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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE QUARTERLY PERIOD ENDED September 30, 2002 or
 
¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                              to
 
Commission File Number 0-25837
 
 
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
 
 
Delaware
     
36-2681268
(State or Other Jurisdiction of
Incorporation or Organization)
     
(I.R.S. Employer
Identification Number)
 
233 South Wacker Drive-Suite 4200
Chicago, Illinois
60606-6303
 
 
(Address of Principal Executive Offices)
 
(312) 496-1200
 
 
(Registrant’s Telephone Number, Including Area Code)
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
The number of shares outstanding of the Company’s common stock as of November 7, 2002 was 18,153,578.
 

Table of Contents
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
 
INDEX
 
         
PAGE
PART I.
   
FINANCIAL INFORMATION
     
Item 1.
   
Consolidated Financial Statements
     
       
1
       
3
       
4
       
5
       
6
Item 2.
      
14
Item 3.
      
26
Item 4.
      
27
PART II.
      
27
  
28
  
29

Table of Contents
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 
    
September 30,
2002
   
December 31,
2001
    
(unaudited)
     
Current assets:
              
Cash and cash equivalents
   
$
109,670
   
$
108,732
Accounts receivable, net of allowance for doubtful accounts
   
 
57,134
   
 
54,241
Other receivables
   
 
3,749
   
 
5,870
Prepaid expenses
   
 
11,811
   
 
11,445
Income taxes recoverable
   
 
—  
   
 
22,958
Deferred income taxes, net
   
 
35,578
   
 
36,605
    
  
Total current assets
   
 
217,942
   
 
239,851
    
  
Non-current assets:
              
Property and equipment, net
   
 
41,585
   
 
54,364
Assets designated for pension plans
   
 
19,497
   
 
16,624
Investments
   
 
2,782
   
 
14,836
Other non-current assets
   
 
9,479
   
 
14,637
Deferred income taxes, net
   
 
24,287
   
 
7,089
Goodwill, net
   
 
51,769
   
 
51,110
Other intangibles, net
   
 
11,186
   
 
12,595
    
  
Total non-current assets
   
 
160,585
   
 
171,255
    
  
Total assets
   
$
378,527
   
$
411,106
    
  
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.

1

Table of Contents
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 
    
September 30, 2002
     
December 31, 2001
  
    
(unaudited)
         
Current liabilities:
                  
Current maturities of long-term debt
   
$
1,652
 
   
$
2,480
 
Accounts payable
   
 
8,082
 
   
 
13,391
 
Accrued expenses:
                  
Salaries and employee benefits
   
 
80,649
 
   
 
96,991
 
Other
   
 
20,793
 
   
 
18,955
 
Current portion of accrued special charges
   
 
10,529
 
   
 
15,248
 
Income taxes payable
   
 
1,202
 
   
 
—  
 
    
  
Total current liabilities
   
 
122,907
 
   
 
147,065
 
    
  
Non-current liabilities:
                  
Long-term debt, less current maturities
   
 
693
 
   
 
1,959
 
Retirement and pension plans
   
 
23,226
 
   
 
19,092
 
Non-current portion of accrued special charges
   
 
14,147
 
   
 
13,282
 
Other non-current liabilities
   
 
341
 
   
 
117
 
    
  
Total non-current liabilities
   
 
38,407
 
   
 
34,450
 
    
  
Total liabilities
   
 
161,314
 
   
 
181,515
 
    
  
Stockholders’ equity
                  
Preferred stock, $.01 par value, 10,000,000 shares authorized, no shares issued at September 30, 2002 and December 31, 2001.
   
 
—  
 
   
 
—  
 
Common stock, $.01 par value, 100,000,000 shares authorized, of which 18,133,622 and 18,040,779 shares were issued and outstanding at September 30, 2002 and December 31, 2001, respectively.
   
 
196
 
   
 
195
 
Treasury stock at cost, 1,439,532 and 1,435,500 shares at September 30, 2002 and December 31, 2001, respectively.
   
