Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Jul. 31, 2018 | Sep. 04, 2018 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jul. 31, 2018 | |
Document Fiscal Year Focus | 2,019 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | KFY | |
Entity Registrant Name | KORN FERRY INTERNATIONAL | |
Entity Central Index Key | 56,679 | |
Current Fiscal Year End Date | --04-30 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 56,940,561 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jul. 31, 2018 | Apr. 30, 2018 |
ASSETS | ||
Cash and cash equivalents | $ 365,729 | $ 520,848 |
Marketable securities | 10,952 | 14,293 |
Receivables due from clients, net of allowance for doubtful accounts of $19,201 and $17,845 at July 31, 2018 and April 30, 2018, respectively | 397,559 | 384,996 |
Income taxes and other receivables | 36,999 | 29,089 |
Unearned compensation | 40,713 | 37,333 |
Prepaid expenses and other assets | 32,056 | 27,700 |
Total current assets | 884,008 | 1,014,259 |
Marketable securities, non-current | 123,124 | 122,792 |
Property and equipment, net | 123,318 | 119,901 |
Cash surrender value of company owned life insurance policies, net of loans | 121,828 | 120,087 |
Deferred income taxes | 39,512 | 25,520 |
Goodwill | 581,858 | 584,222 |
Intangible assets, net | 93,050 | 203,216 |
Unearned compensation, non-current | 92,378 | 78,295 |
Investments and other assets | 20,394 | 19,622 |
Total assets | 2,079,470 | 2,287,914 |
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||
Accounts payable | 35,325 | 35,196 |
Income taxes payable | 25,790 | 23,034 |
Compensation and benefits payable | 175,477 | 304,980 |
Term loan | 26,629 | 24,911 |
Other accrued liabilities | 150,534 | 170,339 |
Total current liabilities | 413,755 | 558,460 |
Deferred compensation and other retirement plans | 234,468 | 227,729 |
Term loan, non-current | 204,654 | 211,311 |
Deferred tax liabilities | 1,609 | 9,105 |
Other liabilities | 60,364 | 61,694 |
Total liabilities | 914,850 | 1,068,299 |
Stockholders' equity | ||
Common stock: $0.01 par value, 150,000 shares authorized, 72,171 and 71,631 shares issued at July 31, 2018 and April 30, 2018, respectively, and 56,938 and 56,517 shares outstanding at July 31, 2018 and April 30, 2018, respectively | 681,060 | 683,942 |
Retained earnings | 537,015 | 572,800 |
Accumulated other comprehensive loss, net | (56,488) | (40,135) |
Total Korn/Ferry International stockholders' equity | 1,161,587 | 1,216,607 |
Noncontrolling interest | 3,033 | 3,008 |
Total stockholders' equity | 1,164,620 | 1,219,615 |
Total liabilities and stockholders' equity | $ 2,079,470 | $ 2,287,914 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jul. 31, 2018 | Apr. 30, 2018 |
Statement Of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 19,201 | $ 17,845 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 150,000,000 | 150,000,000 |
Common stock, shares issued | 72,171,000 | 71,631,000 |
Common stock, shares outstanding | 56,938,000 | 56,517,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Jul. 31, 2018 | Jul. 31, 2017 | |
Total revenue | $ 478,362 | $ 414,917 |
Compensation and benefits | 321,905 | 272,756 |
General and administrative expenses | 168,724 | 58,261 |
Depreciation and amortization | 11,731 | 12,209 |
Restructuring charges, net | 280 | |
Total operating expenses | 533,481 | 372,982 |
Operating (loss) income | (55,119) | 41,935 |
Other income, net | 4,491 | 3,354 |
Interest expense, net | (4,103) | (3,680) |
(Loss) income before (benefit) provision for income taxes and equity in earnings of unconsolidated subsidiaries | (54,731) | 41,609 |
Equity in earnings of unconsolidated subsidiaries | 29 | 30 |
Income tax (benefit) provision | (16,110) | 12,210 |
Net (loss) income | (38,592) | 29,429 |
Net income attributable to noncontrolling interest | (19) | (388) |
Net (loss) income attributable to Korn/Ferry International | $ (38,611) | $ 29,041 |
(Loss) earnings per common share attributable to Korn/Ferry International: | ||
Basic | $ (0.70) | $ 0.52 |
Diluted | $ (0.70) | $ 0.51 |
Weighted-average common shares outstanding: | ||
Basic | 55,378 | 55,795 |
Diluted | 55,378 | 56,403 |
Cash dividends declared per share: | $ 0.10 | $ 0.10 |
Fee Revenue | ||
Total revenue | $ 465,568 | $ 401,254 |
Cost of services | 18,327 | 15,813 |
Reimbursed Out Of Pocket Engagement Expenses | ||
Total revenue | 12,794 | 13,663 |
Reimbursed Expenses | ||
Cost of services | $ 12,794 | $ 13,663 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Jul. 31, 2018 | Jul. 31, 2017 | |
Statement Of Income And Comprehensive Income [Abstract] | ||
Net (loss) income | $ (38,592) | $ 29,429 |
Other comprehensive (loss) income: | ||
Foreign currency translation adjustments | (14,556) | 16,189 |
Deferred compensation and pension plan adjustments, net of tax | 273 | 352 |
Net unrealized gain (loss) on interest rate swap, net of tax | 133 | (63) |
Comprehensive (loss) income | (52,742) | 45,907 |
Less: comprehensive income attributable to noncontrolling interest | (25) | (493) |
Comprehensive (loss) income attributable to Korn/Ferry International | $ (52,767) | $ 45,414 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Total | Common Stock | Retained Earnings | Accumulated Other Comprehensive (Loss) Income, Net | Total Korn/Ferry International Stockholders' Equity | Noncontrolling Interest |
Begining Balance at Apr. 30, 2017 | $ 1,087,048 | $ 692,527 | $ 461,976 | $ (71,064) | $ 1,083,439 | $ 3,609 |
Beginning Balance, Shares at Apr. 30, 2017 | 56,938,000 | |||||
Net (loss) income | 29,429 | 29,041 | 29,041 | 388 | ||
Other Comprehensive (loss) income | 16,478 | 16,373 | 16,373 | 105 | ||
Dividends paid to shareholders | (5,823) | (5,823) | (5,823) | |||
Purchase of stock | (7,372) | $ (7,372) | (7,372) | |||
Purchase of stock, shares | (217,000) | |||||
Issuance of stock | 4,586 | $ 4,586 | 4,586 | |||
Issuance of stock (shares) | 525,000 | |||||
Stock-based compensation | 4,405 | $ 4,405 | 4,405 | |||
Ending Balance at Jul. 31, 2017 | 1,128,751 | $ 694,146 | 485,194 | (54,691) | 1,124,649 | 4,102 |
Ending Balance, Shares at Jul. 31, 2017 | 57,246,000 | |||||
Begining Balance at Apr. 30, 2018 | $ 1,219,615 | $ 683,942 | 572,800 | (40,135) | 1,216,607 | 3,008 |
Beginning Balance, Shares at Apr. 30, 2018 | 56,517,000 | 56,517,000 | ||||
Net (loss) income | $ (38,592) | (38,611) | (38,611) | 19 | ||
Other Comprehensive (loss) income | (14,150) | (14,156) | (14,156) | 6 | ||
Effect of adopting new accounting standards | 6,656 | 8,853 | (2,197) | 6,656 | ||
Dividends paid to shareholders | (6,027) | (6,027) | (6,027) | |||
Purchase of stock | (13,055) | $ (13,055) | (13,055) | |||
Purchase of stock, shares | (200,000) | |||||
Issuance of stock | 4,804 | $ 4,804 | 4,804 | |||
Issuance of stock (shares) | 621,000 | |||||
Stock-based compensation | 5,369 | $ 5,369 | 5,369 | |||
Ending Balance at Jul. 31, 2018 | $ 1,164,620 | $ 681,060 | $ 537,015 | $ (56,488) | $ 1,161,587 | $ 3,033 |
Ending Balance, Shares at Jul. 31, 2018 | 56,938,000 | 56,938,000 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Jul. 31, 2018 | Jul. 31, 2017 | |
Cash flows from operating activities: | ||
Net (loss) income | $ (38,592) | $ 29,429 |
Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||
Depreciation and amortization | 11,731 | 12,209 |
Stock-based compensation expense | 5,714 | 4,696 |
Tradename write-offs | 106,555 | |
Provision for doubtful accounts | 3,707 | 3,070 |
Gain on cash surrender value of life insurance policies | (1,347) | (2,485) |
Gain on marketable securities | (4,001) | (3,429) |
Deferred income taxes | (22,564) | 8,562 |
Change in other assets and liabilities: | ||
Deferred compensation | 3,021 | 8,288 |
Receivables due from clients | (16,270) | (23,413) |
Income taxes and other receivables | (7,811) | (10,930) |
Prepaid expenses and other assets | (4,356) | (4,780) |
Unearned compensation | (17,463) | (29,115) |
Investment in unconsolidated subsidiaries | (29) | (30) |
Income taxes payable | 1,434 | 6,463 |
Accounts payable and accrued liabilities | (135,405) | (109,034) |
Other | (1,816) | 926 |
Net cash used in operating activities | (117,492) | (109,573) |
Cash flows from investing activities: | ||
Purchase of property and equipment | (13,163) | (9,529) |
Purchase of marketable securities | (1,396) | (4,600) |
Proceeds from sales/maturities of marketable securities | 8,240 | 1,734 |
Premium on company-owned life insurance policies | (398) | (403) |
Proceeds from life insurance policies | 85 | 971 |
Dividends received from unconsolidated subsidiaries | 60 | |
Net cash used in investing activities | (6,632) | (11,767) |
Cash flows from financing activities: | ||
Principal payments on term loan facility | (5,156) | (5,156) |
Payment of contingent consideration from acquisitions | (455) | (485) |
Repurchases of common stock | (4,026) | |
Payments of tax withholdings on restricted stock | (13,054) | (3,346) |
Proceeds from issuance of common stock upon exercise of employee stock options and in connection with an employee stock purchase plan | 4,105 | 3,984 |
Dividends paid to shareholders | (6,027) | (5,823) |
Payments on life insurance policy loans | (414) | |
Net cash used in financing activities | (20,587) | (15,266) |
Effect of exchange rate changes on cash and cash equivalents | (10,408) | 7,743 |
Net decrease in cash and cash equivalents | (155,119) | (128,863) |
Cash and cash equivalents at beginning of period | 520,848 | 410,882 |
Cash and cash equivalents at end of the period | $ 365,729 | $ 282,019 |
Organization and Summary of Sig
Organization and Summary of Significant Accounting Policies | 3 Months Ended |
Jul. 31, 2018 | |
Accounting Policies [Abstract] | |
Organization and Summary of Significant Accounting Policies | 1. Organization and Summary of Significant Accounting Policies Nature of Business Korn/Ferry International, a Delaware corporation (the “Company”), and its subsidiaries are engaged in the business of providing executive searches on a retained basis, advisory solutions and products, recruitment for non-executive professionals and recruitment process outsourcing (“RPO”). On June 12, 2018, the Company’s Board of Directors approved a plan (the “Plan”) to go to market under a single, master brand architecture and to simplify the Company’s organizational structure by eliminating and/or consolidating certain legal entities and implementing a rebranding of the Company to offer the Company’s current products and services using the “Korn Ferry” name, branding and trademarks. In connection with the Plan, the Company intends to sunset all sub-brands, including Futurestep, Hay Group and Lominger, among others. The Company is harmonizing under one brand to help accelerate the firm’s positioning as the preeminent organizational consultancy and bring more client awareness to its broad range of talent management solutions. While the rebranding will not impact the Company’s segment financial reporting, the Company renamed its Hay Group segment as “Advisory” and its Futurestep segment as “RPO & Professional Search.” The Company’s Executive Search segment remains unchanged. Basis of Consolidation and Presentation The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended April 30, 2018 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. Use of Estimates and Uncertainties 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, deferred compensation, annual performance related bonuses, evaluation of the carrying value of receivables, goodwill and other intangible assets, share-based payments and the recoverability of deferred income taxes. Revenue Recognition Substantially all fee revenue is derived from fees for professional services related to executive and professional recruitment performed on a retained basis, recruitment process outsourcing, talent and organizational advisory services and the sale of products, stand alone or as part of a solution. Revenue is recognized when control of the goods and services are transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. Revenue contracts with customers are evaluated based on the five-step model outlined in Accounting Standard Codification 606 (“ASC 606”): 1) identify the contract with a customer; 2) identify the performance obligation(s) in the contract; 3) determine the transaction price; 4) allocate the transaction price to the separate performance obligation(s); and 5) recognize revenue when (or as) each performance obligation is satisfied. Fee revenue from executive and non-executive professional search activities is generally one-third of the estimated first year compensation of the placed candidate plus a percentage of the fee to cover RPO fee Consulting fee revenue, primarily generated from Advisory, is recognized as services are rendered, measured by total hours incurred to the total estimated hours at completion. It is possible that updated estimates for consulting engagements may vary from initial estimates with such updates being recognized in the period of determination. Depending on the timing of billings and services rendered, the Company accrues or defers revenue as appropriate. Product revenue is generated from a range of online tools designed to support human resource processes for pay, talent and engagement, assessments, as well as licenses to proprietary intellectual property (“IP”) and tangible/digital products. IP Functional IP licenses grant customers the right to use IP content via delivery of a flat file. Because the IP content license has significant standalone functionality, revenue is recognized upon delivery and when an enforceable right to payment exists . Online assessments are delivered in the form of online questionnaires. A bundle of assessments represents one performance obligation, and revenue is recognized as assessment services are delivered and the Company has a legally enforceable right to payment. Reimbursements The Company incurs certain out-of-pocket expenses that are reimbursed by its clients, which are accounted for as revenue in its consolidated statements of operations. Allowance for Doubtful Accounts 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. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. As of July 31, 2018 and April 30, 2018, the Company’s investments in cash equivalents consist of money market funds for which market prices are readily available. Marketable Securities 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. 