Heidrick & Struggles International, Inc. (ticker: HSII, exchange: NASDAQ) News Release - 29-Oct-2001

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Heidrick & Struggles Unveils Future Direction; Aligns Costs With Current Revenue Levels

Reshapes Organization as It Prepares for the Future

Initiates Reductions in Workforce and Infrastructure

Expects to Save Approximately $80 Million in Annual Costs from Year-to-Date Restructurings

Provides View on 2001 Third and Fourth Quarters

CHICAGO, Oct. 29 /PRNewswire/ -- Heidrick & Struggles International, Inc. (Nasdaq: HSII), the world's premier executive search and leadership consulting firm, today announced broad company-wide plans to enhance its strategic and operational direction. Highlights of the plan include a reshaping of the organization, a renewed focus on the company's core executive search business, and cost reduction initiatives to better align costs with current revenue levels. An estimated charge of $45 million to $50 million is expected to be incurred, mostly in the fourth quarter, as a result of these initiatives. The company also announced preliminary results for the 2001 third quarter and its perspective on the 2001 fourth quarter.
"We are building a leaner, more focused, client-driven organization that combines our individual strengths into a powerful, unified force more effectively than ever before. Through this, we can and will be the firm of choice for helping clients build the best leadership teams in the world," said Piers Marmion, Chief Executive Officer of Heidrick & Struggles International. "We have been analyzing every aspect of our business model and cost structure to identify the inefficiencies that have crept in to our operations. While we are taking significant actions now to reallocate resources and to reduce costs, our focus extends well beyond simple cost-cutting measures. We are reshaping the organization because we want to maintain the muscle for future growth and the resources to invest in strengthening ourselves."

Reshaping the Organization
In preparation for the future, Heidrick & Struggles is reshaping the organization by focusing most of its resources on the core executive search business and by organizing the company around clients to build relationships of significant mutual value.

"We must ensure that everything we do continues to be focused upon providing the highest quality of service for our clients. A centerpiece of the way we go to market will be drawing our capabilities together to build broad client relationships through the development of major accounts," said Marmion.

Establishing more major account relationships will serve as a catalyst for future growth potential in the highly fragmented executive search market, as well as for complementary offerings like LeadersOnline and the company's leadership consulting services. Reshaping the company also involves simplifying the company's geographic and management structure, under which managers will have greater accountability for quality of service, development of people, and financial performance. The company intends to balance revenue growth with a rigorous and disciplined approach to cost management in order to improve profit performance.

The organizational simplification includes the complete integration by January 2002 of LeadersOnline, the company's mid-level recruiting business, into the core executive search business. The company is repositioning LeadersOnline as a practice group focused on emerging high potential executive talent. This will leverage the Heidrick & Struggles brand name and utilize the executive search delivery channel to help clients strengthen their organizations with a premium source for tomorrow's leaders.

Cost Structure Initiative
The company is taking a series of aggressive steps to adapt its cost structure to current revenue expectations. As part of the cost structure initiative, Heidrick & Struggles is implementing a reduction in its workforce. This reduction will affect approximately 335 people -- or 16 percent of the company's global workforce -- at all levels of Heidrick & Struggles in all regions of the world. On a global basis, there will be 66 fewer consultants in executive search; the remainder of the reduction is search team support and corporate staff. This workforce reduction is in addition to the actions announced in June, when the company reduced its workforce by approximately 300 employees.

A significant portion of the charge is the consolidation or downsizing of office space and other infrastructure. Many of the large offices will become service centers for smaller offices that will operate without local administrative support. This design is particularly applicable in North America and other homogenous markets where there is significant opportunity to serve global clients and achieve cost efficiencies.

Management Change
The company also announced today that Patrick S. Pittard, Chairman and former CEO, has elected to retire as an employee of Heidrick & Struggles effective October 1, 2001.

"I would like to take this opportunity to extend our appreciation to Pat for his numerous contributions to the company over the past 18 years, particularly for his leadership during the 1990s in building Heidrick & Struggles into a firm with an enviable reputation, strong brand name and solid financial foundation," said Marmion. "His energy and determination drove the enormous undertaking of the company's initial public offering and subsequent follow-on offering, which helped fuel our growth. He also led us through our global unification and many important acquisitions."

