##### 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 October 31, 2008
 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
    
    (I.R.S. Employerof incorporation or organization)
    
    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)
 
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company
o
 Yes o No þ




---



##### 



KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
Table of Contents
 PagePART I. FINANCIAL INFORMATIONItem 1. Condensed Financial StatementsConsolidated Balance Sheets as of October 31, 2008 (unaudited) and April 30, 2008
    
    
    3Unaudited Consolidated Statements of Income for the three months ended October 31, 2008 and 2007
    
    
    4Unaudited Consolidated Statements of Cash Flows for the three months ended October 31, 2008 and 2007
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    24PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    24Item 1A. Risk Factors
    
    
    24Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
    
    
    24Item 3. Defaults Upon Senior Securities
    
    
    24Item 4. Submission of Matters to a Vote of Security Holders
    
    
    25Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    25SIGNATURES
    
    
    26Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Condensed Financial Statements
 KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except per share amounts)
 As of
    
    
    As ofOctober 31,
    
    
    April 30,2008
    
    
    2008(unaudited)ASSETSCash and cash equivalents
    
    $
    199,228
    
    
    $
    305,296Marketable securities
    
    
    2,377
    
    
    
    5,940Receivables due from clients, net of allowance for doubtful accounts of
$11,937 and $11,504, respectively
    
    
    125,453
    
    
    
    119,952Income tax and other receivables
    
    
    5,753
    
    
    
    7,071Deferred income taxes
    
    
    9,714
    
    
    
    10,401Prepaid expenses
    
    
    24,316
    
    
    
    20,057Total current assets
    
    
    366,841
    
    
    
    468,717Marketable securities, noncurrent
    
    
    78,237
    
    
    
    78,026Property and equipment, net
    
    
    31,504
    
    
    
    32,462Cash surrender value of company owned life insurance policies, net of loans
    
    
    77,753
    
    
    
    81,377Deferred income taxes
    
    
    42,258
    
    
    
    47,128Goodwill
    
    
    124,228
    
    
    
    142,699Intangible assets, net
    
    
    15,243
    
    
    
    15,519Investments and other
    
    
    15,643
    
    
    
    14,286Total assets
    
    $
    751,707
    
    
    $
    880,214LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable
    
    $
    10,550
    
    
    $
    15,309Income taxes payable
    
    
    9,270
    
    
    
    20,948Compensation and benefits payable
    
    
    112,872
    
    
    
    199,081Other accrued liabilities
    
    
    32,565
    
    
    
    37,120Total current liabilities
    
    
    165,257
    
    
    
    272,458Deferred compensation and other retirement plans
    
    
    101,490
    
    
    
    105,719Other liabilities
    
    
    4,963
    
    
    
    5,903Total liabilities
    
    
    271,710
    
    
    
    384,080Stockholders equity:Common stock: $0.01 par value, 150,000 shares authorized, 56,077 and
54,786 shares issued and 44,734 and 44,593 shares outstanding,
respectively
    
    
    361,938
    
    
    
    358,568Retained earnings
    
    
    124,478
    
    
    
    95,014Accumulated other comprehensive (loss) income
    
    
    (5,877
    )
    
    
    43,097Stockholders equity
    
    
    480,539
    
    
    
    496,679Less: Notes receivable from stockholders
    
    
    (542
    )
    
    
    (545
    )Total stockholders equity
    
    
    479,997
    
    
    
    496,134Total liabilities and stockholders equity
    
    $
    751,707
    
    
    $
    880,214
   3




---



##### Table of Contents



KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 (in thousands, except per share amounts)
 (unaudited)
 Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Fee revenue
    
    $
    189,300
    
    
    $
    195,857
    
    
    $
    395,033
    
    
    $
    381,210Reimbursed out-of-pocket engagement expenses
    
    
    10,437
    
    
    
    10,967
    
    
    
    22,176
    
    
    
