##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended July 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 001-14505
 
 KORN/FERRY INTERNATIONAL
 (Exact Name of Registrant as Specified in its Charter)
 Delaware
    
    95-2623879(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification Number)
 1900 Avenue of the Stars, Suite 2600, Los Angeles, California 90067  (Address of principal executive offices) (Zip code)
 (310) 552-1834  (Registrants telephone number, including area code)
 
 Yes þ No o
 Yes o No o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
Table of Contents
 Item #
    
    
    Description
    
    PagePart I. Financial InformationItem 1
    
    Condensed Consolidated Financial Statements
    
    
    1Consolidated Balance Sheets as of July 31, 2009 (unaudited) and April 30, 2009
    
    
    1Unaudited Consolidated Statements of Operations for the three months ended July 31, 2009 and 2008
    
    
    2Unaudited Consolidated Statements of Cash Flows for the three months ended July 31, 2009 and 2008
    
    
    3Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    4Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    25Item 4
    
    Controls and Procedures
    
    
    26Part II. Other InformationItem 1
    
    Legal Proceedings
    
    
    27Item 1A
    
    Risk Factors
    
    
    27Item 2
    
    Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
    
    
    27Item 5
    
    Other Information
    
    
    27Item 6
    
    Exhibits
    
    
    28Signatures
    
    
    29Exhibit 31.1Exhibit 31.2Exhibit 32.1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Condensed Consolidated Financial Statements
 KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 July 31,
    
    
    April 30,2009
    
    
    2009(unaudited)(in thousands, except per share data)ASSETSCash and cash equivalents
    
    $
    187,569
    
    
    $
    255,000Marketable securities
    
    
    4,425
    
    
    
    4,263Receivables due from clients, net of allowance for doubtful accounts of
$9,466 and $11,197, respectively
    
    
    86,287
    
    
    
    67,308Income taxes and other receivables
    
    
    8,776
    
    
    
    9,001Deferred income taxes
    
    
    18,487
    
    
    
    14,583Prepaid expenses and other assets
    
    
    28,043
    
    
    
    21,442Total current assets
    
    
    333,587
    
    
    
    371,597Marketable securities, noncurrent
    
    
    73,858
    
    
    
    70,992Property and equipment, net
    
    
    28,553
    
    
    
    27,970Cash surrender value of company owned life insurance policies, net of loans
    
    
    63,816
    
    
    
    63,108Deferred income taxes
    
    
    44,277
    
    
    
    45,141Goodwill
    
    
    160,901
    
    
    
    133,331Intangible assets, net
    
    
    18,667
    
    
    
    16,928Investments and other assets
    
    
    14,926
    
    
    
    11,812Total assets
    
    $
    738,585
    
    
    $
    740,879LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable
    
    $
    11,816
    
    
    $
    10,282Income taxes payable
    
    
    5,617
    
    
    
    2,059Compensation and benefits payable
    
    
    77,362
    
    
    
    116,705Other accrued liabilities
    
    
    52,762
    
    
    
    44,301Total current liabilities
    
    
    147,557
    
    
    
    173,347Deferred compensation and other retirement plans
    
    
    113,088
    
    
    
    99,238Other liabilities
    
    
    15,526
    
    
    
    9,195Total liabilities
    
    
    276,171
    
    
    
    281,780Stockholders equity:Common stock: $0.01 par value, 150,000 shares authorized, 57,348 and 56,185
shares issued and 45,659 and 44,729 shares outstanding, respectively
    
    
    373,732
    
    
    
    368,430Retained earnings
    
    
    70,649
    
    
    
    84,922Accumulated other comprehensive income, net
    
    
    18,569
    
    
    
    6,285Stockholders equity
    
    
    462,950
    
    
    
    459,637Less: notes receivable from stockholders
    
    
    (536
    )
    
    
    (538
    )Total stockholders equity
    
    
    462,414
    
    
    
    459,099Total liabilities and stockholders equity
    
    $
    738,585
    
    
    $
    740,879
   1




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##### Table of Contents



KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 Three Months EndedJuly 31,2009
    
    
    2008(in thousands, except per share data)Fee revenue
    
    $
    116,803
    
    
    $
    205,733Reimbursed out-of-pocket engagement expenses
    
    
    6,485
    
    
    