Added Pittard, "I am proud of the firm's accomplishments, and hope I was instrumental in some way. I am very confident that the new team will provide the excellent leadership needed during these turbulent economic times. We will see an even stronger Heidrick & Struggles emerge from this environment."

Charge And Related Cost Savings
The company will incur special charges aggregating between $45 million and $50 million -- or $1.48 to $1.65 per diluted share -- for severance, office space reductions and other costs. Most of the amount will be incurred in the fourth quarter. One of the charges is $7.8 million, net of expense accrued to date, related to the settlement of Pittard's contract. No future obligations remain on this contract. Approximately 90 percent of the aggregate charge will be a use of cash, of which $9.4 million is related to Pittard's contract.

The current set of actions will result in annual cost savings of approximately $45 million to $50 million. Combined with the savings resulting from the June workforce reduction, the company estimates its annual cost savings from all of these actions will be approximately $80 million in 2002, as a result of the estimated combined 2001 charges of approximately $55 million to $60 million.

Consolidated Preliminary Results for 2001 Third Quarter
Heidrick & Struggles will release its 2001 third quarter financial results on Monday, November 5, 2001. The company expects revenue to be slightly below $105 million, with a loss per share of approximately $(0.21) on a pro forma basis excluding one-time items, which include a special charge of $2.3 million from the workforce reduction announced in June 2001. On a reported basis, the loss per share is anticipated to be approximately $(0.69). In addition, in the third quarter the company wrote down its investment in SVIC -- due to the economy's impact on Internet infrastructure start-up companies -- incurring a non-cash charge of $9.8 million.

During the third quarter the company repurchased 967,500 shares of its common stock on the open market for a total cost of $15.4 million. As of September 30, 2001, the company's cash balance was approximately $126 million.

Consolidated Outlook for 2001 Fourth Quarter and Full Year 2002
For the 2001 fourth quarter, the company currently believes revenue could be in the range of $95 million to $105 million, as the period typically is affected by the holiday season. At those revenue levels, the company estimates that 2001 fourth quarter results could range from losses per share of $(0.33) to $(0.11).

Heidrick & Struggles is in the preliminary stages of budget planning for 2002 and is presently taking the conservative view that there will be little improvement in the worldwide economy next year. The company considers 2002 to be a transition year. It expects that 2002 revenue will continue at approximately the 2001 third quarter run rate of $105 million, with modest profitability, as the company implements programs and processes that will enable margin acceleration when the economy strengthens.

About Heidrick & Struggles International, Inc.
Heidrick & Struggles International, Inc. is the world's premier provider of executive-level search and leadership consulting services. Currently, more than 1,000 Heidrick & Struggles professionals operate from offices in over 75 locations throughout North and South America, Europe, the Middle East, Africa and Asia Pacific. For nearly 50 years, our core business -- Heidrick & Struggles Executive Search -- has specialized 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, nonprofit 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-enhanced recruiting business, serves clients who seek the next generation of corporate leaders. For more information about Heidrick & Struggles, visit our web site at http://www.heidrick.com/ .

Safe Harbor Statement
This news release contains forward-looking statements. The forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry in which we operate and management's beliefs and assumptions. Forward-looking statements may be identified by the use of words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and similar expressions. Forward- looking statements are not guarantees of future performance and involve certain known and unknown risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed, forecasted or implied in the forward-looking statements. Factors that may affect the outcome of the forward-looking statements include, among other things, our ability to attract and retain qualified executive search consultants; a continuing economic downturn in the United States or a material economic downturn in Europe or elsewhere, or social or political instability in overseas markets; bad debt write-offs far in excess of allowances for doubtful accounts; continued increased acceptance of online recruiting; losses in our venture capital investments; an inability to achieve the planned cost savings from our restructuring initiatives; and delays in the development and/or implementation of new technology and systems. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

SOURCE Heidrick & Struggles International, Inc.

Web site: http://www.heidrick.com/

CONTACT: Media, Eric Sodorff, +1-312-496-1613, esodorff@heidrick.com , or Analyst, Barry Hollingsworth, +1-312-496-1723, bhollingsworth@heidrick.com , both of Heidrick & Struggles International, Inc.