HEIDRICK & STRUGGLES INTERNATIONAL INC - 10-Q Quarterly Report

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 JUNE 30, 2004

¨	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 August 2, 2004, there were 19,114,915 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 June 30, 2004 (Unaudited) and December 31, 2003	1

	Unaudited Consolidated Statements of Operations for the three months and six months ended June 30, 2004 and 2003	3

	Unaudited Consolidated Statement of Stockholders’ Equity and Comprehensive Income (Loss) for the six months ended June 30, 2004	4

	Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and 2003	5

	Unaudited Notes to Consolidated Financial Statements	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	27

Item 4.	Controls and Procedures	27

PART II.	OTHER INFORMATION	28

SIGNATURE		30

HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)


	June 30, 2004		December 31, 2003
	(Unaudited)
Current assets:
Cash and cash equivalents	$	118,674	$	119,289
Accounts receivable, net of allowance for doubtful accounts		64,789		46,847
Other receivables		1,895		3,191
Prepaid expenses		7,659		9,022

Total current assets		193,017		178,349

Non-current assets:
Property and equipment, net		29,982		33,466
Assets designated for retirement and pension plans		27,703		28,751
Investments		4,342		2,842
Other non-current assets		3,603		4,226
Goodwill		48,594		48,627
Other intangible assets, net		7,328		7,771

Total non-current assets		121,552		125,683

Total assets	$	314,569	$	304,032

The accompanying notes to consolidated financial statements are an integral part of these statements.

HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)


	June 30, 2004			December 31, 2003
	(Unaudited)
Current liabilities:
Current maturities of long-term debt	$	214		$	568
Accounts payable		7,791			7,196
Accrued salaries and employee benefits		68,983			61,275
Other accrued liabilities		20,661			21,660
Current portion of accrued restructuring charges		12,525			18,090
Income taxes payable, net		3,779			4,349

Total current liabilities		113,953			113,138

Non-current liabilities:
Long-term debt, less current maturities		27			26
Retirement and pension plans		31,616			32,232
Non-current portion of accrued restructuring charges		23,704			27,698
Other non-current liabilities		4,751			4,729

Total non-current liabilities		60,098			64,685

Total liabilities		174,051			177,823

Stockholders’ equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized, no shares issued at June 30, 2004 and December 31, 2003		—			—
Common stock, $.01 par value, 100,000,000 shares authorized, of which 19,099,391 and 18,339,567 shares were outstanding at June 30, 2004 and December 31, 2003, respectively		196			196
Treasury stock at cost, 486,386 and 1,246,210 shares at June 30, 2004 and December 31, 2003, respectively		(8,552	)		(21,898	)
Additional paid in capital		242,261			250,489
Accumulated deficit		(95,744	)		(106,895	)
Cumulative foreign currency translation adjustment		5,287			6,712
Unrealized gain on available for sale investments		5			—
Deferred stock-based compensation		(2,935	)		(2,395	)

Total stockholders’ equity		140,518			126,209

Total liabilities and stockholders’ equity	$	314,569		$	304,032

The accompanying notes to consolidated financial statements are an integral part of these statements.

HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003
Revenue:
Revenue before reimbursements (net revenue)	$	97,926		$	81,674		$	185,155		$	158,985
Reimbursements		4,954			6,221			10,153			11,886

Total revenue		102,880			87,895			195,308			170,871

Operating expenses:
Salaries and employee benefits		66,299			62,917			127,668			117,067
General and administrative expenses		23,024			20,398			43,771			42,960
Reimbursed expenses		4,954			6,221			10,153			11,886
Restructuring charges		—			—			—			5,500

Total operating expenses		94,277			89,536			181,592			177,413

Operating income (loss)		8,603			(1,641	)		13,716			(6,542	)

Non-operating income (expense):
Interest income		331			468			695			960
Interest expense		(18	)		(53	)		(23	)		(90	)
Net realized and unrealized gains (losses) on equity and warrant portfolio		644			21			522			248
Other, net		83			(315	)		(106	)		(1,137	)

Net non-operating income (expense)		1,040			121			1,088			(19	)

Income (loss) before income taxes		9,643			(1,520	)		14,804			(6,561	)
Provision for income taxes		2,717			1,089			3,653			2,785

Net income (loss)	$	6,926		$	(2,609	)	$	11,151		$	(9,346	)

Basic earnings (loss) per common share	$	0.36		$	(0.14	)	$	0.59		$	(0.52	)

Diluted earnings (loss) per common share	$	0.34		$	(0.14	)	$	0.56		$	(0.52	)

Weighted average common shares outstanding:
Basic		19,000			18,138			18,745			18,147
Diluted		20,082			18,138			19,755			18,147

The accompanying notes are an integral part of these consolidated financial statements.

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 Compre- hensive Income (Loss)			Deferred Stock- Based Compen- sation			Total
	Shares	Amount		Treasury Stock			Additional Paid in Capital		Accumulated Deficit			Accumulated Other Compre- hensive Income (Loss)			Deferred Stock- Based Compen- sation			Total
Balance at December 31, 2003	18,340	$	196	$	(21,898	)	$	250,489	$	(106,895	)	$	6,712		$	(2,395	)	$	126,209
Net income	—		—		—			—		11,151			—			—			11,151
Other comprehensive income (loss):
Unrealized gain on available-for-sale investments	—		—		—			—		—			5			—			5
Foreign currency translation adjustment	—		—		—			—		—			(1,425	)		—			(1,425	)

Total comprehensive income (loss)	—		—		—			—		11,151