Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☑ No ¨☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x☑ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer” and~~filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act. ~~(Check one):~~

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ¨☐ No x☑

The number of shares outstanding of our common stock as of September ~~6, 2016~~5, 2017 was ~~57,901,738~~56,492,489 shares.

~~PART I. FINANCIAL INFORMATION~~Item 1. Consolidated Financial Statements


	July 31, 2016			April 30, 2016			July 31, 2017			April 30, 2017
	(unaudited)						(unaudited)
	(in thousands, except per share data)						(in thousands, except per share data)
ASSETS
Cash and cash equivalents	$	244,073		$	273,252		$	282,019		$	410,882
Marketable securities		3,475			11,338			11,651			4,363
Receivables due from clients, net of allowance for doubtful accounts of $12,674 and $11,292, respectively		341,984			315,975
Receivables due from clients, net of allowance for doubtful accounts of $16,088 and $15,455 at July 31, 2017 and April 30, 2017, respectively								365,657			345,314
Income taxes and other receivables		28,672			20,579			44,035			31,573
Prepaid expenses and other assets		53,196			43,130			62,525			51,542

Total current assets		671,400			664,274			765,887			843,674

Marketable securities, non-current		133,502			130,092			114,608			115,574
Property and equipment, net		99,980			95,436			112,787			109,567
Cash surrender value of company owned life insurance policies, net of loans		110,195			107,296			113,866			113,067
Deferred income taxes, net		26,232			27,163			19,387			20,175
Goodwill		587,615			590,072			583,265			576,865
Intangible assets, net		228,992			233,027			213,910			217,319
Investments and other assets		67,447			51,240			90,617			66,657

Total assets	$	1,925,363		$	1,898,600		$	2,014,327		$	2,062,898

LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	33,719		$	26,634		$	32,658		$	37,481
Income taxes payable		4,351			8,396			7,204			4,526
Compensation and benefits payable		147,617			266,211			145,752			248,354
Term loan		19,754			30,000			19,754			19,754
Other accrued liabilities		149,865			145,023			153,386			148,464

Total current liabilities		355,306			476,264			358,754			458,579

Deferred compensation and other retirement plans		217,957			216,113			220,894			219,905
Term loan, non-current		251,038			110,000			231,284			236,222
Deferred tax liabilities		13,664			5,088			18,758			7,014
Other liabilities		51,056			43,834			55,886			54,130

Total liabilities		889,021			851,299			885,576			975,850


Stockholders’ equity:
Common stock: $0.01 par value, 150,000 shares authorized, 70,576 and 69,723 shares issued and 57,898 and 57,272 shares outstanding, respectively		705,792			702,098
Common stock: $0.01 par value, 150,000 shares authorized, 71,480 and 70,811 shares issued at July 31, 2017 and April 30, 2017, respectively, and 57,246 and 56,938 shares outstanding at July 31, 2017 and April 30, 2017, respectively								694,146			692,527
Retained earnings		398,412			401,113			485,194			461,976
Accumulated other comprehensive loss, net		(70,577	)		(57,911	)		(54,691	)		(71,064	)

Total Korn/Ferry International stockholders’ equity		1,033,627			1,045,300			1,124,649			1,083,439
Noncontrolling interest		2,715			2,001			4,102			3,609

Total stockholders’ equity		1,036,342			1,047,301			1,128,751			1,087,048

Total liabilities and stockholders’ equity	$	1,925,363		$	1,898,600		$	2,014,327		$	2,062,898

The accompanying notes are an integral part of these consolidated financial statements.


	Three Months Ended July 31,						Three Months Ended July 31,
	2016			2015			2017			2016
	(in thousands, except per share data)						(in thousands, except per share data)
Fee revenue	$	375,621		$	267,394		$	401,254		$	375,621
Reimbursed out-of-pocket engagement expenses		17,312			11,941			13,663			17,312

Total revenue		392,933			279,335			414,917			392,933


Compensation and benefits		262,967			179,456			273,954			262,967
General and administrative expenses		55,342			37,491			58,261			55,342
Reimbursed expenses		17,312			11,941			13,663			17,312
Cost of services		16,832			10,120			15,813			16,832
Depreciation and amortization		11,444			7,423			12,209			11,444
Restructuring charges, net		24,520			—			280			24,520

Total operating expenses		388,417			246,431			374,180			388,417


Operating income		4,516			32,904			40,737			4,516
Other income (loss), net		4,259			(74	)
Other income, net								3,532			4,259
Interest expense, net		(3,061	)		(299	)		(2,660	)		(3,061	)

Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries		5,714			32,531			41,609			5,714
Equity in earnings of unconsolidated subsidiaries, net		79			725			30			79
Income tax provision		1,725			10,174			12,210			1,725

Net income		4,068			23,082			29,429			4,068
Net income attributable to noncontrolling interest		(860	)		—			(388	)		(860	)

Net income attributable to Korn/Ferry International	$	3,208		$	23,082		$	29,041		$	3,208


Earnings per common share attributable to Korn/Ferry International:
Basic	$	0.06		$	0.46		$	0.52		$	0.06

Diluted	$	0.06		$	0.46		$	0.51		$	0.06


Weighted-average common shares outstanding:
Basic		56,189			49,493			55,795			56,189

Diluted		56,576			50,014			56,403			56,576

Cash dividends declared per share	$	0.10		$	0.10

Cash dividends declared per share:							$	0.10		$	0.10

The accompanying notes are an integral part of these consolidated financial statements.


							Three Months Ended July 31,
	Three Months Ended July 31,						2017			2016
	2016			2015			(in thousands, except per share data)
	(in thousands)
Net income	$	4,068		$	23,082		$	29,429		$	4,068

Other comprehensive (loss) income:
Other comprehensive income (loss):
Foreign currency translation adjustments		(13,274	)		(15,632	)		16,189			(13,274	)
Deferred compensation and pension plan adjustments, net of tax		462			447			352			462
Unrealized losses on marketable securities, net of tax		—			(4	)
Net unrealized loss on interest rate swap, net of tax								(63	)		—

Comprehensive (loss) income		(8,744	)		7,893
Comprehensive income (loss)								45,907			(8,744	)
Less: comprehensive income attributable to noncontrolling interest		(714	)		—			(493	)		(714	)

Comprehensive (loss) income attributable to Korn/Ferry International	$	(9,458	)	$	7,893
Comprehensive income (loss) attributable to Korn/Ferry International							$	45,414		$	(9,458	)

The accompanying notes are an integral part of these consolidated financial statements.


	Three Months Ended July 31,						Three Months Ended July 31,
	2016			2015			2017			2016
	(in thousands)						(in thousands)
Cash flows from operating activities:
Net income	$	4,068		$	23,082		$	29,429		$	4,068
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		11,444			7,423			12,209			11,444
Stock-based compensation expense		4,915			3,691			4,696			4,915
Provision for doubtful accounts		2,577			2,068			3,070			2,577
Gain on cash surrender value of life insurance policies		(2,498	)		(2,494	)		(2,485	)		(2,498	)
Gain on marketable securities		(3,915	)		(665	)		(3,429	)		(3,915	)
Deferred income taxes		5,410			5,124			8,562			5,410
Change in other assets and liabilities:
Deferred compensation		(5,866	)		(1,820	)		8,288			(5,866	)
Receivables due from clients		(28,586	)		(13,058	)		(23,413	)		(28,586	)
Income tax and other receivables		(8,093	)		1,145			(10,930	)		(8,093	)
Prepaid expenses and other assets		(10,066	)		(4,869	)		(10,983	)		(10,066	)
Investment in unconsolidated subsidiaries		(79	)		(725	)		(30	)		(79	)
Income taxes payable		(4,346	)		(1,990	)		6,463			(4,014	)
Accounts payable and accrued liabilities		(93,866	)		(96,737	)		(109,034	)		(93,866	)
Other		(7,137	)		(10,368	)		(21,986	)		(7,137	)

Net cash used in operating activities		(136,038	)		(90,193	)		(109,573	)		(135,706	)

Cash flows from investing activities:
Purchase of property and equipment		(15,079	)		(5,485	)		(9,529	)		(15,079	)
Cash paid for acquisition, net of cash acquired		(2,880	)		—			—			(2,880	)
Purchase of marketable securities		(5,430	)		(9,116	)		(4,600	)		(5,430	)
Proceeds from sales/maturities of marketable securities		13,764			16,364			1,734			13,764
Premium on company-owned life insurance policies		(401	)		(404	)		(403	)		(401	)
Proceeds from life insurance policies		—			1,659			971			—
Dividends received from unconsolidated subsidiaries		230			806			60			230

Net cash (used in) provided by investing activities		(9,796	)		3,824
Net cash used in investing activities								(11,767	)		(9,796	)

Cash flows from financing activities:
Proceeds from term loan facility		275,000			—			—			275,000
Principal payment on term loan facility		(140,000	)		—			(5,156	)		(140,000	)
Payment of contingent consideration from acquisition		(1,070	)		—			(485	)		(1,070	)
Purchase of common stock		(4,161	)		(6,573	)
Repurchases of common stock								(4,026	)		—
Payments of tax withholdings on restricted stock								(3,346	)		(4,161	)
Proceeds from issuance of common stock upon exercise of employee stock options and in connection with an employee stock purchase plan		2,430			2,379			3,984			2,430
Tax benefit related to stock-based compensation		332			4,064
Dividends paid to shareholders		(5,909	)		(5,115	)		(5,823	)		(5,909	)
Payments on life insurance policy loans		—			(1,151	)		(414	)		—

Net cash provided by (used in) financing activities		126,622			(6,396	)
Net cash (used in) provided by financing activities								(15,266	)		126,290

Effect of exchange rate changes on cash and cash equivalents		(9,967	)		(11,559	)		7,743			(9,967	)

Net decrease in cash and cash equivalents		(29,179	)		(104,324	)		(128,863	)		(29,179	)
Cash and cash equivalents at beginning of period		273,252			380,838			410,882			273,252

Cash and cash equivalents at end of period	$	244,073		$	276,514		$	282,019		$	244,073

The accompanying notes are an integral part of these consolidated financial statements.

~~July 31, 2016~~

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

July 31, 2017

Korn/Ferry International, a Delaware corporation (the “Company”), and its subsidiaries are engaged in the business of providing talent management solutions, including executive search on a retained basis, recruitment fornon-executive professionals, recruitment process outsourcing and leadership & talent consulting services. ~~The Company’s worldwide network of 128 offices in 52 countries enables it to meet the needs of its clients in all industries.~~

The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form10-K for the year ended April 30, ~~2016~~2017 for the Company and its wholly and majority owned/controlled domestic and international subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The preparation of the consolidated financial statements conform with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and prevailing practice within the industry. The consolidated financial statements include all adjustments, consisting of normal recurring accruals and any other adjustments that management considers necessary for a fair presentation of the results for these periods. The results of operations for the interim period are not necessarily indicative of the results for the entire fiscal year.

Investments in affiliated companies, which are 50% or less owned and where the Company exercises significant influence over operations, are accounted for using the equity method.

The Company has control of a Mexico subsidiary and consolidates the operations of this subsidiary. Noncontrolling interest, which represents the Company’s 51% noncontrolling interest in the Mexico subsidiary, is reflected on the Company’s consolidated financial statements.

The Company considers events or transactions that occur after the balance sheet date but before the consolidated financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosures.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates, and changes in estimates are reported in current operations as new information is learned or upon the amounts becoming fixed and determinable. The most significant areas that require management judgment are revenue recognition, restructuring, deferred compensation, annual performance related bonuses, evaluation of the carrying value of receivables, goodwill and other intangible assets, fair value of contingent consideration, share-based payments and the recoverability of deferred income taxes.

Substantially all fee revenue is derived from fees for professional services related to executive search performed on a retained basis, recruitment fornon-executive professionals, recruitment process outsourcing, people and organizational advisory services and the sale of ~~productized~~product services. Fee revenue from executive search activities and recruitment fornon-executive professionals is generallyone-third of the estimated first year compensation of the placed executive ornon-executive professional, as applicable, plus a percentage of the fee to cover indirect engagement related expenses. The Company generally recognizes such revenue on a straight-line basis over a three-month period, commencing upon client acceptance, as this is the period over which the recruitment services are performed. Fees earned in excess of the initial contract amount are recognized upon completion of the engagement, which reflect the difference between the final actual compensation of the placed executive and the estimate used for purposes of the previous billings. Since the initial contract fees are typically not contingent upon placement of a candidate, our assumptions primarily relate to establishing the period over which such service is performed. These assumptions determine the timing of revenue recognition and profitability for the reported period. Any revenues associated with services that are provided on a contingent basis are recognized once the contingency is resolved. In addition to recruitment fornon-executive professionals, Futurestep provides recruitment process outsourcing (“RPO”) services and fee revenue is recognized as services are rendered and/or as milestones are achieved. Fee revenue from Hay Group (formerly known as Leadership & Talent Consulting (“Legacy LTC”) which was combined with HG (Luxembourg) S.à.r.l (“Legacy Hay”) in December 2015) is recognized as services are rendered for consulting engagements and other ~~time based~~time-based services,

measured by total hours incurred to the total estimated hours at completion. It is possible that updated estimates for the consulting engagement may vary from initial estimates with such updates being recognized in the period of determination.

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

July 31, 2017 (continued)

Depending on the timing of billings and services rendered, the Company accrues or defers revenue as appropriate. Hay Group revenue is also derived from the sale of ~~productized~~product services, which includes revenue from licenses and from the sale of products. Revenue from licenses is recognized using a straight-line method over the term of the contract (generally 12 months). Under the fixed term licenses, the Company is obligated to provide the licensee with access to any updates to the underlying intellectual property that are made by the Company during the term of the license. Once the term of the agreement expires, the client’s right to access or use the intellectual property expires and the Company has no further obligations to the client under the license agreement. Revenue from perpetual licenses is recognized when the license is sold since the Company’s only obligation is to provide the client access to the intellectual property but is not obligated to provide maintenance, support, updates or upgrades. Products sold by the Company mainly consist of books and automated services covering a variety of topics including performance management, team effectiveness, and coaching and development. The Company recognizes revenue for its products when the product has been sold or shipped in the case of books. As of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, the Company included deferred revenue of ~~$88.9~~$93.6 million and ~~$95.9~~$95.8 million, respectively, in other accrued liabilities.

The Company incurs certainout-of-pocket expenses that are reimbursed by its clients, which are accounted for as revenue in its consolidated statements of income.

An allowance is established for doubtful accounts by taking a charge to general and administrative expenses. The amount of the allowance is based on historical loss experience, assessment of the collectability of specific accounts, as well as expectations of future collections based upon trends and the type of work for which services are rendered. After the Company exhausts all collection efforts, the amount of the allowance is reduced for balances identified as uncollectible.

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. As of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, the Company’s investments in cash equivalents consist of money market funds for which market prices are readily available.

The Company currently has investments in mutual funds that are classified as trading securities based upon management’s intent and ability to hold, sell or trade such securities. The classification of the investments in mutual funds is assessed upon purchase and reassessed at each reporting period. The investments in mutual funds (for which market prices are readily available) are held in trust to satisfy obligations under the Company’s deferred compensation ~~plans (see Note 6 —~~ ~~Financial Instruments~~).plans. Such investments are based upon the employees’ investment elections in their deemed accounts in the Executive Capital Accumulation Plan and similar plans in Asia Pacific and Canada (“ECAP”) from apre-determined set of securities and the Company invests in marketable securities to mirror these elections. These investments are recorded at fair value and are classified as marketable securities in the accompanying consolidated balance sheets. The investments that the Company may sell within the next twelve months are carried as current assets. Realized gains (losses) on marketable securities are determined by specific identification. Interest is recognized on an accrual ~~basis,~~basis; dividends are recorded as earned on theex-dividend date. Interest, ~~and~~ dividend income and the changes in fair value in trading securities are recorded in the accompanying consolidated statements of income in other income, ~~(loss),~~ net.

Beginning in the third quarter of fiscal 2016, the Company established a program that primarily utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures which increased as a result of the Hay Group acquisition. These foreign currency forward contracts are neither used for trading purposes nor are they designated as hedging instruments pursuant to Accounting Standards Codification 815, Derivatives and Hedging. Accordingly, the fair value of these contracts are recorded as of the end of the reporting period in the accompanying consolidated balance sheets, while the change in fair value is recorded to the accompanying consolidated statements of income.

Fair value is the price the Company would receive to sell an asset or transfer a liability (exit price) in an orderly transaction between market participants. For those assets and liabilities recorded or disclosed at fair value, the Company determines the fair value based upon the quoted market price, if available. If a quoted market price is not available for identical assets, the fair value is based upon the quoted market price of similar assets. The fair values are assigned a level within the fair value hierarchy as defined below:

As of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, the Company held certain assets that are required to be measured at fair value on a recurring basis. These included cash, cash equivalents, accounts receivable, marketable securities, ~~and~~ foreign currency forward ~~contracts.~~

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

July 31, 2017 (continued)

contracts and interest rate swap. The carrying amount of cash, cash equivalents and accounts receivable approximates fair value due to the short maturity of these instruments. The fair values of marketable securities classified as trading are obtained from quoted market prices, and the fair values of foreign currency forward contracts or the interest rate swap are obtained from a third party, which are based on quoted prices or market prices for similar assets and financial instruments.

The Company is exposed to interest rate risk due to the outstanding senior secured credit agreement entered on June 15, 2016. The Company has entered into an interest rate swap agreement to effectively convert its variable debt to a fixed-rate basis. The principal objective of these contracts is to eliminate or reduce the variability of the cash flows in interest payments associated with the Company’s long-term debt, thus reducing the impact of interest rate changes on future interest payment cash flows. The Company has determined that the interest rate swap qualifies as a cash flow hedge in accordance with Accounting Standards Codification 815,Derivatives and Hedging. Changes in the fair value of an interest rate swap agreement designated as a cash flow hedge are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are amortized to interest expense over the term of the related debt.

The Company has established a program that primarily utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures. These foreign currency forward contracts are neither used for trading purposes nor are they designated as hedging instruments pursuant to Accounting Standards Codification 815,Derivatives and Hedging. Accordingly, the fair value of these contracts is recorded as of the end of the reporting period in the accompanying consolidated balance sheets, while the change in fair value is recorded to the accompanying consolidated statements of income.

