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 MARCH 31, 2005

¨	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 2, 2005, there were 19,507,466 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, 2005 (Unaudited) and December 31, 2004	1

		Unaudited Consolidated Statements of Operations for the three months ended March 31, 2005 and 2004	3

		Unaudited Consolidated Statement of Stockholders’ Equity and Comprehensive Income (Loss) for the three months ended March 31, 2005	4

		Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004	5

		Unaudited Notes to Consolidated Financial Statements	6

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

	Item 3.	Quantitative and Qualitative Disclosure About Market Risk	21

	Item 4.	Controls and Procedures	21

PART II.		OTHER INFORMATION

	Item 1.	Legal Proceedings	22

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22

	Item 6.	Exhibits	23

SIGNATURE			24

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

HEIDRICK & STRUGGLES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)


	March 31, 2005		December 31, 2004
	(Unaudited)
Current assets:
Cash and cash equivalents	$	57,665	$	98,428
Short-term investments		127,225		124,325
Accounts receivable, net of allowance for doubtful accounts		66,636		51,843
Other receivables		4,689		4,453
Prepaid expenses		10,028		8,377
Income taxes recoverable, net		223		—
Deferred income taxes, net		1,210		2,744

Total current assets		267,676		290,170

Non-current assets:
Property and equipment, net		25,518		27,677
Assets designated for retirement and pension plans		31,517		32,468
Investments		2,500		4,089
Other non-current assets		4,018		3,406
Goodwill		48,747		48,818
Other intangible assets, net		6,672		6,890
Deferred income taxes, net		9,356		7,766

Total non-current assets		128,328		131,114

Total assets	$	396,004	$	421,284

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)


	March 31, 2005			December 31, 2004
	(Unaudited)
Current liabilities:
Short-term debt	$	26		$	27
Accounts payable		8,140			10,986
Accrued salaries and employee benefits		52,298			68,044
Other accrued liabilities		40,962			42,843
Current portion of accrued restructuring charges		8,595			10,609
Income taxes payable, net		—			7,463

Total current liabilities		110,021			139,972

Non-current liabilities:
Retirement and pension plans		36,699			37,941
Non-current portion of accrued restructuring charges		20,634			21,632
Other non-current liabilities		5,601			5,613

Total non-current liabilities		62,934			65,186

Total liabilities		172,955			205,158

Stockholders’ equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized, no shares issued at March 31, 2005 and December 31, 2004		—			—
Common stock, $.01 par value, 100,000,000 shares authorized, of which 19,406,089 and 19,158,588 shares were outstanding at March 31, 2005 and December 31, 2004, respectively		196			196
Treasury stock at cost, 179,688 and 427,189 shares at March 31, 2005 and December 31, 2004, respectively		(4,641	)		(8,448	)
Additional paid in capital		260,539			242,655
Accumulated deficit		(17,727	)		(24,587	)
Accumulated other comprehensive income		7,562			9,033
Deferred stock-based compensation		(22,880	)		(2,723	)

Total stockholders’ equity		223,049			216,126

Total liabilities and stockholders’ equity	$	396,004		$	421,284

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 March 31,
	2005			2004
Revenue:
Revenue before reimbursements (net revenue)	$	98,582		$	87,229
Reimbursements		6,875			5,199

Total revenue		105,457			92,428

Operating expenses:
Salaries and employee benefits		67,912			61,369
General and administrative expenses		24,277			20,747
Reimbursed expenses		6,887			5,199

Total operating expenses		99,076			87,315

Operating income		6,381			5,113

Non-operating income (expense):
Interest income		1,157			364
Interest expense		(155	)		(5	)
Net realized and unrealized losses on equity and warrant portfolio, net of the consultants’ share of the losses		(150	)		(122	)
Other, net		409			(189	)

Net non-operating income		1,261			48

Income before income taxes		7,642			5,161
Provision for income taxes		782			936

Net income	$	6,860		$	4,225

Basic earnings per common share	$	0.36		$	0.23

Diluted earnings per common share	$	0.33		$	0.22

Weighted average common shares outstanding:
Basic		19,226			18,489
Diluted		20,661			19,427

The accompanying notes to consolidated financial statements are an integral part of these 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, 2004	19,159	$	196	$	(8,448	)	$	242,655		$	(24,587	)	$	9,033		$	(2,723	)	$	216,126

Net income	—		—		—			—			6,860			—			—			6,860

Other comprehensive loss:
Change in unrealized gain on available-for-sale investments	—		—		—			—			—			(90	)		—			(90	)
Foreign currency translation adjustment	—		—		—			—			—			(1,381	)		—			(1,381	)

Total comprehensive income (loss)	—		—		—			—			6,860			(1,471	)		—			5,389

Treasury and common stock transactions:

Issuance of restricted stock units	—		—		—			21,734			—			—			(21,734	)		—

Amortization of deferred stock-based compensation	—		—		—			—			—			—			1,577			1,577

Other stock-based compensation	—		—		—			48			—			—			—			48

Exercise of stock options	217		—		4,308			(740	)		—			—			—			3,568

Purchases of treasury stock

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