Korn Ferry International Announces Fourth Quarter and Fiscal 2014 Results of Operations

 Korn Ferry International Announces Fourth Quarter and Fiscal 2014 Results of                                   Operations  Highlights  -- Korn Ferry reports record quarterly fee revenue of $251.7 million in the fourth quarter of 2014, an increase of 10.4% (the effect of exchange rates was not significant), from Q4 FY'13, with increases realized across all segments:  Futurestep 20.3%  Leadership and Talent Consulting 10.1%  Executive Recruitment 8.3%  -- Adjusted EBITDA margin was 13.7% in Q4 FY'14 compared to 12.2% in Q4 FY'13.  -- Q4 FY'14 diluted earnings per share was $0.43 compared to $0.25 in Q4 FY'13. Adjusted diluted earnings per share was $0.32 in Q4 FY'13, which excludes $3.5 million of net restructuring and integration/acquisition costs. No such costs were incurred in Q4 FY'14.  -- For the full year of FY'14, Korn Ferry reports record annual fee revenue of $960.3 million, an increase of 18.1% (19.1% on a constant currency basis) over FY'13. Adjusting for the prior year acquisitions, annual fee revenue increased 9.3% over FY'13.  -- FY'14 diluted earnings per share was $1.48 compared to $0.70 in FY'13. Adjusted diluted earnings per share was $1.60 in FY'14 and $1.10 in FY'13, excluding $8.6 million and $26.5 million of net restructuring, integration/acquisition and separation costs, respectively.  PR Newswire  LOS ANGELES, June 16, 2014  LOS ANGELES, June 16, 2014 /PRNewswire/ --Korn/Ferry International (NYSE: KFY), a single source of leadership and talent consulting services, today announced record quarterly and annual fee revenues of $251.7 million and $960.3 million for the fourth quarter and FY'14, respectively. Fourth quarter diluted earnings per share were $0.43. Full year adjusted diluted earnings per share were $1.60, excluding restructuring, integration/acquisition, and separation costs of $8.6 million. Including such costs, diluted earnings per share was $1.48 for the year ended April 30, 2014.  "Korn Ferry closed out the fiscal year with a strong quarter – 10.7% growth in fee revenue for the quarter and 19.1% growth for the year, at constant currency – which represents the strongest top line results in the company's history, with earnings per share of $0.43," said Gary D. Burnison, CEO, Korn Ferry. "Korn Ferry's performance is a testament to our differentiated strategy, robust intellectual property and talented people."  Financial Results (dollars in millions, except per share amounts)                      Fourth Quarter                Year to Date                      FY'14          FY'13          FY'14        FY'13 Fee revenue          $    251.7  $   227.9   $   960.3  $   812.8 Total revenue        $    260.8  $   238.6   $   995.6  $   849.7 Operating income     $          $    15.4  $         $    43.9                      24.5                          91.6 Operating margin     9.7%           6.8%           9.5%         5.4% Net income           $          $    12.2  $         $    33.3                      21.2                          72.7 Basic earnings per   $          $    0.26  $         $    0.71 share                0.44                          1.51 Diluted earnings per $          $    0.25  $         $    0.70 share                0.43                          1.48  EBITDA Results (a):   Fourth Quarter                Year to Date                       FY'14          FY'13          FY'14        FY'13 EBITDA                $          $    24.3  $   129.7  $                          34.5                                       71.3 EBITDA margin         13.7%          10.7%          13.5%        8.8% Adjusted Results (b): Fourth Quarter                Year to Date                       FY'14          FY'13          FY'14        FY'13 Operating income      $          $    18.9  $   100.2  $                          24.5                                       70.4 Operating margin      9.7%           8.3%           10.4%        8.7% EBITDA (a)            $          $    27.8  $   138.3  $                          34.5                                       97.8 EBITDA margin (a)     13.7%          12.2%          14.4%        12.0% Net income            $          $    15.6  $         $                          21.2                          78.5         52.8 Basic earnings per    $          $    0.33  $         $    share                 0.44                          1.63         1.12 Diluted earnings per  $          $    0.32  $         $    share                 0.43                          1.60         1.10          EBITDA refers to earnings before interest, taxes, depreciation and         amortization. Adjusted EBITDA further adjusts EBITDA to exclude (a)     restructuring charges (net of recoveries), 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):                                     Fourth Quarter          Year to Date                                  FY'14        FY'13      FY'14      FY'13 Restructuring charges, net of    $       $      $      $     recoveries                          —       2.9     3.7      22.8 Integration/acquisition costs    $       $      $      $                                         —       0.6     0.4       3.1 Separation costs                 $       $      $      $                                         —       —      4.5       0.6  Fiscal 2014 Fourth Quarter Results  Fee revenue was $251.7 million in Q4 FY'14, an increase of $23.8 million, or 10.4% (the effect of exchange rates was not significant), compared to the year-ago quarter, primarily driven by an $11.4 million, $6.3 million, and a $6.1 million increase in fee revenue in Executive Recruitment, Futurestep and Leadership & Talent Consulting, respectively. The overall fee revenue increase was driven by fee revenue growth in financial services, technology, life science/healthcare and the industrial sectors.  