Business acquisitions are accounted for under the acquisition method. The acquisition method requires the reporting entity to identify the acquirer, determine the acquisition date, recognize and measure the identifiable assets acquired, the liabilities assumed and any ~~non-controlling~~noncontrolling interest in the acquired entity, and recognize and measure goodwill or a gain from the purchase. The acquiree’s results are included in the Company’s consolidated financial statements from the date of acquisition. Assets acquired and liabilities assumed are recorded at their fair values and the excess of the purchase price over the amounts assigned is recorded as goodwill, or if the fair value of the assets acquired exceeds the purchase price consideration, a bargain purchase gain is recorded. Adjustments to fair value assessments are generally recorded to goodwill over the measurement period (not longer than twelve months). The acquisition method also requires that acquisition-related transaction and post-acquisition restructuring costs be charged to expense as committed, and requires the Company to recognize and measure certain assets and liabilities including those arising from contingencies and contingent consideration in a business combination.

Goodwill represents the excess of the purchase price over the fair value of assets acquired. The goodwill impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting unit would be considered impaired. To measure the amount of the impairment loss, the implied fair value of a reporting unit’s goodwill is compared to the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. For each of these tests, the fair value of each of the Company’s reporting units is determined using a combination of valuation techniques, including a discounted cash flow methodology. To corroborate the discounted cash flow analysis performed at each reporting unit, a market approach is utilized using observable market data such as comparable companies in similar lines of business that are publicly traded or which are part of a public or private transaction (to the extent available). Results of the annual impairment test performed as of January 31, ~~2016,~~2017, indicated that the fair value of each reporting unit exceeded its carrying amount and no reporting units were at risk of failing the impairment test. As a result, no impairment charge was recognized. There ~~were~~was also no ~~indicators~~indication of potential impairment as of July 31, ~~2016~~2017 and April 30, ~~2016~~2017 that would have required further testing.

Intangible assets primarily consist of customer lists,non-compete agreements, proprietary databases, intellectual property and trademarks and are recorded at their estimated fair value at the date of acquisition and are amortized in a pattern in which the asset is consumed if that pattern can be reliably determined, or using the straight-line method over their estimated useful lives which range from one to 24 years. For intangible assets subject to amortization, an impairment loss is recognized if the carrying amount of the intangible assets is not recoverable and exceeds fair value. The carrying amount of the intangible assets is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from use of the asset. Intangible assets with indefinite lives are not amortized, but are reviewed annually for impairment or more frequently

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

July 31, 2017 (continued)

whenever events or changes in circumstances indicate that the fair value of the asset may be less than its carrying amount. As of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, there were no indicators of impairment with respect to the Company’s intangible assets.

Compensation and benefits expense in the accompanying consolidated statements of income consist of compensation and benefits paid to consultants (employees who originate business), executive officers and administrative and support personnel. The most significant portions of this expense are salaries and the amounts paid under the annual performance related bonus plan to employees. The portion of the expense applicable to salaries is comprised of amounts earned by employees during a reporting period. The portion of the expenses applicable to annual performance related bonuses refers to the Company’s annual employee performance related bonus with respect to a fiscal year, the amount of which is communicated and paid to each eligible employee following the completion of the fiscal year.

Each quarter, management makes its best estimate of its annual performance related bonuses, which requires management to, among other things, project annual consultant productivity (as measured by engagement fees billed and collected by executive search consultants and revenue and other ~~performance~~performance/profitability metrics for Hay Group and Futurestep consultants), the level of engagements referred by a ~~fee earner~~consultant in one line of business to a different line of business, Company performance including profitability, competitive forces and future economic conditions and their impact on the Company’s results. At the end of each fiscal year, annual performance related bonuses take into account final individual consultant productivity (including referred work), ~~Company~~Company/line of business results including profitability, the achievement of strategic objectives and the results of individual performance appraisals, and the current economic landscape. Accordingly, each quarter the Company reevaluates the assumptions used to estimate annual performance related bonus liability and adjusts the carrying amount of the liability recorded on the consolidated balance sheet and reports any changes in the estimate in current operations.

Because annual performance-based bonuses are communicated and paid only after the Company reports its full fiscal year results, actual performance-based bonus payments may differ from the prior year’s estimate. Such changes in the bonus estimate historically have been immaterial and are recorded in current operations in the period in which they are determined. The performance related bonus expense was ~~$42.4~~$41.6 million and ~~$41.8~~$42.4 million during the three months ended July 31, ~~2016~~2017 and ~~2015,~~2016, respectively, included in compensation and benefits expense in the consolidated statements of income.

Other expenses included in compensation and benefits expense are due to changes in deferred compensation and pension plan liabilities, changes in cash surrender value (“CSV”) of company owned life insurance (“COLI”) contracts, amortization of stock compensation awards, payroll taxes and employee insurance benefits. Investments and other assets include long-term retention awards that are generally amortized over four to five years.

The Company accounts for its restructuring charges as a liability when the obligations are incurred and records such charges at fair value. Such charges includedone-time employee termination benefits and the cost to terminate an office lease including remaining lease payments. Changes in the estimates of the restructuring charges are recorded in the period the change is determined.

The Company has employee compensation plans under which various types of stock-based instruments are granted. These instruments principally include restricted stock units, restricted stock, stock options and an Employee Stock Purchase Plan (“ESPP”). The Company recognizes compensation expense related to restricted stock units, restricted stock and the estimated fair value of stock options and stock purchases under the ESPP on a straight-line basis over the service period for the entire award.

In ~~April 2015,~~ March 2016,the ~~Financial Accounting Standards Board (the “FASB”)~~FASB issued guidance ~~simplifying~~on accounting for certain aspects of share-based payments to employees. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. Furthermore, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The guidance also allows companies to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifying that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity in the consolidated statements of cash flows and provides an accounting policy election to account for forfeitures as they occur. The provisions of the guidance are effective for fiscal years beginning after December 15, 2016, and were adopted by the Company effective May 1, 2017. The primary impact of the adoption was the recognition of excess tax benefits in our provision for income taxes in the current year compared to recording it previously as a component of equity. Additional amendments to the accounting for income taxes and

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

July 31, 2017 (continued)

minimum statutory withholding tax requirements had no impact to retained earnings, where the cumulative effect of these changes are required to be recorded. The Company elected to apply the presentation ~~of debt issue costs. The guidance requires debt issuance costs~~for cash flows related to excess tax benefits retrospectively for all periods presented which resulted in a ~~debt liability~~decrease to ~~be presented~~cash used in ~~the balance sheet as a direct deduction from the carrying amount~~operations and cash provided by financing activities of ~~that debt liability, rather than being classified as an asset. The Company adopted this guidance during~~$0.3 million for the three months ended July 31, ~~2016 and~~2016. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact on any of the periods presented on our consolidated cash flows statements since such cash flows have historically been presented as a result, $4.2 million of unamortized debt issuance costs associated with its senior secured Credit Agreement were classified as a direct deduction to the term loan as of July 31, 2016, of which $0.9 million was recorded to term loan, current, and $3.3 million was recorded to term loan, non-current. The adoption did not have a material impact on the consolidated financial statements as of April 30, 2016.

In September 2015, the FASB issued guidance requiring an acquirer to recognize adjustments to provisional amounts recorded in an acquisition that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The acquirer is required to record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The acquirer is also required to present separately on the face of the income statement or disclose in the footnotes, the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustments had been recognized as of the acquisition date.financing activity. The Company ~~adopted this guidance during~~elected to account for forfeitures as they occur, rather than estimating the ~~three months ended July 31, 2016 and~~expected forfeitures over the ~~adoption~~vesting period. This election did not have an impact on the consolidated financial ~~statements of the Company.~~statements.

In May 2014, the FASB issued guidance that supersedes revenue recognition requirements regarding contracts with customers to transfer goods or services or for the transfer of nonfinancial assets. Under the new guidance, entities are required to recognize revenue ~~in order to depict~~that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step analysis to be performed on transactions to determine when and how revenue is recognized. The guidance permits two transition methods of adoption 1) the full retrospective method, in which case the standard would be applied to all reporting periods presented, or 2) the modified retrospective method, with a cumulative-effect adjustment as of the date of adoption. In July 2015, the FASB decided to approve aone-year deferral of the effective date as well as providing an option to early adopt the standard on the original effective date. This new guidance is effective for fiscal years and interim periods within those annual years beginning after December 15, ~~2017 as opposed to the original effective date of December 15, 2016.~~2017. The Company will adopt this guidance in its fiscal year beginning May 1, 2018. The Company ~~is currently evaluating~~has organized a team and developed a project plan to guide the ~~effect~~implementation. The project plan includes working sessions to review, evaluate and document the ~~guidance will have on~~arrangements with customers under our ~~financial condition and results~~various reporting units to identify potential differences that would result from applying the requirements of ~~operations.~~

~~In January 2016,~~ the FASB issued guidance on the classification and measurement of financial instruments, which requires that (i) all equity investments, other than equity-method investments, in unconsolidated entities, generally be measured at fair value through earnings and (ii) when the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit risk, be recognized separately in other comprehensive income. Additionally, it changes the disclosure requirements for financial instruments. The new ~~guidance is effective for fiscal years beginning after December 15, 2017, with early adoption permitted for certain provisions.~~standard. The Company is currently in the process of developing an updated accounting policy utilizing abottoms-up approach by reviewing our current contracts with customers by various revenue streams, evaluating new disclosure requirements and identifying and implementing appropriate changes to business processes, systems and controls to support revenue recognition and disclosure under the new standard. The Company is still evaluating the ~~effect~~impact of ASUNo. 2014-09 on our financial statements. Based on our evaluation to date, under the ~~guidance will have~~new standard revenue on the ~~consolidated financial statements.~~majority of our contracts will continue to be recognized over time as services are rendered. In addition, capitalization of costs associated with obtaining contracts will be required upon adoption of the new standard. The Company expects to finalize the evaluation in upcoming quarters and will provide updates on our progress including decisions made on method of adoption in future filings.

In February 2016, the FASB issued guidance on accounting for leases that generally requires all leases to be recognized inon the consolidated balance sheet. The provisions of the guidance are effective for fiscal years beginning after December 15, ~~2018;~~2018, and early adoption is permitted. The Company plans to adopt this guidance in fiscal year beginning May 1, 2019. The provisions of the guidance are to be applied using a modified retrospective approach. The Company is currently evaluating the effect ~~that~~ this guidance will have on the consolidated financial statements.

In ~~March~~August 2016, the FASB issued guidance on ~~accounting for~~the classification of certain ~~aspects~~cash receipts and cash payments in the statement of ~~share-based payments to employees.~~cash flows. The new guidance ~~requires excess tax benefits~~provides clarification on specific cash flow issues regarding presentation and ~~tax deficiencies to be recorded~~classification in the ~~income~~ statement when the awards vest or are settled. Furthermore, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The guidance also allows companies to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifying that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity in the consolidated statements of cash flows ~~and provides an accounting policy election~~with the objective of reducing the existing diversity in practice. The amendments in this update are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The Company plans to ~~account for forfeitures as they occur.~~adopt this guidance in its fiscal year beginning May 1, 2018. The provisions of the guidance are to be applied using a retrospective transition method. The adoption of this guidance is not anticipated to have a material impact on the consolidated financial statements.

In January 2017, the FASB issued guidance that clarifies the definition of a business. The new guidance assists a company when evaluating whether transactions should be accounted for as acquisitions (disposals) of assets or businesses. The provisions of the guidance require that if the fair value of the gross assets acquired (or disposed of) is substantially concentrated in a single identifiable asset or a group of similar identifiable assets, then it is not a business. The provisions of the guidance are effective for annual years beginning after December 15, 2017, including interim periods, with early adoption permitted. The Company plans to adopt this guidance in its fiscal year beginning May 1, 2018. The provisions of the guidance are to be applied prospectively. The adoption of this guidance is not anticipated to have a material impact on the consolidated financial statements.

In January 2017, the FASB issued guidance simplifying the test for goodwill impairment. The new guidance simplifies the test for goodwill impairment by removing Step 2 from the goodwill impairment test. Companies will now perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value not to exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendments of this standard are effective for goodwill

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

July 31, 2017 (continued)

impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted for goodwill impairment tests performed after January 1, 2017. The Company is evaluating the adoption timeline and the effects that the standard will have on the consolidated financial statements.

In March 2017, the FASB issued guidance that improves the presentation of net periodic pension cost and net periodic postretirement benefit cost. The new guidance will change the presentation of net periodic benefit cost related to employer sponsored defined benefit plans and other postretirement benefits. Service cost will be included within the same income statement line item as other compensation costs arising from services rendered during the period, while other components of net periodic benefit pension cost will be presented separately outside of operating income. Additionally, only service costs may be capitalized in assets. The amendments of this standard are effective for fiscal years beginning after December 15, ~~2016;~~2017, including interim periods within those years. The Company will adopt this guidance in its fiscal year beginning May 1, 2018. The adoption of this standard is not anticipated to have a material impact on the consolidated financial statements.

In May 2017, the FASB issued guidance clarifying the scope of modification accounting for stock compensation. The new standard provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This pronouncement is effective for annual reporting periods beginning after December 15, 2017, but early adoption is permitted. The Company will adopt this guidance in its fiscal year beginning May 1, 2018. The Company is currently evaluating the ~~effect that~~impact of adopting this ~~guidance will have on the consolidated financial statements.~~guidance.

~~KORN/FERRY INTERNATIONAL AND SUBSIDIARIES~~2. Basic and Diluted Earnings Per Share

Accounting Standards Codification 260,Earnings Per Share, requires companies to treat unvested share-based payment awards that havenon-forfeitable rights to dividends prior to vesting as a separate class of securities in calculating earnings per share. We have granted and expect to continue to grant to certain employees under our restricted stock agreements, grants that containnon-forfeitable rights to dividends. Such grants are considered participating securities. Therefore, we are required to apply thetwo-class method in calculating earnings per share. Thetwo-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. The dilutive effect of participating securities is calculated using the more dilutive of the treasury method or thetwo-class method.

Basic earnings per common share was computed using thetwo-class method by dividing basic net earnings attributable to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per common share was computed using thetwo-class method by dividing diluted net earnings attributable to common stockholders by the weighted-average number of common shares outstanding plus dilutive common equivalent shares. Dilutive common equivalent shares include allin-the-money outstanding options or other contracts to issue common stock as if they were exercised or converted.

~~During~~ Financial instruments that are not in the ~~three months ended July 31, 2016~~form of common stock, but when converted into common stock increase earnings per share are anti-dilutive, and ~~2015, all shares of outstanding options were~~are not included in the computation of diluted earnings per share.

During ~~both~~ the three months ended July 31, ~~2016~~2017 and ~~2015,~~2016, restricted stock awards of 0.6 million and 0.5 million were outstanding, respectively, but not included in the computation of diluted earnings per share because they were anti-dilutive.

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

July 31, 2017 (continued)

The following table summarizes basic and diluted earnings per common share attributable to common stockholders:


	Three Months Ended July 31,				Three Months Ended July 31,
	2016		2015		2017		2016
	(in thousands, except per share data)				(in thousands, except per share data)
Net income attributable to Korn/Ferry International	$	3,208	$	23,082	$	29,041	$	3,208
Less: distributed and undistributed earnings to nonvested restricted stockholders		44		224		288		44

Basic net earnings attributable to common stockholders		3,164		22,858		28,753		3,164
Add: undistributed earnings to nonvested restricted stockholders		—		176		232		—
Less: reallocation of undistributed earnings to nonvested restricted stockholders		—		174		230		—

Diluted net earnings attributable to common stockholders	$	3,164	$	22,860	$	28,755	$	3,164


Weighted-average common shares outstanding:
Basic weighted-average number of common shares outstanding		56,189		49,493		55,795		56,189
Effect of dilutive securities:
Restricted stock		316		452		588		316
Stock options		60		66		12		60
ESPP		11		3		8		11

Diluted weighted-average number of common shares outstanding		56,576		50,014		56,403		56,576


Net earnings per common share:
Basic earnings per share	$	0.06	$	0.46	$	0.52	$	0.06

Diluted earnings per share	$	0.06	$	0.46	$	0.51	$	0.06

The following table summarizes the changes in stockholders’ equity for the three months ended July 31, ~~2016~~

~~Stockholders’ Equity~~

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

July 31, 2017 (continued)

The following table summarizes the changes in stockholders’ equity for the three months ended July 31, 2016:


	Total Korn/Ferry International Stockholders’ Equity			Noncontrolling Interest			Total Stockholders’ Equity			Total Korn/Ferry International Stockholders’ Equity			Noncontrolling Interest			Total Stockholders’ Equity
	(in thousands)									(in thousands)
Balance as of April 30, 2016	$	1,045,300		$	2,001		$	1,047,301		$	1,045,300		$	2,001		$	1,047,301
Comprehensive income (loss):
Net income		3,208			860			4,068			3,208			860			4,068
Foreign currency translation adjustments		(13,128	)		(146	)		(13,274	)		(13,128	)		(146	)		(13,274	)
Deferred compensation and pension plan adjustments, net of tax		462			—			462			462			—			462
Dividends declared		(5,909	)		—			(5,909	)
Dividends paid to shareholders											(5,909	)		—			(5,909	)
Purchase of stock		(4,161	)		—			(4,161	)		(4,161	)		—			(4,161	)
Issuance of stock		2,784			—			2,784			2,784			—			2,784
Stock-based compensation		4,739			—			4,739			4,739			—			4,739
Tax benefit from exercise of stock options and vesting of restricted stock		332			—			332			332			—			332

Balance as of July 31, 2016	$	1,033,627		$	2,715		$	1,036,342		$	1,033,627		$	2,715		$	1,036,342

Comprehensive income (loss) ~~income~~ is comprised of net income (loss) and all changes to stockholders’ equity, except those changes resulting from investments by stockholders (changes in paid in capital) and distributions to stockholders (dividends) and is reported in the accompanying consolidated statements of comprehensive income (loss)~~/income.~~. Accumulated other comprehensive loss, net of taxes, is recorded as a component of stockholders’ equity.