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 a pre-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; dividends are recorded as earned on the ex-dividend date. Interest, dividend income and the changes in fair value in trading securities are recorded in the accompanying consolidated statements of operations in other income, net. Fair Value of Financial Instruments 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: ▪ Level 1: Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. ▪ Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. ▪ Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions. As of July 31, 2018 and April 30, 2018, 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, foreign currency forward contracts and an 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 and 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. Derivative 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 Foreign Currency Forward Contracts Not Designated as Hedges 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 primarily originating from intercompany balances due to cross border work performed in the ordinary course of business. 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 Business Acquisitions 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 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 and Intangible Assets 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, 2018, 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 was also no indication of potential impairment as of July 31, 2018 and April 30, 2018 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 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, 2018 and April 30, 2018, there were no further indicators of impairment with respect to the Company’s intangible assets, with the exception of the intangible asset impairment charge discussed below. On June 12, 2018, the Company’s Board of Directors voted to approve a rebranding plan with the Company going to market under a single, master brand architecture, solely as Korn Ferry and sunsetting of all the Company’s sub-brands, including Futurestep, Hay Group and Lominger, among others. This integrated go-to-market approach was a key driver in our fee revenue growth in FY’18, which led to the decision to further integrate our go-to-market activities under one master brand – Korn Ferry. As a result, the Company discontinued the use of all sub-brands. Two of the Company’s sub-brands, Hay Group and Lominger came to Korn Ferry through acquisitions. In connection with the accounting for these acquisitions, $106.6 million of the purchase price was allocated to indefinite lived tradename intangible assets. As a result of the decision to discontinue their use, the Company took a non-cash intangible asset impairment charge of $106.6 million, during the three months ended of July 31, 2018 recorded in general and administrative expenses. Compensation and Benefits Expense Compensation and benefits expense in the accompanying consolidated statements of operations 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/profitability metrics for Advisory and RPO and Professional Search consultants), the level of engagements referred by a 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/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 $61.0 million and $41.6 million during the three months ended July 31, 2018 and 2017, respectively, included in compensation and benefits expense in the consolidated statements of operations. 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. Unearned compensation on the consolidated balance sheets includes long-term retention awards that are generally amortized over four to five years. Restructuring Charges, Net The Company accounts for its restructuring charges as a liability when the obligations are incurred and records such charges at fair value. Such charges included one-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. Stock-Based Compensation 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 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 purchases under the ESPP on a straight-line basis over the service period for the entire award. Reclassifications Certain reclassifications have been made to the amounts in prior periods in order to conform to the current period’s presentation. Recently Adopted Accounting Standards In May 2014, the FASB issued ASU 2014-09 (“ASC 606”), which superseded revenue recognition requirements regarding contracts with customers to transfer goods or services or for the transfer of nonfinancial assets. Under this guidance, entities are required to recognize revenue 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 transfer is considered to occur when the customer obtains control of the goods or services delivered. The guidance provides a five-step analysis to be performed on transactions to determine when and how revenue is recognized. The new guidance is effective for fiscal years and interim periods within those annual years beginning after December 15, 2017. The Company adopted ASC 606 in its fiscal year beginning May 1, 2018 using the modified retrospective transition method applied to those contracts still outstanding and not completed as of May 1, 2018. The Company recognized the cumulative effect of initially applying the new guidance as an adjustment to the opening balance of retained earnings. The comparative periods have not been restated and continue to be reported under the revenue accounting standards in effect for those periods. As a result of the adoption, the Company recorded an increase to retained earnings of $6.7 million, net of tax as of May 1, 2018 due to the cumulative impact of adopting ASC 606. The change in total assets was recorded to unbilled receivables which is included in receivables due from clients; the changes in total liabilities was recorded to income taxes payable, deferred tax liabilities and deferred revenue, which is included in other accrued liabilities. The following table summarizes the effect of changes made to our consolidated balance sheet at May 1, 2018: Adjustments April 30, 2018 due to ASC 606 May 1, 2018 (in thousands) Total assets $ 2,287,914 $ 3,496 $ 2,291,410 Total liabilities $ 1,068,299 $ (3,160 ) $ 1,065,139 Total stockholders’ equity $ 1,219,615 $ 6,656 $ 1,226,271 The adjustments primarily relate to uptick revenue (uptick revenue occurs when a placement’s actual compensation is higher than the original estimated compensation) and certain Korn Ferry products that are now considered Functional IP. Under the new standard, uptick revenue is considered variable consideration and estimated at contract inception using the expected value method and recognized over the service period. Previously, the Company recognized uptick revenue as the amount became fixed or determinable. Under the new standard, certain products are now considered Functional IP as delivery of intellectual property content fulfills the performance obligation, and revenue is recognized upon delivery and when an enforceable right to payment exists. Previously these products were considered term licenses and revenue was recognized ratably over the contract term. In August 2016, the FASB issued guidance on the classification of certain cash receipts and cash payments in the statement of cash flows. The new guidance provides clarification on specific cash flow issues regarding presentation and classification in the statement of cash flows 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 and were adopted by the Company effective May 1, 2018. The adoption of this guidance did not have an impact on the Company’s 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 to be applied prospectively. The provisions of the guidance are effective for annual years beginning after December 15, 2017 and were adopted by the Company effective May 1, 2018. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements. In March 2017, the FASB issued guidance that changes 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. This pronouncement is effective for annual reporting periods beginning after December 15, 2017 and was adopted by the Company effective May 1, 2018. The change to the c onsolidated statements of operations Prior period amounts were revised, which resulted in a decrease in compensation expense and other income of $1.2 million and $0.2 million, respectively, and an increase in interest expense of $1.0 million (see Note 6 — Deferred Compensation and Retirement Plans ). 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 and was adopted by the Company effective May 1, 2018. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements. Any future impact of this guidance will be dependent on future modification including the number of awards modified In February 2018, the FASB issued guidance that provides companies the option to reclassify stranded tax effects from accumulated other comprehensive (loss) income to retained earnings. The new guidance requires companies to disclose whether they decided to reclassify the income tax effects of the Tax Act from accumulated other comprehensive income (loss) to retained earnings. The guidance is effective for annual reporting periods beginning after December 15, 2018, but early adoption is permitted. The Company early adopted effective May 1, 2018 and elected not to reclassify prior periods but instead record it in the period of adoption. The adoption of this guidance resulted in an increase of $2.2 million to retained earnings due to the reclassification from accumulated other comprehensive (loss) income to retained earnings. Recently Proposed Accounting Standards – Not Yet Adopted In February 2016, the FASB issued guidance on accounting for leases that generally requires all leases to be recognized on the consolidated balance sheet. The provisions of the guidance are effective for fiscal years beginning after December 15, 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. On July 30, 2018, the FASB issued an amendment that allows entities to apply the provisions at the effective date without adjusting comparative periods. The Company is still evaluating the effect this guidance will have on the consolidated financial statements. Based on our initial assessment, the Company expects that upon adoption it will report an increase in assets and liabilities on our consolidated balance sheet as a result of recognizing right-of-use assets and lease liabilities related to lease agreements. 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 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 August 2017, the FASB issued guidance amending and simplifying accounting for hedging activities. The new guidance will refine and expand strategies that qualify for hedge accounting and simplify the application of hedge accounting in certain situations. The amendments of this standard are effective for fiscal years beginning after December 15, 2018. The Company will adopt this guidance in its fiscal year beginning May 1, 2019. The Company is currently evaluating the impact of adopting this guidance. |
Basic and Diluted (Loss) Earnin
Basic and Diluted (Loss) Earnings Per Share | 3 Months Ended |
Jul. 31, 2018 | |
Earnings Per Share [Abstract] | |
Basic and Diluted (Loss) Earnings Per Share | 2. Basic and Diluted (Loss) Earnings Per Share Accounting Standards Codification 260, Earnings Per Share Basic (loss) earnings per common share was computed using the two-class method by dividing basic net (loss) earnings attributable to common stockholders by the weighted-average number of common shares outstanding. Diluted (loss) earnings per common share was computed using the two-class method by dividing diluted net (loss) earnings attributable to common stockholders by the weighted-average number of common shares outstanding plus dilutive common equivalent shares. Dilutive common equivalent shares include all in-the-money outstanding options or other contracts to issue common stock as if they were exercised or converted. Financial instruments that are not in the form of common stock, but when converted into common stock increase earnings per share are anti-dilutive and are not included in the computation of diluted earnings per share. Because the Company is in a net loss position, diluted net loss per share excludes the effects of common stock equivalents consisting of restricted stock awards, which are all antidilutive. During the three months ended July 31, 2018 and 2017, restricted stock awards of 1.8 million and 0.6 million were outstanding, respectively, but not included in the computation of diluted (loss) earnings per share because they were anti-dilutive. The following table summarizes basic and diluted earnings per common share attributable to common stockholders: Three Months Ended July 31, 2018 2017 (in thousands, except per share data) Net (loss) income attributable to Korn/Ferry International $ (38,611 ) $ 29,041 Less: distributed and undistributed earnings to nonvested restricted stockholders 59 288 Basic net (loss) earnings attributable to common stockholders (38,670 ) 28,753 Add: undistributed earnings to nonvested restricted stockholders — 232 Less: reallocation of undistributed earnings to nonvested restricted stockholders — 230 Diluted net (loss) earnings attributable to common stockholders $ (38,670 ) $ 28,755 Weighted-average common shares outstanding: Basic weighted-average number of common shares outstanding 55,378 55,795 Effect of dilutive securities: Restricted stock — 588 Stock options — 12 ESPP — 8 Diluted weighted-average number of common shares outstanding 55,378 56,403 Net (loss) earnings per common share: Basic (loss) earnings per share $ (0.70 ) $ 0.52 Diluted (loss) earnings per share $ (0.70 ) $ 0.51 |
Comprehensive (Loss) Income
Comprehensive (Loss) Income | 3 Months Ended |
Jul. 31, 2018 | |
Equity [Abstract] | |
Comprehensive (Loss) Income | 3. Comprehensive (Loss) Income Comprehensive (loss) income is comprised of net (loss) income 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 (loss) income. Accumulated other comprehensive (loss) income, net of taxes, is recorded as a component of stockholders’ equity. The components of accumulated other comprehensive (loss) income were as follows: July 31, 2018 April 30, 2018 (in thousands) Foreign currency translation adjustments $ (46,961 ) $ (32,399 ) Deferred compensation and pension plan adjustments, net of tax (11,196 ) (9,073 ) Interest rate swap unrealized gain, net of taxes 1,669 1,337 Accumulated other comprehensive loss, net $ (56,488 ) $ (40,135 ) The following table summarizes the changes in each component of accumulated other comprehensive (loss) income for the three months ended July 31, 2018. Foreign Currency Translation Deferred Compensation and Pension Plan (1) Unrealized gains on interest rate swap (2) Accumulated Other Comprehensive Income (Loss) (in thousands) Balance as of April 30, 2018 $ (32,399 ) $ (9,073 ) $ 1,337 $ (40,135 ) Unrealized (losses) gains arising during the period (14,562 ) — 149 (14,413 ) Reclassification of realized net losses (gains) to net (loss) income — 273 (16 ) 257 Effect of adoption of accounting standard — (2,396 ) 199 (2,197 ) Balance as of July 31, 2018 $ (46,961 ) $ (11,196 ) $ 1,669 $ (56,488 ) The following table summarizes the changes in each component of accumulated other comprehensive (loss) income for the three months ended July 31, 2017: 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 ) (1) The tax effect on the reclassifications of realized net losses was $0.1 million and $0.2 million for the three months ended July 31, 2018 and 2017, respectively. (2) The tax effect on unrealized gains (losses) was $0.1 million and $(0.1) million for the three months ended July 31, 2018 and 2017, respectively. The tax effect on the reclassification of realized net losses to net (loss) income was $0.1 million for the three months ended July 31, 2017. |