Compensation and benefit expenses were $170.6 million in Q4 FY'14, an increase of $16.2 million, or 10.5%, compared to the year-ago quarter. The increase was due to an increase in performance related bonus expense resulting from the increase in fee revenue and profitability, as well as an increase in salaries and related payroll taxes. The increase in salaries and related payroll taxes was due to a 3.5% increase in the average headcount in Q4 FY'14 compared to Q4 FY'13.  General and administrative expenses were $39.1 million in Q4 FY'14, a decrease of $1.0 million, or 2.5%, from the year-ago quarter, primarily due to a decrease in office and premise expense of $1.6 million due to synergies obtained from the PDI Ninth House and Global Novations acquisitions (the "prior year acquisitions") and a decrease in foreign exchange loss of $0.6 million, offset by an increase in travel and business development related expenses in Q4 FY'14 compared to the year-ago quarter.  Adjusted EBITDA was $34.5 million in Q4 FY'14, an increase of $6.7 million, or 24.1%, compared to Q4 FY'13. Adjusted EBITDA margin was 13.7% and 12.2% in Q4 FY'14 and Q4 FY'13, respectively.  On a GAAP basis, operating income was $24.5 million in Q4 FY'14 and $15.4 million in Q4 FY'13 resulting in a margin of 9.7% in the current quarter compared to 6.8% in the year-ago quarter.  Fiscal 2014 Results  Fee revenue was $960.3 million in FY'14, an increase of $147.5 million, or 18.1% (19.1% on a constant currency basis), compared to FY'13. Adjusting for the prior year acquisitions, fee revenue was $888.4 million in FY'14, an increase of $75.6 million, or 9.3%, compared to FY'13. The increase in fee revenue was driven by a 9.2% increase in the number of engagements billed in FY'14 compared to FY'13. The overall fee revenue increase was driven by fee revenue growth in life science/healthcare, industrial, technology and financial services sectors.  Adjusted EBITDA was $138.3 million during FY'14, an increase of $40.5 million, or 41.4%, compared to FY'13. Adjusted EBITDA margin was 14.4% and 12.0% in FY'14 and FY'13, respectively.  On a GAAP basis, operating income was $91.6 million in FY'14, an increase of $47.7 million, or 108.7%, compared to FY'13, resulting in an operating margin of 9.5% in the current year compared to 5.4% in the prior year.  Balance Sheet and Liquidity  Cash and marketable securities were $468.3 million at April 30, 2014, compared to $366.0 million at April 30, 2013. Cash and marketable securities include $116.2 million held in trust for deferred compensation plans at April 30, 2014, compared to $98.0 million at April 30, 2013. Cash and marketable securities increased by $102.3 million from April 30, 2013, primarily attributable to cash provided by operating activities, partially offset by bonuses earned in fiscal 2013 and paid during the first quarter of fiscal 2014 and $15.0 million in contingent consideration paid to selling stockholders of PDI Ninth House.  Results by Segment  Selected Executive Recruitment Data (dollars in millions)                              Fourth Quarter               Year to Date                              FY'14          FY'13         FY'14  FY'13 Fee revenue                  $   148.2   $   136.8   $    $   522.5                                                           568.9 Total revenue                $   153.7   $   142.8   $    $   544.8                                                           591.2 Operating income             $    28.4  $    26.5  $    $                                                              116.4  81.0 Operating margin             19.1%          19.4%         20.5%  15.5% Ending number of consultants 432            399           432    399 Average number of            431            395           416    400 consultants Engagements billed           3,048          2,718         8,144  7,554 New engagements (a)          1,303          1,231         5,052  4,750    EBITDA Results (b):   Fourth Quarter                Year to Date                       FY'14          FY'13          FY'14       FY'13 EBITDA                $    31.7  $    29.4   $  126.5  $    91.2 EBITDA margin         21.4%          21.5%          22.2%       17.5% Adjusted Results (c): Fourth Quarter                Year to Date                       FY'14          FY'13          FY'14       FY'13 Operating income      $    28.4  $    23.9  $  117.7  $    89.7 Operating margin      19.1%          17.5%          20.7%       17.2% EBITDA (b)            $    31.7  $    26.8  $  127.8  $    99.9 EBITDA margin (b)     21.4%          19.6%          22.5%       19.1%  (a)             Represents new engagements opened in the respective period.                 EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA (b)             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'14        FY'13        FY'14       FY'13 Restructuring charges, net  $       $       $      $      of recoveries                  —     (2.6)        1.3       8.1 Separation costs            $       $      $      $                                     —       —         —        0.6  Executive Recruitment  Fee revenue was $148.2 million in Q4 FY'14, an increase of $11.4 million, or 8.3% (the effect of exchange rates was not significant), compared to Q4 FY'13. The increase in fee revenue was driven by increases in Europe, North America and Asia Pacific, partially offset by a decrease in Latin America. This increase is primarily attributed to a 12.1% increase in the number of executive recruitment engagements billed, offset by a 3.4% decrease in the weighted-average fees billed per engagement in Q4 FY'14 compared to the Q4 FY'13.  