    11,739Total revenue
    
    
    123,288
    
    
    
    217,472Compensation and benefits
    
    
    90,385
    
    
    
    142,123General and administrative expenses
    
    
    28,054
    
    
    
    34,030Out-of-pocket engagement expenses
    
    
    8,789
    
    
    
    14,733Depreciation and amortization
    
    
    2,829
    
    
    
    2,832Restructuring charges
    
    
    18,183
    
    
    
    Total operating expenses
    
    
    148,240
    
    
    
    193,718Operating (loss) income
    
    
    (24,952
    )
    
    
    23,754Interest and other income, net
    
    
    4,733
    
    
    
    1,604Interest expense
    
    
    1,442
    
    
    
    1,224(Loss) income before (benefit) provision for
income taxes and equity in earnings of
unconsolidated subsidiaries
    
    
    (21,661
    )
    
    
    24,134(Benefit) provision for income taxes
    
    
    (7,365
    )
    
    
    9,293Equity in earnings of unconsolidated subsidiaries, net
    
    
    23
    
    
    
    1,063Net (loss) income
    
    $
    (14,273
    )
    
    $
    15,904(Loss) earnings per common share:Basic
    
    $
    (0.33
    )
    
    $
    0.37Diluted
    
    $
    (0.33
    )
    
    $
    0.36Weighted-average common shares outstanding:Basic
    
    
    43,776
    
    
    
    43,432Diluted
    
    
    43,776
    
    
    
    44,549
   2




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##### Table of Contents



KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 Three Months EndedJuly 31,2009
    
    
    2008(in thousands)Cash flows from operating activities:Net (loss) income
    
    $
    (14,273
    )
    
    $
    15,904Adjustments to reconcile net (loss) income to net cash used in operating activities:Depreciation and amortization
    
    
    2,829
    
    
    
    2,832Stock-based compensation expense
    
    
    4,496
    
    
    
    4,211Loss on disposition of property and equipment
    
    
    515
    
    
    
    21Provision for doubtful accounts
    
    
    656
    
    
    
    1,639(Gain) loss on cash surrender value of life insurance policies
    
    
    (3,379
    )
    
    
    202Gain on marketable securities classified as trading
    
    
    (4,100
    )
    
    
    Realized gain on available-for sale marketable securities
    
    
    
    
    
    
    (237
    )Deferred income taxes
    
    
    (3,040
    )
    
    
    4,374Change in other assets and liabilities:Deferred compensation
    
    
    13,850
    
    
    
    5,434Receivables
    
    
    (12,733
    )
    
    
    (19,848
    )Prepaid expenses
    
    
    (3,488
    )
    
    
    (2,556
    )Investment in unconsolidated subsidiaries
    
    
    (23
    )
    
    
    (1,316
    )Income taxes payable
    
    
    1,625
    
    
    
    (2,220
    )Accounts payable and accrued liabilities
    
    
    (48,243
    )
    
    
    (97,240
    )Other
    
    
    (1,066
    )
    
    
    (71
    )Net cash used in operating activities
    
    
    (66,374
    )
    
    
    (88,871
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (1,185
    )
    
    
    (2,895
    )Proceeds from (purchase of) marketable securities, net
    
    
    1,083
    
    
    
    (7,659
    )Cash paid for acquisitions, net of cash acquired
    
    
    (10,251
    )
    
    
    Premiums on life insurance policies
    
    
    (425
    )
    
    
    (425
    )Dividends received from unconsolidated subsidiaries
    
    
    157
    
    
    
    341Net cash used in investing activities
    
    
    (10,621
    )
    
    
    (10,638
    )Cash flows from financing activities:Payments on life insurance policy loans
    
    
    
    
    
    
    (367
    )Borrowings under life insurance policies
    
    
    3,098
    
    
    
    412Purchase of common stock
    
    
    (1,230
    )
    
    
    (2,136
    )Proceeds from issuance of common stock upon exercise of employee stock
options and in connection with an employee stock purchase plan
    
    
    3,619
    
    
    
    1,761Tax benefit from exercise of stock options
    
    
    (1,450
    )
    
    
    36Net cash provided by (used in) financing activities
    
    
    4,037
    
    
    