Employee Stock Plans
Employee Stock Plans | 3 Months Ended |
Jul. 31, 2018 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Employee Stock Plans | 4. Employee Stock Plans Stock-Based Compensation The following table summarizes the components of stock-based compensation expense recognized in the Company’s consolidated statements of operations for the periods indicated: Three Months Ended July 31, 2018 2017 (in thousands) Restricted stock $ 5,369 $ 4,405 ESPP 345 291 Total stock-based compensation expense, pre-tax 5,714 4,696 Tax benefit from stock-based compensation expense (1,682 ) (1,378 ) Total stock-based compensation expense, net of tax $ 4,032 $ 3,318 Stock Incentive Plans At the Company’s 2016 Annual Meeting of Stockholders, held on 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 2016 amendment and restatement being “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 11,200,000 shares, subject to certain changes in the Company’s capital structure and other extraordinary events. The 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 Third A&R 2008 Plan, the ability to issue full-value awards is limited by requiring full-value stock awards to count 2.3 times as much as stock options. Restricted Stock The Company grants time-based restricted stock awards to executive officers and other senior employees generally vesting over a 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 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. 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, 2018 is summarized below: Shares Weighted- Average Grant Date Fair Value (in thousands, except per share data) Non-vested, April 30, 2018 1,730 $ 33.45 Granted 478 $ 48.55 Vested (539 ) $ 34.05 Forfeited/expired (20 ) $ 26.86 Non-vested, July 31, 2018 1,649 $ 40.66 As of July 31, 2018, there were 0.6 million shares and 0.2 million shares outstanding relating to market-based and performance-based restricted stock units, respectively, with total unrecognized compensation totaling $14.5 million and $1.7 million, respectively. As of July 31, 2018, there was $48.1 million of total unrecognized compensation cost related to all non-vested awards of restricted stock, which is expected to be recognized over a weighted-average period of 2.8 years. During the three months ended July 31, 2018 and 2017, 199,795 shares and 97,483 shares of restricted stock totaling $13.1 million and $3.3 million, respectively, were repurchased by the Company, at the option of the employee, to pay for taxes related to vesting of restricted stock. Employee Stock Purchase Plan 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, 2018 and 2017, employees purchased 75,106 shares at $52.64 per share and 116,285 shares at $29.35 Common Stock During the three months ended July 31, 2018 and 2017, the Company issued 6,720 shares and 41,075 shares of common stock, respectively, as a result of the exercise of stock options, with cash proceeds from the exercise of $0.2 million and $0.6 million, respectively. During the three months ended July 31, 2018, no shares were repurchased by the Company (on the open market). |
Financial Instruments
Financial Instruments | 3 Months Ended |
Jul. 31, 2018 | |
Investments All Other Investments [Abstract] | |
Financial Instruments | 5. Financial Instruments The following tables show the Company’s financial instruments and balance sheet classification as of July 31, 2018 and April 30, 2018: July 31, 2018 Fair Value Measurement Balance Sheet Classification Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities, Current Marketable Securities, Non- current Income Taxes & Other Receivables Other Accrued Liabilities (in thousands) Level 1: Cash $ 344,684 $ — $ — $ 344,684 $ 344,684 $ — $ — $ — $ — Money market funds 21,045 — — 21,045 21,045 — — — — Mutual funds (1) 124,589 10,395 (908 ) 134,076 — 10,952 123,124 — — Total $ 490,318 $ 10,395 $ (908 ) $ 499,805 $ 365,729 $ 10,952 $ 123,124 $ — $ — Level 2: Foreign currency forward contracts $ — $ 603 $ (621 ) $ (18 ) $ — $ — $ — $ — $ (18 ) Interest rate swap $ — $ 2,256 $ — $ 2,256 $ — $ — $ — $ 2,256 $ — April 30, 2018 Fair Value Measurement Balance Sheet Classification Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities, Current Marketable Securities, Non- current Income Taxes & Other Receivables Other Accrued Liabilities (in thousands) Level 1: Cash $ 519,818 $ — $ — $ 519,818 $ 519,818 $ — $ — $ — $ — Money market funds 1,030 — — 1,030 1,030 — — — — Mutual funds (1) 127,077 11,040 (1,032 ) 137,085 — 14,293 122,792 — — Total $ 647,925 $ 11,040 $ (1,032 ) $ 657,933 $ 520,848 $ 14,293 $ 122,792 $ — $ — Level 2: Foreign currency forward contracts $ — $ 1,778 $ (1,025 ) $ 753 $ — $ — $ — $ 753 $ — Interest rate swap $ — $ 2,076 $ — $ 2,076 $ — $ — $ — $ 2,076 $ — (1) These investments are held in trust for settlement of the Company’s vested obligations of $125.4 million and $118.2 million as of July 31, 2018 and April 30, 2018, respectively, under the ECAP (see Note 6 — Deferred Compensation and Retirement Plans Investments in marketable securities classified as trading are based upon investment selections the employee elects from a pre-determined set of securities in the ECAP and the Company invests in marketable securities to mirror these elections. As of July 31, 2018 and April 30, 2018, the Company’s investments in marketable securities classified as trading consist of mutual funds for which market prices are readily available. Designated Derivatives - Interest Rate Swap Agreement 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 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 a cash flow hedge. The notional amount will be amortized so that the amount is always half of the principal balance of the debt outstanding. As of July 31, 2018, the notional amount was $116.9 million. The interest rate swap agreement matures on June 15, 2021, and locks the interest rates on half the debt outstanding at 1.919%, exclusive of the credit spread on the debt. The fair value of the derivative designated as a cash flow hedge instrument is as follows: July 31, 2018 April 30, 2018 (in thousands) Derivative asset: Interest rate swap contract $ 2,256 $ 2,076 During the three months ended July 31, 2018, the Company recognized the following gains and losses on the interest rate swap: Three Months Ended July 31, 2018 2017 (in thousands) Gains (Losses) recognized in other comprehensive income (net of tax effects of $53 and ($149), respectively) $ 149 $ (234 ) Gains (Losses) reclassified from accumulated other comprehensive income into interest expense, net $ 22 $ (280 ) 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 $0.6 million of derivative gains included in accumulated other comprehensive income as of July 31, 2018 will be reclassified into interest expense, net within the following 12 months. The cash flows related to the interest rate swap contract are included in net cash provided by operating activities. Foreign Currency Forward Contracts Not Designated as Hedges The fair value of derivatives not designated as hedge instruments are as follows: July 31, 2018 April 30, 2018 (in thousands) Derivative assets: Foreign currency forward contracts $ 603 $ 1,778 Derivative liabilities: Foreign currency forward contracts $ 621 $ 1,025 As of July 31, 2018, the total notional amounts of the forward contracts purchased and sold were $44.9 million and $42.3 million, respectively. As of April 30, 2018, the total notional amounts of the forward contracts purchased and sold were $80.8 million and $78.5 million, respectively. The Company recognizes forward contracts as a net asset or net liability on the consolidated balance sheets as such contracts are covered by a master netting agreement. During the three months ended July 31, 2018, the Company incurred gains of $0.1 million related to forward contracts which is recorded in general and administrative expenses in the accompanying consolidated statements of operations. These gains offset foreign currency losses that result from transactions denominated in a currency other than the Company’s functional currency. During the three months ended July 31, 2017, the Company incurred losses of $2.6 million related to forward contracts which 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 currency other than the Company’s functional currency. The cash flows related to foreign currency forward contracts are included in net cash used in operating activities. |
Deferred Compensation and Retir
Deferred Compensation and Retirement Plans | 3 Months Ended |
Jul. 31, 2018 | |
Compensation And Retirement Disclosure [Abstract] | |
Deferred Compensation and Retirement Plans | 6. Deferred Compensation and Retirement Plans 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 employees in the United States. The assets of this plan are held separately from the assets of the sponsors in self-administered funds. All other defined benefit obligations from other plans are unfunded. The components of net periodic benefit costs are as follows: Three Months Ended July 31, 2018 2017 (in thousands) Service cost $ 3,646 $ 2,065 Interest cost 1,296 1,020 Amortization of actuarial loss 446 577 Expected return on plan assets (1) (392 ) (399 ) Net periodic service credit amortization (77 ) — Net periodic benefit costs (2) $ 4,919 $ 3,263 (1) The expected long-term rate of return on plan assets is 6.25% and 6.50% for July 31, 2018 and 2017, respectively. (2) The service cost, interest cost and the other components of net periodic benefit costs are included in compensation and benefits expense, interest expense, net and other income, net, respectively, on the consolidated statements of operations. 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. The gross CSV of these contracts of $188.5 and $186.8 million as of July 31, 2018 and April 30, 2018, respectively, The Company’s ECAP is intended to provide certain employees an opportunity to defer salary and/or bonus on a pre-tax basis. 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 on the employee’s performance. Certain key management may also receive Company ECAP contributions upon commencement of employment. The Company amortizes these contributions 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 expected to be paid to employees over the next 12 months are classified as a current liability included in compensation and benefits payable on the accompanying balance sheet. 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, 2018 and 2017, deferred compensation liability increased; therefore, the Company recognized an increase in compensation expense of $4.2 million and $3.7 million, respectively. Offsetting 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 the ECAP) of $4.0 million and $3.4 million during the three months ended July 31, 2018 and 2017, respectively, recorded in other income, net on the consolidated statements of operations (see Note 5— Financial Instruments |
Fee Revenue
Fee Revenue | 3 Months Ended |
Jul. 31, 2018 | |
Revenue From Contract With Customer [Abstract] | |
Fee Revenue | 7. Fee Revenue Substantially all fee revenue is derived from fees for professional services related to executive and professional recruitment performed on a retained basis, recruitment process outsourcing, talent and organizational advisory services and the sale of products, standalone or as part of a solution. The Company adopted ASC 606 in its fiscal year beginning May 1, 2018 using the modified retrospective transition method applied to those contracts still outstanding and not completed as of May 1, 2018. Effect of the Adoption of ASC 606 For the three months ended July 31, 2018, the Company recorded $0.2 million in additional revenue related to adoption of ASC 606. The impact of adoption to the balance sheet was immaterial. Contract Balances A contract asset (unbilled receivables) is recorded when the Company transfers control of products or services before there is an unconditional right to payment. A contract liability (deferred revenue) is recorded when cash is received in advance of performance of the obligation. Deferred revenue represents the future performance obligations to transfer control of products or services for which we have already received consideration. Deferred revenue is presented in other accrued liabilities on the consolidated balance sheet. The following table outlines our contract asset and liability balances as of July 31, 2018 and May 1, 2018: July 31, 2018 May 1, 2018 (in thousands) Contract assets (unbilled receivables) $ 68,570 $ 65,164 Contract liabilities (deferred revenue) $ 104,581 $ 114,695 During the three months ended July 31, 2018, we recognized revenue of $66.5 million that was included in the contract liabilities balance at the beginning of the period. Performance Obligations The Company has elected to apply the practical expedient to exclude the value of unsatisfied performance obligations for contracts with a duration of one year or less, which applies to all executive search and professional search fee revenue. As of July 31, 2018, the aggregate transaction price allocated to the performance obligations that are unsatisfied for contracts with an expected duration of greater than one year at inception was $486.7 million. Of the $486.7 million of remaining performance obligations, we expect to recognize approximately $225.6 million as fee revenue in fiscal 2019, $137.3 million in fiscal 2020, $72.4 million in fiscal 2021 and the remaining $51.4 million in fiscal 2022 and thereafter. However, this amount should not be considered an indication of the Company’s future revenue as contracts with an initial term of one year or less are not included. Further, our contract terms and conditions allow for clients to increase or decrease the scope of services and such changes do not become a performance obligation until the company has an enforceable right to payment. Disaggregation of revenue The Company disaggregates revenue by line of business and further by region for Executive Search. This information is presented in Note 9— Business Segments The following table provides further disaggregation of fee revenue by industry: Three Months Ended July 31, 2018 2017 Dollars % Dollars % (dollars in thousands) Industrial $ 135,764 29.2 % $ 121,447 30.3 % Financial Services 80,193 17.2 67,260 16.8 Life Sciences/Healthcare 79,169 17.0 66,580 16.6 Consumer Goods 71,794 15.4 61,831 15.4 Technology 61,849 13.3 51,772 12.9 Education 32,936 7.1 28,677 7.1 General 3,863 0.8 3,687 0.9 Fee Revenue $ 465,568 100.0 % $ 401,254 100.0 % |
