##### 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 January 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
    
    (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




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##### 



KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
Table of Contents
 PagePART I. FINANCIAL INFORMATIONItem 1. Condensed Financial Statements
    
    
    3Consolidated Balance Sheets as of January 31, 2009 (unaudited) and April 30, 2008
    
    
    3Unaudited Consolidated Statements of Operations for the three and nine months ended January 31,
2009 and 2008
    
    
    4Unaudited Consolidated Statements of Cash Flows for the nine months ended January 31, 2009 and 2008
    
    
    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
    
    
    25Item 1A. Risk Factors
    
    
    25Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
    
    
    25Item 3. Defaults Upon Senior Securities
    
    
    25Item 4. Submission of Matters to a Vote of Security Holders
    
    
    25Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    26SIGNATURES
    
    
    27Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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##### 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 ofJanuary 31,
    
    
    April 30,2009
    
    
    2008(unaudited)ASSETSCash and cash equivalents
    
    $
    217,486
    
    
    $
    305,296Marketable securities
    
    
    2,094
    
    
    
    5,940Receivables due from clients, net of allowance for doubtful accounts of $12,501 and
$11,504, respectively
    
    
    98,200
    
    
    
    119,952Income taxes and other receivables
    
    
    6,247
    
    
    
    7,071Deferred income taxes
    
    
    11,636
    
    
    
    10,401Prepaid expenses and other assets
    
    
    21,949
    
    
    
    20,057Total current assets
    
    
    357,612
    
    
    
    468,717Marketable securities, noncurrent
    
    
    70,299
    
    
    
    78,026Property and equipment, net
    
    
    32,395
    
    
    
    32,462Cash surrender value of company owned life insurance policies, net of loans
    
    
    62,437
    
    
    
    81,377Deferred income taxes
    
    
    35,072
    
    
    
    47,128Goodwill
    
    
    131,997
    
    
    
    142,699Intangible assets, net
    
    
    17,146
    
    
    
    15,519Investments and other
    
    
    28,112
    
    
    
    14,286Total assets
    
    $
    735,070
    
    
    $
    880,214LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable
    
    $
    9,191
    
    
    $
    15,309Income taxes payable
    
    
    1,180
    
    
    
    20,948Compensation and benefits payable
    
    
    113,394
    
    
    
    199,081Other accrued liabilities
    
    
    38,143
    
    
    
    37,120Total current liabilities
    
    
    161,908
    
    
    
    272,458Deferred compensation and other retirement plans
    
    
    100,667
    
    
    
    105,719Other liabilities
    
    
    5,677
    
    
    
    5,903Total liabilities
    
    
    268,252
    
    
    
    384,080Stockholders equity:Common stock: $0.01 par value, 150,000 shares authorized, 56,085 and 54,786 shares
issued and 44,696 and 44,593 shares outstanding, respectively
    
    
    365,172
    
    
    
    358,568Retained earnings
    
    
    102,122
    
    
    
    95,014Accumulated other comprehensive income
    
    
    64
    
    
    
    43,097Stockholders equity
    
    
    467,358
    
    
    
    496,679Less: notes receivable from stockholders
    
    
    (540
    )
    
    
    (545
    )Total stockholders equity
    
    
    466,818
    
    
    
    496,134Total liabilities and stockholders equity
    
    $
    735,070
    
    
    $
    880,214
   3




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##### Table of Contents



KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share amounts)

(unaudited)
 Three Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Fee revenue
    
    $
    136,210
    
    
    $
    201,156
    
    
    $
    531,243
    
    
    $
    582,366Reimbursed out-of-pocket engagement expenses
    
    
    8,283
    
    
    
    10,935
    
    
    
    30,459
    
    
    
    32,826Total revenue
    
    
    144,493
    
    
    
    212,091
    
    
    
    561,702
    
    
    
    615,192Compensation and benefits
    
    
    93,978
    
    
    
    138,594
    
    
    
    365,849
    
    
    
    391,984General and administrative expenses
    
    
    30,963
    
    
    
    35,255
    
    
    
    97,316
    
    
    
    101,168Out-of-pocket engagement expenses
    
    
    11,041
    
    
    
    14,250
    
    
    
    39,071
    
    
    
    42,664Depreciation and amortization
    
    
    2,924
    
    
    