    (294
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    5,527
    
    
    
    456Net decrease in cash and cash equivalents
    
    
    (67,431
    )
    
    
    (99,347
    )Cash and cash equivalents at beginning of period
    
    
    255,000
    
    
    
    305,296Cash and cash equivalents at end of period
    
    $
    187,569
    
    
    $
    205,949
   3




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##### Table of Contents



KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2009
 1. Organization and Summary of Significant Accounting Policies
 Nature of Business
  Basis of Consolidation and Presentation
   Use of Estimates and Uncertainties
  Revenue Recognition
  Cash and Cash Equivalents
   4




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KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
July 31, 2009
 Marketable Securities
 Accounting for Certain Investments in Debt and Equity Securities
   Goodwill and Intangible Assets
  Goodwill and Other Intangible Assets
   5




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KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
July 31, 2009
 Stock-Based Compensation
 Share-Based Payments
 Restructuring Charges
 Accounting for Costs Associated with Exit or Disposal Activities
 Fair Value of Financial Instruments
 Fair Value Measurements
 
    
    Level 1: Observable inputs such as quoted prices (unadjusted) in active markets that
are accessible at the measurement date for identical, unrestricted assets or liabilities.
 
    
    Level 2: Inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly. These include quoted prices for similar assets or
liabilities in active markets and quoted prices for identical or similar assets or
liabilities in markets that are not active.
 
    
    Level 3: Unobservable inputs that reflect the reporting entitys own assumptions.
  Recently Adopted Accounting Standards
 Business Combinations
  6




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KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
July 31, 2009
 Noncontrolling Interests in Consolidated
Financial Statements  An Amendment of ARB No. 51
 Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly
 Interim Disclosures
about Fair Value of Financial Instruments
 Subsequent Events
 Recently Issued Accounting Standards
 , The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles a Replacement of FASB Statement No. 162
  7




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KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
July 31, 2009
 2. Basic and Diluted (Loss) Earnings Per Share
   Three Months EndedJuly 31,2009
    
    
    2008(in thousands, except per share data)Net (loss) earnings attributable to common stockholders:
    
    $
    (14,273
    )
    
    $
    15,904Weighted-average common shares outstanding:Basic weighted-average number of common shares outstanding
    
    
    43,776
    
    
    
    43,432Effect of dilutive securities:Warrants
    
    
    
    
    
    
    80Restricted stock
    
    
    
    
    
    
    278Stock options
    
    
    
    
    
    
    748ESPP
    
    
    
    
    
    
    11Diluted weighted-average number of common shares outstanding
    
    
    43,776
    
    
    
    44,549Net (loss) earnings per common share:Basic (loss) earnings per share
    
    $
    (0.33
    )
    
    $
    0.37Diluted (loss) earnings per share
    
    $
    (0.33
    )
    
    $
    0.36
 3. Comprehensive (Loss) Income
   Three Months EndedJuly 31,2009
    
    
    2008(in thousands)Net (loss) income
    
    $
    (14,273
    )
    
    $
    15,904Foreign currency translation adjustments
    
    
    12,284
    
    
    
    (1,385
    )Unrealized loss on marketable securities, net of taxes
    
    
    
    
    
    
    (1,430
    )Comprehensive (loss) income
    
    $
    (1,989
    )
    
    $
    13,089
  8




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KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
July 31, 2009
  July 31,
    
    
    April 30,2009
    
    
    2009(in thousands)Foreign currency translation adjustments
    
    $
    15,807
    
    
    $
    3,523SFAS 158 adjustments, net of taxes
    
    
    2,762
    
    
    
    2,762Accumulated other comprehensive income
    
    $
    18,569
    
    
    $
    6,285
 4. Employee Stock Plans
 Stock-Based Compensation
  Three Months EndedJuly 31,2009
    
    
    2008(in thousands)Stock options and SARs
    
    $
    236
    
    
    $
    288Restricted stock
    
    
    4,147
    
    
    
    3,790ESPP
    
    
    113
    
    
    
    133Total stock-based compensation expense, pre-tax
    
    
    4,496
    
    
    
    4,211Tax benefit from stock-based compensation expense
    
    
    (1,641
    )
    