Income Taxes
Income Taxes | 3 Months Ended |
Jul. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 8. Income Taxes The provision for income tax was a benefit of $16.1 million in the three months ended July 31, 2018 compared to an expense of $12.2 million in the three months ended July 31, 2017. This reflects a 29.4% (benefit) and 29.3% (provision) tax rate for the three months ended July 31, 2018 and 2017 respectively. The Company’s effective tax rate was 29.4% (benefit) for the three months ended July 31, 2018 compared to the U.S. federal statutory rate of 21.0%. This difference is primarily due to the trademark impairment charge and the excess tax benefit on vested stock-based awards, both of which were recorded as discrete to the current quarter. The excess tax benefit is the amount by which the Company’s tax deduction for these awards, based on the fair market value of the awards on the date of vesting, exceeds the expense recorded in the Company’s financial statements over the awards’ vesting period. The Company’s effective tax rate for the three months ended July 31, 2017 was lower than the then U.S. federal statutory rate of 35.0% due principally to the Company’s earnings outside the United States which were generally taxed at rates lower than the then applicable U.S. federal rate. In accordance with Staff Accounting Bulletin No. 118 (“SAB 118”), we did not record any adjustment in the quarter to the provisional tax expense on accumulated foreign earnings (the “Transition Tax”) recorded during the fiscal year ended April 30, 2018 after the enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). This provisional expense may be adjusted in subsequent periods based on additional guidance that may be issued by the U.S. Treasury Department, the Internal Revenue Service (“IRS”) and other standard-setting bodies The Company will continue to appropriately analyze and, if necessary, adjust this amount within the measurement period provided under SAB 118, with the analysis to be completed no later than December 22, 2018. The Company also continues to evaluate the impact of the Global Intangible Low-Taxed Income (“GILTI”), Foreign Derived Intangible Income (“FDII”), Base Erosion and Anti-Abuse Tax (“BEAT”), the change to the IRC Section 162(m) limitation (the “Executive Compensation Limitation”) and IRC Section 163 (j) interest limitation (the “Interest Limitation) provisions of the Tax Act which is complex and subject to continuing regulatory interpretation. In accordance with SAB 118, we recorded a provisional estimate in our effective tax rate for the three months ended July 31, 2018 for GILTI, FDII and the Executive Compensation Limitation. For BEAT and the Interest Limitation computations, we did not record a provisional estimate in our effective tax rate for the three months ended July 31, 2018 because we currently estimate that these provisions will not affect our tax expense in the current fiscal year. We will continue to refine our provisional estimates for the GILTI, FDII, BEAT, Executive Compensation Limitation and Interest Limitation computations as we gather additional information and receive additional guidance from standard-setting bodies. The Company is required to make an accounting policy election of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred (the “period cost method”) or (2) factoring such amounts in the Company’s measurement of its deferred taxes (the “deferred method”). The Company’s accounting policy election with respect to the new GILTI rules will depend, in part, on analyzing its global income to determine whether it can reasonably estimate the tax impact. In accordance with SAB 118, the Company is continuing with its analysis and has not yet determined which method to elect. |
Business Segments
Business Segments | 3 Months Ended |
Jul. 31, 2018 | |
Segment Reporting [Abstract] | |
Business Segments | 9. Business Segments The Company currently operates in three global businesses: Executive Search, Advisory and RPO & Professional Search. The Executive Search segment focuses on recruiting Board of Director and C-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. Advisory assists clients synchronize strategy and talent by addressing four fundamental needs: Organizational Strategy, Assessment and Succession, Leadership Development, and Rewards and Benefits, all underpinned by a comprehensive array of world-leading intellectual property, products and tools. RPO & Professional Search 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 Advisory and RPO & Professional Search worldwide operations are managed by their Chief Executive Officers. The Executive Search geographic regional leaders and the Chief Executive Officers of Advisory and RPO & Professional Search 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 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 certain non-cash charges (goodwill, intangible asset and other than temporary impairment). The 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. Financial highlights by business segment are as follows: Three Months Ended July 31, 2018 Executive Search North America EMEA Asia Pacific Latin America Subtotal Advisory RPO & Professional Search Corporate Consolidated (in thousands) Fee revenue $ 112,097 $ 46,654 $ 26,295 $ 7,878 $ 192,924 $ 195,375 $ 77,269 $ — $ 465,568 Total revenue $ 115,757 $ 47,749 $ 26,625 $ 7,903 $ 198,034 $ 200,147 $ 80,181 $ — $ 478,362 Net loss attributable to Korn/Ferry International $ (38,611 ) Net income attributable to noncontrolling interest 19 Other income, net (4,491 ) Interest expense, net 4,103 Equity in earnings of unconsolidated subsidiaries, net (29 ) Income tax benefit (16,110 ) Operating income (loss) $ 26,514 $ 6,969 $ 6,641 $ 754 $ 40,878 $ (83,079 ) $ 11,645 $ (24,563 ) (55,119 ) Depreciation and amortization 979 370 370 107 1,826 7,431 761 1,713 11,731 Other income (loss), net 3,472 340 175 37 4,024 570 105 (208 ) 4,491 Equity in earnings of unconsolidated subsidiaries, net 29 — — — 29 — — — 29 EBITDA 30,994 7,679 7,186 898 46,757 (75,078 ) 12,511 (23,058 ) (38,868 ) Integration/acquisition costs — — — — — 3,027 — 80 3,107 Tradename write-offs — — — — — 106,555 — — 106,555 Adjusted EBITDA $ 30,994 $ 7,679 $ 7,186 $ 898 $ 46,757 $ 34,504 $ 12,511 $ (22,978 ) $ 70,794 Three Months Ended July 31, 2017 Executive Search North America EMEA Asia Pacific Latin America Subtotal Advisory RPO & Professional Search Corporate Consolidated (in thousands) Fee revenue $ 91,833 $ 40,121 $ 21,578 $ 7,659 $ 161,191 $ 179,453 $ 60,610 $ — $ 401,254 Total revenue $ 95,205 $ 41,058 $ 21,880 $ 7,664 $ 165,807 $ 183,296 $ 65,814 $ — $ 414,917 Net income attributable to Korn/Ferry International $ 29,041 Net income attributable to noncontrolling interest 388 Other income, net (3,354 ) Interest expense, net 3,680 Equity in earnings of unconsolidated subsidiaries, net (30 ) Income tax provision 12,210 Operating income (loss) $ 22,070 $ 6,675 $ 3,141 $ 1,026 $ 32,912 $ 19,055 $ 8,245 $ (18,277 ) 41,935 Depreciation and amortization 949 428 320 107 1,804 8,085 796 1,524 12,209 Other income, net 282 56 105 20 463 431 8 2,452 3,354 Equity in earnings of unconsolidated subsidiaries, net 30 — — — 30 — — — 30 EBITDA 23,331 7,159 3,566 1,153 35,209 27,571 9,049 (14,301 ) 57,528 Restructuring charges, net — — 40 — 40 240 — — 280 Integration/acquisition costs — — — — — 2,549 — 39 2,588 Adjusted EBITDA $ 23,331 $ 7,159 $ 3,606 $ 1,153 $ 35,249 $ 30,360 $ 9,049 $ (14,262 ) $ 60,396 |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Jul. 31, 2018 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | 10. Long-Term Debt On June 15, 2016, the Company entered into a senior secured $400.0 million Credit Agreement (the “Credit Agreement”) with a syndicate of banks and Wells Fargo Bank, National Association as administrative agent. On June 8, 2018, in anticipation of the approval by the Board of Directors of the Company of a rebranding and restructuring plan (which plan was approved on June 12, 2018), the Company entered into an amendment to its Credit Agreement. The Amendment permits a holding company reorganization (the “KF Merger”), after which a new public holding company, Korn Ferry, will own all of the stock of the Company, and will become effective when certain conditions set forth therein, including consummation of the KF Merger, are satisfied. The Company previously considered pursuing the KF Merger as part of the Plan. While the Company continues to pursue the Plan, it is further evaluating various other structuring alternatives to effectuate the Plan but may not do so via the KF Merger structure previously disclosed. The Credit Agreement provides for, among other things: (a) a senior secured term loan facility in an aggregate principal amount of $275.0 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 $125.0 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 permitted add-backs to Adjusted EBITDA in recognition of the accelerated integration actions. The Company’s credit agreement permits payment of dividends to stockholders and share repurchases so long as the pro forma leverage ratio is no greater than 2.50 to 1.00, and the pro forma domestic liquidity is at least $50.0 million. The Company drew down $275.0 million on the new term loan and used $140.0 million of the proceeds to pay-off the term loan that was outstanding as of April 30, 2016. 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, 2018 and 2017, the average rate on the Term Facility was 3.24% and 2.34%, 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 with principal payments totaling $5.2 million made during the three months ended July 31, 2018. As of July 31, 2018, $233.7 million was outstanding under the Term Facility compared to $238.9 million as of April 30, 2018. The current and long-term portion of unamortized debt issuance costs associated with the long-term debt, was $2.4 million and $2.7 million as of July 31, 2018 and April 30, 2018, respectively. The fair value of the Company’s 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 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, 2018, the Company was in compliance with its debt covenants. As of July 31, 2018 and April 30, 2018, the Company had no borrowings under the Revolver. The Company had a total of $122.1 million available under the Revolver after $2.9 million of standby letters of credit were issued as of July 31, 2018 and April 30, 2018, respectively. The Company had a total of $7.9 million and $7.4 million of standby letters with other financial institutions of July 31, 2018 and April 30, 2018, respectively. The standby letters of credits were generally issued as a result of entering into office premise leases. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Jul. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | 11. Subsequent Events Quarterly Dividend Declaration On September 5, 2018, the Board of Directors of the Company declared a cash dividend of $0.10 per share with a payment date of October 15, 2018 to holders of the Company’s common stock of record at the close of business on September 28, 2018. 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. |
Organization and Summary of S19
Organization and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Jul. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Consolidation and Presentation | Basis of Consolidation and Presentation The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended April 30, 2018 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. |
Use of Estimates and Uncertainties | Use of Estimates and Uncertainties 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, deferred compensation, annual performance related bonuses, evaluation of the carrying value of receivables, goodwill and other intangible assets, share-based payments and the recoverability of deferred income taxes. |
Revenue Recognition | Revenue Recognition Substantially all fee revenue is derived from fees for professional services related to executive and professional recruitment performed on a retained basis, recruitment process outsourcing, talent and organizational advisory services and the sale of products, stand alone or as part of a solution. Revenue is recognized when control of the goods and services are transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. Revenue contracts with customers are evaluated based on the five-step model outlined in Accounting Standard Codification 606 (“ASC 606”): 1) identify the contract with a customer; 2) identify the performance obligation(s) in the contract; 3) determine the transaction price; 4) allocate the transaction price to the separate performance obligation(s); and 5) recognize revenue when (or as) each performance obligation is satisfied. Fee revenue from executive and non-executive professional search activities is generally one-third of the estimated first year compensation of the placed candidate plus a percentage of the fee to cover RPO fee Consulting fee revenue, primarily generated from Advisory, is recognized as services are rendered, measured by total hours incurred to the total estimated hours at completion. It is possible that updated estimates for consulting engagements may vary from initial estimates with such updates being recognized in the period of determination. Depending on the timing of billings and services rendered, the Company accrues or defers revenue as appropriate. Product revenue is generated from a range of online tools designed to support human resource processes for pay, talent and engagement, assessments, as well as licenses to proprietary intellectual property (“IP”) and tangible/digital products. IP Functional IP licenses grant customers the right to use IP content via delivery of a flat file. Because the IP content license has significant standalone functionality, revenue is recognized upon delivery and when an enforceable right to payment exists . Online assessments are delivered in the form of online questionnaires. A bundle of assessments represents one performance obligation, and revenue is recognized as assessment services are delivered and the Company has a legally enforceable right to payment. |
Reimbursements | Reimbursements The Company incurs certain out-of-pocket expenses that are reimbursed by its clients, which are accounted for as revenue in its consolidated statements of operations. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts 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. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. As of July 31, 2018 and April 30, 2018, the Company’s investments in cash equivalents consist of money market funds for which market prices are readily available. |
