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Heidrick & Struggles International Inc. Reports Operating Results (10-Q)

August 04, 2010 | About:
10qk

10qk

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Heidrick & Struggles International Inc. (HSII) filed Quarterly Report for the period ended 2010-06-30.

Heidrick & Struggles International Inc. has a market cap of $345.6 million; its shares were traded at around $19.78 with a P/E ratio of 19.2 and P/S ratio of 0.8. The dividend yield of Heidrick & Struggles International Inc. stocks is 2.6%.HSII is in the portfolios of HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Net revenue in the Americas was $65.1 million for the three months ended June 30, 2010, an increase of $16.7 million, or 34.6%, from $48.3 million in the second quarter of 2009. Net revenue in Europe was $31.7 million for the three months ended June 30, 2010, an increase of $4.2 million, or 15.4%, from $27.5 million in the second quarter of 2009. The negative impact of exchange rate fluctuations offset the increase in net revenue by approximately 4 percentage points in the second quarter of 2010. In Asia Pacific, net revenue was $29.3 million for the three months ended June 30, 2010, an increase of $12.0 million, or 69.4%, from $17.3 million in the second quarter of 2009. The positive impact of exchange rate fluctuations resulted in approximately 10 percentage points of the net revenue increase in the second quarter of 2010.

Salaries and employee benefits. Consolidated salaries and employee benefits expense increased $21.4 million, or 33.1%, to $86.0 million for the three months ended June 30, 2010 from $64.6 million for the three months ended June 30, 2009. The increase in salaries and employee benefits expense is primarily a result of a $22.7 million increase in performance-related compensation expense reflecting higher bonus accruals associated with higher net revenue, offset by a $1.3 million decrease in fixed compensation. In the second quarter 2010, we issued special recognition awards to certain of our consultants in order to incentivize future service to the Company which resulted in additional fixed compensation expense of $2.0 million. Additionally, severance expense increased $1.0 million and other compensation increased $0.6 million. This additional expense was offset by a $3.6 million decrease in stock-based compensation expense as a result of significant forfeitures in the second quarter of 2010 and an overall decrease in the amount of equity awards granted in 2009 and 2010. Amortization of deferred cash compensation also decreased $1.3 million. At June 30, 2010 we had 1,432 total employees, compared to 1,429 total employees as of June 30, 2009.

General and administrative expenses. Consolidated general and administrative expenses increased $4.9 million, or 17.3%, to $32.9 million for the three months ended June 30, 2010 from $28.0 million for the three months ended June 30, 2009. The increase primarily reflects $2.5 million of expense related to the worldwide consultants meeting held in the second quarter of 2010, an increase of $0.8 million in travel expenses due to training and business development initiatives reinstated in 2010, and $2.2 million in fees for professional services primarily related to the ongoing development of our internal search system, other systems development projects and non-recurring legal costs incurred in the second quarter of 2010. Additionally, we recorded impairment charges of $0.7 million associated with intangible assets related to our Schwab Enterprise, LLC, 75 Search Partners, LLC and Ray and Berndtson Sp. z o. o acquisitions and $0.2 million of other operating and infrastructure expenses. These increases were partially offset by decreases in premise-related costs and depreciation expense of $1.5 million as a result of favorable lease renewals and lease terminations in the Americas and European regions.

Operating income (loss). Consolidated operating income was $7.6 million for the three months ended June 30, 2010 compared to operating loss of $11.6 million for the three months ended June 30, 2009. The increase in operating income is primarily due to an increase in net revenue of $33.0 million, a decrease in restructuring and impairment charges of $11.4 million and other operating income of $1.1 million, offset by increases in salaries and employee benefits expense of $21.4 million and general and administrative expenses of $4.9 million.

In the Americas, operating income for the three months ended June 30, 2010 increased $8.7 million to $13.8 million from $5.1 million for the three months ended June 30, 2009. The increase is due to higher net revenue of $16.7 million and lower general and administrative expenses of $0.8 million, offset by an $8.8 million increase in salaries and employee benefits expense. Additionally, salaries and employee benefits expense within the Americas benefited by $1.1 million related to a reallocation of search and corporate support expenses to Global Operations Support.

Global Operations Support expenses for the three months ended June 30, 2010 increased $5.9 million or 71.9% to $14.1 million from $8.2 million for the three months ended June 30, 2009. Compensation expense increased $2.1 million and general and administrative expenses increased $3.8 million. The increase in compensation expense is primarily due to $1.1 million of search and corporate support expenses previously provided through the Americas region that is now provided through our Global Business Services group and $1.0 million of severance expense. The increase in general and administrative expenses is due to $2.5 million related to the worldwide consultants meeting held in the second quarter of 2010, $1.0 million in fees for professional services and $0.3 million in other operating and infrastructure expenses.

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