    
    (1,537
    )Total stock-based compensation expense, net of tax
    
    $
    2,855
    
    
    $
    2,674
   Three Months EndedJuly 31,2009
    
    
    2008Expected volatility
    
    
    48.91
    %
    
    
    44.11
    %Risk-free interest rate
    
    
    2.53
    %
    
    
    3.27
    %Expected option life (in years)
    
    
    5.00
    
    
    
    4.25Expected dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
   9




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KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
July 31, 2009
 Stock Incentive Plans
  Stock Options and SARs
  Three Months Ended July 31, 2009Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    Price
    
    
    Life (In Years)
    
    
    Value(in thousands, except per share data)Outstanding, April 30, 2009
    
    
    3,113
    
    
    $
    14.83Granted
    
    
    552
    
    
    $
    10.38Exercised
    
    
    (291
    )
    
    $
    8.03Forfeited/expired
    
    
    (280
    )
    
    $
    17.04Outstanding, July 31, 2009
    
    
    3,094
    
    
    $
    14.48
    
    
    
    4.15
    
    
    $
    7,623Exercisable, July 31, 2009
    
    
    2,482
    
    
    $
    15.30
    
    
    
    3.61
    
    
    $
    5,622
   Three Months EndedJuly 31,2009
    
    
    2008(in thousands)Weighted-average fair value of stock options granted
    
    $
    4.66
    
    
    $
    6.75Total fair value of stock options and SARs vested
    
    $
    88
    
    
    $
    1,692Total intrinsic value of stock options exercised
    
    $
    718
    
    
    $
    99Total intrinsic value of SARs paid
    
    $
    
    
    
    $
    
 Restricted Stock
   10




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KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
July 31, 2009
  Three Months EndedJuly 31,Weighted-Average GrantDate FairShares
    
    
    Value(in thousands, except per share data)Non-vested, April 30, 2009
    
    
    2,387
    
    
    $
    15.50Granted
    
    
    898
    
    
    $
    9.81Vested
    
    
    (618
    )
    
    $
    20.59Forfeited/expired
    
    
    (17
    )
    
    $
    18.06Non-vested, July 31, 2009
    
    
    2,650
    
    
    $
    14.24
  Common Stock
  Employee Stock Purchase Plan
   11




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##### Table of Contents



KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
July 31, 2009
 5. Marketable Securities
  July 31, 2009Available-for-Trading
    
    
    Sale(1)
    
    
    Total(in thousands)Auction rate securities
    
    $
    11,007
    
    
    $
    
    
    
    $
    11,007Auction rate securities put option
    
    
    1,218
    
    
    
    
    
    
    
    1,218Equity securities (2)
    
    
    26,709
    
    
    
    
    
    
    
    26,709Fixed income mutual fund (2)
    
    
    15,201
    
    
    
    
    
    
    
    15,201Non-current money market (2)
    
    
    23,424
    
    
    
    
    
    
    
    23,424Time deposits
    
    
    
    
    
    
    724
    
    
    
    724Total
    
    
    77,559
    
    
    
    724
    
    
    
    78,283Less: current portion of marketable securities
    
    
    (3,701
    )
    
    
    (724
    )
    
    
    (4,425
    )Long-term marketable securities
    
    $
    73,858
    
    
    $
    
    
    
    $
    73,858
 
 (1)
    
    Due to the short maturities for these instruments fair value approximates amortized cost.(2)
    
    These investments are held in trust for settlement of the Companys obligations under certain
of its deferred compensation plans with $3.7 million classified as current assets.  April 30, 2009Available-for-Trading
    
    
    Sale(1)
    
    
    Total(in thousands)Auction rate securities
    
    $
    11,329
    
    
    $
    
    
    
    $
    11,329Auction rate securities put option
    
    
    1,096
    
    
    
    
    
    
    
    1,096Equity securities (2)
    
    
    23,816
    
    
    
    
    
    
    
    23,816Fixed income mutual fund (2)
    
    
    14,320
    
    
    
    
    
    
    
    14,320Non-current money market (2)
    
    
    22,692
    
    
    
    
    
    
    
    22,692Time deposits
    
    
    
    
    
    
    2,002
    
    
    
    2,002Total
    
    
    73,253
    
    
    
    2,002
    
    
    
    75,255Less: current portion of marketable securities
    
    
    (2,261
    )
    