    21,891Total revenue
    
    
    199,737
    
    
    
    206,824
    
    
    
    417,209
    
    
    
    403,101Compensation and benefits
    
    
    129,748
    
    
    
    130,404
    
    
    
    271,871
    
    
    
    253,390General and administrative expenses
    
    
    32,323
    
    
    
    34,212
    
    
    
    66,353
    
    
    
    65,913Out-of-pocket engagement expenses
    
    
    13,297
    
    
    
    14,287
    
    
    
    28,030
    
    
    
    28,414Depreciation and amortization
    
    
    2,881
    
    
    
    2,539
    
    
    
    5,713
    
    
    
    4,889Total operating expenses
    
    
    178,249
    
    
    
    181,442
    
    
    
    371,967
    
    
    
    352,606Operating income
    
    
    21,488
    
    
    
    25,382
    
    
    
    45,242
    
    
    
    50,495Interest and other (loss) income, net
    
    
    (104
    )
    
    
    2,014
    
    
    
    1,500
    
    
    
    4,744Interest expense
    
    
    1,080
    
    
    
    1,215
    
    
    
    2,304
    
    
    
    2,447Income before provision for income taxes and
equity in earnings of unconsolidated subsidiaries
    
    
    20,304
    
    
    
    26,181
    
    
    
    44,438
    
    
    
    52,792Provision for income taxes
    
    
    7,583
    
    
    
    9,966
    
    
    
    16,876
    
    
    
    20,400Equity in earnings of unconsolidated subsidiaries, net
    
    
    839
    
    
    
    894
    
    
    
    1,902
    
    
    
    1,817Net income
    
    $
    13,560
    
    
    $
    17,109
    
    
    $
    29,464
    
    
    $
    34,209Basic earnings per common share
    
    $
    0.31
    
    
    $
    0.38
    
    
    $
    0.68
    
    
    $
    0.76Basic weighted average common shares outstanding
    
    
    43,776
    
    
    
    44,529
    
    
    
    43,604
    
    
    
    44,785Diluted earnings per common share
    
    $
    0.30
    
    
    $
    0.37
    
    
    $
    0.66
    
    
    $
    0.74Diluted weighted average common shares outstanding
    
    
    44,676
    
    
    
    45,841
    
    
    
    44,590
    
    
    
    46,573
   4




---



##### Table of Contents



KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 (unaudited)
 Six Months EndedOctober 31,2008
    
    
    2007Cash from operating activities:Net income
    
    $
    29,464
    
    
    $
    34,209Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    5,712
    
    
    
    4,889Stock-based compensation expense
    
    
    8,528
    
    
    
    8,094Loss on disposition of property and equipment
    
    
    85
    
    
    
    125Provision for doubtful accounts
    
    
    4,871
    
    
    
    6,520Loss (gain) on cash surrender value of life insurance policies
    
    
    4,005
    
    
    
    (3,945
    )Realized loss (gain) on marketable securities
    
    
    1,242
    
    
    
    (827
    )Deferred income taxes
    
    
    5,557
    
    
    
    (6,610
    )Change in other assets and liabilities, net of effect of acquisitions:Deferred compensation
    
    
    (4,229
    )
    
    
    12,785Receivables
    
    
    (9,054
    )
    
    
    (44,608
    )Prepaid expenses
    
    
    (4,259
    )
    
    
    (1.357
    )Investment in unconsolidated subsidiaries
    
    
    (3,724
    )
    
    
    (2.256
    )Income taxes payable
    
    
    (6,401
    )
    
    
    9,019Accounts payable and accrued liabilities
    
    
    (95,317
    )
    
    
    (56,815
    )Other
    
    
    (551
    )
    
    
    (2,593
    )Net cash used in operating activities
    
    
    (64,071
    )
    
    
    (43,370
    )Cash from investing activities:Purchase of property and equipment
    
    
    (6,414
    )
    