    2,812
    
    
    
    8,637
    
    
    
    7,701Restructuring charges
    
    
    16,845
    
    
    
    
    
    
    
    16,845
    
    
    
    Total operating expenses
    
    
    155,751
    
    
    
    190,911
    
    
    
    527,718
    
    
    
    543,517Operating (loss) income
    
    
    (11,258
    )
    
    
    21,180
    
    
    
    33,984
    
    
    
    71,675Interest and other (loss) income, net
    
    
    (14,794
    )
    
    
    5,025
    
    
    
    (13,294
    )
    
    
    9,769Interest expense
    
    
    1,267
    
    
    
    1,248
    
    
    
    3,571
    
    
    
    3,695(Loss) income before (benefit) provision for income taxes and
equity in earnings of unconsolidated subsidiaries
    
    
    (27,319
    )
    
    
    24,957
    
    
    
    17,119
    
    
    
    77,749(Benefit) provision for income taxes
    
    
    (4,549
    )
    
    
    9,353
    
    
    
    12,327
    
    
    
    29,753Equity in earnings of unconsolidated subsidiaries, net
    
    
    414
    
    
    
    652
    
    
    
    2,316
    
    
    
    2,469Net (loss) income
    
    $
    (22,356
    )
    
    $
    16,256
    
    
    $
    7,108
    
    
    $
    50,465Basic (loss) earnings per common share
    
    $
    (0.52
    )
    
    $
    0.38
    
    
    $
    0.16
    
    
    $
    1.14Basic weighted average common shares outstanding
    
    
    43,406
    
    
    
    43,247
    
    
    
    43,538
    
    
    
    44,273Diluted (loss) earnings per common share
    
    $
    (0.52
    )
    
    $
    0.37
    
    
    $
    0.16
    
    
    $
    1.10Diluted weighted average common shares outstanding
    
    
    43,406
    
    
    
    44,303
    
    
    
    44,352
    
    
    
    45,839
   4




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##### Table of Contents



KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)

(unaudited)
 Nine Months EndedJanuary 31,2009
    
    
    2008Cash from operating activities:Net income
    
    $
    7,108
    
    
    $
    50,465Adjustments to reconcile net income to net cash (used in) provided by operating activities:Depreciation and amortization
    
    
    8,637
    
    
    
    7,701Stock-based compensation expense
    
    
    12,396
    
    
    
    11,931Loss on disposition of property and equipment
    
    
    248
    
    
    
    130Provision for doubtful accounts
    
    
    7,223
    
    
    
    9,332Loss (gain) on cash surrender value of life insurance policies
    
    
    3,799
    
    
    
    (1,908
    )Realized loss (gain) on marketable securities
    
    
    1,264
    
    
    
    (4,013
    )Other-than temporary impairment on marketable securities
    
    
    15,893
    
    
    
    Deferred income taxes
    
    
    10,298
    
    
    
    (8,143
    )Change in other assets and liabilities, net of effect of acquisitions:Deferred compensation
    
    
    (5,052
    )
    
    
    12,784Receivables
    
    
    18,536
    
    
    
    (41,176
    )Prepaid expenses
    
    
    (1,772
    )
    
    
    (2,003
    )Investment in unconsolidated subsidiaries
    
    
    (2,316
    )
    
    
    (3,123
    )Income taxes payable
    
    
    (19,954
    )
    
    
    1,750Accounts payable and accrued liabilities
    
    
    (92,706
    )
    
    
    (7,745
    )Other
    
    
    1,444
    
    
    
    (2,277
    )Net cash (used in) provided by operating activities
    
    
    (34,954
    )
    
    
    23,705Cash from investing activities:Purchase of property and equipment
    
    
    (10,300
    )
    
    
    (12,849
    )(Purchase of) proceeds from marketable securities, net
    
    
    (3,290
    )
    
    
    16,023Cash paid for acquisitions, net of cash acquired
    
    
    (12,900
    )
    
    
    (4,260
    )Premiums on life insurance policies
    
    
    (1,479
    )
    
    
    (1,525
    )Dividends received from unconsolidated subsidiaries
    
    
    2,952
    
    
    
    2,782Net cash (used in) provided by investing activities
    
    
    (25,017
    )
    
