Heidrick & Struggles International, Inc. (ticker: HSII, exchange: NASDAQ) News Release - 21-Sep-2000
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Heidrick & Struggles Charts New Course with LeadersOnline
CHICAGO, Sept. 21 /PRNewswire/ -- Heidrick & Struggles International, Inc. (Nasdaq: HSII), the world's largest and premier executive search firm, today announced that it intends to tighten the linkages between LeadersOnline and the company's core business, Heidrick & Struggles Executive Search, and retain proprietary control of LeadersOnline's revolutionary innovations in online recruiting.
As part of that decision, LeadersOnline, the company's Internet-enhanced recruiting subsidiary for mid-level executives and professionals, intends to withdraw its registration statement with the Securities and Exchange Commission relating to a proposed initial public offering of Class A common stock.
"As we look at the tremendous success of LeadersOnline in its first year of operations -- and its prospects for the future -- we're more convinced than ever that this web-enhanced business has profound implications for the future of our entire company," said Patrick S. Pittard, Chairman, President and Chief Executive Officer of Heidrick & Struggles International (HSI Group). "We have said for several years that the executive search delivery model will change dramatically in the near future. Heidrick & Struggles is driving that change. We are migrating toward a totally web-based firm and are identifying processes that are integral to that change. We believe our clients and other stakeholders will be better served by the integrated solution of Heidrick & Struggles Executive Search and LeadersOnline, rather than two distinct entities under separate ownership."
The company also announced that two members of the LeadersOnline senior management team will take on new roles. President and Chief Executive Officer Michael T. Christy, 59, will assume the role of Chairman of LeadersOnline, and will chair its Advisory Board. In his new role, Christy will serve as the primary architect of the transfer of innovative online processes from LeadersOnline to Executive Search. Additionally, he will focus on significant revenue development opportunities for LeadersOnline. Chief Operating Officer James R. Quandt, 51, will become the President and Chief Executive Officer of LeadersOnline. Both changes are effective immediately.
"Under Mike Christy's talented leadership, LeadersOnline has enjoyed impressive growth. He has been and will continue to be instrumental in strengthening the relationships between LeadersOnline and the Heidrick & Struggles partners," said Pittard. "Jim Quandt has shown boundless energy and insightful expertise in the explosive online recruiting sector since joining the company a year ago. He has demonstrated a unique proficiency for running the company and has won the respect and trust of the Heidrick & Struggles partnership. The timing of these management changes perfectly parallels our strategic plans for LeadersOnline."
On a diluted basis, Heidrick & Struggles and LeadersOnline employees own approximately 15 percent of LeadersOnline. As a result, Heidrick & Struggles expects to incur several non-recurring charges, the majority of which are expected to occur in the 2000 third quarter, relating to costs associated with the IPO withdrawal. These include a payment of up to $10 million to compensate management and employees for the value of their LeadersOnline options, which will be charged to the equity section of the Heidrick & Struggles consolidated balance sheet. This compensation is structured primarily to retain and motivate LeadersOnline employees and align their interests with the Heidrick & Struggles shareholders.
The company will also incur an expense of no more than $13 million, which represents the remainder of the non-cash compensation charges related to the difference between the deemed fair market value for accounting purposes and the exercise price of LeadersOnline options granted to certain Heidrick & Struggles and LeadersOnline employees. In addition, the company will incur a non-recurring expense of up to $4.3 million relating to the costs incurred in connection with planning the IPO and the repurchase of LeadersOnline stock from Heidrick & Struggles employees and VerticalNet, Inc.
Of the approximately $17 million total pre-tax charge ($0.80 per diluted share) to the consolidated income statement, about 25 percent is expected to be cash. Excluding the non-recurring items in the third quarter 2000, the company remains comfortable with the current analysts' estimates for earnings per share for the third and fourth quarters of 2000.
Conference Call Webcast
A conference call will be held on Friday, Sept. 22, at 9:00 a.m. (CDT) featuring remarks by Pittard, Christy and Quandt. The call will be webcast and available online at www.heidrick.com or www.streetfusion.com .
About LeadersOnline
LeadersOnline is a quality, full-service Internet-based executive search organization founded on the experience and commitment to quality of Heidrick & Struggles International. This blend of executive search expertise and proprietary Internet technology forms a powerful and effective resource for both clients and candidates. LeadersOnline enables leading companies and organizations in all industries to fill mission-critical mid-level management positions and find emerging executive talent. The LeadersOnline headquarters are in Irvine, California.
As of August 30, LeadersOnline employed a staff of 74 professionals. Of these employees, 65 were located in North America and nine were located outside North America. The average compensation of a LeadersOnline placement is approximately $140,000.
LeadersOnline has forged important strategic alliances with Business Week and VerticalNet. Under the Business Week alliance, The Business Week Online Careers Channel and the LeadersOnline site will be linked to form a comprehensive online career destination for professional and managerial talent. In addition, Business Week Online will supply editorial content for a weekly electronic newsletter and custom-publish a magazine called "LeadersOnline," designed to be the premier career management resource for the next generation of corporate leaders. It is anticipated the first issue of the magazine will launch in the 2000 fourth quarter.
About Heidrick & Struggles International, Inc. (HSI Group)
Heidrick & Struggles International, Inc. (HSI Group) is the world's largest and premier provider of executive-level search and consulting services. Nearly 1,000 Heidrick & Struggles professionals operate from offices in more than 75 locations throughout North and South America, Europe, the Middle East, Africa and Asia Pacific. Our core business -- Heidrick & Struggles Executive Search -- has been an industry leader for nearly 50 years, specializing in chief executive, board member and senior level management assignments for a broad spectrum of clients: multi-national corporations, mid-cap and start-up companies, not-for-profit entities, educational institutions, foundations, associations and governmental units. We are expanding our range of complementary services to offer solutions to senior management teams for their human capital needs. LeadersOnline, our Internet-based recruiting business, serves clients who seek the next generation of corporate leaders. We are capitalizing on our access to the highest levels of our clients' organizations through Heidrick Ventures, our unit responsible for corporate development, alliances and investments. For more information about HSI Group, visit our web site at www.heidrick.com .
Safe Harbor Statement
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. SOURCE Heidrick & Struggles International, Inc.
CONTACT: Barry Hollingsworth of Heidrick & Struggles International, Inc., 312-496-1723, or email bhollingsworth@heidrick.com/