    
    (2,002
    )
    
    
    (4,263
    )Long-term marketable securities
    
    $
    70,992
    
    
    $
    
    
    
    $
    70,992
 
 (1)
    
    Due to the short maturities for these instruments fair value approximates amortized cost.(2)
    
    These investments are held in trust for settlement of the Companys obligations under certain
of its deferred compensation plans with $2.3 million classified as current assets.    12




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KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
July 31, 2009
    July 31, 2009Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3(in thousands)Cash equivalents
    
    $
    115,090
    
    
    $
    115,090
    
    
    $
    
    
    
    $
    Auction rate securities
    
    
    11,007
    
    
    
    
    
    
    
    
    
    
    
    11,007Auction rate securities put option
    
    
    1,218
    
    
    
    
    
    
    
    
    
    
    
    1,218Equity securities
    
    
    26,709
    
    
    
    26,709
    
    
    
    
    
    
    
    Fixed income mutual fund
    
    
    15,201
    
    
    
    15,201
    
    
    
    
    
    
    
    Noncurrent money market mutual funds
    
    
    23,424
    
    
    
    23,424
    
    
    
    
    
    
    
    Time deposits
    
    
    724
    
    
    
    724
    
    
    
    
    
    
    
    Total
    
    $
    193,373
    
    
    $
    181,148
    
    
    $
    
    
    
    $
    12,225
  Auction Rate
Securities(in thousands)Balance, April 30, 2009
    
    $
    12,425Auction rate securities put option
    
    
    122Unrealized loss included in income
    
    
    (122
    )Sale of securities
    
    
    (200
    )Balance, July 31, 2009
    
    $
    12,225
  13




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KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
July 31, 2009
 6. Restructuring Charges
   Severance
    
    
    Facilities
    
    
    Total(in thousands)Liability as of April 30, 2009
    
    $
    10,554
    
    
    $
    12,807
    
    
    $
    23,361Additions charged to expense
    
    
    8,348
    
    
    
    9,835
    
    
    
    18,183Non-cash items
    
    
    (370
    )
    
    
    (69
    )
    
    
    (439
    )Reductions for cash payments
    
    
    (7,413
    )
    
    
    (2,034
    )
    
    
    (9,447
    )Exchange rate fluctuations
    
    
    411
    
    
    
    606
    
    
    
    1,017Liability as of July 31, 2009
    
    $
    11,530
    
    
    $
    21,145
    
    
    $
    32,675
   July 31, 2009Severance
    
    
    Facilities
    
    
    Total(in thousands)Executive RecruitmentNorth America
    
    $
    2,017
    
    
    $
    2,641
    
    
    $
    4,658Europe, Middle East and Africa (EMEA)
    
    
    7,671
    
    
    
    12,242
    
    
    
    19,913Asia Pacific
    
    
    38
    
    
    
    1,049
    
    
    
    1,087South America
    
    
    787
    
    
    
    310
    
    
    
    1,097Total Executive Recruitment
    
    
    10,513
    
    
    
    16,242
    
    
    
    26,755Futurestep
    
    
    1,017
    
    
    
    4,903
    
    
    
    5,920Liability as of July 31, 2009
    
    $
    11,530
    
    
    $
    21,145
    
    
    $
    32,675
 April 30, 2009Severance
    
    
    Facilities
    
    
    Total(in thousands)Executive RecruitmentNorth America
    
    $
    3,052
    
    
    $
    3,187
    
    
    $
    6,239EMEA
    
    
    4,714
    
    
    
    2,514
    
    
    
    7,228Asia Pacific
    
    
    48
    
    
    
    1,243
    
    
    
    1,291South America
    
    
    787
    
    
    
    334
    
    
    
    1,121Total Executive Recruitment
    
    
    8,601
    
    
    
    7,278
    
    
    
    15,879Futurestep
    
    
    1,953
    
    
    
    5,529
    
    
    
    7,482Liability as of April 30, 2009
    
    $
    10,554
    
    
    $
    12,807
    
    
    $
    23,361
  14




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##### Table of Contents



KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
July 31, 2009
 7. Deferred Compensation and Retirement Plans
   Three Months EndedJuly 31,2009
    