	July 31, 2016			April 30, 2016			July 31, 2017			April 30, 2017
	(in thousands)						(in thousands)
Foreign currency translation adjustments	$	(49,467	)	$	(36,339	)	$	(39,275	)	$	(55,359	)
Deferred compensation and pension plan adjustments, net of tax		(21,110	)		(21,572	)		(14,775	)		(15,127	)
Interest rate swap unrealized loss, net of taxes								(641	)		(578	)

Accumulated other comprehensive loss, net	$	(70,577	)	$	(57,911	)	$	(54,691	)	$	(71,064	)

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

July 31, 2017 (continued)

The following table summarizes the changes in each component of accumulated other comprehensive income (loss) for the three months ended July 31, 2017:

The following table summarizes the changes in each component of accumulated other comprehensive income (loss) for the three months ended July 31, 2016:

~~The following table summarizes the changes in each component of accumulated other comprehensive income (loss) for the three months ended July 31, 2015:~~


	Foreign Currency Translation			Deferred Compensation and Pension Plan (1)			Unrealized Gains (Losses) on Marketable Securities			Accumulated Other Comprehensive Income (Loss)			Foreign Currency Translation			Deferred Compensation and Pension Plan (1)			Accumulated Other Comprehensive Income (Loss)
	(in thousands)												(in thousands)
Balance as of April 30, 2015	$	(20,919	)	$	(19,708	)	$	4		$	(40,623	)
Balance as of April 30, 2016													$	(36,339	)	$	(21,572	)	$	(57,911	)
Unrealized losses arising during the period		(15,632	)		—			(4	)		(15,636	)		(13,128	)		—			(13,128	)
Reclassification of realized net losses to net income		—			447			—			447			—			462			462

Balance as of July 31, 2015	$	(36,551	)	$	(19,261	)	$	—		$	(55,812	)
Balance as of July 31, 2016													$	(49,467	)	$	(21,110	)	$	(70,577	)

The following table summarizes the components of stock-based compensation expense recognized in the Company’s consolidated statements of ~~income~~operations for the periods indicated:


	Three Months Ended July 31,						Three Months Ended July 31,
	2016			2015			2017			2016
	(in thousands)						(in thousands)
Restricted stock	$	4,739		$	3,554		$	4,405		$	4,739
ESPP		176			120			291			176
Stock options		—			17

Total stock-based compensation expense, pre-tax		4,915			3,691			4,696			4,915
Tax benefit from stock-based compensation expense		(1,484	)		(1,154	)		(1,378	)		(1,484	)

Total stock-based compensation expense, net of tax	$	3,431		$	2,537		$	3,318		$	3,431

At the Company’s ~~2012~~2016 Annual Meeting of Stockholders, held on ~~September 27, 2012,~~October 6, 2016, the Company’s stockholders approved an amendment and restatement to the Korn/Ferry International Amended and Restated 2008 Stock Incentive Plan (the ~~2012~~2016 amendment and restatement being ~~the “Second~~“The Third A&R 2008 Plan”), which among other things, increased the number of shares under the plan by 5,500,000 shares, increasing the current maximum number of shares that may be issued under the plan to ~~5,700,000~~11,200,000 shares, subject to certain changes in the Company’s capital structure and other extraordinary events. The ~~Second~~Third A&R 2008 Plan provides for the grant of awards to eligible participants, designated as either nonqualified or incentive stock options, restricted stock and restricted stock units, any of which may be performance-based or market-based, and incentive bonuses, which may be paid in cash or stock or a combination thereof. Under the ~~Second~~Third A&R 2008 Plan, the ability to issue full-value awards is limited by requiring full-value stock awards to count ~~1.91~~2.3 times as much as stock options.

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

July 31, 2017 (continued)

The Company grants time-based restricted stock awards to executive officers and other senior employees generally vesting over a ~~three to four year~~four-year period. In addition, certain key management members typically receive time-based restricted stock awards upon commencement of employment and may receive them annually in conjunction with the Company’s performance review. Time-based restricted stock awards are granted at a price equal to fair value, which is determined based on the closing price of the Company’s common stock on the grant date. The Company recognizes compensation expense for time-based restricted stock awards on a straight-line basis over the vesting period.

The Company also grants market-based and performance-based restricted stock units to executive officers and other senior employees. The market-based units vest after three years depending upon the Company’s total stockholder return over the

three-year performance period relative to other companies in its selected peer group. The fair value of these market-based restricted stock units are determined by using extensive market data that is based on historical Company and peer group information. The Company recognizes compensation expense for market-based restricted stock units on a straight-line basis over the vesting period.

Performance-based restricted stock units vest after three years depending upon the Company meeting certain objectives that are set at the time the restricted stock unit is issued. Performance-based restricted stock units are granted at a price equal to the fair value, which is determined based on the closing price of the Company’s common stock on the grant date. ~~The Company recognizes compensation expense for performance-based restricted stock units on a straight-line basis over the vesting period.~~ At the end of each reporting period, the Company estimates the number of restricted stock units expected to vest, based on the probability that certain performance objectives will be met, exceeded, or fall below target levels, and the Company takes into account these estimates when calculating the expense for the period.

Restricted stock activity during the three months ended July 31, ~~2016~~2017 is summarized below:


	Shares			Weighted- Average Grant Date Fair Value		Shares			Weighted- Average Grant Date Fair Value
	(in thousands, except per share data)					(in thousands, except per share data)
Non-vested, April 30, 2016		1,506		$	34.12
Non-vested, April 30, 2017							1,581		$	29.74
Granted		718		$	19.89		574		$	34.10
Vested		(666	)	$	21.80		(368	)	$	26.32
Forfeited/expired		(11	)	$	26.35		(62	)	$	33.19

Non-vested, July 31, 2016		1,547		$	32.87
Non-vested, July 31, 2017							1,725		$	31.79

As of July 31, ~~2016,~~2017, there were ~~0.6~~0.7 million shares and ~~0.1~~0.2 million shares outstanding relating to market-based and performance-based restricted stock units, respectively, with total unrecognized compensation totaling ~~$11.7~~$11.0 million and ~~$9.3~~$7.0 million, respectively.

As of July 31, ~~2016,~~2017, there was ~~$41.6~~$42.1 million of total unrecognized compensation cost related to allnon-vested awards of restricted stock, which is expected to be recognized over a weighted-average period of 2.7 years. During the three months ended July 31, 2017 and 2016, ~~and 2015, 185,754~~97,483 shares and ~~188,104~~185,754 shares of restricted stock totaling ~~$4.2~~$3.3 million and ~~$6.6~~$4.2 million, respectively, were repurchased by the Company, at the option of the employee, to pay for taxes related to vesting of restricted stock.

The Company has an ESPP that, in accordance with Section 423 of the Internal Revenue Code, allows eligible employees to authorize payroll deductions of up to 15% of their salary to purchase shares of the Company’s common stock at 85% of the fair market price of the common stock on the last day of the enrollment period. Employees may not purchase more than $25,000 in stock during any calendar year. The maximum number of shares that may be issued under the ESPP is 3.0 million shares. During the three months ended July 31, 2017 and 2016, employees purchased 116,285 shares at $29.35 per share and 114,011 shares at $17.60 per ~~share. During the three months ended July 31, 2015, employees purchased 44,334 shares at $29.55 per share.~~share, respectively. As of July 31, ~~2016,~~2017, the ESPP had approximately ~~1.4~~1.2 million shares remaining available for future issuance.

During the three months ended July 31, ~~2016~~2017 and ~~2015,~~2016, the Company issued ~~32,470~~41,075 shares and ~~71,428~~32,470 shares of common stock, respectively, as a result of the exercise of stock options, with cash proceeds from the exercise of ~~$0.4~~$0.6 million and ~~$1.1~~$0.4 million, respectively.

During the three months ended July 31, 2017, the Company repurchased (on the open market) 119,356 shares of the Company’s common stock for $4.0 million. No shares were repurchased during the three months ended July 31, 2016, ~~and 2015,~~ other than to satisfy minimum tax withholding requirements upon the vesting of restricted stock as described above.

~~July 31, 2016~~

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

July 31, 2017 (continued)

The following tables show the Company’s ~~cash, trading securities~~financial instruments and foreign currency forward contracts’ cost, gross unrealized gains, gross unrealized losses and fair value by significant category recorded as cash and cash equivalents, current portion of current marketable securities, non-current marketable securities, or other accrued liabilitiesbalance sheet classification as of July 31, ~~2016~~2017 and April 30, ~~2016:~~2017:


																				July 31, 2017
	July 31, 2016																			Fair Value Measurement										Balance Sheet Classification
	Fair Value Measurement										Balance Sheet Classification									Cost		Unrealized Gains		Unrealized Losses			Fair Value			Cash and Cash Equivalents		Marketable Securities, Current		Marketable Securities, Non-current		Other Accrued Liabilities			Income Taxes & Other Receivables
	Cost		Unrealized Gains		Unrealized Losses			Fair Value			Cash and Cash Equivalents		Marketable Securities, Current		Marketable Securities, Non-current		Other Accrued Liabilities			(in thousands)
	(in thousands)
Level 1:
Cash	$	119,660	$	—	$	—		$	119,660		$	119,660	$	—	$	—	$	—		$	280,961	$	—	$	—		$	280,961		$	280,961	$	—	$	—	$	—		$	—
Money market funds		124,413		—		—			124,413			124,413		—		—		—			1,058		—		—			1,058			1,058		—		—		—			—
Mutual funds (1)		134,447		3,477		(947	)		136,977			—		3,475		133,502		—			117,222		9,533		(496	)		126,259			—		11,651		114,608		—			—

Total	$	378,520	$	3,477	$	(947	)	$	381,050		$	244,073	$	3,475	$	133,502	$	—		$	399,241	$	9,533	$	(496	)	$	408,278		$	282,019	$	11,651	$	114,608	$	—		$	—


Level 2:
Foreign currency forward contracts	$	—	$	419	$	(966	)	$	(547	)	$	—	$	—	$	—	$	(547	)	$	—	$	386	$	(400	)	$	(14	)	$	—	$	—	$	—	$	(315	)	$	301
Interest rate swap																				$	—	$	—	$	(1,050	)	$	(1,050	)	$	—	$	—	$	—	$	(1,050	)	$	—

																				April 30, 2017
																				Fair Value Measurement										Balance Sheet Classification
																				Cost		Unrealized Gains		Unrealized Losses			Fair Value			Cash and Cash Equivalents		Marketable Securities, Current		Marketable Securities, Non-current		Other Accrued Liabilities			Income Taxes & Other Receivables
																				(in thousands)

Level 1:
Cash																				$	409,824	$	—	$	—		$	409,824		$	409,824	$	—	$	—	$	—		$	—
Money market funds																					1,058		—		—			1,058			1,058		—		—		—			—
Mutual funds (1)																					113,818		6,697		(578	)		119,937			—		4,363		115,574		—			—

Total																				$	524,700	$	6,697	$	(578	)	$	530,819		$	410,882	$	4,363	$	115,574	$	—		$	—


Level 2:
Foreign currency forward contracts																				$	—	$	129	$	(846	)	$	(717	)	$	—	$	—	$	—	$	(717	)	$	—
Interest rate swap																				$	—	$	—	$	(947	)	$	(947	)	$	—	$	—	$	—	$	(947	)	$	—

Investments in marketable securities classified as trading are based upon investment selections the employee elects from apre-determined set of securities in the ECAP and the Company invests in marketable securities to mirror these elections. As of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, the Company’s investments in marketable securities classified as trading consist of mutual funds for which market prices are readily available. ~~Investments~~

In March 2017, the Company entered into an interest rate swap contract with a notional amount of $129.8 million, to hedge the variability to changes in ~~marketable securities classified~~cash flows attributable to interest rate risks caused by changes in interest rates related to its variable rate debt. The Company has designated the swap as ~~available-for-sale securities are made based on~~a cash flow hedge. The notional amount will be amortized so that the ~~Company’s investment policy, which restricts~~amount is always half of the ~~types~~principal balance of ~~investments that can be made.~~the debt outstanding. As of July 31, ~~2016~~2017, the notional amount was $127.2 million. The interest rate swap agreement matures on June 15, 2021, and ~~April 30, 2016,~~locks the ~~Company does not hold marketable securities classified~~interest rates on half the debt outstanding at 1.919%, exclusive of the credit spread on the debt.

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

July 31, 2017 (continued)

The fair value of the derivative designated as ~~available-for-sale.~~ a cash flow hedge instrument is as follows:

During the three months ended July 31, ~~2015,~~2017, the Company ~~received $3.0~~recognized the following losses on the interest rate swap:

As the critical terms of the hedging instrument and the hedged forecasted transaction are the same, the Company has concluded that the changes in the fair value or cash flows attributable to the risk being hedged are expected to completely offset at inception and on an ongoing basis.

We estimate that $0.7 million of derivative losses included in ~~proceeds from maturities~~accumulated other comprehensive income as of ~~available-for-sale marketable securities.~~

2017 will be reclassified into other expense within the following 12 months. The cash flows related to the interest rate swap contract are included in net cash provided by operating activities.

The fair value of derivatives not designated as hedge instruments are as follows:


	July 31, 2016		April 30, 2016		July 31, 2017			April 30, 2017
	(in thousands)				(in thousands)
Derivative assets:
Foreign currency forward contracts	$	419	$	324
Total gross amount of foreign currency forward contracts					$	386		$	—
Gross derivatives offset on the balance sheet (1)						(85	)		—

Net amounts presented on the balance sheet					$	301		$	—


Derivative liabilities:
Foreign currency forward contracts	$	966	$	1,041
Total gross amount of foreign currency forward contracts					$	400		$	846
Gross derivatives offset on the balance sheet (1)						(85	)		(129	)

Net amounts presented on the balance sheet					$	315		$	717

As of July 31, ~~2016,~~2017, the total notional amounts of the forward contracts purchased and sold were ~~$13.1~~$12.2 million and ~~$58.5~~$67.2 million, respectively. As of April 30, ~~2016,~~2017, the total notional amounts of the forward contracts purchased and sold were ~~$14.5~~$19.4 million and ~~$44.3~~$70.0 million, respectively. ~~The~~During the three months ended July 31, 2017, the Company ~~recognizes~~incurred losses of $2.6 million related to forward contracts aswhich is recorded in general and administrative expenses in the accompanying consolidated statements of operations. These losses offset foreign currency gains that result from transactions denominated in a ~~net asset or net liability on~~currency other than the ~~consolidated balance sheets as such contracts are covered by master netting agreements.~~Company’s functional currency. The Company incurred an immaterial net gain related to forward contracts during the three months ended July 31, ~~2016, which is recorded in general and administrative expenses in the accompanying consolidated statements of income.~~2016. The cash flows related to foreign currency forward contracts are included in net cash used in operating activities.

The Company has several deferred compensation and retirement plans for eligible consultants and vice presidents that provide defined benefits to participants based on the deferral of current compensation or contributions made by the Company subject to vesting and retirement or termination provisions. Among these plans is a defined benefit pension plan for certain Hay Group employees in the United States. The assets of this plan are held separately from the assets of the sponsors in self-administered funds. The plan is funded consistent with local statutory requirements and the Company ~~does not expect~~expects to ~~make any contribution~~contribute $0.2 million to this plan during fiscal ~~2017.~~2018. All other defined benefit obligations from other plans are unfunded.


	Three Months Ended July 31,					Three Months Ended July 31,
	2016			2015		2017			2016
	(in thousands)					(in thousands)
Service cost						$	2,126		$	609
Interest cost	$	1,062		$	703		959			1,062
Amortization of actuarial loss		763			731		577			763
Service cost		609			—
Expected return on plan assets(1)		(390	)		—		(399	)		(390	)

Net periodic benefit costs	$	2,044		$	1,434	$	3,263		$	2,044

The Company purchased COLI contracts insuring the lives of certain employees eligible to participate in the deferred compensation and pension plans as a means of funding benefits under such ~~plans mentioned above that are unfunded.~~plans. The gross CSV of these contracts of ~~$178.6~~$180.7 million and ~~$175.7~~$180.3 million is offset by outstanding policy loans of ~~$68.4~~$66.8 million and $67.2 million in the accompanying consolidated balance sheets as of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, respectively. The CSV value of the underlying COLI investments increased by $2.5 million during ~~both~~ the three months ended July 31, 2017 and 2016, and ~~2015, respectively,~~is recorded as a decrease in compensation and benefits expense in the accompanying consolidated statements of income.

The ~~Company has an~~Company’s ECAP ~~which~~ is intended to provide certain employees an opportunity to defer salary and/or bonus on apre-tax basis or make anafter-tax contribution. In addition, the Company, as part of its compensation philosophy, makes discretionary contributions into the ECAP and such contributions may be granted to key employees annually based ~~upon employee~~on the employee’s performance. Certain key management may also receive Company ECAP contributions upon commencement of employment. AsThe Company amortizes these contributions ~~vest,~~on a straight-line basis over the service period, generally a four- to five-year period. Participants have the ability to allocate their deferrals among a number of investment options and may receive their benefits at termination, retirement or “in service” either in a lump sum or in quarterly installments over one to 15 years. The ECAP amounts that are ~~recorded~~expected to be paid to employees over the next 12 months are classified as a current liability included in ~~deferred~~ compensation and ~~other retirement plans~~benefits payable on the accompanying balance ~~sheet and compensation and benefits on the accompanying consolidated statements of income. Participants generally vest in Company contributions over a four to five year period.~~

The ECAP is accounted for whereby the changes in the fair value of the vested amounts owed to the participants are adjusted with a corresponding charge (or credit) to compensation and benefits costs. During the three months ended July 31, ~~2016~~2017 and ~~2015,~~2016, deferred compensation liability increased; therefore, the Company recognized an increase in compensation expense ~~$3.2~~of $3.7 million and ~~$0.7~~$3.2 million, respectively. Offsetting ~~these increases~~the increase in compensation and benefits expense was an increase in the fair value of marketable securities classified as trading (held in trust to satisfy obligations under ~~certain deferred compensation liabilities)~~the ECAP) of ~~$3.9~~$3.4 million and ~~$0.7~~$3.9 million during the three months ended July 31, ~~2016~~2017 and ~~2015,~~2016, respectively, recorded in other income, ~~(loss),~~ net on the consolidated statements of income (see Note ~~6 —~~6—Financial Instruments).