Marketable Securities | Marketable Securities 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. 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 a pre-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; dividends are recorded as earned on the ex-dividend date. Interest, dividend income and the changes in fair value in trading securities are recorded in the accompanying consolidated statements of operations in other income, net. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments 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: ▪ Level 1: Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. ▪ Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. ▪ Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions. As of July 31, 2018 and April 30, 2018, 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, foreign currency forward contracts and an 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 and 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. |
Derivative Financial Instruments | Derivative 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 |
Foreign Currency Forward Contracts Not Designated as Hedges | Foreign Currency Forward Contracts Not Designated as Hedges 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 primarily originating from intercompany balances due to cross border work performed in the ordinary course of business. 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 |
Business Acquisitions | Business Acquisitions 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 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 and Intangible Assets | Goodwill and Intangible Assets 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, 2018, 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 was also no indication of potential impairment as of July 31, 2018 and April 30, 2018 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 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, 2018 and April 30, 2018, there were no further indicators of impairment with respect to the Company’s intangible assets, with the exception of the intangible asset impairment charge discussed below. On June 12, 2018, the Company’s Board of Directors voted to approve a rebranding plan with the Company going to market under a single, master brand architecture, solely as Korn Ferry and sunsetting of all the Company’s sub-brands, including Futurestep, Hay Group and Lominger, among others. This integrated go-to-market approach was a key driver in our fee revenue growth in FY’18, which led to the decision to further integrate our go-to-market activities under one master brand – Korn Ferry. As a result, the Company discontinued the use of all sub-brands. Two of the Company’s sub-brands, Hay Group and Lominger came to Korn Ferry through acquisitions. In connection with the accounting for these acquisitions, $106.6 million of the purchase price was allocated to indefinite lived tradename intangible assets. As a result of the decision to discontinue their use, the Company took a non-cash intangible asset impairment charge of $106.6 million, during the three months ended of July 31, 2018 recorded in general and administrative expenses. |
Compensation and Benefits Expense | Compensation and Benefits Expense Compensation and benefits expense in the accompanying consolidated statements of operations 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/profitability metrics for Advisory and RPO and Professional Search consultants), the level of engagements referred by a 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/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 $61.0 million and $41.6 million during the three months ended July 31, 2018 and 2017, respectively, included in compensation and benefits expense in the consolidated statements of operations. 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. Unearned compensation on the consolidated balance sheets includes long-term retention awards that are generally amortized over four to five years. |
Restructuring Charges, Net | Restructuring Charges, Net The Company accounts for its restructuring charges as a liability when the obligations are incurred and records such charges at fair value. Such charges included one-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. |
Stock-Based Compensation | Stock-Based Compensation 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 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 purchases under the ESPP on a straight-line basis over the service period for the entire award. |
Reclassifications | Reclassifications Certain reclassifications have been made to the amounts in prior periods in order to conform to the current period’s presentation. |
Recently Adopted Accounting Standards | Recently Adopted Accounting Standards In May 2014, the FASB issued ASU 2014-09 (“ASC 606”), which superseded revenue recognition requirements regarding contracts with customers to transfer goods or services or for the transfer of nonfinancial assets. Under this guidance, entities are required to recognize revenue 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 transfer is considered to occur when the customer obtains control of the goods or services delivered. The guidance provides a five-step analysis to be performed on transactions to determine when and how revenue is recognized. The new guidance is effective for fiscal years and interim periods within those annual years beginning after December 15, 2017. The Company adopted ASC 606 in its fiscal year beginning May 1, 2018 using the modified retrospective transition method applied to those contracts still outstanding and not completed as of May 1, 2018. The Company recognized the cumulative effect of initially applying the new guidance as an adjustment to the opening balance of retained earnings. The comparative periods have not been restated and continue to be reported under the revenue accounting standards in effect for those periods. As a result of the adoption, the Company recorded an increase to retained earnings of $6.7 million, net of tax as of May 1, 2018 due to the cumulative impact of adopting ASC 606. The change in total assets was recorded to unbilled receivables which is included in receivables due from clients; the changes in total liabilities was recorded to income taxes payable, deferred tax liabilities and deferred revenue, which is included in other accrued liabilities. The following table summarizes the effect of changes made to our consolidated balance sheet at May 1, 2018: Adjustments April 30, 2018 due to ASC 606 May 1, 2018 (in thousands) Total assets $ 2,287,914 $ 3,496 $ 2,291,410 Total liabilities $ 1,068,299 $ (3,160 ) $ 1,065,139 Total stockholders’ equity $ 1,219,615 $ 6,656 $ 1,226,271 The adjustments primarily relate to uptick revenue (uptick revenue occurs when a placement’s actual compensation is higher than the original estimated compensation) and certain Korn Ferry products that are now considered Functional IP. Under the new standard, uptick revenue is considered variable consideration and estimated at contract inception using the expected value method and recognized over the service period. Previously, the Company recognized uptick revenue as the amount became fixed or determinable. Under the new standard, certain products are now considered Functional IP as delivery of intellectual property content fulfills the performance obligation, and revenue is recognized upon delivery and when an enforceable right to payment exists. Previously these products were considered term licenses and revenue was recognized ratably over the contract term. In August 2016, the FASB issued guidance on the classification of certain cash receipts and cash payments in the statement of cash flows. The new guidance provides clarification on specific cash flow issues regarding presentation and classification in the statement of cash flows 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 and were adopted by the Company effective May 1, 2018. The adoption of this guidance did not have an impact on the Company’s 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 to be applied prospectively. The provisions of the guidance are effective for annual years beginning after December 15, 2017 and were adopted by the Company effective May 1, 2018. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements. In March 2017, the FASB issued guidance that changes 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. This pronouncement is effective for annual reporting periods beginning after December 15, 2017 and was adopted by the Company effective May 1, 2018. The change to the c onsolidated statements of operations Prior period amounts were revised, which resulted in a decrease in compensation expense and other income of $1.2 million and $0.2 million, respectively, and an increase in interest expense of $1.0 million (see Note 6 — Deferred Compensation and Retirement Plans ). 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 and was adopted by the Company effective May 1, 2018. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements. Any future impact of this guidance will be dependent on future modification including the number of awards modified In February 2018, the FASB issued guidance that provides companies the option to reclassify stranded tax effects from accumulated other comprehensive (loss) income to retained earnings. The new guidance requires companies to disclose whether they decided to reclassify the income tax effects of the Tax Act from accumulated other comprehensive income (loss) to retained earnings. The guidance is effective for annual reporting periods beginning after December 15, 2018, but early adoption is permitted. The Company early adopted effective May 1, 2018 and elected not to reclassify prior periods but instead record it in the period of adoption. The adoption of this guidance resulted in an increase of $2.2 million to retained earnings due to the reclassification from accumulated other comprehensive (loss) income to retained earnings. |
Recently Proposed Accounting Standards - Not Yet Adopted | Recently Proposed Accounting Standards – Not Yet Adopted In February 2016, the FASB issued guidance on accounting for leases that generally requires all leases to be recognized on the consolidated balance sheet. The provisions of the guidance are effective for fiscal years beginning after December 15, 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. On July 30, 2018, the FASB issued an amendment that allows entities to apply the provisions at the effective date without adjusting comparative periods. The Company is still evaluating the effect this guidance will have on the consolidated financial statements. Based on our initial assessment, the Company expects that upon adoption it will report an increase in assets and liabilities on our consolidated balance sheet as a result of recognizing right-of-use assets and lease liabilities related to lease agreements. 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 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 August 2017, the FASB issued guidance amending and simplifying accounting for hedging activities. The new guidance will refine and expand strategies that qualify for hedge accounting and simplify the application of hedge accounting in certain situations. The amendments of this standard are effective for fiscal years beginning after December 15, 2018. The Company will adopt this guidance in its fiscal year beginning May 1, 2019. The Company is currently evaluating the impact of adopting this guidance. |
Organization and Summary of S20
Organization and Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Jul. 31, 2018 | |
Accounting Standards Update 2014-09 | |
Summary of Effect of Changes to Consolidated Balance Sheet | The following table summarizes the effect of changes made to our consolidated balance sheet at May 1, 2018: Adjustments April 30, 2018 due to ASC 606 May 1, 2018 (in thousands) Total assets $ 2,287,914 $ 3,496 $ 2,291,410 Total liabilities $ 1,068,299 $ (3,160 ) $ 1,065,139 Total stockholders’ equity $ 1,219,615 $ 6,656 $ 1,226,271 |
Basic and Diluted (Loss) Earn21
Basic and Diluted (Loss) Earnings Per Share (Tables) | 3 Months Ended |
Jul. 31, 2018 | |
Earnings Per Share [Abstract] | |
Basic and Diluted Earnings per Common Share Attributable to Common Stockholders | The following table summarizes basic and diluted earnings per common share attributable to common stockholders: Three Months Ended July 31, 2018 2017 (in thousands, except per share data) Net (loss) income attributable to Korn/Ferry International $ (38,611 ) $ 29,041 Less: distributed and undistributed earnings to nonvested restricted stockholders 59 288 Basic net (loss) earnings attributable to common stockholders (38,670 ) 28,753 Add: undistributed earnings to nonvested restricted stockholders — 232 Less: reallocation of undistributed earnings to nonvested restricted stockholders — 230 Diluted net (loss) earnings attributable to common stockholders $ (38,670 ) $ 28,755 Weighted-average common shares outstanding: Basic weighted-average number of common shares outstanding 55,378 55,795 Effect of dilutive securities: Restricted stock — 588 Stock options — 12 ESPP — 8 Diluted weighted-average number of common shares outstanding 55,378 56,403 Net (loss) earnings per common share: Basic (loss) earnings per share $ (0.70 ) $ 0.52 Diluted (loss) earnings per share $ (0.70 ) $ 0.51 |
Comprehensive (Loss) Income (Ta
Comprehensive (Loss) Income (Tables) | 3 Months Ended |
Jul. 31, 2018 | |
Equity [Abstract] | |
Components of Accumulated Other Comprehensive (Loss) Income | The components of accumulated other comprehensive (loss) income were as follows: July 31, 2018 April 30, 2018 (in thousands) Foreign currency translation adjustments $ (46,961 ) $ (32,399 ) Deferred compensation and pension plan adjustments, net of tax (11,196 ) (9,073 ) Interest rate swap unrealized gain, net of taxes 1,669 1,337 Accumulated other comprehensive loss, net $ (56,488 ) $ (40,135 ) |
Changes in Each Component of Accumulated Other Comprehensive (Loss) Income | The following table summarizes the changes in each component of accumulated other comprehensive (loss) income for the three months ended July 31, 2018. Foreign Currency Translation Deferred Compensation and Pension Plan (1) Unrealized gains on interest rate swap (2) Accumulated Other Comprehensive Income (Loss) (in thousands) Balance as of April 30, 2018 $ (32,399 ) $ (9,073 ) $ 1,337 $ (40,135 ) Unrealized (losses) gains arising during the period (14,562 ) — 149 (14,413 ) Reclassification of realized net losses (gains) to net (loss) income — 273 (16 ) 257 Effect of adoption of accounting standard — (2,396 ) 199 (2,197 ) Balance as of July 31, 2018 $ (46,961 ) $ (11,196 ) $ 1,669 $ (56,488 ) The following table summarizes the changes in each component of accumulated other comprehensive (loss) income for the three months ended July 31, 2017: 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 ) (1) The tax effect on the reclassifications of realized net losses was $0.1 million and $0.2 million for the three months ended July 31, 2018 and 2017, respectively. (2) The tax effect on unrealized gains (losses) was $0.1 million and $(0.1) million for the three months ended July 31, 2018 and 2017, respectively. The tax effect on the reclassification of realized net losses to net (loss) income was $0.1 million for the three months ended July 31, 2017. |