    
    (8,050
    )(Purchase of) proceeds from marketable securities, net
    
    
    (9,637
    )
    
    
    19,674Cash paid for acquisitions, net of cash acquired
    
    
    
    
    
    
    (3,755
    )Premiums on life insurance policies
    
    
    (439
    )
    
    
    (484
    )Dividends received from unconsolidated subsidiaries
    
    
    1,799
    
    
    
    1,027Net cash (used in) provided by investing activities
    
    
    (14,691
    )
    
    
    8,412Cash from financing activities:Payments on life insurance policy loans
    
    
    (367
    )
    
    
    Borrowings under life insurance policies
    
    
    426
    
    
    
    427Purchase of common stock
    
    
    (7,582
    )
    
    
    (54,532
    )Proceeds from issuance of common stock upon exercise of employee stock
options and in connection with an employee stock purchase plan
    
    
    2,484
    
    
    
    14,928Tax benefit from exercise of stock options
    
    
    162
    
    
    
    3,276Receipts on stockholders notes
    
    
    3
    
    
    
    4Net cash used in financing activities
    
    
    (4,874
    )
    
    
    (35,897
    )Effect of exchange rates on cash and cash equivalents
    
    
    (22,432
    )
    
    
    5,232Net decrease in cash and cash equivalents during the period
    
    
    (106,068
    )
    
    
    (65,623
    )Cash and cash equivalents at beginning of the period
    
    
    305,296
    
    
    
    232,531Cash and cash equivalents at end of the period
    
    $
    199,228
    
    
    $
    166,908
   5




---



##### Table of Contents



KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except per share amounts)
 1. Summary of Significant Accounting Policies
 Basis of Presentation
  Critical Accounting Policies and Use of Estimates
  Cash and Cash Equivalents
  Marketable Securities
  Stock-Based Compensation
   Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Stock options and SARs
    
    $
    (64
    )
    
    $
    308
    
    
    $
    224
    
    
    $
    1,027Restricted stock
    
    
    4,268
    
    
    
    3,814
    
    
    
    8,058
    
    
    
    6,839ESPP
    
    
    113
    
    
    
    133
    
    
    
    246
    
    
    
    274Total stock-based compensation expense, pre-tax
    
    
    4,317
    
    
    
    4,255
    
    
    
    8,528
    
    
    
    8,140Tax benefit from stock-based compensation expense
    
    
    (1,576
    )
    
    
    (1,553
    )
    
    
    (3,113
    )
    
    
    (2,971
    )Total stock-based compensation expense, net of tax
    
    $
    2,741
    
    
    $
    2,702
    
    
    $
    5,415
    
    
    $
    5,169
  6




---



##### Table of Contents



Six Months EndedOctober 31,2008
    
    
    2007Expected volatility
    
    
    44.11
    %
    
    
    44.42
    %Risk-free interest rate
    
    
    3.27
    %
    
    
    4.60
    %Expected option life (in years)
    
    
    4.25
    
    
    
    4.00Expected dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
  Common Stock
  Reclassifications
  New Accounting Standards
     7




---



##### Table of Contents



2. Basic and Diluted Earnings Per Share
  Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (Numerator):Net income for basic EPS
    
    $
    13,560
    
    
    $
    17,109
    
    
    $
    29,464
    
    
    $
    34,209Interest expense on convertible securities, net of related tax effects
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    73Net income for diluted EPS
    
    $
    13,560
    
    
    $
    17,145
    
    
    $
    29,464
    
    
    $
    34,282Shares (Denominator):Weighted average shares for basic EPS
    
    
    43,776
    
    
    
    44,529
    
    
    
    43,604
    
    
    
    44,785Effect of:Warrants
    
    
    72
    
    
    
    109
    
    
    
    76
    
    
    
    129Restricted stock
    
    
    98
    
    
    
    158
    
    
    
    160
    
    
    
    298Stock options
    
    
    717
    
    
    