During fiscal 2016, the Company implemented a restructuring plan in order to rationalize its cost structure by eliminating redundant positions and consolidating office space due to the acquisition of Legacy Hay on December 1, 2015. The Company continued the implementation of the fiscal 2016 restructuring plan ~~during the three months ended July 31, 2016~~in fiscal 2018 in order to integrate the Hay Group entities that were acquired in ~~the prior year acquisition~~fiscal 2016 by ~~eliminating redundant positions and operational and general and administrative expenses and~~ consolidating ~~office space.~~premises. This resulted in restructuring charges of ~~$24.5~~$0.3 million in the three months ended July 31, ~~2016,~~2017, all of which ~~$11.5 million relates to severance and $13.0 million~~ relates to consolidation of ~~office space.~~premises.

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

July 31, 2017 (continued)

Changes in the restructuring liability during the three months ended July 31, ~~2016~~2017 are as follows:


	Severance			Facilities			Total				Severance			Facilities			Total
	(in thousands)										(in thousands)
Liability as of April 30, 2016	$	5,293		$	669		$	5,962
Liability as of April 30, 2017											$	5,341		$	8,354		$	13,695
Restructuring charges, net		11,472			13,048			24,520				—			280			280
Reductions for cash payments		(4,788	)		(1,787	)		(6,575	)			(2,602	)		(1,464	)		(4,066	)
Reductions for non-cash charges		—			(2,480	)		(2,480	)
Exchange rate fluctuations		(111	)		(66	)		(177	)			165			244			409

Liability as of July 31, 2016	$	11,866		$	9,384		$	21,250
Liability as of July 31, 2017											$	2,904		$	7,414		$	10,318

As of July 31, 2017 and April 30, 2017, the restructuring liability is included in the current portion of other accrued liabilities on the consolidated balance sheets, except for $4.0 million and $4.6 million, respectively, of facilities costs which primarily relate to commitments under operating leases, net of sublease income, which are included in other long-term liabilities. The restructuring liability by segment is summarized below:										As of July 31, 2017 and April 30, 2017, the restructuring liability is included in the current portion of other accrued liabilities on the consolidated balance sheets, except for $4.0 million and $4.6 million, respectively, of facilities costs which primarily relate to commitments under operating leases, net of sublease income, which are included in other long-term liabilities. The restructuring liability by segment is summarized below:
											July 31, 2017
											Severance			Facilities			Total
											(in thousands)
Executive Search
North America											$	40		$	242		$	282
Europe, Middle East and Africa (“EMEA”)												204			—			204
Asia Pacific												—			3			3
Latin America												—			49			49

Total Executive Search												244			294			538
Hay Group												2,660			6,991			9,651
Futurestep												—			129			129

Liability as of July 31, 2017											$	2,904		$	7,414		$	10,318


											April 30, 2017
											Severance			Facilities			Total
											(in thousands)
Executive Search
North America											$	134		$	250		$	384
Europe, Middle East and Africa												393			—			393
Asia Pacific												—			6			6
Latin America												—			87			87

Total Executive Search												527			343			870
Hay Group												4,814			7,879			12,693
Futurestep												—			132			132

Liability as of April 30, 2017											$	5,341		$	8,354		$	13,695

As of July 31, 2016 and April 30, 2016, the restructuring liability is included in the current portion of other accrued liabilities on the consolidated balance sheets, except for $4.5 million and $0.6 million, respectively, of facilities costs which primarily relate to commitments under operating leases, net of sublease income, which are included in other long-term liabilities.9. Business Segments

The Company currently operates in three global businesses: Executive Search, Hay Group and Futurestep. The Executive Search segment focuses on recruiting Board of Director andC-level positions, in addition to research-based interviewing and onboarding solutions, for clients predominantly in the consumer, financial services, industrial, life sciences/healthcare and technology industries. Hay Group assists clients with ongoing assessment, compensation and development of their senior executives and management teams, and addresses ~~three~~four fundamental needs: Talent Strategy, Succession Management, ~~and~~ Leadership Development, and Rewards, Motivation and Engagement, all underpinned by a comprehensive array of world-leading ~~IP,~~intellectual property, products and tools. Futurestep is a global industry leader in high-impact talent acquisition solutions. Its portfolio of services includes global and regional RPO, project recruitment, individual professional search and consulting. The Executive Search business segment is managed by geographic regional leaders and Hay Group and Futurestep worldwide operations are managed by their Chief Executive Officers. The Executive Search geographic regional leaders and the Chief Executive Officers of Hay Group and Futurestep report directly to the Chief Executive Officer of the Company. The Company also operates a Corporate segment to record global expenses of the Company.

The Company evaluates performance and allocates resources based on the Company’s chief operating decision maker’s ~~(“CODM”)~~ review of (1) fee revenue and (2) adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). To the extent that such charges occur, Adjusted EBITDA excludes restructuring charges, integration/acquisition costs, certain separation costs and certainnon-cash charges (goodwill, intangible asset and other than temporary impairment). The

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

July 31, 2017 (continued)

accounting policies for the reportable segments are the same as those described in the summary of significant accounting policies, except the items described above are excluded from EBITDA to arrive at Adjusted EBITDA.

Adjusted EBITDA includes deferred revenue adjustment related to the Legacy Hay acquisition, reflecting revenue that the Hay Group would have realized if not for business combination accounting that requires a company to record the acquisition balance sheet at fair value andwrite-off deferred revenue where no future services are required to be performed to earn that revenue.


	Three Months Ended July 31, 2016																						Three Months Ended July 31, 2017
	Executive Search																						Executive Search
	North America		EMEA		Asia Pacific		Latin America		Subtotal		Hay Group			Futurestep			Corporate			Consolidated			North America		EMEA		Asia Pacific		Latin America		Subtotal		Hay Group		Futurestep		Corporate			Consolidated
	(in thousands)																						(in thousands)
Fee revenue	$	81,802	$	35,370	$	19,626	$	9,563	$	146,361	$	174,582		$	54,678		$	—		$	375,621		$	91,833	$	40,121	$	21,578	$	7,659	$	161,191	$	179,453	$	60,610	$	—		$	401,254
Deferred revenue adjustment due to acquisition		—		—		—		—		—		3,535			—			—			3,535

Adjusted fee revenue	$	81,802	$	35,370	$	19,626	$	9,563	$	146,361	$	178,117		$	54,678		$	—		$	379,156

Total revenue	$	85,425	$	36,249	$	20,180	$	9,614	$	151,468	$	181,508		$	59,957		$	—		$	392,933		$	95,205	$	41,058	$	21,880	$	7,664	$	165,807	$	183,296	$	65,814	$	—		$	414,917

Net income																					4,068
Net income attributable to Korn/Ferry International																																								$	29,041
Net income attributable to noncontrolling interest																																									388
Other income, net																					(4,259	)																			(3,532	)
Interest expense, net																					3,061																				2,660
Equity in earnings of unconsolidated subsidiaries, net																					(79	)																			(30	)
Income tax provision																					1,725																				12,210

Operating income (loss)	$	16,468	$	6,027	$	2,102	$	2,330	$	26,927	$	(7,743	)	$	7,513		$	(22,181	)	$	4,516		$	21,995	$	6,675	$	3,141	$	1,026	$	32,837	$	19,083	$	8,237	$	(19,420	)		40,737
Depreciation and amortization		830		211		225		114		1,380		8,016			623			1,425			11,444			949		428		320		107		1,804		8,085		796		1,524			12,209
Other income (loss), net		288		24		87		73		472		235			(2	)		3,554			4,259			282		56		105		20		463		32		8		3,029			3,532
Equity in earnings of unconsolidated subsidiaries, net		79		—		—		—		79		—			—			—			79			30		—		—		—		30		—		—		—			30

EBITDA		17,665		6,262		2,414		2,517		28,858		508			8,134			(17,202	)		20,298			23,256		7,159		3,566		1,153		35,134		27,200		9,041		(14,867	)		56,508
Restructuring charges, net		1,706		128		622		360		2,816		21,488			—			216			24,520			—		—		40		—		40		240		—		—			280
Integration/acquisition costs		—		—		—		—		—		4,264			—			3,763			8,027
Deferred revenue adjustment due to acquisition		—		—		—		—		—		3,535			—			—			3,535
Integration/acquisition cost																								—		—		—		—		—		2,549		—		39			2,588

Adjusted EBITDA	$	19,371	$	6,390	$	3,036	$	2,877	$	31,674	$	29,795		$	8,134		$	(13,223	)	$	56,380		$	23,256	$	7,159	$	3,606	$	1,153	$	35,174	$	29,989	$	9,041	$	(14,828	)	$	59,376

~~July 31, 2016~~

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

July 31, 2017 (continued)

On June 15, 2016, the Company entered into a senior secured $400 million Credit Agreement (the “Credit Agreement”) with a syndicate of banks and Wells Fargo Bank, National Association as administrative agent (to provide for enhanced financial flexibility and in recognition of the accelerated pace of the Hay Group integration). The Credit Agreement provides for, among other things: (a) a senior secured term loan facility in an aggregate principal amount of $275 million (the ~~“ Term~~“Term Facility”);, (b) a senior secured revolving credit facility (the “Revolver” and together with the Term Facility, the “Credit Facilities”) in an aggregate principal amount of $125 million, (c) annual term loan amortization of 7.5%, 7.5%, 10.0%, 10.0%, and 10.0%, with the remaining principal due at maturity, (d) certain customary affirmative and negative covenants, including a maximum consolidated total leverage ratio (as defined below) and a minimum interest coverage ratio and (e) an expanded definition of permittedadd-backs to Adjusted EBITDA in recognition of the accelerated integration actions. The Company drew down $275 million on the new term loan and used $140 million of the proceeds topay-off the term loan that was outstanding as of April 30, 2016. ~~The remaining funds will be used for working capital and general corporate purposes. As of July 31, 2016, the Company was in compliance with its debt covenants.~~

At the Company’s option, loans issued under the Credit Agreement will bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. The interest rate applicable to loans outstanding under the Credit Facilities may fluctuate between LIBOR plus 1.25% per annum to LIBOR plus 2.00% per annum, in the case of LIBOR borrowings (or between the alternate base rate plus 0.25% per annum and the alternate base rate plus 1.00% per annum, in the alternative), based upon the Company’s total funded debt to adjusted EBITDA ratio (as set forth in the Credit Agreement, the “consolidated leverage ratio”) at such time. In addition, the Company will be required to pay to the lenders a quarterly fee ranging from 0.20% to 0.35% per annum on the average daily unused amount of the Term Facility, based upon the Company’s consolidated leverage ratio at such time, and fees relating to the issuance of letters of credit. During the three months ended July 31, 2017 and 2016, the average rate on the Term Facility was 2.34% and 2.40%, respectively.

Both the Revolver and the Term Facility mature on June 15, 2021, and may be prepaid and terminated early by the Company at any time without premium or penalty (subject to customary LIBOR breakage fees). The Term Facility is payable in quarterly installments ~~beginning on September 30, 2016.~~with principal payments totaling $5.2 million made during the three months ended July 31, 2017. As of July 31, ~~2016, $275.0~~2017, $254.4 million was outstanding under the Term Facility compared to ~~$140.0~~$259.5 million as of April 30, ~~2016, under~~2017. The current and long-term portion of unamortized debt issuance costs associated with the ~~previous Facility. During the three months ended~~long-term debt, was $3.4 million and $3.5 million as of July 31, ~~2016,~~2017 and April 30, 2017, respectively. The fair value of the ~~average rate~~Company’s Term Facility is based on borrowing rates

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

July 31, 2017 (continued)

currently required of loans with similar terms, maturity and credit risk. The carrying amount of the Term Facility approximates fair value because the base interest rate charged varies with market conditions and the credit spread is commensurate with current market spreads for issuers of similar risk. The fair value of the Term Facility is classified as a Level 2 liability in the fair value hierarchy. As of July 31, 2017, the Company was ~~2.40%.~~in compliance with its debt covenants.

As of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, the Company had no borrowings under the Revolver. ~~At July 31, 2016 and April 30, 2016, there were $2.8~~The Company had $3.0 million of standby letters of ~~credit~~credits issued under its long-term debt ~~arrangements.~~arrangements as of July 31, 2017 and April 30, 2017. The Company had a total of ~~$5.6~~$8.8 million and ~~$6.4~~$8.1 million of standby letters of credits with other financial institutions as of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, respectively. The standby letters of credits were generally issued as a result of entering into office premise leases.

On September ~~7, 2016,~~5, 2017, the Board of Directors of the Company declared a cash dividend of $0.10 per share ~~that will be paid on~~with a payment date of October ~~14, 2016~~13, 2017 to holders of the Company’s common stock of record at the close of business on September ~~26, 2016.~~27, 2017. The declaration and payment of future dividends under the quarterly dividend policy will be at the discretion of the Board of Directors and will depend upon many factors, including the Company’s earnings, capital requirements, financial conditions, the terms of the Company’s indebtedness and other factors that the Board of Directors may deem to be relevant. The Board may amend, revoke or suspend the dividend policy at any time and for any reason.

~~Item 2.~~	*~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~*

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report onForm 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, as amended and Section 21E of the Securities Exchange Act of 1934, as ~~amended.~~amended (the “Exchange Act”). 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,” “likely,” “estimates,” “potential,” “continue” or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also are forward-looking statements. All of these forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those contemplated by the relevant forward-looking statement. The principal risk factors that could cause actual performance and future actions to differ materially from the forward-looking statements include, but are not limited to, changes in demand for our services as a result of automation, dependence on attracting and retaining qualified and experienced consultants, maintaining our brand name and professional reputation, potential legal liability and regulatory developments, portability of client relationships, global and local political or economic developments in or affecting countries where we have operations, currency fluctuations in our international operations, risks related to growth, restrictions imposed byoff-limits agreements, competition, reliance on information processing systems, cyber security vulnerabilities, changes to data security, data privacy, and data protection laws, limited protection of our intellectual property, our ability to enhance and develop new technology, our ability to successfully recover from a disaster or business continuity problems, employment liability risk, an impairment in the carrying value of goodwill and other intangible assets, deferred tax assets that we may not be able to use, our ability to develop new products and services, changes in our accounting estimates and assumptions, alignment of our cost structure, risks related to the integration of recently acquired businesses, the utilization and billing rates of our consultants, seasonality, and the matters disclosed under the heading “Risk Factors” in the Company’s Exchange Act reports, including Item 1A of the Company’s Annual Report on Form10-K for the fiscal year ended April 30, ~~2016~~2017 (“Form10-K”). Readers are urged to consider these factors carefully in evaluating the forward-looking statements. The forward-looking statements included in this Quarterly Report on Form10-Q are made only as of the date of this Quarterly Report on Form10-Q and we undertake no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances.

The following presentation of management’s discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included in this Quarterly Report onForm 10-Q. We also make available on the Investor Relations portion of our website at www.kornferry.com earnings slides and other important information, which we encourage you to review.

Korn/Ferry International (referred to herein as the “Company,” “Korn Ferry,” or in the first person notations “we,” “our,” and “us”) is the preeminent global people and organizational advisory firm. Our services include Executive Search, advisory solutions and products through Hay Group (formerly known as Leadership & Talent Consulting (“Legacy LTC”) which was combined with HG (Luxembourg) S.à.r.l (“Legacy Hay”) in December 2015) and recruitment fornon-executive professionals and recruitment process outsourcing (“RPO”) through Futurestep. The Company also operates a Corporate segment to record global expenses of the Company. Approximately ~~73%~~71% of the executive searches we performed in fiscal ~~2016~~2017 were for board level, chief executive and other senior executive and general management positions. Our ~~5,575~~3,589 executive search clients in fiscal ~~2016~~2017 included many of the world’s largest and most prestigious public and private companies, including approximately ~~54%~~57% of the ~~FORTUNE~~Fortune 500, middle market and emerging growth companies, as well as government and nonprofit organizations. We have built strong client loyalty, with ~~84%~~82% of assignments performed (without giving effect to Legacy Hay assignments) during fiscal ~~2016~~2017 having been on behalf of clients for whom we had conducted assignments in the previous three fiscal years. Approximately ~~62%~~61% of our revenues were generated from clients that utilize multiple lines of business.

Superior performance comes from having the right conditions for success in two key areas – the organization and its people. Organizational conditions encourage people to put forth their best effort and invest their energy towards achieving the organization’s purpose. We can help operationalize a client’s complete strategy or address any combination of six broad categories:

During fiscal ~~2016,~~2017, we ~~implemented a~~continued the implementation of our fiscal 2016 restructuring plan in order to rationalize our cost structure ~~in order to eliminate~~by eliminating redundant positions and real estate that were created due to the acquisition of ~~HG (Luxembourg) S.à.r.l (“~~Legacy ~~Hay”)~~Hay in December 2015. In particular, the majority of our efforts in fiscal 2016 were focused on activities associated with integration of ourgo-to-market activities, our intellectual property and content, our solution sets and service offerings, and our back office systems and business processes. ~~We continued to implement this plan during~~During the ~~first quarter of fiscal 2017 and in connection with the plan,~~three months ended July 31, 2016, we recorded $24.5 million ofin restructuring charges with $11.5 million ~~relating to~~of severance costs and $13.0 million relating to ~~the~~ consolidation of ~~office space during~~premises. During the three months ended July 31, ~~2016. No~~2017, we recorded $0.3 million of restructuring charges ~~were incurred during~~relating to the ~~three months ended July 31, 2015.~~consolidation of premises.

The Company currently operates in three global business segments: Executive Search, Hay Group and Futurestep. See Note 9 –—Business Segments, in the Notes to Consolidated Unaudited ~~Consolidated~~ Financial Statements for discussion of the Company’s global business segments. The Company evaluates performance and allocates resources based on the chief operating decision maker’s review of (1) fee revenue and (2) adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). To the extent that such charges occur, Adjusted EBITDA excludes restructuring charges, integration/acquisition costs and certain separation costs and certainnon-cash charges (goodwill, intangible asset and other than temporary impairment). For the three months ended July 31, 2016, Adjusted EBITDA includes a deferred revenue adjustment related to the Legacy Hay acquisition, reflecting revenue that Hay Group would have realized if not for business combination accounting that requires a company to record the acquisition balance sheet at fair value andwrite-off deferred revenue where no future services are required to be performed to earn that revenue. ~~Management will~~During the three months ended July 31, 2017, management no longer ~~have~~has adjusted fee ~~revenue after this quarter.~~ revenue.

Adjusted EBITDA ~~is a~~ and EBITDA arenon-GAAP financial ~~measure. It has~~measures. They have limitations as an analytical ~~tool,~~tools, should not be viewed as a substitute for financial information determined in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”), and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. In addition, itthey may not necessarily be comparable tonon-GAAP performance measures that may be presented by other companies.