Employee Stock Plans (Tables)
Employee Stock Plans (Tables) | 3 Months Ended |
Jul. 31, 2018 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Components Of Stock-Based Compensation Expense Recognized | The following table summarizes the components of stock-based compensation expense recognized in the Company’s consolidated statements of operations for the periods indicated: Three Months Ended July 31, 2018 2017 (in thousands) Restricted stock $ 5,369 $ 4,405 ESPP 345 291 Total stock-based compensation expense, pre-tax 5,714 4,696 Tax benefit from stock-based compensation expense (1,682 ) (1,378 ) Total stock-based compensation expense, net of tax $ 4,032 $ 3,318 |
Restricted Stock Activity | Restricted stock activity during the three months ended July 31, 2018 is summarized below: Shares Weighted- Average Grant Date Fair Value (in thousands, except per share data) Non-vested, April 30, 2018 1,730 $ 33.45 Granted 478 $ 48.55 Vested (539 ) $ 34.05 Forfeited/expired (20 ) $ 26.86 Non-vested, July 31, 2018 1,649 $ 40.66 |
Financial Instruments (Tables)
Financial Instruments (Tables) | 3 Months Ended |
Jul. 31, 2018 | |
Financial Instruments and Balance Sheet Classification | The following tables show the Company’s financial instruments and balance sheet classification as of July 31, 2018 and April 30, 2018: July 31, 2018 Fair Value Measurement Balance Sheet Classification Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities, Current Marketable Securities, Non- current Income Taxes & Other Receivables Other Accrued Liabilities (in thousands) Level 1: Cash $ 344,684 $ — $ — $ 344,684 $ 344,684 $ — $ — $ — $ — Money market funds 21,045 — — 21,045 21,045 — — — — Mutual funds (1) 124,589 10,395 (908 ) 134,076 — 10,952 123,124 — — Total $ 490,318 $ 10,395 $ (908 ) $ 499,805 $ 365,729 $ 10,952 $ 123,124 $ — $ — Level 2: Foreign currency forward contracts $ — $ 603 $ (621 ) $ (18 ) $ — $ — $ — $ — $ (18 ) Interest rate swap $ — $ 2,256 $ — $ 2,256 $ — $ — $ — $ 2,256 $ — April 30, 2018 Fair Value Measurement Balance Sheet Classification Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities, Current Marketable Securities, Non- current Income Taxes & Other Receivables Other Accrued Liabilities (in thousands) Level 1: Cash $ 519,818 $ — $ — $ 519,818 $ 519,818 $ — $ — $ — $ — Money market funds 1,030 — — 1,030 1,030 — — — — Mutual funds (1) 127,077 11,040 (1,032 ) 137,085 — 14,293 122,792 — — Total $ 647,925 $ 11,040 $ (1,032 ) $ 657,933 $ 520,848 $ 14,293 $ 122,792 $ — $ — Level 2: Foreign currency forward contracts $ — $ 1,778 $ (1,025 ) $ 753 $ — $ — $ — $ 753 $ — Interest rate swap $ — $ 2,076 $ — $ 2,076 $ — $ — $ — $ 2,076 $ — (1) These investments are held in trust for settlement of the Company’s vested obligations of $125.4 million and $118.2 million as of July 31, 2018 and April 30, 2018, respectively, under the ECAP (see Note 6 — Deferred Compensation and Retirement Plans |
Financial Instruments and Balance Sheet Classification | The following tables show the Company’s financial instruments and balance sheet classification as of July 31, 2018 and April 30, 2018: July 31, 2018 Fair Value Measurement Balance Sheet Classification Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities, Current Marketable Securities, Non- current Income Taxes & Other Receivables Other Accrued Liabilities (in thousands) Level 1: Cash $ 344,684 $ — $ — $ 344,684 $ 344,684 $ — $ — $ — $ — Money market funds 21,045 — — 21,045 21,045 — — — — Mutual funds (1) 124,589 10,395 (908 ) 134,076 — 10,952 123,124 — — Total $ 490,318 $ 10,395 $ (908 ) $ 499,805 $ 365,729 $ 10,952 $ 123,124 $ — $ — Level 2: Foreign currency forward contracts $ — $ 603 $ (621 ) $ (18 ) $ — $ — $ — $ — $ (18 ) Interest rate swap $ — $ 2,256 $ — $ 2,256 $ — $ — $ — $ 2,256 $ — April 30, 2018 Fair Value Measurement Balance Sheet Classification Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities, Current Marketable Securities, Non- current Income Taxes & Other Receivables Other Accrued Liabilities (in thousands) Level 1: Cash $ 519,818 $ — $ — $ 519,818 $ 519,818 $ — $ — $ — $ — Money market funds 1,030 — — 1,030 1,030 — — — — Mutual funds (1) 127,077 11,040 (1,032 ) 137,085 — 14,293 122,792 — — Total $ 647,925 $ 11,040 $ (1,032 ) $ 657,933 $ 520,848 $ 14,293 $ 122,792 $ — $ — Level 2: Foreign currency forward contracts $ — $ 1,778 $ (1,025 ) $ 753 $ — $ — $ — $ 753 $ — Interest rate swap $ — $ 2,076 $ — $ 2,076 $ — $ — $ — $ 2,076 $ — (1) These investments are held in trust for settlement of the Company’s vested obligations of $125.4 million and $118.2 million as of July 31, 2018 and April 30, 2018, respectively, under the ECAP (see Note 6 — Deferred Compensation and Retirement Plans |
Summary of Gains and Losses on Interest Rate Swap | During the three months ended July 31, 2018, the Company recognized the following gains and losses on the interest rate swap: Three Months Ended July 31, 2018 2017 (in thousands) Gains (Losses) recognized in other comprehensive income (net of tax effects of $53 and ($149), respectively) $ 149 $ (234 ) Gains (Losses) reclassified from accumulated other comprehensive income into interest expense, net $ 22 $ (280 ) |
Fair Value of Liabilities Derivatives | The fair value of derivatives not designated as hedge instruments are as follows: July 31, 2018 April 30, 2018 (in thousands) Derivative assets: Foreign currency forward contracts $ 603 $ 1,778 Derivative liabilities: Foreign currency forward contracts $ 621 $ 1,025 |
Not Designated as Hedge Instrument | |
Fair Value of Assets Derivatives | The fair value of derivatives not designated as hedge instruments are as follows: July 31, 2018 April 30, 2018 (in thousands) Derivative assets: Foreign currency forward contracts $ 603 $ 1,778 Derivative liabilities: Foreign currency forward contracts $ 621 $ 1,025 |
Cash Flow Hedge | |
Fair Value of Derivative Designated as Cash Flow Hedge Instrument | The fair value of the derivative designated as a cash flow hedge instrument is as follows: July 31, 2018 April 30, 2018 (in thousands) Derivative asset: Interest rate swap contract $ 2,256 $ 2,076 |
Deferred Compensation and Ret25
Deferred Compensation and Retirement Plans (Tables) | 3 Months Ended |
Jul. 31, 2018 | |
Compensation And Retirement Disclosure [Abstract] | |
Components of Net Periodic Benefits Costs | The components of net periodic benefit costs are as follows: Three Months Ended July 31, 2018 2017 (in thousands) Service cost $ 3,646 $ 2,065 Interest cost 1,296 1,020 Amortization of actuarial loss 446 577 Expected return on plan assets (1) (392 ) (399 ) Net periodic service credit amortization (77 ) — Net periodic benefit costs (2) $ 4,919 $ 3,263 (1) The expected long-term rate of return on plan assets is 6.25% and 6.50% for July 31, 2018 and 2017, respectively. (2) The service cost, interest cost and the other components of net periodic benefit costs are included in compensation and benefits expense, interest expense, net and other income, net, respectively, on the consolidated statements of operations. |
Fee Revenue (Tables)
Fee Revenue (Tables) | 3 Months Ended |
Jul. 31, 2018 | |
Revenue From Contract With Customer [Abstract] | |
Schedule of Contract Asset and Liability | The following table outlines our contract asset and liability balances as of July 31, 2018 and May 1, 2018: July 31, 2018 May 1, 2018 (in thousands) Contract assets (unbilled receivables) $ 68,570 $ 65,164 Contract liabilities (deferred revenue) $ 104,581 $ 114,695 |
Schedule of Disaggregation of Fee Revenue by Industry | The following table provides further disaggregation of fee revenue by industry: Three Months Ended July 31, 2018 2017 Dollars % Dollars % (dollars in thousands) Industrial $ 135,764 29.2 % $ 121,447 30.3 % Financial Services 80,193 17.2 67,260 16.8 Life Sciences/Healthcare 79,169 17.0 66,580 16.6 Consumer Goods 71,794 15.4 61,831 15.4 Technology 61,849 13.3 51,772 12.9 Education 32,936 7.1 28,677 7.1 General 3,863 0.8 3,687 0.9 Fee Revenue $ 465,568 100.0 % $ 401,254 100.0 % |
Business Segments (Tables)
Business Segments (Tables) | 3 Months Ended |
Jul. 31, 2018 | |
Segment Reporting [Abstract] | |
Financial Highlights by Business Segment | Financial highlights by business segment are as follows: Three Months Ended July 31, 2018 Executive Search North America EMEA Asia Pacific Latin America Subtotal Advisory RPO & Professional Search Corporate Consolidated (in thousands) Fee revenue $ 112,097 $ 46,654 $ 26,295 $ 7,878 $ 192,924 $ 195,375 $ 77,269 $ — $ 465,568 Total revenue $ 115,757 $ 47,749 $ 26,625 $ 7,903 $ 198,034 $ 200,147 $ 80,181 $ — $ 478,362 Net loss attributable to Korn/Ferry International $ (38,611 ) Net income attributable to noncontrolling interest 19 Other income, net (4,491 ) Interest expense, net 4,103 Equity in earnings of unconsolidated subsidiaries, net (29 ) Income tax benefit (16,110 ) Operating income (loss) $ 26,514 $ 6,969 $ 6,641 $ 754 $ 40,878 $ (83,079 ) $ 11,645 $ (24,563 ) (55,119 ) Depreciation and amortization 979 370 370 107 1,826 7,431 761 1,713 11,731 Other income (loss), net 3,472 340 175 37 4,024 570 105 (208 ) 4,491 Equity in earnings of unconsolidated subsidiaries, net 29 — — — 29 — — — 29 EBITDA 30,994 7,679 7,186 898 46,757 (75,078 ) 12,511 (23,058 ) (38,868 ) Integration/acquisition costs — — — — — 3,027 — 80 3,107 Tradename write-offs — — — — — 106,555 — — 106,555 Adjusted EBITDA $ 30,994 $ 7,679 $ 7,186 $ 898 $ 46,757 $ 34,504 $ 12,511 $ (22,978 ) $ 70,794 Three Months Ended July 31, 2017 Executive Search North America EMEA Asia Pacific Latin America Subtotal Advisory RPO & Professional Search Corporate Consolidated (in thousands) Fee revenue $ 91,833 $ 40,121 $ 21,578 $ 7,659 $ 161,191 $ 179,453 $ 60,610 $ — $ 401,254 Total revenue $ 95,205 $ 41,058 $ 21,880 $ 7,664 $ 165,807 $ 183,296 $ 65,814 $ — $ 414,917 Net income attributable to Korn/Ferry International $ 29,041 Net income attributable to noncontrolling interest 388 Other income, net (3,354 ) Interest expense, net 3,680 Equity in earnings of unconsolidated subsidiaries, net (30 ) Income tax provision 12,210 Operating income (loss) $ 22,070 $ 6,675 $ 3,141 $ 1,026 $ 32,912 $ 19,055 $ 8,245 $ (18,277 ) 41,935 Depreciation and amortization 949 428 320 107 1,804 8,085 796 1,524 12,209 Other income, net 282 56 105 20 463 431 8 2,452 3,354 Equity in earnings of unconsolidated subsidiaries, net 30 — — — 30 — — — 30 EBITDA 23,331 7,159 3,566 1,153 35,209 27,571 9,049 (14,301 ) 57,528 Restructuring charges, net — — 40 — 40 240 — — 280 Integration/acquisition costs — — — — — 2,549 — 39 2,588 Adjusted EBITDA $ 23,331 $ 7,159 $ 3,606 $ 1,153 $ 35,249 $ 30,360 $ 9,049 $ (14,262 ) $ 60,396 |
Organization and Summary of S28
Organization and Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Jul. 31, 2018 | Jul. 31, 2017 | Apr. 30, 2018 | May 01, 2018 | |
Organization And Summary Of Significant Accounting Policies [Line Items] | ||||
Investments in affiliated companies maximum | 50.00% | |||
Impairment of goodwill | $ 0 | $ 0 | ||
Impairment of intangible assets | 0 | $ 0 | ||
Purchase price allocated to indefinite lived trade name intangible assets | 106,600,000 | |||
Performance related bonus expenses | 61,000,000 | $ 41,600,000 | ||
Accounting Standards Update 2014-09 | Adjustments Due to ASC 606 | ||||
Organization And Summary Of Significant Accounting Policies [Line Items] | ||||
Increase to retained earnings, net of tax | $ 6,700,000 | |||
Accounting Standards Update 2018-02 | ||||
Organization And Summary Of Significant Accounting Policies [Line Items] | ||||
Increase to retained earnings, net of tax | 2,200,000 | |||
General and Administrative Expenses | ||||
Organization And Summary Of Significant Accounting Policies [Line Items] | ||||
Impairment of intangible assets | 106,600,000 | |||
Compensation Expense | Accounting Standards Update 2017-07 | ||||
Organization And Summary Of Significant Accounting Policies [Line Items] | ||||
Reclassification adjustment revised amount | 1,200,000 | |||
Other Income | Accounting Standards Update 2017-07 | ||||
Organization And Summary Of Significant Accounting Policies [Line Items] | ||||
Reclassification adjustment revised amount | (200,000) | |||
Interest Expense | Accounting Standards Update 2017-07 | ||||
Organization And Summary Of Significant Accounting Policies [Line Items] | ||||
Reclassification adjustment revised amount | $ (1,000,000) | |||
Minimum | ||||
Organization And Summary Of Significant Accounting Policies [Line Items] | ||||
Intangible assets estimated useful lives | 1 year | |||
Amortization of long-term retention awards | 4 years | |||
Maximum | ||||
Organization And Summary Of Significant Accounting Policies [Line Items] | ||||
Intangible assets estimated useful lives | 24 years | |||
Amortization of long-term retention awards | 5 years | |||
Mexico Subsidiary | ||||
Organization And Summary Of Significant Accounting Policies [Line Items] | ||||
Percentage of Noncontrolling interest in subsidiary | 51.00% |
Organization and Summary of S29
Organization and Summary of Significant Accounting Policies - Summary of Effect of Changes to Consolidated Balance Sheet (Detail) - USD ($) $ in Thousands | Jul. 31, 2018 | May 01, 2018 | Apr. 30, 2018 | Jul. 31, 2017 | Apr. 30, 2017 |
Revenue Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Total assets | $ 2,079,470 | $ 2,287,914 | |||
Total liabilities | 914,850 | 1,068,299 | |||
Total stockholders’ equity | $ 1,164,620 | $ 1,219,615 | $ 1,128,751 | $ 1,087,048 | |
Accounting Standards Update 2014-09 | |||||
Revenue Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Total assets | $ 2,291,410 | ||||
Total liabilities | 1,065,139 | ||||
Total stockholders’ equity | 1,226,271 | ||||
Adjustments Due to ASC 606 | Accounting Standards Update 2014-09 | |||||
Revenue Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Total assets | 3,496 | ||||
Total liabilities | (3,160) | ||||
Total stockholders’ equity | $ 6,656 |
Basic and Diluted (Loss) Earn30
Basic and Diluted (Loss) Earnings Per Share - Additional Information (Detail) - shares shares in Millions | 3 Months Ended | |
Jul. 31, 2018 | Jul. 31, 2017 | |
Restricted Stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities excluded from computation of diluted (loss) earnings per share, shares | 1.8 | 0.6 |
Basic and Diluted Earnings per
Basic and Diluted Earnings per Common Share Attributable to Common Stockholders (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Jul. 31, 2018 | Jul. 31, 2017 | |
Earnings Per Share Disclosure [Line Items] | ||
Net (loss) income attributable to Korn/Ferry International | $ (38,611) | $ 29,041 |