Adjusted EBITDA was $31.7 million during Q4 FY'14, an increase of $4.9 million, or 18.3%, compared to Q4 FY'13. This increase is primarily attributed to the $11.4 million increase in fee revenue in Q4 FY'14 as compared to Q4 FY'13, partially offset by an increase of $5.9 million in compensation and benefit expenses driven primarily by an increase in performance related bonus expense and salaries and related payroll taxes. For the full year, adjusted EBITDA increased by $27.9 million due to a $46.4 million increase in fee revenue and a decrease in general and administrative expenses offset by an increase in compensation and benefit expenses.  On a GAAP basis, operating income was $28.4 million in Q4 FY'14, an increase of $1.9 million, or 7.2%, compared to Q4 FY'13, resulting in an operating margin of 19.1% in the current quarter compared to 19.4% in the year-ago quarter. On a GAAP basis, operating income was $116.4 million in FY'14, an increase of $35.4 million, or 43.7%, compared to FY'13, resulting in an operating margin of 20.5% in FY'14 compared to 15.5% in FY'13.    Selected Leadership & Talent Consulting Data (dollars in millions)                              Fourth Quarter             Year to Date                              FY'14       FY'13          FY'14    FY'13 Fee revenue                  $        $    60.1   $      $   168.1                              66.2                      254.6 Total revenue                $        $    63.1   $      $   176.6                              68.4                      263.0 Operating (loss) income      $       $           $     $                                  6.8        (1.3)          23.8     6.4 Operating margin             10.3%       (2.1)%         9.4%     3.8% Ending number of consultants 127         133            127      133 (a) Staff utilization (b)        70%         67%            67%      64% EBITDA Results (c):          Fourth Quarter             Year to Date                              FY'14       FY'13          FY'14    FY'13 EBITDA                       $        $    1.2   $     $                                 10.0                      36.4     12.4 EBITDA margin               15.1%       2.0%           14.3%    7.4% Adjusted Results (d):        Fourth Quarter             Year to Date                              FY'14       FY'13          FY'14    FY'13 Operating income             $       $     3.8  $     $                                 6.8                       25.0     16.6 Operating margin             10.3%       6.3%           9.8%     9.9% EBITDA (c)                   $       $     6.3  $     $                                 10.0                       37.6     22.6 EBITDA margin (c)            15.1%       10.4%          14.8%    13.4%  (a)       Represents number of employees originating consulting services.           Calculated by dividing the number of hours of our full-time LTC (b)       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):                             Fourth Quarter              Year to Date                          FY'14          FY'13        FY'14        FY'13 Restructuring charges,   $        $       $       $      net of recoveries          —          5.1        1.2         10.2  Leadership & Talent Consulting  Fee revenue was $66.2 million in Q4 FY'14, an increase of $6.1 million, or 10.1% (the effect of exchange rates was not significant), from the year-ago quarter. The increase in fee revenue was driven by increases in North America and Europe. This increase is primarily attributed to an increase in consulting fee revenue of $3.8 million and an increase in product revenue of $2.3 million in Q4 FY'14 compared to the year-ago quarter.  Adjusted EBITDA was $10.0 million during Q4 FY'14, an increase of $3.7 million, or 58.7%, compared to Q4 FY'13. Adjusted EBITDA margin was 15.1% in Q4 FY'14 compared to 10.4% in Q4 FY'13 due to an increase in fee revenue of $6.1 million and a decrease in general administrative expenses of $1.2 million, offset by an increase in compensation and benefit expense of $4.2 million. The decrease in general and administrative expenses was due to a decrease in office and premise expense due to synergies obtained from the prior year acquisitions. The increase in compensation and benefit expenses was due to an increase in performance related bonus expense, salaries and related payroll taxes, and an increase in the use of outside contractors. For the full year, adjusted EBITDA was $37.6 million, an increase of $15.0 million, or 66.4%, compared to FY'13. Adjusted EBITDA margin was 14.8% compared 13.4% in FY'13.  On a GAAP basis, operating income was $6.8 million in Q4 FY'14, an increase of $8.1 million compared to the year-ago quarter, resulting in an operating margin of 10.3% in the current quarter compared to (2.1%) in the year-ago quarter. On a GAAP basis, operating income was $23.8 million in FY'14, an increase of $17.4 million compared to FY'13 resulting in an operating margin of 9.4% in FY'14 compared to 3.8% in FY'13.  Selected Futurestep Data (dollars in millions)                      Fourth Quarter               Year to Date                      FY'14           FY'13        FY'14          FY'13 Fee revenue          $    37.3   $         $   136.8   $   122.2                                      31.0 Total revenue        $    38.7   $         $   141.4   $   128.3                                      32.7 Operating income     $     4.3  $        $           $                                         3.9          13.3          11.0 Operating margin     11.7%           12.4%        9.8%           9.0% Engagements billed   1,205           1,032        3,246          3,074 New engagements (a)  598             524          2,427          2,308 EBITDA Results (b):   Fourth Quarter              Year to Date                       FY'14          FY'13        FY'14          FY'13 EBITDA               $     4.8  $        $           $                                         4.1          15.7          12.2 EBITDA margin        13.1%           13.3%        11.5%          10.0% Adjusted Results (c): Fourth Quarter              Year to Date                       FY'14          FY'13        FY'14          FY'13 Operating income      $          $        $    14.5  $                          4.3           4.3                         14.5 Operating margin      11.7%          13.8%        10.6%          11.9% EBITDA (b)            $          $        $    16.9  $                          4.8           4.5                         15.7 EBITDA margin (b)     13.1%          14.7%        12.3%          12.9%  (a)           Represents new engagements opened in the respective period.               EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA (b)           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'14          FY'13        FY'14        FY'13 Restructuring charges,   $        $       $       $      net of recoveries          —          0.4        1.2          3.5  Futurestep  Fee revenue was $37.3 million in Q4 FY'14, an increase of $6.3 million, or 20.3% (21.0% on a constant currency basis), compared to the year-ago quarter. The increase in fee revenue was driven by a 16.8% increase in the number of engagements billed and a 3.0% increase in the weighted average fees billed per engagement in Q4 FY'14 compared to Q4 FY'13. The increase was primarily due to large recruitment process outsourcing contracts entered into in the first six months of FY'14, which continued to be delivered in the current quarter and an increase in professional recruitment.  Adjusted EBITDA was $4.8 million during Q4 FY'14, an increase of $0.3 million, or 6.7%, compared to Q4 FY'13, due primarily to the increase in fee revenue of $6.3 million, offset by an increase in compensation and benefit expenses of $4.6 million (due to an increase in performance related bonus expense and headcount), an increase in cost of services expense of $0.7 million and an increase in general and administrative expenses of $0.5 million. For the full year, adjusted EBITDA increased $1.2 million due to the $14.6 million increase in fee revenue, partially offset by an increase in compensation and benefit expenses of $11.0 million and $2.3 million in cost of services expenses. The increase in compensation and benefit expenses for the full year is primarily driven by an increase in staffing to accommodate a number of larger recruitment process outsourcing contracts won by the Company in the current fiscal year and an increase in performance related bonus expense.  On a GAAP basis, operating income was $4.3 million in Q4 FY'14, an increase of $0.4 million, compared to Q4 FY'13, resulting in an operating margin of 11.7% in the current quarter compared to 12.4% in the year-ago quarter. On a GAAP basis, operating income was $13.3 million in FY'14, an increase of $2.3 million, compared to FY'13, resulting in an operating margin of 9.8% in FY'14 compared to 9.0% in FY'13.  Outlook  As previously disclosed, over the past year we have implemented common technology systems designed to allow us to further integrate our legacy businesses with our recent acquisitions. Due to the efficiencies we expect to gain from these investments, other integration items from recent acquisitions and other cost savings initiatives, we plan to take additional actions to rationalize our cost structure in Q1 FY'15. We estimate the realized savings in FY'15 associated with these actions to be in the range of $0.08 to $0.10 per diluted earnings share with the cost of these actions in Q1 FY'15 to be in the range of $0.06 to $0.08 per diluted earnings share. Assuming worldwide economic conditions, financial markets and foreign exchange rates remain steady, Q1 FY'15 fee revenue is likely to range from $240 million to $250 million and, after taking into consideration the actions discussed above, adjusted diluted earnings per share are likely to range from $0.37 to $0.43 with diluted earnings per share as measured by Generally Accepted Accounting Principles likely to range from $0.29 to $0.37  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. We will also post to this section of our website earnings slides, which will accompany our webcast, and other important information, and encourage you to review the information that we make available on our website.  About Korn Ferry  At Korn Ferry, we design, build, attract and ignite talent. Since our inception, clients have trusted us to help recruit world-class leadership. Today, we are a single source for leadership and talent consulting services to empower businesses and leaders to reach their goals. Our solutions range from executive recruitment and leadership development programs, to enterprise learning, succession planning and recruitment process outsourcing (RPO). Visit www.kornferry.com for more information on Korn Ferry, 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, seasonality 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:    oadjusted operating income and operating margin, adjusted to exclude     restructuring (net of recoveries), integration/acquisition and separation     costs;   oadjusted net income, adjusted to exclude restructuring (net of     recoveries), integration/acquisition and separation costs, net of income     tax effect;   oadjusted basic and diluted earnings per share, adjusted to exclude     restructuring (net of recoveries), integration/acquisition and separation     costs, net of income tax effect;   oconstant 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;   oEBITDA, or earnings before interest, taxes, depreciation and amortization     and EBITDA margin; and   oadjusted EBITDA, which is EBITDA further adjusted to exclude restructuring     (net of recoveries), 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.  