    
    2008(in thousands)Service cost
    
    $
    85
    
    
    $
    174Interest cost
    
    
    945
    
    
    
    910Amortization of actuarial gain
    
    
    (20
    )
    
    
    (21
    )Amortization of net transition obligation
    
    
    
    
    
    
    53Net periodic benefit costs
    
    $
    1,010
    
    
    $
    1,116
 Accounting for Deferred Compensation Arrangements Where Amounts Earned
Are Held in a Rabbi Trust and Invested
  15




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##### Table of Contents



KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
July 31, 2009
 8. Business Segments
   Three Months Ended July 31, 2009Executive RecruitmentNorth
    
    
    
    
    
    
    
    
    
    
    SouthAmerica
    
    
    EMEA
    
    
    Asia Pacific
    
    
    America
    
    
    Subtotal
    
    
    Futurestep
    
    
    Corporate(1)
    
    
    Consolidated(in thousands)Fee revenue
    
    $
    55,292
    
    
    $
    29,221
    
    
    $
    12,371
    
    
    $
    4,445
    
    
    $
    101,329
    
    
    $
    15,474
    
    
    $
    
    
    
    $
    116,803Total revenue
    
    $
    59,053
    
    
    $
    30,407
    
    
    $
    12,633
    
    
    $
    4,541
    
    
    $
    106,634
    
    
    $
    16,654
    
    
    $
    
    
    
    $
    123,288Operating (loss) income
    
    $
    4,207
    
    
    $
    (17,620
    )
    
    $
    975
    
    
    $
    (686
    )
    
    $
    (13,124
    )
    
    $
    (815
    )
    
    $
    (11,013
    )
    
    $
    (24,952
    )
 Three Months Ended July 31, 2008Executive RecruitmentNorth
    
    
    
    
    
    
    
    
    
    
    SouthAmerica
    
    
    EMEA
    
    
    Asia Pacific
    
    
    America
    
    
    Subtotal
    
    
    Futurestep
    
    
    Corporate(1)
    
    
    Consolidated(in thousands)Fee revenue
    
    $
    93,974
    
    
    $
    51,590
    
    
    $
    21,403
    
    
    $
    7,585
    
    
    $
    174,552
    
    
    $
    31,181
    
    
    $
    
    
    
    $
    205,733Total revenue
    
    $
    99,844
    
    
    $
    53,480
    
    
    $
    21,855
    
    
    $
    7,693
    
    
    $
    182,872
    
    
    $
    34,600
    
    
    $
    
    
    
    $
    217,472Operating income (loss)
    
    $
    18,637
    
    
    $
    8,486
    
    
    $
    3,476
    
    
    $
    1,080
    
    
    $
    31,679
    
    
    $
    2,855
    
    
    $
    (10,780
    )
    
    $
    23,754
 
 (1)
    
    Increase in operating loss primarily due to $3.3 million in expenses related to a change in
amounts due under a benefit plan with obligations determined by an increase (or decrease) in
market values. 9. Acquisition
   16




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Forward-looking Statements
 This Quarterly Report on Form 10-Q may contain certain statements that we believe are, or may
be considered to be, forward-looking statements, within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements generally can be identified by use of statements that include phrases
such as believe, expect, anticipate, intend, plan, foresee, may, will, estimates,
potential, continue or other similar words or phrases. Similarly, statements that describe our
objectives, plans or goals also are forward-looking statements. All of these forward-looking
statements are subject to risks and uncertainties that could cause our actual results to differ
materially from those contemplated by the relevant forward-looking statement. The principal risk
factors that could cause actual performance and future actions to differ materially from the
forward-looking statements include, but are not limited to, dependence on attracting and retaining
qualified and experienced consultants, portability of client relationships, global, local political
or economic developments in or affecting countries where we have operations, currency fluctuations
in our international operations, ability to manage growth, competition, reliance on information
processing systems, risks related to the growth and results of Futurestep, restrictions imposed by
off-limits agreements, employment liability risk, an impairment in the carrying value of goodwill
and other intangible assets, deferred tax assets that we may not be able to use and alignment of
our cost structure to our revenue level, and also includes risks related to the successful
integration of recently acquired businesses as well as the matters disclosed under the heading
Risk Factors in Item 1A of the Companys Annual Report of Form 10-K for the fiscal year ended
April 30, 2009 ( Form 10-K ). Readers are urged to consider these factors carefully in evaluating
the forward-looking statements. The forward-looking statements included in this Quarterly Report on
Form 10-Q are made only as of the date of this Quarterly Report on Form 10-Q and we undertake no
obligation to publicly update these forward-looking statements to reflect subsequent events or
circumstances.
 The following presentation of managements discussion and analysis of our financial condition
and results of operations should be read together with our consolidated financial statements and
related notes included in this Quarterly Report on Form 10-Q.
 Executive Summary
     17