    1,038
    
    
    
    732
    
    
    
    1,347ESPP
    
    
    13
    
    
    
    7
    
    
    
    18
    
    
    
    14Adjusted weighted average shares for diluted EPS
    
    
    44,676
    
    
    
    45,841
    
    
    
    44,590
    
    
    
    46,573Basic EPS
    
    $
    0.31
    
    
    $
    0.38
    
    
    $
    0.68
    
    
    $
    0.76Diluted EPS
    
    $
    0.30
    
    
    $
    0.37
    
    
    $
    0.66
    
    
    $
    0.74
   8




---



##### Table of Contents



3 . Comprehensive (Loss) Income
   Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    13,560
    
    
    $
    17,109
    
    
    $
    29,464
    
    
    $
    34,209Foreign currency translation adjustment
    
    
    (41,330
    )
    
    
    12,478
    
    
    
    (42,715
    )
    
    
    15,563Unrealized (losses) gains on marketable securities, net of taxes
    
    
    (4,829
    )
    
    
    1,636
    
    
    
    (6,259
    )
    
    
    1,359Comprehensive (loss) income
    
    $
    (32,599
    )
    
    $
    31,223
    
    
    $
    (19,510
    )
    
    $
    51,131
  As ofOctober 31,2008
    
    
    2007Foreign currency translation adjustments
    
    $
    1,493
    
    
    $
    34,877Unrealized (losses) gains on marketable securities, net of taxes
    
    
    (8,149
    )
    
    
    2,985SFAS No. 158 adjustments, net of taxes
    
    
    779
    
    
    
    (335
    )Accumulated other comprehensive (loss) income
    
    $
    (5,877
    )
    
    $
    37,527
 4. Employee Stock Plans
 Stock Option Plans
   Weighted-averageWeighted-
    
    
    remaining
    
    
    AggregateOptions
    
    
    average
    
    
    contractual
    
    
    intrinsic(in thousands)
    
    
    exercise price
    
    
    life (Yrs)
    
    
    valueOutstanding at April 30, 2008
    
    
    3,564
    
    
    $
    14.79Granted
    
    
    3
    
    
    
    16.81Exercised
    
    
    (107
    )
    
    
    9.12Forfeited/expired
    
    
    (80
    )
    
    
    20.98Outstanding at October 31, 2008
    
    
    3,380
    
    
    $
    14.82
    
    
    
    4.3
    
    
    $
    7,612Exercisable at October 31, 2008
    
    
    3,295
    
    
    $
    14.70
    
    
    
    4.2
    
    
    $
    7,612
   9




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Weighted average fair value of stock options granted
    
    $
    6.67
    
    
    $
    
    
    
    $
    6.69
    
    
    $
    10.30Total fair value of stock options and SARs vested
    
    
    216
    
    
    
    329
    
    
    
    1,908
    
    
    
    3,934Total intrinsic value of stock options exercised
    
    
    511
    
    
    
    1,083
    
    
    
    610
    
    
    
    11,776Total intrinsic value of SARs paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Restricted Stock
   Weighted-averageShares
    
    
    grant dateNonvested shares
    
    (in thousands)
    
    
    fair valueNonvested at April 30, 2008
    
    
    1,952
    
    
    $
    22.01Granted
    
    
    1,269
    
    
    
    17.64Vested
    
    
    (563
    )
    
    
    21.35Forfeited
    
    
    (66
    )
    
    
    19.06Nonvested at October 31, 2008
    
    
    2,592
    
    
    $
    17.13
  Employee Stock Purchase Plan
   10




---



##### Table of Contents



5. Marketable Securities
  
    
    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.
        11




---



##### Table of Contents



Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Cash equivalents
    
    $
    76,438
    
    
    $
    76,438
    
    
    $
    
    
    
    $
    Auction rate securities (1)
    
    
    15,939
    
    
    
    
    
    
    
    
    
    
    