Management believes the presentation of ~~this~~ thesenon-GAAP financial ~~measure~~measures provides meaningful supplemental information regarding Korn Ferry’s performance by excluding certain charges, items of income and other items that may not be indicative of Korn Ferry’s ongoing operating results. The use of ~~this~~ thesenon-GAAP financial ~~measure~~measures facilitates comparisons to Korn Ferry’s historical performance and identification of operating trends that may otherwise be distorted by certain charges and other items that may not be indicative of Korn Ferry’s ongoing operating results. Korn Ferry includes ~~this~~ thesenon-GAAP financial ~~measure~~measures because management believes it is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its evaluation

of Korn Ferry’s ongoing operations and financial and operational decision-making. The accounting policies for the reportable segments are the same as those described in the summary of significant accounting policies in the accompanying consolidated financial statements, except that the above noted items are excluded from EBITDA to arrive at Adjusted EBITDA. Management further believes that EBITDA is useful to investors because it is frequently used by investors and other interested parties to measure operating performance among companies with different capital structures, effective tax rates and tax attributes and capitalized asset values, all of which can vary substantially from company to company.

Similarly, adjusted fee revenue is anon-GAAP financial measure. Adjusted fee revenue is not a measure that substitutes an individually tailored revenue recognition or measurement method for those of ~~GAAP,~~GAAP; rather, it is an adjustment for a short period of time that will provide better comparability in the current and future periods. Management believes the presentation of adjusted fee revenue assists management in its evaluation of ongoing operations and provides useful information to investors because it allows investors to make more meaningfulperiod-to-period comparisons of the Company’s operating results, to

better identify operating trends that may otherwise be distorted by write-offs required under business combination accounting and to perform related trend analysis, and provides a higher degree of transparency of information used by management in its evaluation of Korn Ferry’s ongoing operations and financial and operational decision-making.

Fee revenue increased ~~$108.2~~$25.7 million, or ~~40%~~7%, in the three months ended July 31, 2017 to $401.3 million compared to $375.6 million in the three months ended July 31, 2016, ~~to $375.6 million compared to $267.4 million in the three months ended July 31, 2015,~~ with increases in fee revenue in ~~Hay Group and Futurestep offset by lower fee revenue in Executive Search.~~all business segments. During the three months ended July 31, ~~2016,~~2017, we recorded operating income of ~~$4.5~~$40.7 million with Executive Search and Futurestep segments contributing $26.9 million and $7.5 million, respectively, offset by the operating losses from Hay Group and Corporate segments of $7.7 million and $22.2 million, respectively. Net income during the three months ended July 31, 2016 and 2015 was $4.1 million and $23.1 million, respectively. Adjusted EBITDA was $56.4 million during the three months ended July 31, 2016 with Executive Search, Hay Group and Futurestep segments contributing ~~$31.7~~$32.8 million, ~~$29.8~~$19.1 million and ~~$8.1~~$8.2 million, respectively, offset by ~~corporate~~Corporate expenses ~~net~~ of ~~other~~$19.4 million. Net income attributable to Korn Ferry during the three months ended July 31, 2017 was $29.0 million compared to $3.2 million for the three months ended July 31, 2016, an increase of ~~$13.2 million.~~$25.8 million over theyear-ago quarter. Adjusted EBITDA ~~increased $14.7~~was $59.4 million during the three months ended July 31, ~~2016,~~2017 with Executive Search, Hay Group and Futurestep segments contributing $35.2 million, $30.0 million, and $9.0 million, respectively, offset by Corporate expenses net of other income of $14.8 million. Adjusted EBITDA increased $3.0 million during the three months ended July 31, 2017, from Adjusted EBITDA of ~~$41.7~~$56.4 million in theyear-ago quarter.

Our cash, cash equivalents and marketable securities decreased ~~$33.6~~$122.5 million, or 8%23%, to ~~$381.1~~$408.3 million at July 31, ~~2016,~~2017, compared to ~~$414.7~~$530.8 million at April 30, ~~2016.~~2017. This decrease is mainly due to bonuses earned in fiscal ~~2016~~2017 and paid during the first quarter of fiscal ~~2017, $15.1~~2018,sign-on and retention payments, $9.5 million in payments for the purchase of fixed assets, ~~$5.9~~$5.8 million in dividends paid during first quarter of fiscal ~~2017,~~2018, $5.2 million in principal payments on our term loan and $4.0 million in stock repurchases in the open market, partially offset by ~~the drawdown of $275 million on the new term loan of which $140 million of the proceeds were used to pay-off the term loan that was outstanding as of April 30, 2016 and~~ cash provided by operating activities. As of July 31, ~~2016,~~2017, we held marketable securities to settle obligations under our Executive Capital Accumulation Plan (“ECAP”) with a cost value of ~~$134.4~~$117.2 million and a fair value of ~~$137.0~~$126.3 million. Our vested ~~and unvested~~ obligations for which these assets were held in trust totaled ~~$133.9~~$116.2 million as of July 31, ~~2016.~~2017 and our unvested obligations totaled $25.3 million.

Our working capital increased by ~~$128.1~~$22.0 million to ~~$316.1~~$407.1 million in the three months ended July 31, ~~2016.~~2017. We believe that cash on hand and funds from operations and other forms of liquidity will be sufficient to meet our anticipated working capital, capital expenditures, general corporate requirements, repayment of the debt obligations incurred in connection with the Legacy Hay acquisition, the retention pool obligations pursuant to the Legacy Hay acquisition and dividend payments under our dividend policy in the next twelve months. We had no outstanding borrowings under our revolving credit facility at July 31, ~~2016~~2017 and April 30, ~~2016.~~2017. As of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, there was ~~$2.8~~$3.0 million of standby letters of credit issued under our long-term debt arrangements. We ~~have~~had a total of ~~$5.6~~$8.8 million and ~~$6.4~~$8.1 million of standby letters of credits with other financial institutions as of July 31, ~~2016~~2017 and April 30, ~~2016, respectively.~~

The following table summarizes the results of our operations as a percentage of fee revenue:



	Three Months Ended July 31,						Three Months Ended July 31,
	2016			2015			2017			2016
Fee revenue		100.0	%		100.0	%		100.0	%		100.0	%
Reimbursed out-of-pocket engagement expenses		4.6			4.5			3.4			4.6

Total revenue		104.6			104.5			103.4			104.6
Compensation and benefits		70.0			67.1			68.3			70.0
General and administrative expenses		14.7			14.0			14.5			14.7
Reimbursed expenses		4.6			4.5			3.4			4.6
Cost of services		4.5			3.8			3.9			4.5
Depreciation and amortization		3.0			2.8			3.0			3.0
Restructuring charges, net		6.5			—			0.1			6.5

Operating income		1.2			12.3			10.2			1.2

Net income		1.1	%		8.6	%		7.3	%		1.1	%

Net income attributable to Korn/Ferry International		0.9	%		8.6	%		7.2	%		0.9	%

The following tables summarize the results of our operations by business segment:


	Three Months Ended July 31,												Three Months Ended July 31,
	2016						2015						2017						2016
	Dollars			Margin (1)			Dollars			Margin (1)			Dollars			%			Dollars			%
	(dollars in thousands)												(dollars in thousands)
Operating income
Fee revenue
Executive Search:
North America	$	16,468			20.1	%	$	24,145			26.7	%	$	91,833			22.9	%	$	81,802			21.8	%
EMEA		6,027			17.0			6,276			17.4			40,121			10.0			35,370			9.4
Asia Pacific		2,102			10.7			2,986			15.5			21,578			5.4			19,626			5.2
Latin America.		2,330			24.4			1,508			23.5
Latin America														7,659			1.9			9,563			2.5

Total Executive Search														161,191			40.2			146,361			39.0
Hay Group														179,453			44.7			174,582			46.5
Futurestep														60,610			15.1			54,678			14.6

Total fee revenue														401,254			100.0	%		375,621			100.0	%

Reimbursedout-of-pocket engagement expense														13,663						17,312

Total revenue													$	414,917					$	392,933


													Three Months Ended July 31,
													2017						2016
													Dollars			Margin(1)			Dollars			Margin(1)
													(dollars in thousands)
Operating income (loss)
Executive Search:
North America													$	21,995			24.0	%	$	16,468			20.1	%
EMEA														6,675			16.6			6,027			17.0
Asia Pacific														3,141			14.6			2,102			10.7
Latin America														1,026			13.4			2,330			24.4

Total Executive Search		26,927			18.4			34,915			23.0			32,837			20.4			26,927			18.4
Hay Group		(7,743	)		(4.4	)		7,495			10.8			19,083			10.6			(7,743	)		(4.4	)
Futurestep		7,513			13.7			6,189			13.4			8,237			13.6			7,513			13.7
Corporate		(22,181	)					(15,695	)					(19,420	)					(22,181	)

Total operating income	$	4,516			1.2	%	$	32,904			12.3	%	$	40,737			10.2	%	$	4,516			1.2	%

Three Months Ended July 31, 2016
Executive Search
North
America EMEA Asia
Pacific Latin
America Subtotal Hay
Group Futurestep Corporate Consolidated
(in thousands)
Fee revenue
$ 81,802    $ 35,370    $ 19,626    $ 9,563    $ 146,361    $ 174,582    $ 54,678    $ —      $ 375,621
Deferred revenue adjustment due to acquisition
—      —      —      —      —      3,535    —      —      3,535

Adjusted fee revenue
$ 81,802    $ 35,370    $ 19,626    $ 9,563    $ 146,361    $ 178,117    $ 54,678    $ —      $ 379,156

Total revenue
$ 85,425    $ 36,249    $ 20,180    $ 9,614    $ 151,468    $ 181,508    $ 59,957    $ —      $ 392,933
Net income
$ 4,068
Other income, net
(4,259 )
Interest expense, net
3,061
Equity in earnings of unconsolidated subsidiaries, net
(79 )
Income tax provision
1,725

Operating income (loss)
$ 16,468    $ 6,027    $ 2,102    $ 2,330    $ 26,927    $ (7,743 ) $ 7,513    $ (22,181 ) 4,516
Depreciation and amortization
830    211    225    114    1,380    8,016    623    1,425    11,444
Other income (loss), net
288    24    87    73    472    235    (2 ) 3,554    4,259
Equity in earnings of unconsolidated subsidiaries, net
79    —      —      —      79    —      —      —      79

EBITDA
17,665    6,262    2,414    2,517    28,858    508    8,134    (17,202 ) 20,298
Restructuring charges, net
1,706    128    622    360    2,816    21,488    —      216    24,520
Integration/acquisition costs
—      —      —      —      —      4,264    —      3,763    8,027
Deferred revenue adjustment due to acquisition
—      —      —      —      —      3,535    —      —      3,535

Adjusted EBITDA
$ 19,371    $ 6,390    $ 3,036    $ 2,877    $ 31,674    $ 29,795    $ 8,134    $ (13,223 ) $ 56,380

Adjusted EBITDA margin
23.7 % 18.1 % 15.5 % 30.1 % 21.6 % 16.7 % 14.9 % 14.9 %


	Three Months Ended July 31, 2015																											Three Months Ended July 31, 2017
	Executive Search																											Executive Search
	North America			EMEA			Asia Pacific			Latin America			Subtotal			Hay Group			Futurestep			Corporate			Consolidated			North America			EMEA			Asia Pacific			Latin America			Subtotal			Hay Group			Futurestep			Corporate			Consolidated
	(in thousands)																											(in thousands)
Fee revenue	$	90,359		$	36,090		$	19,215		$	6,426		$	152,090		$	69,240		$	46,064		$	—		$	267,394		$	91,833		$	40,121		$	21,578		$	7,659		$	161,191		$	179,453		$	60,610		$	—		$	401,254

Total revenue	$	94,399		$	37,171		$	19,990		$	6,432		$	157,992		$	71,441		$	49,902		$	—		$	279,335		$	95,205		$	41,058		$	21,880		$	7,664		$	165,807		$	183,296		$	65,814		$	—		$	414,917

Net income																									$	23,082
Other loss, net																										74
Net income attributable to Korn/Ferry International																																																				$	29,041
Net income attributable to noncontrolling interest																																																					388
Other income, net																																																					(3,532	)
Interest expense, net																										299																											2,660
Equity in earnings of unconsolidated subsidiaries, net																										(725	)																										(30	)
Income tax provision																										10,174																											12,210

Operating income (loss)	$	24,145		$	6,276		$	2,986		$	1,508		$	34,915		$	7,495		$	6,189		$	(15,695	)		32,904		$	21,995		$	6,675		$	3,141		$	1,026		$	32,837		$	19,083		$	8,237		$	(19,420	)		40,737
Depreciation and amortization		827			365			246			78			1,516			3,748			585			1,574			7,423			949			428			320			107			1,804			8,085			796			1,524			12,209
Other income (loss), net		32			143			18			239			432			(863	)		—			357			(74	)		282			56			105			20			463			32			8			3,029			3,532
Equity in earnings of unconsolidated subsidiaries, net		86			—			—			—			86			—			—			639			725			30			—			—			—			30			—			—			—			30

EBITDA		25,090			6,784			3,250			1,825			36,949			10,380			6,774			(13,125	)		40,978			23,256			7,159			3,566			1,153			35,134			27,200			9,041			(14,867	)		56,508

Restructuring charges, net																													—			—			40			—			40			240			—			—			280
Integration/acquisition costs		—			—			—			—			—			329			—			345			674			—			—			—			—			—			2,549			—			39			2,588

Adjusted EBITDA	$	25,090		$	6,784		$	3,250		$	1,825		$	36,949		$	10,709		$	6,774		$	(12,780	)	$	41,652		$	23,256		$	7,159		$	3,606		$	1,153		$	35,174		$	29,989		$	9,041		$	(14,828	)	$	59,376

Adjusted EBITDA margin		27.8	%		18.8	%		16.9	%		28.4	%		24.3	%		15.5	%		14.7	%					15.6	%		25.3	%		17.8	%		16.7	%		15.1	%		21.8	%		16.7	%		14.9	%					14.8	%

Three Months Ended July 31, ~~2016~~2017 Compared to Three Months Ended July 31, ~~2015~~2016

Fee Revenue.Fee revenue went up by ~~$108.2~~$25.7 million, or ~~40%~~7%, to ~~$375.6~~$401.3 million in the three months ended July 31, ~~2016~~2017 compared to ~~$267.4~~$375.6 million in theyear-ago quarter. Exchange rates unfavorably impacted fee revenue by ~~$8.4~~$3.3 million, or 1%, in the three months ended July 31, 2017 compared to theyear-ago quarter. The higher fee revenue was attributable to organic growth in all lines of business.

Executive Search.Executive Search reported fee revenue of $161.2 million, an increase of $14.8 million, or 10%, in the three months ended July 31, 2017 compared to $146.4 million in theyear-ago quarter. As detailed below, Executive Search fee revenue was higher in North America, EMEA and Asia Pacific, partially offset by lower fee revenue in the Latin America region in the three months ended July 31, 2017 as compared to theyear-ago quarter. The higher fee revenue in Executive Search was mainly due to a 12% increase in the number of engagements billed, offset by a 1% decrease in the weighted-average fees billed per engagement (calculated using local currency) during the three months ended July 31, 2017 compared to theyear-ago quarter. Exchange rates unfavorably impacted fee revenue by $1.2 million, or 1%, in the three months ended July 31, 2017, compared to theyear-ago quarter.

North America reported fee revenue of $91.8 million, an increase of $10.0 million, or 12%, in the three months ended July 31, 2017 compared to $81.8 million in theyear-ago quarter. North America’s fee revenue was higher due to a 9% increase in the number of engagements billed and a 3% increase in the weighted-average fees billed per engagement (calculated using local currency) during the three months ended July 31, 2017 compared to theyear-ago quarter. The overall increase in fee revenue was driven by the increase in fee revenue from the industrial and technology sectors compared to theyear-ago quarter, offset by a decline in fee revenue in the life sciences/healthcare and consumer goods sectors. The effect of exchange rates was minimal to fee revenue in the three months ended July 31, 2017, compared to theyear-ago quarter.

EMEA reported fee revenue of $40.1 million, an increase of $4.7 million, or 13%, in the three months ended July 31, 2017 compared to $35.4 million in theyear-ago quarter. Exchange rates unfavorably impacted fee revenue by $1.1 million, or 3%, in the three months ended July 31, ~~2016~~2017, compared to theyear-ago quarter. The ~~higher~~rest of the change in fee revenue was ~~attributable~~due to ~~growth in Hay Group and Futurestep, offset with the decrease in Executive Search. The~~a 24% increase in ~~Hay Group was primarily due to~~ the ~~Legacy Hay acquisition, which was consummated in the third quarter~~number of ~~fiscal 2016.~~

~~Executive Search.~~Executive Search reported fee revenue of $146.4 million, a decrease of $5.7 million, or 4%, in the three months ended July 31, 2016 compared to $152.1 million in the year-ago quarter. As detailed below, Executive Search fee revenue was lower in North America and EMEA,engagements billed, offset by higher fee revenue in the Latin America and Asia Pacific regions in the three months ended July 31, 2016 as compared to the year-ago quarter. The lower fee revenue in Executive Search was mainly due to an 11%a 6% decrease in the weighted-average fees billed per engagement ~~partially offset by a 7% increase in engagements billed~~(calculated using local currency) during the three months ended July 31, ~~2016 as~~2017 compared to theyear-ago quarter. The ~~consolidation of our Mexico subsidiary that we obtained control of~~performance in the ~~fourth~~United Kingdom, Germany and Italy were the primary contributors to the increase in fee revenue in

the three months ended July 31, 2017 compared to theyear-ago quarter, ~~of fiscal 2016 drove~~offset by a 5% decrease in ~~the weighted-average fees billed per engagement. Exchange rates unfavorably impacted~~ fee revenue ~~by $3.6 million, or 2%,~~in the United Arab Emirates. In terms of business sectors, industrial, life sciences/healthcare and technology had the largest increase in fee revenue in the three months ended July 31, ~~2016, when~~2017 as compared to theyear-ago quarter.

