UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004
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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 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.
As of May 3, 2004, there were 18,941,296 shares of the Company’s common stock outstanding.
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
| PAGE | ||
| PART I. FINANCIAL INFORMATION |
||
| Item 1. Consolidated Financial Statements |
||
| Consolidated Balance Sheets as of March 31, 2004 (Unaudited) and December 31, 2003 |
1 | |
| Unaudited Consolidated Statements of Operations for the three months ended March 31, 2004 and 2003 |
3 | |
| 4 | ||
| Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2004 and 2003 |
5 | |
| 6 | ||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 | |
| Item 3. Quantitative and Qualitative Disclosure About Market Risk |
23 | |
| Item 4. Controls and Procedures |
23 | |
| PART II. OTHER INFORMATION |
24 | |
| 26 | ||
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
| March 31, 2004 |
December 31, 2003 | |||||
| (Unaudited) | ||||||
| Current assets: |
||||||
| Cash and cash equivalents |
$ | 97,329 | $ | 119,289 | ||
| Accounts receivable, net of allowance for doubtful accounts |
56,675 | 46,847 | ||||
| Other receivables |
3,013 | 3,191 | ||||
| Prepaid expenses |
9,022 | 9,022 | ||||
| Total current assets |
166,039 | 178,349 | ||||
| Non-current assets: |
||||||
| Property and equipment, net |
32,330 | 33,466 | ||||
| Assets designated for retirement and pension plans |
28,614 | 28,751 | ||||
| Investments |
2,897 | 2,842 | ||||
| Other non-current assets |
3,864 | 4,226 | ||||
| Goodwill |
48,610 | 48,627 | ||||
| Other intangible assets, net |
7,546 | 7,771 | ||||
| Total non-current assets |
123,861 | 125,683 | ||||
| Total assets |
$ | 289,900 | $ | 304,032 | ||
The accompanying notes to consolidated financial statements are an integral part of these statements.
1
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
| March 31, 2004 |
December 31, 2003 |
|||||||
| (Unaudited) | ||||||||
| Current liabilities: |
||||||||
| Current maturities of long-term debt |
$ | 217 | $ | 568 | ||||
| Accounts payable |
7,076 | 7,196 | ||||||
| Accrued salaries and employee benefits |
51,760 | 61,275 | ||||||
| Other accrued liabilities |
22,256 | 22,056 | ||||||
| Current portion of accrued restructuring charges |
14,676 | 18,090 | ||||||
| Income taxes payable, net |
1,172 | 4,349 | ||||||
| Total current liabilities |
97,157 | 113,534 | ||||||
| Non-current liabilities: |
||||||||
| Long-term debt, less current maturities |
27 | 26 | ||||||
| Retirement and pension plans |
31,875 | 32,232 | ||||||
| Non-current portion of accrued restructuring charges |
25,402 | 27,698 | ||||||
| Other non-current liabilities |
4,767 | 4,729 | ||||||
| Total non-current liabilities |
62,071 | 64,685 | ||||||
| Total liabilities |
159,228 | 178,219 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $.01 par value, 10,000,000 shares authorized, no shares issued at March 31, 2004 and December 31, 2003 |
— | — | ||||||
| Common stock, $.01 par value, 100,000,000 shares authorized, of which 18,901,764 and 18,339,567 shares were outstanding at March 31, 2004 and December 31, 2003, respectively |
196 | 196 | ||||||
| Treasury stock at cost, 684,013 and 1,246,210 shares at March 31, 2004 and December 31, 2003, respectively |
(12,022 | ) | (21,898 | ) | ||||
| Additional paid in capital |
241,729 | 250,093 | ||||||
| Accumulated deficit |
(102,670 | ) | (106,895 | ) | ||||
