Heidrick & Struggles International, Inc. (ticker: HSII, exchange: NASDAQ) News Release - 11-May-1999
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Heidrick & Struggles International, Inc. Reports Record Revenues and Earnings for the First Quarter of 1999
CHICAGO--(BUSINESS WIRE)--May 11, 1999--Heidrick & Struggles International, Inc. today announced that the company produced record revenues and earnings for the quarter ended March 31, 1999, excluding non-recurring items and assuming the merger of Heidrick & Struggles, Inc. ("H&S Inc.") and Heidrick & Struggles International, Inc. ("HSI") occurred on January 1, 1998 (hereafter referred to as "adjusted basis"). The merger, completed on February 26, 1999, combined the operations of H&S Inc., which operated in all regions of the world except Europe, with HSI, a Europe-based company, which previously had been approximately 35% owned by H&S Inc.
On an adjusted basis, revenues rose 23.9% in the 1999 first quarter to $91.7 million from $74.0 million in the 1998 comparable period. Net income increased 45.1% to $1.7 million. Earnings per share in the quarter, again on an adjusted basis, grew 37.5% to $0.11 per diluted share, compared with $0.08 per diluted share in the prior year. On a reported basis, revenues in the 1999 first quarter increased 56.1%, and a net loss of $10.1 million was recorded because of a non-recurring pre-tax charge of $12.4 million. This charge was the result of the modification of the terms of HSI's acquisition agreement with Mulder & Partner GmbH & Co. KG, including the termination of all employment contingencies.
Commenting on the 1999 first quarter, Patrick S. Pittard, President and Chief Executive Officer, stated, "The year is off to a good start. Continued excellence in client service stimulated strong demand from our global client base and enhanced the Heidrick & Struggles brand. This is particularly evident in our U.S. operation, which saw year-over-year growth in first quarter revenues of 34%. We also are pleased to see that our increased attention to profitability is taking hold, as the company's expense structure is responding to our margin improvement initiatives."
An increase in revenues of over 50% from International Technology clients, and strong results from several other practices, including Industrial, Consumer Products and Professional Services, contributed to the quarter's revenue growth. Confirmed searches in the 1999 first quarter increased 10%, and fees per search grew 13%, as the company's strategic focus on working at the top level of executive search and higher levels of consultant productivity continued to drive performance.
Operating income on an adjusted basis reached $3.5 million, a 41.1% increase over last year's first quarter. Lower salary and related expenses as a percent of revenues were achieved because of increased productivity from the higher-than-average number of search teams hired in 1998 and a change in the bonus structure for senior management that replaces a portion of cash incentive compensation with options. The decline more than offset the expected rise in the general and administrative expense ratio. The growth in G&A expenses was the result of costs of consulting services for the company's technology initiatives and investment spending for new complementary business services, including LeadersOnline(TM), the company's Internet-based search product; management audit; governance consulting; and interim executive placement.
Results in the United States benefited from increased revenue from most of the company's practices, from the addition of a higher than normal number of consultant search teams hired in 1998 and from aggressive business development efforts. European revenues grew 14%, with particular strength in the International Technology, Industrial and Financial Services practices. In the Other International segment, which consists of Canada and the Latin America and Asia Pacific regions, revenues increased 4% despite the ongoing difficult environment in certain developing markets.
The company expects its 1999 year to produce solid increases in its results, driven by organic top-line growth, an ongoing rise in consultant productivity and margin improvement initiatives. "As the premier global firm in top-level executive search, Heidrick & Struggles continues to be a strong competitor in all major markets around the world," said Pittard. "Also, we are well positioned to extend our lead further in the rapidly growing Technology sector. Finally, our solid corporate capital structure provides us tremendous flexibility to continue building our business through internal growth and selective accretive acquisitions."
Heidrick & Struggles is one of the world's leading executive search firms, specializing in chief executive, board of directors and senior level management assignments. Today, over 750 Heidrick & Struggles professionals serve a broad range of organizations including Fortune 500 companies, financial institutions, major health care organizations, universities and not-for-profit organizations, leading mid-cap companies, and emerging growth companies from offices in more than 60 cities throughout North and South America, Europe, the Middle East, Africa and Asia Pacific. For more information about Heidrick & Struggles, please visit our website at (http://www.heidrick.com/).