KORN FERRY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts)                                 Three Months Ended    Year Ended                                 April 30,             April 30,                                 2014        2013        2014        2013                                 (unaudited) Fee revenue                   $ 251,712   $ 227,902   $ 960,301   $ 812,831 Reimbursed out-of-pocket       9,086       10,705      35,258      36,870 engagement expenses  Total revenue       260,798     238,607     995,559     849,701 Compensation and benefits     170,595     154,487     646,889     555,346 General and administrative     39,109      40,096      152,040     142,771 expenses Reimbursed expenses           9,086       10,705      35,258      36,870 Cost of services              10,213      9,129       39,910      28,977 Depreciation and               7,315       5,877       26,172      19,004 amortization Restructuring charges, net    -           2,921       3,682       22,857  Total operating      236,318     223,215     903,951     805,825 expenses Operating income             24,480      15,392      91,608      43,876 Other income, net             2,018       2,501       9,769       6,309 Interest expense, net         (261)       (644)       (2,363)     (2,365)  Income before provision for income taxes  and equity in earnings of unconsolidated      26,237      17,249      99,014      47,820 subsidiaries Equity in earnings of          677         543         2,169       2,110 unconsolidated subsidiaries Income tax provision         5,703       5,595       28,492      16,637  Net income         $  21,211  $  12,197  $  72,691  $  33,293 Earnings per common share:  Basic                    $        $        $        $                                    0.44        0.26        1.51        0.71  Diluted                  $        $        $        $                                    0.43        0.25        1.48        0.70 Weighted-average common shares outstanding:  Basic                    48,523      47,452      48,162      47,224  Diluted                  49,458      48,345      49,145      47,883    KORN FERRY AND SUBSIDIARIES FINANCIAL SUMMARY BY SEGMENT (in thousands) (unaudited)                          Three Months Ended April 30,        Year Ended April 30,                          2014              2013      %       2014              2013      %                                                      Change                              Change Fee Revenue: Executive recruitment:  North America           $                $        4%      $                 $         6%                          80,230           77,511           306,768          290,317  EMEA                   40,175            32,242    25%     147,917           128,807   15%  Asia Pacific            21,753            19,199    13%     84,816            73,221    16%  South America           6,028             7,839     (23%)   29,374            30,134    (3%) Total executive          148,186           136,791   8%      568,875           522,479   9% recruitment Leadership & Talent      66,279            60,116    10%     254,636           168,115   51% Consulting Futurestep               37,247            30,995    20%     136,790           122,237   12%  Total fee revenue       251,712           227,902   10%     960,301           812,831   18% Reimbursed out-of-pocket engagement 9,086             10,705    (15%)   35,258            36,870    (4%) expenses  Total revenue           $                 $         9%      $                 $         17%                          260,798          238,607          995,559          849,701 Reconciliation of Operating Income (GAAP) to Adjusted Operating Income Operating Income:                  Margin            Margin            Margin            Margin Executive recruitment:  North America           $        23.0%   $        22.1%   $        22.9%   $        20.3%                          18,483           17,104           70,256           58,832  EMEA                    4,699     11.7%   4,137     12.8%   23,168    15.7%   9,173     7.1%  Asia Pacific            4,380     20.1%   3,482     18.1%   17,274    20.4%   6,973     9.5%  South America           761       12.6%   1,761     22.5%   5,654     19.2%   5,987     19.9% Total executive          28,323    19.1%   26,484    19.4%   116,352   20.5%   80,965    15.5% recruitment Leadership & Talent      6,855     10.3%   (1,292)   (2.1%)  23,847    9.4%    6,424     3.8% Consulting Futurestep               4,343     11.7%   3,834     12.4%   13,352    9.8%    10,975    9.0% Corporate                (15,041)          (13,634)          (61,943)          (54,488)  Total operating income $        9.7%    $        6.8%    $        9.5%    $        5.4%                          24,480           15,392           91,608           43,876 Restructuring, Separation, and Integration/Acquisition Costs, net: Executive recruitment:  North America           $      -       $       (2.4%)  $      0.3%    $       1.2%                             -           (1,853)            816             3,583  EMEA                    -         -       (770)     (2.4%)  460       0.3%    4,498     3.5%  Asia Pacific            -         -       16        0.1%    60        0.0%    629       0.9%  South America           -         -       -         -       -         -       -         - Total executive          -         -       (2,607)   (1.9%)  1,336     0.2%    8,710     1.7% recruitment Leadership & Talent      -         -       5,080     8.4%    1,149     0.4%    10,198    6.1% Consulting Futurestep               -         -       441       1.4%    1,134     0.8%    3,527     2.9% Corporate                                  598               4,957             4,044  Total restructuring,  separation, and         $      -       $       1.5%    $       0.9%    $        3.3%  integration/acquisition    -           3,512            8,576            26,479  costs, net Adjusted Operating Income:  (Excluding Restructuring, Separation, and                    Margin            Margin            Margin            Margin Integration/Acquisition Costs, net) Executive recruitment:  North America           $        23.0%   $        19.7%   $        23.2%   $        21.5%                          18,483           15,251           71,072           62,415  EMEA                    4,699     11.7%   3,367     10.4%   23,628    16.0%   13,671    10.6%  Asia Pacific            4,380     20.1%   3,498     18.2%   17,334    20.4%   7,602     10.4%  South America           761       12.6%   1,761     22.5%   5,654     19.2%   5,987     19.9% Total executive          28,323    19.1%   23,877    17.5%   117,688   20.7%   89,675    17.2% recruitment Leadership & Talent      6,855     10.3%   3,788     6.3%    24,996    9.8%    16,622    9.9% Consulting Futurestep               4,343     11.7%   4,275     13.8%   14,486    10.6%   14,502    11.9% Corporate               (15,041)          (13,036)          (56,986)          (50,444)  Total adjusted         $        9.7%    $        8.3%    $         10.4%   $        8.7%  operating income       24,480           18,904           100,184          70,355    KORN FERRY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts)                                                   April 30,                                                   2014           2013 ASSETS Cash and cash equivalents                         $  333,717   $  224,066 Marketable securities                             9,566          20,347 Receivables due from clients, net of allowance for doubtful accounts of $9,513 and $9,097 respectively                 175,986        161,508 Income taxes and other receivables                8,244          8,944 Deferred income taxes                             4,486          3,511 Prepaid expenses and other assets                 29,955         28,724 Total current assets                              561,954        447,100 Marketable securities, non-current                124,993        121,569 Property and equipment, net                       60,434         53,628 Cash surrender value of company owned life        94,274         85,873 insurance policies, net of loans Deferred income taxes                             55,039         63,203 Goodwill                                          257,582        257,293 Intangible assets, net                            49,560         58,187 Investments and other assets                      29,830         28,376 Total assets                                      $ 1,233,666    $ 1,115,229 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable                                  $   19,375  $   19,460 Income taxes payable                              13,014         5,502 Compensation and benefits payable                 192,035        160,298 Other accrued liabilities                         62,509         83,291 Total current liabilities                         286,933        268,551 Deferred compensation and other retirement plans  169,235        159,706 Other liabilities                                 21,962         22,504 Total liabilities                                 478,130        450,761 Stockholders' equity Common stock: $0.01 par value, 150,000 shares authorized, 62,282 and 61,022 shares issued and 49,811 and 48,734        449,631        431,508 shares outstanding, respectively Retained earnings                                 308,781        236,090 Accumulated other comprehensive loss, net         (2,388)        (2,631) Stockholders' equity                              756,024        664,967 Less: notes receivable from stockholders         (488)          (499) Total stockholders' equity                        755,536        664,468 Total liabilities and stockholders' equity        $ 1,233,666    $ 1,115,229    KORN FERRY 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, 2014                   April 30, 2013                    As        Adjustments  As        As        Adjustments  As                    Reported               Adjusted  Reported               Adjusted Fee revenue      $                      $         $                      $                    251,712                251,712   227,902                227,902 Reimbursed out-of-pocket      9,086                  9,086     10,705                 10,705 engagement expenses  Total   260,798                260,798   238,607                238,607 revenue Compensation and  170,595                170,595   154,487                154,487 benefits General and administrative     39,109                 39,109    40,096    (591)        39,505 expenses Reimbursed        9,086                  9,086     10,705                 10,705 expenses Cost of           10,213                 10,213    9,129                  9,129 services Depreciation and  7,315                  7,315     5,877                  5,877 amortization Restructuring     -                      -         2,921     (2,921)      - charges, net  Total operating          236,318   -            236,318   223,215   (3,512)      219,703 expenses Operating         24,480    -            24,480    15,392    3,512        18,904 income Other income,     2,018                  2,018     2,501                  2,501 net Interest          (261)                  (261)     (644)                  (644) expense, net  Income before provision for income taxes and equity in earnings of        26,237    -            26,237    17,249    3,512        20,761 unconsolidated subsidiaries Equity in earnings of        677                    677       543                    543 unconsolidated subsidiaries Income tax provision (1)      5,703                  5,703     5,595     119          5,714 (2)  Net    $        $       $        $        $        $  income            21,211       -      21,211    12,197    3,393       15,590 Earnings per common share:  Basic       $                   $      $                   $                       0.44                   0.44      0.26                   0.33  Diluted     $                   $      $                   $                       0.43                   0.43      0.25                   0.32 Weighted-average common shares outstanding:  Basic       48,523                 48,523    47,452                 47,452  Diluted     49,458                 49,458    48,345                 48,345 Explanation of Non-GAAP Adjustments  (1)         The adjustments result in an effective tax rate of 28% for the as             adjusted amounts for the three months ended April 30, 2013.             