    15,939Auction rate securities put option
    
    
    1,638
    
    
    
    
    
    
    
    
    
    
    
    1,638Equity securities (2)
    
    
    28,004
    
    
    
    28,004
    
    
    
    
    
    
    
    Fixed income mutual fund (2)
    
    
    9,082
    
    
    
    9,082
    
    
    
    
    
    
    
    Noncurrent money market mutual funds (2)
    
    
    25,951
    
    
    
    25,951
    
    
    
    
    
    
    
    Total
    
    $
    157,052
    
    
    $
    139,475
    
    
    $
    
    
    
    $
    17,577
 
 (1)
    
    $11,562 classified as trading securities.(2)
    
    These investments are held in trust for settlement of the Companys obligations under certain
of its deferred compensation plans with $2,377 classified as current assets.  Auction Rate SecuritiesThree Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2008Balance at beginning of period
    
    $
    17,783
    
    
    $
    20,475Auction rate securities put option
    
    
    1,638
    
    
    
    1,638Reversal of unrealized loss associated with transfer of securities to trading
    
    
    780
    
    
    
    780Unrealized loss included in income
    
    
    (1,638
    )
    
    
    (1,638
    )Unrealized loss included in accumulated other comprehensive income
    
    
    (327
    )
    
    
    (586
    )Sales of securities
    
    
    (700
    )
    
    
    (3,250
    )Reversal of unrealized loss associated with sales of securities at par
    
    
    41
    
    
    
    158Ending balance at October 31, 2008
    
    $
    17,577
    
    
    $
    17,577
  12




---



##### Table of Contents



6. Deferred Compensation and Retirement Plans
  Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,Components of net periodic benefit costs:
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Service cost
    
    $
    174
    
    
    $
    267
    
    
    $
    348
    
    
    $
    534Interest cost
    
    
    910
    
    
    
    835
    
    
    
    1,820
    
    
    
    1,670Amortization of actuarial gain
    
    
    (21
    )
    
    
    (18
    )
    
    
    (42
    )
    
    
    (36
    )Amortization of net transition obligation
    
    
    53
    
    
    
    53
    
    
    
    106
    
    
    
    106Net periodic benefit cost
    
    $
    1,116
    
    
    $
    1,137
    
    
    $
    2,232
    
    
    $
    2,274
   13




---



##### Table of Contents



7. Business Segments
   Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Fee revenue:Executive recruitment:North America
    
    $
    91,697
    
    
    $
    94,862
    
    
    $
    185,671
    
    
    $
    182,176EMEA
    
    
    40,486
    
    
    
    42,058
    
    
    
    92,076
    
    
    
    86,780Asia Pacific
    
    
    21,187
    
    
    
    24,656
    
    
    
    42,590
    
    
    
    47,317South America
    
    
    6,828
    
    
    
    7,497
    
    
    
    14,413
    
    
    
    12,567Total executive recruitment
    
    
    160,198
    
    
    
    169,073
    
    
    
    334,750
    
    
    
    328,840Futurestep
    
    
    29,102
    
    
    
    26,784
    
    
    
    60,283
    
    
    
    52,370Total fee revenue
    
    $
    189,300
    
    
    $
    195,857
    
    
    $
    395,033
    
    
    $
    381,210
 Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Total revenue:Executive Recruitment:North America
    
    $
    97,224
    
    
    $
    100,163
    
    
    $
    197,068
    
    
    $
    192,393EMEA
    
    
    42,010
    
    
    
    43,439
    
    
    
    95,490
    
    
    
    89,472Asia Pacific
    
    
    21,603
    
    
    
    25,248
    
    
    
    43,458
    
    
    
    48,490South America
    
    
    6,954
    
    
    
    7,606
    
    
    
    14,647
    
    
    
    12,792Total executive recruitment
    
    
    167,791
    
    
    
    176,456
    
    
    
    350,663
    
    
    