Less: distributed and undistributed earnings to nonvested restricted stockholders | 59 | 288 |
Basic net (loss) earnings attributable to common stockholders | (38,670) | 28,753 |
Add: undistributed earnings to nonvested restricted stockholders | 232 | |
Less: reallocation of undistributed earnings to nonvested restricted stockholders | 230 | |
Diluted net (loss) earnings attributable to common stockholders | $ (38,670) | $ 28,755 |
Basic weighted-average number of common shares outstanding | 55,378 | 55,795 |
Diluted weighted-average number of common shares outstanding | 55,378 | 56,403 |
Basic (loss) earnings per share | $ (0.70) | $ 0.52 |
Diluted (loss) earnings per share | $ (0.70) | $ 0.51 |
ESPP | ||
Earnings Per Share Disclosure [Line Items] | ||
Stock | 8 | |
Restricted Stock | ||
Earnings Per Share Disclosure [Line Items] | ||
Stock | 588 | |
Stock Options | ||
Earnings Per Share Disclosure [Line Items] | ||
Stock | 12 |
Comprehensive (Loss) Income - C
Comprehensive (Loss) Income - Components of Accumulated Other Comprehensive (Loss) Income (Detail) - USD ($) $ in Thousands | Jul. 31, 2018 | Apr. 30, 2018 |
Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract] | ||
Foreign currency translation adjustments | $ (46,961) | $ (32,399) |
Deferred compensation and pension plan adjustments, net of tax | (11,196) | (9,073) |
Interest rate swap unrealized gain, net of taxes | 1,669 | 1,337 |
Accumulated other comprehensive loss, net | $ (56,488) | $ (40,135) |
Comprehensive (Loss) Income -33
Comprehensive (Loss) Income - Changes in Each Component of Accumulated Other Comprehensive (Loss) Income (Detail) - USD ($) $ in Thousands | 3 Months Ended | ||
Jul. 31, 2018 | Jul. 31, 2017 | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Beginning balance | $ 1,216,607 | ||
Ending balance | 1,161,587 | ||
Accumulated Translation Adjustment | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Beginning balance | (32,399) | $ (55,359) | |
Unrealized (losses) gains arising during the period | (14,562) | 16,084 | |
Ending balance | (46,961) | (39,275) | |
Accumulated Defined Benefit Plan Adjustment | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Beginning balance | [1] | (9,073) | (15,127) |
Reclassification of realized net losses (gains) to net (loss) income | [1] | 273 | 352 |
Effect of adoption of accounting standard | [1] | (2,396) | |
Ending balance | [1] | (11,196) | (14,775) |
Unrealized Gains (Losses) on Interest Rate Swap | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Beginning balance | [2] | 1,337 | (578) |
Unrealized (losses) gains arising during the period | [2] | 149 | (234) |
Reclassification of realized net losses (gains) to net (loss) income | [2] | (16) | 171 |
Effect of adoption of accounting standard | [2] | 199 | |
Ending balance | [2] | 1,669 | (641) |
Accumulated Other Comprehensive Income (Loss) | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Beginning balance | (40,135) | (71,064) | |
Unrealized (losses) gains arising during the period | (14,413) | 15,850 | |
Reclassification of realized net losses (gains) to net (loss) income | 257 | 523 | |
Effect of adoption of accounting standard | (2,197) | ||
Ending balance | $ (56,488) | $ (54,691) | |
[1] | The tax effect on the reclassifications of realized net losses was $0.1 million and $0.2 million for the three months ended July 31, 2018 and 2017, respectively. | ||
[2] | The tax effect on unrealized gains (losses) was $0.1 million and $(0.1) million for the three months ended July 31, 2018 and 2017, respectively. The tax effect on the reclassification of realized net losses to net (loss) income was $0.1 million for the three months ended July 31, 2017. |
Comprehensive (Loss) Income -34
Comprehensive (Loss) Income - Changes in Each Component of Accumulated Other Comprehensive (Loss) Income (Parenthetical) (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Jul. 31, 2018 | Jul. 31, 2017 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Tax effect on reclassifications of realized net losses | $ 0.1 | $ 0.2 |
Unrealized Gains (Losses) on Interest Rate Swap | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Tax effect on unrealized gains (losses) | $ 0.1 | (0.1) |
Tax effect on reclassifications of realized net losses | $ 0.1 |
Employee Stock Plans - Componen
Employee Stock Plans - Components of Stock-Based Compensation Expense Recognized (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Jul. 31, 2018 | Jul. 31, 2017 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total stock-based compensation expense, pre-tax | $ 5,714 | $ 4,696 |
Tax benefit from stock-based compensation expense | (1,682) | (1,378) |
Total stock-based compensation expense, net of tax | 4,032 | 3,318 |
Restricted Stock | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total stock-based compensation expense, pre-tax | 5,369 | 4,405 |
ESPP | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total stock-based compensation expense, pre-tax | $ 345 | $ 291 |
Employee Stock Plans - Addition
Employee Stock Plans - Additional Information (Detail) | 3 Months Ended | ||
Jul. 31, 2018USD ($)$ / sharesshares | Jul. 31, 2017USD ($)$ / sharesshares | Apr. 30, 2018shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Payments of tax withholdings on restricted stock | $ | $ 13,054,000 | $ 3,346,000 | |
Shares repurchased during the period, value | $ | $ 13,055,000 | $ 7,372,000 | |
Treasury Stock, Common | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Shares repurchased during the period | 0 | 119,356 | |
Shares repurchased during the period, value | $ | $ 4,000,000 | ||
ESPP | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Maximum number of shares reserved for issuance | 3,000,000 | ||
Authorized payroll deductions | 15.00% | ||
Fair market price of common stock | 85.00% | ||
Authorized payroll deductions, value | $ | $ 25,000 | ||
Shares available for future issuance | 1,000,000 | ||
Employees stock purchased | 75,106 | 116,285 | |
Employees stock purchased, price per share | $ / shares | $ 52.64 | $ 29.35 | |
Time Based Restricted Stock | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period | 4 years | ||
Market Based Restricted Stock | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period | 3 years | ||
Shares outstanding | 600,000 | ||
Total unrecognized compensation cost related to non-vested awards | $ | $ 14,500,000 | ||
Performance Based Restricted Stock Unit | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period | 3 years | ||
Shares outstanding | 200,000 | ||
Total unrecognized compensation cost related to non-vested awards | $ | $ 1,700,000 | ||
Restricted Stock | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Shares outstanding | 1,649,000 | 1,730,000 | |
Total unrecognized compensation cost related to non-vested awards | $ | $ 48,100,000 | ||
Expected cost recognized over weighted-average period | 2 years 9 months 18 days | ||
Shares repurchased during the period to pay for taxes | 199,795 | 97,483 | |
Payments of tax withholdings on restricted stock | $ | $ 13,100,000 | $ 3,300,000 | |
Stock Options | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Proceeds from issuance of common stock upon exercise of employee stock options | $ | $ 200,000 | $ 600,000 | |
Stock Options | Common Stock | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock issued for stock options exercised | 6,720 | 41,075 | |
Stock Incentive Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock incentive plan, additional number of shares | 5,500,000 | ||
Maximum number of shares reserved for issuance | 11,200,000 | ||
Issuance of full-value stock awards limitation, required ratio to stock options | 2.3 |
Employee Stock Plans - Restrict
Employee Stock Plans - Restricted Stock Activity (Detail) - Restricted Stock shares in Thousands | 3 Months Ended |
Jul. 31, 2018$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Shares, Non-vested, beginning of year | shares | 1,730 |
Shares, Granted | shares | 478 |
Shares, Vested | shares | (539) |
Shares, Forfeited/expired | shares | (20) |
Shares, Non-vested, end of year | shares | 1,649 |
Weighted-Average Grant Date Fair Value, Non-vested, beginning of year | $ / shares | $ 33.45 |
Weighted-Average Grant Date Fair Value, Granted | $ / shares | 48.55 |
Weighted-Average Grant Date Fair Value, Vested | $ / shares | 34.05 |
Weighted-Average Grant Date Fair Value, Forfeited/expired | $ / shares | 26.86 |
Weighted-Average Grant Date Fair Value, Non-vested, end of year | $ / shares | $ 40.66 |
Financial Instruments - Financi
Financial Instruments - Financial Instruments and Balance Sheet Classification (Detail) - USD ($) $ in Thousands | Jul. 31, 2018 | Apr. 30, 2018 | Jul. 31, 2017 | Apr. 30, 2017 | |
Investment Holdings [Line Items] | |||||
Cash and cash equivalents | $ 365,729 | $ 520,848 | $ 282,019 | $ 410,882 | |
Marketable Securities, Current | 10,952 | 14,293 | |||
Marketable securities, non-current | 123,124 | 122,792 | |||
Income Taxes & Other Receivables | 36,999 | 29,089 | |||
Other Accrued Liabilities | (150,534) | (170,339) | |||
Fair Value, Inputs, Level 1 | |||||
Investment Holdings [Line Items] | |||||
Cost | 490,318 | 647,925 | |||
Unrealized Gains | 10,395 | 11,040 | |||
Unrealized Losses | (908) | (1,032) | |||
Fair Value | 499,805 | 657,933 | |||
Cash and cash equivalents | 365,729 | 520,848 | |||
Marketable Securities, Current | 10,952 | 14,293 | |||
Marketable securities, non-current | 123,124 | 122,792 | |||
Fair Value, Inputs, Level 1 | Cash | |||||
Investment Holdings [Line Items] | |||||
Cost | 344,684 | 519,818 | |||
Fair Value | 344,684 | 519,818 | |||
Cash and cash equivalents | 344,684 | 519,818 | |||
Fair Value, Inputs, Level 1 | Money Market Funds | |||||
Investment Holdings [Line Items] | |||||
Cost | 21,045 | 1,030 | |||
Fair Value | 21,045 | 1,030 | |||
Cash and cash equivalents | 21,045 | 1,030 | |||
Fair Value, Inputs, Level 1 | Mutual Funds | |||||
Investment Holdings [Line Items] | |||||
Cost | [1] | 124,589 | 127,077 | ||
Unrealized Gains | [1] | 10,395 | 11,040 | ||
Unrealized Losses | [1] | (908) | (1,032) | ||
Fair Value | [1] | 134,076 | 137,085 | ||
Marketable Securities, Current | [1] | 10,952 | 14,293 | ||
Marketable securities, non-current | [1] | 123,124 | 122,792 | ||
Fair Value, Inputs, Level 2 | Foreign Exchange Forward Contracts | |||||
Investment Holdings [Line Items] | |||||
Unrealized Gains | 603 | 1,778 | |||
Unrealized Losses | (621) | (1,025) | |||
Fair Value | (18) | 753 | |||
Income Taxes & Other Receivables | 753 | ||||
Other Accrued Liabilities | (18) | ||||
Fair Value, Inputs, Level 2 | Interest Rate Swap | |||||
Investment Holdings [Line Items] | |||||
Fair Value | 2,256 | 2,076 | |||
Income Taxes & Other Receivables | 2,256 | 2,076 | |||
Unrealized Gains | $ 2,256 | $ 2,076 | |||
[1] | These investments are held in trust for settlement of the Company’s vested obligations of $125.4 million and $118.2 million as of July 31, 2018 and April 30, 2018, respectively, under the ECAP (see Note 6 — Deferred Compensation and Retirement Plans). During the three months ended July 31, 2018 and 2017, the fair value of the investments increased; therefore, the Company recognized income of $4.0 million and $3.4 million, respectively, which was recorded in other income, net. |
Financial Instruments - Finan39
Financial Instruments - Financial Instruments and Balance Sheet Classification (Parenthetical) (Detail) - USD ($) $ in Thousands | 3 Months Ended | ||
Jul. 31, 2018 | Jul. 31, 2017 | Apr. 30, 2018 | |
Investments Debt And Equity Securities [Abstract] | |||
Obligations for which assets are held in trust | $ 125,400 | $ 118,200 | |
Gain (loss) on marketable securities | $ 4,001 | $ 3,429 |
Financial Instruments - Additio
Financial Instruments - Additional Information (Detail) - USD ($) | 1 Months Ended | 3 Months Ended | ||
Mar. 31, 2017 | Jul. 31, 2018 | Jul. 31, 2017 | Apr. 30, 2018 | |
Maximum | ||||
Financial Instrument [Line Items] | ||||
Derivative gains included in accumulated other comprehensive income | $ 600,000 | |||
Designated as Hedge Instrument | Interest Rate Swap | Cash Flow Hedge | ||||
Financial Instrument [Line Items] | ||||
Derivative notional amount | $ 129,800,000 | $ 116,900,000 | ||
Derivative, Maturity Date | Jun. 15, 2021 | |||
Interest rate | 1.919% | |||
Not Designated as Hedge Instrument | Foreign Exchange Forward Contracts | ||||
Financial Instrument [Line Items] | ||||
Foreign currency gains (losses) | $ 100,000 | $ (2,600,000) | ||
Not Designated as Hedge Instrument | Foreign Exchange Forward Contracts | Other Accrued Liabilities | Derivatives Purchased | ||||
Financial Instrument [Line Items] | ||||
Derivative notional amount | 44,900,000 | $ 80,800,000 | ||
Not Designated as Hedge Instrument | Foreign Exchange Forward Contracts | Other Accrued Liabilities | Derivatives Sold | ||||
Financial Instrument [Line Items] | ||||
Derivative notional amount | $ 42,300,000 | $ 78,500,000 |
Financial Instruments - Fair Va
Financial Instruments - Fair Value of Derivative Designated as Cash Flow Hedge Instrument (Detail) - USD ($) $ in Thousands | Jul. 31, 2018 | Apr. 30, 2018 |
Designated as Hedge Instrument | Interest Rate Swap | ||
Derivative asset: | ||
Interest rate swap contract | $ 2,256 | $ 2,076 |
Financial Instruments - Summary
Financial Instruments - Summary of Gains and Losses on Interest Rate Swap (Detail) - Interest Rate Swap - USD ($) $ in Thousands | 3 Months Ended | |
Jul. 31, 2018 | Jul. 31, 2017 | |
Derivative [Line Items] | ||
Gains (Losses) recognized in other comprehensive income (net of tax effects of $53 and ($149), respectively) | $ 149 | $ (234) |
Gains (Losses) reclassified from accumulated other comprehensive income into interest expense, net | $ 22 | $ (280) |
Financial Instruments - Summa43
Financial Instruments - Summary of Gains and Losses on Interest Rate Swap (Parenthetical) (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Jul. 31, 2018 | Jul. 31, 2017 | |
Interest Rate Swap | ||
Derivative [Line Items] | ||
Gains (Losses) recognized in OCI, tax effects | $ 53 | $ (149) |
Financial Instruments - Fair 44
Financial Instruments - Fair Value of Derivatives Not Designated as Hedge Instruments (Detail) - Not Designated as Hedge Instrument - Foreign Exchange Forward Contracts - USD ($) $ in Thousands | Jul. 31, 2018 | Apr. 30, 2018 |
Derivative assets: | ||
Fair Value of Derivative Assets | $ 603 | $ 1,778 |
Derivative liabilities: | ||
Fair Value of Derivative Liabilities | $ 621 | $ 1,025 |
Deferred Compensation and Ret45
Deferred Compensation and Retirement Plans - Components of Net Periodic Benefits Costs (Detail) - Deferred Compensation Plan - USD ($) $ in Thousands | 3 Months Ended | ||
Jul. 31, 2018 | Jul. 31, 2017 | ||
Defined Benefit Plan Disclosure [Line Items] | |||
Service cost | $ 3,646 | $ 2,065 | |
Interest cost | 1,296 | 1,020 | |
Amortization of actuarial loss | 446 | 577 | |
Expected return on plan assets | [1] | (392) | (399) |