| Cumulative foreign currency translation adjustment |
6,312 | 6,712 | ||||||
| Deferred stock-based compensation |
(2,873 | ) | (2,395 | ) | ||||
| Total stockholders’ equity |
130,672 | 125,813 | ||||||
| Total liabilities and stockholders’ equity |
$ | 289,900 | $ | 304,032 | ||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
2
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Revenue: |
||||||||
| Revenue before reimbursements (net revenue) |
$ | 87,229 | $ | 77,311 | ||||
| Reimbursements |
5,199 | 5,665 | ||||||
| Total revenue |
92,428 | 82,976 | ||||||
| Operating expenses: |
||||||||
| Salaries and employee benefits |
61,369 | 54,150 | ||||||
| General and administrative expenses |
20,747 | 22,562 | ||||||
| Reimbursed expenses |
5,199 | 5,665 | ||||||
| Restructuring charges |
— | 5,500 | ||||||
| Total operating expenses |
87,315 | 87,877 | ||||||
| Operating income (loss) |
5,113 | (4,901 | ) | |||||
| Non-operating income (expense): |
||||||||
| Interest income |
364 | 492 | ||||||
| Interest expense |
(5 | ) | (37 | ) | ||||
| Net realized and unrealized gains (losses) on equity and warrant portfolio |
(122 | ) | 227 | |||||
| Other, net |
(189 | ) | (822 | ) | ||||
| Net non-operating income (expense) |
48 | (140 | ) | |||||
| Income (loss) before income taxes |
5,161 | (5,041 | ) | |||||
| Provision for income taxes |
936 | 1,696 | ||||||
| Net income (loss) |
$ | 4,225 | $ | (6,737 | ) | |||
| Basic earnings (loss) per common share |
$ | 0.23 | $ | (0.37 | ) | |||
| Diluted earnings (loss) per common share |
$ | 0.22 | $ | (0.37 | ) | |||
| Weighted average common shares outstanding: |
||||||||
| Basic |
18,489 | 18,157 | ||||||
| Diluted |
19,427 | 18,157 | ||||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
3
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY AND
COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
| Common Stock |
Treasury Stock |
Additional Paid in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Income (Loss) |
Deferred Stock-Based Compensation |
Total |
|||||||||||||||||||||||
| Shares |
Amount |
||||||||||||||||||||||||||||
| Balance at December 31, 2003 |
18,340 | $ | 196 | $ | (21,898 | ) | $ | 250,093 | $ | (106,895 | ) | $ | 6,712 | $ | (2,395 | ) | $ | 125,813 | |||||||||||
| Net income |
— | — | — | — | 4,225 | — | — | 4,225 | |||||||||||||||||||||
| Other comprehensive loss: |
|||||||||||||||||||||||||||||
| Foreign currency translation adjustment |
— | — | — | — | — | (400 | ) | — | (400 | ) | |||||||||||||||||||
| Total comprehensive income (loss) |
— | — | — | — | 4,225 | (400 | ) | — | 3,825 | ||||||||||||||||||||
| Treasury and common stock transactions: |
|||||||||||||||||||||||||||||
| Issuance of restricted stock units |
— | — | — | 1,270 | — | — | (1,270 | ) | — | ||||||||||||||||||||
| Amortization of deferred stock-based compensation |
— | — | — | — | — | — | 791 | 791 | |||||||||||||||||||||
| Forfeitures of restricted stock units |
— | — | — | (1,028 | ) | — | — | 1 | (1,027 | ) | |||||||||||||||||||
| Exercise of stock options |
233 | — | 4,089 | (378 | ) | — | — | — | 3,711 | ||||||||||||||||||||
| Vested restricted stock units, net of tax withholdings |
329 | — | 5,787 | (8,228 | ) | — | — | — | (2,441 | ) | |||||||||||||||||||
| Balance at March 31, 2004 |
18,902 | $ | 196 | $ | (12,022 | ) | $ | 241,729 | $ | (102,670 | ) | $ | 6,312 | $ | (2,873 | ) | $ | 130,672 | |||||||||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
4
HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||