    
    171Cash from financing activities:Payments on life insurance policy loans
    
    
    (367
    )
    
    
    (1,012
    )Borrowings under life insurance policies
    
    
    1,459
    
    
    
    1,464Purchase of common stock
    
    
    (9,539
    )
    
    
    (62,617
    )Proceeds from issuance of common stock upon exercise of employee stock
options and in connection with an employee stock purchase plan
    
    
    3,480
    
    
    
    17,177Tax benefit from exercise of stock options
    
    
    169
    
    
    
    3,473Receipts on stockholders notes
    
    
    5
    
    
    
    6Net cash used in financing activities
    
    
    (4,793
    )
    
    
    (41,509
    )Effect of exchange rates on cash and cash equivalents
    
    
    (23,046
    )
    
    
    8,756Net decrease in cash and cash equivalents during the period
    
    
    (87,810
    )
    
    
    (8,877
    )Cash and cash equivalents at beginning of the period
    
    
    305,296
    
    
    
    232,531Cash and cash equivalents at end of the period
    
    $
    217,486
    
    
    $
    223,654
   5




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##### 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
   6




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Three Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Stock options and SARs
    
    $
    (115
    )
    
    $
    238
    
    
    $
    109
    
    
    $
    1,265Restricted stock
    
    
    3,889
    
    
    
    3,518
    
    
    
    11,947
    
    
    
    10,357ESPP
    
    
    94
    
    
    
    125
    
    
    
    340
    
    
    
    399Total stock-based compensation expense, pre-tax
    
    
    3,868
    
    
    
    3,881
    
    
    
    12,396
    
    
    
    12,021Tax benefit from stock-based compensation expense
    
    
    (1,412
    )
    
    
    (1,417
    )
    
    
    (4,525
    )
    
    
    (4,388
    )Total stock-based compensation expense, net of tax
    
    $
    2,456
    
    
    $
    2,464
    
    
    $
    7,871
    
    
    $
    7,633
  Nine Months EndedJanuary 31,2009
    
    
    2008Expected 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




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##### Table of Contents



2. Basic and Diluted (Loss) Earnings Per Share
   Three Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Net (loss) earnings:Net (loss) earnings
    
    $
    (22,356
    )
    
    $
    16,256
    
    
    $
    7,108
    
    
    $
    50,465Interest expense on convertible securities, net of related tax effects
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    109Net (loss) earnings attributable to common stockholders
    
    $
    (22,356
    )
    
    $
    16,292
    
    
    $
    7,108
    
    
    $
    50,574Weighted-average shares outstanding:Basic weighted-average number of common shares outstanding
    
    
    43,406
    
    
    
    43,247
    
    
    
    43,538
    
    
    
    44,273Effect of dilutive securities:Warrants
    
    
    
    
    
    
    84
    
    
    
    54
    
    
    
    117Restricted stock
    
    
    
    
    
    
    179
    
    
    
    132
    
    
    
    302Stock options
    
    
    
    
    
    
    790
    
    
    
    593
    
    
    
    1,135ESPP
    
    
    
    
    
    
    3
    
    
    
    35
    
    
    
    12Diluted weighted-average number of common shares outstanding
    
    
    43,406
    
    
    
    44,303
    
    
    
    44,352
    
    
    
    45,839Net (loss) earnings per common share:Basic (loss) earnings per share
    
    $
    (0.52
    )
    
    $
    0.38
    
    
    $
    0.16
    
    
    $
    1.14Diluted (loss) earnings per share
    
    $
    (0.52
    )
    
    $
    0.37
    
    
    $
    0.16
    
    
    $
    1.10
   8




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##### Table of Contents



3 . Comprehensive (Loss) Income
   Three Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Net (loss) income
    
    $
    (22,356
    )
    
    $
    16,256
    
    
    $
    7,108
    
    
    $
    50,465Foreign currency translation adjustment
    
    
    (2,208
    )
    
    
    (112
    )
    
    
    (44,923
    )
    
    
    15,451Unrealized losses on marketable securities, net of taxes
    
    
    (846
    )
    
    
    (4,488
    )
    
    
    (7,105
    )
    
    
    (3,129
    )Reclassification of unrealized losses on marketable securities, net of taxes to other-than-temporary impairment
    