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Critical Accounting Policies
  Results of Operations
  Three Months EndedJuly 31,2009
    
    
    2008Fee revenue
    
    
    100.0
    %
    
    
    100.0
    %Reimbursed out-of-pocket engagement expenses
    
    
    5.6
    
    
    
    5.7Total revenue
    
    
    105.6
    
    
    
    105.7Compensation and benefits
    
    
    77.4
    
    
    
    69.1General and administrative expenses
    
    
    24.0
    
    
    
    16.5Out-of-pocket engagement expenses
    
    
    7.5
    
    
    
    7.2Depreciation and amortization
    
    
    2.5
    
    
    
    1.4Restructuring charges
    
    
    15.6
    
    
    
    Operating (loss) income
    
    
    (21.4
    )
    
    
    11.5Net (loss) income
    
    
    (12.2
    )%
    
    
    7.7
    %
  18




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Three Months Ended July 31,2009
    
    
    2008Dollars
    
    
    %
    
    
    Dollars
    
    
    %(dollars in thousands)Fee revenueExecutive recruitment:North America
    
    $
    55,292
    
    
    
    47.4
    %
    
    $
    93,974
    
    
    
    45.7
    %EMEA
    
    
    29,221
    
    
    
    25.0
    
    
    
    51,590
    
    
    
    25.1Asia Pacific
    
    
    12,371
    
    
    
    10.6
    
    
    
    21,403
    
    
    
    10.4South America
    
    
    4,445
    
    
    
    3.8
    
    
    
    7,585
    
    
    
    3.7Total executive recruitment
    
    
    101,329
    
    
    
    86.8
    
    
    
    174,552
    
    
    
    84.9Futurestep
    
    
    15,474
    
    
    
    13.2
    
    
    
    31,181
    
    
    
    15.1Total fee revenue
    
    
    116,803
    
    
    
    100.0
    %
    
    
    205,733
    
    
    
    100.0
    %Reimbursed out-of-pocket engagement expense
    
    
    6,485
    
    
    
    
    
    
    
    11,739Total revenue
    
    $
    123,288
    
    
    
    
    
    
    $
    217,472
 Three Months Ended July 31,2009
    
    
    2008Dollars
    
    
    Margin(1)
    
    
    Dollars
    
    
    Margin(1)(dollars in thousands)Operating (loss) incomeExecutive recruitment:North America
    
    $
    4,207
    
    
    
    7.6
    %
    
    $
    18,637
    
    
    
    19.8
    %EMEA
    
    
    (17,620
    )
    
    
    (60.3
    )
    
    
    8,486
    
    
    
    16.4Asia Pacific
    
    
    975
    
    
    
    7.9
    
    
    
    3,476
    
    
    
    16.2South America
    
    
    (686
    )
    
    
    (15.4
    )
    
    
    1,080
    
    
    
    14.2Total executive recruitment
    
    
    (13,124
    )
    
    
    (13.0
    )
    
    
    31,679
    
    
    
    18.1Futurestep
    
    
    (815
    )
    
    
    (5.3
    )
    
    
    2,855
    
    
    
    9.2Corporate(2)
    
    
    (11,013
    )
    
    
    
    
    
    
    (10,780
    )Total operating (loss) income
    
    $
    (24,952
    )
    
    
    (21.4
    )%
    
    $
    23,754
    
    
    
    11.5
    %
 
 (1)
    
    Margin calculated as a percentage of fee revenue by business segment.(2)
    
    Increase in operating loss primarily due to $3.3 million in expenses related to a change in
amounts due under a benefit plan with obligations determined by an increase (or decrease) in
market values. Three Months Ended July 31, 2009 Compared to Three Months Ended July 31, 2008
 Fee Revenue
 Fee Revenue.
 Executive Recruitment.
  19