    343,147Futurestep
    
    
    31,946
    
    
    
    30,368
    
    
    
    66,546
    
    
    
    59,954Total revenue
    
    $
    199,737
    
    
    $
    206,824
    
    
    $
    417,209
    
    
    $
    403,101
 Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Operating income (loss):Executive recruitment:North America
    
    $
    16,197
    
    
    $
    21,388
    
    
    $
    34,834
    
    
    $
    41,179EMEA
    
    
    5,910
    
    
    
    6,064
    
    
    
    14,396
    
    
    
    13,755Asia Pacific
    
    
    3,267
    
    
    
    4,614
    
    
    
    6,743
    
    
    
    9,151South America
    
    
    1,214
    
    
    
    884
    
    
    
    2,294
    
    
    
    1,545Total executive recruitment
    
    
    26,588
    
    
    
    32,950
    
    
    
    58,267
    
    
    
    65,630Futurestep
    
    
    1,221
    
    
    
    1,532
    
    
    
    4,076
    
    
    
    3,616Corporate
    
    
    (6,321
    )
    
    
    (9,100
    )
    
    
    (17,101
    )
    
    
    (18,751
    )Total operating income
    
    $
    21,488
    
    
    $
    25,382
    
    
    $
    45,242
    
    
    $
    50,495
  14




---



##### 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 are also 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, local political or
economic developments in or affecting countries where we have operations, currency fluctuations in
our international operations, ability to manage growth, restrictions imposed by off-limits
agreements, competition, risks related to the growth and results of
Futurestep, global economic developments, reliance on
information processing systems, and employment liability risk as well as the matters disclosed
under the heading Risk Factors in Item 1A of the
Companys Annual Report on Form 10-K for the fiscal year ended
April 30, 2008 (Form 10-K). Readers are urged to consider these factors carefully in evaluating the
forward-looking statements included in this Form 10-Q. The forward-looking statements included in this Form 10-Q are made only
as of the date of this report 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 condensed consolidated financial
statements included in this Form 10-Q .
 Executive Summary
      15




---



##### Table of Contents



Critical Accounting Policies
  Results of Operations
  Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Fee revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Reimbursed out-of-pocket engagement expenses
    
    
    5.5
    
    
    
    5.6
    
    
    
    5.6
    
    
    
    5.7Total revenue
    
    
    105.5
    
    
    
    105.6
    
    
    
    105.6
    
    
    
    105.7Compensation and benefits
    
    
    68.5
    
    
    
    66.6
    
    
    
    68.8
    
    
    
    66.5General and administrative expenses
    
    
    17.1
    
    
    
    17.5
    
    
    
    16.8
    
    
    
    17.3Out-of-pocket engagement expenses
    
    
    7.0
    
    
    
    7.3
    
    
    
    7.1
    
    
    
    7.5Depreciation and amortization
    
    
    1.5
    
    
    
    1.2
    
    
    
    1.4
    
    
    
    1.2Operating income
    
    
    11.4
    
    
    
    13.0
    
    
    
    11.5
    
    
    
    13.2Net income
    
    
    7.2
    %
    
    
    8.7
    %
    
    
    7.5
    %
    
    
    9.0
    %
  Three Months Ended October 31,
    
    
    Six Months Ended October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Dollars
    
    
    %
    
    
    Dollars
    
    
    %
    
    
    Dollars
    
    
    %
    
    
    Dollars
    
    
    %Fee revenueExecutive recruitment:North America
    
    $
    91,697
    
    
    
    48.4
    %
    
    $
    94,862
    
    
    
    48.4
    %
    
    $
    185,671
    
    
    
    47.0
    %
    
    $
    182,176
    
    
    
    47.8
    %EMEA
    
    
    40,486
    
    
    
    21.4
    
    
    
    42,058
    
    
    
    21.5
    
    
    
    92,076
    
    
    
    23.3
    
    
    
    86,780
    
    
    