    
    8,995
    
    
    
    
    
    
    
    8,995
    
    
    
    Comprehensive (loss) income
    
    $
    (16,415
    )
    
    $
    11,656
    
    
    $
    (35,925
    )
    
    $
    62,787
  As ofJanuary 31,2009
    
    
    2008Foreign currency translation adjustments
    
    $
    (715
    )
    
    $
    34,765Unrealized losses on marketable securities, net of taxes
    
    
    
    
    
    
    (1,503
    )SFAS No. 158 adjustments, net of taxes
    
    
    779
    
    
    
    (335
    )Accumulated other comprehensive income
    
    $
    64
    
    
    $
    32,927
 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
    
    
    6
    
    
    
    14.54Exercised
    
    
    (112
    )
    
    
    9.05Forfeited/expired
    
    
    (112
    )
    
    
    20.32Outstanding at January 31, 2009
    
    
    3,346
    
    
    $
    14.79
    
    
    
    3.90
    
    
    $
    1,923Exercisable at January 31, 2009
    
    
    3,269
    
    
    $
    14.69
    
    
    
    3.84
    
    
    $
    1,923
   9




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Weighted average fair value of stock options granted
    
    $
    5.01
    
    
    $
    7.24
    
    
    $
    5.77
    
    
    $
    8.77Total fair value of stock options and SARs vested
    
    
    23
    
    
    
    32
    
    
    
    1,931
    
    
    
    3,966Total intrinsic value of stock options exercised
    
    
    20
    
    
    
    528
    
    
    
    630
    
    
    
    12,304Total intrinsic value of SARs paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Restricted Stock
   Weighted-averageShares
    
    
    grant dateNonvested shares
    
    (in thousands)
    
    
    fair valueNonvested at April 30, 2008
    
    
    1,952
    
    
    $
    22.01Granted
    
    
    1,288
    
    
    
    17.57Vested
    
    
    (579
    )
    
    
    21.34Forfeited
    
    
    (184
    )
    
    
    19.68Nonvested at January 31, 2009
    
    
    2,477
    
    
    $
    15.50
  Employee Stock Purchase Plan
   10




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##### 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




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Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Cash equivalents
    
    $
    97,334
    
    
    $
    97,334
    
    
    $
    
    
    
    $
    Auction rate securities (1)
    
    
    11,545
    
    
    
    
    
    
    
    
    
    
    
    11,545Auction rate securities put option
    
    
    880
    
    
    
    
    
    
    
    
    
    
    
    880Equity securities (2)
    
    
    23,768
    
    
    
    23,768
    
    
    
    
    
    
    
    Fixed income mutual fund (2)
    
    
    10,965
    
    
    
    10,965
    
    
    
    
    
    
    
    Noncurrent money market mutual funds (2)
    
    
    25,235
    
    
    
    25,235
    
    
    
    
    
    
    
    Total
    
    $
    169,727
    
    
    $
    157,302
    
    
    $
    
    
    
    $
    12,425
 
 (1)
    
    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
$2,094 classified as current assets (see Note 6).  Auction Rate SecuritiesThree Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2009
    
    
    2009Balance at beginning of period
    
    $
    17,577
    
    
    $
    20,475Auction rate securities put option
    
    
    (758
    )
    
    
    880Reversal of unrealized loss associated with transfer of securities to trading
    
    
    
    
    
    
    780Unrealized gain (loss) included in income
    
    
    758
    
    
    
    (880
    )Unrealized loss included in accumulated other comprehensive (loss) income
    
    
    
    
    
    
    (586
    )Sales of securities
    
    
    (5,775
    )
    
    
    (9,025
    )Reversal of unrealized loss associated with sales of securities at par
    
    
    623
    
    
    
    781Ending balance at January 31, 2009
    
    $
    12,425
    
    
    $
    12,425
 6. Deferred Compensation and Retirement Plans
  Three Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,Components of net periodic benefit costs:
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Service cost
    
    $
    174
    
    
    $
    267
    
    
    $
    522
    
    
    $
    800Interest cost
    
    
    910
    
    
    
    835
    
    
    
    2,730
    
    
    
    2,505Amortization of actuarial gain
    
    
    (21
    )
    
    
    (18
    )
    
    
    (63
    )
    
