Heidrick & Struggles International, Inc. (ticker: HSII, exchange: NASDAQ) News Release - 5-Aug-1999
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Heidrick & Struggles International, Inc. Reports Record Revenues and Earnings for the Second Quarter of 1999
Business Editors
CHICAGO--(BUSINESS WIRE)--Aug. 5, 1999--
Successful Execution of Strategy Drives Results to Exceed Published Consensus Estimates
Heidrick & Struggles International, Inc. (Nasdaq:HSII), the world's leading executive search firm, today announced record revenues and earnings for the second quarter and six months ended June 30, 1999, excluding prior period nonrecurring 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. The quarter's results exceeded the published analyst consensus estimates as the company's revenue growth continued to surpass that of the industry.
On an adjusted basis, revenue increased 29.0% in the 1999 second quarter to $108.6 million from $84.2 million in the 1998 comparable period. Net income grew 433.9% to $4.6 million. Diluted earnings per share in the quarter rose 400.0% to $0.30 per share, compared with $0.06 per share last year. On a reported basis, revenue in the 1999 second quarter grew 105.8%, and net income increased 272.0%.
"These results are evidence that we are solidly executing the growth strategies we have developed over the past several years. We are leading in top-level placements in the technology and e-commerce arenas, which are experiencing explosive growth," said Patrick S. Pittard, President and Chief Executive Officer. "We are also reaping the benefits of building our global network of consultants at an accelerated rate in 1998. Most rewardingly, the heightened focus on profitability exhibited by our management team is resulting in substantially higher earnings."
On an adjusted basis, revenue from executive searches in International Technology and e-commerce grew over 100% over last year's comparable quarter. The Industrial, Consumer Products and Financial Services practices also recorded strong performances. Demand for the Heidrick & Struggles' senior-level search capabilities and improved consultant productivity resulted in confirmed searches increasing by 12% over the 1998 second quarter, and fees per search rising 15%.
On a geographic basis, Heidrick & Struggles extended its market leadership in the United States, where revenues increased 43% over last year's second quarter. The unprecedented demand for the company's expertise in technology and e-commerce searches, aggressive business development activities, and the successful integration of new consultants into the firm's global network were all factors in the quarter. In Europe, growth in the International Technology, Industrial and Financial Services practices contributed to a 9% increase in revenues. The Other International segment, which consists of Canada and the Latin America and Asia Pacific regions, recorded a 27% rise in revenue, as the Asia Pacific area displayed some early signs of economic recovery.
Operating income on an adjusted basis grew 51.3% in the quarter, to $8.3 million. The operating margin improved over 100 basis points. Salaries and employee benefits as a percent of revenue were more than 200 basis points lower due to increased consultant productivity and greater leverage of the support staff. As expected, the general and administrative expense ratio increased because of costs related to the company's technology initiatives and investment spending for the development of new, complementary businesses.
Six Month Results
On an adjusted basis, revenue for the six months ended June 30, 1999 grew 26.6% to $200.3 million. Net income of $6.4 million was recorded, an increase of 207.5%. Diluted earnings per share were $.41, up 192.9% from last year's $.14 per diluted share. On a reported basis, revenues rose 82.7%. A net loss of $5.5 million for the 1999 year to date period included a $12.4 million nonrecurring pre-tax charge. 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.
Heidrick & Struggles is the world's leading executive search firm, 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 65 locations 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 per share data)
(unaudited)
Three Months Ended June 30,
1999 1998 % Change
Revenue $108,612 $52,778 105.8%
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Operating expenses:
Salaries and employee benefits 73,110 37,852 93.1%
General and administrative
expenses 27,163 12,184 122.9%
Nonrecurring charge (1) -- -- --
-------- -------
Total operating expenses 100,273 50,036 100.4%
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Operating income 8,339 2,742 204.1%
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Non-operating income (expense):
Interest income 418 250 67.2%
Interest expense (417) (62) 572.6%
Other, net 64 200 -68.0%
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Net non-operating
income (expense) 65 388 -83.2%
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Equity in net loss of affiliate -- (729) --
-------- -------
Income (loss) before income taxes 8,404 2,401 250.0%
Provision for income taxes 3,791 1,161 226.5%
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Net income (loss) $4,613 $1,240 272.0%
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Basic earnings (loss)
per common share $0.33 $0.46 -28.3%
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Basic weighted average
common shares outstanding 14,113 2,680
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Diluted earnings (loss)
per common share $0.33 $0.46 -28.3%
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Diluted weighted average
common shares outstanding 14,141 2,680
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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 nonrecurring 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.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(unaudited)
Six Months Ended June 30,
1999 1998 % Change
Revenue $180,331 $98,715 82.7%
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Operating expenses:
Salaries and employee benefits 119,952 72,613 65.2%
General and administrative expenses 47,147 22,533 109.2%
Nonrecurring charge (1) 12,420 -- --
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Total operating expenses 179,519 95,146 88.7%
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Operating income 812 3,569 -77.2%
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Non-operating income (expense):
Interest income 580 405 43.2%
Interest expense (850) (118) 620.3%
Other, net 78 (164) --
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Net non-operating
income (expense) (192) 123 --
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Equity in net loss of affiliate (630) (906) -30.5%