    22.8Asia Pacific
    
    
    21,187
    
    
    
    11.2
    
    
    
    24,656
    
    
    
    12.6
    
    
    
    42,590
    
    
    
    10.8
    
    
    
    47,317
    
    
    
    12.4South America
    
    
    6,828
    
    
    
    3.6
    
    
    
    7,497
    
    
    
    3.8
    
    
    
    14,413
    
    
    
    3.6
    
    
    
    12,567
    
    
    
    3.3Total executive recruitment
    
    
    160,198
    
    
    
    84.6
    
    
    
    169,073
    
    
    
    86.3
    
    
    
    334,750
    
    
    
    84.7
    
    
    
    328,840
    
    
    
    86.3Futurestep
    
    
    29,102
    
    
    
    15.4
    
    
    
    26,784
    
    
    
    13.7
    
    
    
    60,283
    
    
    
    15.3
    
    
    
    52,370
    
    
    
    13.7Total fee revenue
    
    
    189,300
    
    
    
    100.0
    %
    
    
    195,857
    
    
    
    100.0
    %
    
    
    395,033
    
    
    
    100.0
    %
    
    
    381,210
    
    
    
    100.0
    %Reimbursed out-of-pocket engagement
expenses
    
    
    10,437
    
    
    
    
    
    
    
    10,967
    
    
    
    
    
    
    
    22,176
    
    
    
    
    
    
    
    21,891Total revenue
    
    $
    199,737
    
    
    
    
    
    
    $
    206,824
    
    
    
    
    
    
    $
    417,209
    
    
    
    
    
    
    $
    403,101
 Three Months Ended October 31,
    
    
    Six Months Ended October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Dollars
    
    
    %
    
    
    Dollars
    
    
    %
    
    
    Dollars
    
    
    %
    
    
    Dollars
    
    
    %Operating income (loss)Executive recruitment:North America
    
    $
    16,197
    
    
    
    17.7
    %
    
    $
    21,388
    
    
    
    22.5
    %
    
    $
    34,834
    
    
    
    18.8
    %
    
    $
    41,179
    
    
    
    22.6
    %EMEA
    
    
    5,910
    
    
    
    14.6
    
    
    
    6,064
    
    
    
    14.4
    
    
    
    14,396
    
    
    
    15.6
    
    
    
    13,755
    
    
    
    15.9Asia Pacific
    
    
    3,267
    
    
    
    15.4
    
    
    
    4,614
    
    
    
    18.7
    
    
    
    6,743
    
    
    
    15.8
    
    
    
    9,151
    
    
    
    19.3South America
    
    
    1,214
    
    
    
    17.8
    
    
    
    884
    
    
    
    11.8
    
    
    
    2,294
    
    
    
    15.9
    
    
    
    1,545
    
    
    
    12.3Total executive recruitment
    
    
    26,588
    
    
    
    16.6
    
    
    
    32,950
    
    
    
    19.5
    
    
    
    58,267
    
    
    
    17.4
    
    
    
    65,630
    
    
    
    20.0Futurestep
    
    
    1,221
    
    
    
    4.2
    
    
    
    1,532
    
    
    
    5.7
    
    
    
    4,076
    
    
    
    6.8
    
    
    
    3,616
    
    
    
    6.9Corporate
    
    
    (6,321
    )
    
    
    
    
    
    
    (9,100
    )
    
    
    
    
    
    
    (17,101
    )
    
    
    
    
    
    
    (18,751
    )Total operating income
    
    $
    21,488
    
    
    
    11.4
    %
    
    $
    25,382
    
    
    
    13.0
    %
    
    $
    45,242
    
    
    
    11.5
    %
    
    $
    50,495
    
    
    
    13.2
    %
  16




---



##### Table of Contents



Three Months Ended October 31, 2008 Compared to Three Months Ended October 31, 2007
 Fee Revenue.
 Executive Recruitment.
     Futurestep.
 Compensation and Benefits.
  17