Net periodic service credit amortization | (77) | ||
Net periodic benefit costs | [2] | $ 4,919 | $ 3,263 |
[1] | The expected long-term rate of return on plan assets is 6.25% and 6.50% for July 31, 2018 and 2017, respectively. | ||
[2] | The service cost, interest cost and the other components of net periodic benefit costs are included in compensation and benefits expense, interest expense, net and other income, net, respectively, on the consolidated statements of operations. |
Deferred Compensation and Ret46
Deferred Compensation and Retirement Plans - Components of Net Periodic Benefits Costs (Parenthetical) (Detail) | 3 Months Ended | |
Jul. 31, 2018 | Jul. 31, 2017 | |
Compensation And Retirement Disclosure [Abstract] | ||
Expected long-term rate of return on plan assets | 6.25% | 6.50% |
Deferred Compensation and Ret47
Deferred Compensation and Retirement Plans - Additional Information (Detail) - USD ($) $ in Thousands | 3 Months Ended | ||
Jul. 31, 2018 | Jul. 31, 2017 | Apr. 30, 2018 | |
Defined Benefit Plan Disclosure [Line Items] | |||
Increase in market value of the underlying COLI investments | $ 1,347 | $ 2,485 | |
Recognized investment income(expense) | 4,001 | 3,429 | |
Executive Capital Accumulation Plan | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Gain (loss) on deferred compensation plan | $ 4,200 | 3,700 | |
Minimum | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Option to receive employee benefits by quarterly installments periods | 1 year | ||
Minimum | Executive Capital Accumulation Plan | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Deferred compensation arrangement vesting period | 4 years | ||
Maximum | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Option to receive employee benefits by quarterly installments periods | 15 years | ||
Maximum | Executive Capital Accumulation Plan | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Deferred compensation arrangement vesting period | 5 years | ||
CSV of COLI Contracts | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Gross CSV | $ 188,500 | $ 186,800 | |
Outstanding policy loans | 66,700 | $ 66,700 | |
Increase in market value of the underlying COLI investments | $ 1,300 | $ 2,500 |
Fee Revenue - Additional Inform
Fee Revenue - Additional Information (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Jul. 31, 2018 | Jul. 31, 2017 | |
Disaggregation Of Revenue [Line Items] | ||
Total revenue | $ 478,362 | $ 414,917 |
Contract liabilities, revenue recognized | $ 66,500 | |
Revenue, practical expedient, initial application and transition, completed contract, same reporting period | true | |
Revenue, remaining performance obligation, optional exemption, performance obligation | true | |
Adjustments Due to ASC 606 | Accounting Standards Update 2014-09 | ||
Disaggregation Of Revenue [Line Items] | ||
Total revenue | $ 200 |
Fee Revenue - Schedule of Contr
Fee Revenue - Schedule of Contract Asset and Liability (Detail) - USD ($) $ in Thousands | Jul. 31, 2018 | May 01, 2018 |
Revenue From Contract With Customer [Abstract] | ||
Contract assets (unbilled receivables) | $ 68,570 | $ 65,164 |
Contract liabilities (deferred revenue) | $ 104,581 | $ 114,695 |
Fee Revenue - Additional Info50
Fee Revenue - Additional Information (Detail 1) $ in Millions | 3 Months Ended |
Jul. 31, 2018USD ($) | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2018-08-01 | |
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items] | |
Revenue recognized, remaining performance obligation | $ 225.6 |
Revenue, remaining performance obligation, expected timing of satisfaction, period | 9 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2019-05-01 | |
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items] | |
Revenue recognized, remaining performance obligation | $ 137.3 |
Revenue, remaining performance obligation, expected timing of satisfaction, period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2020-05-01 | |
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items] | |
Revenue recognized, remaining performance obligation | $ 72.4 |
Revenue, remaining performance obligation, expected timing of satisfaction, period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2021-05-01 | |
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items] | |
Revenue recognized, remaining performance obligation | $ 51.4 |
Revenue, remaining performance obligation, expected timing of satisfaction, explanation | 2022 and thereafter |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: (nil) | |
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items] | |
Revenue recognized, remaining performance obligation | $ 486.7 |
Revenue, remaining performance obligation, expected timing of satisfaction, period |
Fee Revenue - Schedule of Disag
Fee Revenue - Schedule of Disaggregation of Fee Revenue by Industry (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Jul. 31, 2018 | Jul. 31, 2017 | |
Disaggregation Of Revenue [Line Items] | ||
Fee Revenue | $ 478,362 | $ 414,917 |
Industrial | ||
Disaggregation Of Revenue [Line Items] | ||
Fee Revenue | $ 135,764 | $ 121,447 |
Fee Revenue, Percentage | 29.20% | 30.30% |
Financial Services | ||
Disaggregation Of Revenue [Line Items] | ||
Fee Revenue | $ 80,193 | $ 67,260 |
Fee Revenue, Percentage | 17.20% | 16.80% |
Life Sciences/Healthcare | ||
Disaggregation Of Revenue [Line Items] | ||
Fee Revenue | $ 79,169 | $ 66,580 |
Fee Revenue, Percentage | 17.00% | 16.60% |
Consumer Goods | ||
Disaggregation Of Revenue [Line Items] | ||
Fee Revenue | $ 71,794 | $ 61,831 |
Fee Revenue, Percentage | 15.40% | 15.40% |
Technology | ||
Disaggregation Of Revenue [Line Items] | ||
Fee Revenue | $ 61,849 | $ 51,772 |
Fee Revenue, Percentage | 13.30% | 12.90% |
Education | ||
Disaggregation Of Revenue [Line Items] | ||
Fee Revenue | $ 32,936 | $ 28,677 |
Fee Revenue, Percentage | 7.10% | 7.10% |
General | ||
Disaggregation Of Revenue [Line Items] | ||
Fee Revenue | $ 3,863 | $ 3,687 |
Fee Revenue, Percentage | 0.80% | 0.90% |
Fee Revenue | ||
Disaggregation Of Revenue [Line Items] | ||
Fee Revenue | $ 465,568 | $ 401,254 |
Fee Revenue, Percentage | 100.00% | 100.00% |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Jul. 31, 2018 | Jul. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Income tax (benefit) provision | $ (16,110) | $ 12,210 |
Income tax (benefit) provision tax rate | (29.40%) | 29.30% |
U.S. corporate federal statutory income tax rate | 21.00% | 35.00% |
Business Segments - Additional
Business Segments - Additional Information (Detail) | 3 Months Ended |
Jul. 31, 2018Segment | |
Segment Reporting [Abstract] | |
Number of business segments | 3 |
Business Segments - Financial H
Business Segments - Financial Highlights by Business Segment (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Jul. 31, 2018 | Jul. 31, 2017 | |
Segment Reporting Information [Line Items] | ||
Total revenue | $ 478,362 | $ 414,917 |
Net (loss) income attributable to Korn/Ferry International | (38,611) | 29,041 |
Net income attributable to noncontrolling interest | 19 | 388 |
Other income, net | (4,491) | (3,354) |
Interest expense, net | 4,103 | 3,680 |
Equity in earnings of unconsolidated subsidiaries, net | (29) | (30) |
Income tax (benefit) provision | (16,110) | 12,210 |
Operating (loss) income | (55,119) | 41,935 |
Depreciation and amortization | 11,731 | 12,209 |
Other income (loss), net | 4,491 | 3,354 |
Equity in earnings of unconsolidated subsidiaries, net | 29 | 30 |
EBITDA | (38,868) | 57,528 |
Restructuring charges, net | 280 | |
Integration/acquisition costs | 3,107 | 2,588 |
Tradename write-offs | 106,555 | |
Adjusted EBITDA | 70,794 | 60,396 |
Fee Revenue | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 465,568 | 401,254 |
Operating Segments | Executive Search | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 198,034 | 165,807 |
Operating (loss) income | 40,878 | 32,912 |
Depreciation and amortization | 1,826 | 1,804 |
Other income (loss), net | 4,024 | 463 |
Equity in earnings of unconsolidated subsidiaries, net | 29 | 30 |
EBITDA | 46,757 | 35,209 |
Restructuring charges, net | 40 | |
Adjusted EBITDA | 46,757 | 35,249 |
Operating Segments | Executive Search | North America | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 115,757 | 95,205 |
Operating (loss) income | 26,514 | 22,070 |
Depreciation and amortization | 979 | 949 |
Other income (loss), net | 3,472 | 282 |
Equity in earnings of unconsolidated subsidiaries, net | 29 | 30 |
EBITDA | 30,994 | 23,331 |
Adjusted EBITDA | 30,994 | 23,331 |
Operating Segments | Executive Search | EMEA | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 47,749 | 41,058 |
Operating (loss) income | 6,969 | 6,675 |
Depreciation and amortization | 370 | 428 |
Other income (loss), net | 340 | 56 |
EBITDA | 7,679 | 7,159 |
Adjusted EBITDA | 7,679 | 7,159 |
Operating Segments | Executive Search | Asia Pacific | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 26,625 | 21,880 |
Operating (loss) income | 6,641 | 3,141 |
Depreciation and amortization | 370 | 320 |
Other income (loss), net | 175 | 105 |
EBITDA | 7,186 | 3,566 |
Restructuring charges, net | 40 | |
Adjusted EBITDA | 7,186 | 3,606 |
Operating Segments | Executive Search | Latin America | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 7,903 | 7,664 |
Operating (loss) income | 754 | 1,026 |
Depreciation and amortization | 107 | 107 |
Other income (loss), net | 37 | 20 |
EBITDA | 898 | 1,153 |
Adjusted EBITDA | 898 | 1,153 |
Operating Segments | Advisory | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 200,147 | 183,296 |
Operating (loss) income | (83,079) | 19,055 |
Depreciation and amortization | 7,431 | 8,085 |
Other income (loss), net | 570 | 431 |
EBITDA | (75,078) | 27,571 |
Restructuring charges, net | 240 | |
Integration/acquisition costs | 3,027 | 2,549 |
Tradename write-offs | 106,555 | |
Adjusted EBITDA | 34,504 | 30,360 |
Operating Segments | RPO & Professional Search | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 80,181 | 65,814 |
Operating (loss) income | 11,645 | 8,245 |
Depreciation and amortization | 761 | 796 |
Other income (loss), net | 105 | 8 |
EBITDA | 12,511 | 9,049 |
Adjusted EBITDA | 12,511 | 9,049 |
Operating Segments | Fee Revenue | Executive Search | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 192,924 | 161,191 |
Operating Segments | Fee Revenue | Executive Search | North America | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 112,097 | 91,833 |
Operating Segments | Fee Revenue | Executive Search | EMEA | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 46,654 | 40,121 |
Operating Segments | Fee Revenue | Executive Search | Asia Pacific | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 26,295 | 21,578 |
Operating Segments | Fee Revenue | Executive Search | Latin America | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 7,878 | 7,659 |
Operating Segments | Fee Revenue | Advisory | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 195,375 | 179,453 |
Operating Segments | Fee Revenue | RPO & Professional Search | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 77,269 | 60,610 |
Corporate | ||
Segment Reporting Information [Line Items] | ||
Operating (loss) income | (24,563) | (18,277) |
Depreciation and amortization | 1,713 | 1,524 |
Other income (loss), net | (208) | 2,452 |
EBITDA | (23,058) | (14,301) |
Integration/acquisition costs | 80 | 39 |
Adjusted EBITDA | $ (22,978) | $ (14,262) |
Long-Term Debt - Additional Inf
Long-Term Debt - Additional Information (Detail) | Jun. 15, 2016USD ($) | Jul. 31, 2018USD ($) | Jul. 31, 2017USD ($) | Apr. 30, 2018USD ($) |
Debt Instrument [Line Items] | ||||
Principal payment on term loan facility | $ 5,156,000 | $ 5,156,000 | ||
Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Line of credit facility borrowings | 0 | $ 0 | ||
Line of credit facility, remaining borrowing capacity | 122,100,000 | |||
Standby Letters of Credit | ||||
Debt Instrument [Line Items] | ||||
Long-term debt arrangement | 2,900,000 | 2,900,000 | ||
Standby Letters of Credit | Other Financial Institutions | ||||
Debt Instrument [Line Items] | ||||
Long-term debt arrangement | 7,900,000 | 7,400,000 | ||
Credit Agreement | ||||
Debt Instrument [Line Items] | ||||
Credit agreement initiation date | Jun. 15, 2016 | |||
Line of credit facility, maximum borrowing capacity | $ 400,000,000 | |||
Line of credit facility borrowings | 275,000,000 | |||
Principal payment on term loan facility | $ 140,000,000 | |||
Unamortized debt issuance costs | $ 2,400,000 | 2,700,000 | ||
Credit Agreement | Maximum | ||||
Debt Instrument [Line Items] | ||||
Pro forma leverage ratio | 2.50 | |||
Credit Agreement | Maximum | London Interbank Offered Rate (LIBOR) | ||||
Debt Instrument [Line Items] | ||||
Applicable margin on variable interest rate | 2.00% | |||
Credit Agreement | Maximum | Base Rate Loans | ||||
Debt Instrument [Line Items] | ||||
Applicable margin on variable interest rate | 1.00% | |||
Credit Agreement | Minimum | ||||
Debt Instrument [Line Items] | ||||
Pro forma domestic liquidity | $ 50,000,000 | |||
Credit Agreement | Minimum | London Interbank Offered Rate (LIBOR) | ||||
Debt Instrument [Line Items] | ||||
Applicable margin on variable interest rate | 1.25% | |||
Credit Agreement | Minimum | Base Rate Loans | ||||
Debt Instrument [Line Items] | ||||
Applicable margin on variable interest rate | 0.25% | |||
Credit Agreement | Term Facility | ||||
Debt Instrument [Line Items] | ||||
Line of credit facility, maximum borrowing capacity | $ 275,000,000 | |||
Term loan amortization percentage year one | 7.50% | |||
Term loan amortization percentage year two | 7.50% | |||
Term loan amortization percentage year three | 10.00% | |||
Term loan amortization percentage year four | 10.00% | |||
Term loan amortization percentage year five | 10.00% | |||
Principal payment on term loan facility | $ 5,200,000 | |||
Average interest rate | 3.24% | 2.34% | ||
Line of credit facility, maturity date | Jun. 15, 2021 | |||
Long-term debt | $ 233,700,000 | $ 238,900,000 | ||
Credit Agreement | Term Facility | Maximum | ||||
Debt Instrument [Line Items] | ||||
Quarterly fee on average daily unused amount of Credit Facilities | 0.35% | |||
Credit Agreement | Term Facility | Minimum | ||||
Debt Instrument [Line Items] | ||||
Quarterly fee on average daily unused amount of Credit Facilities | 0.20% | |||
Credit Agreement | Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Line of credit facility, maximum borrowing capacity | $ 125,000,000 | |||
Line of credit facility, maturity date | Jun. 15, 2021 |
Subsequent Events - Additional
Subsequent Events - Additional Information (Detail) - Subsequent Event - Dividend Declared | Sep. 05, 2018$ / shares |
Subsequent Event [Line Items] | |
Dividends payable, declared date | Sep. 5, 2018 |
Dividends payable, per share amount | $ 0.10 |
Dividends payable, payable date | Oct. 15, 2018 |
Dividends declared, record date | Sep. 28, 2018 |