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Income (loss) before income taxes (10) 2,786 --
Provision for income taxes 5,489 1,346 307.8%
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Net income (loss) $(5,499) $1,440 --
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Basic earnings (loss)
per common share $(0.55) $0.53 --
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Basic weighted average
common shares outstanding 10,019 2,709
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Diluted earnings (loss)
per common share $(0.55) $0.53 --
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Diluted weighted average
common shares outstanding 10,019 2,710
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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 nonrecurring 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)
June 30, Dec 31, June 30,
1999 1998 1998
---------- -------- --------
(unaudited) (unaudited)
Current assets:
Cash and cash equivalents $ 65,737 $ 10,428 $ 18,509
Accounts receivable, net of
allowance for doubtful accounts 79,216 40,816 45,349
Other receivables 3,163 2,862 1,630
Notes receivable from
affiliate -- 1,900 5,148
Prepaid expenses 3,654 1,771 1,879
Prepaid income taxes -- 3,575 3,600
Deferred income taxes 15,860 8,871 7,133
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Total current assets 167,630 70,223 83,248
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Property and equipment, net 46,623 24,778 20,349
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Other assets:
Cash and investments designated
for nonqualified retirement
plans 30,924 13,552 12,559
Investment in Heidrick &
Struggles International, Inc. -- 4,766 5,874
Investments and other assets 12,544 -- --
Deferred income taxes 5,483 1,776 2,541
Goodwill & other
intangibles, net 45,376 8,055 6,147
-------- -------- --------
Total other assets 94,327 28,149 27,121
-------- -------- --------
Total assets $308,580 $123,150 $130,718
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Current liabilities:
Short-term debt $ -- $ 22,000 $ 5,151
Current maturities of
long-term debt 4,070 2,547 734
Accounts payable 9,649 2,918 3,340
Accrued expenses-
Salaries and employee benefits 83,036 23,090 49,182
Profit sharing and retirement 1,830 3,155 1,305
Deferred compensation 6,729 -- --
Payroll taxes 2,780 920 1,013
Other 15,704 7,401 5,452
Income taxes payable 1,878 -- --
-------- -------- --------
Total current liabilities 125,676 62,031 66,177
-------- -------- --------
Long-term debt, less
current maturities 2,024 5,150 5,737
-------- -------- --------
Liability for nonqualified
retirement plans 28,555 11,358 11,201
-------- -------- --------
Mandatorily redeemable
common stock -- 44,611 47,603
-------- -------- --------
Stockholders' equity 152,325 -- --
-------- -------- --------
Total liabilities, mandatorily
redeemable common stock and
stockholders' equity $308,580 $123,150 $130,718
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HEIDRICK & STRUGGLES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME, AS ADJUSTED (Excluding
one-time adjustments and assuming completion of the merger
of H&S and HSI and public company status at January 1, 1998)
(In thousands, except per share data)
(unaudited)
Three Months Ended June 30,
(Adjusted)
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1999 (1) 1998 (1) % Change
--------- --------- ----------
Revenue $ 108,612 $ 84,180 29.0%
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Operating expenses:
Salaries and employee
benefits (2) (3) 73,110 58,476 25.0%
General and administrative
expenses (4) 27,163 20,194 34.5%
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Total operating expenses 100,273 78,670 27.5%
--------- ---------
Operating income 8,339 5,510 51.3%
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Non-operating income (expense):
Interest income 418 250 67.2%
Interest expense (417) (268) 55.6%
Other, net(5) 64 (2,941) --
--------- ---------
Net non-operating
income (expense) 65 (2,959) --
--------- ---------
Income before income
taxes (6) 8,404 2,551 229.4%
Provision for income taxes 3,791 1,687 124.7%
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Net income $ 4,613 $ 864 433.9%
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Basic earnings per
common share $ 0.30 $ 0.06 400.0%
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Basic weighted average
common shares outstanding (7) 15,361 14,255 7.8%
========= =========
Diluted earnings per
common share $ 0.30 $ 0.06 400.0%
========= =========
Diluted weighted average
common shares
outstanding (7)(8) 15,400 14,414 6.8%
========= =========
(1) Amounts assume that the merger of H&S Inc. and HSI had occurred January 1, 1998.
(2) Amortization of deferred compensation expense of $1.2 million to the acquisition of Mulder has been eliminated from the three months ended June 30, 1998.
(3) Amount has been adjusted by $0.7 million for the three months ended June 30, 1998 to eliminate compensation expense representing the difference between the amount actually paid to management for bonus over the amount which would have been paid under the Company's GlobalShare plan. The GlobalShare plan will issue options to managing partners and corporate officers in lieu of a portion of their annual cash performance bonus.
(4) Includes amortization related to acquired intangibles and goodwill arising from the merger of H&S and HSI and other merger related costs of $0.7 million for the three months ended June 30, 1998
(5) Includes a $2.9 million charge for the three months ended June 30, 1998, arising from the write-off of leasehold improvements and accruals for non-cancelable lease commitments due to the decision to relocate the Company's London office.
(6) Equity in net loss of affiliate has been eliminated for the three months ended June 30, 1998 to reflect 100% ownership of HSI after the merger.
(7) Amount has been adjusted to give effect to the initial public offering of 3.7 million shares and issuance of 0.7 million shares under the Company's GlobalShare plan as of January 1, 1999 and 1998, respectively. In addition, the three months ended June 30, 1999 has been adjusted for the issuance of 0.5 million shares on June 1, 1999 which arose from the exercise of a portion of the over-allotment option granted to certain underwriters of the initial public offering.
(8) Amount has been adjusted to give effect to the issuance of options pursuant to the Company's GlobalShare plan equivalent to 0.04 and 0.2 million shares for the three months ended June 30, 1999 and 1998, respectively, under the treasury stock method.
--30--AMP/ALW/se*
CONTACT: Heidrick & Struggles Inc.
Jennifer Silver, 404/572-0019 (media) or Lynn McHugh, 312/496-1593 (analysts)
KEYWORD: afxal ILLINOIS
INDUSTRY KEYWORD: EARNINGS COMPUTERS/ELECTRONICS COMED
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