    
    (54
    )Amortization of net transition obligation
    
    
    53
    
    
    
    53
    
    
    
    159
    
    
    
    159Net periodic benefit cost
    
    $
    1,116
    
    
    $
    1,137
    
    
    $
    3,348
    
    
    $
    3,410
  12




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##### Table of Contents



Accounting for Deferred Compensation Arrangements Where Amounts Earned
Are Held in a Rabbi Trust and Invested
 7. Business Segments
   Three Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Fee revenue:Executive recruitment:North America
    
    $
    66,978
    
    
    $
    94,812
    
    
    $
    252,649
    
    
    $
    276,988EMEA
    
    
    30,423
    
    
    
    46,292
    
    
    
    122,499
    
    
    
    133,072Asia Pacific
    
    
    13,591
    
    
    
    25,322
    
    
    
    56,181
    
    
    
    72,639South America
    
    
    5,650
    
    
    
    6,617
    
    
    
    20,063
    
    
    
    19,184Total executive recruitment
    
    
    116,642
    
    
    
    173,043
    
    
    
    451,392
    
    
    
    501,883Futurestep
    
    
    19,568
    
    
    
    28,113
    
    
    
    79,851
    
    
    
    80,483Total fee revenue
    
    $
    136,210
    
    
    $
    201,156
    
    
    $
    531,243
    
    
    $
    582,366
 Three Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Total revenue:Executive Recruitment:North America
    
    $
    72,118
    
    
    $
    99,707
    
    
    $
    269,186
    
    
    $
    292,100EMEA
    
    
    31,552
    
    
    
    47,731
    
    
    
    127,042
    
    
    
    137,203Asia Pacific
    
    
    13,942
    
    
    
    25,731
    
    
    
    57,400
    
    
    
    74,221South America
    
    
    5,731
    
    
    
    6,740
    
    
    
    20,378
    
    
    
    19,532Total executive recruitment
    
    
    123,343
    
    
    
    179,909
    
    
    
    474,006
    
    
    
    523,056Futurestep
    
    
    21,150
    
    
    
    32,182
    
    
    
    87,696
    
    
    
    92,136Total revenue
    
    $
    144,493
    
    
    $
    212,091
    
    
    $
    561,702
    
    
    $
    615,192
 Three Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Operating (loss) income:Executive recruitment:North America
    
    $
    10,767
    
    
    $
    16,167
    
    
    $
    45,601
    
    
    $
    57,346EMEA
    
    
    (6,291
    )
    
    
    7,116
    
    
    
    8,105
    
    
    
    20,871Asia Pacific
    
    
    367
    
    
    
    5,444
    
    
    
    7,110
    
    
    
    14,595South America
    
    
    373
    
    
    
    291
    
    
    
    2,667
    
    
    
    1,836Total executive recruitment
    
    
    5,216
    
    
    
    29,018
    
    
    
    63,483
    
    
    
    94,648Futurestep
    
    
    (8,309
    )
    
    
    2,026
    
    
    
    (4,233
    )
    
    
    5,642Corporate
    
    
    (8,165
    )
    
    
    (9,864
    )
    
    
    (25,266
    )
    
    
    (28,615
    )Total operating (loss) income
    
    $
    (11,258
    )
    
    $
    21,180
    
    
    $
    33,984
    
    
    $
    71,675
  13




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##### Table of Contents



8. Restructuring Charges
   Severance
    
    
    Facilities
    
    
    TotalLiability as of April 30, 2008
    
    $
    
    
    
    $
    
    
    
    $
    Charge to expense
    
    
    13,006
    
    
    
    2,572
    
    
    
    15,578Non-cash items
    
    
    462
    
    
    
    805
    
    
    
    1,267Cash payments
    
    
    (5,492
    )
    
    
    (67
    )
    
    
    (5,559
    )Exchange rate fluctuations
    
    
    (295
    )
    
    
    (29
    )
    
    
    (324
    )Liability as of January 31, 2009
    
    $
    7,681
    
    
    $
    3,281
    
    
    $
    10,962
  Severance
    
    
    Facilities
    
    
    TotalExecutive recruitmentNorth America
    
    $
    2,557
    
    
    $
    
    
    
    $
    2,557EMEA
    
    
    6,606
    
    
    
