


2,897


408


861


5,944

        Other income, net 


381


8


565


1,313


2,267

       Equity in earnings of unconsolidated subsidiaries, net 


102


-


-


363


465

 EBITDA 


30,541


7,240


3,518


(15,962)


25,337

 EBITDA margin 


22.3%


12.1%


11.1%




11.1%












       Restructuring charges, net 


1,336


1,149


1,134


63


3,682

       Separation costs 


-


-


-


2,500


2,500

       Integration/acquisition costs 


-


-


-


394


394

 Adjusted EBITDA 


$        31,877


$         8,389


$         4,652


$    (13,005)


$            31,913

 Adjusted EBITDA margin 


23.3%


14.0%


14.7%




14.0%

























 Three Months Ended July 31, 2012 



 Executive Recruitment 


 Leadership & Talent Consulting 


 Futurestep 


 Corporate 


 Consolidated 












 Fee revenue 


$      127,446


$       28,392


$       30,856


$                -


$          186,694












 Net income 










$            10,418

       Other loss, net 










1,017

       Interest expense, net 










599

       Income tax provision 










5,605

       Equity in earnings of unconsolidated subsidiaries, net 










(630)

 Operating income (loss) 


$        22,449


$         4,262


$         3,182


$    (12,884)


17,009

       Depreciation and amortization 


2,206


617


296


623


3,742

       Other income (loss), net 


58


15


9


(1,099)


(1,017)

       Equity in earnings of unconsolidated subsidiaries, net 


227


-


-


403


630

 EBITDA 


24,940


4,894


3,487


(12,957)


20,364

 EBITDA margin 


19.6%


17.2%


11.3%




10.9%












 Adjusted EBITDA 


$        24,940


$         4,894


$         3,487


$    (12,957)


$            20,364

 Adjusted EBITDA margin 


19.6%


17.2%


11.3%




10.9%

 

 

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