~~North America~~Asia Pacific reported fee revenue of ~~$81.8~~$21.6 million, ~~a decrease~~an increase of ~~$8.6~~$2.0 million, or 10%, in the three months ended July 31, ~~2016~~2017 compared to ~~$90.4~~$19.6 million in theyear-ago quarter. North America’s fee revenue was lower due to a 6% decrease in the weighted-average fees billed per engagement and a 4% decrease in the number of engagements billed during the three months ended July 31, 2016 compared to the year-ago quarter. The ~~overall decrease in fee revenue~~effect of exchange rates was ~~driven by a decline in the industrial, technology, life sciences/healthcare, and financial services sectors as compared~~minimal to the year-ago quarter, partially offset by the growth in the consumer goods sector. Exchange rates unfavorably impacted fee revenue by $0.2 million in the three months ended July 31, 2016, when compared to the year-ago quarter.

EMEA reported fee revenue of $35.4 million, a decrease of $0.7 million, or 2%, in the three months ended July 31, 2016 compared to $36.1 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $1.5 million, or 4%, in the three months ended July 31, 2016, when compared to the year-ago quarter. EMEA’s fee revenue was lower due to a 4% decrease in the weighted-average fees billed per engagement, offset by a 2% increase in the number of engagements billed during the three months ended July 31, 2016 compared to the year-ago quarter. The performance in existing offices in Switzerland and France were the primary contributors to the decrease in fee revenue in the three months ended July 31, ~~2016~~2017, compared to theyear-ago quarter, offset by an increase in fee revenue in Germany and United Arab Emirates. In terms of business sectors, life sciences/healthcare experienced the largest decline in fee revenue in the three months ended July 31, 2016 as compared to the year-ago quarter, partially offset by an increase in the technology sector.

Asia Pacific reported fee revenue of $19.6 million, an increase of $0.4 million, or 2%, in the three months ended July 31, 2016 compared to $19.2 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $0.5 million, or 3%, in the three months ended July 31, 2016, when compared to the year-ago quarter. The increase in fee revenue was due to a 6%9% increase in the number of engagements billed ~~offset by~~and a ~~3% decrease~~1% increase in the weighted-average fees billed per engagement (calculated using local currency) in the three months ended July 31, ~~2016~~2017 compared to theyear-ago quarter. The performance in ~~China,~~Australia and Japan ~~and India~~ were the primary contributors to the increase in fee revenue in the three months ended July 31, ~~2016~~2017 compared to theyear-ago quarter, partially offset by a ~~decrease~~decline in fee revenue in ~~Australia. Financial~~Hong Kong. Industrial and financial services ~~and consumer goods~~ were the main sectors contributing to the increase in fee revenue in the three months ended July 31, ~~2016~~2017, as compared to theyear-ago ~~quarter, partially offset by a decline in fee revenue in the industrial sector.~~ quarter.

Latin America reported fee revenue of ~~$9.6~~$7.7 million, ~~an increase~~a decrease of ~~$3.2~~$1.9 million, or ~~50%~~20%, in the three months ended July 31, ~~2016~~2017 compared to ~~$6.4~~$9.6 million in theyear-ago ~~quarter. Exchange rates unfavorably impacted fee revenue for Latin America by $1.4 million, or 22%, in the three months ended July 31, 2016, when compared to the year-ago~~ quarter. The ~~increase is due~~effect of exchange rates was minimal to $4.4 million in fee revenue from our Mexican subsidiary that we began consolidating in the fourth quarter of fiscal 2016 as a result of obtaining control of the entity. The rest of the change primarily relates to an increase in fee revenue in Brazil, offset by lower fee revenues in Venezuela in the three months ended July 31, 2016 compared to the year-ago quarter. Industrial, financial services, consumer goods, and life sciences/healthcare were the main sectors contributing to the growth in fee revenue in the three months ended July 31, ~~2016~~2017, compared to theyear-ago quarter. The decrease is due to lower fee revenue in Mexico and Brazil in the three months ended July 31, 2017, compared to theyear-ago quarter, partially offset by higher fee revenue in Chile. Consumer goods and financial services were the main sectors contributing to the decline in fee revenue, offset by the growth in technology sector in the three months ended July 31, 2017, compared to theyear-ago quarter.

Hay Group.Hay Group reported fee revenue of ~~$174.6~~$179.5 million, an increase of $105.4 million, or 152%, in the three months ended July 31, 2016 compared to $69.2 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $3.4 million, or 5%, compared to the year-ago quarter. The increase in fee revenue was primarily due to the legacy Hay acquisition which was consummated in the third quarter of fiscal 2016. As a result of the Legacy Hay acquisition, consulting fee revenue was higher by $70.5 million in the three months ended July 31, 2016 compared to the year-ago quarter, with the remaining increase generated by product revenue.

~~Futurestep.~~Futurestep reported fee revenue of $54.7 million, an increase of $8.6 million, or 19%, in the three months ended July 31, 2016 compared to $46.1 million in the year-ago quarter. Exchange rates unfavorably impacted fee revenue by $1.4$4.9 million, or 3%, in the three months ended July 31, ~~2016.~~2017 compared to $174.6 million in theyear-ago quarter. Exchange rates unfavorably impacted fee revenue by $1.7 million, or 1%, compared to theyear-ago quarter. Fee revenue from our products business was higher by $4.6 million in the three months ended July 31, 2017 compared to theyear-ago quarter, with the remaining increase of $0.3 million generated by consulting services.

Futurestep.Futurestep reported fee revenue of $60.6 million, an increase of $5.9 million, or 11%, in the three months ended July 31, 2017 compared to $54.7 million in theyear-ago quarter. Exchange rates unfavorably impacted fee revenue by $0.4 million, or 1%, in the three months ended July 31, 2017. Higher fee revenues in RPO and professional search of ~~$5.4~~$5.2 million and ~~$2.9~~$1.4 million, respectively, drove the increase in fee revenue. ~~The increase in fee revenue in professional search was due to a 14% increase in the number of engagements billed in the three months ended July 31, 2016 compared to the year-ago quarter.~~

Compensation and benefits expense increased ~~$83.5~~$11.0 million, or ~~47%~~4%, to ~~$263.0~~$274.0 million in the three months ended July 31, ~~2016~~2017 from ~~$179.5~~$263.0 million in theyear-ago quarter. Exchange rates favorably impacted compensation and benefits expenses by ~~$5.3~~$1.8 million, or 3%1%, in the three months ended July 31, ~~2016~~2017 compared to theyear-ago quarter. The increase in compensation and benefits was primarily due to ~~the Legacy Hay acquisition and $5.3~~higher average headcount which contributed $13.9 million ~~in integration/acquisition costs compared to the year-ago quarter. The acquisition was the main factor for increases of $59.1 million, $2.2 million, $1.7 million and $1.1 million~~higher in salaries and related payroll taxes, ~~retirement plans, insurance~~partially offset by a decline of $3.0 million in integration costs compared toyear-ago quarter.

Executive Search compensation and ~~outside contractors, respectively.~~benefits expense increased by $8.8 million, or 9%, to $107.5 million in the three months ended July 31, 2017 compared to $98.7 million in theyear-ago quarter. The increase was primarily due to higher salaries and related payroll taxes of $4.4 million due to an 8% increase in average headcount reflecting our continued growth-related investments back into the business. Also contributing to the increase in compensation and benefits expense was an increase ~~in the amortization~~ of ~~long-term incentive awards of $2.6 million, $1.3~~$1.9 million in higher stock based compensation and a change in the fair value of vested amounts owed under certain deferred compensation plans of $2.5 million in the three months ended July 31, 2016 compared to the year-ago quarter due to market movements.

Executive Search compensation and benefits expense decreased by $0.7 million, to $98.7 million in the three months ended July 31, 2016 compared to $99.4 million in the year-ago quarter. This decrease was primarily due to lower performance related bonus expense of $7.3 million, partially offset by an increase of $3.3 million in salaries and related payroll expense, $2.0 million in the amortization of long-term incentive awards and $2.3 million in increased compensation expenses associated with our deferred compensation plans ~~during the three months ended July 31, 2016~~and a $1.6 million increase in amortization of long-term incentive awards compared to theyear-ago ~~quarter due to market movements. The decrease in performance related bonus expense was principally due to lower fee revenue and profitability.~~ quarter. Executive Search compensation and benefits expense, as a percentage of fee revenue, ~~increased to~~was 67% in both the three months ended July 31, ~~2016 from 65% in the year-ago quarter.~~2017 and 2016.

Hay Group compensation and benefits expense ~~increased $73.8~~decreased $1.3 million, or ~~178%~~1%, to ~~$115.3~~$114.0 million in the three months ended July 31, ~~2016~~2017 from ~~$41.5~~$115.3 million in theyear-ago quarter. The ~~increase in compensation and benefits~~change was primarily due to ~~the Legacy Hay acquisition and $4.0 million~~a decrease in integration/acquisition costs compared to the year-ago quarter. Due to the acquisition, average headcount increased by 297% during the three months ended July 31, 2016 compared to the year-ago quarter, resulting in higher salaries and related payroll taxes, performance related bonus expense, retirement plans and insuranceintegration costs of ~~$50.3 million, $7.8 million,~~ $1.7 million ~~and $1.5 million, respectively.~~compared toyear-ago quarter. Hay Group compensation and benefits expense, as a percentage of fee revenue, ~~increased to 66%~~was 64% in the three months ended July 31, ~~2016 from 60%~~2017 compared to 66% in theyear-ago quarter.

Futurestep compensation and benefits expense increased ~~$6.7~~$5.0 million, or ~~21%~~13%, to ~~$38.0~~$43.0 million in the three months ended July 31, ~~2016~~2017 from ~~$31.3~~$38.0 million in theyear-ago quarter. ~~Salaries~~The increase was due to higher salaries and related payroll taxes ~~were the primary drivers which increased by $5.3~~of $5.0 million due to a ~~29%~~13% increase in the average headcount in the three months ended July 31, ~~2016~~2017 compared to theyear-ago quarter. The higher average headcount was primarily driven by the need to service an increase in fee revenue in ~~both professional search and~~the RPO ~~businesses.~~business. Futurestep compensation and benefits expense, as a percentage of fee revenue, was ~~69%~~71% in the three months ended July 31, ~~2016~~2017 compared to ~~68%~~69% in theyear-ago quarter.

Corporate compensation and benefits expense ~~increased~~decreased by ~~$3.7~~$1.6 million, or ~~51%~~15%, to ~~$11.0~~$9.4 million in the three months ended July 31, ~~2016~~2017 from ~~$7.3~~$11.0 million in theyear-ago quarter. ~~Excluding~~This decrease was mainly due to a decrease of $1.3 million ~~of integration/acquisition~~in integration costs ~~related to the Legacy Hay acquisition, compensation and benefits expense increased $2.4 million~~ in the three months ended July 31, ~~2016 as~~2017 compared to theyear-ago quarter. This increase was mainly due to an increase of $1.1 million and $0.9 million in stock based compensation and expenses associated with our deferred compensation plans, respectively in the three months ended July 31, 2016 compared to the year-ago quarter.

General and administrative expenses increased ~~$17.8~~$3.0 million, or ~~48%~~5%, to ~~$55.3~~$58.3 million in the three months ended July 31, ~~2016~~2017 compared to ~~$37.5~~$55.3 million in the ~~three months ended July 31, 2015.~~year-ago quarter. Exchange rates favorably impacted general and administrative expenses by ~~$1.4~~$0.6 million, or 4%1%, during the three months ended July 31, ~~2016~~2017 compared to theyear-ago quarter. The increase in general and administrative expenses was ~~primarily~~ due to foreign exchange loss of $1.4 million during the ~~Legacy Hay acquisition that took place in the third quarter of fiscal 2016 and $2.1 million in integration/acquisition costs~~three months ended July 31, 2017 compared to a foreign exchange gain of $1.3 million during theyear-ago quarter. The ~~acquisition~~rest of the change in general and administrative expenses was ~~the main factor for~~due to increases of ~~$11.3~~$1.3 million, ~~$2.1 million, $1.6~~$0.5 million and ~~$1.2~~$0.5 million in premise and office expense, business development expenses ~~legal~~ and ~~other professional~~bad debt expenses, ~~and travel related expenses, respectively.~~respectively, offset by a decline of $2.4 million in integration costs compared to theyear-ago quarter. General and administrative expenses, as a percentage of fee revenue, was 15% in both the three months ended July 31, ~~2016 compared to 14% in the year-ago quarter.~~2017 and 2016.

Executive Search general and administrative expenses ~~decreased $0.5~~increased $2.2 million, or 3%14%, to ~~$16.1~~$18.3 million in the three months ended July 31, ~~2016~~2017 from ~~$16.6~~$16.1 million in theyear-ago quarter. General and administrative expenses ~~decreased~~increased of $1.1 million primarily due to ~~higher~~generating foreign exchange gains ~~of $0.7 million~~ during theyear-ago quarter compared to being flat in the three months ended July 31, ~~2016 compared to the year-ago quarter.~~2017. Executive Search general and administrative expenses, as a percentage of fee revenue, was 11% in both the three months ended July 31, ~~2016~~2017 and ~~2015.~~2016.

Hay Group general and administrative expenses increased ~~$15.4~~$0.8 million, or ~~177%~~3%, to ~~$24.1~~$24.9 million in the three months ended July 31, ~~2016~~2017 compared to ~~$8.7~~$24.1 million in theyear-ago quarter. The increase is primarily due to foreign exchange losses of $0.6 million during the three months ended July 31, ~~2015. The increase in general and administrative expenses was primarily due~~2017 compared to ~~the Legacy Hay acquisition. The acquisition was the main factor for increases~~a foreign exchange gains of ~~$10.7~~$0.5 million ~~$1.6 million, $ 1.3 million and $1.2 million in premise and office expense, business development expenses, legal and other professional expenses and travel related expenses, respectively.~~during theyear-ago quarter. Hay Group general and administrative expenses, as a percentage of fee revenue, was 14% in both the three months ended July 31, ~~2016 compared to 13% in the year-ago quarter.~~2017 and 2016.

Futurestep general and administrative expenses ~~were $5.6~~increased $1.0 million, ~~and $5.4~~or 18%, to $6.6 million ~~respectively,~~ in the three months ended July 31, ~~2016~~2017 from $5.6 million in theyear-ago quarter. The increase was mainly due to increases of $0.5 million and ~~2015.~~$0.4 million in premise and office expense and bad debt expense, respectively, during the three months ended July 31, 2017 compared to theyear-ago quarter. Such increases were due in large part to the increase in fee revenue in the three months ended July 31, 2017 compared theyear-ago quarter. Futurestep general and administrative expenses, as a percentage of fee revenue, was ~~10%~~11% in the three months ended July 31, ~~2016~~2017 compared to ~~12%~~10% in theyear-ago quarter.

Corporate general and administrative expenses ~~increased $2.7~~decreased $1.0 million, or ~~40%~~11%, to ~~$9.5~~$8.5 million in the three months ended July 31, ~~2016~~2017 compared to ~~$6.8~~$9.5 million in theyear-ago quarter. The ~~increase~~decrease in general and administrative expenses was ~~driven by~~due to a decrease of $2.4 million in ~~integration/acquisition~~integration costs associated with the Legacy Hay acquisition, ~~incurred~~offset by the increase of $0.8 million and $0.5 million in legal and other professional expenses and foreign currency losses, respectively, during the three months ended July 31, 2017 compared to the three months ended July 31, 2016.

Cost of services expense ~~consist~~consists primarily ofnon-billable contractor and product costs related to the delivery of various services and products, primarily in Futurestep and Hay Group. Cost of services expense ~~increased $6.7~~decreased $1.0 million, or ~~66%~~6%, to ~~$16.8~~$15.8 million in the three months ended July 31, ~~2016~~2017 compared to ~~$10.1~~$16.8 million in theyear-ago quarter. ~~The increase is mainly due to higher fee revenue in Hay Group due to the Legacy Hay acquisition.~~ Cost of services expense, as a percentage of fee revenue, was 4% in both the three months ended July 31, ~~2016~~2017 and ~~2015.~~2016.

Depreciation and amortization expenses were ~~$11.4~~$12.2 million, an increase of ~~$4.0~~$0.8 million, or ~~54%~~7%, in the three months ended July 31, ~~2016~~2017 compared to ~~$7.4~~$11.4 million in theyear-ago quarter. ~~The increase is mainly due to the Legacy Hay acquisition.~~ The increase relates primarily to technology investments ~~that were~~ made in the current and prior year in software and computer equipment, in addition to increases in leasehold improvements, furniture and fixtures and intangible assets.

During the three months ended July 31, 2017, we continued the implementation of the fiscal 2016 werestructuring plan to integrate Legacy Hay entities that were acquired in fiscal 2016 and recorded $0.3 million of restructuring charges relating to the consolidation of premises.

During the three months ended July 31, 2016, the Company continued the implementation of the fiscal 2016 restructuring plan in order to integrate the Hay Group entities that were acquired in ~~the prior year~~fiscal 2016 by eliminating redundant positions and operational, ~~and~~ general and administrative expenses and ~~consolidation of office space. As a result, we recorded $24.5 million of~~consolidating premises. This resulted in restructuring charges ~~with $11.5 million~~ of severance costs and $13.0 million relating to the consolidation of office space during the three months ended July 31, 2016. No restructuring charges, net were incurred during the three months ended July 31, 2015.

~~Operating income was $4.5~~$24.5 million in the three months ended July 31, 2016, ~~as compared~~of which $11.5 million relates to ~~operating~~severance and $13.0 million relates to consolidation of premises.

Operating income of $32.9 million in the year-ago quarter. This decrease in operating income resulted from increases of $83.5 million in compensation and benefits expense (which included $5.3 million in integration/acquisition costs), $24.5 million in restructuring charges, net, $17.8 million in general and administrative expenses (which included $2.1 million in integration/acquisition costs), $6.7 million cost of services expense and $4.0 million of depreciation and amortization expenses. These changes were partially offset by higher fee revenue of $108.2 million during the three months ended July 31, 2016 as compared to the year-ago quarter.

~~Executive Search operating income decreased $8.0 million to $26.9~~was $40.7 million in the three months ended July 31, ~~2016~~2017 as compared to ~~$34.9~~$4.5 million in theyear-ago quarter. This increase in operating income resulted from higher fee revenue of $25.7 million and a decrease in restructuring charges, net of $24.2 million, offset by increases of $11.0 million in compensation and benefits expense and $3.0 million in general and administrative expenses.