    
    
    
    
    6,606Asia Pacific
    
    
    947
    
    
    
    
    
    
    
    947South America
    
    
    956
    
    
    
    
    
    
    
    956Total executive recruitment
    
    
    11,066
    
    
    
    
    
    
    
    11,066Futurestep
    
    
    2,402
    
    
    
    3,377
    
    
    
    5,779Corporate
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    13,468
    
    
    $
    3,377
    
    
    $
    16,845
  14




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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 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



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##### Table of Contents



Critical Accounting Policies
  Results of Operations
  Three Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Fee revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Reimbursed out-of-pocket engagement expenses
    
    
    6.1
    
    
    
    5.4
    
    
    
    5.7
    
    
    
    5.6Total revenue
    
    
    106.1
    
    
    
    105.4
    
    
    
    105.7
    
    
    
    105.6Compensation and benefits
    
    
    69.0
    
    
    
    68.9
    
    
    
    68.9
    
    
    
    67.3General and administrative expenses
    
    
    22.7
    
    
    
    17.5
    
    
    
    18.3
    
    
    
    17.4Out-of-pocket engagement expenses
    
    
    8.1
    
    
    
    7.1
    
    
    
    7.4
    
    
    
    7.3Depreciation and amortization
    
    
    2.2
    
    
    
    1.4
    
    
    
    1.5
    
    
    
    1.3Restructuring charges
    
    
    12.4
    
    
    
    
    
    
    
    3.2
    
    
    
    Operating (loss) income
    
    
    (8.3
    )
    
    
    10.5
    
    
    
    6.4
    
    
    
    12.3Net (loss) income
    
    
    (16.4
    %)
    
    
    8.1
    %
    
    
    1.3
    %
    
    
    8.7
    %
  Three Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Dollars
    
    
    %
    
    
    Dollars
    
    
    %
    
    
    Dollars
    
    
    %
    
    
    Dollars
    
    
    %Fee revenueExecutive recruitment:North America
    
    $
    66,978
    
    
    
    49.2
    %
    
    $
    94,812
    
    
    
    47.1
    %
    
    $
    252,649
    
    
    
    47.6
    %
    
    $
    276,988
    
    
    
    47.6
    %EMEA
    
    
    30,423
    
    
    
    22.3
    
    
    
    46,292
    
    
    
    23.0
    
    
    
    122,499
    
    
    
    23.1
    
    
    
    133,072
    
    
    
    22.9Asia Pacific
    
    
    13,591
    
    
    
    10.0
    
    
    
    25,322
    
    
    
    12.6
    
    
    
    56,181
    
    
    
    10.6
    
    
    
    72,639
    
    
    
    12.5South America
    
    
    5,650
    
    
    
    4.1
    
    
    
    6,617
    
    
    
    3.3
    
    
    
    20,063
    
    
    
    3.7
    
    
    
    19,184
    
    
    
    3.2Total executive
recruitment
    
    
    116,642
    
    
    
    85.6
    
    
    
    173,043
    
    
    
    86.0
    
    
    
    451,392
    
    
    
    85.0
    
    
    
    501,883
    
    
    
    86.2Futurestep
    
    
    19,568
    
    
    
    14.4
    
    
    
    28,113
    
    
    
    14.0
    
    
    
    79,851
    
    
    
    15.0
    
    
    
    80,483
    
    
    
    13.8Total fee revenue
    
    
    136,210
    
    
    
    100.0
    %
    
    
    201,156
    
    
    
    100.0
    %
    
    
    531,243
    
    
    
    100.0
    %
    
    
    582,366
    
    
    
    100.0
    %Reimbursed
out-of-pocket
engagement expenses
    
    
    8,283
    
    
    
    
    
    
    
    10,935
    
    
    
    
    
    
    
    30,459
    
    
    
    
    
    
    
    32,826Total revenue
    
    $
    144,493
    
    
    
    
    
    
    $
    212,091
    
    
    
    
    
    
    $
    561,702
    
    
    
    
    
    
    $
    615,192
 Three Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Dollars
    
    
    %
    
    
    Dollars
    
    
    %
    
    
    Dollars
    
    
    %
    
    
    Dollars
    
    
    %Operating (loss) incomeExecutive recruitment:North America
    
    $
    10,767
    
    
    