Certain matters discussed in this news release are forward-looking statements that are necessarily dependent upon assumptions, estimates and data that may be incorrect or imprecise, and include known and unknown risks, uncertainties and other important factors that could cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Some of the risks, uncertainties, assumptions and factors that could affect the Company's financial results are included in the Company's recent SEC filings. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. All forward-looking statements in this news release are expressly qualified by these cautionary statements, and the Company expressly disclaims any duty to update such forward-looking statements.
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
(unaudited)
Three Months Ended March 31,
1999 1998 % Change
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Revenue $ 71,719 $ 45,937 56.1%
Operating expenses:
Salaries and
employee benefits 46,842 34,761 34.8%
General and administrative
expenses 19,984 10,349 93.1%
Nonrecurring charge (1) 12,420 - -
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Total operating expenses 79,246 45,110 75.7%
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Operating income (loss) (7,527) 827 -
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Non-operating
income (expense):
Interest income 162 155 4.5%
Interest expense (433) (56) 673.2%
Other 14 (364) -
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Net non-operating expense (257) (265) -
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Equity in net
loss of affiliate (630) (177) 255.9%
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Income (loss) before
income taxes (8,414) 385 -
Provision for income taxes 1,698 185 817.8%
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Net income (loss) $(10,112) $ 200 -
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Basic earnings (loss)
per common share $ (1.72) $ 0.07 -
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Basic weighted average
common shares
outstanding 5,879,882 2,738,974 -
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Diluted earnings (loss)
per common share $ (1.72) $ 0.07 -
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Diluted weighted average
common shares
outstanding 5,879,882 2,739,353 -
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(1) The $12.4 million charge is the result of the modification of the
terms of the Mulder acquisition agreement, including the
termination of all employment contingencies. This non-recurring
charge represents the write-off of $2.9 million of deferred
compensation assets, the settlement of the remaining cash due of
$4.3 million, and the issuance of 428,452 common shares (worth
$5.2 million) to the previous owners of Mulder.
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31, March 31,
1999 1998 1998
----------- ----------- ----------
(unaudited) (unaudited)
Current assets:
Cash and cash equivalents $ 20,724 $ 10,428 $ 14,944
Accounts receivable, net
of allowance for
doubtful accounts 67,875 40,816 39,152
Other receivables 2,976 2,862 1,630
Notes receivable from affiliate - 1,900 5,148
Prepaid expenses 3,647 1,771 1,465
Prepaid income taxes 509 3,575 -
Deferred income taxes 16,698 8,871 7,144
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Total current assets 112,429 70,223 69,483
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Property and equipment, net 42,275 24,778 17,433
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Other assets:
Cash and investments
designated for nonqualified
retirement plans 30,472 13,552 12,023
Investment in Heidrick &
Struggles International, Inc. - 4,766 6,603
Investments and other assets 10,682 - -
Deferred income taxes 5,827 1,776 2,551
Goodwill and other
intangibles, net 45,755 8,055 -
----------- ----------- ----------
Total other assets 92,736 28,149 21,177
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Total assets $ 247,440 $ 123,150 $ 108,093
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HEIDRICK & STRUGGLES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31, March 31,
1999 1998 1998
----------- ----------- ----------
(unaudited) (unaudited)
Current liabilities:
Short-term debt $ 29,349 $ 22,000 $ 5,148
Current maturities
of long-term debt 2,725 2,547 808
Accounts payable 5,770 2,918 2,700
Accrued expenses-
Salaries and
employee benefits 57,953 23,090 31,468
Profit sharing and
retirement 1,058 3,155 933
Deferred compensation 4,965 - -
Payroll taxes 6,894 920 528
Other 18,602 7,401 4,368
Income taxes payable - - 220
----------- ----------- ----------
Total current liabilities 127,316 62,031 46,173
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Long-term debt,
less current maturities 5,159 5,150 1,601
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Liability for nonqualified
retirement plans 29,013 11,358 12,142
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Mandatorily redeemable
common stock 85,952 44,611 48,177
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Total liabilities and
mandatorily redeemable
common stock $ 247,440 $ 123,150 $ 108,093
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--30--tia/ny*
CONTACT: Heidrick & Struggles
Jennifer Silver (media)
404/572-0019
or
Lynn McHugh (analysts)
312/496-1593
KEYWORD: GEORGIA ILLINOIS
INDUSTRY KEYWORD: BANKING COMPUTERS/ELECTRONICS COMED EARNINGS