 
(27,540
)
   
 
(27,459
)
Additional paid-in capital
   
 
260,758
 
   
 
258,699
 
Retained earnings (accumulated deficit)
   
 
(6,273
)
   
 
13,935
 
Cumulative foreign currency translation adjustment
   
 
(2,498
)
   
 
(5,881
)
Unrealized gain on available-for-sale investments, net of tax
   
 
49
 
   
 
9
 
Deferred compensation
   
 
(7,479
)
   
 
(9,907
)
    
  
Total stockholders’ equity
   
 
217,213
 
   
 
229,591
 
    
  
Total liabilities and stockholders’ equity
   
$
378,527
 
   
$
411,106
 
    
  
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.

2

Table of Contents
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 
    
Three Months Ended September 30,
     
Nine Months Ended September 30,
  
    
2002
     
2001
     
2002
     
2001
  
Revenue:
                                    
Revenue before reimbursements (net revenue)
   
$
87,356
 
   
$
104,618
 
   
$
272,555
 
   
$
367,057
 
Reimbursements
   
 
6,507
 
   
 
6,779
 
   
 
19,824
 
   
 
21,043
 
    
  
  
  
Total revenue
   
 
93,863
 
   
 
111,397
 
   
 
292,379
 
   
 
388,100
 
    
  
  
  
Operating expenses:
                                    
Salaries and employee benefits
   
 
56,244
 
   
 
77,465
 
   
 
189,414
 
   
 
245,105
 
General and administrative expenses
   
 
27,558
 
   
 
32,873
 
   
 
83,618
 
   
 
118,942
 
Reimbursed expenses
   
 
6,507
 
   
 
6,779
 
   
 
19,824
 
   
 
21,043
 
Special charges
   
 
—  
 
   
 
2,272
 
   
 
23,169
 
   
 
10,435
 
    
  
  
  
Total operating expenses
   
 
90,309
 
   
 
119,389
 
   
 
316,025
 
   
 
395,525
 
    
  
  
  
Operating income (loss)
   
 
3,554
 
   
 
(7,992
)
   
 
(23,646
)
   
 
(7,425
)
    
  
  
  
Non-operating income (expense):
                                    
Interest income
   
 
479
 
   
 
1,124
 
   
 
1,390
 
   
 
4,604
 
Interest expense
   
 
(71
)
   
 
(34
)
   
 
(159
)
   
 
(113
)
Net realized and unrealized gains (losses) on equity and warrant portfolio
   
 
(801
)
   
 
(2,626
)
   
 
(2,043
)
   
 
(4,647
)
Write-down of long-term investment
   
 
—  
 
   
 
(9,760
)
   
 
(5,000
)
   
 
(9,760
)
Other, net
   
 
(576
)
   
 
(14
)
   
 
(469
)
   
 
(440
)
    
  
  
  
Net non-operating income (expense)
   
 
(969
)
   
 
(11,310
)
   
 
(6,281
)
   
 
(10,356
)
    
  
  
  
Income (loss) before income taxes and cumulative effect of accounting change
   
 
2,585
 
   
 
(19,302
)
   
 
(29,927
)
   
 
(17,781
)
Provision for (benefit from) income taxes
   
 
1,661
 
   
 
(6,295
)
   
 
(9,719
)
   
 
(5,641
)
    
  
  
  
Net income (loss) before cumulative effect of accounting change
   
 
924
 
   
 
(13,007
)
   
 
(20,208
)
   
 
(12,140
)
Cumulative effect of accounting change, net of tax
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
4,494
 
    
  
  
  
Net income (loss)
   
$
924
 
   
$
(13,007
)
   
$
(20,208
)
   
$
(7,646
)
    
  
  
  
Basic earnings (loss) per common share:
                                    
Net income (loss) before cumulative effect of accounting change
   
$
0.05
 
   
$
(0.69
)
   
$
(1.12
)
   
$
(0.64
)