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Futurestep.
 Compensation and Benefits
 Restructuring Charges
  20




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Marketable Securities
 General and Administrative Expenses
      21




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Out-of-Pocket Engagement Expenses
  Depreciation and Amortization Expenses
  Restructuring Charges
  Operating (Loss) Income
    Interest Income and Other Income, Net
   22




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Interest Expense
  (Benefit) Provision for Income Taxes
  Equity in Earnings of Unconsolidated Subsidiary
  Liquidity and Capital Resources
      23




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Long-Term Debt
   24




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Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Foreign Currency Risk
    Interest Rate Risk
    25




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Item 4. Controls and Procedures
      26




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PART II.
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 Form 10-K.
 Global economic developments and the conditions in the geographic regions and the industries from
which we derive a significant portion of our fee revenue could negatively affect our business,
financial condition and results of operations.
  
 Item 2. Unregistered Sale of Equity Securities, Use of Proceeds and Issuers Purchases of Equity
Securities
 Issuer Purchases of Equity Securities
  Approximate DollarShares Purchased
    
    
    Value of SharesAverage
    
    
    as Part of Publicly-
    
    
    That May Yet beShares
    
    
    Price Paid
    
    
    Announced
    
    
    Purchased under thePurchased (1)
    
    
    Per Share
    
    
    Programs (2)
    
    
    Programs (2)May 1, 2009  May 31, 2009
    
    
    334
    
    
    $
    10.28
    
    
    
    
    
    
    $36.4 millionJune 1,
2009   June 30, 2009
    
    
    50,139
    
    
    $
    10.86
    
    
    
    
    
    
    $36.4 millionJuly 1,
2009  July 31, 2009
    
    
    69,444
    
    
    $
    9.81
    
    
    
    
    
    
    $36.4 millionTotal
    
    
    119,917
 
 (1)
    
    Represents withholding of a portion of restricted shares to cover taxes on vested restricted
shares.(2)
    
    On November 2, 2007, the Board of Directors approved the repurchase of $50 million of our
common stock in a common stock repurchase program. The shares can be repurchased in open
market transactions or privately negotiated transactions at our discretion. 
 Item 5. Other Information
 Restructuring Charges
   27




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Item 6. Exhibits
 ExhibitNumber
    
    Description10.1
    *+
    
    Form of Restricted Stock Award Agreement to Employees and Non-Employee Directors Under the
Korn/Ferry International 2008 Stock Incentive Plan, filed as Exhibit 10.2 to the Companys Current
Report on Form 8-K, filed June 12, 2009.10.2
    *+
    
    Form of Stock Option Agreement to Employees and Non-Employee Directors Under the Korn/Ferry
International 2008 Stock Incentive Plan, filed as Exhibit 10.3 to the Companys Current Report on
Form 8-K, filed June 12, 2009.31.1
    
    
    Chief Executive Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act.31.2
    
    
    Chief Financial Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act.32.1
    
    
    Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350.
 
 *
    
    Management contract, compensatory plan or arrangement.+
    
    Incorporated herein by reference.  28




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SIGNATURES
 Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
 Korn/Ferry InternationalBy:
    /s/ Michael A. DiGregorioMichael A. DiGregorioExecutive Vice President and Chief Financial Officer   29




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EXHIBIT INDEX
 ExhibitNumber
    
    
    Description10.1
    *+
    
    
    Form of Restricted Stock Award Agreement to Employees and Non-Employee Directors Under the
Korn/Ferry International 2008 Stock Incentive Plan, filed as Exhibit 10.2 to the Companys Current
Report on Form 8-K, filed June 12, 2009.10.2
    *+
    
    
    Form of Stock Option Agreement to Employees and Non-Employee Directors Under the Korn/Ferry
International 2008 Stock Incentive Plan, filed as Exhibit 10.3 to the Companys Current Report on
Form 8-K, filed June 12, 2009.31.1
    
    
    
    Chief Executive Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act.31.2
    
    
    
    Chief Financial Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act.32.1
    
    
    
    Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350.
 
 *
    
    Management contract, compensatory plan or arrangement.+
    
    Incorporated herein by reference.