---



##### Table of Contents



General and Administrative Expenses.
    Out-of-Pocket Engagement Expenses.
 Depreciation and Amortization Expenses.
  18




---



##### Table of Contents



Operating Income.
   Interest Income and Other (Loss) Income, Net.
 Interest Expense.
 Provision for Income Taxes.
 Equity in Earnings of Unconsolidated Subsidiaries.
 Six Months Ended October 31, 2008 Compared to Six Months Ended October 31, 2007
 Fee Revenue.
 Executive Recruitment.
    19




---



##### Table of Contents



Futurestep.
 Compensation and Benefits.
    General and Administrative Expenses.
  20




---



##### Table of Contents



Out-of-Pocket Engagement Expenses.
 Depreciation and Amortization Expenses.
 Operating Income.
   Interest Income and Other Income, Net.
  21




---



##### Table of Contents



Interest Expense.
 Provision for Income Taxes.
 Equity in Earnings of Unconsolidated Subsidiaries.
 Liquidity and Capital Resources
      Off-Balance Sheet Arrangements
   22




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Foreign Currency Risk
    Interest Rate Risk
    23




---



##### Table of Contents



Item 4. Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures.
  (b) Changes in Internal Control over Financial Reporting.
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Global economic developments and the economic conditions in the geographic regions and the
industries from which we derive a significant portion of our fee revenue could undermine our future
profitability.
  
 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
  ApproximateShares
    
    
    Dollar Value ofPurchased
    
    
    Shares thatAverage
    
    
    as Part of a
    
    
    May Yet BePrice
    
    
    Publicly-
    
    
    PurchasedPaid
    
    
    Announced
    
    
    Under theShares
    
    
    Per
    
    
    Program
    
    
    ProgramPurchased
    
    
    Share
    
    
    (1)
    
    
    (1)August 1, 2008  August 31, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $43.6 millionSeptember 1, 2008  September 30, 2008
    
    
    27,202
    
    
    $
    16.20
    
    
    
    19,300
    
    
    $43.3 millionOctober 1, 2008  October 31, 2008
    
    
    390,600
    
    
    $
    12.81
    
    
    
    390,600
    
    
    $38.3 millionBalance as of October 31, 2008
    
    
    417,802
    
    
    
    
    
    
    
    409,900
 (1)
    
    On November 2, 2007, the Board of Directors approved the repurchase of up to $50 million of
the Companys common stock in a common stock repurchase program. The shares can be repurchased
in open market transactions or privately negotiated transactions at the Companys discretion. 
 Item 3. Defaults Upon Senior Securities
   24




---



##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 ExhibitNumber
    
    Description of Exhibit3.1
    
    
    Certificate of Incorporation of the Company, filed as Exhibit 3.1 to the Companys Quarterly Report
on Form 10-Q, dated December 15, 1999, and incorporated herein by reference.3.2
    
    
    Certificate of Designations of 7.5% Convertible Preferred Stock, filed as Exhibit 3.1 to the
Companys Current Report on Form 8-K, dated June 18, 2002, and incorporated herein by reference.3.3
    
    
    Amended and Restated Bylaws of the Company, filed as Exhibit 3.3 to the Companys Annual Report on
Form 10-K, dated October 29, 2002, and incorporated herein by reference.31.1
    
    
    Certification by Chief Executive Office pursuant to Rule 13a-14(a) under the Exchange Act, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification by Chief Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350.
  25




---



##### Table of Contents



SIGNATURE
  KORN/FERRY INTERNATIONALDate: December 10, 2008
    By:
    /s/ STEPHEN J. GIUSTOStephen J. GiustoExecutive Vice President and Chief Financial Officer  26




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description of Exhibit31.1
    
    
    Certification by Chief Executive Office pursuant to Rule 13a-14(a) under the Exchange Act, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification by Chief Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350.
  27