The three months ended April 30, 2013, includes the tax effect on (2)         restructuring charges and integration/acquisition costs associated             with the acquisition of PDI Ninth House.    KORN FERRY 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, 2014                   April 30, 2013                    As        Adjustments  As        As        Adjustments  As                    Reported               Adjusted  Reported               Adjusted Fee revenue      $                     $        $                     $                     960,301                960,301   812,831                812,831 Reimbursed out-of-pocket      35,258                 35,258    36,870                 36,870 engagement expenses  Total   995,559                995,559   849,701                849,701 revenue Compensation and  646,889   (4,500)      642,389   555,346   (516)        554,830 benefits General and administrative     152,040   (394)        151,646   142,771   (3,106)      139,665 expenses Reimbursed        35,258                 35,258    36,870                 36,870 expenses Cost of           39,910                 39,910    28,977                 28,977 services Depreciation and  26,172                 26,172    19,004                 19,004 amortization Restructuring     3,682     (3,682)      -         22,857    (22,857)     - charges, net  Total operating          903,951   (8,576)      895,375   805,825   (26,479)     779,346 expenses Operating         91,608    8,576        100,184   43,876    26,479       70,355 income Other income,     9,769                  9,769     6,309                  6,309 net Interest          (2,363)                (2,363)   (2,365)                (2,365) expense, net  Income before provision for income taxes and equity in earnings of        99,014    8,576        107,590   47,820    26,479       74,299 unconsolidated subsidiaries Equity in earnings of        2,169                  2,169     2,110                  2,110 unconsolidated subsidiaries Income tax provision (1)      28,492    2,796        31,288    16,637    6,953        23,590 (2)  Net    $       $       $       $       $        $   income           72,691    5,780        78,471    33,293    19,526       52,819 Earnings per common share:  Basic       $                   $      $                   $                        1.51                 1.63    0.71                 1.12  Diluted     $                   $      $                   $                        1.48                 1.60    0.70                 1.10 Weighted-average common shares outstanding:  Basic       48,162                 48,162    47,224                 47,224  Diluted     49,145                 49,145    47,883                 47,883 Explanation of Non-GAAP Adjustments      The adjustments result in an effective tax rate of 29% and 32% (1) for the as adjusted amounts for the year ended April 30, 2014     and 2013, respectively.     The year ended April 30, 2014 and 2013 include the tax effect on (2) restructuring charges, separation costs, and integration/acquisition costs     associated with the acquisition of PDI Ninth House.    KORN FERRY 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, 2014                          Executive    Leadership                          Recruitment  & Talent     Futurestep  Corporate  Consolidated                                        Consulting Fee revenue            $  148,186  $          $           $       $                                           66,279       37,247         -        251,712 Net income                                                                   $                                                                                     21,211  Other income,                                                           (2,018) net  Interest                                                                261 expense, net  Equity in earnings of                                                                    (677) unconsolidated subsidiaries  Income tax                                                              5,703 provision Operating income        $           $         $          $           24,480 (loss)                  28,323       6,855        4,343        (15,041)  Depreciation and  2,614         3,161        512           1,028        7,315 amortization  Other income      683           (39)         7             1,367        2,018 (loss), net  Equity in earnings of              125           -            -             552          677 unconsolidated subsidiaries EBITDA                 31,745        9,977        4,862         (12,094)     34,490 EBITDA margin          21.4%         15.1%        13.1%                      13.7% Adjusted EBITDA        $           $         $          $           $                               31,745       9,977        4,862        (12,094)     34,490 Adjusted EBITDA         21.4%         15.1%        13.1%                      13.7% margin                          Three Months Ended April 30, 2013                          Executive    Leadership                          Recruitment  & Talent     Futurestep  Corporate  Consolidated                                        Consulting Fee revenue            $  136,791  $          $           $       $                                           60,116       30,995         -        227,902 Net income                                                                   $                                                                                     