    16.1
    %
    
    $
    16,167
    
    
    
    17.1
    %
    
    $
    45,601
    
    
    
    18.0
    %
    
    $
    57,346
    
    
    
    20.7
    %EMEA
    
    
    (6,291
    )
    
    
    (20.7
    )
    
    
    7,116
    
    
    
    15.4
    
    
    
    8,105
    
    
    
    6.6
    
    
    
    20,871
    
    
    
    15.7Asia Pacific
    
    
    367
    
    
    
    2.7
    
    
    
    5,444
    
    
    
    21.5
    
    
    
    7,110
    
    
    
    12.7
    
    
    
    14,595
    
    
    
    20.1South America
    
    
    373
    
    
    
    6.6
    
    
    
    291
    
    
    
    4.4
    
    
    
    2,667
    
    
    
    13.3
    
    
    
    1,836
    
    
    
    9.6Total executive
recruitment
    
    
    5,216
    
    
    
    4.5
    
    
    
    29,018
    
    
    
    16.8
    
    
    
    63,483
    
    
    
    14.1
    
    
    
    94,648
    
    
    
    18.9Futurestep
    
    
    (8,309
    )
    
    
    (42.5
    )
    
    
    2,026
    
    
    
    7.2
    
    
    
    (4,233
    )
    
    
    (5.3
    )
    
    
    5,642
    
    
    
    7.0Corporate
    
    
    (8,165
    )
    
    
    
    
    
    
    (9,864
    )
    
    
    
    
    
    
    (25,266
    )
    
    
    
    
    
    
    (28,615
    )Total operating
(loss) income
    
    $
    (11,258
    )
    
    
    (8.3
    %)
    
    $
    21,180
    
    
    
    10.5
    %
    
    $
    33,984
    
    
    
    6.4
    %
    
    $
    71,675
    
    
    
    12.3
    %
  16




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##### Table of Contents



Three Months Ended January 31, 2009 Compared to Three Months Ended January 31, 2008
 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



Restructuring Charges.
 Operating (Loss) Income.
   Interest Income and Other (Loss) Income, Net.
 Interest Expense.
 (Benefit) Provision for Income Taxes.
 Equity in Earnings of Unconsolidated Subsidiaries.
 Nine Months Ended January 31, 2009 Compared to Nine Months Ended January 31, 2008
 Fee Revenue.
 Executive Recruitment.
  19




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##### Table of Contents



Futurestep.
 Compensation and Benefits.
    20




---



##### Table of Contents



General and Administrative Expenses.
    Out-of-Pocket Engagement Expenses.
 Depreciation and Amortization Expenses.
 Restructuring Charges.
 Operating Income.
  21




---



##### Table of Contents



Interest Income and Other (Loss) Income, Net.
 Interest Expense.
 Provision for Income Taxes.
 Equity in Earnings of Unconsolidated Subsidiaries.
 Liquidity and Capital Resources
     22




---



##### Table of Contents



Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Foreign Currency Risk
     23




---



##### Table of Contents



Interest Rate Risk
    
 Item 4. Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures.
  (b) Changes in Internal Control over Financial Reporting.
   24




---



##### Table of Contents



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)November 1, 2008  November 30, 2008
    
    
    156,426
    
    
    $
    12.37
    
    
    
    154,400
    
    
    $
    36.4 millionDecember 1, 2008  December 31, 2008
    
    
    710
    
    
    $
    11.63
    
    
    
    
    
    
    $
    36.4 millionJanuary 1, 2009  January 31, 2009
    
    
    1,200
    
    
    $
    11.16
    
    
    
    
    
    
    $
    36.4 millionBalance as of January 31, 2009
    
    
    158,336
    
    
    
    
    
    
    
    154,400
 (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
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
   25




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##### Table of Contents



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, 1999.3.2
    *
    
    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, 2002.3.3
    *
    
    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, 2002.31.1
    
    
    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.
 *
    
    incorporated by reference.  26




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##### Table of Contents



SIGNATURE
  KORN/FERRY INTERNATIONALDate: March 12, 2009
    By:
    /s/ STEPHEN J. GIUSTOStephen J. GiustoExecutive Vice President and Chief Financial Officer  27




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##### 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.
  28