Executive Search operating income increased $5.9 million, or 22%, to $32.8 million in the three months ended July 31, 2017 as compared to $26.9 million in theyear-ago quarter. The ~~decrease~~increase in Executive Search operating income was driven by ~~lower~~increases in higher fee revenue of ~~$5.7~~$14.8 million and ~~an increase~~a decrease in restructuring charges, net of $2.8 million, offset by increases in ~~restructuring charges, net.~~compensation and benefits expense, general and administrative expenses and depreciation and amortization expenses of $8.8 million $2.2 million and $0.4 million, respectively. Executive Search operating income, as a percentage of fee revenue, was ~~18%~~20% in the three months ended July 31, ~~2016~~2017 as compared to ~~23%~~18% in theyear-ago quarter.

Hay Group operating ~~loss~~income was ~~$7.7~~$19.1 million, ~~primarily~~an increase of $26.8 million, in the three months ended July 31, ~~2016~~2017 as compared to operating ~~income~~loss of ~~$7.5~~$7.7 million in theyear-ago quarter. The change was primarily driven by ~~increases~~a decrease in restructuring charges, net of $21.2 million, an increase in fee revenue of $4.9 million and a decrease of $1.3 million in compensation and benefits expense, ~~(which included $4.0 million~~offset by an increase in ~~integration/acquisition costs), restructuring charges, net and~~ general and administrative expenses of ~~$73.8~~$0.8 million ~~$21.5 million and $15.4 million, respectively~~ in the three months ended July 31, ~~2016~~2017 compared to theyear-ago quarter. ~~Further contributing the decline was an increase in cost~~Hay Group operating income, as a percentage of ~~services expense and depreciation and amortization expense of $5.6 million and $4.3 million, respectively. Partially offsetting these changes in operating loss was an increase in~~ fee revenue, ~~of $105.4 million mainly due~~was 11% in the three months ended July 31, 2017 compared to ~~the Legacy Hay acquisition. Hay Group~~ operating loss as a percentage of fee revenue ~~was 4%~~of (4%) in the ~~three months ended July 31, 2016 compared to operating income as a percentage of fee revenue of 11% in the~~ year-ago quarter.

Futurestep operating income ~~increased by $1.3~~was $8.2 million, ~~to $7.5~~an increase of $0.7 million, in the three months ended July 31, ~~2016~~2017 as compared to $7.5 million from ~~$6.2 million in~~ theyear-ago quarter. The increase ~~in Futurestep~~ operating income was ~~primarily due to $8.6 million in~~driven by higher fee revenue ~~partially~~of $5.9 million, offset by an increase ~~of $6.7 million~~ in compensation and benefits expense in the three months ended July 31, 2016 compared to the year-ago quarter. The change in compensation and benefits expense was driven by higher salaries and related payroll taxes due to an increase in average headcount.of $5.0 million. Futurestep operating income, as a percentage of fee revenue, was 14% in both the three months ended July 31, ~~2016 compared to 13% in the three months ended July 31, 2015.~~2017 and 2016.

Net income attributable to Korn Ferry ~~decreased $19.9~~increased by $25.8 million ~~or 86%,~~ to ~~$3.2~~$29.0 million in the three months ended July 31, ~~2016~~2017 compared to ~~$23.1~~$3.2 million in theyear-ago quarter. The ~~decrease~~increase was due to higher total revenue of $22.0 million and lower operating expenses of ~~$142.0~~$14.2 million, offset by an increase in ~~total revenue of $113.6 million and a decrease in~~ income tax provision of ~~$8.4~~$10.5 million due to ~~lower profitability.~~higher profitability compared theyear-ago quarter. Net income attributable to Korn Ferry, as a percentage of fee revenue, was 7% for the three months ended July 31, 2017 as compared to 1% in theyear-ago quarter.

Adjusted EBITDA increased ~~$14.7~~$3.0 million to ~~$56.4~~$59.4 million in the three months ended July 31, ~~2016~~2017 as compared to ~~$41.7~~$56.4 million in theyear-ago quarter. This increase was driven by higher adjusted fee revenue of ~~$111.8~~$22.1 million, (which included a $3.5 million deferred revenue adjustment related to the Legacy Hay acquisition) and an increase in the fair value of our marketable securities of $3.2 million in the three months ended July 31, 2016 compared to the year-ago quarter, offset by increases of ~~$78.2 million, $15.7 million and $6.7~~$14.0 million in compensation and benefits expense ~~(excluding integration/acquisition costs),~~and $5.4 million in general and administrative ~~expense (excluding integration/acquisition costs) and cost of services expense, respectively.~~expenses. Adjusted EBITDA, as a percentage of adjusted fee revenue, was 15% in both the three months ended July 31, ~~2016 as compared to 16% in the year-ago quarter.~~2017 and 2016.

Executive Search Adjusted EBITDA ~~was $31.7 million, a decrease of $5.2~~increased $3.5 million, or ~~14%~~11%, ~~in the three months ended July 31, 2016 as compared~~ to ~~$36.9~~$35.2 million in the three months ended July 31, ~~2015. This decrease~~2017 as compared to $31.7 million in the three months ended July 31, 2016. The increase was ~~due to lower~~driven by higher fee revenue of ~~$5.7~~$14.8 million, offset by ~~a decrease~~increases of ~~$0.7~~$8.8 million in compensation and benefits expense and $2.2 million in general and administrative expenses during the three months ended July 31, ~~2016~~2017 compared to theyear-ago quarter. ~~The decrease in compensation and benefits expense was driven by lower performance related bonus expense, offset by an increase in salaries and related payroll expense.~~ Executive Search Adjusted EBITDA, as a percentage of fee revenue, was 22% in both the three months ended July 31, ~~2016 as compared to 24% in the year-ago quarter.~~2017 and 2016.

Hay Group Adjusted EBITDA ~~increased by $19.1 million to $29.8~~was $30.0 million in the three months ended July 31, ~~2016~~2017 as compared to ~~$10.7~~$29.8 million in theyear-ago quarter. This increase was due to higher adjusted fee revenue of $108.9 million (which included a $3.5 million deferred revenue adjustment related to Legacy Hay acquisition), offset by an increase of $69.8 million, $15.4 million and $5.6 million in compensation and benefit expense (excluding integration/acquisition costs), general and administrative expenses and cost of services expense, respectively. Hay Group Adjusted EBITDA, as a percentage of adjusted fee revenue, was 17% in both the three months ended July 31, ~~2016 as compared to 15% in the year-ago quarter.~~2017 and 2016.

Futurestep Adjusted EBITDA ~~increased by $1.3 million to $8.1~~was $9.0 million in the three months ended July 31, ~~2016~~2017 as compared to ~~$6.8~~$8.1 million in theyear-ago quarter. The increase in Futurestep Adjusted EBITDA was primarily due to an increase in fee revenue of $8.6 million, offset by an increase of $6.7 million in compensation and benefits expense during the three months ended July 31, 2016 as compared to the year-ago quarter. The increase in compensation and benefits expense was primarily driven by higher salaries and related payroll taxes due to an increase in average headcount. Futurestep Adjusted EBITDA, as a percentage of fee revenue, was 15% in both the three months ended July 31, ~~2016~~2017 and ~~2015.~~2016.

Other income, net was ~~$4.3~~$3.5 million in the three months ended July 31, ~~2016~~2017 as compared to ~~other loss, net of $0.1~~$4.3 million in theyear-ago quarter. The ~~change~~decrease was primarily due to the ~~increase~~change in the fair value of our marketable securities, which created a smaller gain ~~of $3.9 million and $0.7 million~~ during the three months ended July 31, ~~2016 and 2015, respectively.~~2017 compared to theyear-ago quarter.

Interest expense, net primarily relates to our term loan facility and borrowings under our COLI policies, which is partially offset by interest earned on cash and cash equivalent balances. Interest expense, net was ~~$3.1~~$2.7 million in the three months ended July 31, ~~2016~~2017 as compared to ~~$0.3~~$3.1 million in theyear-ago quarter. The ~~increase~~decrease was mainly due to thewrite-off of $1.0 million in debt issuance costs in theyear-ago quarter associated with our prior term facility, offset with the increase of $0.5 million in interest expense associated with the term loan facility that we entered into in ~~the current quarter~~fiscal 2017 to provide enhanced financial ~~flexibility.~~

flexibility and in ~~Earnings~~recognition of ~~Unconsolidated Subsidiaries~~

~~Equity in earnings~~the accelerated pace of ~~unconsolidated subsidiaries is comprised of our less than 50% interest in IGroup, LLC, which is engaged in organizing, planning and conducting conferences and training programs throughout~~ the world for directors, chief executive officers, other senior level executives and business leaders, in three months ended July 31, 2016, and also includes our Mexican subsidiary for the three months ended July 31, 2015. In the fourth quarter of fiscal 2016, we obtained control of our Mexico subsidiary and began to consolidate the operations. Equity in earnings was $0.1 million in the three months ended July 31, 2016 as compared to $0.7 million in the three months ended July 31, 2015. The decrease is due to the consolidation of our Mexico subsidiary for the three months ended July 31, 2016, which is now included in operations.Legacy Hay integration.

The provision for income tax was ~~$1.7~~$12.2 million in the three months ended July 31, ~~2016~~2017 compared to ~~$10.1~~$1.7 million in theyear-ago quarter. This reflects a ~~30%~~29% and ~~31%~~30% effective tax rate infor the three months ended July 31, 2017 and 2016, ~~and 2015,~~ respectively.

Net income attributable to ~~non-controlling~~noncontrolling interest represents the portion of a subsidiary’s net earnings that are attributable to shares of such subsidiary not held by Korn Ferry that are included in the consolidated results of operations. ~~In the fourth quarter of fiscal 2016, we obtained control of our Mexico subsidiary and began to consolidate the operations.~~ Net income attributable to ~~non-controlling~~noncontrolling interest for the three months ended July 31, ~~2016~~2017 was $0.4 million compared to $0.9 ~~million.~~million for the three months ended July 31, 2016.

The Company and its Board of Directors endorse a balanced approach to capital allocation. The Company’s ~~first~~ priority is to invest in growth initiatives, such as the hiring of consultants, the continued development of intellectual property and derivative products and services, and the investment in synergistic accretive ~~M&A~~merger and acquisition transactions that earn a return that is superior to the Company’s cost of capital. Next, the Company’s capital allocation approach contemplates the planned return of a portion of excess capital to stockholders, in the form of a regular quarterly dividend, subject to the factors discussed in the “Risk Factors” sections of the Annual Report on Form10-K for the fiscal year ending April 30, ~~2016.~~2017. Additionally, the Company considers share repurchases on an opportunistic basis and subject to the terms of our credit agreement.

On June 15, 2016, we entered into a ~~new~~ senior secured $400 million Credit Agreement with a syndicate of banks and Wells Fargo Bank, National Association as administrative agent, to provide for enhanced financial flexibility and in recognition of the accelerated pace of the Legacy Hay integration. See Note 10 —Long-Term Debtfor a description of the new credit facility. We drew down $275 million on the new term loan and used $140 million of the proceeds topay-off the term loan that was outstanding as of April 30, 2016. We had $3.0 million standby letters of credit issued under our long-term debt arrangements as of July 31, 2017 and April 30, 2017. We had a total of $8.8 million and $8.1 million of standby letters of credits with other financial institutions as of July 31, 2017 and April 30, 2017, respectively. The ~~remaining funds are available for working capital and general corporate purposes.~~standby letters of credits were generally issued as a result of entering into office premise leases.

As part of the Legacy Hay acquisition, the Company has committed to a $40 million retention pool ~~(up to $5~~(of which $9.0 million ~~payable within one year of the closing of the acquisition)~~was paid in fiscal 2017) for certain employees of Legacy Hay subject to certain circumstances. Of the remaining balance, 50% will be payable within 45 days after November 30, 2017 and the remaining 50% will be payable within 45 days after November 30, 2018.

On December 8, 2014, the Board of Directors adopted a dividend policy to distribute, to our stockholders, a regular quarterly cash dividend of $0.10 per share. Every quarter since the adoption of the dividend policy, the Company has declared a quarterly dividend. The declaration and payment of future dividends under the quarterly dividend program will be at the discretion of the Board of Directors and will depend upon many factors, including our earnings, capital requirements, financial conditions, the terms of our indebtedness and other factors our Board of Directors may deem to be relevant. Our Board of Directors may, however, amend, revoke or suspend our dividend policy at any time and for any reason.

On December 8, 2014, the Board of Directors also approved an increase in the Company’s stock repurchase program to an aggregate of $150.0 million. Common stock may be repurchased from time to time in open market or privately negotiated transactions at the Company’s discretion subject to market conditions and other factors. During the second quarter of fiscal 2017, we resumed repurchasing shares through this program. We repurchased approximately $4.0 million of the Company’s common stock during the three months ended July 31, 2017. As of July 31, 2017, $117.2 million remained available for common stock repurchases under our stock repurchase program. Any decision to continue to execute our currently outstanding issuer repurchase program will depend on our earnings, capital requirements, financial condition and other factors considered relevant by our Board of Directors. Our senior secured credit agreement requires that our pro forma leverage ratio, defined as, the ratio of consolidated funded indebtedness to consolidated adjusted EBITDA, is no greater than 2.50 to 1.00, and our pro forma domestic liquidity is at least $50.0 million as a condition to consummating permitted acquisitions, paying dividends to our stockholders and share repurchases of our common stock.

Our performance is subject to the general level of economic activity in the geographic regions and the industries which we service. We believe, based on current economic conditions, that our cash on hand and funds from operations and the Credit Agreement we entered into on June 15, 2016 will be sufficient to meet anticipated working capital, capital expenditures, general corporate requirements, repayment of the debt incurred in connection with the Legacy Hay acquisition, the retention pool obligations in connection with the Legacy Hay acquisition, shares repurchases and dividend payments under our dividend policy during the next twelve months. However, if the national or global economy, credit market conditions and/or labor markets were to deteriorate in the future, such changes ~~would~~could put negative pressure on demand for our services and affect our operating cash flows. If these conditions were to persist over an extended period of time, we may incur negative cash flows, and it might require us to access our existing credit facility to meet our capital needs and/or discontinue our dividend policy.

Cash and cash equivalents and marketable securities were ~~$381.1~~$408.3 million and ~~$414.7~~$530.8 million as of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, respectively. Net of amounts held in trust for deferred compensation plans and accrued bonuses, cash and marketable securities were ~~$195.0~~$235.1 million and ~~$88.9~~$245.1 million at July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, respectively. As of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, we held ~~$127.5~~$184.8 million and ~~$129.0~~$165.8 million, respectively of cash and cash equivalents in foreign locations, net of amounts held in trust for deferred compensation plans and to pay fiscal ~~2017~~2018 and ~~2016~~2017 annual bonuses. If

these amounts were distributed to the United States, in the form of dividends, we would be subject to additional U.S. income taxes. The Company has a plan to distribute a small portion of the cash held in foreign locations to the United States. No deferred tax liability has been recorded because no additional taxes would arise in connection with such distributions. Cash and cash equivalents consist of cash and highly liquid investments purchased with original maturities of three months or less. Marketable securities consist of mutual funds in the three months ended July 31, ~~2016.~~2017. The primary objectives of our investment in mutual funds are to meet the obligations under certain of our deferred compensation plans.

As of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, marketable securities ~~included trading securities~~ of ~~$137.0~~$126.3 million (net of gross unrealized gains of ~~$3.5~~$9.5 million and gross unrealized losses of ~~$0.9~~$0.5 million) and ~~$141.4~~$119.9 million (net of gross unrealized gains of ~~$1.4~~$6.7 million and gross unrealized losses of ~~$2.6~~$0.6 million), respectively, held in trust for settlement of our obligations under certain deferred compensation plans, of which ~~$133.5~~$114.6 million and ~~$130.1~~$115.6 million, respectively, are classified asnon-current. ~~Our vested and unvested obligations for which these assets~~ These marketable securities were held ~~in trust totaled $133.9~~to satisfy vested obligations totaling $116.2 million and ~~$138.8~~$99.5 million as of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, respectively. Unvested obligations under the deferred compensation plans totaled $25.3 million and $37.6 million as of July 31, 2017 and April 30, 2017, respectively.

The net increase in our working capital of ~~$128.1~~$22.0 million as of July 31, ~~2016~~2017 compared to April 30, ~~2016~~2017 is primarily attributable to a decrease in compensation and benefits payable and an increase in accounts receivable, offset by decreases in cash and cash equivalents. The decrease in compensation and benefits payable and cash and cash equivalents was primarily due to the payment of annual bonuses earned in fiscal ~~2016~~2017 and paid during the first quarter of fiscal ~~2017 while~~2018, with cash and cash equivalents also decreasing due tosign-on and retention payments made during the quarter. The increase in accounts receivable ~~increased~~was due to an increase in days of sales outstanding which went from 5561 days to 6769 days (which is consistent with historical experience) from April 30, ~~2016~~2017 to July 31, ~~2016.~~2017. Cash used in operating activities was ~~$136.0~~$109.6 million in the three months ended July 31, ~~2016~~2017, a decrease of $26.1 million, compared to ~~$90.2~~$135.7 million in theyear-ago ~~quarter.~~ period.

Cash used in investing activities was ~~$9.8~~$11.8 million in the three months ended July 31, ~~2016,~~2017, an increase of ~~$13.6~~$2.0 million, compared to ~~cash provided by investing activities of $3.8~~$9.8 million in theyear-ago quarter. Cash used in investing activities was higher primarily due cash used to ~~an increase~~purchase marketable securities net of sales/maturities of marketable securities in the three months ended July 31, 2017 compared to cash provided by sales/maturities of marketable securities net of purchase of marketable securities in theyear-ago quarter, offset with the decrease in cash used to purchase property and equipment in connection with ourco-location activities and ~~a payment made on~~ the ~~final working capital settlement~~amount paid in theyear-ago quarter related to the Legacy Hay acquisition.

Cash ~~provided by~~used in financing activities was ~~$126.6~~$15.3 million in the three months ended July 31, ~~2016, an increase of $133.0 million,~~2017 compared to cash ~~used in~~provided by financing activities of ~~$6.4~~$126.3 million in theyear-ago quarter. Cash ~~provided by~~used in financing activities increased primarily due to ~~the borrowing~~a decrease of ~~$275.0~~$135.0 million in proceeds from ~~the new~~our term loan facility ~~in the three months ended July 31, 2016, offset by $140.0 million used to~~ net ofpay-off of the term loan that was outstanding as of April 30, ~~2016. As of~~2016, $5.2 million in term loan payments made during the three months ended July 31, ~~2016, $150.0~~2017 and $4.0 million ~~remained available for~~of Company’s common stock ~~repurchases~~purchased under ~~our~~the stock repurchase program.