12,197  Other income,                                                           (2,501) net  Interest                                                                644 expense, net  Equity in earnings of                                                                    (543) unconsolidated subsidiaries  Income tax                                                              5,595 provision Operating income        $           $          $          $           15,392 (loss)                  26,484       (1,292)     3,834        (13,634)  Depreciation and  2,243         2,625        240           769          5,877 amortization  Other income      518           (146)        36            2,093        2,501 (loss), net  Equity in earnings of              129           -            -             414          543 unconsolidated subsidiaries EBITDA                 29,374        1,187        4,110         (10,358)     24,313 EBITDA margin          21.5%         2.0%         13.3%                      10.7%  Restructuring (recoveries) charges,    (2,607)       5,080        441           7            2,921 net  Integration/acquisition  -             -            -             591          591 costs Adjusted EBITDA        $           $         $          $          $                               26,767       6,267        4,551        (9,760)      27,825 Adjusted EBITDA         19.6%         10.4%        14.7%                      12.2% margin    KORN FERRY AND SUBSIDIARIES RECONCILIATION OF NET INCOME AND OPERATING INCOME (GAAP) TO EBITDA AND ADJUSTED EBITDA (NON-GAAP) (in thousands) (unaudited)                          Year Ended April 30, 2014                          Executive    Leadership                          Recruitment  & Talent     Futurestep  Corporate  Consolidated                                        Consulting Fee revenue            $  568,875  $  254,636  $  136,790   $       $                                                                        -        960,301 Net income                                                                   $                                                                                    72,691  Other income,                                                           (9,769) net  Interest expense,                                                       2,363 net  Equity in earnings of                                                                    (2,169) unconsolidated subsidiaries  Income tax                                                              28,492 provision Operating income        $  116,352  $          $   13,352  $ (61,943)  91,608 (loss)                                23,847  Depreciation and  8,012         12,491       1,797         3,872        26,172 amortization  Other income,     1,769         106          583           7,311        9,769 net  Equity in earnings of              383           -            -             1,786        2,169 unconsolidated subsidiaries EBITDA                 126,516       36,444       15,732        (48,974)     129,718 EBITDA margin          22.2%         14.3%        11.5%                      13.5%  Restructuring     1,336         1,149        1,134         63           3,682 charges, net  Separation        -             -            -             4,500        4,500 costs  Integration/acquisition  -             -            -             394          394 costs Adjusted EBITDA        $  127,852  $          $   16,866  $ (44,017)  $                                           37,593                                  138,294 Adjusted EBITDA margin 22.5%         14.8%        12.3%                      14.4%                          Year Ended April 30, 2013                          Executive    Leadership                          Recruitment  & Talent     Futurestep  Corporate  Consolidated                                        Consulting Fee revenue            $  522,479  $  168,115  $  122,237   $       $                                                                        -        812,831 Net income                                                                   $                                                                                    33,293  Other income,                                                           (6,309) net  Interest expense,                                                       2,365 net  Equity in earnings of                                                                    (2,110) unconsolidated subsidiaries  Income tax                                                              16,637 provision Operating income        $           $         $   10,975  $ (54,488)  43,876 (loss)                  80,965       6,424  Depreciation and  8,991         6,012        1,180         2,821        19,004 amortization  Other income      793           (75)         51            5,540        6,309 (loss), net  Equity in earnings of              434           -            -             1,676        2,110 unconsolidated subsidiaries EBITDA                 91,183        12,361       12,206        (44,451)     71,299 EBITDA margin          17.5%         7.4%         10.0%                      8.8%  Restructuring     8,194         10,198       3,527         938          22,857 charges, net  Integration/acquisition  -             -            -             3,106        3,106 costs  Separation        516           -            -             -            516 costs Adjusted EBITDA        $           $          $   15,733  $ (40,407)  $                              99,893       22,559                                  97,778 Adjusted EBITDA margin 19.1%         13.4%        12.9%                      12.0%  SOURCE Korn Ferry  Website: http://www.kornferry.com Contact: Investor Relations: Gregg Kvochak, (310) 556-8550; For Media: Mike Distefano, (310) 843-4199  
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