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Korn/Ferry International Reports Operating Results (10-Q)

December 11, 2012 | About:

10qk

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Korn/Ferry International (KFY) filed Quarterly Report for the period ended 2012-10-31.

Korn/ferry International has a market cap of $532.636 million; its shares were traded at around $14.7 with a P/E ratio of 13.6799 and P/S ratio of 0.8341.

Highlight of Business Operations:

Leadership & Talent Consulting. Leadership & Talent Consulting serves as a bridge between a clients business strategy and their talent strategy. Leadership & Talent Consulting combines intellectual content with traditional consulting services such as CEO & top team effectiveness, integrated talent management as well as leadership development & enterprise learning. Leadership & Talent Consulting reported fee revenue of $38.4 million, an increase of $9.4 million, or 32%, in the three months ended October 31, 2012 compared to $29.0 million in the three months ended October 31, 2011. Excluding fee revenue of approximately $5.2 million, from the acquisition of Global Novations, LLC on September 1, 2012, fee revenue would have been $33.2 million, an increase of $4.2 million, or 14% as compared to the three months ended October 31, 2011. The improvement in fee revenue was driven by an increase in consulting fee revenue, driven by an increase in the number of consulting clients, in the three months ended October 31, 2012 compared to the three months ended October 31, 2011. Excluding fee revenue from the acquisition of Global Novations, LLC, the increase in fee revenue consisted of an increase in fee revenue in EMEA of $1.6 million, or 33%, to $6.5 million, an increase in South America fee revenue of $1.3 million, to $2.0 million and an increase in North America of $1.2 million, or 6%, to $21.2 million. Exchange rates unfavorably impacted fee revenue for Leadership & Talent Consulting by $0.6 million in the three months ended October 31, 2012.

Leadership & Talent Consulting. Leadership & Talent Consulting serves as a bridge between a clients business strategy and their talent strategy. Leadership & Talent Consulting combines intellectual content with traditional consulting services such as CEO & top team effectiveness, integrated talent management as well as leadership development & enterprise learning. Leadership & Talent Consulting reported fee revenue of $66.8 million, an increase of $11.1 million, or 20%, in the six months ended October 31, 2012 compared to $55.7 million in the six months ended October 31, 2011. Excluding fee revenue of approximately $5.2 million, from the acquisition of Global Novations, LLC on September 1, 2012, fee revenue would have been $61.6 million, an increase of $5.9 million, or 11% as compared to the six months ended October 31, 2011. Excluding fee revenue from the acquisition of Global Novations, LLC, the improvement in fee revenue was driven by an increase in broad based client demand as demonstrated by the increase in the number of consulting clients, partially offset by a decrease in fee revenue productivity per consultant in the six months ended October 31, 2012 compared to the six months ended October 31, 2011. The increase in fee revenue consisted of an increase in fee revenue in EMEA of $2.9 million, or 31%, to $12.2 million, an increase in South America fee revenue of $1.7 million to $3.0 million and an increase in North America of $1.2 million or 3% to $39.7 million. Exchange rates unfavorably impacted fee revenue for Leadership & Talent Consulting by $1.4 million in the six months ended October 31, 2012.

Compensation and benefits expense decreased $7.8 million, or 3%, to $261.1 million in the six months ended October 31, 2012 from $268.9 million in the six months ended October 31, 2011. The decrease in compensation and benefits expense was mainly due to a $4.4 million, or 5% decrease in salaries and related payroll taxes (excluding Global Novations, LLC) and an increase in the cash surrender value of the company owned life insurance that reduced compensation and benefits expense by $1.1 million in the six months ended October 31, 2012 compared to the six months ended October 31, 2011. Salaries and related payroll taxes declined due to a 6% decrease in the average executive recruitment consultant headcount during the six months ended October 31, 2012 compared to the six months ended October 31, 2011. Also contributing to the decline in compensation and benefits expense was a $5.9 million, or 10% decrease in performance related bonus expense to $53.8 million in the six months ended October 31, 2012 from $59.7 million in the six months ended October 31, 2011. The decrease in performance related bonus expense was driven by a 6% decrease in fee revenue and a decline in the Companys overall level of profitability as defined by pre-tax income before bonus and restructuring expense in the six months ended October 31, 2012 compared to the six month ended October 31, 2011. The remaining decrease was primarily driven by a decrease in the fair value of amounts owed under certain compensation plans. Exchange rates favorably impacted compensation and benefits expenses by $8.3 million during the six months ended October 31, 2012.

Executive recruitment compensation and benefits expense decreased $12.6 million, or 7%, to $171.4 million in the six months ended October 31, 2012 compared to $184.0 million in the six months ended October 31, 2011, primarily due to a $5.8 million or 6% decrease in salaries and relates payroll taxes and the expense arising from the use of outside contractors declined by $1.0 million, offset by the increase in the fair value of vested amounts owed under certain deferred compensation plans that resulted in an increase in compensation expense of $3.7 million in the six months ended October 31, 2012 compared to the six months ended October 31, 2011. Salaries and related payroll taxes declined due to the 6% decrease in average executive recruitment consultant headcount while the decrease in the use of outside consultants was due to ongoing cost control initiatives. In addition performance related bonus expense decreased by $6.4 million driven by the Companys decrease in fee revenue and a decline in consultant headcount, which contributed to the decrease in the overall level of profitability as defined by pre-tax income before bonus and restructuring expense. Exchange rates favorably impacted compensation and benefits expense by $5.8 million during the six months ended October 31, 2012. Executive recruitment compensation and benefits expense increased as a percentage of fee revenue to 67% from 63% in the six months ended October 31, 2012 and 2011, respectively.

Leadership & Talent Consulting general and administrative expenses increased $0.8 million, or 10%, to $9.2 million in the six months ended October 31, 2012 from $8.4 million in the six months ended October 31, 2011. The increase in general and administrative expense was due to an increase in premise and office expenses of $0.7 million due in large part to the acquisition of Global Novations, LLC. Global Novations, LLC contributed $0.5 million to the increase in general and administrative expenses. The rest of the increase was due to the increase in bad debt expense of $0.2 million and an increase in business development expense of $0.2 million, offset, by a decrease in travel expenses of $0.4 million in the six months ended October 31, 2012 compared to the six months ended October 31, 2011. The increases in business development expense and bad debt expense were due to the increase in Leadership & Talent Consultings business activity while the decrease in travel related expenses was due to the implementation of ongoing cost control initiatives. Exchange rates favorably impacted general and administrative expenses by $0.3 million. Leadership & Talent Consulting general and administrative expenses as a percentage of fee revenue was 14% in the six months ended October 31, 2012 compared to 15% in the six months ended October 31, 2011.

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