Cash Surrender Value of Company Owned Life Insurance Policies, Net of Loans

The Company purchased COLI policies or contracts insuring the lives of certain employees eligible to participate in the deferred compensation and pension plans as a means of funding benefits under such plans. As of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, we held contracts with gross CSV of ~~$178.6~~$180.7 million and ~~$175.7~~$180.3 million, respectively. Since fiscal 2012, we paid the premiums under our COLI contracts from operating cash, and in prior years, we generally borrowed under our COLI contracts to pay related premiums. Such borrowings do not require annual principal repayments, bear interest primarily at variable rates and are secured by the CSV of COLI contracts. Total outstanding borrowings against the CSV of COLI contracts were ~~$68.4~~$66.8 million and $67.2 million as of July 31, ~~2016~~2017 and April 30, ~~2016.~~2017, respectively. At July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, the net cash value of these policies was ~~$110.2~~$113.9 million and ~~$107.3~~$113.1 million, respectively.

On June 15, 2016, we entered into a senior secured $400 million Credit Agreement (the “Credit Agreement”) with a syndicate of banks and Wells Fargo Bank, National Association as administrative agent ~~( to~~(to provide for enhanced financial flexibility and in recognition of the accelerated pace of the Hay Group integration). The Credit Agreement provides for, among other things: (a) a senior secured term loan facility in an aggregate principal amount of $275 million (the “ Term Facility”);, (b) a senior secured revolving credit facility (the “Revolver” and together with the Term Facility, the “Credit Facilities”) in an aggregate principal amount of $125 million, (c) annual term loan amortization of 7.5%, 7.5%, 10.0%, 10.0%, and 10.0%, with the remaining principal due at maturity, (d) certain customary affirmative and negative covenants, including a maximum consolidated total leverage ratio (as defined below) and a minimum interest coverage ratio and (e) an expanded definition of permittedadd-backs to Adjusted EBITDA in recognition of the accelerated integration ~~actions referenced above.~~actions. We drew down $275 million on

the new term loan and used $140 million of the proceeds topay-off the term loan that was outstanding as of April 30, 2016. ~~The remaining funds will be used for working capital and general corporate purposes. As of July 31, 2016, we were in compliance with our debt covenants.~~

At our option, loans issued under the Credit Agreement will bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. The interest rate applicable to loans outstanding under the Credit Facilities may fluctuate between LIBOR plus 1.25% per annum to LIBOR plus 2.00% per annum, in the case of LIBOR borrowings (or between the alternate base rate plus 0.25% per annum and the alternate base rate plus 1.00% per annum, in the alternative), based upon our total funded debt to adjusted EBITDA ratio (as set forth in the Credit Agreement, the “consolidated leverage ratio”) at such time. In addition, ~~the Company~~we will be required to pay to the lenders a quarterly fee ranging from 0.20% to 0.35% per annum on the average daily unused amount of the Term Facility, based upon ~~the Company’s~~our consolidated leverage ratio at such time, and fees relating to the issuance of letters of credit. During the three months ended July 31, 2017 and 2016, the average rate on the Term Facility was 2.34% and 2.40%, respectively.

Both the Revolver and the Term Facility mature on June 15, 2021, and may be prepaid and terminated early by us at any time without premium or penalty (subject to customary LIBOR breakage fees). The Term Facility is payable in quarterly ~~instalments beginning on September 30, 2016.~~installments with principal payments totaling $5.2 million made during the three months ended July 31, 2017. As of July 31, ~~2016, $275~~2017, $254.4 million was outstanding under the Term Facility compared to ~~$140~~$259.5 million as of April 30, ~~2016, under~~2017. The current and long-term portion of unamortized debt issuance costs associated with the ~~previous Facility. During the three months ended~~long-term debt, was $3.4 million and $3.5 million as of July 31, ~~2016, the average rate~~2017 and April 30, 2017, respectively. The fair value of our Term Facility is based on borrowing rates currently required of loans with similar terms, maturity and credit risk. The carrying amount of the Term Facility ~~was 2.40%~~approximates fair value because the base interest rate charged varies with market conditions and the credit spread is commensurate with current market spreads for issuers of similar risk. The fair value of the Term Facility is classified as a Level 2 liability in the fair value hierarchy. As of July 31, 2017, we were in compliance with its debt covenants.

As of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, we had no borrowings under the Revolver. ~~At July 31, 2016 and April 30, 2016, there was $2.8~~We had $3.0 million of standby letters of ~~credit~~credits issued under ~~our~~its long-term debt ~~arrangements.~~arrangements as of July 31, 2017 and April 30, 2017. We had a total of ~~$5.6~~$8.8 million and ~~$6.4~~$8.1 million of standby letters of credits with other financial institutions as of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, respectively. The standby letters of credits were generally issued as a result of entering into office premise leases.

We are not aware of any other trends, demands or commitments that would materially affect liquidity or those that relate to our resources.

We have nooff-balance sheet arrangements and have not entered into any transactions involving unconsolidated, special purpose entities. We had no material changes in contractual obligations as of July 31, ~~2016,~~2017, as compared to those disclosed in our table of contractual obligations included in our Annual Report.

Preparation of this Quarterly Report onForm 10-Q requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates and assumptions and changes in the estimates are reported in current operations as new information is learned or upon the amounts becoming fixed and determinable. In preparing our interim consolidated financial statements and accounting for the underlying transactions and balances, we apply our accounting policies as disclosed in the notes to our consolidated financial statements. We consider the policies related to revenue recognition, performance related bonuses, ~~restructuring,~~ deferred compensation, carrying values of receivables, goodwill, intangible assets, fair value of contingent consideration ~~share-based payments~~ and recoverability of deferred income taxes as critical to an understanding of our interim consolidated financial statements because their application places the most significant demands on management’s judgment and estimates. Specific risks for these critical accounting policies are described in our Form10-K filed with the Securities Exchange Commission. There have been no material changes in our critical accounting policies since fiscal ~~2016.~~

~~Item 3.~~

~~Quantitative and Qualitative Disclosures About Market Risk~~

Item 3.Quantitative and Qualitative Disclosures About Market Risk

As a result of our global operating activities, we are exposed to certain market risks, including foreign currency exchange fluctuations and fluctuations in interest rates. We manage our exposure to these risks in the normal course of our business as described below.

Substantially all our foreign subsidiaries’ operations are measured in their local currencies. Assets and liabilities are translated into U.S. dollars at the rates of exchange in effect at the end of each reporting period and revenue and expenses are translated at average rates of exchange during the reporting period. Resulting translation adjustments are reported as a component of accumulated other comprehensive loss, net on our consolidated balance sheets.

Transactions ~~entered in the ordinary course of business,~~ denominated in a currency other than the reporting entity’s functional currency may give rise to foreign currency gains or losses that impact our results of operations. Historically, we have not realized significant foreign currency gains or losses on such transactions. Foreign currency losses, on an after tax basis, included in net income were $1.0 million in the

three months ended July 31, 2017 as compared to foreign currency gains, on an after tax basis, included in net income were $1.0 million in the three months ended July 31, ~~2016 as compared to foreign currency losses, on an after tax basis, included in net income of $0.2 million in the three months ended July 31, 2015.~~2016.

Our exposure to foreign currency exchange rates is primarily driven by fluctuations involving the following currencies – U.S. ~~dollars,~~Dollar, Canadian Dollar, Euro, Pound Sterling, Swiss Franc, Korean Won, Brazilian Real ~~Japanese Yen, Australian dollar~~ and ~~Chinese Yuan.~~Russian Ruble. Based on balances exposed to fluctuation in exchange rates between these currencies as of July 31, ~~2016,~~2017, a 10% increase or decrease equally in the value of these currencies ~~would have resulted~~could result in a foreign exchange gain or loss of ~~$6.7~~$8.5 million. ~~Beginning in the third quarter of fiscal 2016, we~~We have established a program that primarily utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures which increased as a result of the Legacy Hay acquisition. These foreign currency forward contracts are neither used for trading purposes nor are they designated as hedging instruments pursuant to Accounting Standards Codification 815,Derivatives and ~~Hedging.~~Hedging.

Our exposure to interest rate risk is limited to our Term Facility and borrowings against the CSV of COLI contracts. As of July 31, ~~2016,~~2017, there was ~~$275.0~~$254.4 million outstanding under the Term Facility. At our option, loans issued under the Credit ~~Agreement will~~Facilities bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. The interest rate applicable to loans outstanding under the Credit Facilities may fluctuate between LIBOR plus 1.25% per annum to LIBOR plus 2.00% per annum, in the case of LIBOR borrowings (or between the alternate base rate plus 0.25% per annum and the alternate base rate plus 1.00% per annum, in the alternative), based upon ~~the Company’s~~our total funded debt to adjusted EBITDA ratio (as set forth in the Credit Agreement, the “consolidated leverage ratio”) at such time. In addition, ~~the Company is~~we are required to pay to the lenders a quarterly fee ranging from 0.20% to 0.35% per annum on the average daily unused amount of the Term Facility, based upon ~~the Company��s~~our consolidated leverage ratio at such time, and fees relating to the issuance of letters of credit. A 100 basis point increase in LIBOR rates would have increased our interest expense by approximately ~~$0.5~~$0.7 million for the three months ended July 31, ~~2016.~~2017. During the three months ended July 31, 2017 and 2016, the average interest rate on the ~~new~~ term loan was 2.34% and 2.40%., respectively. We had no borrowings under the Revolver as of July 31, ~~2016.~~ 2017.

To mitigate the interest rate risk on our Term Facility, we entered into an interest rate swap contract with an initial notional amount of $129.8 million to hedge the variability to changes in cash flows attributable to interest rate risks caused by changes in interest rates related to our variable rate debt. We have designated the swap as a cash flow hedge. The notional amount is amortized so that the amount is always 50% of the principal balance of the debt outstanding. As of July 31, 2017, the notional amount was $127.2 million. The interest rate swap agreement matures on June 15, 2021 and locks the interest rates on 50% of our outstanding debt at 1.919%, exclusive of the credit spread on the debt.

We had ~~$68.4~~$66.8 million and $67.2 of borrowings against the CSV of COLI contracts as of July 31, ~~2016~~2017 and April 30, ~~2016,~~2017, respectively, bearing interest primarily at variable rates. The risk of fluctuations in these variable rates is minimized by the fact that we receive a corresponding adjustment to our borrowed funds crediting rate which has the effect of increasing the CSV on our COLI contracts.

Based on their evaluation of our disclosure controls and procedures (as defined in Rules13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) conducted as of the end of the period covered by this Quarterly Report on Form10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined inRules 13a-15(e) and15d-15(e) under the ~~Securities~~ Exchange ~~Act of 1934 (the “Exchange Act”))~~Act) are effective.

There were no changes in our internal control over financial reporting during the three months ended July 31, ~~2016~~2017 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

From time to time, the Company has been and is involved in litigation incidental to its business. The Company is currently not a party to any litigation, which, if resolved adversely against the Company, would, in the opinion of management, after consultation with legal counsel, have a material adverse effect on the Company’s business, financial position or results of operations.

In our Form10-K for the year ended April 30, ~~2016,~~2017, we described material risk factors facing our business. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. As of the date of this report, there have been no material changes to the risk factors described in our Form10-K.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuers Purchases of Equity Securities

The following table summarizes common stock repurchased by us during the quarter ended July 31, ~~2016:~~2017:

Our senior secured credit agreement, dated June 15, 2016, permits us to pay dividends to our stockholders and make share repurchases so long as our pro forma leverage ratio, defined as, the ratio of consolidated funded indebtedness to consolidated adjusted EBITDA, is no greater than 2.50 to 1.00, and our pro forma domestic liquidity is at least $50.0 million.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Item #	Description	Page

	Part I. Financial Information

Item 1.	Consolidated Financial Statements

	Consolidated Balance Sheets as of July 31, 2017 (unaudited) and April 30, 2017		1

	Consolidated ~~Balance Sheets as of July 31, 2016 (unaudited) and April 30, 2016~~		1

	~~Unaudited Consolidated~~ Statements of Income (unaudited) for the three months ended July 31, ~~2016~~2017 and ~~2015~~2016		2

	~~Unaudited~~ Consolidated Statements of Comprehensive Income (Loss)~~/Income~~ (unaudited) for the three months ended July 31, ~~2016~~2017 and ~~2015~~2016		3

	~~Unaudited~~ Consolidated Statements of Cash Flows (unaudited) for the three months ended July 31, ~~2016~~2017 and ~~2015~~2016		4

	Notes to Consolidated Unaudited ~~Consolidated~~ Financial Statements		5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2022

Item 3.	Quantitative and Qualitative Disclosures ~~about~~About Market Risk		3332

Item 4.	Controls and Procedures		3433

	Part II. Other Information

Item 1.	Legal Proceedings		3534

Item 1A.	Risk Factors		3534

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities		3534	��

Item 6.	Exhibits		3635

	Signatures		3736


Strategy Execution & Organization Design		We establish the conditions for success by clarifying strategy; designing an operating model and organization structure that aligns to it; and defining a high performance culture. We enable strategic change by engaging and motivating people to perform.

Talent Strategy and Work Design		We map talent strategy to business strategy and help organizations put their plan into action. We ~~help organizations to~~ make sure they have the right people, in the right roles, engaged and enabled to do the right ~~things - both now and in the future.~~things.

Rewards and Benefits		We help organizations align reward with strategy. We help them pay their people fairly for doing the right things -— with rewards they value -— at a cost the organization can afford.

Assessment and Succession		We provide actionable, research-backed ~~insight~~insights that ~~allows~~allow organizations to understand the ~~talent they have, benchmarked against the talent they need to deliver on the business strategy.~~ ~~Our assessments allow leaders to make the right decisions about~~true capabilities of their people ~~for today, and to prepare~~so they can make decisions that ensure the right leaders ~~to be~~are ready -— when and where they are needed -— in the future.

Executive Search and Recruitment		We integrate scientific research with our practical experience and industry-specific expertise to recruit professionals of all levels and functions at organizations across every ~~sector.~~ industry.

Leadership Development		We activate purpose, vision, and strategy through leaders at all levels and organizations. We combine expertise, science, and proven techniques with forward thinking and creativity to build leadership experiences that help ~~entry-~~entry to senior-level leaders grow and deliver superior results.


	Shares Purchased(1)		Average Price Paid Per Share		Shares Purchased as Part of Publicly- Announced Programs (2)		Approximate Dollar Value of Shares That May Yet be Purchased Under the Programs (2)
May 1, 2016— May 31, 2016		659	$	27.01		—	$150.0 million
June 1, 2016— June 30, 2016		7,873	$	28.80		—	$150.0 million
July 1, 2016— July 31, 2016		177,222	$	22.10		—	$150.0 million

Total		185,754	$	22.40		—	$150.0 million


	Shares Purchased (1)		Average Price Paid Per Share		Shares Purchased as Part of Publicly- Announced Programs (2)		Approximate Dollar Value of Shares That May Yet be Purchased Under the Programs (2)

May 1, 2017— May 31, 2017		656	$	32.63		—		$121.2 million
June 1, 2017— June 30, 2017		10,767	$	34.34		10,000		$120.8 million
July 1, 2017— July 31, 2017		205,416	$	33.98		109,356		$117.2 million

Total		216,839	$	34.00		119,356

x
☑		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended July 31, 2017

		or

☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Foreign Currency Translation			Deferred Compensation and Pension Plan (1)			Unrealized (losses) on interest rate swap (2)			Accumulated Other Comprehensive Income (Loss)
	(in thousands)
Balance as of April 30, 2017	$	(55,359	)	$	(15,127	)	$	(578	)	$	(71,064	)
Unrealized gains (losses) arising during the period		16,084			—			(234	)		15,850
Reclassification of realized net losses to net income		—			352			171			523

Balance as of July 31, 2017	$	(39,275	)	$	(14,775	)	$	(641	)	$	(54,691	)


	April 30, 2016
	Fair Value Measurement										Balance Sheet Classification
	Cost		Unrealized Gains		Unrealized Losses			Fair Value			Cash and Cash Equivalents		Marketable Securities, Current		Marketable Securities, Non-current		Other Accrued Liabilities
	(in thousands)
Level 1:
Cash	$	155,702	$	—	$	—		$	155,702		$	155,702	$	—	$	—	$	—
Money market funds		117,550		—		—			117,550			117,550		—		—		—
Mutual funds (1)		142,588		1,395		(2,553	)		141,430			—		11,338		130,092		—

Total	$	415,840	$	1,395	$	(2,553	)	$	414,682		$	273,252	$	11,338	$	130,092	$	—

Level 2:
Foreign currency forward contracts	$	—	$	324	$	(1,041	)	$	(717	)	$	—	$	—	$	—	$	(717	)


	July 31, 2017
	(in thousands)
Losses recognized in other comprehensive income (net of tax effects of $149)	$	234
Losses reclassified from accumulated other comprehensive income into interest expense, net		280


Exhibit Number		Description

~~10.1*+~~		~~Korn/Ferry International Long Term Performance Unit Plan, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed July 14, 2016.~~

~~10.2*+~~		~~Korn/Ferry International Long Term Performance Unit Plan Form of Unit Award Agreement, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed July 14, 2016.~~

~~10.3+~~		Credit Agreement, dated June 15, 2016, by and among, Wells Fargo Bank, National Association, as administrative agent and other lender parties thereto, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed June 17, 2016.

31.1		Chief Executive Officer Certification pursuant to Rule13a-14(a) under the Exchange Act.

31.2		Chief Financial Officer Certification pursuant to Rule13a-14(a) under the Exchange Act.

32.1		Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350.

101.INS		XBRL Instance Document.

101.SCH		XBRL Taxonomy Extension Schema Document.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.


K~~ORN~~/F~~ERRY~~ I~~NTERNATIONAL~~Korn/Ferry International

By:		/s/ Robert P. Rozek
		Robert P. Rozek
		Executive Vice President, Chief Financial Officer
		and Chief Corporate Officer

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨☐ (Do not check if a smaller reporting company)

Smaller reporting company

¨☐
Emerging growth company☐